ATTENTUS CDO III, LTD. ATTENTUS CDO III, LLC

U.S.$150,000,000 Class A-1A First Priority Delayed Draw Senior Secured Floating Rate Notes Due 2042 U.S.$100,000,000 Class A-2 Third Priority Senior Secured Floating Rate Notes Due 2042

U.S.$34,000,000 Class B Fourth Priority Deferrable Secured Floating Rate Notes Due 2042 U.S.$16,000,000 Class C-1 Fifth Priority Deferrable Secured Floating Rate Notes Due 2042

U.S.$15,000,000 Class C-2 Fifth Priority Deferrable Secured Fixed/Floating Rate Notes Due 2042 U.S.$10,000,000 Class D Sixth Priority Deferrable Secured Fixed/Floating Rate Notes Due 2042 U.S.$15,000,000 Class E-1 Seventh Priority Deferrable Secured Floating Rate Notes Due 2042

U.S.$7,000,000 Class E-2 Seventh Priority Deferrable Secured Fixed Rate Notes Due 2042 U.S.$24,000,000 Class F Eighth Priority Deferrable Secured Fixed Rate Notes Due 2042

U.S.$35,500,000 Subordinated Notes Due 2042 Attentus CDO III, Ltd., a Cayman Islands exempted company incorporated with limited liability (the “Issuer”) and Attentus CDO III, LLC, a Delaware limited liability company (the “Co-Issuer” and, together with the Issuer, the “Co-Issuers”), will issue U.S.$150,000,000 Class A-1A First Priority Delayed Draw Senior Secured Floating Rate Notes due 2042 (the “Class A-1A Notes”); U.S.$100,000,000 Class A-1B Second Priority Senior Secured Floating Rate Notes due 2042 (the “Class A-1B Notes” and, together with Class A-1A Notes, the “Class A-1 Notes”); U.S.$100,000,000 Class A-2 Third Priority Senior Secured Floating Rate Notes due 2042 (the “Class A-2 Notes” and, collectively with the Class A-1 Notes, the “Class A Notes”); U.S.$34,000,000 Class B Fourth Priority Deferrable Secured Floating Rate Notes due 2042 (the “Class B Notes”); U.S.$16,000,000 Class C-1 Fifth Priority Deferrable Secured Floating Rate Notes due 2042 (the “Class C-1 Notes”); U.S.$15,000,000 Class C-2 Fifth Priority Deferrable Secured Fixed/Floating Rate Notes due 2042 (the “Class C-2 Notes” and, together with the Class C-1 Notes, the “Class C Notes”); U.S.$10,000,000 Class D Sixth Priority Deferrable Secured Fixed/Floating Rate Notes due 2042 (the “Class D Notes”); U.S.$15,000,000 Class E-1 Seventh Priority Deferrable Secured Floating Rate Notes due 2042 (the “Class E-1 Notes”); and U.S.$7,000,000 Class E-2 Seventh Priority Deferrable Secured Fixed Rate Notes due 2042 (the “Class E-2 Notes” and, together with the Class E-1 Notes, the “Class E Notes” and, collectively with the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes, the “Co-Issued Notes”). The Issuer will issue U.S.$24,000,000 Class F Eighth Priority Deferrable Secured Fixed Rate Notes due 2042 (the “Class F Notes” and, collectively with the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, the “Senior Notes”); and U.S.$35,500,000 Subordinated Notes due 2042 (the “Subordinated Notes” and, collectively with the Senior Notes, the “Notes”). The Senior Notes will constitute limited recourse debt obligations of the Issuer or the Co-Issuers, as applicable. The Collateral Debt Securities will be pledged to secure the Senior Notes and will be required to satisfy certain criteria described herein. The portfolio of Collateral Debt Securities securing the Senior Notes will be managed by Attentus Management Group, LLC, a Delaware limited liability company (“AMG”, or, in its capacity as collateral manager under the Collateral Management Agreement, the “Collateral Manager”).

Under a separate financial guaranty insurance policy (the “Policy”) Assured Guaranty Corp. (the “Insurer”) will unconditionally and irrevocably guarantee the full and complete payment of Insured Amounts in respect of the Class A-1B Notes (the “Insured Notes”) that become Due for Payment but remain unpaid by reason of Nonpayment. The Class A-1A Notes, Class A-2 Notes, Class B Notes, Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Subordinated Notes (collectively, the “Uninsured Notes”) will not be entitled to the benefit of the Policy.

Application has been made to the Irish Financial Services Regulatory Authority (the “IFSRA”), as competent authority under Directive 2003/71/EC, for the final Offering Circular to be approved. Application has been made to the Irish Stock Exchange Limited for the Class A-1A, Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Subordinated Notes to be admitted to the Official List of the Irish Stock Exchange and to trading on the regulated market of the Irish Stock Exchange. This Offering Circular constitutes a prospectus (the “Prospectus”) for the purposes of Directive 2003/71/EC. Such approval relates only to the Notes which are to be admitted for trading on the regulated market of the Irish Stock Exchange or other regulated markets for the purpose of Directive 93/22/EEC of which are to be offered to the public of any Member State of the European Economic Area. Reference throughout this document to “Offering Circular” will be taken to read “Prospectus” for such purpose. There can be no assurance that the IFSRA or the Irish Stock Exchange will in fact accept the listing of such Offered Securities or that the listing, if granted, will be maintained.

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Investing in the Notes involves risks. See “Risk Factors” beginning on page 25. ________________________

The Notes have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”). The Notes are being offered in the United States and to U.S. Persons only to Qualified Purchasers (“Qualified Purchasers”) for purposes of Section 3(c)(7) under the Investment Company Act of 1940, as amended (the “1940 Act”) who are (i) Qualified Institutional Buyers within the meaning of Rule 144A under the Securities Act (“Qualified Institutional Buyers”), (ii) in connection with the initial distribution of the Co-Issued Notes, Institutional Accredited Investors within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act (“Institutional Accredited Investors”) or (iii) in the case of Class F Notes and Subordinated Notes, Accredited Investors within the meaning of Rule 501(a) of Regulation D under the Securities Act (“Accredited Investors”). The Notes are also being offered outside the United States in compliance with Regulation S under the Securities Act (“Regulation S”). Because the Notes are not registered, they are subject to certain restrictions on resale that are described under “Purchase and Transfer Restrictions”. Neither Co-Issuer has been registered as an investment company under the 1940 Act.

(1) “NR” means this Class of Notes is not rated by this Rating Agency. (2) The Class A-1B Notes will be rated without giving effect to the Policy. (3) During the Fixed Rate Period the Class C-2 Notes and the Class D Notes will bear interest at a fixed rate per annum equal to 6.312% and 6.612% , respectively, and from and including the Fixed Rate Period Termination Date at a floating rate per annum equal to LIBOR plus 1.35% and LIBOR plus 1.65%, respectively. (4) The Subordinated Notes are being offered in privately negotiated transactions at varying prices.

The Co-Issued Notes are being offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) as initial purchaser (in such capacity, the “Initial Purchaser”, which term includes, as the context requires, Merrill Lynch as Placement Agent), when, as and if such Notes are received and accepted by the Initial Purchaser and subject to prior sale, withdrawal, cancellation or modification of the offer without notice, to the right of the Initial Purchaser to reject orders in whole or in part and to certain other conditions. The Class F Notes and the Subordinated Notes are being offered by the Issuer through Merrill Lynch as placement agent (in such capacity, the “Placement Agent”, which term includes, as the context requires, Merrill Lynch as Initial Purchaser when, as and if such Notes are issued) to purchasers in privately negotiated transactions, subject to prior sale, withdrawal, cancellation or modification of the offer without notice, to the right of the Placement Agent to reject orders in whole or in part and to certain other conditions. It is expected that the Notes will be delivered on or about January 18, 2007. It is a condition to the issuance of the Notes that all Notes be issued concurrently.

Merrill Lynch The date of this Offering Circular is March 26, 2007

Class of Notes Initial Aggregate Principal Amount Note Interest Rate

Ratings (S&P/Moody’s/Fitch(1)) Issue Price Stated Maturity Date

Class A-1A Notes $150,000,000 LIBOR + 0.32% AAA/Aaa/AAA 100% October 11, 2042 Class A-1B Notes (2) $100,000,000 LIBOR + 0.26% AAA/Aaa/AAA 100% October 11, 2042 Class A-2 Notes $100,000,000 LIBOR + 0.45% AAA/Aaa/AAA 100% October 11, 2042 Class B Notes $34,000,000 LIBOR + 0.70% AA/Aa2/AA 100% October 11, 2042 Class C-1 Notes $16,000,000 LIBOR + 1.35% A/A2/A 100% October 11, 2042 Class C-2 Notes $15,000,000 6.312%/LIBOR + 1.35% (3) A/A2/A 100% October 11, 2042 Class D Notes $10,000,000 6.612%/LIBOR + 1.65%(3) A-/NR/A- 100% October 11, 2042 Class E-1 Notes $15,000,000 LIBOR + 2.95% BBB/NR/BBB 100% October 11, 2042 Class E-2 Notes $7,000,000 7.982% BBB/NR/BBB 100% October 11, 2042 Class F Notes $24,000,000 9.532% BB/NR/BB 100% October 11, 2042 Subordinated Notes $35,500,000 N/A NR/NR/NR N/A(4) October 11, 2042

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The pledged assets of the Issuer (including the Issuer’s rights under the Insurance Documents, in the case of the Insured Notes only) are the sole source of payments on the Notes. The Insured Notes are entitled to the benefit of the Policy. The Uninsured Notes are not entitled to the benefit of the Policy. The Notes do not represent an interest in or obligations of, and are not insured or guaranteed by, The Bank of New York Trust Company, National Association, as trustee (the “Trustee”), the Insurer (except with respect to the Insured Notes to the extent described herein), the Collateral Manager, Merrill Lynch, or any of their respective affiliates.

This Offering Circular has been prepared by the Co-Issuers solely for use in connection with the proposed offering of the Notes described herein. This Offering Circular is personal to each offeree and does not constitute an offer to any other person or to the public generally to subscribe for or otherwise acquire Notes. Distribution of this Offering Circular to any other person other than the offeree and any person retained to advise such offeree with respect to its purchase is unauthorized, and any disclosure or any of its contents, without the prior written consent of the Co-Issuers, is prohibited. Each prospective investor, by accepting delivery of this Offering Circular, agrees to the foregoing and to make no photocopies of this Offering Circular or any documents referred to herein.

None of the United States Securities and Exchange Commission (the “SEC”), any state securities commission or any other regulatory authority of the United States or any other jurisdiction, has approved or disapproved the Notes nor has any of the foregoing authorities passed upon or endorsed the merits of this offering or the accuracy or adequacy of this Offering Circular. Any representation to the contrary is a criminal offense.

In making an investment decision, prospective investors must rely on their own examination of the Co-Issuers and the terms of this Offering, including the merits and risks involved. Prospective investors should not construe anything in this Offering Circular as legal, business, accounting or tax advice. Each prospective investor should consult its own advisors as needed to make its investment decision and to determine whether it is legally permitted to purchase the Notes under applicable legal investment or similar laws or regulations. Investors should be aware that they may be required to bear the financial risks of this investment for an indefinite period of time.

This Offering Circular contains summaries believed to be accurate with respect to certain documents, but reference is made to the actual documents for complete information. All such summaries are qualified in their entirety by such reference. Copies of documents referred to herein will be made available to prospective investors upon request to the Co-Issuers or the Initial Purchaser.

NOTICES TO PURCHASERS

Notice to New Hampshire Residents

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421–B OF THE NEW HAMPSHIRE REVISED STATUTES (“RSA 421-B”) WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421–B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUER, THE CO-ISSUER, THE COLLATERAL MANAGER, THE INITIAL PURCHASER OR ANY HEDGE COUNTERPARTY OR ANY OF THEIR RESPECTIVE AFFILIATES. THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, (A) ANY SECURITIES OTHER THAN THE NOTES OR (B) ANY NOTES IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFER OR SOLICITATION. THE DISTRIBUTION OF THIS OFFERING CIRCULAR AND THE OFFERING OF THE NOTES IN CERTAIN JURISDICTIONS MAY BE RESTRICTED BY LAW. PERSONS INTO WHOSE POSSESSION THIS OFFERING CIRCULAR COMES ARE REQUIRED BY THE CO-ISSUERS AND THE INITIAL PURCHASER TO INFORM THEMSELVES ABOUT, AND TO OBSERVE, ANY SUCH RESTRICTIONS. IN PARTICULAR, THERE ARE RESTRICTIONS ON THE DISTRIBUTION OF THIS OFFERING CIRCULAR, AND THE OFFER AND SALE OF NOTES, IN THE UNITED STATES OF AMERICA, THE UNITED KINGDOM AND THE CAYMAN ISLANDS. SEE “PLAN OF DISTRIBUTION.” NEITHER THE DELIVERY OF THIS OFFERING CIRCULAR NOR THE SALE OF ANY NOTES OFFERED HEREBY SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CO-ISSUERS OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE AS OF WHICH SUCH INFORMATION IS GIVEN HEREIN. THE CO-ISSUERS AND THE INITIAL PURCHASER RESERVE THE RIGHT, FOR ANY REASON, TO REJECT ANY OFFER TO PURCHASE IN WHOLE OR IN PART, TO ALLOT TO ANY OFFEREE LESS THAN THE FULL AMOUNT OF NOTES SOUGHT BY SUCH OFFEREE OR TO SELL LESS THAN THE AGGREGATE STATED PRINCIPAL AMOUNT OF ANY CLASS OF NOTES.

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THE NOTES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. THE NOTES ARE TO BE PURCHASED FOR INVESTMENT ONLY AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED BY AN INVESTOR DIRECTLY OR INDIRECTLY EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. PROSPECTIVE PURCHASERS ARE HEREBY NOTIFIED THAT THE SELLER OF ANY NOTE MAY BE RELYING ON THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER (“RULE 144A”) OR ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. FOR CERTAIN RESTRICTIONS ON RESALE, SEE “DESCRIPTION OF THE NOTES—FORM, DENOMINATION, REGISTRATION AND TRANSFER,” AND “TRANSFER RESTRICTIONS.” A TRANSFER OF NOTES IS SUBJECT TO THE RESTRICTIONS DESCRIBED HEREIN, INCLUDING THAT NO SALE, PLEDGE, TRANSFER OR EXCHANGE MAY BE MADE OF A NOTE (A) EXCEPT AS PERMITTED UNDER (I) THE SECURITIES ACT

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PURSUANT TO AN EXEMPTION FROM REGISTRATION AS DESCRIBED HEREIN, (II) APPLICABLE STATE SECURITIES LAWS AND (III) APPLICABLE SECURITIES LAWS OF ANY OTHER JURISDICTION, (B) EXCEPT IN COMPLIANCE WITH THE CERTIFICATION AND OTHER REQUIREMENTS SET FORTH IN THE INDENTURE AND (C) IN A DENOMINATION LESS THAN THE REQUIRED MINIMUM DENOMINATION. THE NOTES ARE SUBJECT TO FURTHER RESTRICTIONS ON TRANSFER. SEE “TRANSFER RESTRICTIONS.”

NONE OF THE ISSUER, THE CO-ISSUER OR THE POOL OF COLLATERAL HAS BEEN REGISTERED UNDER THE 1940 ACT, BY REASON OF THE EXEMPTION FROM REGISTRATION CONTAINED IN SECTION 3(c)(7) THEREOF. NO TRANSFER OF NOTES WHICH WOULD HAVE THE EFFECT OF REQUIRING THE ISSUER, THE CO-ISSUER OR THE POOL OF COLLATERAL TO REGISTER AS AN INVESTMENT COMPANY UNDER THE 1940 ACT WILL BE PERMITTED. ANY TRANSFER OF A DEFINITIVE NOTE MAY BE EFFECTED ONLY ON THE NOTE REGISTER MAINTAINED BY THE NOTE REGISTRAR PURSUANT TO THE INDENTURE. ANY TRANSFER OF AN INTEREST IN A GLOBAL NOTE WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED BY DTC AND ITS PARTICIPANTS AND INDIRECT PARTICIPANTS (INCLUDING, WITHOUT LIMITATION, IN THE CASE OF THE REGULATION S GLOBAL SENIOR NOTE OR REGULATION S GLOBAL SUBORDINATED NOTE, EUROCLEAR AND CLEARSTREAM).

EACH PURCHASER AND TRANSFEREE OF A CO-ISSUED NOTE WILL BE REQUIRED TO REPRESENT AND WARRANT (OR, IN CERTAIN CIRCUMSTANCES, BE DEEMED TO REPRESENT AND WARRANT) EITHER THAT (A) IT IS NOT (AND FOR SO LONG AS IT HOLDS SUCH NOTE WILL NOT BE), AND IS NOT ACTING ON BEHALF OF (AND FOR SO LONG AS IT HOLDS SUCH NOTE WILL NOT BE ACTING ON BEHALF OF), AN “EMPLOYEE BENEFIT PLAN” SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), A “PLAN” SUBJECT TO SECTION 4975 OF THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), AN ENTITY WHOSE UNDERLYING ASSETS WOULD BE DEEMED TO INCLUDE PLAN ASSETS BY REASON OF INVESTMENT BY AN “EMPLOYEE BENEFIT PLAN” OR “PLAN” IN THE ENTITY, OR A GOVERNMENTAL OR CHURCH PLAN SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS SUBSTANTIALLY SIMILAR TO THE PROHIBITED TRANSACTION PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR THE PROVISIONS OF ERISA UNDER WHICH THE ASSETS OF AN ISSUER MAY BE DEEMED TO INCLUDE PLAN ASSETS (“SIMILAR LAW”), OR (B) ITS PURCHASE AND OWNERSHIP OF SUCH NOTE WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE (OR, IN THE CASE OF A GOVERNMENTAL OR CHURCH PLAN SUBJECT TO SIMILAR LAW, A NON-EXEMPT VIOLATION OF ANY SIMILAR LAW).

THE ACQUISITION OF A RESTRICTED SUBORDINATED NOTE OR RESTRICTED CLASS F NOTE BY, OR ON BEHALF OF, OR WITH THE ASSETS OF (A) ANY “EMPLOYEE BENEFIT PLAN” SUBJECT TO TITLE I OF ERISA, (B) ANY “PLAN” SUBJECT TO SECTION 4975 OF THE CODE, (C) ANY ENTITY WHOSE UNDERLYING ASSETS WOULD BE DEEMED TO INCLUDE “PLAN ASSETS” BY REASON OF THE INVESTMENT BY AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN IN THE ENTITY WITHIN THE MEANING OF 29 C.F.R. SECTION 2510.3-101, AS MODIFIED BY SECTION 3(42) OF ERISA (EACH OF THE FOREGOING, A “BENEFIT PLAN INVESTOR”), OR (D) THE ISSUER, THE INITIAL PURCHASER, THE COLLATERAL MANAGER OR ANY OTHER PERSON (OTHER THAN A BENEFIT PLAN INVESTOR) THAT HAS DISCRETIONARY AUTHORITY OR CONTROL WITH RESPECT TO THE ASSETS OF THE ISSUER OR A PERSON WHO PROVIDES INVESTMENT ADVICE FOR A FEE (DIRECT OR INDIRECT) WITH RESPECT TO THE ASSETS OF THE ISSUER, OR ANY “AFFILIATE” (AS DEFINED IN 29 C.F.R. SECTION 2510.3-101(f)(3)) OF ANY SUCH PERSON (EACH A “CONTROLLING PERSON”) WILL NOT BE EFFECTIVE, AND THE ISSUER, THE TRUSTEE, THE TRANSFER AGENT AND THE NOTE REGISTRAR WILL NOT RECOGNIZE SUCH ACQUISITION, IF SUCH ACQUISITION WOULD RESULT IN (I) BENEFIT PLAN INVESTORS OWNING 25% OR MORE OF THE TOTAL VALUE OF ANY SUCH CLASS OF NOTES (INCLUDING THE REGULATION S SUBORDINATED NOTES AND CLASS F NOTES, IN EACH CASE ACQUIRED ON THE CLOSING DATE BY CERTAIN PLANS (“PERMITTED PLANS”) THAT OBTAINED THE PRIOR WRITTEN CONSENT OF THE ISSUER) OR (II) A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE.

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NO REGULATION S SUBORDINATED NOTE OR REGULATION S CLASS F NOTE MAY BE ACQUIRED BY, OR ON BEHALF OF, OR WITH THE ASSETS OF, ANY BENEFIT PLAN INVESTOR OR CONTROLLING PERSON. NOTWITHSTANDING THE FOREGOING, PERMITTED PLANS THAT HAVE OBTAINED THE PRIOR WRITTEN CONSENT OF THE ISSUER WILL BE PERMITTED TO PURCHASE REGULATION S SUBORDINATED NOTES AND REGULATION S CLASS F NOTES ON THE CLOSING DATE. EACH PERMITTED PLAN WILL BE DEEMED TO REPRESENT, WARRANT AND COVENANT THAT ITS PURCHASE, HOLDING AND DISPOSITION OF SUCH NOTE WILL NOT RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE.

EACH PURCHASER AND TRANSFEREE OF A SUBORDINATED NOTE OR CLASS F NOTE WILL BE REQUIRED TO REPRESENT AND WARRANT (OR, IN CERTAIN CIRCUMSTANCES, WILL BE DEEMED TO REPRESENT AND WARRANT) EITHER (A) THAT IT IS NOT (AND FOR SO LONG AS IT HOLDS SUCH NOTE OR AN INTEREST THEREIN WILL NOT BE), AND IS NOT ACTING ON BEHALF OF (AND FOR SO LONG AS IT HOLDS SUCH NOTE OR AN INTEREST THEREIN WILL NOT BE ACTING ON BEHALF OF), A GOVERNMENTAL OR CHURCH PLAN SUBJECT TO SIMILAR LAW, OR (B) ITS PURCHASE AND OWNERSHIP OF SUCH NOTE WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT VIOLATION OF ANY SIMILAR LAW.

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THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION, AND NONE OF THE FOREGOING AUTHORITIES HAS CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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IMPORTANT NOTICE REGARDING THE NOTES

THE NOTES REFERRED TO IN THIS OFFERING CIRCULAR, AND THE ASSETS BACKING THEM, ARE SUBJECT TO MODIFICATION OR REVISION (INCLUDING THE POSSIBILITY THAT ONE OR MORE CLASSES OF NOTES MAY BE SPLIT, COMBINED OR ELIMINATED AT ANY TIME PRIOR TO ISSUANCE OR AVAILABILITY OF A FINAL OFFERING CIRCULAR) AND ARE OFFERED ON A “WHEN, AS AND IF ISSUED” BASIS. EACH PROSPECTIVE INVESTOR UNDERSTANDS THAT, WHEN SUCH PROSPECTIVE INVESTOR IS CONSIDERING THE PURCHASE OF THESE NOTES, A CONTRACT OF SALE WILL COME INTO BEING NO SOONER THAN THE DATE ON WHICH THE RELEVANT CLASS OF NOTES HAS BEEN PRICED AND THE INITIAL PURCHASER AND THE PLACEMENT AGENT HAVE CONFIRMED THE ALLOCATION OF THE NOTES TO BE MADE TO SUCH PROSPECTIVE INVESTOR; ANY “INDICATIONS OF INTEREST” EXPRESSED BY ANY PROSPECTIVE INVESTOR, AND ANY “SOFT CIRCLES” GENERATED BY THE INITIAL PURCHASER, THE PLACEMENT AGENT, THE COLLATERAL MANAGER, THE ISSUER, THE CO-ISSUER OR ANY OF THEIR RESPECTIVE AGENTS OR AFFILIATES, WILL NOT CREATE BINDING CONTRACTUAL OBLIGATIONS FOR SUCH PROSPECTIVE INVESTOR, ON THE ONE HAND, OR THE INITIAL PURCHASER, THE PLACEMENT AGENT, THE COLLATERAL MANAGER, THE ISSUER, THE CO-ISSUER OR ANY OF THEIR RESPECTIVE AGENTS OR AFFILIATES, ON THE OTHER HAND.

AS A RESULT OF THE FOREGOING, A PROSPECTIVE INVESTOR MAY COMMIT TO PURCHASE NOTES THAT HAVE CHARACTERISTICS THAT MAY CHANGE, AND EACH PROSPECTIVE INVESTOR IS ADVISED THAT ALL OR A PORTION OF THE NOTES MAY NOT BE ISSUED WITH THE CHARACTERISTICS DESCRIBED IN THIS OFFERING CIRCULAR. THE INITIAL PURCHASER’S OBLIGATION TO SELL ANY NOTES TO, AND THE PLACEMENT AGENT’S OBLIGATION TO PLACE ANY NOTES WITH, ANY PROSPECTIVE INVESTOR IS CONDITIONED ON THE NOTES HAVING THE CHARACTERISTICS DESCRIBED IN THIS OFFERING CIRCULAR. IF THE INITIAL PURCHASER OR THE PLACEMENT AGENT DETERMINES THAT CONDITION IS NOT SATISFIED IN ANY MATERIAL RESPECT, SUCH PROSPECTIVE INVESTOR WILL BE NOTIFIED, AND NONE OF THE ISSUER, THE CO-ISSUER, THE INITIAL PURCHASER OR THE PLACEMENT AGENT WILL HAVE ANY OBLIGATION TO

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SUCH PROSPECTIVE INVESTOR TO DELIVER ANY PORTION OF THE NOTES THAT SUCH PROSPECTIVE INVESTOR HAS COMMITTED TO PURCHASE, AND THERE WILL BE NO LIABILITY BETWEEN THE INITIAL PURCHASER, THE PLACEMENT AGENT, THE COLLATERAL MANAGER, THE ISSUER, THE CO-ISSUER OR ANY OF THEIR RESPECTIVE AGENTS OR AFFILIATES, ON THE ONE HAND, AND SUCH PROSPECTIVE INVESTOR, ON THE OTHER HAND, AS A CONSEQUENCE OF THE NON-DELIVERY.

EACH PROSPECTIVE INVESTOR IN THE NOTES REQUESTED THAT THE INITIAL PURCHASER OR THE PLACEMENT AGENT PROVIDE TO SUCH PROSPECTIVE INVESTOR INFORMATION IN CONNECTION WITH SUCH PROSPECTIVE INVESTOR’S CONSIDERATION OF THE PURCHASE OF CERTAIN NOTES DESCRIBED IN THIS OFFERING CIRCULAR. THIS OFFERING CIRCULAR IS BEING PROVIDED TO EACH PROSPECTIVE INVESTOR FOR INFORMATIVE PURPOSES ONLY IN RESPONSE TO SUCH PROSPECTIVE INVESTOR’S SPECIFIC REQUEST. THE INITIAL PURCHASER AND THE PLACEMENT AGENT DESCRIBED IN THIS OFFERING CIRCULAR MAY FROM TIME TO TIME PERFORM INVESTMENT BANKING SERVICES FOR, OR SOLICIT INVESTMENT BANKING BUSINESS FROM, ANY COMPANY NAMED IN THIS OFFERING CIRCULAR. THE INITIAL PURCHASER, THE PLACEMENT AGENT AND/OR THEIR AFFILIATES AND EMPLOYEES MAY FROM TIME TO TIME HAVE A LONG OR SHORT POSITION IN ANY CONTRACT OR SECURITY DISCUSSED IN THIS OFFERING CIRCULAR.

THE INFORMATION CONTAINED HEREIN SUPERSEDES ANY PREVIOUS SUCH INFORMATION DELIVERED TO ANY PROSPECTIVE INVESTOR AND MAY BE SUPERSEDED BY INFORMATION DELIVERED TO SUCH PROSPECTIVE INVESTOR PRIOR TO THE TIME OF SALE.

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This Offering Circular has been prepared by the Co-Issuers solely for use in connection with the offering of the Notes described herein (the “Offering”) and for listing purposes. The Co-Issuers accept responsibility for the information contained in this Offering Circular (excluding the information appearing in the section entitled and “The Collateral Manager”). To the best knowledge and belief of the Co-Issuers, the information contained herein is in accordance with the facts and does not omit anything likely to affect the import of such information. The Co-Issuers accept responsibility accordingly. The Co-Issuers disclaim any obligation to update such information and do not intend to do so. Neither the Initial Purchaser nor any of its affiliates makes any representation or warranty as to, or has independently verified or assumes any responsibility for, the accuracy or completeness of the information contained herein. Neither the Initial Purchaser nor any of its affiliates has independently verified any such information or assumes any responsibility for its accuracy or completeness. To the best knowledge and belief of the Collateral Manager, the information contained in the section entitled “The Collateral Manager” is in accordance with the material facts and does not omit material facts likely to affect the import of such information.

Neither the Collateral Manager nor any of its affiliates makes any representation or warranty as to, or has independently verified or assumes any responsibility for, the accuracy and completeness of the information contained herein other than the information appearing in the section entitled “The Collateral Manager.” The Collateral Manager disclaims any obligation to update such information and does not intend to do so.

Neither the Insurer nor any of its affiliates makes any representation or warranty as to, or has independently verified or assumes any responsibility for, the accuracy and completeness of the information contained herein.

Neither the Hedge Counterparties nor any of their respective affiliates makes any representation or warranty as to, has independently verified or assumes any responsibility for, the accuracy and completeness of the information contained herein. Each Hedge Counterparty disclaims any obligation to update any information herein and does not intend to do so. Nothing contained in this Offering Circular is or should be relied upon as a promise or representation as to future results or events. The Trustee has not participated in the preparation of this Offering Circular and assumes no responsibility for its contents.

This Offering Circular contains summaries of certain documents and of the terms of the Collateral Debt Securities. The summaries do not purport to be complete, contain generalizations and are qualified in their entirety by reference to such documents, copies of which will be made available to offerees upon request. Requests and

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inquiries regarding this Offering Circular or such documents should be directed to Merrill Lynch, Pierce, Fenner & Smith Incorporated, 4 World Financial Center, 7th Floor, New York, New York 10281, Attention: Structured Credit Products.

The Co-Issuers will make available to any offeree of the Notes, prior to the issuance thereof, the opportunity to ask questions of and to receive answers from the Co-Issuers or a person acting on their behalf concerning the terms and conditions of the Offering, the Co-Issuers or any other relevant matters and to obtain any additional information to the extent the Co-Issuers possess such information or can obtain it without unreasonable expense.

Each purchaser of a Note offered or sold in the United States or to a U.S. Person will be required (or, in certain circumstances relating to the offer and a sale of a Senior Note, deemed) to represent to the Issuer, the Co-Issuer (in the case of a Co-Issued Note), the Trustee and the Initial Purchaser that it is a Qualified Purchaser that is either (a) a Qualified Institutional Buyer, purchasing for its own account, to whom notice is given that the resale, pledge or other transfer is being made in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A or (b) in the case of an initial purchase of a Co-Issued Note, an Institutional Accredited Investor or solely in the case of a purchase of a Class F Note or a Subordinated Note, an Accredited Investor. Each purchaser of a Note offered and sold in reliance on Regulation S will be required (or, in certain circumstances be deemed) to represent to the Issuer, the Co-Issuer (in the case of a Co-Issued Note), the Trustee and the Initial Purchaser that it is not a U.S. Person, and that it is acquiring the Notes in an offshore transaction in accordance with Regulation S, for its own account and not for the account or benefit of a U.S. Person. Each purchaser of a Note will also be required (or, in certain circumstances relating to the offer and a sale of a Co-Issued Note, be deemed) to acknowledge that the Notes have not been and will not be registered under the Securities Act and may not be reoffered, resold, pledged or otherwise transferred except (i) to (A) a Qualified Purchaser that the transferor reasonably believes is (1) a Qualified Institutional Buyer purchasing for its own account, to whom notice is given that the resale, pledge or other transfer is being made in reliance on the exemption from Securities Act registration provided by Rule 144A, or (2) solely in the case of a transfer of Restricted Definitive Class F Notes or Subordinated Notes, an Accredited Investor, purchasing for its own account, to whom notice is given that the transfer is being made in reliance on an exemption from the registration requirements of the Securities Act (subject to the delivery of such certifications, legal opinions or other information as the Issuer may reasonably require to confirm that such transfer of Restricted Subordinated Notes is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act), or (B) a person that is not a U.S. Person, and is acquiring the Notes in reliance on the exemption from registration provided by Regulation S thereunder, (ii) in compliance with the certification, if any, and other requirements set forth in the Indenture and (iii) in accordance with any applicable securities laws of any state of the United States and any other relevant jurisdiction. For a description of these and certain other restrictions on offers and sales of the Notes and distribution of this Offering Circular, see “Transfer Restrictions.”

Although the Initial Purchaser may from time to time make a market in any Tranche of Notes, the Initial Purchaser is under no obligation to do so. In the event that the Initial Purchaser commences any market-making, the Initial Purchaser may discontinue such market-making at any time. There can be no assurance that a secondary market for any Tranche of Notes will develop, or if a secondary market does develop, that it will provide the Holders of such Tranche of Notes with liquidity of investment or that it will continue for the life of such Tranche of Notes.

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ANY DISCUSSION OF UNITED STATES FEDERAL TAX ISSUES SET FORTH IN THIS OFFERING CIRCULAR IS WRITTEN IN CONNECTION WITH THE PROMOTION AND MARKETING BY THE CO-ISSUERS AND MERRILL LYNCH OF THE NOTES DESCRIBED IN THIS OFFERING CIRCULAR. SUCH DISCUSSION IS NOT INTENDED OR WRITTEN TO BE LEGAL OR TAX ADVICE TO ANY PERSON AND IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY ANY PERSON FOR THE PURPOSE OF AVOIDING ANY UNITED STATES FEDERAL TAX PENALTIES THAT MAY BE IMPOSED ON SUCH PERSON. EACH INVESTOR SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

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THIS OFFERING CIRCULAR IS FOR INFORMATION PURPOSES ONLY AND IS NOT INTENDED TO BE RELIED UPON ALONE AS THE BASIS FOR AN INVESTMENT DECISION. IN MAKING AN INVESTMENT DECISION, PROSPECTIVE INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE CO-ISSUERS AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED AND MUST NOT RELY UPON INFORMATION PROVIDED BY OR STATEMENTS MADE BY THE INITIAL PURCHASER, THE COLLATERAL MANAGER OR ANY OF THEIR RESPECTIVE AFFILIATES. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF AN INVESTMENT IN NOTES FOR AN INDEFINITE PERIOD OF TIME.

NONE OF THE ISSUER, THE CO-ISSUER, THE COLLATERAL MANAGER, THE INITIAL PURCHASER, THE INSURER OR THEIR RESPECTIVE AFFILIATES MAKES ANY REPRESENTATION TO ANY OFFEREE OR PURCHASER OF NOTES REGARDING THE LEGALITY OF INVESTMENT THEREIN BY SUCH OFFEREE OR PURCHASER UNDER APPLICABLE LEGAL INVESTMENT OR SIMILAR LAWS OR REGULATIONS OR THE PROPER CLASSIFICATION OF SUCH AN INVESTMENT THEREUNDER.

THE CONTENTS OF THIS OFFERING CIRCULAR ARE NOT TO BE CONSTRUED AS LEGAL, ACCOUNTING, BUSINESS OR TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN ATTORNEY, ACCOUNTANT, BUSINESS ADVISOR AND TAX ADVISOR AS TO LEGAL, ACCOUNTING, BUSINESS AND TAX ADVICE.

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Unless otherwise indicated, (a) references herein to “Dollars”, “U.S. Dollars” and “$” shall be to the lawful currency of the United States of America; (b) the term “Rating Agencies” shall, except as otherwise provided herein, mean S&P, Moody’s and Fitch; (c) references to a “Rating Agency” shall mean S&P, Moody’s or Fitch; (d) references to a Rating Agency in connection with a rating of the Offered Notes shall be deemed to mean such Rating Agency with respect to the Offered Notes rated by it; (e) references to the term “Holder” shall mean the Person in whose name a security is registered; provided that, except where the context otherwise requires, Holder shall include the beneficial owner of such security, and “Noteholder” shall have the analogous meaning with respect to the Notes; and (f) references to “U.S.” and “United States” shall be to the United States of America, its territories and its possessions.

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Application has been made to IFSRA, as competent authority under Directive 2003/71/EC, for the final Offering Circular to be approved. Application has been made to the Irish Stock Exchange for the Notes (other than the Insured Notes) to be admitted to the Official List of the Irish Stock Exchange and to trading on the regulated market of the Irish Stock Exchange.

Application has been made to the Irish Stock Exchange for the Insured Notes to be admitted to the Official List of the Irish Stock Exchange and to trading on the alternative securities market of the Irish Stock Exchange. There can be no assurance that the IFSRA or the Irish Stock Exchange will in fact accept the listing of the Insured Notes or that the listing, if granted, will be maintained.

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Offers, sales and deliveries of the Notes are subject to certain restrictions in the United States, the United Kingdom, the Cayman Islands and other jurisdictions. See “Plan of Distribution” and “Transfer Restrictions.”

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No invitation may be made to the public in the Cayman Islands to subscribe for the Notes. ______________________

Notice to Florida Residents

The Notes are offered pursuant to a claim of exemption under Section 517.061 of the Florida Securities Act and have not been registered under said act in the State of Florida. All Florida residents who are not institutional

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investors described in Section 517.061(7) of the Florida Securities Act have the right to void their purchase of the Notes, without penalty, within three (3) days after the first tender of consideration.

Notice to Georgia Residents

The Notes will be issued or sold in reliance on paragraph (13) of Code Section 10-5-9 of the Georgia Securities Act of 1973, and may not be sold or transferred except in a transaction which is exempt under such act or pursuant to an effective registration under such act.

Jurisdictional Notices to Purchasers

Notice to Residents of the European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), Merrill Lynch has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date” ) it has not made and will not make an offer of Notes to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Notes which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of Notes to the public in that Relevant Member State at any time:

(a) to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities;

(b) to any legal entity which has two or more of (i) an average of at least 250 employees during the last financial year; (ii) a total balance sheet of more than EUR 43,000,000 and (iii) an annual net turnover of more than EUR 50,000,000, as shown in its last annual or consolidated accounts; or

(c) in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of Notes to the public” in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

Notice to Residents of the United Kingdom

This Offering Circular is only being distributed to and is only directed at (a) persons who are outside the United Kingdom or (b) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (“FSMA”) (financial promotion) order 2005 (the “2005 Order”) or (c) high net worth entities, and other persons to whom it may lawfully be communicated, falling within article 49(2)(a) to (e) of the 2005 Order (all such persons together being referred to as “Relevant Persons”). The Notes are available only to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such notes will be engaged in only with, Relevant Persons, any person who is not a Relevant Person should not act or rely on this Offering Circular or any of its contents.

GENERAL RESTRICTIONS

EACH PURCHASER OF THE NOTES MUST COMPLY WITH ALL APPLICABLE LAWS AND REGULATIONS IN FORCE IN EACH JURISDICTION IN WHICH IT PURCHASES, OFFERS OR SELLS

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SUCH NOTES AND MUST OBTAIN ANY CONSENT, APPROVAL OR PERMISSION REQUIRED FOR THE PURCHASE, OFFER OR SALE BY IT OF SUCH NOTES UNDER THE LAWS AND REGULATIONS IN FORCE IN ANY JURISDICTIONS TO WHICH IT IS SUBJECT OR IN WHICH IT MAKES SUCH PURCHASES, OFFERS OR SALES, AND NONE OF THE ISSUER, THE CO-ISSUER, THE COLLATERAL MANAGER, THE INSURER OR THE INITIAL PURCHASER SHALL HAVE ANY RESPONSIBILITY THEREFOR.

DISCLOSURE OF TAX STRUCTURE

Notwithstanding anything herein to the contrary, each prospective investor (and each employee, representative, or other agent of such prospective investor) may disclose to any and all persons, without limitation of any kind, the United States federal income “tax treatment” and “tax structure” (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions described in this Offering Circular and all materials of any kind (including opinions or other tax analyses) that are provided to such prospective investor (or such prospective investor’s representatives or agents) relating to such tax treatment or tax structure. This authorization of tax disclosure is retroactively effective to the commencement of discussions with prospective investors regarding the transactions contemplated herein.

AVAILABLE INFORMATION

To permit compliance with Rule 144A in connection with sales of the Notes, the Co-Issuers (or, in the case of the Class F Notes and Subordinated Notes, the Issuer) will be required to furnish, upon request of a Noteholder, to such Noteholder and a prospective purchaser designated by such Noteholder the information required to be delivered under Rule 144A(d)(4) under the Securities Act if at the time of the request the Issuer or the Co-Issuer, as applicable, is not a reporting company under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is not exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act. Such information may be obtained from the Trustee. It is not contemplated that the Issuer or the Co-Issuer will be such a reporting company or so exempt.

FORWARD LOOKING STATEMENTS

This Offering Circular contains forward-looking statements, which can be identified by words like “anticipate,” “believe,” “plan,” “hope,” “goal,” “initiative,” “expect,” “future,” “intend,” “will,” “could,” and “should” and by similar expressions. Prospective investors should not place undue reliance on forward-looking statements. Actual results could differ materially from those referred to in forward-looking statements for many reasons, including the risks described in “Risk Factors.” Forward-looking statements are necessarily speculative in nature, and some of or all the assumptions underlying any forward-looking statements may not materialize or may vary significantly from actual results. Variations between assumptions and results may be material.

Without limiting the generality of the foregoing, the inclusion of forward-looking statements in this Offering Circular should not be regarded as a representation by the Issuer, the Collateral Manager or the Initial Purchaser or any of their respective affiliates or any other person of the results that will actually be achieved by the Issuer or the Notes. None of the foregoing persons has any obligation to update or otherwise revise any forward-looking statements, including any revisions to reflect changes in any circumstances arising after the date of this Offering Circular relating to any assumptions or otherwise.

In connection with the offering of the Notes, the Initial Purchaser or any person or entity acting on behalf of the Initial Purchaser may over-allot or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail for a limited period after the date of issuance thereof. There may not, however, be any obligation of the Initial Purchaser or any of its agents to take such action. Such stabilizing, if commenced, may be discontinued at any time, and must be brought to an end after a limited period of time.

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SUMMARIES OF DOCUMENTS

This Offering Circular summarizes certain provisions of the Notes, the Indenture, the Collateral Management Agreement, the Insurance Documents and other transactions and documents. The summaries do not purport to be complete and (whether or not so stated in this Offering Circular) are subject to, are qualified in their entirety by reference to, and incorporate by reference, the provisions of the actual documents (including definitions of terms). However, no documents incorporated by reference are part of this Offering Circular for purposes of the admission of the Notes to trading on (a) in the case of the Insured Notes, the alternative securities market of the Irish Stock Exchange, and (b) in the case of all other Notes, the regulated market of the Irish Stock Exchange. Following the Closing Date, copies of the Indenture may be obtained by investors in the Notes upon request in writing to the Trustee at The Bank of New York Trust Company, National Association, 601 Travis Street, 16th Floor, Houston, Texas 77002, Attention: Global Corporate Trust – Attentus CDO III.

TABLE OF CONTENTS

Page

SUMMARY OF TERMS ..............................................................................................................................................1 Principal Parties...............................................................................................................................................1 Description of the Notes..................................................................................................................................2 Certain Key Dates ...........................................................................................................................................5 Other Terms ....................................................................................................................................................6

RISK FACTORS .........................................................................................................................................................25 General; Priorities of Notes...........................................................................................................................25 Relating to the Notes .....................................................................................................................................25 Relating to the Collateral Manager................................................................................................................34 Relating to Real Estate Entities .....................................................................................................................35 Relating to Mortgage Loans Comprising or Underlying Certain Collateral Debt Securities ........................39 Relating to the Collateral Debt Securities .....................................................................................................40 Relating to Certain Conflicts of Interest........................................................................................................52 Relating to Other General Risks....................................................................................................................56

DESCRIPTION OF THE NOTES...............................................................................................................................62 Status and Security ........................................................................................................................................63 Class A-1A Note Mechanics .........................................................................................................................63 Interest...........................................................................................................................................................65 Principal ........................................................................................................................................................68 Mandatory Redemption.................................................................................................................................69 Auction Call Redemption..............................................................................................................................70 Optional Redemption and Tax Redemption ..................................................................................................72 Redemption Procedures.................................................................................................................................73 Redemption Price ..........................................................................................................................................74 Cancellation...................................................................................................................................................74 Payments .......................................................................................................................................................74 Priority of Payments......................................................................................................................................75 The Coverage Tests .......................................................................................................................................82 Form, Denomination, Registration and Transfer...........................................................................................84 No Gross-Up .................................................................................................................................................93 The Indenture ................................................................................................................................................94 Events of Default...........................................................................................................................................94

USE OF PROCEEDS ................................................................................................................................................101

RATINGS OF THE NOTES .....................................................................................................................................102

MATURITY, PREPAYMENT AND YIELD CONSIDERATIONS........................................................................103

THE CO-ISSUERS....................................................................................................................................................104 General ........................................................................................................................................................104 Capitalization ..............................................................................................................................................105 Business.......................................................................................................................................................106 Consolidation, Merger or Transfer of Assets ..............................................................................................106

SECURITY FOR THE SENIOR NOTES .................................................................................................................106 General ........................................................................................................................................................106 Collateral Debt Securities............................................................................................................................106

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The Portfolio ...............................................................................................................................................110 Certain Terms of the Collateral Debt Securities..........................................................................................110 Certain Matters Relating to Synthetic Securities.........................................................................................122 The Collateral Quality Tests........................................................................................................................123 Criteria for Purchase of Collateral...............................................................................................................124 Changes in Composition of the Collateral Debt Securities .........................................................................127 Disposition of Collateral Debt Securities ....................................................................................................128 Acquisition of Collateral Debt Securities after the Closing Date ................................................................129 The Hedge Agreements ...............................................................................................................................129 The Accounts...............................................................................................................................................132

THE COLLATERAL MANAGER ...........................................................................................................................135 General Information ....................................................................................................................................135 The AMG Team ..........................................................................................................................................136

THE COLLATERAL MANAGEMENT AGREEMENT .........................................................................................137 General ........................................................................................................................................................137 Conflicts of Interest .....................................................................................................................................141 Disclosure and Consent Provisions Relating to “Principal Trades” and Certain Related Matters ..............141 Compensation..............................................................................................................................................142

THE POLICY AND THE INSURANCE AGREEMENT ........................................................................................142 The Policy ...................................................................................................................................................142 The Insurance Agreement ...........................................................................................................................145

CERTAIN INCOME TAX CONSIDERATIONS.....................................................................................................147 General ........................................................................................................................................................147 U.S. Federal Income Tax Considerations....................................................................................................148 Tax Treatment of U.S. Holders of the Senior Notes....................................................................................150 Tax Treatment of U.S. Holders of the Subordinated Notes.........................................................................151 U.S. Federal Income Taxation of Non-U.S. Holders...................................................................................154 Withholding, Information Reporting and Related Matters..........................................................................154 Transfer Reporting Requirements ...............................................................................................................154 Special Considerations for Tax-Exempt U.S. Holders ................................................................................154 Disclosure Requirements for U.S. Holders Recognizing Significant Losses, and for Certain

Subordinated Noteholders ..................................................................................................................154 Cayman Islands Tax Considerations ...........................................................................................................155

CERTAIN ERISA CONSIDERATIONS..................................................................................................................156 IRS Circular 230 Notice ..............................................................................................................................156 General ........................................................................................................................................................156 Plan Asset Considerations; Purchase and Transfer Restrictions .................................................................157 Nature of Discussion ...................................................................................................................................159

PLAN OF DISTRIBUTION......................................................................................................................................160 Offers and Sales of Notes............................................................................................................................160 European Economic Area............................................................................................................................161 Purchaser Inquiries ......................................................................................................................................162

ANTI-MONEY LAUNDERING AND ANTI-TERRORISM REQUIREMENTS AND DISCLOSURES..............162

TRANSFER RESTRICTIONS..................................................................................................................................163 Representations and Agreements ................................................................................................................163 Legends .......................................................................................................................................................169

LISTING AND GENERAL INFORMATION..........................................................................................................174

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CERTAIN LEGAL MATTERS ................................................................................................................................175

GLOSSARY OF CERTAIN DEFINED TERMS......................................................................................................176

INDEX OF DEFINED TERMS ................................................................................................................................207

SUMMARY OF TERMS

The following summary is qualified in its entirety by reference to the more detailed information appearing elsewhere in this Offering Circular (the “Offering Circular”) and the documents referred to herein. A glossary of certain defined terms used herein appears at the end of this Offering Circular. For a discussion of certain factors to be considered in connection with an investment in the Notes, see “Risk Factors”.

Principal Parties

The Issuer: Attentus CDO III, Ltd. is an exempted company incorporated with limited liability under the laws of the Cayman Islands for the limited purposes of: (a) investing in and disposing of Collateral Debt Securities and Eligible Investments, (b) entering into, and performing its obligations under, the Indenture, the Collateral Management Agreement, the Insurance Documents, the Collateral Administration Agreement and the Purchase and Placement Agency Agreement, (c) entering into and performing its obligations under the Hedge Agreements, (d) issuing and selling the Notes, (e) pledging the Collateral as security for its obligations in respect of the Senior Notes and otherwise for the benefit of the Secured Parties, (f) owning the Co-Issuer, (g) other activities incidental to the foregoing and paying the expenses of the Issuer incurred in the ordinary course of its business otherwise permitted under the Indenture, and (h) doing or performing any action or thing which is required by or ancillary to the attainment of the objects specified in clauses (a) through (g) above, including supplementing or restructuring the transactions contemplated by the objects specified in clauses (a) through (g) above or any of the agreements, deeds or other documents entered into by the Issuer pursuant thereto, and entering into further agreements, understandings and contracts and executing certificates, affidavits, notices and any other documentation in respect of the transactions contemplated by the objects specified in clauses (a) through (g) above. The entire issued share capital of the Issuer consists of 250 ordinary shares, par value $1.00 per share, each of which will be held in trust for charitable purposes by Maples Finance Limited in the Cayman Islands under the terms of a declaration of trust.

The Issuer will not have any material assets other than the Collateral Debt Securities, Eligible Investments, membership interests in the Co-Issuer and rights under the Hedge Agreements and under certain other agreements entered into as described herein, which assets will be the only source of funds available to make payments on the Notes. The Issuer will own the entire share capital of the Co-Issuer.

The Co-Issuer: Attentus CDO III, LLC is a Delaware limited liability company that was organized for the sole purpose of co-issuing the Co-Issued Notes.

The Co-Issuer will be capitalized only to the extent of the contribution of the Issuer, its sole member, will have no assets other than such contribution, will have no debt other than as Co-Issuer of the Co-Issued Notes and will not pledge any assets to secure the Notes. The Co-Issuer will not have any interest in the Collateral Debt Securities held by the Issuer and will have no claim against the Issuer in respect of the Collateral Debt Securities or otherwise. The Co-Issuer will not co-issue the Class F Notes or the Subordinated Notes.

Collateral Manager: Attentus Management Group, LLC, a Delaware limited liability company, will monitor the Collateral under a Collateral Management Agreement to be entered into between the Issuer and the Collateral Manager. Pursuant to the Collateral Management Agreement and in accordance with the Indenture, the Collateral

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Manager will (a) determine, upon the request of the Trustee, when payments received in respect of the Collateral Debt Securities and the Hedge Agreements shall be applied as Principal Proceeds and when such payments shall be applied as Interest Proceeds, such determination to be made in accordance with the Indenture, (b) facilitate the acquisition and settlement of Collateral Debt Securities by the Issuer, (c) administer the Collateral Debt Securities, (d) advise the Issuer with respect to the disposition of Collateral Debt Securities in accordance with the terms of the Indenture, (e) advise the Issuer with respect to the selection of Eligible Investments, (f) monitor the Hedge Agreements and advise the Issuer with respect to entering into, assigning, transferring and terminating the Hedge Agreements and (g) take certain other actions on behalf of the Issuer in accordance with the terms of the Collateral Management Agreement. For a summary of certain provisions of the Collateral Management Agreement and certain other information concerning the Collateral Manager, including key individuals associated therewith who will be administering the Issuer’s portfolio, see “The Collateral Manager” and “The Collateral Management Agreement.”

On the Closing Date, the members of the Collateral Manager will collectively be obligated to purchase, or cause one or more of their respective affiliates to purchase, at least $10,000,000 aggregate principal amount of Subordinated Notes, and may, but will not be obligated to purchase Class F Notes. No such entity will be obligated to retain ownership of any Note.

For a description of the compensation payable to the Collateral Manager, see “The Collateral Management Agreement—Compensation.”

The Trustee: The Bank of New York Trust Company, National Association.

Irish Listing Agent: Dillon Eustace.

Irish Paying Agent: Custom House Administration and Corporate Services Limited.

Description of the Notes

The Notes: The Notes will be issued on or about January 18, 2007. The Co-Issuers or the Issuer, as applicable, are issuing the following Classes of Notes:

Class of Notes

Principal Amount as of Closing Date

Percentageof all Notes

Interest Rate

Weighted Average Life(1)

Final Maturity Date

Class A-1A $150,000,000 (3) 29.62% LIBOR + 0.32% 7.6 years October 11, 2042 Class A-1B $100,000,000 19.74% LIBOR + 0.26% 10.0 years October 11, 2042 Class A-2 $100,000,000 19.74% LIBOR + 0.45% 10.0 years October 11, 2042 Class B $34,000,000 6.71% LIBOR + 0.70% 10.0 years October 11, 2042

Class C-1 $16,000,000 3.16% LIBOR + 1.35% 10.0 years October 11, 2042 Class C-2 $15,000,000 2.96% 6.312%/LIBOR

+ 1.35% (2)

10.0 years October 11, 2042

Class D $10,000,000 1.97% 6.612%/LIBOR + 1.65% (2)

10.0 years October 11, 2042

Class E-1 $15,000,000 2.96% LIBOR + 2.95% 9.2 years October 11, 2042 Class E-2 $7,000,000 1.38% 7.982% 9.2 years October 11, 2042 Class F $24,000,000 4.74% 9.532% 9.2 years October 11, 2042

Subordinated Notes

$35,500,000 7.01% N/A N/A October 11, 2042

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(1) The weighted average life of the Notes has been calculated assuming certain Collateral characteristics and that there are no prepayments, defaults, delinquencies or redemptions. There are no assurances that such assumptions will be met. See “Maturity, Prepayment and Yield Considerations” herein. The weighted average life of the Subordinated Notes has not been calculated. (2) During the Fixed Rate Period the Class C-2 Notes and the Class D Notes will bear interest at a fixed rate per annum equal to 6.312% and 6.612%, respectively, and from and including the Fixed Rate Period Termination Date at a floating rate per annum equal to LIBOR plus 1.35% and LIBOR plus 1.65%, respectively. (3) U.S.$67,500,000 of the Class A-1A Notes will be funded on the Closing Date.

Each of the Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Subordinated Notes are referred to herein as a “Class” of Notes. The Class A-1A Notes, the Class A-1B Notes, the Class A-2 Notes, the Class B Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Class E-1 Notes, the Class E-2 Notes, the Class F Notes and the Subordinated Notes are each referred to herein as a “Tranche” of Notes. The Class C-2 Notes and the Class D Notes are together referred to as the “Fixed/Floating Rate Notes”. The Class E-2 Notes and Class F Notes are together referred to as the “Fixed Rate Notes”. The Senior Notes other than the Fixed/Floating Rate Notes and Fixed Rate Notes are collectively referred to as the “Floating Rate Notes”.

The Notes will be issued and the Senior Notes will be secured pursuant to the Indenture to be dated as of January 18, 2007 (the “Indenture”), among the Issuer, the Co-Issuer, the Trustee and the Insurer. Each Hedge Counterparty and the Collateral Manager will be express third party beneficiaries of the Indenture. The Senior Notes will be limited recourse debt obligations of the Issuer, secured solely by a pledge of the Collateral by the Issuer to the Trustee pursuant to the Indenture for the benefit of the Senior Noteholders, the Trustee, the Collateral Manager, the Insurer, the Hedge Counterparties, and, with respect to any funds on deposit in any Synthetic Security Collateral Account, the related Synthetic Security Counterparty (collectively, the “Secured Parties”). See “Description of the Notes—Status and Security.” The Co-Issued Notes will be non-recourse debt obligations of the Co-Issuer. The Subordinated Notes will be non-recourse obligations of the Issuer and will be unsecured. The Notes are payable solely from the Collateral.

Class A-1A Notes: The Class A-1A Notes are a delayed draw Class of Notes that will be issued on the Closing Date and funded over the course of the Initial Investment Period. Pursuant to one or more Class A-1A Note Purchase Agreements dated as of the Closing Date (each, a “Class A-1A Note Purchase Agreement”) between the Issuer, the Co-Issuer, the Trustee, the Distribution Agent and the Holders from time to time of the Class A-1A Notes (or the Liquidity Provider(s) with respect to any such Holder), the Class A-1A Noteholders or the Liquidity Provider(s) with respect to any such Holder will commit to make advances to the Issuer during the Initial Investment Period, up to an aggregate amount equal to U.S.$150,000,000, as further described below. The maximum aggregate principal amount of advances (whether at the time funded or unfunded) that a Holder of Class A-1A Notes is obligated to make to the Issuer from time to time during the Initial Investment Period under its Class A-1A Note Purchase Agreement is referred to herein as the “Class A-1A Commitment” of such Holder. It is not a condition to closing that the Issuer borrow any amount under the Class A-1A Notes on the Closing Date. The Issuer will draw all remaining unutilized Class A-1A Commitments on the last day of the Initial Investment Period.

The Class A-1A Notes will be funded in installments on up to 3 Draw Dates (each installment, a “Draw” and the date of any such Draw a “Draw Date”),

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which are expected to occur on the 25th of any month during the Initial Investment Period. The commitment of the Class A-1A Noteholders to fund Draws will terminate no later than the Commitment Period Termination Date. The remainder of the proceeds of the Draws not applied to acquire Additional Collateral Debt Securities, if any, will be treated as Principal Proceeds.

During the Initial Investment Period, any Class A-1A Noteholder that is unable to satisfy the Rating Criteria must satisfy certain posting or transfer requirements. See “Description of the Securities—Replacement of Class A-1A Noteholders— Rating Criteria and Class A-1A Noteholders”.

Use of Proceeds: The gross proceeds received from the issuance and sale of the Notes will be approximately $506,500,000 (which amount is calculated as if the Class A-1A Notes were fully drawn). A portion of such proceeds (in addition to any up-front payment, if any, made to the Issuer under any Hedge Agreement) will be used (a) to pay the organizational fees and expenses of the Co-Issuers (including, without limitation, the legal fees and expenses of counsel to the Co-Issuers, the Initial Purchaser and the Collateral Manager), (b) to pay expenses relating to the acquisition of the Collateral Debt Securities (including the reimbursement of the Collateral Manager, its members and its affiliates and the Initial Purchaser for such expenses), (c) to pay the expenses of offering the Notes (including initial purchaser fees or similar fees payable in connection with the placement of the Notes), (d) to pay the Up-Front Collateral Management Fee to the Collateral Manager, (e) to make an initial deposit into the Expense Account of $100,000, (f) to make a deposit into the Discretionary Interest Shortfall Reserve Account of $500,000 and (g) to make up-front payments, if any, in respect of the Hedge Agreements.

The proceeds received from the sale and issuance of the Notes (including all Draws under the Class A-1A Notes), net of the foregoing, will be approximately $500,000,000 and will be used by the Issuer to purchase a diversified portfolio of securities that will satisfy the investment criteria described herein and will initially consist of:

(a) approximately $192,620,618 aggregate principal amount of Trust Preferred Securities and Real Estate Entity Securities issued by issuers related to (or issued directly by) REITs;

(b) approximately $197,033,767 aggregate principal amount of Trust Preferred Securities and Real Estate Entity Securities issued by issuers related to (or issued directly by) REOCs;

(c) approximately $82,958,000 aggregate principal amount of Trust Preferred Securities and Real Estate Entity Securities issued by issuers related to (or issued directly by) Homebuilding Companies;

(d) approximately $0 aggregate principal amount of Real Estate Entity Securities issued by issuers related to (or issued directly by) Limited Real Estate Entities;

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(e) approximately $7,500,000 aggregate principal amount of CMBS and CMBS CDO Securities;

(f) approximately $0 aggregate principal amount of Synthetic Securities referencing CMBS, CMBS CDO Securities or Real Estate Entity Securities issued by Homebuilding Companies; and

(g) approximately $75,251,385 aggregate principal amount of Loans.

Any such proceeds not invested in Collateral Debt Securities or deposited into the Expense Account on the Closing Date will be deposited by the Trustee in the Uninvested Proceeds Account and invested in Eligible Investments pending the use of such proceeds in accordance with the terms of the Indenture. See “Security for the Senior Notes.”

Certain Key Dates

Closing Date: January 18, 2007 (the “Closing Date”).

Interest Period: With respect to (i) the Floating Rate Notes, (a) in the case of the initial Interest Period, the period from, and including, the Closing Date to, but excluding, the initial Distribution Date and (b) thereafter, the period from, and including, the Distribution Date immediately following the last day of the immediately preceding Interest Period to, but excluding, the next succeeding Distribution Date and (ii) during the Initial Investment Period, any Draw under the Class A-1A Notes (a) the period from and including the relevant Draw Date to but excluding the first Distribution Date thereafter; and (b) after the initial Interest Period for such Draw each successive period from and including the Distribution Date immediately following the last day of the immediately preceding Interest Period to but excluding the next succeeding Distribution Date until such Draw is paid in full (each, an “Interest Period”). Notwithstanding the foregoing, the first Interest Period for the Fixed/Floating Rate Notes shall commence on the Fixed Rate Period Termination Date.

Due Period: With respect to any Distribution Date (other than a Redemption Date or Stated Maturity of the Notes), the period ending on the 3rd Business Day of the calendar month in which such Distribution Date occurs (or, in the case of a Redemption Date or Stated Maturity of the Notes, the Business Day preceding the Redemption Date or Stated Maturity, as the case may be) and beginning on (and including) the 4th Business Day of the calendar month in which the preceding Distribution Date occurs (or beginning on the Closing Date, in the case of the first Due Period) (each, a “Due Period”).

Distribution Date: Quarterly on January 11, April 11, July 11 and October 11 of each year, or, if such day is not a Business Day, the next Business Day, commencing in July, 2007 (each, a “Distribution Date”).

Determination Date: The last day of a Due Period (each, a “Determination Date”).

Measurement Date: Each of the following will constitute a “Measurement Date”:

(a) the Closing Date;

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(b) the Ramp-Up Completion Date (if such date is not the Closing Date);

(c) any date after the Ramp-Up Completion Date on which the Issuer disposes of any Collateral Debt Security;

(d) any date after the Ramp-Up Completion Date on which the Issuer acquires any Additional Collateral Debt Security;

(e) any date after the Ramp-Up Completion Date on which a Collateral Debt Security becomes a Defaulted Security or a Deferred Interest PIK Security;

(f) each Determination Date;

(g) the 25th day of any calendar month ending after the Ramp-Up Completion Date (excluding any month in which a Determination Date falls); and

(h) with two Business Days’ notice to the Issuer and the Trustee, any other Business Day that any Rating Agency, the Insurer or a Majority of any Class of 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 Business Day.

Record Date: The fifteenth calendar day immediately preceding each Distribution Date (each, a “Record Date”).

Reinvestment Period: The period between the Ramp-Up Completion Date and the Distribution Date occurring in January 2012.

Other Terms

Interest Payments on the Senior Notes: The Aggregate Principal Amount of each Tranche of Senior Notes will bear

interest at a per annum rate (the “Note Interest Rate” with respect to such Tranche of Notes) set forth opposite such Tranche in the table below:

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Class of Notes

Note Interest Rate for each Interest Period

Class A-1A LIBOR plus 0.32 % per annum Class A-1B LIBOR plus 0.26% per annum Class A-2 LIBOR plus 0.45% per annum Class B LIBOR plus 0.70% per annum Class C-1 LIBOR plus 1.35% per annum Class C-2 6.312% per annum/

LIBOR plus 1.35% per annum(1) Class D 6.612% per annum/

LIBOR plus 1.65% per annum(1) Class E-1 LIBOR plus 2.95% per annum Class E-2 7.982% per annum Class F 9.532% per annum (1) During the Fixed Rate Period the Class C-2 Notes and the Class D Notes will bear interest at a fixed rate per annum equal to 6.312% and 6.612%, respectively, and from and including the Fixed Rate Period Termination Date at a floating rate per annum equal to LIBOR plus 1.35% and LIBOR plus 1.65%, respectively.

Interest on each Tranche of Floating Rate Notes (and the Class A-1A Commitment Fee) will be computed on the basis of a 360-day year and the actual number of days elapsed in the relevant Interest Period. Interest on each Tranche of Floating Rate Notes will accrue from and including the Closing Date.

Interest on each Tranche of Fixed Rate Notes will be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest on each Tranche of Fixed Rate Notes will accrue from and including the Closing Date.

During the Fixed Rate Period, interest will accrue on each Tranche of Fixed/Floating Rate Notes at their respective fixed rates. During such period, interest on such Fixed/Floating Rate Notes will be computed on the basis of a 360-day year consisting of twelve 30-day months. After the Fixed Rate Period Termination Date, interest on each Tranche of Fixed/Floating Rate Notes will be payable at their respective floating rates quarterly in arrears in respect of each Interest Period on the related Distribution Date, and will be computed on the basis of the actual number of days in the Interest Period and a 360-day year. Interest on each Tranche of Fixed/Floating Rate Notes will accrue from and including the Closing Date.

Accrued and unpaid interest and the Class A-1A Commitment Fee will be payable quarterly in arrears on each Distribution Date, if and to the extent that funds are available on such Distribution Date in accordance with the Priority of Payments; provided, that in the event that any date identified as a Distribution Date, Redemption Date or Stated Maturity falls on a day other than a Business Day, the Distribution Date, Redemption Date or Stated Maturity, as the case may be, shall be deemed to be the next succeeding Business Day and with respect to any Senior Notes, interest (and with respect to the Class A-1A Notes, the Class A-1A Commitment Fee) that accrues with respect to the period from and after any such identified date to such next succeeding Business Day shall be payable on such next succeeding Business Day.

During each Interest Period ending on or prior to the Fixed Rate Period Termination Date, the two Tranches comprising each of the Class C Notes and the Class E Notes bear interest at different rates. In accordance with the Priority of Payments, interest payments will be allocated between the Class C-1 Notes and the Class C-2 Notes pro rata based on amounts due, and interest payments will be allocated between the Class E-1 Notes and the Class E-2 Notes pro rata based on amounts due.

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So long as any Class A Notes are outstanding, any interest on the Class B Notes that is not paid when due by operation of the Priority of Payments will be deferred (such interest being referred to herein as “Class B Deferred Interest”). Any interest so deferred will be added to the Aggregate Outstanding Principal Amount (as defined herein) of the Class B Notes and thereafter interest will accrue on the Aggregate Outstanding Principal Amount of the Class B Notes, as so increased. So long as any Class A Notes remain outstanding, failure to make payment in respect of interest on any Class B Notes on any Distribution Date by reason of the operation of the Priority of Payments will not constitute an Event of Default under the Indenture. Upon the payment of Class B Deferred Interest previously capitalized as additional principal, the Aggregate Outstanding Principal Amount of the Class B Notes will be reduced by the amount of such payment.

So long as any Class A Notes or Class B Notes are outstanding, (i) any interest on the Class C-1 Notes that is not paid when due by operation of the Priority of Payments will be deferred (such interest being referred to herein as “Class C-1 Deferred Interest”) and (ii) any interest on the Class C-2 Notes that is not paid when due by operation of the Priority of Payments will be deferred (such interest being referred to herein as “Class C-2 Deferred Interest”, and together with the Class C-1 Deferred Interest, the “Class C Deferred Interest”). Any interest so deferred will be added to the Aggregate Outstanding Principal Amount (as defined herein) of the related Tranche of Class C Notes and thereafter interest will accrue on the Aggregate Outstanding Principal Amount of the related Tranche of Class C Notes, as so increased. So long as any Class A Notes or Class B Notes remain outstanding, failure to make payment in respect of interest on any Class C Notes on any Distribution Date by reason of the operation of the Priority of Payments will not constitute an Event of Default under the Indenture. Upon the payment of Class C Deferred Interest previously capitalized as additional principal, the Aggregate Outstanding Principal Amount of the related Tranche of Class C Notes will be reduced by the amount of such payment.

So long as any Class A Notes, Class B Notes or Class C Notes are outstanding, any interest on the Class D Notes that is not paid when due by operation of the Priority of Payments will be deferred (such interest being referred to herein as “Class D Deferred Interest”). Any interest so deferred will be added to the Aggregate Outstanding Principal Amount (as defined herein) of the Class D Notes and thereafter interest will accrue on the Aggregate Outstanding Principal Amount of the Class D Notes, as so increased. So long as any Class A Notes, Class B Notes or Class C Notes remain outstanding, failure to make payment in respect of interest on any Class D Notes on any Distribution Date by reason of the operation of the Priority of Payments will not constitute an Event of Default under the Indenture. Upon the payment of Class D Deferred Interest previously capitalized as additional principal, the Aggregate Outstanding Principal Amount of the Class D Notes will be reduced by the amount of such payment.

So long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes are outstanding, (i) any interest on the Class E-1 Notes that is not paid when due by operation of the Priority of Payments will be deferred (such interest being referred to herein as “Class E-1 Deferred Interest”) and (ii) any interest on the Class E-2 Notes that is not paid when due by operation of the Priority of Payments will be deferred (such interest being referred to herein as “Class E-2 Deferred Interest”, and together with the Class E-1 Deferred Interest, the “Class E Deferred Interest”). Any interest so deferred will be added to the Aggregate Outstanding Principal Amount (as defined herein) of the related

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Tranche of Class E Notes and thereafter interest will accrue on the Aggregate Outstanding Principal Amount of the related Tranche of Class E Notes, as so increased. So long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes remain outstanding, failure to make payment in respect of interest on any Class E Notes on any Distribution Date by reason of the operation of the Priority of Payments will not constitute an Event of Default under the Indenture. Upon the payment of Class E Deferred Interest previously capitalized as additional principal, the Aggregate Outstanding Principal Amount of the related Tranche of Class E Notes will be reduced by the amount of such payment.

So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are outstanding, (i) any interest on the Class F Notes that is not paid when due by operation of the Priority of Payments will be deferred (such interest being referred to herein as “Class F Deferred Interest”). Any interest so deferred will be added to the Aggregate Outstanding Principal Amount (as defined herein) of the Class F Notes and thereafter interest will accrue on the Aggregate Outstanding Principal Amount of the Class F Notes, as so increased. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes remain outstanding, failure to make payment in respect of interest on any Class F Notes on any Distribution Date by reason of the operation of the Priority of Payments will not constitute an Event of Default under the Indenture. Upon the payment of Class F Deferred Interest previously capitalized as additional principal, the Aggregate Outstanding Principal Amount of the Class F Notes will be reduced by the amount of such payment.

So long as any Class A Notes are outstanding, if either of the Class A Coverage Tests is not satisfied on any Determination Date, then funds that would otherwise be used to make distributions on the Subordinated Notes and payments in respect of interest on the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes on the related Distribution Date, will be used instead to redeem, first, the Class A-1A Notes, second, the Class A-1B Notes, and third, the Class A-2 Notes until each applicable Coverage Test is satisfied. See “Description of the Notes—Priority of Payments,” “—Mandatory Redemption” and “Ratings of the Notes.”

So long as any Class B Notes are outstanding, if either of the Class B Coverage Tests is not satisfied on any Determination Date, then funds that would otherwise be used to make distributions on the Subordinated Notes and payments in respect of interest on the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes on the related Distribution Date, will be used instead to redeem, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, and fourth, the Class B Notes, until each applicable Coverage Test is satisfied. See “Description of the Notes—Priority of Payments,” “—Mandatory Redemption” and “Ratings of the Notes.”

So long as any Class C Notes are outstanding, if either of the Class C Coverage Tests is not satisfied on any Determination Date, then funds that would otherwise be used to make distributions on the Subordinated Notes and payments in respect of interest on the Class D Notes, the Class E Notes and the Class F Notes on the related Distribution Date, will be used instead to redeem, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, and fifth, the Class C Notes, until each applicable Coverage Test is satisfied. See “Description of the Notes—Priority of Payments,” “—Mandatory Redemption,” and “Ratings of the Notes.”

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So long as any Class D Notes are outstanding, if either of the Class D Coverage Tests is not satisfied on any Determination Date, then funds that would otherwise be used to make distributions on the Subordinated Notes and payments in respect of interest on the Class E Notes and the Class F Notes on the related Distribution Date, will be used instead to redeem, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, the Class C Notes, and sixth, the Class D Notes, until each applicable Coverage Test is satisfied. See “Description of the Notes—Priority of Payments,” “—Mandatory Redemption” and “Ratings of the Notes.”

So long as any Class E Notes are outstanding, if either of the Class E Coverage Tests is not satisfied on any Determination Date, then funds that would otherwise be used to make distributions on the Subordinated Notes and payments in respect of interest on the Class F Notes on the related Distribution Date, will be used instead to redeem, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, the Class C Notes, sixth, the Class D Notes, and, seventh, the Class E Notes, until each applicable Coverage Test is satisfied. See “Description of the Notes—Priority of Payments,” “—Mandatory Redemption,” and “Ratings of the Notes.”

So long as any Class F Notes are outstanding, if either of the Class F Coverage Tests is not satisfied on any Determination Date related to any Distribution Date, then funds that would otherwise be used to make distributions on the Subordinated Notes on the related Distribution Date, will be used instead to redeem, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, the Class C Notes, sixth, the Class D Notes, seventh, the Class E Notes, and, eighth, the Class F Notes, until each applicable Coverage Test is satisfied. See “Description of the Notes—Priority of Payments,” “—Mandatory Redemption,” and “Ratings of the Notes.”

In the event of a Ramp-Up Ratings Confirmation Failure, Uninvested Proceeds and, to the extent that Uninvested Proceeds are insufficient for such purpose, Interest Proceeds and Principal Proceeds that would otherwise be used to make distributions on the Subordinated Notes and payments in respect of interest on the Senior Notes may be used to make payments in respect of principal on the Senior Notes. See “Description of the Notes— Priority of Payments” and “—Mandatory Redemption.”

Principal Payments on the Senior Notes: Principal Proceeds, to the extent not reinvested in Additional Collateral Debt

Securities as described herein, will be applied on each Distribution Date in accordance with the Priority of Payments to pay principal of each Class of Notes. The amount and frequency of principal payments of a Class of Notes will depend upon, among other things, the amount and frequency of payments of principal and interest received with respect to the Collateral Debt Securities.

The Issuer may redeem the Notes in connection with an Optional Redemption or a Tax Redemption under the circumstances described in “Description of the Notes—Optional Redemption and Tax Redemption.”

Class A-1A Commitment Fee: A commitment fee (the “Class A-1A Commitment Fee”), will be payable on all undrawn amounts under the Class A-1A Commitments. The Class A-1A Commitment Fee will be payable in accordance with the Priority of Payments on each Distribution Date in respect of Class A-1A Commitments that are unutilized during the related Interest Period. The Class A-1A Commitment Fee on undrawn amounts will accrue on the undrawn principal amount of the Class

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A-1A Notes for each day from and including the Closing Date to but excluding the date the Aggregate Undrawn Amount of the Class A-1A Notes is reduced to zero and the Issuer is not permitted under the Class A-1A Note Purchase Agreements to request any further Borrowing, at a rate per annum equal to 0.16%. The Class A-1A Commitment Fee will be payable quarterly in arrears on each Distribution Date and will rank pari passu with the payment of interest on the Class A-1A Notes. The Class A-1A Commitment Fee will be computed on the basis of a 360-day year and the actual number of days elapsed. See “Description of the Securities—Class A-1A Note Mechanics”.

Distributions on the Subordinated Notes; Subordination of the Subordinated Notes: The Subordinated Notes will not bear interest at a stated rate and will be entitled

to distributions only to the extent funds are available therefor as described below. On each Distribution Date, to the extent funds are available therefor, Interest Proceeds will be paid to the Holders of the Subordinated Notes only after the payment of interest on the Senior Notes and the payment of certain other amounts in accordance with the Priority of Payments; provided that (a) on the Distribution Date occurring in January 2008, and on each Distribution Date thereafter to and including the Distribution Date in January 2012, if the Class E Notes and the Class F Notes are not redeemed in full on or prior to any such Distribution Date, an amount equal to 8% of the Interest Proceeds available after application of Interest Proceeds to pay Deferred Interest on the Class F Notes in accordance with the Priority of Payments will be applied to pay, pro rata, principal of the Class E Notes and the Class F Notes until each such Class of Notes has been paid in full, (b) on the Distribution Date occurring after January 2012, and on each Distribution Date thereafter to and including the Distribution Date in January 2017, if the Class E Notes and the Class F Notes are not redeemed in full on or prior to any such Distribution Date, an amount equal to 25% of the Interest Proceeds available after application of Interest Proceeds to pay Deferred Interest on the Class F Notes in accordance with the Priority of Payments will be applied to pay, pro rata, principal of the Class E Notes and the Class F Notes until each such Class of Notes has been paid in full and (c) on the Distribution Date occurring in April 2017, and on each Distribution Date thereafter, if the Senior Notes are not redeemed in full on or prior to such date, an amount equal to 60% of the Interest Proceeds available after application of Interest Proceeds to pay Deferred Interest on the Class F Notes in accordance with the Priority of Payments will be applied to pay, pro rata, principal of the Class A-1A Notes, Class A-1B Notes, 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, until each such Class of Notes has been paid in full. See “Description of the Notes—Principal,” “—Mandatory Redemption” and “—Priority of Payments—Interest Proceeds.”

Until the Senior Notes have been paid in full, Principal Proceeds not used to redeem Senior Notes (or to purchase additional Collateral Debt Securities in accordance with the terms of the Indenture) will not be available to make distributions in respect of the Subordinated Notes.

Maturity: The stated maturity of the Notes is the Distribution Date in October 2042 (with respect to the Notes, the “Stated Maturity”). Each of the Notes will mature at the Stated Maturity unless redeemed or repaid prior thereto.

Mandatory Redemption of Senior Notes: Each Class of Senior Notes shall, on any Distribution Date, be subject to

mandatory redemption in the event that any Coverage Test applicable to such

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Class of Senior Notes or any Class of Senior Notes subordinate to such Class is not satisfied on the related Determination Date. Any such redemption will be effected, first, from Interest Proceeds and, second (to the extent that the application of Interest Proceeds pursuant to the Priority of Payments would be insufficient to cause such tests to be satisfied), from Principal Proceeds, in each case to the extent necessary to cause each applicable Coverage Test to be satisfied. Any such redemption will be applied to each outstanding Class of Senior Notes sequentially in order of seniority and will otherwise be effected as described below under “Description of the Notes—Priority of Payments.”

In the event of a Ramp-Up Ratings Confirmation Failure, the Issuer will be required to apply on the first Distribution Date Uninvested Proceeds, Interest Proceeds and Principal Proceeds to the repayment of each outstanding Class of Senior Notes sequentially in order of seniority in accordance with the Priority of Payments as, and to the extent, necessary to obtain a Ratings Confirmation. See “Description of the Notes—Mandatory Redemption.”

(a) On the Distribution Date occurring in January 2008, and on each Distribution Date thereafter to and including the Distribution Date in January 2012, if the Class E Notes and the Class F Notes are not redeemed in full on or prior to any such Distribution Date, an amount equal to 8% of the Interest Proceeds available after application of Interest Proceeds to pay Deferred Interest on the Class F Notes in accordance with the Priority of Payments will be applied to pay, pro rata, principal of the Class E Notes and the Class F Notes until each such Class of Notes has been paid in full and (b) on the Distribution Date occurring after January 2012, and on each Distribution Date thereafter to and including the Distribution Date in January 2017, if the Class E Notes and the Class F Notes are not redeemed in full on or prior to any such Distribution Date, an amount equal to 25% of the Interest Proceeds available after application of Interest Proceeds to pay Deferred Interest on the Class F Notes in accordance with the Priority of Payments will be applied to pay, pro rata, principal of the Class E Notes and the Class F Notes until each such Class of Notes has been paid in full. See “Description of the Notes—Principal,” “—Mandatory Redemption” and “—Priority of Payments—Interest Proceeds.”

On each Distribution Date occurring after the Distribution Date in January 2017, if the Senior Notes are not redeemed in full on or prior to such date, an amount equal to 60% of the Interest Proceeds available after application of Interest Proceeds to pay Deferred Interest on the Class F Notes in accordance with the Priority of Payments will be applied to pay, pro rata, principal of the Class A-1A Notes, the Class A-1B Notes, 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, until each such Class of Senior Notes has been paid in full. See “Description of the Notes—Principal,” “—Mandatory Redemption” and “—Priority of Payments—Interest Proceeds.”

Auction Call Redemption: If the Senior Notes have not been redeemed in full prior to the Distribution Date occurring in January 2017, then an auction of the Collateral Debt Securities will be conducted by the Collateral Manager on behalf of the Issuer and, provided that certain conditions are satisfied, the Collateral Debt Securities will be sold and the Notes will be redeemed on such Distribution Date. If such conditions are not satisfied and the auction is not successfully conducted on such Distribution Date, the Collateral Manager will conduct auctions on a quarterly basis until the Senior Notes are redeemed in full. See “Description of the Notes—Auction Call Redemption.”

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Optional Redemption and Tax Redemption of the Notes: Subject to certain conditions described herein, on any Distribution Date

occurring on or after the Distribution Date occurring in April 2012, the Co-Issuers may redeem the Notes (such redemption, an “Optional Redemption”) at the direction of the Holders of at least a Majority of the Subordinated Notes at the applicable Redemption Price therefor. See “Description of the Notes—Optional Redemption and Tax Redemption—Optional Redemption.” In connection with such a redemption, the Senior Notes will be redeemed in whole, and not in part.

In addition, upon the occurrence of any Tax Event with respect to which the Tax Materiality Condition is satisfied, the Co-Issuers may redeem the Notes (such redemption, a “Tax Redemption”) on any Distribution Date at the direction of the Holders of a Majority of the Subordinated Notes or the Majority of the most Subordinate Class of Senior Notes then outstanding (each such Class, an “Affected Class”; provided that in the event the aggregate amount of funds deducted or withheld as described in the definition of Tax Event at any time exceeds the sum of the Aggregate Outstanding Principal Amount of the Subordinated Notes then outstanding and the Aggregate Outstanding Principal Amount of the most subordinate Class of Senior Notes then outstanding, the “Affected Class” shall be deemed to be the next most subordinate Class of Senior Notes then outstanding). Any such redemption may only be effected on a Distribution Date and only from (a) the sale proceeds of the Collateral and (b) all other funds in the Interest Collection Account, Principal Collection Account, the Expense Account, the Discretionary Interest Shortfall Reserve Account, the Semi-Annual Interest Reserve Account and the Payment Account on such Distribution Date, at the applicable Redemption Price. No Tax Redemption may be effected, however, unless (i) except as otherwise set forth in the Indenture and described herein, the Sale Proceeds and all cash and Eligible Investments credited to the Interest Collection Account, Principal Collection Account, the Expense Account and the Payment Account on the relevant Distribution Date must be at least sufficient to redeem the Senior Notes simultaneously in accordance with the procedures described in the Indenture and to pay any amounts payable to the Insurer under the Insurance Documents and (ii) such Sale Proceeds are used to make such a redemption. See “Description of the Notes—Optional Redemption and Tax Redemption—Tax Redemption.”

The Policy: The Insured Notes will be entitled to the benefit of the Policy to be issued on the Closing Date by the Insurer pursuant to an Insurance and Indemnity Agreement (the “Insurance Agreement”). Pursuant to the Policy, the Insurer will irrevocably and unconditionally guarantee to the Insured Noteholders payment of the Insured Amounts that shall become Due for Payment but shall be unpaid by reason of Nonpayment (as such terms are defined herein).

Any amounts paid by the Insurer under the Policy, together with certain other costs and expenses incurred by the Insurer, shall constitute “Accrued Insurance Liabilities” and shall be payable by the Issuer. See “The Policy and the Insurance Agreement.”

No Notes other than the Class A-1B Notes will be entitled to the benefits of the Policy.

Security for the Senior Notes: Pursuant to the Indenture, the Senior Notes as well as the Issuer’s obligations to

the Trustee, the Collateral Manager, the Insurer under the Insurance Documents and the Hedge Counterparties under the Hedge Agreements, will be secured by:

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(a) the Collateral Debt Securities and Equity Securities; (b) the rights of the Issuer under the Hedge Agreements; (c) the Payment Account, the Interest Collection Account, the Principal Collection Account, the Uninvested Proceeds Account, the Hedge Counterparty Collateral Accounts, the Expense Account, the Synthetic Security Collateral Account, the Discretionary Interest Shortfall Reserve Account, the Semi-Annual Interest Reserve Account, amounts on deposit therein and Eligible Investments purchased with funds on deposit in such accounts; (d) solely for the benefit of the Insured Noteholders, the Insurance Documents, to the extent of any rights of the Issuer therein; (e) the rights of the Issuer under the Collateral Management Agreement and the Collateral Administration Agreement; (f) all cash and money delivered to the Trustee; and (g) all proceeds of the foregoing (collectively, the “Collateral”). In the event of any realization on the Collateral, proceeds will be allocated to the payment of each Class of Notes in accordance with the respective priorities established by the Priority of Payments.

Acquisition of Collateral: It is expected that on the Closing Date, the Issuer will have purchased (or entered into agreements to purchase for settlement following the Closing Date) Collateral Debt Securities having an aggregate Principal Balance of not less than $398,000,000. In the event the aggregate Principal Balance of Collateral Debt Securities acquired by the Issuer on the Closing Date is less than $500,000,000 (the “Aggregate Ramp-Up Par Amount”), then the Issuer will be authorized to use Uninvested Proceeds to purchase additional Collateral Debt Securities, such that the total par amount of Collateral Debt Securities held by the Issuer following such purchase will be approximately equal to the Aggregate Ramp-Up Par Amount. If the Issuer acquires Collateral Debt Securities on the Closing Date with an aggregate principal amount at least equal to the Aggregate Ramp-Up Par Amount, the Issuer will not be obligated to invest Uninvested Proceeds in additional Collateral Debt Securities after the Closing Date. See “Security for the Senior Notes—Acquisition of Collateral Debt Securities after the Closing Date.”

The Issuer may acquire Collateral Debt Securities during the period from the Closing Date to the Ramp-Up Completion Date that are either (a) issued by issuers specified on a schedule to the Indenture, in the order in which such issuers are listed on such schedule, or (b) identified by the Collateral Manager and purchased by the Issuer in the secondary market and, in either case, in accordance with the guidelines set forth in a schedule to the Indenture, which guidelines are intended to ensure that such acquisition will not cause the Issuer to be engaged in the conduct of a trade or business in the United States (the “Investment Guidelines”). With respect to clause (a) above, if the Collateral Debt Securities of the highest ranking issuer on such schedule from whom Collateral Debt Securities have not already been purchased by the Issuer are not available for purchase on the applicable terms set forth on such schedule and in accordance with the terms set forth in the Indenture, then the Issuer will instead acquire Collateral Debt Securities from the next highest ranking issuer on such schedule from whom such Collateral Debt Securities are available on such terms and in accordance with such restrictions.

The Collateral Debt Securities purchased by the Issuer will have the characteristics and satisfy the criteria set forth herein under “Security for the Senior Notes—Collateral Debt Securities” and “—Criteria for Purchase of Collateral.” Although the Issuer expects that the Collateral Debt Securities purchased by it will, on the day on which it has purchased Collateral Debt Securities having an aggregate principal balance at least equal to the Aggregate Ramp-Up Par Amount, satisfy the Coverage Tests and the Collateral Quality

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Tests described herein, there is no assurance that such tests will be satisfied on such date. Failure to satisfy the Coverage Tests in respect of any Class of Notes on or following the Ramp-Up Completion Date may result in the prepayment or redemption of such Class of Notes in accordance with the Priority of Payments. See “Description of the Notes—Mandatory Redemption.”

The Issuer may also acquire Collateral Debt Securities after the Ramp-Up Completion Date, subject to certain limitations. See “Security for the Senior Notes—Changes in Composition of the Collateral Debt Securities” and “—Criteria for Purchase of Collateral—Additional Eligibility Criteria for Additional Collateral Debt Securities.”

Collateral Debt Securities: “Collateral Debt Securities” consist of U.S. dollar denominated (a) trust preferred securities (the “Trust Preferred Securities”) issued by trust subsidiaries of entities qualifying and electing to be treated as “real estate investment trusts” for U.S. federal income tax purposes or any subsidiaries thereof (each, a “REIT”), real estate operating companies (including trusts and other entities) that are not treated as REITs or any subsidiaries thereof (each, a “REOC”) or homebuilding companies or any subsidiary thereof (each, a “Homebuilding Company”) (including, for the avoidance of doubt, any Corresponding Debentures delivered to the Issuer pursuant to the indenture under which they are issued), (b) senior securities (the “Senior Securities”) issued by REITs, REOCs, Homebuilding Companies and companies other than REITs, REOCs and Homebuilding Companies that are principally engaged in a non-real estate-related business, but which invest in real estate and real estate-related investments as part of their overall business strategy (each, a “Limited Real Estate Entity” and collectively with the REITs, REOCs and Homebuilding Companies, the “Real Estate Entities”) (each, a “Senior Securities Issuer”), (c) subordinated securities (the “Subordinated Securities” and together with the Senior Securities, the “Real Estate Entity Securities”) issued by Real Estate Entities (each, a “Subordinated Securities Issuer” and together with the Senior Securities Issuers, the “Security Issuers”), (d) commercial mortgage-backed securities (“CMBS”) issued by CMBS issuers (each, a “CMBS Issuer”), (e) collateralized debt obligation securities (“CMBS CDO Securities”) issued by structured special purpose issuers (each, a “CMBS CDO Issuer”) that primarily own a portfolio of commercial mortgage-backed securities and/or commercial real estate loans, (f) Synthetic Securities referencing CMBS, CMBS CDO and Real Estate Entity Securities issued by Homebuilding Companies and (g) senior secured leveraged loans (including bank loans acquired by way of a purchase, assignment or participation interest) secured directly or indirectly by first liens in real estate and/or other assets (“Senior Secured Loans”), senior secured leveraged loans (including bank loans acquired by way of a purchase, assignment or participation interest) secured directly or indirectly by second liens in real estate and/or other assets (“Specified Second Position Loans”), senior unsecured loans (including bank loans acquired by way of a purchase, assignment or participation interest) to Real Estate Entities for which the primary expected source of repayment is income from real estate assets (“Senior Unsecured Loans” and, together with Senior Secured Loans and Specified Second Position Loans, “Senior Loans”), secured and unsecured loans (including bank loans acquired by way of a purchase, assignment or participation interest) that are either (a) made to Real Estate Entities for which the primary expected source of repayment is income from real estate assets or (b) secured directly or indirectly by a valid security interest in or lien on real estate and that in either case are not Senior Loans (“Non-Senior Loans” and, together with Senior Loans, as the context may require, “Loans”) or one or more trust certificates that represent an ownership interest in a grantor trust that will

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hold one or more of such Loans (and all references herein to Loans, including the Collateral Debt Security Criteria, shall refer to such Loans and not to such trust certificates).

A Collateral Debt Security will be eligible for purchase by the Issuer if on the date of its initial acquisition and pledge to the Trustee it is a U.S. dollar denominated security that:

(a) provides for periodic payment of interest thereon in cash no less frequently than semi-annually (subject, in the case of certain Trust Preferred Securities, to deferrals thereof in accordance with clause (g) below);

(b) provides for a fixed amount of principal to be payable on or before the maturity thereof;

(c) is not a Defaulted Security or a Credit Risk Security;

(d) is not the subject of an offer to acquire, exchange or tender;

(e) matures (including as a result of any put right to either the issuer thereof or any other put counterparty with a public senior unsecured rating from each of S&P and Moody’s at least equal to the senior unsecured rating of the issuer thereof) on or before the Stated Maturity Date of the Notes or, in the case of CMBS or CMBS CDO Securities, has an expected maturity occurring prior to the Stated Maturity of the Notes;

(f) is not a debt obligation pursuant to which future advances may be required to be made to the obligor, except a Synthetic Security for which the Issuer has deposited or is required to deposit in the Synthetic Security Collateral Account an amount sufficient to meet such future payment obligations;

(g) in the case of certain Trust Preferred Securities that permit deferrals, provides that distributions of interest thereon may not at any time be deferred for a period (each such period, a “Deferral Period”) of more than eighteen (18) months; provided that (i) such deferral of interest may not extend past the maturity date of such Collateral Debt Security and (ii) all deferred and capitalized interest shall have been paid in cash before a subsequent Deferral Period may begin;

(h) does not have payments subject to, and, in the case of Trust Preferred Securities, the related Corresponding Debenture does not have payments subject to, foreign or United States withholding tax, unless the related obligor or paying agent is required to pay to the Issuer or the Trust Preferred Securities Issuer, as applicable, such additional amount as is necessary to ensure that the net amount actually received by the Issuer or the Trust Preferred Securities Issuer, as applicable (free and clear of taxes, whether assessed against such obligor, the Issuer or the Trust Preferred Securities Issuer), will equal the full amount that the Issuer or the Trust Preferred Securities Issuer, as applicable, would have received had no deduction or withholding occurred;

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(i) is in registered form for U.S. federal income tax purposes and was issued (and any related Corresponding Debenture was issued) after July 18, 1984;

(j) is not an Equity Security and is not by its terms exchangeable for, or convertible into, an Equity Security;

(k) would not cause the Issuer, the Co-Issuer or the pool of Collateral to be required to register under the 1940 Act;

(l) is not Margin Stock;

(m) is not currently deferring or capitalizing interest, and, unless such deferred or capitalized interest is currently being repaid on a timely basis, no such deferred or capitalized interest is outstanding and unpaid;

(n) in the case of a Trust Preferred Security, provides for the distribution of the related Corresponding Debenture to holders of the applicable Trust Preferred Security in the event of any dissolution of the Trust Preferred Securities Issuer;

(o) in the case of a Trust Preferred Security, Senior Security, Subordinated Security or CMBS CDO Security, is a security with respect to which any of the following is true: (i) the Issuer has received an opinion of counsel opining that the ownership of such security will not subject the Issuer to net income tax in the United States for federal income tax purposes; (ii) the Issuer has received an opinion of counsel opining that such security will be treated as debt for U.S. federal income tax purposes; (iii) the Issuer has received the tax opinion rendered at the issuance of such security opining that such security will be treated as debt for U.S. federal income tax purposes or that includes a statement that such security will be treated as debt for U.S. federal income tax purposes; (iv) the Issuer has received documents pursuant to which such security was offered, if any, that include or refer to an opinion of counsel opining that such security will be treated as debt for U.S. federal income tax purposes; (v) if there are no offering documents relating to such security, the Issuer has received both a copy of a placement agency agreement or purchase agreement (or other equivalent document) relating to such security, which agreement requires the delivery of an opinion of counsel opining that such security will be treated as debt for U.S. federal income tax purposes prior to the issuance of such security, and a written certification or confirmation from the initial purchaser (or other equivalent party) for such security stating that such condition precedent to the issuance of such security was not waived; (vi) such security is a Senior Security and the Issuer or the Collateral Manager reasonably believes that such security will be treated as debt for U.S. federal income tax purposes; or (vii) if such security is a certificate of beneficial interest in a trust treated (as evidenced by an opinion of counsel or a reference to an opinion of counsel in documents pursuant to which such security was offered) as a grantor trust for U.S. federal income tax purposes, then any of the conditions specified in clauses (i)

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through (vi) may be satisfied by reference to each asset held pursuant to such grantor trust arrangement rather than by reference to such beneficial ownership interest; provided that a limited amount of Collateral Debt Securities not to exceed 10% of the aggregate Principal Balance of Collateral Debt Securities as of the Ramp-Up Completion Date may be purchased by the Issuer in the secondary market if the opinions described in clauses (i) through (v) were not rendered but the Issuer or the Collateral Manager otherwise reasonably believes (based on advice of nationally recognized tax counsel experienced in such matters) that such security will be treated as debt for U.S. federal income tax purposes and will not cause the Issuer to be engaged in the conduct of a trade or business in the United States;

(p) in the case of CMBS, has a public rating or credit estimate of at least “Baa3” and is not on watch for credit downgrade by Moody’s and has a rating of at least “BBB-” by S&P;

(q) in the case of CMBS CDO Securities, has a public rating or credit estimate of at least “Ba3” and is not on watch for credit downgrade by Moody’s and has a rating of at least “BB-” by S&P;

(r) in the case of CMBS, an opinion from tax counsel states that the issuer either qualifies as a REMIC or will not be subject to net income tax, in each case for U.S. federal income tax purposes; and

(s) is not assigned by S&P a rating that includes the subscript “r,” “t,” “p,” “pi,” or “q”.

If the junior subordinated deferrable interest debt securities (or comparable securities) issued by a Real Estate Entity (other than a Limited Real Estate Entity) to its trust subsidiary (the “Corresponding Debentures”) are exchanged for related Trust Preferred Securities, thereafter such Corresponding Debentures will become Collateral Debt Securities.

Liquidation of Collateral: On or before the Distribution Date in October 2042, or in connection with any Optional Redemption, Tax Redemption, Auction Call Redemption or other redemption of the Notes in accordance with the terms of the Indenture, the Collateral Debt Securities, Eligible Investments and other Collateral will be liquidated. All net proceeds from such liquidation and all available cash will be applied to the payment (in the order of the respective priorities set forth under “Description of the Notes—Priority of Payments”) of all (a) fees, (b) expenses (including the amounts due to the Hedge Counterparties) and (c) principal of (together with, in the case of the Class B Notes, Class B Deferred Interest, in the case of the Class C Notes, Class C Deferred Interest, in the case of the Class D Notes, Class D Deferred Interest, in the case of the Class E Notes, Class E Deferred Interest and in the case of the Class F Notes, Class F Deferred Interest) and interest on (including any Defaulted Interest, interest on Defaulted Interest, and interest on any Class B Deferred Interest, Class C Deferred Interest, Class D Deferred Interest, Class E Deferred Interest and Class F Deferred Interest) the Senior Notes. All remaining proceeds will be distributed to the Subordinated Noteholders.

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The Initial Offering: The Notes are being offered for sale (a) in the United States and to U.S. Persons only to Qualified Purchasers that are either (i) Qualified Institutional Buyers, purchasing for their own account, to whom notice is given that the resale, pledge or other transfer is being made in reliance on the exemption from Securities Act registration provided by Rule 144A or (ii) Institutional Accredited Investors or, in the case of Subordinated Notes, Accredited Investors, in reliance on the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof and (b) outside the United States to certain non-U.S. Persons in offshore transactions in reliance on Regulation S and, in each case, in accordance with any other applicable law. See “Plan of Distribution” and “Transfer Restrictions.”

Ratings: It is a condition to the issuance of the Notes that each Tranche of Senior Notes is assigned the ratings set forth in the following table:

Class of Notes S&P Moody’s Fitch

Class A-1A Notes AAA Aaa AAA Class A-1B Notes (1) AAA Aaa AAA

Class A-2 Notes AAA Aaa AAA Class B Notes AA Aa2 AA

Class C-1 Notes A A2 A Class C-2 Notes A A2 A Class D Notes A- NR(2) A-

Class E-1 Notes BBB NR BBB

Class E-2 Notes BBB NR BBB Class F Notes BB NR BB (1) The Class A-1B Notes will be rated without giving effect to the Policy.

(2) “NR” means this Class of Notes is not rated by this Rating Agency.

The ratings of the Senior Notes address the likelihood of ultimate payment to the Senior Noteholders of all distributions of stated interest and the ultimate payment in full of the principal amount of each Tranche of Senior Notes not later than the Stated Maturity. See “Ratings of the Notes” for a description of the nature of the ratings.

Minimum Denominations: The Notes will be issued in minimum denominations of $250,000 and integral multiples of $1,000 in excess thereof.

After issuance, (a) the principal amount of a Note may fail to be in compliance with the minimum denomination requirement stated above as a result of the repayment of principal thereof in accordance with the Priority of Payments or, in the case of a Senior Note, in connection with any repayment of principal following a Ramp-Up Ratings Confirmation Failure and (b) Class B Notes, each Tranche of C Notes, Class D Notes, each Tranche of E Notes and each Tranche of F Notes may fail to be in an amount which is an integral multiple of $1,000 due to the addition to the principal amount thereof of Class B Deferred Interest, Class C Deferred Interest, Class D Deferred Interest, Class E Deferred Interest or Class F Deferred Interest, respectively.

Form, Registration and Transfer of the Senior Notes: The Senior Notes offered in reliance upon Regulation S (each, a “Regulation S

Senior Note”) will be represented by one or more global notes (“Regulation S Global Senior Notes”) in fully registered form without interest coupons deposited with the Trustee as custodian for, and registered in the name of, The

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Depository Trust Company (“DTC”) (or its nominee) and deposited with or on behalf of DTC initially for the accounts of Euroclear Bank S.A./N.V., as operator of the Euroclear System (“Euroclear”), and/or Clearstream Banking, société anonyme (“Clearstream”). Interests in the Regulation S Global Senior Notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its Participants and Indirect Participants (including, without limitation, Euroclear and/or Clearstream).

The Co-Issued Notes sold in the United States or to U.S. Persons by the Co-Issuers (each, a “Restricted Co-Issued Note”) will be offered in reliance on an exemption from the registration requirements of the Securities Act and will be represented by one or more global notes in definitive, fully registered form without interest coupons (the “Restricted Global Co-Issued Notes”), deposited with the Trustee as custodian for, and registered in the name of, DTC or its nominee. Interests in the Restricted Global Co-Issued Notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its Participants and Indirect Participants. The Regulation S Global Senior Notes and the Restricted Global Co-Issued Notes are collectively referred to herein as “Global Senior Notes”.

During the Initial Investment Period Holders of Class A-1A Notes will be required to satisfy the Rating Criteria specified in the Class A-1A Note Purchase Agreement. Following the Commitment Period Termination Date Holders of Class A-1A Notes will no longer be required to satisfy the Rating Criteria.

The Class F Notes sold in the United States or to U.S. Persons by the Issuer (each, a “Restricted Class F Note”) will be offered in reliance on an exemption from the registration requirements of the Securities Act and will be issued in the form of physical certificates, registered in the name of the beneficial owner thereof, in definitive, fully registered form without interest coupons (the “Restricted Definitive Class F Notes”); provided that $3,000,000 aggregate principal amount of Class F Notes, will, on the Closing Date, be represented by one or more global notes in definitive, fully registered form without interest coupons (the “Restricted Global Class F Notes”), deposited with the Trustee as custodian for, and registered in the name of, DTC or its nominee. The aggregate principal amount of Restricted Global Class F Notes may not at any time exceed $3,000,000 and no Holder of a Restricted Definitive Class F Note will have any right to exchange its interest therein for an interest in a Restricted Global Class F Note.

Interests in the Restricted Global Class F Notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its Participants and Indirect Participants. The Class F Notes sold to non-U.S. Persons in offshore transactions in reliance upon Regulation S (the “Regulation S Class F Notes”) will be represented by one or more global notes in fully registered form without interest coupons deposited with the Trustee as custodian for, and registered in the name of, DTC (or its nominee) and deposited with or on behalf of DTC initially for the accounts of Euroclear and/or Clearstream (each, a “Regulation S Global Class F Note”).

Under certain limited circumstances described herein, definitive registered Notes may be issued in exchange for Global Senior Notes.

Following the initial sale of Senior Notes from the Initial Purchaser, no Senior Note (or any interest therein), may be transferred to a transferee acquiring an interest in a Restricted Co-Issued Note or Restricted Class F Note, as the case

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may be, except (a) to a Qualified Purchaser that is (i) a Qualified Institutional Buyer purchasing for its own account, to whom notice is given that the resale, pledge or other transfer is being made in reliance on the exemption from Securities Act registration provided by Rule 144A, or (ii) in the case of a Restricted Class F Note, an Accredited Investor, (b) in compliance with the certification (if any) and other requirements set forth in the Indenture and (c) in accordance with any applicable securities laws of any state of the United States and any other relevant jurisdiction.

No Senior Note (or any interest therein) may be transferred to a transferee acquiring an interest in a Regulation S Senior Note, except (a) to a transferee that is acquiring such interest in an offshore transaction (within the meaning of Regulation S) in accordance with Rule 904 of Regulation S, (b) in compliance with the certification (if any) and other requirements set forth in the Indenture and (c) in accordance with any applicable securities laws of any state of the United States and any other relevant jurisdiction.

In addition, no Senior Note (or any interest therein) may be transferred, and neither the Trustee nor the Note Registrar will recognize any such transfer, unless (a) such transfer is made in a manner exempt from registration under the Securities Act, (b) such transfer is made in denominations greater than or equal to the minimum denomination therefor, (c) such transfer would not have the effect of requiring the Issuer, the Co-Issuer or the Collateral to register as an investment company under the 1940 Act and (d) the transferee is able to make all applicable certifications and representations required by the Indenture, whether in the form of deemed certifications and representations or certifications and representations made in the relevant transfer certificate attached as an exhibit to the Indenture (if the Indenture requires that a transfer certificate be delivered in connection with such a transfer). The Indenture requires that a written transfer certificate be delivered in connection with certain transfers of Senior Notes. Notwithstanding the foregoing, (i) an owner of a beneficial interest in a Regulation S Global Senior Note may transfer such interest in the form of a beneficial interest in such Regulation S Global Senior Note without the provision of written certification and (ii) an owner of a beneficial interest in a Restricted Global Co-Issued Note or a Restricted Global Class F Note may transfer such interest in the form of a beneficial interest in such Restricted Global Co-Issued Note or Restricted Global Class F Note without the provision of written certification; provided that in each such case, the transferee shall be deemed to have made certain representations set forth in the Indenture. See “Description of the Notes—Form, Denomination, Registration and Transfer” and “Transfer Restrictions.”

No Class F Note (or any interest therein) may be transferred to a transferee that is (a) a Benefit Plan Investor or (b) the Issuer, the Initial Purchaser, the Collateral Manager or any other person (other than a Benefit Plan Investor) that has discretionary authority or control with respect to the assets of the Issuer or a person who provides investment advice for a fee (direct or indirect) with respect to the assets of the Issuer, or any “affiliate” (as defined in 29 C.F.R. Section 2510.3-101(f)(3)) of any such person; provided that Restricted Class F Notes (or interests therein) may be transferred to such transferees if such transfer would not result in (A) Benefit Plan Investors owning 25% or more of the total value of the Class F Notes Outstanding (determined pursuant to 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA) or (B) a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code. For purposes of calculating the percentage of the total value of the Class F Notes, it is understood that 100% of the aggregate principal amount of the

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Restricted Global Class F Notes shall be deemed to be held by Benefit Plan Investors.

The Indenture provides that if, notwithstanding the restrictions on transfer contained therein, either of the Co-Issuers determines that any beneficial owner of an interest in a Senior Note (or any interest therein) (a) is not an entity that acquired such interest in a transaction made in accordance with the terms of Regulation S and (b) is not both a Qualified Institutional Buyer (unless such beneficial owner is (i) with respect to a Co-Issued Note, an Institutional Accredited Investor that purchased an interest therein in connection with the initial distribution thereof or (ii) with respect to a Class F Note, an Accredited Investor that purchased an interest therein in connection with the initial distribution thereof) and a Qualified Purchaser, then either of the Co-Issuers may require, by notice to such Holder, that such Holder sell all of its right, title and interest in such Senior Note (or interest therein) to a Person that is both a Qualified Institutional Buyer and 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, (i) upon direction from the Issuer or the Co-Issuer, the Trustee (on behalf of and at the expense of the Co-Issuers) shall cause such beneficial owner’s interest in such Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Section 9-610(b) of the UCC) to a person that certifies to the Trustee, the Co-Issuers and the Collateral Manager, in connection with such transfer, that such person is both a Qualified Institutional Buyer and a Qualified Purchaser and (ii) pending such transfer, no further payments will be made in respect of such Note held by such beneficial owner.

Form, Registration and Transfer of the Subordinated Notes: Subordinated Notes sold to Qualified Purchasers that are either Qualified

Institutional Buyers or Accredited Investors in reliance on the exemption from the registration requirements of the Securities Act provided by Section 4(2) and/or Rule 144A thereof will be represented by notes in fully registered definitive form registered in the name of the legal and beneficial owner thereof (“Restricted Subordinated Notes”) or a nominee acting on behalf of the disclosed legal and beneficial owner thereof. Owners of beneficial interests in the Subordinated Notes will not be considered to be the owners or Holders of any Subordinated Notes under the Indenture.

The Subordinated Notes offered to non-U.S. Persons in offshore transactions in reliance upon Regulation S (“Regulation S Subordinated Notes”) will be represented by one or more global notes in definitive, fully registered form without interest coupons (the “Regulation S Global Subordinated Note”), deposited with the Trustee as custodian for, and registered in the name of, DTC (or its nominee) and deposited with or on behalf of DTC initially for the accounts of Euroclear and/or Clearstream. Interests in the Regulation S Global Subordinated Notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its Participants and Indirect Participants (including, without limitation, Euroclear and/or Clearstream).

Under certain limited circumstances described herein, definitive registered Subordinated Notes may be issued in exchange for Regulation S Global Subordinated Notes.

No Subordinated Notes (or any interest therein) may be transferred to a transferee acquiring an interest in Restricted Subordinated Notes except (a) to a Qualified Purchaser that is also (i) a Qualified Institutional Buyer, purchasing

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for its own account, to whom notice is given that the resale, pledge or other transfer is being made in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A, or (ii) an Accredited Investor, purchasing for its own account, to whom notice is given that the transfer is being made in reliance on an exemption from Securities Act registration (subject to the delivery of such certifications, legal opinions or other information as the Issuer may reasonably require to confirm that such transfer of Restricted Subordinated Notes is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act), (b) (i) to a transferee that is not (A) a Benefit Plan Investor or (B) a Controlling Person or (ii) to a transferee that is a Benefit Plan Investor or Controlling Person, if such transfer will not result in either (A) Benefit Plan Investors owning 25% or more of the total value of the Subordinated Notes (determined pursuant to 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA) or (B) a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code, (c) to a transferee that is an employee benefit plan subject to Similar Law if such transfer will not result in a non-exempt violation of any Similar Law, or (d) if such transfer is made in accordance with any applicable securities laws of any state of the United States and any other relevant jurisdiction.

No Subordinated Notes (or any interest therein) may be transferred to a transferee acquiring an interest in Regulation S Subordinated Notes except (a) to a transferee that is acquiring such interest in an offshore transaction (within the meaning of Regulation S) in accordance with Rule 904 of Regulation S, (b) to a transferee that is not a U.S. Person, (c) to a transferee that is not a Benefit Plan Investor or a Controlling Person, (d) to a transferee that is an employee benefit plan subject to Similar Law if such transfer will not result in a non-exempt violation of any Similar Law, (e) if such transfer is made in compliance with the certification, if any, and other requirements set forth in the Indenture and (f) if such transfer is made in accordance with any applicable securities laws of any state of the United States and any other relevant jurisdiction.

No Subordinated Notes (or any interest therein) may be transferred, and neither the Trustee nor the Issuer will recognize any such transfer, unless (a) such transfer is made in a manner exempt from registration under the Securities Act, (b) such transfer is made in denominations greater than or equal to the minimum principal amount of Subordinated Notes permitted pursuant to the Indenture, (c) such transfer would not have the effect of requiring the Issuer or the Collateral to register as an investment company under the 1940 Act, (d) the transferee is able to make all applicable representations, and deliver all applicable certifications, if any, required by the Indenture and (e) the transferee provides to the Trustee all information required pursuant to the terms of the Indenture. See “Description of the Notes—Form, Denomination and Registration and Transfer” and “Transfer Restrictions.”

The Indenture provides that if, notwithstanding the restrictions on transfer contained therein, the Issuer determines that any beneficial owner of a Subordinated Note (a) is not a person or entity that acquired such interest in a transaction that was made in accordance with the terms of Regulation S and (b) is not a Qualified Purchaser that is also (i) a Qualified Institutional Buyer or (ii) an Accredited Investor, then the Issuer may require, by notice to such Holder, that such Holder sell all of its right, title and interest to such Subordinated Note (or interest therein) to a Person that is a Qualified Purchaser and either a Qualified Institutional Buyer or an Accredited Investor, with such sale to be effected within 30 days after notice of such sale requirement is given;

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provided that any such transfer to an Accredited Investor that is not also a Qualified Institutional Buyer shall be subject to the delivery of such certifications, legal opinions or other information as the Issuer may reasonably require to confirm that such transfer of Restricted Subordinated Notes is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. If such beneficial owner fails to effect the transfer required within such 30-day period, (A) upon direction from the Issuer, the Trustee (on behalf of and at the expense of the Issuer) shall cause such beneficial owner’s interest in such Subordinated Notes to be transferred in a commercially reasonable sale (conducted by the Administrator in accordance with Section 9-610(b) of the UCC) to a person that certifies to the Trustee, the Issuer and the Collateral Manager, in connection with such transfer, that such person is Qualified Purchaser who is either a Qualified Institutional Buyer or an Accredited Investor (provided that any such transfer to an Accredited Investor that is not also a Qualified Institutional Buyer shall be subject to the delivery of such certifications, legal opinions or other information as the Issuer may reasonably require to confirm that such transfer of Restricted Subordinated Notes is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act) and (B) pending such transfer, no further payments will be made in respect of such Subordinated Notes held by such beneficial owner.

The Listing: Application has been made to the Irish Financial Services Regulatory Authority, as competent authority under Directive 2003/71/EC, for the Prospectus to be approved. Application has been made to admit the Notes (other than the Insured Notes) to the Official List of the Irish Stock Exchange and to trading on the regulated market of the Irish Stock Exchange. There can be no assurance that the admission will be granted or, if granted, that it will be maintained.

Application has been made to the Irish Stock Exchange for the Insured Notes to be admitted to the Official List of the Irish Stock Exchange and to trading on the alternative securities market of the Irish Stock Exchange. There can be no assurance that the admission will be granted or, if granted, will be maintained.

See “Listing and General Information.”

Governing Law: The Notes, the Indenture, the Collateral Management Agreement, the Collateral Administration Agreement, the Hedge Agreements, the Insurance Agreement, the Policy and the Purchase and Placement Agency Agreement will be governed by, and construed in accordance with, the law of the State of New York. The Issuer Charter, the declaration of trust executed in connection with the ordinary shares of the Issuer and the Administration Agreement will be governed by, and construed in accordance with, the law of the Cayman Islands.

Tax Matters: See “Certain Income Tax Considerations.”

ERISA Matters: See “Certain ERISA Considerations.”

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RISK FACTORS

General; Priorities of Notes

The Issuer intends to invest in a portfolio of Collateral Debt Securities which will be comprised of Trust Preferred Securities, Real Estate Entity Securities, CMBS, CMBS CDO Securities, Synthetic Securities referencing CMBS, CMBS CDO Securities or Real Estate Entity Securities issued by Homebuilding Companies and Loans, as provided in the Indenture and the Collateral Management Agreement. See “Security for the Senior Notes.” There can be no assurance that the Issuer’s investments will be successful, that its investment objectives will be achieved, that investors will receive their initial investments under the Notes or that they will receive any return (or avoid any loss, including total loss) on their investment in the Notes. Prospective investors are therefore advised to review this entire Offering Circular carefully and should consider, among other things, the following risk factors (along with, among other things, the inherent risks of investment activities) before deciding whether to invest in the Notes.

Except as is otherwise stated below, the risk factors are generally applicable to all of the Notes, although the degree of risk associated with each Class of Notes may vary. In particular, the priorities of payment of the Senior Notes are generally in the order of their alphabetic designation from Class A-1A (the highest priority) to Class F (the lowest), and the Subordinated Notes have a lower priority of payment than the Senior Notes. In certain circumstances Senior Notes with a lower priority of payment will be paid principal prior to, or on a pro rata basis with, Senior Notes with a higher alphabetical designation. See “Description of the Notes—Priority of Payments—Interest Proceeds”. In addition, the Class A-1B Notes are the only Notes that are entitled to the benefit of the Policy. The Accrued Insurance Liabilities and Premiums payable to the Insurer have the priorities described herein. See “The Policy and the Insurance Agreement”.

Relating to the Notes

Structured Investment Products Like the Notes Are Complex Instruments and May Not Be Appropriate for All Investors.

An investment in the Notes will not be appropriate for all investors. Structured investment products like the Notes are complex instruments, and typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. Any investor interested in purchasing Notes should conduct its own investigation and analysis of the product and consult its own professional advisers as to the risks involved in making such a purchase.

There Is Currently No Market for the Notes and Their Transfer Will Be Restricted; Investors Must Be Prepared to Hold Their Notes for an Indefinite Period of Time or Until Their Stated Maturity.

There is currently no market for the Notes. Although the Initial Purchaser may from time to time make a market in any Class of Notes, the Initial Purchaser is under no obligation to do so. In the event that the Initial Purchaser commences any market-making, it may discontinue the same at any time. There can be no assurance that a secondary market for any of the Notes will develop, or if a secondary market does develop, that it will provide such Noteholders with liquidity of investment or that it will continue for the life of the Notes. In addition, the Notes are subject to certain transfer restrictions and can only be transferred to certain transferees as described under “Transfer Restrictions.” Consequently, an investor in the Notes must be prepared to hold its Notes for an indefinite period of time or until the Stated Maturity of the Notes.

The Notes will not be registered under the Securities Act or any state securities laws, and the Co-Issuers have no intention, and are under no obligation, to register the Notes under the Securities Act. Application has been made to IFSRA, as competent authority under Directive 2003/71/EC, for the Prospectus to be approved. Application has been made to admit the Notes to the Official List of the Irish Stock Exchange and (a) in the case of the Insured Notes, its alternative securities market, and (b) in the case of all other Notes, its regulated market. There can be no assurance that any such admission will be granted or maintained.

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The Notes Are Non-Recourse Obligations; Investors Must Rely on Available Collections from the Collateral Debt Securities and Will Have No Other Source for Payment.

The Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes are non-recourse obligations of the Co-Issuers and the Class F Notes and Subordinated Notes are non-recourse obligations of the Issuer. The Notes are payable solely from the payments received by the Issuer on the Collateral Debt Securities and the other Collateral pledged by the Issuer to secure the Senior Notes (including, in the case of the Insured Notes only, the Policy). The Subordinated Notes are payable solely from the assets of the Issuer and are not secured. None of the securityholders, members, officers, directors, managers, joint venturers or incorporators of the Issuer, the Co-Issuer, the Trustee, the Administrator, the trustee of the ordinary shares in the Issuer, any Rating Agency, the Collateral Manager, the Collateral Administrator, the Initial Purchaser, the Insurer (except with respect to the Insured Notes to the extent described herein) or any of their respective affiliates or any other person or entity will be obligated to make payments on the Notes. Consequently, the Noteholders must rely solely on amounts received by the Issuer in respect of the Collateral Debt Securities and the other Collateral pledged to secure the Senior Notes for the payment of principal thereof and interest thereon (including, in the case of the Insured Notes only, the Policy). There can be no assurance that the distributions on the Collateral Debt Securities and the other Collateral pledged by the Issuer to secure the Senior Notes will be sufficient to make payments on any Class of Notes, in particular after making payments on more Senior Classes of Notes and certain other required amounts ranking Senior to such Class. The Co-Issuers’ ability to make payments in respect of any Class of Notes will be constrained by the terms of the Notes of Classes more Senior to such Class and the Indenture. If distributions on the Collateral are insufficient to make payments on the Notes, no other assets will be available for payment of the deficiency and, following liquidation of all the Collateral, the obligations of the Co-Issuers to pay such deficiencies will be extinguished. In certain scenarios, the Notes may not be paid in full and certain Classes of the Notes may be subject to up to 100% loss of invested capital.

Commitments under the Class A-1A Notes.

The Class A-1A Notes will not be fully funded as of the Closing Date and will be delayed draw. The obligation of the Holders of Class A-1A Notes to fund advances will continue for a period described herein and in the Class A-1A Note Purchase Agreement. See “Description of the Securities—Class A-1A Note Mechanics”.

Holders of Class A-1A Notes (or the Liquidity Provider(s) with respect to any such Holder) will, upon request of the Issuer and subject to certain conditions specified in the Class A-1A Note Purchase Agreements, be obligated to advance funds to the Issuer until the aggregate principal amount advanced under the Class A-1A Notes equals the aggregate committed amount of the Class A-1A Notes. Although the Issuer expects that the aggregate committed amount of the Class A-1A Notes will be fully drawn, there can be no assurance that the aggregate committed amount of the Class A-1A Notes will be fully drawn. In the event that less than the aggregate committed amount of the Class A-1A Notes is drawn or the Class A-1A Noteholders (or the related Liquidity Providers) fail to fund a required draw, the capital structure of the Co-Issuers will vary, perhaps substantially, from the anticipated capitalization described herein and the Issuer will not be able to purchase the full amount of Collateral Debt Securities that it would otherwise purchase. See “Description of the Securities—Class A-1A Note Mechanics”.

The Subordination of the Class A-1B Notes, the Class A-2 Notes, the Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Subordinated Notes Will Affect Their Rights to Payment.

Except as otherwise described herein, no payment of interest on any Class of Notes will be made from Interest Proceeds or Principal Proceeds until all accrued and unpaid interest on the Notes of each Class that is senior to such Class and that remains outstanding has been paid in full. Except as otherwise described herein, no payment of principal of any Class of Notes will be made until all principal of, and all accrued and unpaid interest on, the Notes of each Class that is Senior to such Class and that remain outstanding have been paid in full. See “Description of the Notes—Priority of Payments.” In certain circumstances a Class of Notes with a lower priority of payment may be paid principal prior to, or on a pro rata basis with, a Class or Classes of Notes with a higher alphabetical designation. See “Description of the Notes—Priority of Payments—Interest Proceeds”. If an Event of Default occurs, so long as any Insured Notes are outstanding or any Accrued Insurance Liabilities or Premium under the Insurance Agreement owing to the Insurer remain unpaid and there has not been an Insurer Default under the Policy, the Insurer will be entitled to determine the remedies to be exercised under the Indenture. If no Insured Notes are

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outstanding and no Accrued Insurance Liabilities or Premium under the Insurance Agreement owing to the Insurer remain unpaid or there has been an Insurer Default under the Policy, the most senior Class or Classes then outstanding will be the Controlling Class. So long as any Class A-1 Notes or Class A-2 Notes are outstanding, any interest on the Class B Notes that is not paid on any Distribution Date by reason of the operation of the Priority of Payments will not be considered “due and payable” and the Co-Issuers’ failure to pay such interest will not constitute an Event of Default or a Default under the Indenture. Any interest on the Class B Notes that is not paid when due by operation of the Priority of Payments will be deferred and added to the principal balance of the Class B Notes and, thereafter, will bear interest at the interest rate for the Class B Notes. So long as any Class A-1 Notes, Class A-2 Notes or Class B Notes are outstanding, any interest on a Tranche of Class C Notes that is not paid on any Distribution Date by reason of the operation of the Priority of Payments will not be considered “due and payable” and the Co-Issuers’ failure to pay such interest will not constitute an Event of Default or a Default under the Indenture. Any interest on a Tranche of Class C Notes that is not paid when due by operation of the Priority of Payments will be deferred and added to the principal balance of such Tranche of Class C Notes and, for each Interest Period thereafter, will bear interest at the interest rate for such Tranche of Class C Notes. So long as any Class A-1 Notes, Class A-2 Notes, Class B Notes or Class C Notes are outstanding, any interest the Class D Notes that is not paid on any Distribution Date by reason of the operation of the Priority of Payments will not be considered “due and payable” and the Co-Issuers’ failure to pay such interest will not constitute an Event of Default or a Default under the Indenture. Any interest on the Class D Notes that is not paid when due by operation of the Priority of Payments will be deferred and added to the principal balance of the Class D Notes and, for each Interest Period thereafter, will bear interest at the interest rate for the Class D Notes. So long as any Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes or Class D Notes are outstanding, any interest on a Tranche of Class E Notes that is not paid on any Distribution Date by reason of the operation of the Priority of Payments will not be considered “due and payable” and the Co-Issuers’ failure to pay such interest will not constitute an Event of Default or a Default under the Indenture. Any interest on a Tranche of Class E Notes that is not paid when due by operation of the Priority of Payments will be deferred and added to the principal balance of such Tranche of Class E Notes and, for each Interest Period thereafter, will bear interest at the interest rate for such Tranche of Class E Notes. So long as any Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are outstanding, any interest on the Class F Notes that is not paid on any Distribution Date by reason of the operation of the Priority of Payments will not be considered “due and payable” and the Issuer’s failure to pay such interest will not constitute an Event of Default or a Default under the Indenture. Any interest on the Class F Notes that is not paid when due by operation of the Priority of Payments will be deferred and added to the principal balance of the Class F Notes and, for each Interest Period thereafter, will bear interest at the interest rate for the Class F Notes. In the event of any realization on the Collateral, proceeds will be allocated to the Senior Notes and other amounts in accordance with the Priority of Payments prior to any distribution to the Subordinated Noteholders. See “Description of the Notes—The Indenture” and “—Priority of Payments.” Remedies pursued by the Insurer or, if no Insured Notes are outstanding and no Accrued Insurance Liabilities or Premium under the Insurance Agreement owing to the Insurer remain unpaid or there has been an Insurer default under the Policy, the Holders of at least 66-2/3% of the Aggregate Outstanding Principal Amount of the Notes of the Controlling Class, could be adverse to the interest of the Noteholders or the other Classes of Notes. To the extent that any losses are suffered by any Noteholders, such losses will be borne generally, first, by the Subordinated Noteholders, second, by the Class F Noteholders, third, by the Class E Noteholders, fourth, by the Class D Noteholders, fifth, by the Class C Noteholders, sixth, by the Class B Noteholders, seventh, by the Class A-2 Noteholders, eighth, by the Class A-1B Noteholders and ninth, by the Class A-1A Noteholders.

The Subordinated Notes Are Unsecured Obligations of the Issuer.

The Issuer, pursuant to the Indenture, has pledged substantially all of its assets (excluding, however, its ordinary share capital and the profit fee paid to it) to secure the Senior Notes and certain other obligations of the Issuer. The Subordinated Notes will not be secured by such assets, and will not generally be entitled to exercise remedies under the Indenture and, while the Senior Notes are outstanding, the Trustee will have no obligation to act on behalf of the Subordinated Noteholders. The proceeds of such assets will be available to make payments in respect of the Subordinated Notes only as and when such proceeds are available for such purpose in accordance with the Priority of Payments and the other terms of the Indenture. There can be no assurance that, after payment of principal and interest on the Senior Notes and other fees and expenses of the Issuer in accordance with the Priority of Payments, the Issuer will have funds remaining to make distributions in respect of the Subordinated Notes. See “Description of the Notes—Priority of Payments.”

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The Issuer Is Highly Leveraged, Which Increases Risks to All Investors.

The Issuer will be highly leveraged. Use of leverage is a speculative investment technique and involves certain risks to investors in the Notes. The leverage provided to the Issuer by the issuance of the Notes will result in interest expense and other costs incurred in connection with the borrowings that may not be covered by the net interest income, dividends, and, if applicable in the context of a sale, appreciation of the Collateral Debt Securities. The use of leverage generally magnifies the Issuer’s risk of loss, particularly for the more subordinate Classes of Notes. In certain circumstances, such as in connection with the exercise of remedies following an Event of Default, Holders of the Controlling Class (which will be the Insurer if no Insurer Default has occurred and is continuing and (x) the Insured Notes are Outstanding or (y) any Accrued Insurance Liabilities or Premiums are due and owing) may require the Issuer to dispose of some or all of the Collateral Debt Securities under unfavorable market conditions, thus causing the Issuer to recognize a loss that might not otherwise have occurred. In certain circumstances, the Holders of the Controlling Class (which will be the Insurer if no Insurer Default has occurred and is continuing and (x) the Insured Notes are Outstanding or (y) any Accrued Insurance Liabilities or Premiums are due and owing) are entitled to direct the sales of Collateral Debt Securities and may be expected to do so in their own interest, rather than in the interests of the more subordinate Classes of Notes.

The Subordinated Notes Are Highly Leveraged, Which Increases Risks to Investors in The Subordinated Notes.

The Subordinated Notes represent a leveraged investment in the underlying Collateral. Therefore, it is expected that changes in the value of the Subordinated Notes will be greater than the change in the value of the underlying Collateral Debt Securities, which themselves are subject to credit, liquidity, interest rate and other risks. Such utilization of leverage increases the risk of losses to the Issuer and, therefore, increases the risk of losses to the Subordinated Noteholders. The indebtedness of the Issuer under the Senior Notes will result in interest expense and other costs incurred in connection with such indebtedness that may not be covered by proceeds received from the Collateral. The use of leverage generally magnifies the Issuer’s opportunities for gain and risk of loss.

The Insured Notes May be Subject to the Insurer’s Ability to Make Payments of the Insured Amounts.

Pursuant to the Policy, the Insurer will guarantee the payment of Insured Amounts with respect to the Insured Notes. However, if the Insurer were to become bankrupt or insolvent or otherwise default on its obligations under the Policy, no other persons would obligated to make any payments or make up any deficiencies in payment of the Insured Notes after the liquidation in full of the Collateral by the Trustee on behalf of the Senior Noteholders. None of the events described above, however, will alone constitute an Event of Default under the Indenture.

The Collateral May Be Insufficient to Redeem the Notes in an Event of Default.

It is anticipated that the proceeds received by the Issuer on the Closing Date from the issuance of the Notes, net of certain fees and expenses, will be less than the Aggregate Outstanding Principal Amount of Notes as of the Closing Date. Consequently, it is anticipated that on the Closing Date, the Collateral would be insufficient to redeem the Senior Notes and Subordinated Notes in the event of an Event of Default under the Indenture.

The Initial Purchaser Will Not Have Ongoing Responsibility for the Collateral or the Actions of the Collateral Manager or the Issuer.

Merrill Lynch will not be obligated to monitor the performance of the Collateral or the actions of the Collateral Manager, the Issuer or the Co-Issuer and will have no authority to advise the Collateral Manager, the Issuer or the Co-Issuer or to direct their actions, which will be solely the responsibility of the Collateral Manager, the Issuer and/or the Co-Issuer, as the case may be. If Merrill Lynch acts as Hedge Counterparty or Synthetic Security Counterparty, acts in any other capacity or owns Notes, it will have no responsibility to consider the interests of any Noteholders in actions it takes in such capacities. While Merrill Lynch may own Notes at any time, it has no obligation to make any investment in any Notes and may sell at any time any Notes that it purchases.

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The Controlling Class or the Insurer, Which Generally Will Have the Right to Exercise the Rights of the Controlling Class, Will Control Many Rights Under the Indenture; However, Some Rights of the Controlling Class to Sell Collateral in Connection with an Event of Default Are Limited.

Under the Indenture, many rights of the Noteholders will be controlled by 66-2/3% of the Aggregate Outstanding Principal Amount of the Controlling Class. However, so long as any Insured Notes are outstanding or any Accrued Insurance Liabilities or Premium under the Insurance Agreement owing to the Insurer remain unpaid, and there has not been an Insurer Default, the rights of the Controlling Class will be exercised by the Insurer. The exercise of the rights of the Controlling Class by the Insurer is not conditioned on, among other things, the Insurer’s maintaining any specified credit ratings.

Remedies pursued by the Controlling Class or the Insurer in exercising the rights of the Controlling Class upon an Event of Default could be adverse to the interests of the Noteholders subordinated to the Controlling Class. The Class A-1 Noteholders generally will not have the right to accelerate the maturity of the Senior Notes upon the occurrence of an Event of Default but instead will be entitled to continue to receive regularly scheduled payments of interest and principal, if any, unless and until such maturity is accelerated by the Insurer. After any realization on the Collateral, proceeds will be allocated in accordance with the Priority of Payments pursuant to which the Senior Notes, Accrued Insurance Liabilities or Premium owed to the Insurer and certain other amounts owing by the Co-Issuers will be paid in full before any allocation to the Subordinated Notes, and each Class of Senior Notes (along with certain other amounts owing by the Co-Issuers) will be paid serially in alphabetic order until it is paid in full before any allocation is made to the next Class of Senior Notes.

In addition, the Insurer has the right to declare an event of default under the Insurance Agreement in connection with breaches of covenants and misrepresentations by the Co-Issuers thereunder, which events of default will constitute Events of Default under the Indenture. See “The Policy and the Insurance Agreement.”

However, the ability of the Controlling Class to direct the sale and liquidation of the Collateral is subject to certain limitations. As described under “Description of the Notes—Events of Default,” if an Event of Default occurs and is continuing, the Trustee will retain the Collateral intact and collect all payments in respect of the Collateral and continue making payments in accordance with the Priority of Payments and in accordance with the Indenture unless either: (a) the Trustee determines that the anticipated proceeds of a sale or liquidation of the Collateral would be sufficient to discharge in full the amounts then due and unpaid on the Senior Notes for principal and interest (including Defaulted Interest, interest on Defaulted Interest, Class B Deferred Interest, Class C Deferred Interest, Class D Deferred Interest, Class E Deferred Interest and Class F Deferred Interest), certain due and unpaid Administrative Expenses and any accrued and unpaid amounts payable by the Issuer pursuant to the Hedge Agreements, including termination payments, if any (assuming, for this purpose, that the Hedge Agreements have been terminated by reason of an event of default or termination with respect to the Issuer) and all amounts owing to the Insurer under the Insurance Documents; or (b) a Majority of the Senior Noteholders voting as a single Class direct or consent to, subject to the provisions of the Indenture, the sale and liquidation of the Collateral.

The Issuer May Modify the Indenture by Supplemental Indentures, and Some Supplemental Indentures Do Not Require Consent of Noteholders.

The Indenture provides that the Co-Issuers and the Trustee may enter into supplemental indentures to modify various provisions of the Indenture. Execution of supplemental indentures is subject to various conditions precedent, including in certain cases the consent of the Collateral Manager and the Insurer. In certain cases, the consent of Noteholders also is required, but, in certain cases, such consent is not required. See “Description of the Notes—Events of Default—Modification of the Indenture.”

The Indenture Requires Mandatory Redemption of the Senior Notes for Failure to Satisfy Coverage Tests.

If any Coverage Test applicable to a Class of Senior Notes or any Class of Senior Notes subordinate to such Class is not satisfied as of a Determination Date, Interest Proceeds and, after application of Interest Proceeds, Principal Proceeds, will be used to the extent that funds are available in accordance with the Priority of Payments and to the extent necessary to restore the relevant Coverage Test(s) to certain minimum required levels to repay principal of the Senior Notes sequentially in order of seniority. The foregoing could result in an elimination, deferral

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or reduction in the payments in respect of interest or the principal payments made to the Holders of one or more Classes of Senior Notes that are subordinate to any other outstanding Class of Senior Notes, which could adversely affect the returns of such Holders.

The Indenture Requires Mandatory Redemption of the Senior Notes Upon a Ramp-Up Ratings Confirmation Failure.

In the event the Closing Date and the Ramp-Up Completion Date are not the same date, the Issuer, or the Collateral Manager on behalf of the Issuer, will notify the Trustee, the Insurer, each Rating Agency and the Hedge Counterparties in writing of the occurrence of the Ramp-Up Completion Date within seven business days after the occurrence of the Ramp-Up Completion Date (such notice a “Ramp-Up Notice”). In the event the Issuer, or the Collateral Manager on behalf of the Issuer, gives such notice, the Issuer, or the Collateral Manager on behalf of the Issuer, will request that each Rating Agency confirm within 30 days after receipt of a Ramp-Up Notice that it has not reduced or withdrawn the rating (including shadow, private or confidential ratings, if any) assigned by it on the Closing Date to any Tranche of Notes (in the case of the Class A-1B Notes, without giving effect to the Policy) (such confirmation, together with any confirmation deemed to have been made in accordance with the following sentence, a “Ratings Confirmation”). The Issuer will be deemed to have obtained a confirmation of the ratings assigned by a Rating Agency (other than S&P) on the Closing Date if (a) such Rating Agency does not notify the Issuer in writing within 30 days after receipt of a Ramp-Up Notice that any such rating (including shadow, private or confidential ratings, if any) has been reduced or withdrawn and (b) the Coverage Tests and Collateral Quality Tests are satisfied on the Ramp-Up Completion Date. If the Issuer is unable to obtain a Ratings Confirmation from each Rating Agency (a “Ramp-Up Ratings Confirmation Failure”), on the first Distribution Date the Issuer will be required to apply Uninvested Proceeds and, to the extent that Uninvested Proceeds are insufficient, Interest Proceeds and Principal Proceeds, in each case in accordance with the Priority of Payments, to the payment of, first, the Class A-1A Notes (and any Class A-1A Commitment Fees), second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, the Class C Notes, sixth, the Class D Notes, seventh, the Class E Notes, eighth, the Class F Notes and, ninth, the Subordinated Notes, as, and to the extent, necessary to obtain a Ratings Confirmation from each Rating Agency. See “Description of the Notes—Mandatory Redemption” and “—Priority of Payments.” Notwithstanding anything herein to the contrary, in the event the Issuer acquires Collateral Debt Securities on the Closing Date with an aggregate principal amount at least equal to the Aggregate Ramp-Up Par Amount, a Ratings Confirmation will be deemed to have occurred on the Closing Date.

Interest Proceeds Otherwise Payable to the Subordinated Noteholders May be Applied to Pay Principal of the Senior Notes.

(a) On the Distribution Date occurring in January 2008, and on each Distribution Date thereafter to and including the Distribution Date in January 2012, if the Class E Notes and the Class F Notes are not redeemed in full on or prior to any such Distribution Date, an amount equal to 8% of the Interest Proceeds available after application of Interest Proceeds to pay Deferred Interest on the Class F Notes in accordance with the Priority of Payments will be applied to pay, pro rata, principal of the Class E Notes and the Class F Notes until each such Class of Notes has been paid in full, (b) on the Distribution Date occurring after January 2012, and on each Distribution Date thereafter to and including the Distribution Date in January 2017, if the Class E Notes and the Class F Notes are not redeemed in full on or prior to any such Distribution Date, an amount equal to 25% of the Interest Proceeds available after application of Interest Proceeds to pay Deferred Interest on the Class F Notes in accordance with the Priority of Payments will be applied to pay, pro rata, principal of the Class E Notes and the Class F Notes until each such Class of Notes has been paid in full and (c) on the Distribution Date occurring in April 2017, and on each Distribution Date thereafter, if the Senior Notes are not redeemed in full on or prior to such date, an amount equal to 60% of the Interest Proceeds available after application of Interest Proceeds to pay Deferred Interest on the Class F Notes in accordance with the Priority of Payments will be applied to pay, pro rata, principal of the Class A-1A Notes, the Class A-1B Notes, 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, until each such Class of Senior Notes has been paid in full. See “Description of the Notes—Priority of Payments—Interest Proceeds”. Because such redemption of the Senior Notes will reduce the amount of funds available for payment to the Subordinated Noteholders on and after the Distribution Date occurring in April 2017, until such time as the Senior Notes have been paid in full, the Subordinated Noteholders may have a strong incentive to require that the Senior Notes be redeemed on or prior to such Distribution Date.

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The Senior Notes Are Subject to Auction Call Redemption.

If the Senior Notes have not been redeemed in full prior to the Distribution Date occurring in January 2017, then an auction of the Collateral Debt Securities will be conducted in accordance with the terms of the Indenture and, provided that certain conditions are satisfied, the Collateral Debt Securities will be sold in such Auction and the Senior Notes will be redeemed (in whole, but not in part) on such Distribution Date. If such conditions are not satisfied and the auction is not successfully conducted on such Distribution Date, the Collateral Manager will conduct auctions on a quarterly basis until the Senior Notes are redeemed in full. See “Description of the Notes—Redemption Price” and “—Auction Call Redemption.” Each Hedge Agreement will terminate upon an Auction Call Redemption.

It is not possible to predict the result of an Auction. There can be no assurance that the Issuer will be able to sell the Collateral Debt Securities in connection with any Auction, or that any Auction will be successful. The market prices for the Collateral Debt Securities cannot be predicted with certainty. The Collateral Debt Securities are subject to liquidity risk and there may be no secondary market for the Collateral Debt Securities. In addition, there can be no assurance that the Issuer will be able to sell the securities in a timely manner.

The Notes Are Subject to Optional Redemption.

Subject to satisfaction of certain conditions, Holders of at least a Majority of the Subordinated Notes may require that the Notes be redeemed as described under “Description of the Notes—Optional Redemption and Tax Redemption—Optional Redemption;” provided that such optional redemption may only occur on any Distribution Date occurring on or after April 2012.

In connection with such a redemption, the Senior Notes will be redeemed in whole and not in part. See “Description of the Notes—Optional Redemption and Tax Redemption—Optional Redemption.” Each Hedge Agreement will terminate upon any Optional Redemption.

An Optional Redemption may require the Collateral Manager to liquidate positions more rapidly than would otherwise be desirable, which could adversely affect the realized value of the Collateral Debt Securities. Moreover, the Collateral Manager may be required in connection with an Optional Redemption to aggregate Collateral Debt Securities to be sold together in one block transaction, thereby possibly resulting in a lower realized value for the Collateral Debt Securities sold.

Upon the Occurrence of Certain Tax Events, the Notes May Be Subject to Tax Redemption.

Subject to satisfaction of certain conditions, upon the occurrence of any Tax Event with respect to which the Tax Materiality Condition is satisfied, the Issuer may redeem the Notes at the applicable Redemption Price on any Distribution Date at the direction of the Holders of at least a Majority of the Affected Class; provided that in the event the aggregate amount of funds deducted or withheld as described in the definition of Tax Event at any time exceeds the sum of the Aggregate Outstanding Principal Amount of the Subordinated Notes then outstanding and the Aggregate Outstanding Principal Amount of the most subordinate Class of Senior Notes then outstanding, the “Affected Class” shall be deemed to be the next most subordinate Class of Senior Notes then outstanding, and only from (a) the sale proceeds of the Collateral and (b) all other funds in the Interest Collection Account, Principal Collection Account, the Expense Account, the Discretionary Interest Shortfall Reserve Account, the Semi-Annual Interest Reserve Account and the Payment Account on such Distribution Date. No Tax Redemption may be effected, however, unless (i) a Tax Event has occurred, (ii) the Tax Materiality Condition is satisfied, (iii) except as otherwise set forth in the Indenture and described herein, the Sale Proceeds and all cash and Eligible Investments credited to the Interest Collection Account, Principal Collection Account, the Expense Account, the Discretionary Interest Shortfall Reserve Account, the Semi-Annual Interest Reserve Account and the Payment Account on the relevant Distribution Date must be at least sufficient to redeem the Senior Notes simultaneously in accordance with the procedures described in the Indenture and to pay any amounts payable to the Insurer under the Insurance Documents and (iv) such Sale Proceeds are used to make such a redemption. See “Description of the Notes—Optional Redemption and Tax Redemption—Tax Redemption.” Each Hedge Agreement will terminate upon any Tax Redemption.

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The Notes Will Be Affected by Interest Rate Risk, Including Mismatches Between the Notes and the Collateral Debt Securities.

The Floating Rate Notes and, after the Fixed Rate Period Termination Date, the Fixed/Floating Rate Notes, bear interest at a rate based on three-month LIBOR as determined on the relevant LIBOR Determination Date. Also, each Tranche of Fixed/Floating Rate Notes will bear interest at their respective fixed rates during the Fixed Rate Period. The Fixed Rate Notes will bear interest based on their respective fixed rates in accordance with the terms described herein. The Collateral Debt Securities will include obligations that bear interest at fixed rates or at floating rates that are not the same as the rate or rates on the Senior Notes. In addition, a portion of the Collateral Debt Securities may bear interest at a fixed rate for a specified period of time and then bear interest at a floating rate until their maturity. Accordingly, the Senior Notes are subject to interest rate risk to the extent that there is an interest rate mismatch between the rates at which interest accrues on the Senior Notes and the rates at which interest accrues on the Collateral Debt Securities. In addition, any payments of principal of or interest on Collateral Debt Securities received during a Due Period will be reinvested in Eligible Investments maturing not later than the Business Day immediately preceding the next Distribution Date. There is no requirement that Eligible Investments bear interest at LIBOR, and the interest rates available for Eligible Investments are inherently uncertain. As a result of these mismatches, a change in three-month LIBOR could adversely affect the ability of the Issuer to make payments on the Notes (including by reason of a decline in the value of previously issued fixed rate Collateral Debt Securities as LIBOR increases). With a view toward mitigating a portion of such interest rate mismatch, the Issuer will on the Closing Date, and may at any time on or prior to the Ramp-Up Completion Date, enter into one or more Hedge Agreements; provided that Hedge Agreements may be entered into by the Issuer after the Closing Date only in accordance with the terms of the Indenture, which terms shall include the requirement that any such Hedge Agreement be necessary in order to meet the requirements of the Rating Agencies. However, there can be no assurance that Collateral Debt Securities and Eligible Investments, together with the Hedge Agreements, will generate sufficient Interest Proceeds to make timely payments of interest on the Senior Notes, nor that the Hedge Agreements will ensure any particular return on the Notes. Moreover, the benefits of the Hedge Agreements may not be achieved in the event of the early termination of the Hedge Agreements, including termination upon the failure of any Hedge Counterparty to perform its obligations thereunder. See “Security for the Senior Notes—The Hedge Agreements.”

Subject to the satisfaction of the Rating Condition with respect to such reduction, the Collateral Manager may on any Distribution Date direct the Issuer to reduce the notional amount of any interest rate swap, basis swap or cap outstanding under any Hedge Agreement. In the event of any such reduction, the applicable Hedge Counterparty or the Issuer may be required to make a termination payment in respect of such reduction to the other party. See “Security for the Senior Notes—The Hedge Agreements.”

One or more of the Hedge Agreements that will be in effect on the Closing Date will provide that the Hedge Counterparty will make an up-front payment to the Issuer. As a result of such up-front payment, if any, the amounts payable under the Hedge Agreements by the Issuer on each Distribution Date may be more than each would have been if the up-front payment had not been made. Therefore, if such an up-front payment were made, the funds available to make payments on the Notes may be less on each Distribution Date than they would have been if the up front payment had not been made. Moreover, in the event of an early termination of a Hedge Agreement, the Issuer is more likely to be required to make a termination payment to the Hedge Counterparty (and the amount of such termination payment is likely to be larger) as a result of such up-front payment.

The Average Lives of the Notes May Vary.

The average life of each Class of Notes is expected to be shorter than the number of years until the Stated Maturity thereof. See “Maturity, Prepayment and Yield Considerations.”

The average life of each Class of Notes will be affected by the financial condition of the issuers of the Collateral Debt Securities and the characteristics of the Collateral Debt Securities, including the existence and frequency of exercise of any prepayment, optional redemption or sinking fund features, the prevailing level of interest rates, the redemption price, the actual default rate and the actual level of recoveries on any Defaulted Securities, the frequency of tender or exchange offers for the Collateral Debt Securities and any dividends or other distributions received in respect of Equity Securities. Pursuant to the terms of the Indenture and the Collateral

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Management Agreement, the Collateral Manager will have the ability to dispose of Collateral Debt Securities at any time and, to the limited extent described herein, to reinvest the proceeds thereof in Additional Collateral Debt Securities. Any such disposition of Collateral Debt Securities, and the use of the Sale Proceeds thereof to pay principal on the Notes, as well as any such reinvestment, will affect the average life of the Notes. See “Maturity, Prepayment and Yield Considerations” and “Security for the Senior Notes.”

The Co-Issuers Have No Operating History and Are Limited in their Permitted Activities.

The Co-Issuers have no prior operating history. Accordingly, the Co-Issuers do not have a performance history for a prospective investor to consider in making its decision to invest in the Notes.

The Notes Are Not Guaranteed by the Co-Issuers, the Initial Purchaser, the Collateral Manager, any Hedge Counterparty, the Insurer (except with respect to Insured Amounts) or the Trustee.

None of the Co-Issuers, the Initial Purchaser, the Collateral Manager, any Hedge Counterparty, the Insurer (except to the extent of its obligations to pay Insured Amounts), the Trustee or any of their respective affiliates makes any assurance, guarantee or representation whatsoever as to the expected or projected success, profitability, return, performance result, effect, consequence or benefit (including legal, regulatory, tax, financial, accounting or otherwise) to investors of ownership of the Notes and no purchaser may rely on any such party for a determination of expected or projected success, profitability, return, performance result, effect, consequence or benefit (including legal, regulatory, tax, financial, accounting or otherwise) to such purchaser of ownership of the Notes. Each purchaser of any Tranche of Notes, by its acceptance thereof, will be deemed or required, as the case may be, and each purchaser of the Definitive Subordinated Notes, by its acceptance thereof, will be required, to represent to the Issuer, the Collateral Manager and the Initial Purchaser, among other things, that such purchaser has consulted with its own legal, regulatory, tax, business, investment, financial, and accounting advisors regarding investment in the Notes as such purchaser has deemed necessary and that the investment by such purchaser is within its powers and authority, is permissible under applicable laws governing such purchase, has been duly authorized by it and complies with applicable securities laws and other laws.

Investors Will Indirectly Bear Expenses of the Co-Issuers.

Through their investment in the Notes, investors bear the cost of the Collateral Management Fees and other expenses described in this Offering Circular. In the aggregate, these fees and expenses may be greater than if an investor were directly to make investments identical to the Collateral Debt Securities. On each Distribution Date, in accordance with the priority of payment provisions described herein, certain collections on the Collateral Debt Securities will be used to make certain payments free and clear of the lien of the Indenture, including payment of certain fees to the Collateral Manager, the Collateral Administrator, the Trustee, the Insurer and the Hedge Counterparties. In addition, certain amounts on deposit in the Expense Account may be withdrawn from time to time to pay accrued and unpaid expenses of the Co-Issuers (other than fees and expenses of the Trustee or the Collateral Management Fee).

To the extent that any such distributions are made rather than retained as additional collateral for the Senior Notes, the amounts so distributed will not be available to support payments of principal and interest subsequently payable in respect of the Notes.

Book-Entry Holders Are Not Considered Holders Under the Indenture.

Holders of beneficial interests in any Notes held in global form will not be considered Noteholders under the Indenture. After payment of any interest, principal or other amount to DTC, neither the Issuer nor the Co-Issuer will have any responsibility or liability for the payment of such amount by DTC or to any Holder of a beneficial interest in a Note. DTC or its nominee, Cede & Co., will be the sole Noteholders of Notes held in global form, and therefore each person owning a beneficial interest in a Note held in global form must rely on the procedures of DTC (and if such person is not a participant in DTC, on the procedures of the participant through which such person holds such interest) with respect to the exercise of any rights of a Noteholder under the Indenture.

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Relating to the Collateral Manager

Performance History of the Collateral Manager May Not Be Indicative of Future Results.

The past performance of the principals and affiliates of the Collateral Manager in other portfolios or investment vehicles may not be indicative of the results that the Collateral Manager may be able to achieve with the Collateral Debt Securities. Similarly, the past performance of the Collateral Manager over a particular period may not necessarily be indicative of the results that may be expected in future periods. Furthermore, the nature of, and risks associated with, the Issuer’s investments may differ substantially from those investments and strategies undertaken historically by the principals and affiliates of the Collateral Manager. There can be no assurance that the Issuer’s investments will perform as well as past investments of the Collateral Manager, that the Issuer will be able to avoid losses or that the Issuer will be able to make investments similar to the past investments of the principals or any other person described herein. In addition, such past investments may have been made utilizing a leveraged capital structure, an asset mix and fee arrangements that are different from the anticipated capital structure, asset mix and fee arrangements of the Issuer. Moreover, because the investment criteria that govern investments in the Issuer’s portfolio do not govern the Collateral Manager’s investments and investment strategies generally, such investments conducted in accordance with such criteria, and the results they yield, are not directly comparable with, and may differ substantially from, other investments undertaken by the Collateral Manager.

The Issuer Will Depend on the Managerial Expertise Available to the Collateral Manager.

Because the composition of the Collateral Debt Securities may vary over time, the performance of the Collateral Debt Securities depends heavily on the skills of the Collateral Manager in analyzing, administering and, in certain circumstances permitted under the Indenture, selecting the Collateral Debt Securities. As a result, the Issuer will be highly dependent on the financial and managerial experience of the investment professionals available to the Collateral Manager to whom the task of managing the Collateral has been assigned, none of whom is under any contractual obligation to the Issuer to continue to be associated with the Collateral Manager for any length of time. The Collateral Manager is a joint venture between an affiliate of Financial Stocks, Inc. (“FSI”), which acts as the managing member of the Collateral Manager, and Sandelman Partners, L.P. (“Sandelman”). Sandelman and FSI may restructure their relationship with respect to the Collateral Manager. FSI will make available employees to the Collateral Manager, and such employees will be responsible for various functions of the Collateral Manager, including the management of the Issuer. In the event that FSI ceases to make available such employees to the Collateral Manager or such employees cease to be employed by FSI or otherwise associated with AMG, the Collateral Manager would have to reassign responsibilities internally and/or replace such employees with one or more other investment professionals (although it is not obligated to do so) and such a loss could have a material adverse effect on the performance of the Issuer. See “The Collateral Management Agreement” and “The Collateral Manager.”

The Investment Professionals Available to the Collateral Manager Will Attend to Matters Unrelated to the Investment Activities of the Issuer.

The Collateral Manager has informed the Issuer that the investment professionals available to the Collateral Manager (a) are actively involved in other investment activities not concerning the Issuer, (b) in the case of investment professionals not employed by AMG, will continue to have responsibilities to their employers, FSI and its affiliates, and (c) will not be able to devote all of their time to the Issuer’s business and affairs. In addition, individuals not currently available to the Collateral Manager may become available to the Collateral Manager and the performance of the Collateral Debt Securities may also depend on the financial and managerial experience of such individuals. See “The Collateral Management Agreement” and “The Collateral Manager.”

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Relating to Real Estate Entities

Real Estate Entities Are Subject to Risks Generally Incident to the Ownership, Financing and Building of Real Property.

Real Estate Entities (other than Limited Real Estate Entities) are financial vehicles that seek to pool capital from a number of investors in order to participate directly in real estate ownership, financing or homebuilding. Since the Collateral will consist in part of Trust Preferred Securities issued by trust subsidiaries of Real Estate Entities (other than Limited Real Estate Entities), which trust subsidiaries are entirely dependent upon the Real Estate Entity to provide payment on the Corresponding Debentures issued by the Real Estate Entity to such subsidiary and Real Estate Entity Securities issued directly by and Loans made (in certain circumstances) to, Real Estate Entities, an investment in the Issuer will be subject to varying degrees of risk generally incident to the ownership, financing and building of real property. The underlying value of the Collateral Debt Securities and the performance of the Real Estate Entities may be adversely affected by the following factors, which may adversely affect the Issuer’s ability to make payments to the Noteholders: (a) adverse changes in national economic conditions, (b) adverse changes in local market conditions due to changes in general or local economic conditions and neighborhood characteristics, (c) increased competition from other properties, (d) obsolescence of property, (e) changes in the availability, cost and terms of mortgage funds, (f) the impact of present or future environmental legislation and compliance with environmental laws, (g) the ongoing need for capital improvements (particularly in older properties), changes in real estate tax rates and other operating expenses, (h) regulatory and economic impediments to raising rents, (i) adverse changes in governmental rules and fiscal policies, (j) dependency on management skills, (k) civil unrest, (l) acts of God, including earthquakes and other natural disasters (which may result in uninsured losses), (m) acts of war, (n) adverse changes in zoning laws and (o) other factors which may be beyond the control of the Real Estate Entities issuing Corresponding Debentures or Real Estate Entity Securities or that are obligors on Loans.

Equity Real Estate Entities may concentrate investments in specific geographic areas or in specific property types, i.e., hotels, shopping malls, residential complexes, and office buildings potentially increasing the negative impact of economic conditions on equity Real Estate Entities. Variations in rental income and space availability and vacancy rates in terms of supply and demand are additional factors affecting real estate generally and equity Real Estate Entities in particular. In addition, investors should be aware that equity Real Estate Entities are subject to the risks of financing projects including refinancing risks associated with variations in interest rates. Equity Real Estate Entities are also subject to defaults by borrowers, self-liquidation, the market’s perception of the equity Real Estate Entity industry generally, and the possibility of REITs failing to qualify for tax-free pass through of income under the Code, and the requirement for equity Real Estate Entities to maintain exemption from the 1940 Act. A default by a borrower or lessee may cause the equity Real Estate Entity to experience delays in enforcing its rights as mortgagee or lessor, incur significant costs related to protecting its investments and potentially to realize significant losses.

Mortgage Real Estate Entities will be subject to risks of borrower defaults, bankruptcies, fraud and losses and special hazard losses that are not covered by standard hazard insurance. Also, the costs of financing the mortgage loans could exceed the return on the mortgage loans. In the event of any default under mortgage loans held by a mortgage Real Estate Entity, it would bear the risk of loss of principal and nonpayment of interest and fees to the extent of any deficiency between the value of the mortgage collateral and the principal balance of the mortgage loan.

Equity Real Estate Entities are less likely to be affected by interest rate fluctuations than mortgage Real Estate Entities and the nature of the underlying assets of an equity Real Estate Entity, i.e., investments in real property, may be considered more tangible than that of a mortgage Real Estate Entity. Equity Real Estate Entities are more likely to be adversely affected by decreases in the value of the underlying property it owns than mortgage Real Estate Entities.

Homebuilding Companies are generally engaged in the design, construction and sale of homes. The builder may also develop a portion or all of the lot on which the home is sited. The homebuilding industry is highly fragmented and is a cyclical business affected by demographics, job creation, interest rates and consumer confidence. Homebuilding Companies have benefited from a strong multiyear housing expansion, during which

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most of the macroeconomic drivers have been at historically favorable levels despite wavering consumer confidence and lower employment numbers. The very low mortgage rates and perception of housing as a good investment have offset economic concerns. However, certain recent published data relating to the industry, including recent financial performance of certain individual companies, indicate that these favorable conditions may no longer exist, heightening the economic concerns referred to above.

Uninsured Losses on Properties Held By Real Estate Entities May Reduce Payments on the Notes

Real Estate Entities generally maintain comprehensive insurance on presently owned and subsequently acquired real property assets, including liability, fire and extended coverage. However, there are certain types of losses, generally of a catastrophic nature, such as earthquakes, wildfires, hurricanes and floods or acts of war and terrorism, that may be uninsurable or not economically insurable, as to which the Real Estate Entities properties are at risk in their particular locales. The management of Real Estate Entity issuers uses their discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to requiring appropriate insurance on their investments at a reasonable cost and on suitable terms. This may result in insurance coverage that in the event of a substantial loss would not be sufficient to pay the full current market value or current replacement cost of the lost investment. Inflation, changes in building codes, and ordinances, environmental considerations, and other factors also might make it infeasible to use insurance proceeds to replace a facility after it has been damaged or destroyed. Under such circumstances, the insurance proceeds received by Real Estate Entities might not be adequate to restore its economic position with respect to such property.

Real Estate Entities May Be Subject to Environmental Liability.

Under various federal, state, and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in such property. Such laws often impose liability whether or not the owner or operator caused or knew of the presence of such hazardous or toxic substances and whether or not the storage of such substances was in violation of a tenant’s lease. In addition, the presence of hazardous or toxic substances, or the failure to remediate such property properly, may adversely affect the owner’s ability to borrow using such real property as collateral. No assurance can be given that one or more of the Real Estate Entities issuing Corresponding Debentures or Real Estate Entity Securities or that are obligors on any of the Loans may not be presently liable or potentially liable for any such costs in connection with real estate assets they presently own or subsequently acquire.

Real Estate Entities May Be Required to Make Modifications to Properties to Comply With the Americans with Disabilities Act.

Under the Americans with Disabilities Act of 1990 (the “ADA”), all public accommodations are required to meet certain federal requirements related to physical access and use by disabled persons. In the event that any of the Real Estate Entities issuing Corresponding Debentures or Real Estate Entity Securities or acting as borrower under Loans invest in or hold mortgages on real estate properties subject to the ADA, a determination that any such properties are not in compliance with the ADA could result in imposition of fines or an award of damages to private litigants. If any of the Real Estate Entities were required to make modifications to comply with the ADA, such Real Estate Entity’s ability to make expected payments on its Corresponding Debentures, Real Estate Entity Securities or Loans (as the case may be) to the Issuer could be adversely affected, thus adversely affecting the ability of the Issuer to make payments to the Noteholders.

Property Tax Rates May Increase Due to Assessments.

Real estate generally is subject to real property taxes. The real property taxes on the properties held by the Real Estate Entities may increase or decrease as property tax rates change and as the properties are assessed or reassessed by taxing authorities.

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Real Estate Investments and Holdings of Real Estate Entities are Relatively Illiquid.

The ability of the issuers of the Corresponding Debentures or Real Estate Entity Securities or the borrowers under the Loans that are Real Estate Entities to vary their portfolios in response to changes in economic and other conditions will be limited. There can be no assurance that any Real Estate Entity that is a borrower under a Loan or that issues a Corresponding Debenture or a Real Estate Entity Security will be able to dispose of its underlying real estate assets when it finds disposition advantageous or necessary or that the sale price of any disposition will recoup or exceed the amount of its investment.

REITS are Subject to Particular Risks.

REITs are companies that seek to pool capital from a number of investors in order to participate directly in real estate ownership or financing and that qualify and elect to be treated as “real estate investment trusts” for U.S. federal income tax purposes. REITs can generally be classified as equity REITs, mortgage REITs and hybrid REITs. Equity REITs generally own and operate income producing real estate and derive their income primarily from rents. Mortgage REITs generally either lend money directly to real estate owners or extend credit indirectly through the purchase of mortgage loans or mortgage-backed securities and derive their income primarily from interest payments. Hybrid REITs combine the characteristics of both equity REITs and mortgage REITs. REITs can either be self-managed or managed by separate advisory companies for a fee.

At the close of each quarter, at least 75% of the value of the assets of a qualifying REIT must be in “real estate assets” (including interests in real property, mortgages on real property and shares in other REITs), cash, cash items (including receivables) and government securities. REITs are subject to inherent risks associated with such investments. Those risks include, among other things: declines in value of real estate, adverse changes in national economic conditions, changes in interest rates, adverse changes in local market conditions due to changes in general or local economic conditions and neighborhood characteristics, increased competition from other properties, obsolescence of property, overbuilding, extended vacancies of properties, changes in the availability, cost and terms of mortgage funds, defaults by borrowers, risks associated with leverage or debt, the impact of present or future environmental legislation and compliance with environmental laws, environmental remediation or liability costs, the ongoing need for capital improvements, particularly in older properties, changes in real estate tax rates and other operating expenses, regulatory and economic impediments to raising rents, adverse changes in governmental rules and fiscal policies, dependency on management skills, the relative illiquidity of real estate investments, civil unrest, acts of God, including earthquakes and other natural disasters (which may result in uninsured losses), acts of war or terrorism, casualty or condemnation losses, adverse changes in zoning laws, and other factors which are beyond the control of a REIT. REITs also tend to be small to medium-sized companies in relation to the equity markets as a whole.

To qualify as a REIT under federal tax law, a REIT must satisfy various organizational, income, asset, distribution and record keeping requirements. The laws and rules that govern REIT qualification can be very complex and technical. If those laws and rules are followed, a REIT is permitted to deduct the dividends paid to its shareholders, thereby eliminating much of the REIT’s federal income tax obligations. If a Real Estate Collateral Debt Securities Issuer that is or is sponsored by a REIT should fail to remain qualified as a REIT, such REIT’s dividends will not be deductible and it will be subject to corporate level income taxation. Unless entitled to relief under specific statutory provisions, the REIT also would be disqualified from reelecting taxation as a REIT for the four taxable years following the year during which REIT qualification was lost. This could substantially reduce the cash available to make distributions on the related Collateral Debt Security.

A REIT is generally required to distribute at least 90% of its taxable REIT income each year in order to maintain its REIT status for federal income tax purposes. Because of this distribution requirement, REITs generally are not able to fund future capital needs from operating cash flow and REITs typically rely on third party investments, often in the form of loans, to provide capital for growth. As a result, the Real Estate Collateral Debt Securities Issuers or Real Estate Entities that are REITs may be highly leveraged and much of their borrowings will likely be senior to the Real Estate Collateral Debt Securities or Corresponding Debentures issued by such REITs. The Real Estate Collateral Debt Securities Issuers or Real Estate Entities that are REITs may also be subject to financial covenants that restrict their methods of financing or subject them to oversight and control by their lenders. The risks associated with acquiring the securities of such issuers generally is greater than is the case with more

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highly rated securities. For example, during an economic downturn or a sustained period of rising interest rates (or a period of a flattening or steepening of the yield curve), REITs may be more likely to experience financial stress, especially if such issuers are highly leveraged. During such periods, timely service of debt obligations may also be adversely affected by specific issuer developments or the unavailability of additional financing. The risk of loss due to default by a REIT may be significantly greater for the holders of Corresponding Debentures or Subordinated Securities issued by a REIT than for other lenders to the REIT because the Corresponding Debentures and Subordinated Securities are unsecured and generally junior to the other loans.

REITs and REOCs are Subject to Certain Business Risks.

Each REOC or equity REIT is subject to the risk that its tenants will suffer business setbacks due to market and other adverse factors that may be beyond the ability of the tenant or the REOC or REIT to fully control. Additionally, REOCs and equity REITs invest in one or more of the retail, office, industrial, hotel, self storage, residential or other real estate sectors. Each such property type is subject to particular risks. For example, retail properties are subject to risks of competition for tenants, events affecting anchor or other major tenants, tenant concentration, property condition and competition of their tenants with other local retailers, discount stores, factory outlet centers, video shopping networks, catalogue retailers, direct mail and telemarketing and Internet retailers. Office and industrial properties are subject to risks relating to the quality of their tenants, tenant and industry concentration, local economic conditions, and the age, condition, adaptability and location of the property. The investment strategy of a REOC or an equity REIT may focus on one real estate sector to the exclusion of others or a REOC or an equity REIT may have a large number of leases with one tenant. This investment concentration could increase the likelihood of losses in the event the particular real estate sector or tenant in which the investments of the REOC or the REIT are concentrated experiences adverse business developments.

Mortgage REITs are subject to the risks inherent in real estate lending, which include delinquencies and defaults of the related borrowers under the mortgage loans, early prepayment of mortgage loans (as a result of changes in macroeconomic factors or otherwise), and the risks listed in the paragraph above, which affect the ability of the borrower to make payments on its mortgage and which could be applicable to a mortgage REIT following a foreclosure. Commercial real estate loans are often non-recourse. Also, limited recourse against the borrower may be further limited by applicable provisions of the laws of the jurisdiction in which the mortgaged properties are located or by the selection of remedies and the impact of those laws on that selection. In the event of a borrower default, the specified mortgaged property and other assets, if any, pledged to secure the relevant mortgage loan, may be less than the amount owed under the mortgage loan. In addition, as with equity REITs, mortgage REITs may concentrate their investments in one sector of the mortgage loan market (for example, residential mortgage loans). If such a sector were to suffer a downturn, it could have an adverse effect on any Real Estate Entity that is a REIT that have concentrated their investments in that area.

Additional risks that could affect the ability of a REOC or a REIT to make interest payments on its Collateral Debt Securities may include (among others): (a) limited liquidity and secondary market support, (b) substantial market price volatility resulting from changes in prevailing interest rates, (c) subordination to the prior claims of banks and other senior lenders, (d) the operation of optional redemption or sinking fund provisions during periods of declining interest rates, (e) the possibility that earnings of the related Real Estate Entity may be insufficient to meet its debt service and (f) the declining creditworthiness and potential for insolvency of the REOC or the REIT during periods of rising interest rates, a flattening or steepening of the yield curve or an economic downturn.

Homebuilding Companies Could be Adversely Affected by Downward Changes In General Economic, Real Estate Construction Or Other Business Conditions.

The residential homebuilding industry is sensitive to changes in national and regional economic conditions and other factors, such as the level of employment, consumer confidence, consumer income, availability of financing and interest rate levels. Adverse changes in any of these conditions generally, or in the markets where any Homebuilding Company operates, could decrease demand and pricing for new homes in these areas or result in customer cancellations of pending contracts, which could adversely affect the related Homebuilding Company’s volume of home deliveries, reduce the prices a Homebuilding Company can charge for homes or increase its costs, any of which could result in a decrease in its revenues or earnings, as applicable, or otherwise adversely affect it.

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Certain published data relating to the industry, including data relating to the financial performance of certain individual companies, indicate that there recently has been decreased demand and lower pricing for new homes in many parts of the United States.

Relating to Mortgage Loans Comprising or Underlying Certain Collateral Debt Securities

Commercial Mortgage Loans Entail Risks Of Delinquency And Foreclosure.

Mortgage loans, including mortgage loans comprising or underlying the Collateral Debt Securities, are generally secured by one or more mortgages, deeds of trust or other similar security instruments creating a lien on the related borrower’s fee estate or leasehold estate in one or more single-family residential, multifamily or commercial properties (each, a “Mortgaged Property”) and may entail risks of delinquency and foreclosure, and risks of loss in the event thereof. In addition, commercial mortgage loans are generally non-recourse loans and in the event of a default, will generally only be recourse against the specific properties and other assets that have been pledged to secure such loans. In such event, the specific Mortgaged Property and other assets, if any, pledged to secure the relevant commercial mortgage loan, may be worth less than the amount owed under the commercial mortgage loan. Even if a commercial mortgage loan provides for recourse to a mortgagor or affiliates of the mortgagor, the mortgagee is unlikely to recover any amounts not covered by the related Mortgaged Property. Therefore, the ability of a borrower under a commercial mortgage loan to repay its loan typically is dependent primarily upon the successful operation of an income-producing property rather than upon the existence of independent income or assets of the borrower. If the net operating income of any such property is reduced (for example, if rental or occupancy rates decline or real estate tax rates or other operating expenses increase), the borrower’s ability to repay the loan, and the value of the property, may be impaired. Net operating income of an income-producing property can be affected by, among other things, tenant mix, success of tenant businesses, property management decisions (including responding to changing market conditions, planning and implementing rental or pricing structures and causing maintenance and capital improvements to be carried out in a timely fashion), property location and condition, competition from comparable types of properties, any need to address environmental contamination at the property and the occurrence of any uninsured casualty at the property. In addition, limited recourse against the borrower may be further limited by applicable provisions of the laws of the jurisdiction in which the Mortgaged Property is located or by the selection of remedies and the impact of those laws on that selection. Such recourse may not provide a recovery in respect of a defaulted mortgage loan greater than the liquidation value of the Mortgaged Property.

Mortgage Loans Are Subject to Various Risk.

Mortgage loans are subject to various risks, including general economic conditions, the condition of financial markets, political events, developments or trends in any particular industry, changes in prevailing interest rates and periods of adverse performance. Commercial mortgage loans are subject to additional risks, including lack of standardized terms, shorter maturities than residential mortgage loans (in the case of commercial mortgage loans) 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. 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 mortgage loan. The repayment of commercial real estate 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 property is subject to various risks, including changes in general or local economic conditions and/or specific industry segments; declines in real estate values; declines in rental or occupancy rates; increases in interest rates, real estate tax rates and other operating expenses; changes in governmental rules, regulations and fiscal policies; acts of God; and social unrest and civil disturbances.

Mortgage Loans May Be Subject to Certain Federal, State and Local Laws and Risks Relating to Servicers.

The value of real estate is also subject to a number of laws, such as laws regarding environmental clean-up and limitations on remedies imposed by bankruptcy laws and state laws regarding foreclosures and rights of

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redemption. A property may not readily be converted to an alternative use so that the liquidation value of any such property may be substantially less than would be the case if such property were readily adaptable to other uses. The exercise of remedies and successful realization of liquidation proceeds may be highly dependent on the performance of servicers or special servicers, of which there may be a limited number and which may have conflicts of interest. The failure of the performance of such servicers or special servicers could result in cash flow delays and losses on the related mortgage loans or Collateral Debt Securities.

Mortgage Loans and Originators of Mortgage Loans May Be Subject to Certain Federal, State and Local Consumer Protection Laws.

The loans underlying certain of the Collateral Debt Securities and/or the originators of such loans may be subject to special rules, disclosure and licensing requirements, predatory lending legislation and other provisions of federal, state and local consumer protection laws. Failure to comply with these federal, state and local consumer protection laws and related statutes could subject lenders to specific statutory liabilities. In some cases, this liability may affect the subsequent assignees of such obligations, including the issuer of the related Collateral Debt Security. Numerous class action lawsuits have been filed in multiple states alleging violations of these statutes and seeking damages, rescission and other remedies. These suits have named the originators, current and former holders, and the issuers of related asset-backed securities. If any issuer of a Collateral Debt Security included in the Collateral were to be named as a defendant in a class action lawsuit, the costs of defending or settling such lawsuit or a judgment could reduce the amount available for distribution on the related Collateral Debt Security.

Relating to the Collateral Debt Securities

Distributions on the Trust Preferred Securities will be Entirely Dependent on the Related Real Estate Entities Making Payments on their Corresponding Debentures.

The availability of funds in the Collection Account to pay amounts payable with respect to the Notes will be dependent upon, among other things, the frequency and amount of payments made by the issuers of the Trust Preferred Securities. Due to the structure of Trust Preferred Securities, the ability of a Trust Preferred Securities Issuer to timely pay distributions on, or other amounts payable upon redemption of, its Trust Preferred Securities or upon liquidation of such Trust Preferred Securities Issuer will be dependent upon the frequency and amount of payments made by the related Real Estate Entity on the Corresponding Debentures held by the Trust Preferred Securities Issuers. See “Security for the Senior Notes—Collateral Debt Securities.” If a Real Estate Entity defaults on its obligation to pay principal of or interest on or defers payments on its Corresponding Debentures, the Trust Preferred Securities Issuer will not have sufficient funds to pay distributions or other amounts payable upon the redemption of the Trust Preferred Securities or upon liquidation of the Trust Preferred Securities Issuer. Certain risks associated with the frequency and amount of payments to be made by the Trust Preferred Securities Issuers and the Real Estate Entities are discussed below.

A Real Estate Entity’s Obligations Under Its Corresponding Debentures Will Be Subordinated to All of Its Existing and Future Senior Liabilities and Equal to All of Its Existing and Future Obligations Under Other Similar Trust Guarantees.

The obligations of a Real Estate Entity under its Corresponding Debentures generally are unsecured and will rank junior in priority of payment to its Senior Indebtedness (whether now existing or hereafter incurred) and effectively will rank junior to all existing and future liabilities and obligations of its subsidiaries, if any. Therefore, a Real Estate Entity will not be able to make any payments of principal (including redemption payments) or interest on its Corresponding Debentures if it defaults on a payment on its Senior Indebtedness. In the event of the bankruptcy, liquidation or dissolution of a Real Estate Entity, its assets would be available to pay obligations under the Corresponding Debentures only after all payments had been made on its Senior Indebtedness.

The Trust Preferred Securities and the Corresponding Debentures generally will not limit the ability of the related Real Estate Entity or any of its subsidiaries to incur additional indebtedness, liabilities and obligations, including indebtedness that ranks senior to the Corresponding Debentures.

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Any right of a Real Estate Entity to receive assets of any of its subsidiaries upon its liquidation, reorganization or otherwise (and the right of the holder(s) of the Corresponding Debentures to participate in those assets) will be effectively subordinated to the claims of that subsidiary’s creditors (including, as applicable, the depositors of any depository institution, the policy holders of each insurance company and trade creditors), except to the extent that such Real Estate Entity is itself recognized as a creditor of such subsidiary, in which case the claims of such Real Estate Entity would be subordinate to any security interests in the assets of such subsidiary and any indebtedness of such subsidiary senior to that held by such Real Estate Entity.

There Are Limitations Regarding the Enforcement of Certain Rights of Holders of Trust Preferred Securities.

If an event of default under the Corresponding Debentures occurs and is continuing, such event would also be an event of default under the Trust Preferred Securities related to such Corresponding Debentures. In that case, the holders of the Trust Preferred Securities may rely on the enforcement by the relevant trustee of its rights as holder of the Corresponding Debentures against the related Real Estate Entity. Generally, the holders of a majority in liquidation amount of the Trust Preferred Securities will have the right to direct the Real Estate Entity to exercise its remedies. There can be no assurance that the Issuer will hold a majority in liquidation amount of the Trust Preferred Securities. If an event of default under the Trust Preferred Securities occurs that is attributable to a Real Estate Entity’s failure to pay interest or principal on the Corresponding Debentures, any holder of the Trust Preferred Securities may proceed directly against such Real Estate Entity (or, in the case where the Real Estate Entity is a subsidiary of the related REIT, REOC or Homebuilding Company and the parent entity has executed a Parent Guarantee, the parent entity) to collect its pro rata share of unpaid principal and interest. The holders of Trust Preferred Securities will not be able to exercise directly any other remedies available to the holders of the Corresponding Debentures unless the applicable trustee fails to do so.

The Ability of a Real Estate Entity to Defer Interest Payments Has Consequences for Holders of the Trust Preferred Securities and the Notes.

Certain of the Real Estate Entities issuing Corresponding Debentures have deferral rights. So long as certain limited events of default (including bankruptcy, insolvency, or similar provisions with respect to the Real Estate Entity) under the Corresponding Debentures have not occurred and are not continuing, certain Real Estate Entities have the right, at one or more times, to defer interest payments on the Corresponding Debentures for generally up to four (4) consecutive quarterly periods, but not beyond the maturity date or redemption date of the Corresponding Debentures. As of the Closing Date, the Collateral will include two (2) Trust Preferred Securities issued by Trust Preferred Securities Issuers having an aggregate Principal Balance of $18,750,000, which contain deferral rights. There can be no assurance that such Real Estate Entities will not exercise their rights to defer interest payments as provided pursuant to the terms of the Corresponding Debentures. While certain Real Estate Entities that have the option to defer interest payments may state at the time of sale of their Corresponding Debentures that they do not intend to defer interest at any time while such securities are outstanding, there can be no assurance that such Real Estate Entities will not in fact exercise their rights to defer interest payments as provided pursuant to the terms of the Corresponding Debentures.

If a Real Estate Entity defers interest payments on its Corresponding Debentures, the related Real Estate Entity will also defer distributions on its Trust Preferred Securities. It is expected that a deferral of interest payments by any one Real Estate Entity would reduce the amount available to make distributions to the Subordinated Noteholders and any such deferral by a number of Real Estate Entities (or such a deferral together with a deferral by a number of Subordinated Securities Issuers) could have a material adverse effect on the ability of the Issuer to pay current interest on the Senior Notes. Any such material adverse effect could result in a default with respect to payments of current interest on the Class A-1 Notes or the Class A-2 Notes, and would decrease the aggregate amount of funds then available for distribution to the Class B Noteholders, Class C Noteholders, the Class D Noteholders, the Class E Noteholders, the Class F Noteholders and the Subordinated Noteholders. In addition, notwithstanding the fact that a deferral of interest payments on the Trust Preferred Securities will not, in and of itself, be an event of default under the terms of the Trust Preferred Securities, for the purposes of performing the Coverage Tests, a Trust Preferred Security that is deferring interest as of the relevant date of determination will be treated as a Defaulted Security. Therefore, the deferral of interest payments on Trust Preferred Securities could result in a failure to satisfy the requirements of either or both of the Coverage Tests which, in turn, would result in the early amortization of all or a portion of the most senior Class of Notes then outstanding until the relevant

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Coverage Tests are satisfied. The early amortization of the most senior Class of Notes then outstanding would have the effect of diverting to such Class cash flow that would otherwise have been available for distribution to the Holders of the Class or Classes of Notes that are junior in priority of payment to the most senior Class of Notes, thereby delaying or reducing the payment of amounts with respect to such junior Class or Classes. The deferral of interest payments on the Trust Preferred Securities could also result in the deferral of payments of interest on the Class B Notes, Class C Notes, the Class D Notes, the Class E Notes and/or the Class F Notes. Holders of such Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes (including cash basis Holders) will nonetheless be required to accrue OID into income with respect to such Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes, as applicable, on a current basis and, therefore, could recognize income in a taxable year in amounts greater than the distributions received from the Issuer in respect of such Notes in such taxable year. In addition, the deferral of interest payments on the Trust Preferred Securities will reduce the Issuer’s cash available to make distributions on the Subordinated Notes, but such reduction will not result in a corresponding reduction in the taxable income of the Subordinated Noteholders that are subject to U.S. federal income tax and that are treated as owning shares in a CFC or a PFIC and have made an election to treat their interest in such Subordinated Notes as shares in a qualified electing fund. As a result, the share of the Issuer’s income attributable to any Holder of Subordinated Notes may, on account of the deferral of interest payments on the Corresponding Debentures (and certain other factors), be greater than the distributions received by such Holder of Subordinated Notes. See “Certain Income Tax Considerations”.

If a Real Estate Entity exercises its right to defer interest payments, the market price of the applicable Trust Preferred Security may not fully reflect the value of accrued but unpaid interest on the applicable Corresponding Debentures. Therefore, if the Issuer sells a Trust Preferred Security during a Deferral Period, the Issuer may receive a lower return on its investment than someone who continued to hold such Trust Preferred Security. In addition, the Issuer, as a holder of the Trust Preferred Securities, will not receive the cash distribution related to any accrued and unpaid interest from the Corresponding Debentures if the Issuer sells such Trust Preferred Securities before the end of any Deferral Period.

Trust Preferred Securities and Corresponding Debentures May Be Redeemed at the Option of the Real Estate Entity.

The Corresponding Debentures may be redeemed (a) in whole or in part, prior to their stated maturities or (b) upon the occurrence and during the continuance of a Trust Preferred Securities Special Event.

Any such redemption of Corresponding Debentures will cause a mandatory redemption of Trust Preferred Securities and, in turn, absent the occurrence of an Event of Default under the Indenture, a prepayment of all or a portion of the Notes. See “Security for the Senior Notes—Certain Terms of the Collateral Debt Securities—Certain Terms of the Trust Preferred Securities.” The Noteholders should assume that each Real Estate Entity will exercise its optional redemption option (described in clause (a) above) if it is able to refinance its obligations at a lower interest rate or it is otherwise beneficial to such Real Estate Entity to redeem the Corresponding Debentures.

Holders of Trust Preferred Securities (including the Issuer) Have Limited Voting Rights.

A holder of Trust Preferred Securities (including the Issuer) will have limited voting rights primarily in connection with directing the activities of the Real Estate Entity as the holder of the Corresponding Debentures and will not be entitled to vote to appoint, remove or replace, or to increase or decrease the number of, trustees, which voting rights are vested in the holder of the common securities of the Real Estate Entity, except upon the occurrence of an event of default in connection with the Corresponding Debentures. Furthermore, because the Issuer may own less than 100%, or less than a majority, of the Principal Balance of the Trust Preferred Securities issued by a Real Estate Entity, the Issuer may not be able to control any matters in respect of such Trust Preferred Securities as to which holders thereof are entitled to vote, give their consent or take action.

Trust Preferred Securities Are Subject to Credit Risk, Interest Rate Risk and Liquidity Risk.

The Trust Preferred Securities may generally only be sold to, or purchased by, investors that are Qualified Institutional Buyers and Qualified Purchasers, thus limiting the number of investors that may purchase such securities. Adverse changes in the financial condition or results of operations of a Real Estate Entity or in general economic conditions or both may impair its ability to make payments of principal and interest on Corresponding

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Debentures. Debt obligations are also subject to liquidity risk and the risk of market price fluctuations. Adverse changes in the financial condition, results of operations or prospects of a Real Estate Entity may affect the liquidity of the market for its securities and may reduce the market price of such securities. In addition, changes in general economic conditions may affect the liquidity of the market for Trust Preferred Securities in general and may reduce the market prices of some or all of such securities.

Little or no publicly available information may be available with respect to privately placed Trust Preferred Securities, which Trust Preferred Securities are likely to comprise a substantial portion or most of the aggregate amount of Collateral Debt Securities.

If at any time the Trustee, in accordance with the terms of the Indenture, is instructed to sell or otherwise dispose of any Collateral Debt Securities, it may be difficult or impossible to sell or dispose of such securities in a timely manner, and it is unlikely that the proceeds will be equal to the unpaid principal thereof and interest thereon.

If a Real Estate Entity exercises the right to defer interest payments on its Corresponding Debentures, the market price of the applicable Trust Preferred Securities may not fully reflect the value of accrued but unpaid interest on such Corresponding Debentures. Therefore, if the Issuer sells Trust Preferred Securities during an interest deferral period, the Issuer may receive a lower return on its investment than someone who continued to hold such Trust Preferred Securities.

The Issuer May Receive a Distribution of Corresponding Debentures, which May Be Illiquid; the Issuer May Need to Hold the Corresponding Debentures For an Indefinite Period of Time or Until Their Maturity.

A Trust Preferred Securities Issuer may be terminated at any time before its expiration date at the option of the related Real Estate Entity which, in some cases, requires that such termination does not result in a taxable event to holders of the related Trust Preferred Securities. As a result, and subject to the terms of the relevant declaration of trust or trust agreement, the Trust Preferred Securities Issuer may distribute the Corresponding Debentures to the holders of the Trust Preferred Securities and the common equity holders of the Trust Preferred Securities Issuer. In such a case, the Issuer would hold the Corresponding Debentures so distributed. However, there can be no assurance that a liquid trading market will develop in the Corresponding Debentures.

The market prices for the Corresponding Debentures that may be distributed cannot be predicted with certainty. Accordingly, the Corresponding Debentures that are received upon a distribution thereof (or the Trust Preferred Securities held pending such a distribution) may trade at a discount to the price paid to purchase such Trust Preferred Securities.

Generally, a Parent Real Estate Entity Providing a Parent Guarantee with respect to a Trust Preferred Security Has No Material Assets Other Than Its Investment in the Related Real Estate Entity.

When a Parent Guarantee is executed, the Parent Real Estate Entity will fully and unconditionally guarantee the payment of principal of and premium, if any, and interest on the related Corresponding Debentures. However, typically each such Parent Real Estate Entity conducts substantially all of its operations through the related Real Estate Entity, and the only material asset of the Parent Real Estate Entity is its interest in such Real Estate Entity. As a result, if the related Real Estate Entity is unable to meet its obligations with respect to the related Corresponding Debentures, the Parent Real Estate Entity will not have any assets from which to pay on the Parent Guarantee. Furthermore, the Parent Guarantee will be effectively subordinated to all existing and future preferred equity and unsecured and secured liabilities of and guarantees issued by the Parent Real Estate Entity’s subsidiaries, including the related Real Estate Entity.

The Real Estate Entity Securities Are Subject to Credit Risk, Interest Rate Risk and Liquidity Risk.

All or a portion of the Collateral Debt Securities will consist of Senior Securities and Subordinated Securities. Senior Securities are generally unsecured and are senior debt obligations of Senior Securities Issuers meeting the eligibility criteria described herein. Subordinated Securities will be debt securities issued by Subordinated Securities Issuers that meet the applicable requirements set forth in the Eligibility Criteria.

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Subordinated Securities are subordinated to the claims of general creditors of the related Subordinated Securities Issuers, including the claims of holders of senior debt obligations of Subordinated Securities Issuers, and are unsecured. For a description of certain terms of the Real Estate Entity Securities and the documentation related thereto, see “Security for the Senior Notes.”

The Real Estate Entity Securities are subject to general credit risk, as adverse changes in the financial condition of the Subordinated Securities Issuer or Senior Securities Issuer thereof may impair the ability of the Subordinated Securities Issuer or Senior Securities Issuer to make payments of principal and interest with respect thereto. In addition, adverse changes in the real estate industry or in general economic conditions or both may impair the ability of the Subordinated Securities Issuers and the Senior Securities Issuers to make payments of principal and interest and may affect the market value of the Real Estate Entity Securities. The Real Estate Entity Securities are also subject to other risks, including (a) interest rate risk, (b) limited liquidity risk, (c) market price volatility resulting from changes in prevailing interest rates, (d) subordination to the claims of secured lenders in the assets in which such secured lenders have an interest, (e) the possibility that earnings of the issuer thereof may be insufficient to meet its debt service, (f) the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates, and (g) the declining creditworthiness and potential for insolvency of the issuer thereof during periods of rising interest rates and economic downturn. An economic downturn or an increase in interest rates could severely disrupt the market for Real Estate Entity Securities and adversely affect the value of outstanding Real Estate Entity Securities and the ability of the Security Issuers thereof to repay principal and interest. Also, because the Real Estate Entity Securities generally evidence unsecured debt obligations of the related Real Estate Entity, the Real Estate Entity Securities will rank junior to any secured debt of the related Real Estate Entity, and thus, the Real Estate Entity Securities would be subordinated to the prior payment in full of such debt. It is likely that the related Real Estate Entities will have outstanding debt secured by mortgages on one or more of their properties.

Little or no public information may be available with respect to privately placed Real Estate Entity Securities, which may comprise a substantial portion of the Collateral Debt Securities.

Downward movements in interest rates could also adversely affect the performance of Senior Securities. Real Estate Entity Securities may have call or redemption features that would permit the issuer thereof to repurchase the securities from the Issuer.

The Issuer may have difficulty disposing of certain Real Estate Entity Securities because of reduced secondary market liquidity for such securities. Reduced secondary market liquidity may have an adverse impact on market price and the Issuer’s ability to dispose of particular issues when necessary to meet the Issuer’s liquidity needs or in response to a specific economic event such as a deterioration in the creditworthiness of the issuer of such securities. Reduced secondary market liquidity for certain Real Estate Entity Securities also may make it more difficult for the Issuer to obtain accurate market quotations for purposes of valuing the Issuer’s portfolio. Market quotations are generally available on many Real Estate Entity Securities only from a limited number of dealers and may not necessarily represent firm bids of such dealers of prices for actual sales.

A Portion of the Collateral Debt Securities Pledged to Secure the Senior Notes Will Consist of Subordinated Securities.

The Subordinated Securities will be subordinated to the claims of general creditors of the Subordinated Securities Issuers, including the claims of holders of Senior Indebtedness of the Subordinated Securities Issuers, and are unsecured. The Subordinated Securities will most likely not be rated. However, if they are rated, they may be rated investment grade or below investment grade. Certain risks associated with the frequency and amount of payments to be made by the Subordinated Securities Issuers are discussed below.

A Subordinated Securities Issuer generally will not be able to make any payments of principal (including redemption payments) or interest on its Subordinated Securities or redeem, exchange, retire, purchase or otherwise acquire any Subordinated Securities if it defaults on a payment on its Senior Indebtedness or if the maturity of its Senior Indebtedness is accelerated. In addition, a Subordinated Securities Issuer may be a party to agreements with holders of its Senior Indebtedness that have the practical effect of further subordinating the rights of holders of the related Subordinated Securities to such holders of Senior Indebtedness under certain circumstances. In the event of the bankruptcy, liquidation or dissolution of a Subordinated Securities Issuer, its assets would be available to pay

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obligations under its Subordinated Securities only after all payments had been made on its Senior Indebtedness. Upon the bankruptcy, liquidation or dissolution of a Subordinated Securities Issuer, and subject to the applicable subordination provisions, generally the principal of and all unpaid interest on the Subordinated Securities of such Subordinated Securities Issuer may be accelerated by the requisite percentage of the holders of such Subordinated Securities. However, holders of Subordinated Securities will have no right to accelerate payment in the case of a default in the payment of principal of or interest on the Subordinated Securities or the performance of any other covenant contained in the Subordinated Securities or the indenture relating to the Subordinated Securities.

In addition to the above, a default in the payment of principal of, or premium, if any, or interest on, a Subordinated Security will decrease the amount of cash available to the Issuer to make payments on the Notes.

The Subordinated Securities will have substantially the same terms as the Corresponding Debentures and both the Subordinated Securities and the Subordinated Securities Issuers will be subject to risks similar to all of the risks to which the Corresponding Debentures and the Real Estate Entities are subject, as described under “—Relating to the Trust Preferred Securities” above.

Prospective purchasers of the Notes should consider for themselves the likely level of defaults, the likely level and timing of recoveries and the likely levels of interest rates on Subordinated Securities during the terms of the Notes.

The Commercial Mortgage-Backed Securities Will be Subject to Certain Risks.

CMBS are securities issued by entities (typically trusts) that are intended to qualify to elect for federal income tax purposes to be treated as real estate mortgage investment conduits (“REMICs”), and 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, nursing homes and senior living centers.

CMBS are subject to risk inherent to mortgage loans generally, as described under “—Relating to Mortgage Loans Comprising or Underlying Certain Collateral Debt Securities” above.

CMBS are subject to risks associated with their structure and execution, including the process by which principal and interest payments are allocated and distributed to investors, how credit losses affect the issuing vehicle and the return to investors in such CMBS and the extent to which the entity that is the actual source of the collateral assets is obligated to provide support to the issuing vehicle or to investors in such CMBS. Mortgage loans underlying a CMBS issue may lack regular amortization of principal, resulting in a single “balloon” payment due at maturity. If the underlying mortgage borrower experiences business problems, or other factors limit refinancing alternatives, such balloon payment mortgages are likely to experience payment delays or even default. As a result, the related issue of CMBS could experience delays in cash flow and losses.

A portion of the Collateral Debt Securities will consist of CMBS that are subordinate in right of payment and rank junior to other securities that are secured by or represent an ownership interest in the same pool of assets. In addition, most transactions have structural features that divert payments of interest and/or principal to more senior classes when the loss experience of the pool exceeds certain levels. As a result, such securities have a higher risk of loss as a result of delinquencies or losses on the underlying assets. In certain circumstances, payments of interest may be reduced or eliminated for one or more payment dates. Additionally, as a result of cash flow being diverted to payments of principal on more senior classes, the average lives of such CMBS may lengthen. Subordinate CMBS generally do not have the right to call a default or vote on remedies following a default unless more senior securities have been paid in full. As a result, a shortfall in payments to subordinate investors in CMBS will generally not result in a default being declared on the transaction and the transaction will not be restructured or unwound. Furthermore, because subordinate CMBS may represent a relatively small percentage of the size of an asset pool being securitized, the impact of a relatively small loss on the overall asset pool may substantially impact the holders of such Subordinated Security.

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The holders of classes of securities that are subordinate to the classes of CMBS owned by the Issuer will generally control the exercise of remedies in connection with such CMBS. Such exercise of remedies by a holder of subordinate classes may be in conflict with the interests of the Issuer as the holder of a senior class of CMBS. The Collateral Manager or its affiliates may own classes of securities that are more senior or more subordinate than certain of the CMBS owned by the Issuer which may result in certain conflicts of interest. See “—Relating to Certain Conflicts of Interest—The Issuer Will Be Subject to Various Conflicts of Interest Involving the Collateral Manager” below.

Relating to the Loans

The Collateral Debt Securities may include Senior Unsecured Loans, which are obligations of Real Estate Entities, all of which will be unsecured, for which the primary expected source of repayment is income from real estate assets. The Senior Secured Loans and Specified Second Position Loans will be primarily secured by (a) a mortgage, deed of trust, pledge and security agreement or other similar security instrument creating a lien on the related borrower’s fee estate or leasehold estate in Mortgaged Property and/or (b) a lien on the common stock of one or more subsidiaries of a real estate holding company borrower, and may in addition be secured by liens on residual interests in mortgaged real estate of the borrower, hedge agreements, accounts receivable, inventory and/or cash accounts or other assets. The Non-Senior Loans may be secured or unsecured obligations of Real Estate Entities that rank junior in priority to more senior debt of the related borrower.

The risks of Senior Unsecured Loans, Specified Second Position Loans and Non-Senior Loans include (among others): (a) limited liquidity and secondary market support; (b) the possibility that earnings of the related borrower may be insufficient to meet its debt service; and (c) the declining creditworthiness and potential for insolvency of the borrower of such Senior Unsecured Loan, Specified Second Position Loan or Non-Senior Loan during periods of economic downturn. An economic downturn could severely disrupt the market for Senior Unsecured Loans, Specified Second Position Loans and Non-Senior Loans and adversely affect the value of outstanding Senior Unsecured Loans, Specified Second Position Loans and Non-Senior Loans and the ability of the borrowers thereof to repay principal and interest. Such risks will be increased with respect to the Non-Senior Loans due to the subordinated position of such Loans in the capital structure of the applicable borrower.

Senior Unsecured Loans, Specified Second Position Loans and Non-Senior Loans are generally more illiquid than debt securities of Real Estate Entities. Senior Unsecured Loans, Specified Second Position Loans and Non-Senior Loans are subject to credit risk and may become non-performing for a variety of reasons. Non-performing Senior Unsecured Loans, Specified Second Position Loans and Non-Senior Loans may require substantial workout negotiations or restructuring that may entail, among other things, a substantial reduction in the interest rate and/or a substantial write-down of the principal of the Senior Unsecured Loan, Specified Second Position Loan or Non-Senior Loan. In addition, because of the unique and customized nature of a Senior Unsecured Loan, Specified Second Position Loan or Non-Senior Loan and the private syndication of a Senior Unsecured Loan, Specified Second Position Loan or Non-Senior Loan, certain Senior Unsecured Loans, Specified Second Position Loans or Non-Senior Loans may not be purchased or sold as easily as publicly traded securities, and, as a result, historically the trading volume in the loan market has been small relative to the market for high-yield bonds. Trading in Senior Unsecured Loans, Specified Second Position Loans and Non-Senior Loans is subject to delays due to their unique and customized nature, and transfers may require extensive documentation, the payment of significant fees and the consent of an agent bank or the underlying borrower. In addition, the Issuer may incur additional expenses to the extent it is required to seek recovery upon a default or to participate in the restructuring of a Senior Unsecured Loan, Specified Second Position Loan or Non-Senior Loan.

Because each Senior Unsecured Loan and unsecured Non-Senior Loan evidences an unsecured debt obligation of the related Real Estate Entity, the Senior Unsecured Loans and unsecured Non-Senior Loans will rank junior to any secured debt of the related Real Estate Entity, and thus, the Senior Unsecured Loans and unsecured Non-Senior Loans would be subordinated to the prior payment in full of such debt. Accordingly, any change in any such Real Estate Entity’s ability to meet its debt service requirements may have an adverse effect on the ability of the Issuer to make required payments on the Notes, and in the event of any such Real Estate Entity’s bankruptcy, the Issuer, as the owner of the related Senior Unsecured Loan or unsecured Non-Senior Loan, as the case may be, will become a general creditor of such Real Estate Entity. Furthermore, it is likely that the related Real Estate Entities will have outstanding debt secured by mortgages on one or more of their properties. If any such Real Estate Entity is

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unable to meet its mortgage payments, the mortgage securing its properties could be foreclosed upon by, or the properties could be otherwise transferred to, the mortgagee with a consequent loss of income and asset value to such Real Estate Entity. Any foreclosure would reduce the likelihood of payment in full of the related Senior Unsecured Loan or unsecured Non-Senior Loan, as the case may be and in some cases could impair the ability of the Real Estate Entity to continue to operate, thus further reducing the likelihood of payment of the related Senior Unsecured Loan or unsecured Non-Senior Loan, as the case may be.

Because each Specified Second Position Loan and secured Non-Senior Loan evidences a secured debt obligation of the related Real Estate Entity that is not a first priority secured debt obligation, the Specified Second Position Loans and secured Non-Senior Loans will rank junior to any first priority secured debt of the related Real Estate Entity, and thus, the Specified Second Position Loans and secured Non-Senior Loans would be subordinated to the prior payment in full of such debt. Accordingly, any change in any such Real Estate Entity’s ability to meet its debt service requirements may have an adverse effect on the ability of the Issuer to make required payments on the Notes, and in the event of any such Real Estate Entity’s bankruptcy, the Issuer, as the owner of the related Specified Second Position Loan or secured Non-Senior Loan, as the case may be, will become a second priority secured creditor or junior secured creditor, as the case may be, of such Real Estate Entity. Furthermore, it is likely that the related Real Estate Entities will have outstanding debt secured by mortgages on one or more of their properties that rank higher in priority to the related Specified Second Position Loan or secured Non-Senior Loan, as the case may be. If any such Real Estate Entity is unable to meet its mortgage payments, the mortgage securing its properties could be foreclosed upon by, or the properties could be otherwise transferred to, the first priority mortgagee with a consequent loss of income and asset value to such Real Estate Entity. Any foreclosure would reduce the likelihood of payment in full of the related Specified Second Position Loan or secured Non-Senior Loan, as the case may be, and in some cases could impair the ability of the Real Estate Entity to continue to operate, thus further reducing the likelihood of payment of the related Specified Second Position Loan or secured Non-Senior Loan, as the case may be.

Because each Non-Senior Loan evidences a debt obligation of the related Real Estate Entity that is not a first priority debt obligation, the Non-Senior Loan will rank junior to any senior debt of the related Real Estate Entity, and thus, the Non-Senior Loans would be subordinated to the prior payment in full of such debt. Accordingly, any change in any such Real Estate Entity’s ability to meet its debt service requirements may have an adverse effect on the ability of the Issuer to make required payments on the Notes, and in the event of any such Real Estate Entity’s bankruptcy, the Issuer, as the owner of the related Non-Senior Loan will become, in the case of a secured Non-Senior Loan, a junior secured creditor of such Real Estate Entity, or, in the case of an unsecured Non-Senior Loan, a general creditor of such Real Estate Entity. Furthermore, it is likely that the related Real Estate Entities will have outstanding debt secured by mortgages on one or more of their properties that rank higher in priority to the related Non-Senior Loan. If any such Real Estate Entity is unable to meet its mortgage payments, the mortgage securing its properties could be foreclosed upon by, or the properties could be otherwise transferred to, the first priority mortgagee with a consequent loss of income and asset value to such Real Estate Entity. Any foreclosure would reduce the likelihood of payment in full of the related Non-Senior Loan, and in some cases could impair the ability of the Real Estate Entity to continue to operate, thus further reducing the likelihood of payment of the related Non-Senior Loan.

The Senior Secured Loans, Specified Second Position Loans and secured Non-Senior Loans will be subject to risks similar to those relating to mortgage loans, as described under “—Relating to Mortgage Loans Comprising or Underlying Certain Collateral Debt Securities” above.

Relating to the CMBS CDO Securities Generally

CMBS CDO Securities are issued by a CMBS CDO Issuer and, in certain cases a Delaware co-issuer, (the “CMBS CDO Co-Issuer” and together with the CMBS CDO Issuer, the “CMBS CDO Co-Issuers”). None of the CMBS CDO Issuers have any substantial assets other than the property subject to the lien of the indenture relating to the related CMBS CDO Security, which property includes, among other things, a portfolio of commercial mortgage-backed securities and/or commercial real estate loans and various hedge agreements. No CMBS CDO Co-Issuer has any substantial assets. Consequently, the Issuer, as holder of the CMBS CDO Securities, must rely solely on distributions on the underlying collateral securing the CMBS CDO Securities or proceeds thereof for payment of the CMBS CDO Securities. If distributions on the underlying collateral securing a CMBS CDO Security are not

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sufficient to make payments on the CMBS CDO Security, no other assets will be available for payment of the deficiency, and following realization on that collateral, the obligation of the related CMBS CDO Co-Issuers to pay such deficiency will be extinguished. The CMBS CDO Securities and the CMBS CDO Co-Issuers will be subject to risks similar to all of the risks to which the Notes and the Co-Issuers are subject, as described under “Risk Factors—Relating to the Notes” above.

The CMBS CDO Securities are subordinate in right of payment and rank junior to other securities issued by the CMBS CDO Co-Issuers but are senior to one or more subordinate classes of securities issued by the CMBS CDO Issuer. Accordingly, payments on the CMBS CDO Security of each CMBS CDO Issuer will be made only to the extent sufficient funds are available therefor after payment of both the amounts due on the more senior notes of the related CMBS CDO Co-Issuers and certain expenses of such Co-Issuers. Generally, the CMBS CDO Securities provide that a failure to pay interest thereon does not constitute an event of default and the holders of such securities will not have available to them any associated default remedies for so long as any of the more senior notes of the related CMBS CDO Issuer are outstanding. During such periods of non-payment, the unpaid interest will generally be capitalized and added to the outstanding principal balance of the related CMBS CDO Security. Any such failure to pay will reduce the amount of current payments made on such CMBS CDO Security. Moreover, no payments of principal will be made on the CMBS CDO Securities until the aggregate principal amount of securities of the related CMBS CDO Issuer which are senior to the respective CMBS CDO Securities have been reduced to zero.

The collateral underlying the CMBS CDO Securities includes CMBS that have risks and characteristics substantially similar to the risks and characteristics of the CMBS described in this Offering Circular.

Synthetic Securities Will Expose the Issuer to Certain Risks.

Synthetic Securities will expose the Issuer to the credit and interest rate risks associated with Reference Obligations that consist of CMBS or CMBS CDO Securities. However, the Issuer will usually have a contractual relationship only with the counterparty of such Synthetic Security, and not with the Reference Obligor. Generally, the Issuer will have no right to directly enforce compliance by the Reference Obligor with the terms of the Reference Obligation nor any rights of set-off against the Reference Obligor. The Issuer may be subject to set-off rights exercised by the Reference Obligor against the counterparty. The Issuer will not have any voting rights with respect to the Reference Obligation. The Issuer will not directly benefit from any collateral that may support the Reference Obligation and will not have the benefit of the remedies that would normally be available to a holder of such Reference Obligation.

Credit default swaps with “pay as you go” credit events similar to the Synthetic Securities have only recently been introduced into the market, and the terms and documentation have not yet been standardized and may change significantly after the Closing Date (which would make it more difficult for the Issuer to liquidate the Synthetic Securities). The current premiums that a “buyer” of protection will pay under credit default swaps for reference obligations that are asset-backed securities are at very low levels (compared to the levels during the past five years). This results in part from the fact that the current interest rate spreads over LIBOR (or, in the case of fixed rate asset-backed securities, over the applicable swap rates) on asset-backed securities are at very low levels (compared to the levels during the past ten years); in the event that such interest rate spreads widen or the prevailing credit premiums on credit default swaps on asset-backed securities increase after the Closing Date, the amount of the termination payment due from the Issuer to the counterparty could increase by a substantial amount.

In addition, in the event of the insolvency of the counterparty, the Issuer will be treated as a general creditor of such counterparty, and will not have any claim with respect to the Reference Obligation. Consequently, the Issuer will be subject to the credit risk of the counterparty as well as that of the Reference Obligor. As a result, concentrations of Synthetic Securities in any one counterparty subject the Synthetic Securities to an additional degree of risk with respect to defaults by such counterparty as well as by the Reference Obligor. Although the Collateral Manager will not perform independent credit analyses of the counterparties, any such counterparty, or an entity guaranteeing such counterparty, individually and in the aggregate shall satisfy the required ratings set forth in the definition of “Synthetic Security Counterparty”. The Rating Agencies may downgrade any of the Notes (without giving effect to the Policy) if a Synthetic Security Counterparty has been downgraded by any of the Rating Agencies such that the Issuer is not in compliance with the Synthetic Security Counterparty rating requirements.

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The Issuer May be Affected by the Availability of Collateral.

In addition to the other risks identified herein, a portion of the Collateral may be acquired by the Issuer after the Closing Date and prior to the Ramp-Up Completion Date in accordance with the Indenture, and, while a schedule to the Indenture will identify certain of the Collateral Debt Securities that the Issuer is permitted to purchase after the Closing Date and prior to the Ramp-Up Completion Date, the Issuer will only be able to purchase Collateral Debt Securities in certain circumstances set forth in the Indenture (including without limitation, if such Collateral Debt Securities have not been identified on the schedule referred to above, certain procedures to be set forth in the Indenture intended to ensure that such acquisition will not cause the Issuer to be engaged in the conduct of a trade or business in the United States) and, accordingly, the financial performance of the Issuer may be affected by the availability of such collateral and the ability of the Issuer to purchase such collateral. The Indenture also permits the Issuer in certain circumstances to purchase Additional Collateral Debt Securities after the Ramp-Up Completion Date, and the financial performance of the Issuer may be affected by the price, terms and availability of Collateral so purchased.

The Collateral Debt Securities Are Subject to Credit Risk, Interest Rate Risk and Liquidity Risk.

The Collateral Debt Securities are subject to credit, liquidity and interest rate risk. The Issuer is not aware of a central source for relevant data or standardized method for measuring default rates of Trust Preferred Securities or securities similar to the Real Estate Entity Securities or the Loans. Furthermore, past performance of the Trust Preferred Securities market is not necessarily indicative of the future performance of such market, and past performance of securities similar to the Real Estate Entity Securities and the Loans is not necessarily indicative of the future performance of such securities. In certain circumstances, it is possible that investors in some Classes of Notes will not recover their original investment. Defaults and losses on the Collateral Debt Securities will reduce the amounts that would otherwise have been available for payments in respect of the Notes. To the extent the effect of such defaults and losses is greater than the amount that would have been available for distributions in respect of the Subordinated Notes, the Holders of Class F Notes will be directly affected before the Holders of each Tranche of Class E Notes, the Holders of each Tranche of Class E Notes will be directly affected before the Class D Noteholders, the Class D Noteholders will be directly affected before the Holders of each Tranche of Class C Notes, the Holders of each Tranche of Class C Notes will be directly affected before the Class B Noteholders, the Class B Noteholders will be directly affected before the Class A-2 Noteholders, the Class A-2 Noteholders will be directly affected before the Class A-1B Noteholders and the Class A-1B Noteholders will be directly affected before the Class A-1A Noteholders. The credit risk associated with the Collateral Debt Securities will be heightened to the extent the Collateral Debt Securities are concentrated in particular issuers or regions that are adversely affected by the factors described in “—Changes in Concentration of the Portfolio With Respect to Any Obligor, Industry or Region May Subject the Notes to Greater Degree of Risk” below. Prospective purchasers of the Notes should consider and assess for themselves the likely level of defaults and the likely level and timing of recoveries on the Collateral Debt Securities. In addition, a portion of the Collateral will likely be acquired by the Issuer after the Closing Date in accordance with the Indenture, and, while a schedule to the Indenture will identify certain of the Collateral Debt Securities that the Issuer is permitted to purchase after the Closing Date and prior to the Ramp-Up Completion Date, the Issuer will only be able to purchase such Collateral Debt Securities in certain circumstances set forth in the Indenture and, accordingly, the financial performance of the Issuer may be affected by the availability of Collateral Debt Securities and the ability of the Issuer to purchase such collateral.

With respect to Collateral Debt Securities where the underlying commercial mortgage loan is the subject of a foreclosure proceeding, the Collateral Manager will be required to direct the Trustee to sell such Collateral Debt Security prior to the time that the trustee of the related Senior Securitization or the underlying trust, or the holder of the related purchase right takes title to the underlying property. Any sale of such a Collateral Debt Security may result in greater losses to the Issuer than would otherwise be the case because such sale may be required under the Indenture at a time when the Issuer is unable to negotiate more favorable terms or postpone the sale.

In addition, a portion of the Collateral Debt Securities securing the Senior Notes may have fixed interest rates that remain constant until their maturity, and a majority of the Collateral Debt Securities securing the Senior Notes will bear interest based on a fixed margin over a reference rate, which margin will remain constant until the maturity of such Collateral Debt Securities. Accordingly, the market value of the fixed-rate Collateral Debt Securities will generally fluctuate with changes in market rates of interest. The market value of the Collateral Debt

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Securities will also generally fluctuate with, among other things, general economic conditions, world political events, developments or trends in any particular industry, the conditions of financial markets and the financial condition of the issuers thereof. Therefore, if an Event of Default occurs with respect to the Notes, there can be no assurance that the proceeds of any sale by the Trustee of Collateral Debt Securities and the other Collateral securing the Senior Notes will be sufficient to pay in full any expenses of the Issuer or any amounts payable to the Trustee, the Collateral Administrator, the Collateral Manager, the Insurer or the Hedge Counterparties (all of which amounts are payable prior to payments in respect of the Notes), to make payments of principal of and interest on the Senior Notes or to make any distributions on the Subordinated Notes. However, certain conditions set forth in the Indenture must be satisfied before the Trustee is permitted to sell Collateral Debt Securities and the other Collateral pledged as security for the Senior Notes following an Event of Default. See “Description of the Notes—Events of Default.”

The events described in the preceding paragraph, individually or in the aggregate, may have an adverse effect on the financial condition of the Trust Preferred Securities Issuer. The outcome of any of these events and their effect on the financial condition of the Trust Preferred Securities Issuer cannot be determined.

Changes in Concentration of the Portfolio With Respect to Any Obligor, Industry or Region May Subject the Notes to Greater Degree of Risk.

The Issuer will invest in a portfolio of Collateral Debt Securities consisting, at the Closing Date, of Trust Preferred Securities, Senior Securities, Subordinated Securities, Loans, CMBS, CMBS CDO Securities and Synthetic Securities. It is expected that on the Ramp-Up Completion Date (or, if the Issuer acquires Collateral Debt Securities on the Closing Date with an aggregate principal amount at least equal to the Aggregate Ramp-Up Par Amount, on the Closing Date), the maximum concentration with respect to any particular obligor will not exceed an amount equal to 3.75% of the aggregate Principal Balance of all Collateral Debt Securities. The concentration of the portfolio in any one obligor would subject the Notes to a greater degree of risk with respect to collateral defaults by such obligor, and the concentration of the portfolio in any one region would subject the Notes to a greater degree of risk with respect to economic downturns relating to such region. See “Security for the Senior Notes—Collateral Debt Securities.” Similarly, the concentration of the portfolio in any one industry would subject the Notes to a greater degree of risk with respect to economic downturns relating to such industry. A portion of the Collateral Debt Securities may be purchased following the Closing Date and, therefore, the concentration with respect to any particular obligor, industry or any particular region on the Closing Date may be greater than such concentration on the Ramp-Up Completion Date or any subsequent date on which Collateral Debt Securities are acquired. Certain events, such as prepayments, repayments and deferrals of payments on the Collateral Debt Securities, may cause the concentration with respect to any particular obligor, industry or any particular region to vary after the Ramp-Up Completion Date. Such higher levels of concentration in a single obligor, industry or in a single region would subject the Notes to a greater degree of risk with respect to collateral defaults by such obligor and to a greater degree of risk with respect to economic downturns relating to such industry or region. See “Security for the Senior Notes.”

Credit Ratings of the Collateral Debt Securities Represent the Rating Agencies’ Opinions Regarding Their Credit Quality and Are Not a Guarantee of Quality.

Credit ratings of debt securities represent the rating agencies’ opinions regarding their credit quality and are not a guarantee of quality. Rating agencies attempt to evaluate the safety of principal and interest payments and do not evaluate the risks of fluctuations in market value and, therefore, they may not fully reflect the true risks of an investment. Also, rating agencies may fail to make timely changes in credit ratings in response to subsequent events, so that an issuer’s current financial condition may be better or worse than a rating indicates. Consequently, credit ratings of the Collateral Debt Securities will be used by the Collateral Manager only as a preliminary indicator of investment quality. Investments in non-investment grade and comparable unrated obligations will be more dependent on the Collateral Manager’s credit analysis than would be the case with investments in investment-grade debt obligations.

The Issuer May Be Required to Keep Confidential Certain Information Relating to Certain Collateral Debt Securities and such Information May Not Be Available to Investors.

In connection with the purchase of certain Collateral Debt Securities, the Issuer may be required to enter into one or more confidentiality agreements regarding certain information received with respect to the Real Estate

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Entities, the Subordinated Securities Issuers, the Senior Securities Issuers and/or certain other parties relating to such Collateral Debt Securities. As a result thereof, the ability of the Issuer, or the Collateral Manager on behalf of the Issuer, to provide certain information to Holders regarding the Collateral Debt Securities may be restricted or limited. The Issuer, or the Collateral Manager on behalf of the Issuer, will be obligated to provide certain non-confidential information regarding the Collateral Debt Securities and the issuers thereof to Holders upon their request therefor.

The Collateral Debt Securities will be Purchased by the Issuer from a Company that Was a Party to a Warehousing Arrangement with Affiliates of Merrill Lynch.

Substantially all of the Collateral Debt Securities purchased by the Issuer on the Closing Date will be purchased from a portfolio of Collateral Debt Securities held by Merrill Lynch International (the “Warehouse Entity”), which acquired such Collateral Debt Securities during an accumulation period prior to the Closing Date pursuant to a warehousing arrangement. Some of the Collateral Debt Securities subject to such warehousing arrangement may have been originally acquired by the Warehouse Entity from Merrill Lynch, the Collateral Manager, its members, any of their respective affiliates or any of their respective clients. Merrill Lynch or an affiliate of Merrill Lynch may have assisted in, or arranged for, the origination of a portion of the Collateral Debt Securities that will be purchased by the Issuer from the Warehouse Entity. The Collateral Debt Securities that will be purchased by the Issuer from the Warehouse Entity were purchased by the Warehouse Entity at a price consistent with market levels, which in certain cases may have been more or less than the par amount of such Collateral Debt Securities. The Issuer will purchase Collateral Debt Securities from the Warehouse Entity only to the extent the Issuer determines (which determination shall be made in accordance with the restrictions set forth in the Indenture and may, in the case of purchases made after the Ramp-Up Completion Date, be based in part on recommendations made by the Collateral Manager) that such purchases are consistent with the Investment Guidelines and objectives of the Issuer, the restrictions contained in the Indenture and applicable law. In addition to the above, during the Initial Investment Period, the Issuer may acquire Collateral Debt Securities from the Warehouse Entity or one or more of its Affiliates pursuant to a post-closing warehouse facility entered into between the Issuer and such entity.

In general, the purchases of Collateral Debt Securities by the Issuer on the Closing Date from the Warehouse Entity will be made at a price mutually agreed upon by Merrill Lynch and the Collateral Manager, which in certain cases may exceed the price paid by the Warehouse Entity to acquire the related Collateral Debt Securities. Prior to the Closing Date, hedging arrangements may be entered into with respect to certain of the Collateral Debt Securities held by the Warehouse Entity. The Issuer may assume certain losses and/or gains associated with the termination of such hedging arrangements.

Collateral Debt Securities that are loans were acquired by the Issuer and funded by a participation to the Warehouse Entity pursuant to a warehousing arrangement. The Issuer will repurchase or terminate the participation on the Closing Date.

The Issuer May Not Be Able to Acquire Collateral Debt Securities That Satisfy the Investment Criteria.

Although a portion of the Collateral may be acquired by the Issuer after the Closing Date and prior to the Ramp-Up Completion Date in accordance with the Indenture, the Issuer will only be able to purchase such securities that satisfy the investment criteria and in the circumstances set forth in the Indenture. Accordingly, the financial performance of the Issuer may be affected by the availability of such collateral and the ability of the Issuer to purchase such collateral. The Indenture also permits the Issuer in certain circumstances to purchase additional Collateral Debt Securities after the Ramp-Up Completion Date, and the financial performance of the Issuer may be affected by the price, terms and availability of Collateral so purchased.

Reduced liquidity and relatively lower volumes of trading in certain Collateral Debt Securities, in addition to restrictions on investment represented by the investment criteria, could result in periods during which the Issuer is not able to fully invest its available cash in Collateral Debt Securities. To the extent the Collateral Manager, on behalf of the Issuer, maintains cash balances invested in short term investments instead of higher yielding Collateral Debt Securities, portfolio income will be reduced which will result in reduced amounts available for distributions on the Notes, in particular the Subordinated Notes.

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Certain Collateral Debt Securities May Be Acquired on the Secondary Market; There Can Be No Assurance that the Terms of these Securities Will Be the Same as the Terms Described in This Offering Circular.

A portion of the Collateral Debt Securities that will be acquired by the Issuer may consist of securities that are acquired on the secondary market. While each such security will be required to meet the Collateral Debt Security Criteria and the Eligibility Criteria at the time it is acquired by the Issuer, there can be no assurance that the terms of any securities purchased on the secondary market will be the same as the terms in this Offering Circular.

Relating to Certain Conflicts of Interest

In General, the Transaction Will Involve Various Potential and Actual Conflicts of Interest.

Various potential and actual conflicts of interest may arise from the overall investment activity of the Collateral Manager, its members and their respective clients and affiliates and the Initial Purchaser and their respective affiliates. The following briefly summarizes some of these conflicts, but is not intended to be an exhaustive list of all such conflicts.

The Issuer Will Be Subject to Various Conflicts of Interest Involving the Collateral Manager.

Various potential and actual conflicts of interest may arise from the overall, advisory, investment and other activities of the Collateral Manager, its members and their respective affiliates for their own accounts or for their respective client accounts. The Collateral Manager, its members and their respective clients and affiliates may invest in securities that would be appropriate as security for the Senior Notes, and they have no duty in making such investments to allocate any such investment opportunities to the Issuer. Such investments or purchases may be different from those made by the Issuer. The Collateral Manager, its members and/or their respective affiliates also have economic interests in, ongoing relationships with, render services to and/or engage in transactions with, and will in the future engage in transactions with, (a) other issuers of collateralized debt obligations who invest in assets of a similar nature to those of the Issuer and who may now or in the future own equity or debt securities issued by issuers of and other obligors on Collateral Debt Securities and (b) the issuers of or obligors on Collateral Debt Securities and other companies whose securities are pledged to secure the Senior Notes. Such relationships may create conflicts of interest or cause conflicts of interest to arise in the future. In addition, as a result thereof, employees, officers, members or affiliates of the Collateral Manager may possess information relating to issuers of Collateral Debt Securities that is (a) not known to or (b) known but restricted as to its use by the individuals at the Collateral Manager responsible for monitoring the Collateral Debt Securities and performing the other obligations under the Collateral Management Agreement. Each of such ownership and other relationships may result in securities laws restrictions on transactions in such securities by the Issuer or the Collateral Manager and otherwise create conflicts of interest for the Issuer or the Collateral Manager. The Collateral Manager and certain of its affiliates serve, and expect in the future to serve, as collateral manager or advisor or sub-advisor for other collateralized debt obligation vehicles and/or collateralized loan obligation vehicles (or the like). In addition, the Collateral Manager, its members and their respective affiliates, and the respective clients of the Collateral Manager, its members and their respective affiliates, may invest in securities that are senior to, or have interests different from or adverse to, the securities that are pledged to secure the Senior Notes. The Collateral Manager, its members, their respective affiliates and/or their respective accounts may at certain times be seeking to purchase or dispose of investments for itself or its respective accounts, or any similar entities for which it serves as manager or advisor and for its members, other clients or affiliates, at the same time that it is evaluating the collateral for the Senior Notes or seeking to sell, or determining whether or not it desires to sell, such collateral.

None of the Collateral Manager, its members or any of their respective affiliates is under any obligation to offer investment opportunities of which they become aware to the Issuer or to account to the Issuer for (or share with the Issuer or inform the Issuer of) any such transaction or any benefit received by them from any such transaction or to inform the Issuer of any investments before offering any investments to other funds or accounts that the Collateral Manager and/or its affiliates manage or advise. Furthermore, the Collateral Manager, its members and their respective affiliates may make an investment on behalf of any account that they manage or advise without offering the investment opportunity to the Issuer. The Collateral Manager, its members and their respective affiliates have no affirmative obligation to offer any investments to the Issuer or to inform the Issuer of any investments

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before offering any investments to other funds or accounts that the Collateral Manager, its members and their respective affiliates manage or advise. Furthermore, the Collateral Manager, its members and their respective affiliates may make an investment on their own behalf without offering the investment opportunity to the Issuer. Affirmative obligations may exist or may arise in the future, whereby the Collateral Manager, its members and/or their respective affiliates are obligated to offer certain investments to funds or accounts that they manage or advise, although the Collateral Manager will not have any affirmative obligation to offer those investments to the Issuer. The Collateral Manager, its members and their respective affiliates also have no affirmative obligation to inform the Issuer of any investments before engaging in any investments for themselves. The Collateral Manager may inform the Issuer of investment opportunities in securities or other assets that it has declined to invest in for its own account, the account of any of its members or affiliates or the accounts of their respective clients. In the event a conflict should arise in any manner, the Collateral Manager will endeavor to resolve such conflicts with respect to investment opportunities in a manner that it deems equitable under the facts and circumstances.

The Collateral Manager, its members and their respective affiliates may also at certain times simultaneously seek to purchase or dispose of Collateral Debt Obligations for the Issuer, themselves and/or the accounts of their respective clients. Subject to applicable law and the requirements of any governing documents applicable thereto, investment opportunities sourced by the Collateral Manager will generally be allocated to the Issuer in a manner that the Collateral Manager believes, in its judgment, to be appropriate given factors that it believes to be relevant. Such factors may include the relative amounts of capital available for investments, investment objectives, investment programs and portfolio positions of its clients, the availability of leverage, the relative amounts of capital available for new investments, relative exposure to market trends, transaction costs, the portfolio positions of the participating clients, the manner in which the investment in question is likely to affect the amount of available capital after the investment is made, investment guidelines or restrictions and investment strategies, concentrations and diversification within clients, tax and regulatory issues, the nature and size of existing portfolio holdings and cash positions, risk/return objectives and anticipated redemptions and subscriptions.

Although the professional staff of the Collateral Manager, its members and their respective affiliates will devote as much time to the Issuer as the Collateral Manager deems appropriate to perform its duties in accordance with the Collateral Management Agreement, the staff may have conflicts in allocating its time and services among the Issuer and the Collateral Manager’s, its members’, and its affiliates’ other accounts. In addition, certain members of the professional staff of the Collateral Manager may provide services similar to the services they provide for the Collateral Manager to one or more members or affiliates of the Collateral Manager for the benefit of the accounts of such affiliates or members. The policies of the Collateral Manager are such that certain of the professional staff of the Collateral Manager, its members and their respective affiliates may have or obtain information that, by virtue of the Collateral Manager’s internal policies relating to confidential communications, cannot or may not be used by the Collateral Manager on behalf of the Issuer. In addition, the Collateral Manager, its members and their respective affiliates, in connection with their other business activities, may acquire material non-public confidential information that may restrict the Collateral Manager from purchasing securities or selling securities for itself or for other funds or accounts that the Collateral Manager and/or its affiliates manage or advise (including the Issuer). The Indenture places significant restrictions on the Collateral Manager’s ability to buy or sell Collateral Debt Securities on behalf of the Issuer. Accordingly, during certain periods or in certain circumstances, the Collateral Manager may be unable as a result of such restrictions to buy or sell securities or to take other actions that it might consider to be in the best interests of the Issuer or the Noteholders.

The members of the Collateral Manager will be obligated to purchase, or cause one or more of their respective affiliates or advised accounts to purchase, at least $10,000,000 aggregate principal amount of Subordinated Notes on the Closing Date, but none of the foregoing will be obligated to retain such ownership. The members of the Collateral Manager and/or their respective affiliates may (for their own accounts or for the accounts of others) purchase additional Notes at any time. The members of the Collateral Manager and their affiliates, now and in the future, may have information regarding the Collateral Debt Securities or the issuers thereof, which is not available to other purchasers of the Notes.

Upon the removal or resignation of the Collateral Manager in accordance with the Collateral Management Agreement, a Majority of the Subordinated Notes may appoint a replacement collateral manager so long as neither the Holders of a Majority of the Controlling Class (which will be the Insurer if no Insurer Default has occurred and is continuing and (x) the Insured Notes are Outstanding or (y) any Accrued Insurance Liabilities or Premiums are

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due and owing) nor the Holders of a Majority of the Senior Notes (other than the Controlling Class) voting as a single class disapprove such replacement collateral manager. At all times that AMG or any of its affiliates is acting as Collateral Manager, Notes, if any, held by, or with respect to which discretionary voting rights are held by, AMG and its affiliates will have no voting rights with respect to the removal of AMG as the Collateral Manager, and will be deemed not to be outstanding in connection with any such vote. However, any Notes held by, or with respect to which discretionary voting rights are held by, AMG and its affiliates or their respective employees will have voting rights with respect to all other matters as to which the Noteholders are entitled to vote, including, without limitation, any vote in connection with the appointment of a replacement collateral manager which is not affiliated with AMG in accordance with the Collateral Management Agreement and in connection with an Optional Redemption. See “The Collateral Management Agreement.”

AMG, its members and/or their respective affiliates or advised accounts may own equity or other securities of issuers of Collateral Debt Securities and may have provided advisory and other services to issuers of Collateral Debt Securities, including, without limitation, appointing and/or having an officer or other representative of AMG on the board of directors of such issuers. The Issuer may invest in the securities of companies affiliated with AMG, its members and their respective affiliates and in which AMG, its members and their respective affiliates have an equity or participation interest. The purchase, holding and sale of such investments by the Issuer may enhance the profitability of AMG’s, its members’ and their respective affiliates’ own investments in such companies.

In accordance with the Indenture and the Collateral Management Agreement, the Collateral Manager may also purchase any Collateral Debt Security for inclusion in the Collateral directly from any account or portfolio for which the Collateral Manager, its members or any of their respective affiliates serves as investment advisor, or sell directly any Collateral Debt Security to any account or portfolio for which the Collateral Manager serves as investment advisor, subject to any limits specified in the Indenture and compliance with all applicable law. Pursuant to the Indenture and the Collateral Management Agreement, the Board of Directors of the Issuer (so long as a majority of its members are not affiliated with the Collateral Manager) will be authorized, on a non-exclusive basis, to receive the disclosure and grant the consent contemplated by Section 206(3) of the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Each Noteholder will be deemed to consent to the grant of any such consent by the Issuer’s Board of Directors.

There is no limitation or restriction on AMG, its members or any of their respective affiliates with regard to acting as collateral manager (or in a similar role) to other parties or persons. This and other future activities of the Collateral Manager, its members and their respective affiliates may give rise to additional conflicts of interest.

In addition, because of the different seniorities and other characteristics of the various Tranches of Notes, decisions by the Collateral Manager with respect to the Issuer are likely to affect such Tranches differently (and may even affect one or more Tranches or Classes adversely while affecting one or more other Tranches or Classes positively). Such conflicts are inherent in a multi-class capital structure within a single entity managed by a single collateral manager, but are increased to the extent equity is held by the Collateral Manager, its members and/or their respective affiliates or their advised accounts.

The Issuer Will Be Subject to Various Conflicts of Interest Involving Merrill Lynch.

Various potential and actual conflicts of interest may arise as a result of the investment banking, commercial banking, asset management, financing and financial advisory services and products provided by Merrill Lynch and its Affiliates (each, a “Merrill Lynch Company” and together, the “Merrill Lynch Companies”) to the Issuer, the Collateral Manager, the members of the Collateral Manager, the issuers of the Collateral Debt Securities, each of their respective affiliates and others, as well as in connection with the investment, trading and brokerage activities of the Merrill Lynch Companies. The following briefly summarizes some of these conflicts, but is not intended to be an exhaustive list of all such conflicts.

With respect to the portfolio of Collateral Debt Securities to be acquired by the Issuer on the Closing Date, it is expected that the Issuer will acquire substantially all of such Collateral Debt Securities from the Warehouse Entity, which acquired such Collateral Debt Securities during an accumulation period prior to the Closing Date. For a discussion of the price at which the Issuer will purchase Collateral Debt Securities on the Closing Date, see “Risk Factors—Relating to the Collateral Debt Securities.” The Initial Purchaser and its affiliates may acquire Notes on or

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after the Closing Date. The Initial Purchaser (or its affiliates) may exercise its rights as a Noteholder without considering any adverse effect that its actions may have on the other Noteholders.

Merrill Lynch will serve as Initial Purchaser for the Senior Notes (other than the Class F Notes) and as Placement Agent for the Class F Notes and the Subordinated Notes and will be paid fees and commissions for such services by the Issuer from the proceeds of the issuance of the Notes. One or more Merrill Lynch Companies may act as the Hedge Counterparty under any Hedge Agreements entered into by the Issuer and will do so with respect to an interest rate cap to be in effect on the Closing Date. One or more of the Merrill Lynch Companies may from time to time hold Notes for investment, trading or other purposes. Substantially all of the Collateral Debt Securities will be purchased by the Issuer from an entity that acquired such Collateral Debt Securities pursuant to a warehousing arrangement financed by one or more Merrill Lynch Companies. With respect to certain of the Collateral Debt Securities held by the Issuer on the Closing Date, a Merrill Lynch Company will have provided the financing for such purchase through the purchase of a participation interest therein prior to the Closing Date. One or more Merrill Lynch Companies may have assisted in, or arranged for, the origination of a portion of the Collateral Debt Securities to be purchased by the Issuer on the Closing Date, including acting as Synthetic Security Counterparty with respect to certain Synthetic Securities to be acquired by the Issuer on the Closing Date and one or more Merrill Lynch Companies may act in such capacities with respect to Collateral Debt Securities (including Synthetic Securities) acquired after the Closing Date. After the Closing Date, the Issuer may purchase or sell Collateral Debt Securities from, to or through one or more of the Merrill Lynch Companies. Many of the Collateral Debt Securities acquired or to be acquired by the Issuer may consist of obligations of issuers, or obligations sponsored or serviced by companies, for which the Merrill Lynch Companies have acted as underwriter, agent, initial purchaser or dealer or for which a Merrill Lynch Company has acted as lender or provided other commercial or investment banking services. Certain Eligible Investments may be issued, managed or underwritten by one or more of the Merrill Lynch Companies. One or more of the Merrill Lynch Companies may provide investment banking, commercial banking, asset management, financing and financial advisory services and products to the Collateral Manager, its members, its affiliates, and funds managed by the Collateral Manager, its members and its affiliates, and purchase, hold and sell, both for their respective accounts or for the account of their respective clients, on a principal or agency basis, securities and other obligations and financial instruments of or held by funds or accounts managed by the Collateral Manager and its affiliates. As a result of such transactions or arrangements, one or more of the Merrill Lynch Companies may have interests adverse to those of the Issuer and the Noteholders.

One or more of the Merrill Lynch Companies may from time to time:

(a) have placed or underwritten, or acted as a financial arranger, structuring agent or advisor in connection with the original issuance of, or may act as a broker or dealer with respect to, certain of the Collateral Debt Securities and may in the future place or underwrite, act as a financial arranger, structuring agent or advisor in connection with the original issuance of, or act as a broker or dealer with respect to, certain Collateral Debt Securities;

(b) act as trustee, paying agent and in other capacities in connection with certain of the Collateral Debt Securities or other classes of securities issued by an issuer of a Collateral Debt Security or an affiliate thereof;

(c) be, after the Closing Date, and will be on the Closing Date, a counterparty to issuers of certain of the Collateral Debt Securities under swap or other derivative agreements;

(d) lend to certain of the issuers of Collateral Debt Securities or their respective affiliates or receive guarantees from the issuers of those Collateral Debt Securities or their respective affiliates;

(e) provide other investment banking, asset management, commercial banking, financing or financial advisory services to the issuers of Collateral Debt Securities or their respective affiliates; or

(f) have an equity interest, which may be a substantial equity interest, in certain issuers of the Collateral Debt Securities or their respective affiliates.

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When acting as a trustee, paying agent or in other service capacities with respect to a Collateral Debt Security, the Merrill Lynch Companies will be entitled to fees and expenses senior in priority to payments made in respect of such Collateral Debt Security. When acting as a trustee for other classes of securities issued by the issuer of a Collateral Debt Security or an affiliate thereof, the Merrill Lynch Companies may owe fiduciary duties to the holders of such other classes of securities, which classes of securities may have differing interests from the holders of the class of securities of which the Collateral Debt Security is a part, and may take actions that are adverse to the holders (including the Issuer) of the class of securities of which the Collateral Debt Security is a part. As a counterparty under swaps and other derivative agreements, the Merrill Lynch Companies may take actions adverse to the interests of the Issuer, including, but not limited to, demanding collateralization of its exposure under such agreements (if provided for thereunder) or terminating such swaps or agreements in accordance with the terms thereof. The Issuer’s purchase, holding and sale of Collateral Debt Securities may enhance the profitability or value of investments made by the Merrill Lynch Companies in the issuers thereof. As a result of all such transactions or arrangements between the Merrill Lynch Companies and issuers of Collateral Debt Securities or their respective affiliates, the Merrill Lynch Companies may have interests that are contrary to the interests of the Issuer and the Noteholders.

As part of their regular business, the Merrill Lynch Companies may also provide investment banking, commercial banking, asset management, financing and financial advisory services and products to, and purchase, hold and sell, both for their respective accounts or for the account of their respective clients, on a principal or agency basis, securities and other obligations and financial instruments and engage in private equity investment activities. The Merrill Lynch Companies will not be restricted in their performance of any such services or in the types of debt or equity investments that they may make. In conducting the foregoing activities, the Merrill Lynch Companies will be acting for their own account or the account of their customers and will have no obligation to act in the interest of the Issuer. The Merrill Lynch Companies may act as placement agent and/or initial purchaser in other transactions involving issues of collateralized debt obligations or other investment funds with assets similar to those of the Issuer, which may have an adverse effect on the availability of collateral for the Issuer.

The Merrill Lynch Companies may, by virtue of the relationships described above or otherwise, at the date hereof or at any time hereafter, be in possession of information regarding certain of the issuers of Collateral Debt Securities and their respective affiliates, that is or may be material in the context of the Notes and that is not or may not be known to the general public. None of the Merrill Lynch Companies has any obligation, and the offering of the Notes will not create any obligation on their part, to disclose to any purchaser of the Notes any such relationship or information, whether or not confidential.

Relating to Other General Risks

Anti-Money Laundering Provisions May Require the Imposition of Additional Transfer Restrictions on the Notes.

The Uniting and Strengthening America By Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”), signed into law on and effective as of October 26, 2001, imposes anti-money laundering obligations on different types of financial institutions, including banks, broker dealers and investment companies. The USA PATRIOT Act requires the Secretary of the United States Department of the Treasury (the “Treasury”) to prescribe regulations to define the types of investment companies subject to the USA PATRIOT Act and the related anti-money laundering obligations. It is not clear whether Treasury will require entities such as the Issuer to enact anti-money laundering policies. It is possible that Treasury will promulgate regulations requiring the Co-Issuers or the Collateral Manager or other service providers to the Co-Issuers, in connection with the establishment of anti-money laundering procedures, to share information with governmental authorities with respect to investors in the Notes. Such legislation and/or regulations could require the Co-Issuers to implement additional restrictions on the transfer of the Notes. As may be required, the Issuer reserves the right to request such information and take such actions as are necessary to enable it to comply with the USA PATRIOT Act and other anti-money laundering or similar laws. See “Anti-Money Laundering and Anti-Terrorism Requirements and Disclosures.”

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Non-Petition Agreements May Be Determined to Be Unenforceable under Applicable Bankruptcy Laws Which May Result In the Avoidance of Certain Payments on the Notes as Preferential Transfers.

Each initial purchaser of Notes, and each transferee of Notes will, pursuant to the terms of the Indenture, be deemed to covenant and agree that it will not cause the filing of a petition for winding up or a petition in bankruptcy against the Issuer before one year and one day have elapsed since the payment in full of the Notes or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. If such provision fails to be enforceable under applicable bankruptcy laws, then the filing of such a petition could result in one or more payments on the Notes made during the period prior to such filing being deemed to be preferential transfers subject to avoidance by the bankruptcy trustee or similar official exercising authority with respect to the Issuer’s bankruptcy estate.

Certain Directives Adopted By the European Commission and Changes in Ireland’s Laws May Have an Adverse Effect on the Issuer or the Noteholders, Requiring the Issuer to Delist the Notes from the Irish Stock Exchange.

Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List of the Irish Stock Exchange and to trading on (i) in the case of the Insured Notes, the alternative securities market of the Irish Stock Exchange, and (ii) in the case of all other Notes the regulated market of the Irish Stock Exchange. There can be no assurance that any such admission will be granted or maintained.

As part of the harmonization of securities markets in Europe, the European Commission has adopted a directive known as the Prospectus Directive, which all Member States were required to implement by July 1, 2005, and which regulates offers of securities to the public and admissions to trading to European Union regulated markets. The European Commission has also adopted a directive known as the Transparency Directive (which is expected to be implemented by Member States in 2007) that, among other things, imposes continuing financial reporting obligations on issuers that have certain types of securities admitted to trading on a European Union regulated market. In addition, the Market Abuse Directive harmonizes the rules on insider trading and market manipulation in respect of securities admitted to trading on a European Union regulated market and requires issuers of such securities to disclose any non public, price sensitive information as soon as possible, subject to certain limited exemptions. The listing of the Notes (other than the Insured Notes) on the Irish Stock Exchange may subject the Issuer to regulation under these directives, although the requirements applicable to the Issuer are not yet fully clarified.

In the event it is determined by the Issuer, or the Issuer is given notice by a Majority of the Holders of the Notes, voting together as a single class, that the listing of the Notes on the Irish Stock Exchange has had, or could reasonably be expected to have (as a result of a change in the laws, rules or regulations of Ireland or the interpretation thereof, or as a result of the implementation or application of a directive issued by the European Union or otherwise) an adverse effect on the Issuer or the Noteholders, the Issuer will be required to take certain actions pursuant to the Indenture relating to the delisting of the Notes from the Irish Stock Exchange and the listing of the Notes on an alternate exchange. In the event the Issuer is required to take the above actions, it will incur costs which will be included as Administrative Expenses of the Issuer and any funds that are used to pay such costs will not be available to make payments on the Notes or, to the extent that such costs exceed the amount that would otherwise be payable to the Subordinated Noteholders, the Holders of the most subordinated Class of Notes then outstanding.

Changes in Tax Law Could Result in the Imposition of Withholding Taxes with Respect to Payments on the Notes and Interest and Other Payments on the Collateral Debt Securities, and the Issuer will Not Gross-Up Payments to Noteholders; Imposition of Withholding Taxes May Result in a Tax Event.

The Issuer expects that payments of principal and interest by the Issuer in respect of the Notes will not be subject to any withholding tax in the Cayman Islands, the United States or any other jurisdiction. In the event that withholding or deduction of any taxes from payments of principal or interest in respect of the Notes is required by law in any jurisdiction, neither of the Co-Issuers shall be under any obligation to make any additional payments to the Noteholders in respect of such withholding or deduction. See “Certain Income Tax Considerations”.

The Issuer expects in general that, for U.S. federal income tax purposes (a) the Corresponding Debentures, Real Estate Entity Securities, CMBS and Loans will be treated as indebtedness, and (b) each Trust Preferred

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Securities Issuer will be treated as a grantor trust and, accordingly, the Issuer generally will be considered the owner of a pro rata undivided interest in the Corresponding Debentures. Accordingly, the Issuer does not expect that payments on the Collateral Debt Securities securing the Senior Notes will, as of the time of the Issuer’s acquisition of the Collateral Debt Securities, be subject to the imposition of U.S. withholding tax. If, contrary to the above, the Corresponding Debentures or any Real Estate Entity Securities, CMBS or Loans do not constitute indebtedness for U.S. federal income tax purposes, the Issuer expects that payments of interest (and possibly other payments) on such Corresponding Debentures or Collateral Debt Securities, as the case may be, would be subject to a 30% U.S. withholding tax and could subject the Issuer and/or the U.S. Holders of Subordinated Notes to other adverse U.S. tax consequences. In addition, the Eligibility Criteria for Collateral Debt Securities preclude the Issuer’s purchase of a Collateral Debt Security that is subject to foreign withholding tax. However, there can be no assurance that payments on the Collateral Debt Securities will not in the future become subject to U.S. or other withholding tax as a result of a change in any applicable law, treaty, rule or regulation or interpretation thereof. In the event of imposition of such withholding tax or other adverse tax consequences, it is not anticipated that the obligors of the Collateral Debt Securities will be obligated to make any gross-up or other indemnification payments to compensate for such taxes. The application of any withholding tax to payments on the Collateral Debt Securities or other adverse tax consequences therefore would reduce the amounts available to make payments on the Notes. In such event, there can be no assurance that the remaining payments on the Collateral Debt Securities would be sufficient to make timely payments of interest on and payment of principal at the applicable Stated Maturity of the Senior Notes or to make distributions on and payment of principal at the Stated Maturity of the Subordinated Notes. The imposition of withholding taxes on payments on the Collateral Debt Securities or other adverse tax consequences could result in the occurrence of a Tax Event. If the Tax Materiality Condition is satisfied with respect to any Tax Event, the Notes may be redeemed in whole but not in part, at the applicable redemption price set forth herein, at the direction of a Majority of each Affected Class of Notes, as described under “Description of the Notes—Optional Redemption and Tax Redemption—Tax Redemption.”

A Determination that the Issuer has realized U.S. Trade or Business Income Could Have an Adverse Effect on Investors.

Prior to the issuance of the Notes, the Issuer will receive an opinion from Weil, Gotshal & Manges LLP, special U.S. federal income tax counsel to the Issuer, to the effect that, in its judgment, although no activity closely comparable to that contemplated by the Issuer has been the subject of any U.S. Treasury regulation, revenue ruling or judicial decision, the Issuer will not be treated as having income that is effectively connected with a trade or business within the United States and, consequently, the Issuer’s profits will not be subject to U.S. federal income tax on a net income basis (including the branch profits tax). The opinion is based on the assumption that the Issuer and other transaction parties will comply with the terms of the Indenture, the Collateral Management Agreement and the other transaction documents, as well as certain assumptions and certain representations and agreements of such parties. The opinion represents only special tax counsel’s professional judgment, and is not binding on the Internal Revenue Service. There can be no assurance that the Internal Revenue Service would not assert a contrary position. If, notwithstanding special tax counsel’s opinion, it were determined that the Issuer was engaged in a U.S. trade or business and had taxable income that is effectively connected with such U.S. trade or business, then the Issuer would be subject under the U.S. Internal Revenue Code to the regular corporate income tax on such effectively connected taxable income and to the 30% branch profits tax as well. Such taxes would reduce the amounts available to make payments on the Notes. There can be no assurance that in such circumstance remaining payments on the Collateral Debt Securities would be sufficient to make timely payments of interest on, and payment of principal at the applicable Stated Maturity of, the Notes. In addition, interest paid on the Senior Notes and distributions paid with respect to the Subordinated Notes to a Non-U.S. Holder (as defined herein in "Certain Income Tax Considerations") could in such circumstance be subject to a 30% U.S. withholding tax.

Investors in Subordinated Notes Will be Subject to Special Tax Treatment.

Because the Issuer will be a passive foreign investment company, a U.S. person holding Subordinated Notes may be subject to additional taxes unless it elects to treat the Issuer as a qualified electing fund and to recognize currently its proportionate share of the Issuer’s income. A U.S. Holder that makes a qualified electing fund election may recognize income in amounts significantly greater than the distributions received from the Issuer. A U.S. Holder that makes the election will be required to include in current income its pro rata share of the Issuer’s earnings whether or not the Issuer actually makes distributions. In this regard, prospective purchasers of the

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Subordinated Notes should be aware that it is possible that a significant amount of the Issuer’s income, as determined for U.S. federal income tax purposes, will not be distributed on a current basis for a number of potential reasons, including the investment by the Issuer in Collateral Debt Securities that result in taxable income in excess of cash distributions, and the retirement of all or a portion of certain Classes or Tranches of Senior Notes. Thus U.S. Subordinated Noteholders that make a qualified electing fund election may owe tax on a significant amount of “phantom” income. The U.S. Holder may be able to elect to defer payment, subject to an interest charge for the deferral period, of the tax on income recognized on account of the qualified electing fund election. The Issuer also may be a controlled foreign corporation, in which case U.S. persons holding Subordinated Notes could be subjected to different tax treatments, which may also include the recognition of such “phantom” income. See “Certain Income Tax Considerations.”

Basis Recovery on the Subordinated Notes Will Not Occur Until Retirement or Other Disposition.

The tax basis in the Subordinated Notes of a U.S. Holder that makes a qualified electing fund election with respect to its Subordinated Notes will generally be increased by the amount of the Issuer’s income included in the U.S. Holder’s gross income, and will be decreased by any amount already so included that is distributed to such Holder. A U.S. Holder that does not make a qualified electing fund election will generally not reduce its basis in its Subordinated Notes unless the Issuer makes a payment with respect to the Subordinated Notes in amounts in excess of the current and accumulated earnings and profits of the Issuer that is not an “excess distribution.” Accordingly, as a practical matter, because the applicable U.S. federal income tax rules generally do not permit the amortization of basis of a security treated as a share in a corporation, it is not anticipated that a U.S. Holder’s original tax basis in its Subordinated Notes will be reduced other than in years where the cash payments with respect to the Subordinated Notes exceed the Issuer’s income, which may happen only in the later years, or not at all. Therefore, potential U.S. purchasers of the Subordinated Notes should be aware that although they may be required to recognize ordinary income annually based on their share of the Issuer’s earnings for such year, they may recognize a loss only upon the retirement or other disposition of their Subordinated Notes and such loss generally will be capital in character.

Recharacterization of Tax Treatment of Trust Preferred Securities and Corresponding Debentures May Result in Amortization of the Notes prior to their Stated Maturity.

From time to time, the IRS has challenged taxpayers’ treatment as indebtedness of securities issued with characteristics similar to the Corresponding Debentures and Trust Preferred Securities. To date, the only known challenge that has advanced as far as litigation was settled short of trial, with a resolution favorable to the taxpayer’s position. However, if any such challenge by the IRS were to be upheld, such event could give rise to the redemption of the Trust Preferred Securities and the amortization of the Notes prior to the Stated Maturity thereof.

Investors Should Review ERISA Considerations Applicable to the Notes.

Each purchaser and transferee of a Co-Issued Note that is, or is acting on behalf of, a Plan (or is deemed to hold plan assets of the foregoing) will be deemed to have represented and warranted (or required to represent and warrant) that its investment in such Notes will not constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code (or, in the case of a governmental or church plan subject to Similar Law, a non-exempt violation of any Similar Law). No purchase of a Restricted Subordinated Note or Restricted Class F Note by a purchaser that has represented that it is a Benefit Plan Investor or a Controlling Person will be effective, and the Issuer, the Trustee, the Transfer Agent and the Note Registrar will not recognize such purchase, if such purchase would result in (a) Benefit Plan Investors owning 25% or more of the total value of such Class of Notes (including the Regulation S Subordinated Notes and Class F Notes acquired on the Closing Date by Permitted Plans) or (b) a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of a governmental or church plan, a non-exempt violation of any Similar Law). For purposes of calculating the percentage of the total value of the Class F Notes, it is understood that 100% of the aggregate principal amount of the Restricted Global Class F Notes shall be deemed to be held by Benefit Plan Investors.

Each purchaser and transferee of a Regulation S Subordinated Note or Regulation S Class F Note will be deemed to have represented and warranted that it is not a Benefit Plan Investor or a Controlling Person. Notwithstanding the foregoing, Permitted Plans will be permitted to purchase Regulation S Subordinated Notes or Class F Notes on the Closing Date.

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Each Permitted Plan will be deemed to represent, warrant and covenant that its purchase, holding and disposition of such Note will not constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.

Each purchaser and transferee of a Subordinated Note or Class F Note that is a governmental or church plan subject to Similar Law will be deemed to have represented and warranted that its investment in such Note will not constitute or result in a non-exempt violation of Similar Law. No purchase or transfer of a Subordinated Note or Class F Note by a purchaser or transferee that is a governmental or church plan subject to Similar Law will be effective, and the Issuer, the Trustee, the Transfer Agent and the Note Registrar will not recognize such purchase or transfer, if such purchase or transfer would result in a non-exempt violation of any Similar Law.

Any Plan fiduciary considering the purchase of Class A-1A Notes should note that any purchaser of Class A-1A Notes during the Initial Investment Period must satisfy the Rating Criteria.

See “Certain ERISA Considerations” herein for a more detailed discussion of certain ERISA and related considerations with respect to an investment in the Notes.

Investors Should Review Legal Investment Considerations Applicable to the Notes.

None of the Issuer, the Co-Issuer, the Collateral Manager, the Initial Purchaser, the Insurer or any of their respective affiliates makes any representation as to the proper characterization of the Notes for legal investment or other purposes, as to the ability of particular investors to purchase Notes for legal investment or other purposes or as to the ability of particular investors to purchase Notes under applicable investment restrictions. All institutions, the activities of which are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities should consult their own legal advisors in determining whether and to what extent the Notes are subject to investment, capital or other restrictions. Without limiting the generality of the foregoing, none of the Issuer, the Co-Issuer, the Collateral Manager, the Initial Purchaser, the Insurer or any of their respective affiliates makes any representation as to the characterization of the Notes as a U.S.-domestic or foreign (non-U.S.) investment under any state insurance code or related regulations, and they are not aware of any published precedent that addresses such characterization.

Although they are not making any such representation, the Co-Issuers understand that the New York State Insurance Department, in response to a request for guidance, has been considering the characterization (as U.S.-domestic or foreign (non-U.S.)) of certain collateralized debt obligation securities co-issued by a non-U.S. issuer and a U.S. co-issuer. There can be no assurance as to the nature of any advice or other action that may result from such consideration. The uncertainties described above (and any unfavorable future determinations concerning legal investment or financial institution regulatory characteristics of the Notes) may affect the liquidity of the Notes and the ability of certain prospective investors to purchase the Notes.

Non-Compliance with Restrictions on Ownership of the Notes and the 1940 Act Could Adversely Affect the Issuer.

None of the Issuer, the Co-Issuer or the Collateral has been registered with the SEC as an investment company pursuant to the 1940 Act. The Co-Issuers have not so registered in reliance on an exemption from registration contained in Section 3(c)(7) thereof. Counsel for the Co-Issuers will opine, in connection with the issuance of the Notes, that on the Closing Date neither the Issuer nor the Co-Issuer is an investment company required to be registered under the 1940 Act (assuming, for the purposes of such opinion, that the Notes are sold in accordance with the terms of the Indenture and the Purchase and Placement Agency Agreement and that the Collateral Manager administers the Collateral Debt Securities and other assets of the Issuer in accordance with the terms of the Collateral Management Agreement). No opinion or no-action position has been requested of the SEC.

If the SEC or a court of competent jurisdiction were to find that either the Issuer or the Co-Issuer was required, but in violation of the 1940 Act, had failed to register as an investment company, possible consequences include, but are not limited to, the following: (a) the SEC could apply to a district court to enjoin the violation; (b) investors in the Co-Issuers could sue the Co-Issuers and recover any damages caused by the violation; and (c) any contract to which the Issuer or the Co-Issuer is a party that is made in, or whose performance involves, a

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violation of the 1940 Act would be unenforceable by any party to the contract unless a court were to find that under the circumstances enforcement would produce a more equitable result than nonenforcement and would not be inconsistent with the purposes of the 1940 Act. Should the Issuer or the Co-Issuer be subjected to any or all of the foregoing, the Issuer or the Co-Issuer, as the case may be, would be materially adversely affected.

Each purchaser of a beneficial interest in a Restricted Global Co-Issued Note will be deemed to represent at the time of purchase that: (a) the purchaser is both (i) a Qualified Institutional Buyer (or in connection with the initial distribution of the Notes, an Institutional Accredited Investor) and (ii) a Qualified Purchaser; (b) the purchaser is not a dealer described in paragraph (a)(1)(ii) of Rule 144A unless such purchaser owns and invests on a discretionary basis at least $25,000,000 in securities of issuers that are not affiliated persons of the dealer; (c) the purchaser is not a plan referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(F) of Rule 144A that holds the assets of such a plan, unless investment decisions with respect to the plan are made solely by the fiduciary, trustee or sponsor of such plan; (d) the purchaser and each account for which it is purchasing, is required to hold and transfer at least the minimum denominations of the Notes specified in the Indenture; and (e) the purchaser will provide written notice of the foregoing, and of any applicable restrictions on transfer, to any transferee thereof.

The Indenture provides that if, notwithstanding the restrictions on transfer contained therein, either of the Co-Issuers determines that any beneficial owner of an interest in a Co-Issued Note (or any interest therein) or the Issuer determines that any beneficial owner of an interest in a Class F Note (or any interest therein) (a) is not an entity that acquired such interest in a transaction made in accordance with the terms of Regulation S and (b) is not both a Qualified Institutional Buyer (unless such beneficial owner is either (i)(a) in the case of a Co-Issued Note, an Institutional Accredited Investor that purchased an interest therein in connection with the initial distribution thereof or (b) in the case of a Restricted Global Class F Note, an Accredited Investor that purchased an interest therein in connection with the initial distribution thereof or (ii) in the case of a beneficial owner of a Restricted Definitive Class F Note, an Accredited Investor) and a Qualified Purchaser, then either of the Co-Issuers or the Issuer, as the case may be, may require, by notice to such beneficial owner, that such beneficial owner sell all of its right, title and interest in such Senior Note (or interest therein) to a Person that is both a Qualified Institutional Buyer and 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, (i) upon direction from the Issuer or the Co-Issuer, the Trustee (on behalf of and at the expense of the Co-Issuers) shall cause such beneficial owner’s interest in such Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Section 9-610(b) of the UCC) to a person that certifies to the Trustee, the Co-Issuers and the Collateral Manager, in connection with such transfer, that such person is both a Qualified Institutional Buyer and a Qualified Purchaser and (ii) pending such transfer, no further payments will be made in respect of such Note held by such beneficial owner.

In addition, the Indenture provides that if, notwithstanding the restrictions on transfer contained therein, the Issuer determines that any beneficial owner of Subordinated Notes (a) is not a person or entity that acquired such interest in a transaction that was made in accordance with the terms of Regulation S and (b) is not a Qualified Purchaser that is also (i) a Qualified Institutional Buyer or (ii) an Accredited Investor, then the Issuer may require, by notice to such beneficial owner, that such beneficial owner sell all of its right, title and interest to such Subordinated Notes (or interest therein) to a Person that is a Qualified Purchaser and either a Qualified Institutional Buyer or an Accredited Investor, with such sale to be effected within 30 days after notice of such sale requirement is given; provided that any such transfer to an Accredited Investor that is not also a Qualified Institutional Buyer shall be subject to the delivery of such certifications, legal opinions or other information as the Issuer may reasonably require to confirm that such transfer of Restricted Subordinated Notes is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. If such beneficial owner fails to effect the transfer required within such 30-day period, (A) upon direction from the Issuer, the Trustee (on behalf of and at the expense of the Issuer) shall cause such beneficial owner’s interest in such Subordinated Notes to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Section 9-610(b) of the UCC) to a person that certifies to the Trustee, the Issuer and the Collateral Manager, in connection with such transfer, that such person is a Qualified Purchaser who is either a Qualified Institutional Buyer or an Accredited Investor (provided that any such transfer to an Accredited Investor that is not also a Qualified Institutional Buyer shall be subject to the delivery of such certifications, legal opinions or other information as the Issuer may reasonably require to confirm that such transfer of Restricted Subordinated Notes is being made pursuant to an

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exemption from, or in a transaction not subject to, the registration requirements of the Securities Act) and (B) pending such transfer, no further payments will be made in respect of such Subordinated Notes held by such beneficial owner.

Investors Should Consider the Accounting Treatment Applicable to the Holding of Notes.

Prospective investors should consult their own accounting advisors concerning the accounting treatment that would be given to any Note (or interest therein) held by such investors, and any other consequences that investing in Notes may have on the accounting treatment of such entities. Recent accounting developments may affect whether or not certain Noteholders (or interests therein) are required to consolidate certain assets and liabilities on their financial statements.

In January 2003, the Financial Accounting Standards Board (the “FASB”) issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities and, in December 2003, FASB issued a revised version of such interpretation (collectively, “FIN 46”). Interpreting FIN 46, most accounting authorities have come to the conclusion that, under generally accepted accounting principles, affiliated sponsor companies (such as Real Estate Entities sponsoring Trust Preferred Securities) of trusts issuing trust preferred securities must deconsolidate such trusts in such companies’ financial statements. As a consequence, an affiliated sponsor (such as a Real Estate Entity sponsoring Trust Preferred Securities) may no longer reflect on its balance sheet the trust preferred securities issued out of the trust, but instead must reflect the corresponding debentures that the holding company issued to the deconsolidated trust. The FASB also issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liability and Equity (“FAS 150” ), which provides accounting guidance for the appropriate financial reporting balance sheet classification of trust preferred securities. Certain Real Estate Entities may not have accounted for previous trust preferred issuances as debt. Accordingly, the FAS 150 requirement to treat trust preferred issuances by such Real Estate Entities as debt will increase their leverage, which may, among other matters, have an adverse impact on their ability to borrow under their credit facilities.

No Representation as to Notes.

None of the Co-Issuers, the Initial Purchaser, the Collateral Manager, the Collateral Administrator, the Insurer or the Trustee or any of their respective affiliates makes any representation as to the accounting, capital, tax and other regulatory and legal consequences to investors of ownership of the Notes and no purchaser may rely on any such party for a determination of the accounting, capital, tax and other regulatory and legal consequences to such purchaser of ownership of the Notes. Each purchaser of the Notes, by acceptance thereof, will be required to represent or will be deemed to have represented, as applicable, to the Co-Issuers, the Initial Purchaser, the Collateral Manager, the Collateral Administrator or the Trustee, among other things, that such purchaser has consulted with its own financial, legal, accounting and tax advisors regarding investment in the Notes as such purchaser has deemed necessary and that the investment by such purchaser is permissible under applicable laws governing such purchase, and complies with applicable securities laws and other laws.

DESCRIPTION OF THE NOTES

The Notes will be issued pursuant to the Indenture. However, only the Senior Notes will be secured obligations of the Issuer. The following summary describes certain provisions of the Notes and the Indenture. This summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Indenture. Prior to the Closing Date, copies of the Indenture may be obtained by prospective investors upon request to Merrill Lynch, Pierce, Fenner & Smith Incorporated, 4 World Financial Center, 7th Floor, New York, New York 10281, Attention: Structured Credit Products. After the Closing Date, copies of the Indenture may be obtained by investors upon request to the Trustee at 601 Travis Street, 16th Floor, Houston, Texas 77002, Attention: Global Corporate Trust – Attentus CDO III.

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Status and Security

The Senior Notes will be limited recourse debt obligations of the Issuer. All of the Class A-1A Notes will be entitled to receive payments pari passu among themselves, all of the Class A-1B Notes will be entitled to receive payments pari passu among themselves, all of the Class A-2 Notes will be entitled to receive payments pari passu among themselves, all of the Class B Notes will be entitled to receive payments pari passu among themselves, the Class C-1 Notes and the Class C-2 Notes will rank pari passu with respect to payments of principal and interest and the Holders of the Class C Notes of each such Tranche will be entitled to receive payments pari passu among themselves, all of the Class D Notes will be entitled to receive payments pari passu among themselves, the Class E Notes will rank pari passu with respect to payments of principal and interest and the Holders of the Class E Notes of each such Tranche will be entitled to receive payments pari passu among themselves, the Class F Notes will rank pari passu with respect to payments of principal and interest and the Holders of the Class F Notes will be entitled to receive payments pari passu among themselves and all of the Subordinated Notes will be entitled to receive payments pari passu among themselves. Except as otherwise described herein, the relative order of seniority of payment of the Notes on each Distribution Date is as follows: first, Class A-1A Notes, second, Class A-1B Notes, third, Class A-2 Notes, fourth, Class B Notes, fifth, Class C Notes, sixth, Class D Notes, seventh, Class E Notes, eighth, Class F Notes and ninth, Subordinated Notes with, except as otherwise described herein, (a) each Class of Notes (other than the Subordinated Notes) in such list being “senior” to each other Class of Notes that follows such Class of Notes in such list and (b) each Class of Notes (other than the Class A-1A Notes) in such list being “subordinate” to each other Class of Notes that precedes such Class of Notes in such list. Except as otherwise described herein, no payment of interest on any Class of Notes or distributions on the Subordinated Notes will be made from Interest Proceeds or Principal Proceeds until all accrued and unpaid interest on the Notes of each Class that is senior to such Class and that remains outstanding has been paid in full. Except as otherwise described herein, no payment of principal of any Class of Notes will be made until all principal of, and all accrued and unpaid interest on, the Notes of each Class that is senior to such Class and that remain outstanding have been paid in full. See “—Priority of Payments.” In certain circumstances a Class of Notes with a lower priority of payment may be paid principal prior to, or on a pro rata basis with, a Class or Classes of Notes with a higher alphabetical designation. See “—Priority of Payments—Interest Proceeds.”

Under the terms of the Indenture, the Issuer will grant to the Trustee for the benefit of the Secured Parties a first priority security interest in the Collateral described herein to secure the Issuer’s obligations under the Indenture and the Senior Notes. The Collateral will also secure the Issuer’s obligations under the Insurer Documents.

Payments of principal of and interest on the Notes will be made solely from the proceeds of the Collateral, in accordance with the priorities described under “—Priority of Payments” herein. If the amounts received in respect of the Collateral (net of certain expenses) are insufficient to make payments on the Notes, no other assets will be available for payment of the deficiency and, following liquidation of all the Collateral, the obligations of the Co-Issuers, or, in the case of the Class F Notes and the Subordinated Notes, the Issuer, to pay any such deficiency will be extinguished.

Class A-1A Note Mechanics

The Class A-1A Notes are a delayed draw Class of Notes and will be issued in global form. All of the Class A-1A Notes will be authorized on the Closing Date. U.S.$67,500,000 of the principal amount of the Class A-1A Notes will be funded on the Closing Date. Pursuant to the Class A-1A Note Purchase Agreements, subject to compliance with the conditions set forth therein (some of which are referred to below), the Collateral Manager (on behalf of the Issuer) may request (and the Holders of the Class A-1A Notes, or any Liquidity Provider with respect to any such Holder, will be obligated to make pro rata in accordance with their respective Class A-1 A Commitments) advances under the Class A-1A Notes during the Initial Investment Period to acquire Additional Collateral Debt Obligations. The Class A-1A Noteholders’ commitment to make these advances will be in effect on the Closing Date and will expire on the Commitment Period Termination Date.

Unless otherwise prohibited by the Indenture, if any Class A-1A Commitments are undrawn on the last day of the Initial Investment Period, then on the last day of the Initial Investment Period, the Issuer will make a Draw on the Class A-1A Notes in an amount equal to the undrawn portion of the Class A-1A Commitments in effect and the

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Class A-1A Commitments will terminate immediately after such Draw is made. The remainder of the proceeds of such Draw, if any, will be treated as Principal Proceeds.

Outstanding Draws under the Class A-1A Notes will bear interest at their applicable interest rate, and the Class A-1A Noteholders will be entitled to receive the Class A-1A Commitment Fee on the undrawn portion of the Class A-1A Notes until the Commitment Period Termination Date. The Class A-1A Commitment Fee Amount will be payable to the Class A-1A Noteholders in arrears on each Draw Date.

Draws

The Class A-1A Notes will be funded in up to 3 installments on Draw Dates. The Draw Dates are expected to occur on the 25th of any month during the Initial Investment Period. It is expected that the Class A-1A Notes will be funded in installments of at least U.S.$18,750,000 on each Draw Date. The following conditions must be met prior to any such Draw:

(a) at the time of and immediately after giving effect to such Draw, no Event of Default or event the occurrence of which with notice or the lapse of time or both would become an Event of Default has occurred and is continuing or would result from such Draw;

(b) the Aggregate Principal Amount of the Class A-1A Notes will not exceed the aggregate Class A-1A Commitments; and

(c) each other applicable condition to such Draw set forth in the Class A-1A Note Purchase Agreements is satisfied;

provided that the Issuer shall not commit to purchase any Collateral Debt Securities unless it (or the Collateral Manager on its behalf) has determined in its commercially reasonable judgment that it will have sufficient cash available to it to settle such purchase without taking into account the Aggregate Undrawn Amount of Class A-1A Commitments.

Not later than 1:00 p.m. (New York City time) five Business Days prior to a proposed Draw Date, the Issuer (or the Collateral Manager on behalf of the Issuer) will provide notice to the Trustee, the Distribution Agent and each Holder of Class A-1A Notes of the Issuer’s intention to effect a Draw; provided that the Distribution Agent may waive the requirement for such notice by sending a written notice of such waiver to the Issuer and the Collateral Manager; provided further that any notice received after 1:00 p.m. (New York City time) will be deemed to have been received on the next succeeding Business Day. Any such notice will include the following information: (a) the Draw Date, (b) the amount of such Draw, (c) the wiring instructions for such Draw. The aggregate principal amount of any Draw that may be made, in respect of the Class A-1A Notes (taken as a whole) will be at least U.S.$18,750,000 (and integral multiples of U.S.$1,000 in excess thereof) or, if the Aggregate Undrawn Amount under the Class A-1A Notes is less than U.S.$18,750,000, such lesser amount. Any Draw will be made by the Issuer pro rata according to the unused portion of the Class A-1A Commitment of each Class A-1A Noteholder. Promptly following receipt of a request for a Draw, the Trustee will forward a copy of such request by fax or email to each Class A-1A Noteholder. The Class A-1A Noteholders will fund such Draw five Business Days from the date on which such notice is received from the Issuer or, if later, the Draw Date specified in such notice. Upon each funding of the Class A-1A Commitments, the outstanding principal amount of the Class A-1A Notes shall be increased by the amount of such funding in exchange for the reduction in the same amount of the Class A-1A Commitments.

Rating Criteria and Class A-1A Noteholders

Prior to the Commitment Period Termination Date, each Holder of Class A-1A Notes will be required to satisfy the Rating Criteria specified in the Class A-1A Note Purchase Agreement. If any Holder of Class A-1A Notes (or, if such Holder is then entitled to the benefit of a Liquidity Facility, any of such Holder’s Liquidity Providers) does not at any time during the Initial Investment Period satisfy the Rating Criteria, then such Holder will (i) immediately give notice of such fact to the Issuer, the Collateral Manager, the Trustee and each Rating Agency

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and (ii) not later than 30 days after the date on which such Holder (or, if such Holder is then entitled to the benefit of a Liquidity Facility, any of such Holder’s Liquidity Providers) first obtains knowledge that such Holder does not satisfy the Rating Criteria, (A) transfer all of its rights and obligations in respect of all Class A-1A Notes held by such Holder to a person that satisfies the Rating Criteria on the date of such transfer or (B) cause a Class A-1A Noteholder Prepayment Account (as defined in the Class A-1A Note Purchase Agreement) to be established, credit to such Class A-1A Noteholder Prepayment Account cash or Eligible Prepayment Account Investments (as defined in the Class A-1A Note Purchase Agreement), the aggregate outstanding amount of which is equal to such Class A-1A Noteholder’s Unfunded Commitment at such time and enter into a Noteholder Prepayment Account Control Agreement (as defined in the Class A-1A Note Purchase Agreement) in relation to such account; provided that if such Class A-1A Noteholder elects to transfer all of its rights and obligations pursuant to clause (A) and such transfer has not been effected within the time period set forth in (ii) above, such Holder will cause a Class A-1A Noteholder Prepayment Account to be established and funded pursuant to the terms of the Class A-1A Note Purchase Agreement.

The purchase of Class A-1A Notes (whether in connection with the initial placement or in a subsequent transfer) by any person who does not satisfy the Rating Criteria set forth in clause (a) of the definition thereof at the time of such purchase but who is then entitled to the benefit of a Liquidity Facility described in clause (b) of such definition will be subject to the requirement that each Rating Agency shall have confirmed that the acquisition by such person will not result in a downgrade or withdrawal of its then-current rating, if any, of any of the Notes. Pursuant to the Class A-1A Note Purchase Agreement, any purchaser of Class A-1A Notes that is entitled under a Liquidity Facility to borrow loans from Liquidity Providers may delegate to such Liquidity Providers, and such Liquidity Providers may severally agree to each perform their ratable share (determined in accordance with their respective commitments under the relevant Liquidity Facility) of, all of the purchaser’s obligations under the Class A-1A Note Purchase Agreement in respect of the Class A-1A Notes held by such purchaser.

Each transferee entity obtaining an interest in Class A-1A Notes under any of the circumstances set forth in the preceding paragraphs of this subsection will be required to satisfy the Rating Criteria as of the date on which such entity first becomes a Holder of Class A-1A Notes.

Interest

Interest with respect to the Class A-1A Notes during the Initial Investment Period will accrue on the Aggregate Drawn Amount under the Class A-1A Notes. Interest on the Class A-1A Notes during the Initial Investment Period shall be determined on any Determination Date by dividing the sum of the Aggregate Outstanding Principal Amount of the Class A-1A Notes on each day during the related Interest Period by the number of days in such Interest Period and multiplying that result by the applicable interest rate for the Class A-1A Notes.

Following the Initial Investment Period the Class A-1A Notes will bear interest at a floating rate per annum equal to LIBOR plus 0.32%. The Class A-1B Notes will bear interest at a floating rate per annum equal to LIBOR plus 0.26%. The Class A-2 Notes will bear interest at a floating rate per annum equal to LIBOR plus 0.45%. The Class B Notes will bear interest at a floating rate per annum equal to LIBOR plus 0.70%. The Class C-1 Notes will bear interest at a floating rate per annum equal to LIBOR plus 1.35%. The Class C-2 Notes will bear interest as follows: (i) during the Fixed Rate Period, at a fixed rate per annum equal to 6.312% and (ii) from and including the Fixed Rate Period Termination Date, at a floating rate per annum equal to LIBOR plus 1.35%. The Class D Notes will bear interest as follows: (i) during the Fixed Rate Period, at a fixed rate per annum equal to 6.612% and (ii) from and including the Fixed Rate Period Termination Date, at a floating rate per annum equal to LIBOR plus 1.65%. The Class E-1 Notes will bear interest at a floating rate per annum equal to LIBOR plus 2.95%. The Class E-2 Notes will bear interest at a fixed rate per annum equal to 7.982%. The Class F Notes will bear interest at a fixed rate per annum equal to 9.532%. Interest on the Floating Rate Notes, and after the related Fixed Rate Period, the Fixed/Floating Rate Notes, will be computed on the basis of a 360-day year and the actual number of days elapsed in the relevant Interest Period. Interest on the Fixed Rate Notes, and during the related Fixed Rate Period, the Fixed/Floating Rate Notes, will be computed on the basis of a 360-day year consisting of twelve 30-day months.

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Interest will accrue on the Aggregate Outstanding Principal Amount of each Tranche of Senior Notes (determined as of the first day of each Interest Period and after giving effect to any redemption or other payment of principal occurring on such day) from the Closing Date. Interest accruing for any Interest Period will accrue for the period from and including the first day of such Interest Period to and including the last day of such Interest Period. In the event that any date identified as a Distribution Date, Redemption Date or Stated Maturity falls on a day other than a Business Day, the Distribution Date, Redemption Date or Stated Maturity, as the case may be, shall be deemed to be the next succeeding Business Day and with respect to any Senior Notes, interest that accrues with respect to the period from and after any such identified date to such next succeeding Business Day shall be payable on such next succeeding Business Day.

Payments of interest on the Notes will be payable in U.S. dollars quarterly in arrears on January 11, April 11, July 11 and October 11 of each year commencing on July 11, 2007; provided that (a) the final Distribution Date with respect to the Notes shall be no later than the Distribution Date occurring in October 2042, and (b) if any such date is not a Business Day, the relevant Distribution Date will be the next succeeding Business Day.

So long as any Class of Senior Notes is outstanding, if any Coverage Test applicable to such Class of Senior Notes is not satisfied on any Determination Date relating to any Distribution Date, then funds that would otherwise be used to make payments in respect of interest on any Class of Notes Subordinate to such Class will be used instead to redeem, first, each Class (if any) of Notes senior to such Class of Notes (sequentially in order of seniority) and, second, such Class of Notes, until each applicable Coverage Test is satisfied. See “—Priority of Payments.”

Any interest on the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes that is not paid when due by operation of the Priority of Payments will be deferred; provided that no accrued interest on the Class B Notes, any Tranche of Class C Notes, the Class D Notes, any Tranche of Class E Notes or the Class F Notes shall become Class B Deferred Interest, Class C Deferred Interest, Class D Deferred Interest, Class E Deferred Interest or Class F Deferred Interest, as applicable, unless a more senior Class of Notes is then outstanding. Any interest so deferred will be added to the Aggregate Outstanding Principal Amount of the Class B Notes, the related Tranche of Class C Notes, the Class D Notes, the related Tranche of Class E Notes or the Class F Notes, as applicable, and thereafter interest will accrue on the Aggregate Outstanding Principal Amount of the Class B Notes, the related Tranche of Class C Notes, the Class D Notes, the related Tranche of Class E Notes or the Class F Notes, as applicable, as so increased. So long as any Class A Notes are outstanding, any interest on the Class B Notes that is not paid on any Distribution Date by reason of the operation of the Priority of Payments will not be considered “due and payable” and the Co-Issuers’ failure to pay such interest will not constitute an Event of Default or a Default under the Indenture. So long as any Class A Notes or Class B Notes are outstanding, any interest on a Tranche of Class C Notes that is not paid on any Distribution Date by reason of the operation of the Priority of Payments will not be considered “due and payable” and the Co-Issuers’ failure to pay such interest will not constitute an Event of Default or a Default under the Indenture. So long as any Class A Notes, Class B Notes or Class C Notes are outstanding, any interest on the Class D Notes that is not paid on any Distribution Date by reason of the operation of the Priority of Payments will not be considered “due and payable” and the Co-Issuers’ failure to pay such interest will not constitute an Event of Default or a Default under the Indenture. So long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes are outstanding, any interest on a Tranche of Class E Notes that is not paid on any Distribution Date by reason of the operation of the Priority of Payments will not be considered “due and payable” and the Co-Issuers’ failure to pay such interest will not constitute an Event of Default or a Default under the Indenture. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are outstanding, any interest on the Class F Notes that is not paid on any Distribution Date by reason of the operation of the Priority of Payments will not be considered “due and payable” and the Issuers’ failure to pay such interest will not constitute an Event of Default or a Default under the Indenture. Unless otherwise specified herein, any reference to the principal amount of a Class B Note, Class C Note, Class D Note, Class E Note or Class F Note includes any Class B Deferred Interest, Class C Deferred Interest, Class D Deferred Interest, Class E Deferred Interest or Class F Deferred Interest, as applicable, added thereto. Upon the payment of Class B Deferred Interest, Class C Deferred Interest, Class D Deferred Interest, Class E Deferred Interest or Class F Deferred Interest previously capitalized as additional principal, the Aggregate Outstanding Principal Amount of the Class B Notes, the related Tranche of Class C Notes, the Class D Notes, the related Tranche of Class E Notes or the Class F Notes, as applicable, will be reduced by the amount of such payment.

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Interest will cease to accrue on each Senior Note or, in the case of a partial repayment, on such part, from the date of repayment or Stated Maturity unless payment of principal is improperly withheld or unless default is otherwise made with respect to such payments. To the extent lawful and enforceable, interest on any Defaulted Interest on any Senior Note will accrue at the interest rate applicable to such Senior Note until paid.

On each Distribution Date, to the extent funds are lawfully available therefor, Interest Proceeds will be paid to the Subordinated Noteholders in accordance with the Priority of Payments; provided that such payments will be made only after the payment of interest on the Senior Notes and the payment of certain other amounts in accordance with the Priority of Payments.

(a) On the Distribution Date occurring in January 2008, and on each Distribution Date thereafter to and including the Distribution Date in January 2012, if the Class E Notes and the Class F Notes are not redeemed in full on or prior to any such Distribution Date, an amount equal to 8% of the Interest Proceeds available after application of Interest Proceeds to pay Deferred Interest on the Class F Notes in accordance with the Priority of Payments will be applied to pay, pro rata, principal of the Class E Notes and the Class F Notes until each such Class of Notes has been paid in full and (b) on the Distribution Date occurring after January 2012, and on each Distribution Date thereafter to and including the Distribution Date in January 2017, if the Class E Notes and the Class F Notes are not redeemed in full on or prior to any such Distribution Date, an amount equal to 25% of the Interest Proceeds available after application of Interest Proceeds to pay Deferred Interest on the Class F Notes in accordance with the Priority of Payments will be applied to pay, pro rata, principal of the Class E Notes and the Class F Notes until each such Class of Notes has been paid in full.

On each Distribution Date occurring after the Distribution Date in January 2017, if the Senior Notes are not redeemed in full on or prior to such date, an amount equal to 60% of the Interest Proceeds available after application of Interest Proceeds to pay Deferred Interest on the Class F Notes in accordance with the Priority of Payments will be applied to pay, pro rata, principal of the Class A-1A Notes, the Class A-1B Notes, 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, until each such Class of Senior Notes has been paid in full.

Until the Senior Notes have been paid in full, Principal Proceeds not used to redeem Senior Notes (or to purchase Additional Collateral Debt Securities in accordance with the terms of the Indenture) are not permitted to be distributed to the Subordinated Noteholders and therefore will not be available to make distributions in respect of the Subordinated Notes.

With respect to each Interest Period, “LIBOR” for purposes of calculating the interest rate for the Floating Rate Notes, and after the related Fixed Rate Period, the Fixed/Floating Rate Notes, for such Interest Period will be determined by the Trustee, as calculation agent (the “Calculation Agent”) in accordance with the following provisions:

(a) On the second LIBOR Business Day (as defined below) prior to a Distribution Date or, for purposes of determining LIBOR in respect of the Class A-1A Notes, the date on which a Draw request is delivered to the Trustee pursuant to the Class A-1A Note Purchase Agreement (except with respect to the first interest payment period, which shall be the Closing Date; each such day, a “LIBOR Determination Date”), LIBOR shall for the following interest payment period equal the rate, as obtained by the Calculation Agent from Bloomberg Financial Markets Commodities News, for three-month Eurodollar deposits that appears on Moneyline Telerate Page 3750 (as defined in the International Swaps and Derivatives Association, Inc. 1991 Interest Rate and Currency Exchange Definitions), or such other page as may replace such Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date.

(b) If, on any LIBOR Determination Date, such rate does not appear on Moneyline Telerate Page 3750 or such other page as may replace such Page 3750, the Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks (as defined below) to leading banks in the London interbank market for three-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the LIBOR Determination Date made by the Calculation Agent to

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the Reference Banks. If, on any LIBOR Determination Date, at least two of the Reference Banks provide such quotations, LIBOR shall equal such arithmetic mean of such quotations. If, on any LIBOR Determination Date, only one or none of the Reference Banks provide such quotations, LIBOR shall be deemed to be the arithmetic mean of the offered quotations that leading banks in the City of New York selected by the Calculation Agent are quoting on the relevant LIBOR Determination Date for three-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to the principal London offices of leading banks in the London interbank market; provided that (i) if the Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures provided above, LIBOR shall be LIBOR as determined on the previous LIBOR Determination Date and (ii) in the case of the Class A-1A Notes for any Interest Period (other than the first Interest Period) having a term other than three months, LIBOR shall be determined through the use of straight line interpolation by reference to two rates calculated in accordance with the foregoing procedures, one of which shall be determined as if the maturity of the U.S. Dollar deposits referred to therein were the period of time for which rates are available next shorter than such Interest Period, and the other of which shall be determined as if such maturity were the period of time for which rates are available next longer than such Interest Period; provided that, if an Interest Period is less than or equal to seven days, then LIBOR shall be determined by reference to a rate calculated in accordance with the foregoing as if the maturity of the U.S. Dollar deposits referred to therein were a period of time equal to seven days.

For so long as any Senior Note remains outstanding, the Issuer will at all times maintain an agent appointed to calculate LIBOR in respect of each Interest Period. As soon as possible after 11:00 a.m. (London time) on each LIBOR Determination Date, but in no event later than 11:00 a.m. (London time) on the Business Day immediately following each LIBOR Determination Date, the Calculation Agent will calculate the interest rate for the Senior Notes for the related Interest Period and the amount of interest for such Interest Period payable in respect of each $1,000 in principal amount of each Tranche of Senior Notes, in each case rounded to the nearest cent, with half a cent being rounded upward, on the related Distribution Date and will communicate such rates and amounts and the related Distribution Date to the Issuer, the Co- Issuer, the Trustee, the Insurer, each Paying Agent, Euroclear Bank, Clearstream, DTC and, for so long as any Notes are listed on the Irish Stock Exchange, the Irish Stock Exchange.

The Calculation Agent may be removed by the Co-Issuers at any time. If the Calculation Agent is unable or unwilling to act as such, is removed by the Co-Issuers or fails to determine the interest rate for any Tranche of Senior Notes or the amount of interest payable in respect of any Tranche of Senior Notes for any Interest Period, the Co-Issuers will promptly appoint as a replacement Calculation Agent a leading bank that is engaged in transactions in U.S. Eurodollar deposits in the international Eurodollar market and which does not control and is not controlled by or under common control with the Issuer, the Co-Issuer or any of their respective affiliates. The Calculation Agent may not resign its duties without a successor having been duly appointed. The determination of the interest rate for Senior Notes for each Interest Period by the Calculation Agent shall (in the absence of manifest error) be final and binding upon all parties.

Class A-1A Commitment Fee. A commitment fee on the Class A-1A Notes will accrue on the Aggregate Undrawn Amount of the Class A-1A Commitments for each day from and including the Closing Date until the date that the Aggregate Undrawn Amount of the Class A-1A Notes is reduced to zero and the Issuer is not permitted under the Class A-1A Note Purchase Agreements to request any further Draw, at a rate per annum equal to 0.16%. The Class A-1A Commitment Fee will be payable quarterly in arrear on each Payment Date and will rank pari passu with the payment of interest on the Class A-1A Notes. The Class A-1A Commitment Fee will be computed on the basis of a 360-day year and the actual number of days elapsed. No Notes other than the Class A-1A Notes shall be entitled to receive a commitment fee.

Principal

The Stated Maturity of the Notes is the Distribution Date in October 2042. Each Tranche of Notes will mature at the applicable Stated Maturity unless redeemed or repaid prior thereto. However, the Notes may be paid in full prior to their Stated Maturity. See “Risk Factors—Relating to the Notes—The Average Lives of the Notes May Vary.” Any payment of principal with respect to any Tranche of Notes (including any payment of principal made in

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connection with an Auction Call Redemption, Optional Redemption or Tax Redemption) will be made by the Trustee on a pro rata basis on each Distribution Date among the Notes of such Tranche according to the respective unpaid principal amounts thereof outstanding immediately prior to such payment. The Trustee shall, so long as any Tranche of Notes is listed on the Irish Stock Exchange, on or before each Distribution Date, notify the Irish Stock Exchange of the amount of principal payments to be made on the Notes of each such Tranche on such Distribution Date, the amount of any Class B Deferred Interest, the amount of any Class C Deferred Interest, the amount of any Class D Deferred Interest, the amount of any Class E Deferred Interest, the amount of any Class F Deferred Interest, the Aggregate Outstanding Principal Amount of the Senior Notes of each such Tranche and the percentage of the original Aggregate Outstanding Principal Amount of the Notes of such Tranche after giving effect to the principal payments, if any, on such Distribution Date.

Principal Proceeds, to the extent not reinvested in Additional Collateral Debt Securities as described herein, will be applied on each Distribution Date in accordance with the Priority of Payments to pay principal of each Tranche of Notes, with principal of each Tranche of Notes being paid prior to the payment of principal of each other Tranche of Notes then outstanding that is subordinate in right of payment to the Tranche of Notes being paid.

Mandatory Redemption

Each Class of Senior Notes shall, on any Distribution Date, be subject to mandatory redemption in the event that any Coverage Test applicable to such Class of Senior Notes or any Class of Senior Notes Subordinate to such Class is not satisfied on the related Determination Date. Any such redemption will be effected, first, from Interest Proceeds and, second (to the extent that the application of Interest Proceeds pursuant to the Priority of Payments would be insufficient to cause such tests to be satisfied), from Principal Proceeds, in each case, to the extent necessary to cause each applicable Coverage Test to be satisfied. Any such redemption will be applied to each outstanding Class of Senior Notes sequentially in order of seniority and will otherwise be effected as described below under “—Priority of Payments.”

In addition, the Issuer, or the Collateral Manager on behalf of the Issuer, will provide the Trustee, the Insurer, each Rating Agency and the Hedge Counterparties a Ramp-Up Notice within seven business days after the occurrence of the Ramp-Up Completion Date; provided that, for the avoidance of doubt, if the Issuer acquires Collateral Debt Securities on the Closing Date with an aggregate principal amount at least equal to the Aggregate Ramp-Up Par Amount, the Issuer will not be obligated to provide such notice to the Rating Agencies and the Closing Date will be deemed to be the Ramp-Up Completion Date. In the event the Issuer, or the Collateral Manager on behalf of the Issuer, gives such notice, the Issuer, or the Collateral Manager on behalf of the Issuer, will request that each Rating Agency issue a Ratings Confirmation. If a Ramp-Up Ratings Confirmation Failure occurs, the Issuer will be required to apply Uninvested Proceeds and, to the extent that Uninvested Proceeds are insufficient, Interest Proceeds and Principal Proceeds, to the repayment of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, the Class C Notes, sixth, the Class D Notes, seventh, the Class E Notes and eighth, the Class F Notes, in accordance with the Priority of Payments as, and to the extent, necessary to obtain a Ratings Confirmation from each Rating Agency. Notwithstanding the above, in the event the Issuer acquires Collateral Debt Securities on the Closing Date with an aggregate principal amount at least equal to the Aggregate Ramp-Up Par Amount, a Ratings Confirmation will be deemed to have occurred.

(a) On the Distribution Date occurring in January 2008, and on each Distribution Date thereafter to and including the Distribution Date in January 2012, if the Class E Notes and the Class F Notes are not redeemed in full on or prior to any such Distribution Date, an amount equal to 8% of the Interest Proceeds available after application of Interest Proceeds to pay Deferred Interest on the Class F Notes in accordance with the Priority of Payments will be applied to pay, pro rata, principal of the Class E Notes and the Class F Notes until each such Class of Notes has been paid in full and (b) on the Distribution Date occurring after January 2012, and on each Distribution Date thereafter to and including the Distribution Date in January 2017, if the Class E Notes and the Class F Notes are not redeemed in full on or prior to any such Distribution Date, an amount equal to 25% of the Interest Proceeds available after application of Interest Proceeds to pay Deferred Interest on the Class F Notes in accordance with the Priority of Payments will be applied to pay, pro rata, principal of the Class E Notes and the Class F Notes until each such Class of Notes has been paid in full.

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On each Distribution Date occurring after the Distribution Date in January 2017, if the Senior Notes are not redeemed in full on or prior to such date, an amount equal to 60% of the Interest Proceeds available after application of Interest Proceeds to pay Deferred Interest on the Class F Notes in accordance with the Priority of Payments will be applied to pay, pro rata, principal of the Class A-1A Notes, the Class A-1B Notes, 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, until each such Class of Senior Notes has been paid in full.

Auction Call Redemption

In accordance with the procedures set forth in the Indenture (the “Auction Procedures”), the Collateral Manager shall, at the expense of the Co-Issuers, conduct an auction (an “Auction”) of the Collateral Debt Securities if, on or prior to the Distribution Date occurring in January 2017, the Senior Notes have not been redeemed in full. The Auction shall be conducted not later than (a) the date that is 10 Business Days prior to the Distribution Date occurring in January 2017, and (b) if the Senior Notes are not redeemed in full on such Distribution Date, 10 Business Days prior to each Distribution Date thereafter until all of the Collateral Debt Securities have been sold (each such date, an “Auction Date”). Notwithstanding the foregoing, the Collateral Manager shall not conduct an Auction on an Auction Date if an Auction was conducted on the preceding Auction Date and, due to market conditions, an Auction on such Auction Date is determined by the Collateral Manager to be unlikely to be successful. Any of the Collateral Manager, the Initial Purchaser, the Insurer, the Trustee or any of their respective affiliates may, but shall not be required to, bid at the Auction. The Collateral Manager shall sell and transfer, or shall instruct the Trustee to sell and transfer, the Collateral Debt Securities to the highest bidder therefor (or the highest bidders therefor, in the event the pool of Collateral Debt Securities is divided and sold in subpools) at the Auction; provided that:

(i) the Auction has been conducted in accordance with the Auction Procedures;

(ii) the Collateral Manager has received bids for the Collateral Debt Securities (or for each of the related subpools) from at least two prospective purchasers (including the winning bidder) identified on a list of qualified bidders (such bidders, “Qualified Bidders”) furnished by the Collateral Manager to the Trustee in accordance with the Indenture; provided that the Issuer will be entitled to enter into an agreement for the purchase of the Collateral Debt Securities (or the relevant subpool) with a Person other than a Qualified Bidder in the event that (A) such Person provides a bid in an amount greater than the highest bid received from any Qualified Bidder, (B) the Rating Condition is satisfied with respect thereto and (C) such Person provides credit support in respect of its purchase obligation in the form and amount requested, if any, by the Collateral Manager, the Issuer or any Rating Agency (including, without limitation, in the form of a letter of credit if so requested); provided further that in the event the Collateral Manager or an affiliate of the Collateral Manager has met the requirements set forth in subclauses (B) and (C) of the preceding proviso, the Collateral Manager or such affiliate shall be entitled to purchase the Collateral Debt Securities, or any portion thereof, at a purchase price equal to the highest bid received therefor; and provided further that, in accordance with the Auction Procedures, if the Collateral Manager receives fewer than two bids to purchase all of the Collateral Debt Securities or to purchase each subpool, the Collateral Manager may, if the Holders of a Majority of the Subordinated Notes consent thereto in writing, and in accordance with the provisions of the Indenture, accept such bid as the winning bid;

(iii) either (A) the Collateral Manager certifies that the highest bid(s) would result in the sale of all of the Collateral Debt Securities (or the related subpools constituting all of the Collateral Debt Securities) for a purchase price (paid in cash) which, together with the balance of all Eligible Investments and cash held by the Issuer (other than Eligible Investments and cash held in any Hedge Counterparty Collateral Account), will be at least equal to the sum of (1) the Total Senior Redemption Amount, plus (2) an amount equal to the greater of (a) the initial principal amount of the Subordinated Notes, minus (b) the aggregate amount of all cash distributions made to the Subordinated Noteholders on or prior to the relevant Auction Date and (3) zero (the “Auction Call Redemption

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Amount”) or (B) if the highest bid(s) would not result in the sale of all of the Collateral Debt Securities (or the related subpools constituting all of the Collateral Debt Securities) for a purchase price (paid in cash) which, together with the balance of all Eligible Investments and cash held by the Issuer (other than Eligible Investments and cash held in any Hedge Counterparty Collateral Account), would be at least equal to the Auction Call Redemption Amount, (1) Holders of at least a Majority of the Subordinated Notes and Holders of at least a Majority of any Class of Senior Notes, if any, that would not be entitled to receive 100% of the applicable Redemption Price as a result of such Auction Call Redemption (or, if the Class A-1 Notes would not be entitled to receive 100% of the applicable Redemption Price as a result of such Auction Call Redemption, Holders of 100% of the Aggregate Outstanding Principal Amount of such Class) consents to the completion of such Auction and (2) the Collateral Manager certifies that the highest bid(s) would result in the sale of all of the Collateral Debt Securities (or the related subpools constituting all of the Collateral Debt Securities) for a purchase price (paid in cash) which, together with the balance of all Eligible Investments and cash held by the Issuer (other than Eligible Investments and cash held in any Hedge Counterparty Collateral Account), will be at least equal to the Total Senior Redemption Amount minus the Aggregate Outstanding Principal Amount of each Class with respect to which a consent has been received by the Issuer in accordance with subclause (1) above; and

(iv) subject to the proviso in clause (ii) above, the highest Qualified Bidder(s) enter(s) into a written agreement with the Issuer (which the Issuer shall execute if the conditions set forth above and in the Indenture are satisfied which execution shall constitute certification by the Issuer that such conditions have been satisfied) that obligates the highest bidder (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.

Provided that all of the conditions set forth in clauses (i) through (iv) above have been met, the Collateral Manager will sell and transfer, or will instruct the Trustee to sell and transfer, all of the Collateral Debt Securities (or the related subpool), without representation, warranty or recourse, to such highest bidder (or the highest bidder for each subpool, as the case may be) in accordance with and upon completion of the Auction Procedures. The Trustee will deposit the purchase price for the Collateral Debt Securities in the Collection Accounts. The Senior Notes and, to the extent funds are available therefor, the Subordinated Notes, shall be redeemed on the Distribution Date immediately following the relevant Auction Date (such redemption, the “Auction Call Redemption”) in accordance with the Priority of Payments.

If any of the foregoing conditions is not met with respect to any Auction or if the highest bidder (or the highest bidder for any subpool, as the case may be) fails to pay the purchase price before the sixth Business Day following the relevant Auction Date (and, in the case of any credit support provided in connection with a sale described in subclause (ii) above, the provider of such credit support shall default in its payment obligations thereunder), (a) no Auction Call Redemption shall occur on the Distribution Date following the relevant Auction Date, (b) the Collateral Manager shall give notice to the Trustee of the bidder’s withdrawal, (c) subject to clause (d) below, the Collateral Manager or the Trustee, as the case may be, shall decline to consummate such sale and shall not solicit any further bids or otherwise negotiate any further sale of Collateral Debt Securities in relation to such Auction, and (d) unless the Senior Notes are redeemed in full prior to the next succeeding Auction Date, or the market conditions are such that such Auction would not likely be successful, the Collateral Manager shall conduct another Auction on the next succeeding Auction Date; provided that in the event that the Collateral Manager decides not to hold an Auction pursuant to clause (d) above, if (i) any Insured Notes are Outstanding or any Accrued Insurance Liabilities or Premium are due and owing to the Insurer and (ii) no Insurer Default exists, the Collateral Manager shall consult with and receive the consent of the Insurer prior to foregoing such Auction.

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Optional Redemption and Tax Redemption

Optional Redemption

Subject to certain conditions set forth in the Indenture and described herein, the Holders of at least a Majority of the Subordinated Notes may cause the Issuer to effect an Optional Redemption of the Notes at the applicable Redemption Price therefor (exclusive of installments of principal and interest due on or prior to such date, provided payment of such installments of principal and interest shall have been made or duly provided for, to the Noteholders as provided in the Indenture) on any Distribution Date; provided that no such Optional Redemption may be effected prior to the Distribution Date occurring in April 2012.

Notwithstanding the above, but subject to the following paragraph, no Optional Redemption may be effected unless proceeds from the sale of Collateral, together with all cash and Eligible Investments maturing on or prior to the scheduled Redemption Date credited to the Interest Collection Account, the Principal Collection Account, the Expense Account and the Payment Account on the relevant Distribution Date, equal or exceed the aggregate amount necessary to pay all amounts (including fees and expenses incurred by the Trustee and the Collateral Manager in connection with such sale) due and payable by the Co-Issuers under the Priority of Payments prior to the payment of the Senior Notes (without giving effect to paragraph (2)(c) under “—Priority of Payments—Interest Proceeds”) to pay any accrued and unpaid amounts (including any termination payments), if any, payable by the Issuer pursuant to the Hedge Agreements, to pay all amounts payable to the Insurer under the Insurance Documents, to pay fees and expenses incurred or to be incurred by the Issuer the Trustee and the Collateral Manager in connection with any sale of the Collateral Debt Securities and to redeem the Senior Notes on the scheduled Redemption Date at the applicable Redemption Price therefor and to discharge the Indenture, together with all accrued interest to the date of redemption (such aggregate amount, the “Total Senior Redemption Amount”).

The Indenture provides that, notwithstanding anything contained therein to the contrary, the Holders of at least a Majority of the Subordinated Notes may cause an Optional Redemption if proceeds from the sale of the Collateral, together with all cash and Eligible Investments maturing on or prior to the scheduled Redemption Date credited to the Interest Collection Account, the Principal Collection Account, the Expense Account and the Payment Account on the relevant Distribution Date are insufficient to redeem the Senior Notes on the scheduled Redemption Date at the applicable Redemption Price therefor, if Holders of at least a Majority of any Class of Senior Notes that would not be entitled to receive 100% of the applicable Redemption Price as a result of such Optional Redemption (or, if the Class A-1 Notes would not be entitled to receive 100% of the applicable Redemption Price as a result of such Optional Redemption, Holders of 100% of the Aggregate Outstanding Principal Amount of such Class) consents to such Optional Redemption.

A Majority of the Subordinated Notes, by written notice to the Co-Issuers and the Trustee (which notice will be forwarded by the Trustee to each Hedge Counterparty) delivered at least four days prior to the scheduled Redemption Date, may rescind and annul a declaration of an Optional Redemption described above and its consequences.

Tax Redemption

In addition, upon the occurrence of any Tax Event with respect to which the Tax Materiality Condition is satisfied, the Issuer may cause a Tax Redemption on any Distribution Date at the applicable Redemption Price therefor at the written direction of the Holders of a Majority of the Affected Class; provided that in the event the aggregate amount of funds deducted or withheld as described in the definition of Tax Event at any time exceeds the sum of the Aggregate Outstanding Principal Amount of the Subordinated Notes then outstanding and the Aggregate Outstanding Principal Amount of the most subordinate Class of Senior Notes then outstanding, the “Affected Class” shall be deemed to be the next most subordinate Class of Senior Notes then outstanding. Any such redemption may only be effected from Sale Proceeds and cash and Eligible Investments credited to the Interest Collection Account, the Principal Collection Account, the Expense Account and the Payment Account on any Distribution Date, at the applicable Redemption Price (exclusive of installments of principal and interest due on or prior to such date, the payment of which has been made or duly provided for to the Noteholders as provided in the Indenture); provided that (a) except as otherwise set forth in the Indenture and described herein, the Sale Proceeds and all cash and

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Eligible Investments credited to the Interest Collection Account, Principal Collection Account, the Expense Account and the Payment Account on the relevant Distribution Date must be at least sufficient to redeem the Senior Notes simultaneously in accordance with the procedures described in the Indenture and (b) such Sale Proceeds are used to make such a redemption.

In connection with any potential Tax Redemption that would not satisfy the requirements set forth in subclause (a) of the proviso in the last sentence of the immediately preceding paragraph, Holders of at least a Majority of any Class of Senior Notes that, as a result of the occurrence of a Tax Event, would not be entitled to receive 100% of the aggregate amount of principal and interest payable to such Class (or, if the Class A-1 Notes would not receive 100% of the aggregate amount of principal and interest payable to such Class, Holders of 100% of the Aggregate Outstanding Principal Amount of such Class) may elect to receive less than 100% of the portion of the Total Senior Redemption Amount that would otherwise be payable to Holders of such Affected Class.

Redemption Procedures

Notice of any Auction Call Redemption, Optional Redemption or Tax Redemption will be given by first-class mail, postage prepaid, mailed not less than 10 Business Days prior to the date scheduled for redemption (with respect to such Auction Call Redemption, Optional Redemption or Tax Redemption, the “Redemption Date”), to each Noteholder to be redeemed at such Holder’s address in the Note Register, to the Hedge Counterparties, the Collateral Manager and each Rating Agency. In addition, the Trustee will, if and for so long as any Tranche of Notes to be redeemed is listed on the Irish Stock Exchange, (a) cause notice of such Auction Call Redemption, Optional Redemption or Tax Redemption to be delivered to the Company Announcements Office of the Irish Stock Exchange not less than 10 Business Days prior to the Redemption Date and (b) promptly notify the Irish Stock Exchange of any Auction Call Redemption, Optional Redemption or Tax Redemption. Notes must be surrendered at the offices of any Paying Agent under the Indenture in order to receive the applicable Redemption Price, unless the Holder provides (i) an undertaking to surrender such Notes thereafter and (ii) in the case of a Holder that is not a Qualified Institutional Buyer, such security or indemnity as may be required by the Issuer or the Trustee.

The Notes may not be redeemed pursuant to an Optional Redemption or Tax Redemption unless at least four (4) Business Days before the scheduled Redemption Date, the Collateral Manager shall have furnished to the Trustee and the Insurer 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 a financial institution or institutions 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 each Rating Agency at least equal to the then-highest rating of any Notes then Outstanding or whose short-term unsecured debt obligations have a credit rating of “P-1” by Moody’s, at least “A-1” by S&P and at least “F1” by Fitch (or any other entity that has the benefit of a credit facility, warehouse agreement, liquidity facility or similar arrangement with a financial or other institution or entity that satisfies such criteria and such financial or other institution or entity irrevocably agrees to fund the purchase of all or part of the Collateral Debt Securities as set forth herein), 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 sale price (including in such price the sale of accrued interest) which, when added to all cash and Eligible Investments maturing on or prior to the scheduled Redemption Date credited to the Interest Collection Account, the Principal Collection Account, the Expense Account and the Payment Account on the relevant Distribution Date, will equal or exceed the Total Senior Redemption Amount; provided that if in connection with a Tax Redemption the Holders of any Class of Senior Notes elect to receive less than 100% of the total portion of the Total Senior Redemption Amount that would otherwise be payable to them, such sale price shall be correspondingly reduced; and provided further that the Collateral Manager may, instead of entering into a binding agreement or agreements with one or more purchasers that meet the ratings requirements set forth above, enter into an agreement on behalf of the Issuer to sell all or part of the Collateral Debt Securities at the price described above to the Collateral Manager or any of its affiliates, so long as (a) the Rating Condition is satisfied with respect thereto and (b) such Person provides credit support in respect of its purchase obligation in the form and amount requested, if any, by the Issuer or any Rating Agency (including, without limitation, in the form of a letter of credit if so requested).

Any notice of Auction Call Redemption, Optional Redemption or Tax Redemption may be withdrawn by the Co-Issuers up to the fourth Business Day prior to the scheduled Redemption Date by written notice to the Trustee, the Hedge Counterparties and the Collateral Manager only if the Collateral Manager is unable to deliver the

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sale agreement or agreements referred to above in form satisfactory to the Trustee or to satisfy the conditions to the consummation of an Auction Call Redemption set forth in the Indenture. At the cost of the Co-Issuers, the Trustee shall give notice of any withdrawal by overnight courier guaranteeing next day delivery, sent not later than the third Business Day prior to the scheduled Redemption Date, to each Noteholder to be redeemed at such Holder’s address in the Note Register and to the Hedge Counterparties, with a copy to the Collateral Manager. In addition, the Trustee will, if any Class of Notes to have been redeemed was listed on the Irish Stock Exchange, (a) deliver a notice of such withdrawal to the Company Announcements Office of the Irish Stock Exchange not less than three Business Days prior to the scheduled Redemption Date and (b) promptly notify the Irish Stock Exchange of such withdrawal. In the event of any such withdrawal, the Hedge Agreements shall remain in effect or, if any Hedge Agreement shall have become subject to early termination after the notice of such redemption was delivered, the Issuer shall enter into one or more replacement Hedge Agreements for the terminated Hedge Agreement or Hedge Agreements in accordance with the Indenture.

Redemption Price

The amount payable in connection with any Auction Call Redemption, Optional Redemption or Tax Redemption of any Senior Note will be an amount (with respect to each Class of Senior Notes, the “Senior Notes Redemption Price”) equal to the sum of (a) the outstanding principal amount of such Senior Note being redeemed (including, in the case of any Class B Note, the Class B Deferred Interest with respect thereto, in the case of any Class C Note, the Class C Deferred Interest with respect thereto, in the case of any Class D Note, the Class D Deferred Interest with respect thereto, in the case of any Class E Note, the Class E Deferred Interest with respect thereto and in the case of any Class F Note, the Class F Deferred Interest with respect thereto), plus (b) accrued and unpaid interest thereon (including any Defaulted Interest, interest on Defaulted Interest, interest on any Class B Deferred Interest, interest on any Class C Deferred Interest, interest on any Class D Deferred Interest, interest on any Class E Deferred Interest and interest on any Class F Deferred Interest) through the date of redemption, plus (c) any accrued and unpaid amounts owing to the Insurer under the Insurance Documents. In the event of any redemption of the Senior Notes, the Subordinated Noteholders will receive, in redemption of the Subordinated Notes, the remaining balance, if any, of funds in the Payment Account after payment of all amounts payable pursuant to the terms of the Priority of Payments prior to the payment of such amounts to the Subordinated Noteholders (the “Subordinated Notes Redemption Price”). The Senior Notes Redemption Price and the Subordinated Notes Redemption Price, as to each applicable Tranche of Notes, is herein referred to as the “Redemption Price”.

Upon any Auction Call Redemption, Optional Redemption or Tax Redemption, all payments will be made in accordance with the Priority of Payments.

Cancellation

All Notes that are redeemed or paid and surrendered for cancellation as described herein will forthwith be canceled and may not be reissued or resold.

Payments

Payments in respect of principal of and interest on any Note will be made to the person in whose name such Note is registered on the Record Date. Payments on each Note will be payable by wire transfer in immediately available funds to a Dollar account maintained by the Holder thereof in accordance with wire transfer instructions received by any Paying Agent on or before the Record Date or, if no wire transfer instructions are received by a Paying Agent in respect of such Note, by a Dollar check drawn on a bank in the United States mailed to the address of the such Noteholder as it appears on the Note Register at the close of business on the Record Date for such payment. Final payments in respect of principal of the Notes will be made upon surrender of such Notes at the office of the Paying Agent.

If any payment on the Notes is due on a day that is not a Business Day, then payment will be made on the next succeeding Business Day with the same force and effect as if made on the date for payment. For this purpose, “Business Day” means a day on which commercial banks and foreign exchange markets settle payments in each of New York City, London and the city in which the principal corporate trust office of the Trustee is located and, in the

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case of the final payment of principal of a Note, the place of presentation of such Note. To the extent action is required of the Issuer that has not been delegated to the Trustee, the Collateral Manager or any agent of the Issuer located outside of the Cayman Islands, the Cayman Islands shall be considered in determining “Business Day” for purposes of determining when such Issuer action is required. To the extent action is required of the Irish Paying Agent, Dublin, Ireland shall be considered in determining “Business Day” for purposes of determining when such Irish Paying Agent action is required.

For so long as any Notes are listed on the Irish Stock Exchange and the rules of such exchange shall so require, the Co-Issuers will maintain a listing agent and a Paying Agent with respect to such Notes with an office located in Dublin, Ireland.

Except as otherwise required by applicable law, any money deposited with the Trustee or any Paying Agent in trust for the payment of principal of or interest on any Note and remaining unclaimed for two years after such principal or interest has become due and payable shall be paid to the Issuer upon request by the Issuer therefor, and the Holder of such Note shall thereafter, as an unsecured general creditor, look to the Issuer for payment of such amounts and all liability of the Trustee or such Paying Agent with respect to such trust money shall thereupon cease. The Trustee or the 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 Notes have been called but have not been surrendered for redemption or whose right to or interest in monies due and payable but not claimed is determinable from the records of any Paying Agent, at the last address of record of each such Holder.

Priority of Payments

With respect to any Distribution Date, collections received with respect to each Due Period in respect of the Collateral (except, during the Reinvestment Period, Permitted Sale Proceeds and Permitted Principal Proceeds to the extent reinvested during such Due Period or subject to the Reinvestment Designation) will be divided into Interest Proceeds and Principal Proceeds and applied in the order of priority set forth below under “—Interest Proceeds” and “—Principal Proceeds,” respectively (collectively, the “Priority of Payments”).

Interest Proceeds. On each Distribution Date, Interest Proceeds with respect to the related Due Period will be applied in the order of priority set forth below:

(1) to the payment of taxes and filing and registration fees owed by the Issuer, if any;

(2) (a) first, to the payment, pro rata, to the Trustee, the Underlying Trustee, the Note Registrar and the Collateral Administrator of accrued and unpaid fees and expenses owing to them under the Indenture, the Master Trust Agreement and the Collateral Administration Agreement, as applicable; provided that all payments made pursuant to this clause (a) do not exceed an amount equal to 0.025% of the aggregate Principal Balance of Pledged Securities on such Distribution Date; (b) second, to the payment, pro rata, of other accrued and unpaid Administrative Expenses of the Co-Issuers (excluding fees and expenses described in clause (a) above, the Collateral Management Fee and principal of and interest on the Notes but including other amounts for which the Collateral Manager may claim reimbursement pursuant to the Collateral Management Agreement); provided that the aggregate amount of payments made pursuant to this clause (b) on any four consecutive Distribution Dates does not exceed $300,000; and (c) third, if such date is not the Stated Maturity or a Redemption Date, if the balance of all Eligible Investments and cash in the Expense Account on the related Determination Date is less than $100,000, for deposit to the Expense Account an amount equal to such amount as will cause the balance of all Eligible Investments and cash in the Expense Account immediately after such deposit to equal $100,000;

(3) to the payment to the Collateral Manager of accrued and unpaid Base Collateral Management Fee;

(4) to the payment of any amount scheduled to be paid to the Hedge Counterparties pursuant to the Hedge Agreements, together with any termination payments (and any accrued interest thereon) payable by the Issuer pursuant to the Hedge Agreements other than by reason of an “Event of Default” or “Termination Event” as to which the applicable Hedge Counterparty is the “Defaulting Party” or the sole “Affected Party”;

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(5) first, to the payment of any accrued and unpaid Premium in respect of the Policy, and any Defaulted Premium in respect of the Insured Notes, on a pro rata basis, second, to the payment of accrued and unpaid interest on the Class A-1A Notes (including Defaulted Interest and any interest thereon) and any accrued and unpaid Class A-1A Commitment Fee Amount, third, to the payment of accrued and unpaid interest on the Class A-1B Notes (including Defaulted Interest and any interest thereon) and, fourth, to the payment of Accrued Insurance Liabilities constituting amounts paid by the Insurer under the Policy as set forth in clause (i) in the definition of the term Accrued Insurance Liabilities;

(6) to the payment of accrued and unpaid interest on the Class A-2 Notes (including Defaulted Interest and any interest thereon, if any);

(7) (a) if either of the Class A Coverage Tests is not satisfied on the related Determination Date and if any Class A-1A Notes, Class A-1B Notes or Class A-2 Notes remains outstanding, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, and, third, the Class A-2 Notes, to the extent necessary to cause each of the Class A Coverage Tests to be satisfied on the related Determination Date, and (b) on the first Distribution Date on or after the Ramp-Up Completion Date, if a Ramp-Up Ratings Confirmation Failure has occurred, in the event that the Issuer is unable to obtain a Ratings Confirmation after the application of Uninvested Proceeds to pay principal of the Notes, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, and, third, the Class A-2 Notes, to the extent specified by the Collateral Manager based on the specification of each Rating Agency in order to obtain a Ratings Confirmation;

(8) to the payment of accrued and unpaid interest on the Class B Notes (including Defaulted Interest and any interest thereon, if any, but excluding Class B Deferred Interest);

(9) (a) if either of the Class B Coverage Tests is not satisfied on the related Determination Date and if any Class A-1A Notes, Class A-1B Notes, Class A-2 Notes or Class B Notes remain outstanding, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, and, fourth, the Class B Notes, to the extent necessary to cause each of the Class B Coverage Tests to be satisfied on the related Determination Date, and (b) on the first Distribution Date on or after the Ramp-Up Completion Date, if a Ramp-Up Ratings Confirmation Failure has occurred, in the event that the Issuer is unable to obtain a Ratings Confirmation after the application of Uninvested Proceeds and Interest Proceeds (in accordance with Paragraph (7) above) to pay principal of the Notes, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, and, fourth, the Class B Notes, to the extent specified by the Collateral Manager based on the specifications of each Rating Agency in order to obtain a Ratings Confirmation;

(10) to the payment of Class B Deferred Interest in respect of the Class B Notes (in reduction of the principal amount of the Class B Notes);

(11) to the payment of (i) accrued and unpaid interest on the Class C-1 Notes (including Defaulted Interest and interest thereon, if any, but excluding any Class C-1 Deferred Interest) and (ii) accrued and unpaid interest on the Class C-2 Notes (including Defaulted Interest and interest thereon, if any, but excluding any Class C-2 Deferred Interest), allocated between items (i) and (ii) pari passu based on amounts due;

(12) (a) if either of the Class C Coverage Tests is not satisfied on the related Determination Date and if any Class A-1A Notes, Class A-1B Notes, Class A-2 Notes, Class B Notes or Class C Notes remain outstanding, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, and, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes, to the extent necessary to cause each of the Class C Coverage Tests to be satisfied on the related Determination Date, and (b) on the first Distribution Date on or after the Ramp-Up Completion Date, if a Ramp-Up Ratings Confirmation Failure has occurred, in the event that the Issuer is unable to obtain a Ratings Confirmation after the application of Uninvested Proceeds and Interest Proceeds (in accordance with Paragraphs (7) and (9) above) to pay principal of the Notes, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, and, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes, to the extent specified by the Collateral Manager based on the specifications of each Rating Agency in order to obtain a Ratings Confirmation;

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(13) to the payment of (i) Class C-1 Deferred Interest in respect of the Class C-1 Notes (in reduction of the principal amount of the Class C-1 Notes) and (ii) Class C-2 Deferred Interest in respect of the Class C-2 Notes (in reduction of the principal amount of the Class C-2 Notes), allocated between items (i) and (ii) pari passu based on amounts due;

(14) to the payment of accrued and unpaid interest on the Class D Notes (including Defaulted Interest and interest thereon, if any, but excluding any Class D Deferred Interest);

(15) (a) if either of the Class D Coverage Tests is not satisfied on the related Determination Date and if any Class A-1A Notes, Class A-1B Notes, Class A-2 Notes, Class B Notes, Class C Notes or Class D Notes remain outstanding, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes and, sixth, the Class D Notes, to the extent necessary to cause each of the Class D Coverage Tests to be satisfied on the related Determination Date, and (b) on the first Distribution Date on or after the Ramp-Up Completion Date, if a Ramp-Up Ratings Confirmation Failure has occurred, in the event that the Issuer is unable to obtain a Ratings Confirmation after the application of Uninvested Proceeds and Interest Proceeds (in accordance with Paragraphs (7), (9) and (12) above) to pay principal of the Notes, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes, and sixth, the Class D Notes, to the extent specified by the Collateral Manager based on the specifications of each Rating Agency in order to obtain a Ratings Confirmation;

(16) to the payment of Class D Deferred Interest in respect of the Class D Notes (in reduction of the principal amount of the Class D Notes);

(17) to the payment of (i) accrued and unpaid interest on the Class E-1 Notes (including Defaulted Interest and interest thereon, if any, but excluding any Class E-1 Deferred Interest) and (ii) accrued and unpaid interest on the Class E-2 Notes (including Defaulted Interest and interest thereon, if any, but excluding any Class E-2 Deferred Interest), allocated between items (i) and (ii) pari passu based on amounts due;

(18) (a) if either of the Class E Coverage Tests is not satisfied on the related Determination Date and if any Class A-1A Notes, Class A-1B Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes remain outstanding, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes, sixth, the Class D Notes, and seventh, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class E-1 Notes and the Class E-2 Notes, to the extent necessary to cause each of the Class E Coverage Tests to be satisfied on the related Determination Date, and (b) on the first Distribution Date on or after the Ramp-Up Completion Date, if a Ramp-Up Ratings Confirmation Failure has occurred, in the event that the Issuer is unable to obtain a Ratings Confirmation after the application of Uninvested Proceeds and Interest Proceeds (in accordance with Paragraphs (7), (9), (12) and (15) above) to pay principal of the Notes, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes, sixth, the Class D Notes, and seventh, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class E-1 Notes and the Class E-2 Notes, to the extent specified by the Collateral Manager based on the specifications of each Rating Agency in order to obtain a Ratings Confirmation;

(19) to the payment of (i) Class E-1 Deferred Interest (in reduction of the principal amount of the Class E-1 Notes) and (ii) Class E-2 Deferred Interest in respect of the Class E-2 Notes (in reduction of the principal amount of the Class E-2 Notes), allocated between items (i) and (ii) pari passu based on amounts due;

(20) to the payment of accrued and unpaid interest on the Class F Notes (including Defaulted Interest and interest thereon, if any, but excluding any Class F Deferred Interest);

(21) (a) if either of the Class F Coverage Tests is not satisfied on the related Determination Date and if any Class A-1A Notes, Class A-1B Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes, Class E

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Notes or Class F Notes remain outstanding, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes, sixth, the Class D Notes, seventh, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class E-1 Notes and the Class E-2 Notes and, eighth, the Class F Notes, to the extent necessary to cause each of the Class F Coverage Tests to be satisfied on the related Determination Date, and (b) on the first Distribution Date on or after the Ramp-Up Completion Date, if a Ramp-Up Ratings Confirmation Failure has occurred, in the event that the Issuer is unable to obtain a Ratings Confirmation after the application of Uninvested Proceeds and Interest Proceeds (in accordance with Paragraphs (7), (9), (12), (15) and (18) above) to pay principal of the Notes, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes, sixth, the Class D Notes, seventh, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class E-1 Notes and the Class E-2 Notes and, eighth, the Class F Notes, to the extent specified by the Collateral Manager based on the specifications of each Rating Agency in order to obtain a Ratings Confirmation;

(22) to the payment of Class F Deferred Interest (in reduction of the principal amount of the Class F Notes);

(23) (a) on the Distribution Date occurring in January 2008, and on each Distribution Date thereafter to and including the Distribution Date in January 2012, to the payment, pro rata, of principal of the Class E Notes and the Class F Notes until each such Class of Notes has been paid in full; provided that all payments made pursuant to this Paragraph (23)(a) shall not exceed on any Distribution Date an amount equal to 8% of the Interest Proceeds available after application of such Interest Proceeds pursuant to Paragraph (22) above; and (b) on the Distribution Date occurring after January 2012, and on each Distribution Date thereafter to and including the Distribution Date in January 2017 to the payment, pro rata, of principal of the Class E Notes and the Class F Notes until each such Class of Notes has been paid in full; provided that all payments made pursuant to this Paragraph (23)(b) shall not exceed on any Distribution Date an amount equal to 25% of the Interest Proceeds available after application of such Interest Proceeds pursuant to Paragraph (22) above;

(24) on any Distribution Date occurring after the Distribution Date in January 2017, if such Distribution Date is not a Redemption Date, to the payment, pro rata, of principal of the Class A-1A Notes, the Class A-1B Notes, 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, until each such Class of Senior Notes has been paid in full; provided that all payments made pursuant to this Paragraph (24) shall not exceed on any Distribution Date an amount equal to 60% of the Interest Proceeds available after application of such Interest Proceeds pursuant to Paragraph (22) above;

(25) to the payment of all other accrued and unpaid Administrative Expenses of the Co-Issuers (excluding any Collateral Management Fee) not paid pursuant to Paragraph (2) above (whether as a result of limitations on amounts set forth therein or otherwise), in the order of priority specified therein; provided that Administrative Expenses payable to the Insurer shall be paid under this Paragraph (25) prior to the payment of any other administrative expenses under this Paragraph (25);

(26) to the payment to the Collateral Manager of accrued and unpaid Subordinate Collateral Management Fee;

(27) to the payment of any termination payments (and any accrued interest thereon payable by the Issuer to the Hedge Counterparties pursuant to the Hedge Agreements by reason of an “Event of Default” or “Termination Event” as to which such Hedge Counterparty is the “Defaulting Party” or sole “Affected Party”); and

(28) the remainder to be paid to the Subordinated Noteholders (which amounts shall, on the final Distribution Date, be paid in redemption thereof) in accordance with the terms of the Indenture.

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Principal Proceeds. On each Distribution Date, available Principal Proceeds will be distributed in the order of priority set forth below:

(1) to the payment of the amounts referred to in Paragraphs (1) through (6) under “—Interest Proceeds” above in the order of priority specified therein, but only to the extent not paid in full in accordance with the provisions set forth in “—Interest Proceeds”;

(2) (a) after giving effect to any application of Interest Proceeds pursuant to Paragraph (7) under “—Interest Proceeds” above, if either of the Class A Coverage Tests is not satisfied on the related Determination Date and if any Class A-1 Notes or Class A-2 Notes remain outstanding, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, and third, the Class A-2 Notes, but only to the extent necessary to cause each of the Class A Coverage Tests to be satisfied, and (b) on the first Distribution Date on or after the Ramp-Up Completion Date, if a Ramp-Up Ratings Confirmation Failure has occurred, in the event that the Issuer is unable to obtain a Ratings Confirmation after the application of Uninvested Proceeds and Interest Proceeds as provided above under “—Interest Proceeds,” to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, and third, the Class A-2 Notes, to the extent specified by the Collateral Manager based on the specifications of each Rating Agency in order to obtain a Ratings Confirmation;

(3) (a) after giving effect to any application of Interest Proceeds pursuant to Paragraph (9) under “—Interest Proceeds” above, if either of the Class B Coverage Tests is not satisfied on the related Determination Date and if any Class A-1 Notes, Class A-2 Notes or Class B Notes remain outstanding, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, and fourth, the Class B Notes, but only to the extent necessary to cause each of the Class B Coverage Tests to be satisfied, and (b) on the first Distribution Date on or after the Ramp-Up Completion Date, if a Ramp-Up Ratings Confirmation Failure has occurred, in the event that the Issuer is unable to obtain a Ratings Confirmation after the application of Uninvested Proceeds and Interest Proceeds as provided above under “—Interest Proceeds,” and the application of Principal Proceeds in accordance with Paragraph (2) above, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, and fourth, the Class B Notes, to the extent specified by the Collateral Manager based on the specifications of each Rating Agency in order to obtain a Ratings Confirmation;

(4) (a) after giving effect to any application of Interest Proceeds pursuant to Paragraph (12) under “—Interest Proceeds” above, if either of the Class C Coverage Tests is not satisfied on the related Determination Date and if any Class A-1 Notes, Class A-2 Notes, Class B Notes or Class C Notes remain outstanding, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes and, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes, but only to the extent necessary to cause each of the Class C Coverage Tests to be satisfied, and (b) on the first Distribution Date on or after the Ramp-Up Completion Date, if a Ramp-Up Ratings Confirmation Failure has occurred, in the event that the Issuer is unable to obtain a Ratings Confirmation after the application of Uninvested Proceeds and Interest Proceeds as provided above under “—Interest Proceeds” and the application of Principal Proceeds in accordance with Paragraphs (2) and (3) above, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes and, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes, to the extent specified by the Collateral Manager based on the specifications of each Rating Agency in order to obtain a Ratings Confirmation;

(5) (a) after giving effect to any application of Interest Proceeds pursuant to Paragraph (15) under “—Interest Proceeds” above, if either of the Class D Coverage Tests is not satisfied on the related Determination Date and if any Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes or Class D Notes remain outstanding, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes and, sixth, the Class D Notes, but only to the extent necessary to cause each of the Class D Coverage Tests to be satisfied, and (b) on the first Distribution Date on or after the Ramp-Up Completion Date, if a Ramp-Up Ratings Confirmation Failure has occurred, in the event that the Issuer is unable to obtain a Ratings Confirmation after the application of Uninvested Proceeds and Interest Proceeds as provided above under “—Interest Proceeds” and the application of Principal Proceeds in accordance with Paragraphs (2), (3) and (4) above, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-

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2 Notes, fourth, the Class B Notes, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes and, sixth, the Class D Notes, to the extent specified by the Collateral Manager based on the specifications of each Rating Agency in order to obtain a Ratings Confirmation;

(6) (a) after giving effect to any application of Interest Proceeds pursuant to Paragraph (18) under “—Interest Proceeds” above, if either of the Class E Coverage Tests is not satisfied on the related Determination Date and if any Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes remain outstanding, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes, sixth, the Class D Notes and, seventh, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class E-1 Notes and the Class E-2 Notes, but only to the extent necessary to cause each of the Class E Coverage Tests to be satisfied, and (b) on the first Distribution Date on or after the Ramp-Up Completion Date, if a Ramp-Up Ratings Confirmation Failure has occurred, in the event that the Issuer is unable to obtain a Ratings Confirmation after the application of Uninvested Proceeds and Interest Proceeds as provided above under “—Interest Proceeds” and the application of Principal Proceeds in accordance with Paragraphs (2), (3), (4) and (5) above, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes, sixth, the Class D Notes and, seventh, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class E-1 Notes and the Class E-2 Notes, to the extent specified by the Collateral Manager based on the specifications of each Rating Agency in order to obtain a Ratings Confirmation;

(7) (a) after giving effect to any application of Interest Proceeds pursuant to Paragraph (21) under “—Interest Proceeds” above, if either of the Class F Coverage Tests is not satisfied on the related Determination Date and if any Senior Notes remain outstanding, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes, sixth, the Class D Notes, seventh, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class E-1 Notes and the Class E-2 Notes and, eighth, the Class F Notes, but only to the extent necessary to cause each of the Class F Coverage Tests to be satisfied, and (b) on the first Distribution Date on or after the Ramp-Up Completion Date, if a Ramp-Up Ratings Confirmation Failure has occurred, in the event that the Issuer is unable to obtain a Ratings Confirmation after the application of Uninvested Proceeds and Interest Proceeds as provided above under “—Interest Proceeds” and the application of Principal Proceeds in accordance with Paragraphs (2), (3), (4), (5) and (6) above, to the payment of principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes, sixth, the Class D Notes, seventh, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class E-1 Notes and the Class E-2 Notes and, eighth, the Class F Notes, to the extent specified by the Collateral Manager based on the specifications of each Rating Agency in order to obtain a Ratings Confirmation;

(8) to the payment of the amounts referred to in Paragraphs (8) and (10) under “—Interest Proceeds” above in the same order of priority specified therein, but only to the extent not paid in full in accordance with the provisions set forth in “—Interest Proceeds”; provided that if after giving effect to any such payment or portion of such payment the Class A Overcollateralization Test or the Class B Overcollateralization Test would not be satisfied as of the related Determination Date, no such payment or payments shall be payable under this Paragraph (8);

(9) to the payment of the amounts referred to in Paragraphs (11) and (13) under “—Interest Proceeds” above in the same order of priority therein, but only to the extent not paid in full in accordance with the provisions set forth in “—Interest Proceeds”; provided that if after giving effect to any such payment or portion of such payment the Class A Overcollateralization Test, the Class B Overcollateralization Test or the Class C Overcollateralization Test would not be satisfied as of the related Determination Date, no such payment or payments shall be payable under this Paragraph (9);

(10) to the payment of the amounts referred to in Paragraphs (14) and (16) under “—Interest Proceeds” above in the same order of priority therein, but only to the extent not paid in full in accordance with the provisions set forth in “—Interest Proceeds”; provided that if after giving effect to any such payment or portion of such

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payment the Class A Overcollateralization Test, the Class B Overcollateralization Test, the Class C Overcollateralization Test or the Class D Overcollateralization Test would not be satisfied as of the related Determination Date, no such payment or payments shall be payable under this Paragraph (10);

(11) to the payment of the amounts referred to in Paragraphs (17) and (19) under “—Interest Proceeds” above in the same order of priority therein, but only to the extent not paid in full in accordance with the provisions set forth in “—Interest Proceeds”; provided that if after giving effect to any such payment or portion of such payment the Class A Overcollateralization Test, the Class B Overcollateralization Test, the Class C Overcollateralization Test, the Class D Overcollateralization Test or the Class E Overcollateralization Test would not be satisfied as of the related Determination Date, no such payment or payments shall be payable under this Paragraph (11);

(12) to the payment of the amounts referred to in Paragraphs (20) and (22) under “—Interest Proceeds” above in the same order of priority therein, but only to the extent not paid in full in accordance with the provisions set forth in “—Interest Proceeds”; provided that if after giving effect to any such payment or portion of such payment the Class A Overcollateralization Test, the Class B Overcollateralization Test, the Class C Overcollateralization Test, the Class D Overcollateralization Test, the Class E Overcollateralization Test or the Class F Overcollateralization Test would not be satisfied as of the related Determination Date, no such payment or payments shall be payable under this Paragraph (12);

(13) to the payment of principal of the Class A-1A Notes until the Class A-1A Notes have been paid in full;

(14) to the payment of principal of the Class A-1B Notes until the Class A-1B Notes have been paid in full;

(15) to the payment of principal of the Class A-2 Notes until the Class A-2 Notes have been paid in full;

(16) to the payment of principal of the Class B Notes until the Class B Notes have been paid in full;

(17) to the payment of principal of the Class C-1 Notes and the Class C-2 Notes, pro rata based on Aggregate Outstanding Principal Amount until the Class C-1 Notes and the Class C-2 Notes have been paid in full;

(18) to the payment of principal of the Class D Notes until the Class D Notes have been paid in full;

(19) to the payment of principal of the Class E-1 Notes and the Class E-2 Notes, pro rata based on Aggregate Outstanding Principal Amount until the Class E-1 Notes and the Class E-2 Notes have been paid in full;

(20) to the payment of principal of the Class F Notes until the Class F Notes have been paid in full;

(21) to the payment of amounts referred to in Paragraphs (25), (26) and (27) under “—Interest Proceeds” above, in the same order of priority therein, but in each case only to the extent not paid thereunder; and

(22) the remainder to be paid to the Subordinated Noteholders (which amounts shall, on the final Distribution Date, be paid in redemption thereof) in accordance with the terms of the Indenture.

Except as otherwise expressly provided in the Priority of Payments, if on any Distribution 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 any paragraph of the Priority of Payments to different Persons, the Trustee will make the disbursements called for by each such paragraph ratably in accordance with the respective amounts of such disbursements then due and payable to the extent funds are available therefor.

If, on the first and second Distribution Date, after giving effect to all disbursements required to be made by the Trustee pursuant to the “Priority of Payments—Interest Proceeds” and “—Principal Proceeds”, any amount

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required to be paid pursuant to paragraph (5) and paragraph (6) of “Priority of Payments—Interest Proceeds” (as specified in the statements furnished by the Co-Issuers pursuant to the Indenture), remains unpaid, the Trustee shall withdraw from the Discretionary Interest Shortfall Reserve Account an amount of funds equal to such unpaid amounts (or such lesser amount as shall then be on deposit in the Discretionary Interest Shortfall Reserve Account) and shall disburse such funds in accordance with, and in the priority specified in, paragraph (5) and paragraph (6) of “Priority of Payments—Interest Proceeds”. On the second Distribution Date, after giving effect to any withdrawal, if any, made by the Trustee in accordance with the preceding sentence, the Trustee shall withdraw from the Discretionary Interest Shortfall Reserve Account an amount equal to the amount, if any, of funds remaining on deposit therein (together with any investment income earned with respect thereto while such funds were on deposit in such account, but less any investment losses earned with respect thereto while such funds were on deposit in such account) and disburse such funds as directed by the Collateral Manager either (i) as Interest Proceeds in accordance with “Priority of Payments—Interest Proceeds” or (ii) to acquire Additional Collateral Debt Securities.

If the Notes have not been redeemed prior to the Distribution Date in October 2042, it is expected that the Issuer (or the Collateral Manager acting pursuant to the Collateral Management Agreement on behalf of the Issuer) will sell all of the Collateral Debt Securities and all Eligible Investments and sell or liquidate all other Collateral, and all net proceeds from such sales and liquidations and all available cash after the payment (in the order of priorities set forth in the Priority of Payments) of all (a) fees, (b) expenses, and (c) interest (including any Defaulted Interest and interest on Defaulted Interest, any Class B Deferred Interest and interest on any Class B Deferred Interest, any Class C Deferred Interest and interest on any Class C Deferred Interest, any Class D Deferred Interest and interest on any Class D Deferred Interest, any Class E Deferred Interest and interest on any Class E Deferred Interest and any Class F Deferred Interest and interest on any Class F Deferred Interest) on and principal of the Senior Notes, will be distributed to the Subordinated Noteholders in accordance with the terms of the Indenture.

The Coverage Tests

The Coverage Tests applicable to a Class of Notes will be used primarily to determine whether and to what extent Interest Proceeds may be used to pay interest on Classes of Notes subordinate to such Class and to pay certain other expenses. In the event that either one of the Class A Coverage Tests is not satisfied on any Distribution Date, funds that would otherwise be used to make distributions to the Subordinated Noteholders and to pay interest on the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes and certain other expenses must instead be used to pay principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, and, third, the Class A-2 Notes, to the extent necessary to cause each one of the Class A Coverage Tests to be satisfied. In the event that either one of the Class B Coverage Tests is not satisfied on any Distribution Date, funds that would otherwise be used to make distributions to the Subordinated Noteholders and to pay interest on the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes and certain other expenses must instead be used to pay principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, and fourth, the Class B Notes, to the extent necessary to cause each one of the Class B Coverage Tests to be satisfied. In the event that either one of the Class C Coverage Tests is not satisfied on any Distribution Date, funds that would otherwise be used to make distributions to the Subordinated Noteholders and to pay interest on the Class D Notes, the Class E Notes and the Class F Notes and certain other expenses must instead be used to pay principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes and, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes, to the extent necessary to cause each one of the Class C Coverage Tests to be satisfied. In the event that either one of the Class D Coverage Tests is not satisfied on any Distribution Date, funds that would otherwise be used to make distributions to the Subordinated Noteholders and to pay interest on the Class E Notes and the Class F Notes and to pay certain other expenses must instead be used to pay principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes and, sixth, the Class D Notes, to the extent necessary to cause each one of the Class D Coverage Tests to be satisfied. In the event that either one of the Class E Coverage Tests is not satisfied on any Distribution Date, funds that would otherwise be used to make distributions to the Subordinated Noteholders and to pay interest on the Class F Notes and to pay certain other expenses must instead be used to pay principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes, sixth, the Class D Notes, and seventh, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class E-1 Notes and the Class E-2 Notes, to the extent

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necessary to cause each one of the Class E Coverage Tests to be satisfied. In the event that either one of the Class F Coverage Tests is not satisfied on any Distribution Date, funds that would otherwise be used to make distributions to the Subordinated Noteholders and to pay certain other expenses must instead be used to pay principal of, first, the Class A-1A Notes, second, the Class A-1B Notes, third, the Class A-2 Notes, fourth, the Class B Notes, fifth, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class C-1 Notes and the Class C-2 Notes, sixth, the Class D Notes, seventh, on a pro rata basis based on Aggregate Outstanding Principal Amount, the Class E-1 Notes and the Class E-2 Notes, and eighth, the Class F Notes, to the extent necessary to cause each one of the Class F Coverage Tests to be satisfied. See “—Priority of Payments.”

None of the Coverage Tests will apply prior to the Ramp-Up Completion Date.

Interest Coverage Tests

The Interest Coverage Ratio with respect to the Class A-1 Notes and the Class A-2 Notes (the “Class A Interest Coverage Ratio”), the Class B Notes (the “Class B Interest Coverage Ratio”), the Class C Notes (the “Class C Interest Coverage Ratio”), the Class D Notes (the “Class D Interest Coverage Ratio”), the Class E Notes (the “Class E Interest Coverage Ratio”) or the Class F Notes (the “Class F Interest Coverage Ratio”) as of any Measurement Date will be calculated by dividing:

(a) the sum (without duplication) of (i) the scheduled interest payments due (in each case regardless of whether the due date for any such interest payment has yet occurred, unless the Collateral Manager exercising reasonable business judgment expects that such interest payments will not be made) in the Due Period in which such Measurement Date occurs on (A) the Collateral Debt Securities (other than any Defaulted Security, unless such Defaulted Security is a Current Pay Obligation, and other than any Deferred Interest PIK Security) and (B) any Eligible Investments held in the Collection Accounts, Uninvested Proceeds Account, Synthetic Security Collateral Account, the Semi-Annual Interest Reserve Account or Hedge Counterparty Collateral Account (whether such Eligible Investments were purchased with Interest Proceeds or Principal Proceeds), plus (ii) any fees actually received by the Issuer during such Due Period that constitute Interest Proceeds, plus (iii) the amount, if any, scheduled to be paid to the Issuer by the Hedge Counterparties on the Distribution Date relating to such Due Period under any Hedge Agreement; provided that the amount included in this clause (iii) with respect to each such Hedge Agreement shall reflect the amount scheduled to be paid to the Issuer by the Hedge Counterparties thereunder after giving effect to any netting provisions contained in such Hedge Agreement, plus (iv) the balance, if any, of all cash and Eligible Investments on deposit in the Discretionary Interest Shortfall Reserve Account on such Measurement Date, plus (v) the amount, if any, that will be transferred from the Semi-Annual Interest Reserve Account to the Collection Account on the Business Day prior to the Distribution Date relating to such Due Date, minus (vi) the amount, if any, scheduled to be paid during such Due Period or on the Distribution Date relating to such Due Period for taxes and filing and registration fees owed by the Issuer, minus (vii) the portion, if any, of the Scheduled Interest Payments in clause (i) that is required to be deposited into the Semi-Annual Interest Reserve Account, minus (viii) the amount, if any, scheduled to be paid during such Due Period or on the Distribution Date relating to such Due Period (A) to the Trustee, the Collateral Administrator and the Note Registrar of accrued and unpaid fees and expenses owing to them under the Indenture and the Collateral Administration Agreement, to the extent all such payments pursuant to this clause (A) do not exceed for any three-month calendar period an amount equal to 0.025% of the aggregate Principal Balance of Pledged Securities on such Measurement Date and (B) for other accrued and unpaid Administrative Expenses of the Co-Issuers (or the Issuer in the case of the Class F Interest Coverage Ratio) (excluding the Collateral Management Fee and principal of and interest on the Notes, but including other amounts for which the Collateral Manager may claim reimbursement pursuant to the Collateral Management Agreement), to the extent all such payments pursuant to this clause (B) do not exceed on any four consecutive Distribution Dates an amount equal to $300,000, minus (vi) the amount, if any, scheduled to be paid on the Distribution Date relating to such Due Period to the Collateral Manager in respect of accrued and unpaid Base Collateral Management Fee; by

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(b) an amount equal to (i) the amount, if any, scheduled to be paid to the Hedge Counterparties by the Issuer on the Distribution Date relating to such Due Period under any Hedge Agreement hereunder; provided that the amount included in this clause (i) with respect to each such Hedge Agreement shall reflect the amount scheduled to be paid to the Hedge Counterparties by the Issuer thereunder after giving effect to any netting provisions contained in such Hedge Agreement, plus (ii) any accrued and unpaid Premiums on such Distribution Date (including any Defaulted Premium) plus (iii) (A) in the case of the Class A Interest Coverage Ratio, the scheduled interest on the Class A-1 Notes and the Class A-2 Notes (including any Defaulted Interest thereon and any accrued interest on such Defaulted Interest) payable on the Distribution Date relating to such Due Period, (B) in the case of the Class B Interest Coverage Ratio, the scheduled interest on the Class A-1 Notes, Class A-2 Notes and Class B Notes (including any Defaulted Interest thereon, any accrued interest on such Defaulted Interest and any accrued interest on Class B Deferred Interest, but excluding any Class B Deferred Interest) payable on the Distribution Date relating to such Due Period, (C) in the case of the Class C Interest Coverage Ratio, the scheduled interest on the Class A-1 Notes, Class A-2 Notes, Class B Notes and Class C Notes (including any Defaulted Interest thereon, any accrued interest on such Defaulted Interest and any accrued interest on Class B Deferred Interest and Class C Deferred Interest, but excluding any Class B Deferred Interest and Class C Deferred Interest) payable on the Distribution Date relating to such Due Period, (D) in the case of the Class D Interest Coverage Ratio, the scheduled interest on the Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes and Class D Notes (including any Defaulted Interest thereon, any accrued interest on such Defaulted Interest and any accrued interest on Class B Deferred Interest, Class C Deferred Interest and Class D Deferred Interest, but excluding any Class B Deferred Interest, Class C Deferred Interest and Class D Deferred Interest) payable on the Distribution Date relating to such Due Period, (E) in the case of the Class E Interest Coverage Ratio, the scheduled interest on the Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes (including any Defaulted Interest thereon, any accrued interest on such Defaulted Interest and any accrued interest on Class B Deferred Interest, Class C Deferred Interest, Class D Deferred Interest and Class E Deferred Interest, but excluding any Class B Deferred Interest, Class C Deferred Interest, Class D Deferred Interest and Class E Deferred Interest) payable on the Distribution Date relating to such Due Period, and (F) in the case of the Class F Interest Coverage Ratio, the scheduled interest on the Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes (including any Defaulted Interest thereon, any accrued interest on such Defaulted Interest and any accrued interest on Class B Deferred Interest, Class C Deferred Interest, Class D Deferred Interest, Class E Deferred Interest and Class F Deferred Interest, but excluding any Class B Deferred Interest, Class C Deferred Interest, Class D Deferred Interest, Class E Deferred Interest and Class F Deferred Interest) payable on the Distribution Date relating to such Due Period.

For the purpose of determining compliance with any Interest Coverage Test, there will be excluded all scheduled payments of interest or principal on Defaulted Securities and Deferred Interest PIK Securities and any payment, including any amount payable to the Issuer by the Hedge Counterparties, that will not be made in cash or received when due, as determined by the Collateral Manager in its reasonable judgment. For purposes of calculating any Interest Coverage Ratio, (a) the expected interest income on floating rate Collateral Debt Securities and Eligible Investments and under the Hedge Agreements and the expected interest payable on the Notes will be calculated using the interest rates applicable thereto on the applicable Measurement Date, (c) accrued OID 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 (c) it will be assumed that no principal payments are made on the Notes during the applicable periods.

Form, Denomination, Registration and Transfer

General

The Senior Notes offered in reliance upon Regulation S, which will be sold to non-U.S. Persons in offshore transactions, will be represented by one or more permanent Regulation S Global Senior Notes in definitive, fully registered form, without interest coupons, and deposited with the Trustee as custodian for, and registered in the

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name of, DTC or its nominee, initially for the accounts of Euroclear and Clearstream. By acquisition of a beneficial interest in a Regulation S Global Senior Note, any purchaser thereof will be deemed to represent that it is not a U.S. Person and that, if in the future it decides to transfer such beneficial interest, it will transfer such interest only in an offshore transaction in accordance with Regulation S or to a person who takes delivery in the form of a Restricted Definitive Senior Note or an interest in a Restricted Global Co-Issued Note in accordance with the terms of the Indenture. Beneficial interests in each Regulation S Global Senior Note will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its Participants and Indirect Participants, including, without limitation, Euroclear and Clearstream.

Co-Issued Notes sold to Qualified Purchasers that are Qualified Institutional Buyers (or in connection with the initial offering, Institutional Accredited Investors) in reliance on the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof and/or Rule 144A will be represented by one or more Restricted Global Co-Issued Notes deposited with the Trustee as custodian for, and registered in the name of, DTC or its nominee. Interests in Restricted Global Co-Issued Notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its Participants and Indirect Participants.

The Class F Notes will be subject to certain restrictions on transfer and may bear a legend regarding such restrictions. The Restricted Class F Notes sold to Qualified Purchasers that are Qualified Institutional Buyers or Accredited Investors in reliance on the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof and/or Rule 144A will be represented by Restricted Definitive Class F Notes; provided that U.S.$3,000,000 aggregate principal amount of Class F Notes will, on the Closing Date, be represented by Restricted Global Class F Notes, deposited with the Trustee as custodian for, and registered in the name of, DTC or its nominee. Interests in the Restricted Global Class F Notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its Participants and Indirect Participants. The aggregate principal amount of Restricted Global Class F Notes may not at any time exceed $3,000,000 and no Holder of a Restricted Definitive Class F Note will have any right to exchange its interest therein for an interest in a Restricted Global Class F Note.

The Restricted Subordinated Notes will be subject to certain restrictions on transfer and may bear a legend regarding such restrictions. Restricted Subordinated Notes sold to U.S. Persons, to Persons located in the United States or in transactions that do not otherwise meet the requirements of Regulation S, will be offered to Qualified Purchasers that are (a) Qualified Institutional Buyers acquiring such Notes in reliance on Rule 144A or (b) Accredited Investors acquiring such Notes in reliance on Section 4(2) under the Securities Act and will be represented by certificates in fully registered definitive form registered in the name of the legal and beneficial owner thereof.

Subordinated Notes sold outside the United States to persons that are not U.S. Persons in accordance with Regulation S will be represented by one or more Regulation S Global Subordinated Notes and deposited with the Trustee as custodian for, and registered in the name of, DTC or its nominee, initially for the accounts of Euroclear and Clearstream. By acquisition of a beneficial interest in a Regulation S Subordinated Note, any purchaser thereof will be deemed to represent that (a) it is not a U.S. Person, (b) it is not a Benefit Plan Investor or a Controlling Person and (c) if in the future it decides to transfer such beneficial interest, it will transfer such interest only in an offshore transaction in accordance with Regulation S or to a person who takes delivery in the form of a Restricted Subordinated Note in accordance with the terms of the Indenture. Beneficial interests in Regulation S Subordinated Notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its Participants and indirect Participants, including Euroclear and Clearstream.

The Notes are subject to the restrictions on transfer set forth herein under “Transfer Restrictions.”

Owners of beneficial interests in Global Senior Notes and Restricted Global Class F Notes will be entitled or required, as the case may be, under certain limited circumstances described below, to receive physical delivery of Definitive Senior Notes. Notwithstanding the above, no owner of an interest in a Regulation S Global Senior Note will be entitled to receive a Definitive Senior Note unless such person provides certification that the Definitive Senior Note is beneficially owned by a person that is not a U.S. Person and that such beneficial ownership interest was acquired in a transaction meeting the requirements of Regulation S. The Notes will not be issuable in bearer form.

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Owners of beneficial interests in Regulation S Subordinated Notes will be entitled or required, under certain limited circumstances described below, to receive physical delivery of certificated Subordinated Notes (each, a “Definitive Regulation S Subordinated Note”) in fully registered, definitive form. No owner of an interest in Regulation S Subordinated Notes will be entitled to receive Definitive Regulation S Subordinated Notes unless such person provides certification that the Definitive Regulation S Subordinated Notes are beneficially owned by a person that is not a U.S. Person and that such beneficial ownership interest was acquired in a transaction meeting the requirements of Regulation S.

Pursuant to the Indenture, the Trustee has been appointed and will serve as the Note Registrar and will provide for the registration of Notes and the registration of transfers and exchanges of Notes in the Note Register. The Trustee has been appointed as Transfer Agent with respect to the Notes

The Notes will be issuable in minimum denominations of $250,000 and integral multiples of $1,000 in excess thereof.

After issuance, (a) a Note may fail to be in compliance with the minimum denomination requirement stated above as a result of the repayment of principal thereof in accordance with the Priority of Payments or in connection with any repayment of principal required by the Rating Agencies following a Ramp-Up Ratings Confirmation Failure, (b) the Class B Notes may fail to be in an amount that is an integral multiple of $1,000 due to the addition to the principal amount thereof of Class B Deferred Interest, (c) each Tranche of Class C Notes may fail to be in an amount that is an integral multiple of $1,000 due to the addition to the principal amount thereof of Class C Deferred Interest, (d) the Class D Notes may fail to be in an amount that is an integral multiple of $1,000 due to the addition to the principal amount thereof of Class D Deferred Interest, (e) each Tranche of Class E Notes may fail to be in an amount that is an integral multiple of $1,000 due to the addition to the principal amount thereof of Class E Deferred Interest, (f) the Class F Notes may fail to be in an amount that is an integral multiple of $1,000 due to the addition to the principal amount thereof of Class F Deferred Interest and (g) the Class B Notes, each Tranche of Class C Notes, Class D Notes, each Tranche of Class E Notes and the Class F Notes may fail to be in an amount that is an integral multiple of $1,000 due to the addition to the principal amount thereof of Class B Deferred Interest, Class C Deferred Interest, Class D Deferred Interest, Class E Deferred Interest or Class F Deferred Interest, respectively.

Global Senior Notes and Restricted Global Class F Notes

So long as the depositary for a Global Senior Note or a Restricted Global Class F Note, or its nominee, is the registered Holder of such Global Senior Note or Restricted Global Class F Note, such depositary or such nominee, as the case may be, will be considered the absolute owner or Holder of such Senior Note, as the case may be, represented by such Global Senior Note or Restricted Global Class F Note for all purposes under the Indenture and the Notes and members of, or participants in, the depositary (the “Participants”) as well as any other persons on whose behalf Participants may act (including Euroclear and Clearstream and account holders and participants therein) will have no rights under the Indenture or under such Note. Owners of beneficial interests in a Global Senior Note or a Restricted Global Class F Note will not be considered to be the owners or Holders of any Note under the Indenture or the Notes. In addition, no beneficial owner of an interest in a Global Senior Note or a Restricted Global Class F Note will be able to exchange or transfer that interest, except in accordance with the Applicable Procedures.

Investors may hold their interests in a Regulation S Global Senior Note directly through Euroclear or Clearstream, if they are participants in such systems, or indirectly through organizations which are participants in such systems. Euroclear and Clearstream will hold interests in Regulation S Global Senior Notes on behalf of their participants through customers’ securities accounts in their respective names on the books of their respective depositaries, which in turn will hold such interests in such Regulation S Global Senior Note in customers’ securities accounts in the depositaries’ names on the books of DTC. Investors may hold their interests in a Restricted Global Co-Issued Note directly through DTC, if they are participants in such system, or indirectly through organizations which are participants in such system.

Payments of the principal of, and interest on, an individual Global Senior Note or Restricted Global Class F Note registered in the name of a depositary or its nominee will be made to the depositary or its nominee, as the case may be, as the registered owner of the Global Senior Note or Restricted Global Class F Note. None of the Issuer, the

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Trustee, the Insurer, the Note Registrar and any Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in Global Senior Notes or Restricted Global Class F Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

With respect to the Global Senior Notes and Restricted Global Class F Notes, the Issuer expects that the depositary for any Global Senior Note or Restricted Global Class F Note or its nominee, upon receipt of any payment of principal of or interest on such Global Senior Note or Restricted Global Class F Note, will immediately credit the accounts of Participants with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Senior Note or Restricted Global Class F Note as shown on the records of the depositary or its nominee. The Issuer also expects that payments by Participants to owners of beneficial interests in such Global Senior Note or Restricted Global Class F Note held through such Participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the name of nominees for such customers. Such payments will be the responsibility of such Participants.

The Initial Purchaser will make arrangements for the settlement of trades in global certificates representing Class F Notes through the “Private Offerings, Resales and Trading through Automated Linkages” (“PORTAL”) system, which system has been approved as an SRO Rule 144A System by the SEC. The PORTAL system is maintained by the National Association of Securities Dealers (“NASD”) to permit electronic trading in securities exchanged pursuant to Rule 144A. NASD may impose certain fees on trades effectuated through the PORTAL system. Access to the PORTAL system is only available to Qualified Institutional Buyers that make certain representations to, and agree to certain restrictions imposed by, NASD. There can be no assurance that NASD will maintain the PORTAL system or that the SEC will continue to recognize the PORTAL system as an approved SRO Rule 144A System for trading restricted, non-investment grade securities.

Definitive Senior Notes

Interests in a Regulation S Global Senior Note, a Restricted Global Co-Issued Note or a Restricted Global Class F Note will be exchangeable or transferable, as the case may be, for a Regulation S Senior Note in the form of a Definitive Senior Note (a “Regulation S Definitive Senior Note”), a Restricted Senior Note in the form of a Definitive Senior Note (a “Restricted Definitive Senior Note”) or a Restricted Definitive Class F Note, as applicable, if (a) DTC notifies the Issuer that it is unwilling or unable to continue as depositary for such Note, (b) DTC ceases to be a Clearing Agency, and a successor depositary is not appointed by the Issuer within 90 days, (c) the transferee of an interest in such Global Senior Note or Restricted Global Class F Note is required by law to take physical delivery of securities in definitive form or (d) the transferee is otherwise unable to pledge its interest in a Global Senior Note or Restricted Global Class F Note. Upon the occurrence of any of the events described in the preceding sentence, the Issuer will cause Definitive Senior Notes bearing an appropriate legend regarding restrictions on transfer to be delivered. Upon the transfer, exchange or replacement of Definitive Senior Notes bearing a legend, or upon specific request for removal of a legend on a Note, the Issuer shall deliver through the Trustee or any Paying Agent to the Holder and the transferee, as applicable, one or more Definitive Senior Notes in certificated form corresponding to the principal amount of Definitive Senior Notes surrendered for transfer, exchange or replacement that bear such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to the Issuer such satisfactory evidence, which may include an opinion of U.S. counsel, as may reasonably be required by the Issuer that neither the legend nor the restrictions on transfer set forth therein is required to ensure compliance with the provisions of the Securities Act or the 1940 Act. Definitive Senior Notes will be exchangeable or transferable for interests in other Definitive Senior Notes as described below.

Definitive Regulation S Subordinated Notes

Interests in Regulation S Subordinated Notes represented by a Regulation S Global Subordinated Note will be exchangeable or transferable, as the case may be, for a Definitive Regulation S Subordinated Note if (a) DTC notifies the Issuer that it is unwilling or unable to continue as depositary for such Subordinated Notes, (b) DTC ceases to be a Clearing Agency, and a successor depositary is not appointed by the Issuer within 90 days, (c) the transferee of an interest in such Regulation S Subordinated Notes is required by law to take physical delivery of securities in definitive form or (d) the transferee is otherwise unable to pledge its interest in Regulation S

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Subordinated Notes. Upon the occurrence of any of the events described in the preceding sentence, the Issuer will cause Definitive Regulation S Subordinated Notes bearing an appropriate legend regarding restrictions on transfer to be delivered. Upon the transfer, exchange or replacement of Definitive Regulation S Subordinated Notes bearing a legend, or upon specific request for removal of a legend on a Subordinated Note, the Issuers shall deliver through the Trustee to the Holder and the transferee, as applicable, one or more Definitive Regulation S Subordinated Notes corresponding to the Aggregate Outstanding Principal Amount of Subordinated Notes surrendered for transfer, exchange or replacement that bear such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to the Issuer such satisfactory evidence, which may include an opinion of U.S. counsel, as may reasonably be required by the Issuer that neither the legend nor the restrictions on transfer set forth therein is required to ensure compliance with the provisions of the Securities Act or the 1940 Act. Definitive Regulation S Subordinated Notes will be exchangeable or transferable for interests in other Definitive Regulation S Subordinated Notes as described below.

Transfer and Exchange of Senior Notes

No beneficial owner of an interest in a Global Senior Note or a Restricted Global Class F Note will be able to exchange or transfer that interest, except in accordance with the Applicable Procedures.

An owner of a beneficial interest in a Regulation S Global Senior Note may transfer such interest in the form of a beneficial interest in such Regulation S Global Senior Note without the provision of written certification; provided that (a) such transfer is not made to a U.S. Person or for the account or benefit of a U.S. Person, (b) such transfer is effected through Euroclear or Clearstream in an offshore transaction as required by Regulation S and (c) the transferee can make (and will be deemed to make) each of the applicable representations required by the Indenture and set forth herein under “Transfer Restrictions.”

An owner of a beneficial interest in a Restricted Global Co-Issued Note or a Restricted Global Class F Note may transfer such interest in the form of a beneficial interest in such Restricted Global Co-Issued Note or Restricted Global Class F Note without the provision of written certification; provided that (a) the transferee is a Qualified Purchaser that the transferor reasonably believes is a Qualified Institutional Buyer and (b) the transferee can make (and will be deemed to make) each of the applicable representations required by the Indenture and set forth herein under “Transfer Restrictions.”

Transfers by a Holder of a beneficial interest in a Regulation S Global Senior Note to a transferee who takes delivery of such interest through a Restricted Global Co-Issued Note will be made only upon receipt by the Trustee of written certifications in the form provided for in the Indenture that, among other things, such transferee is both a Qualified Institutional Buyer and a Qualified Purchaser.

Transfers by a Holder of a beneficial interest in a Restricted Global Co-Issued Note or a Restricted Global Class F Note to a transferee who takes delivery of such interest through a Regulation S Global Senior Note will be made only upon receipt by the Trustee of written certification in the form provided in the Indenture to the effect that, among other things, such transfer is being made to a Non-U.S. Person in an offshore transaction (within the meaning of Regulation S) in accordance with Rule 904 of Regulation S.

Notes in the form of Definitive Senior Notes may be exchanged or transferred in whole or in part in the principal amount of authorized denominations by surrendering such Definitive Senior Notes at the office of the Note Registrar or any Transfer Agent with a written instrument of transfer as provided in the Indenture. In addition, if the Definitive Senior Notes being exchanged or transferred contain a legend, additional certifications to the effect that such exchange or transfer is in compliance with the restrictions contained in such legend may be required. With respect to any transfer of a portion of a Definitive Senior Note, the transferor will be entitled to receive, at any aforesaid office, a new Definitive Senior Note representing the principal amount retained by the transferor after giving effect to such transfer; provided that the principal amount thereof being transferred and the principal amount thereof being retained are each at least equal to the minimum denomination applicable to the Notes. Definitive Senior Notes issued upon any such exchange or transfer (whether in whole or in part) will be made available at the office of the Transfer Agent.

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A Restricted Definitive Senior Note or a beneficial interest in a Global Senior Note or Restricted Global Class F Note may be transferred to a person who takes delivery in the form of a Restricted Definitive Senior Note only upon receipt by the Trustee of written certifications that, among other things, the transferee is both a Qualified Purchaser and either (i) a Qualified Institutional Buyer or (ii) in the case of a transferee who takes delivery in the form of a Restricted Definitive Class F Note, an Accredited Investor.

Exchanges or transfers by a Noteholder of a Co-Issued Note represented by a Definitive Senior Note to a transferee who takes delivery of such Co-Issued Note through a Global Senior Note will be made only after the receipt by the Note Registrar or Transfer Agent, as the case may be, of the Definitive Senior Notes to be so exchanged or transferred and shall be made only in accordance with the Applicable Procedures. In addition, a Definitive Senior Note may be transferred to a person who takes delivery in the form of an interest in a Restricted Global Co-Issued Note only upon receipt by the Trustee of a written certification in the form required by the Indenture to the effect that such transfer is being made to a Qualified Purchaser that the transferor reasonably believes is a Qualified Institutional Buyer in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction. A Definitive Senior Note may be transferred to a person who takes delivery in the form of an interest in a Regulation S Global Senior Note only upon receipt by the Trustee of a written certification in the form required by the Indenture to the effect that such transfer is being made in accordance with Regulation S under the Securities Act, as applicable.

The Indenture provides that if, notwithstanding the restrictions on transfer contained therein, either of the Co-Issuers determines that any beneficial owner of an interest in a Restricted Global Co-Issued Note (or any interest therein) (a) is not an entity that acquired such interest in a transaction made in accordance with the terms of Regulation S and (b) is not both a Qualified Institutional Buyer (unless such beneficial owner is an Institutional Accredited Investor that purchased an interest therein in connection with the initial distribution thereof) and a Qualified Purchaser, then either of the Co-Issuers may require, by notice to such Holder, that such Holder sell all of its right, title and interest in such Restricted Global Co-Issued Note (or interest therein) to a Person that is both a Qualified Institutional Buyer and 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, (i) upon direction from the Issuer or the Co-Issuer, the Trustee (on behalf of and at the expense of the Co-Issuers) shall cause such beneficial owner’s interest in such Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Section 9-610(b) of the UCC) to a person that certifies to the Trustee, the Co-Issuers and the Collateral Manager, in connection with such transfer, that such person is both a Qualified Institutional Buyer and a Qualified Purchaser and (ii) pending such transfer, no further payments will be made in respect of such Note held by such beneficial owner.

Transfers by a Holder of Restricted Definitive Class F Notes or Restricted Global Class F Notes to a transferee who takes delivery of Restricted Definitive Class F Notes will be made only upon receipt by the Note Registrar of written certifications from (a) the transferor in the form provided in the Indenture to the effect that, among other things, such transfer is being made to a person whom the transferor reasonably believes is a Qualified Institutional Buyer, purchasing for its own account, to whom notice is given that the resale, pledge or other transfer is being made in reliance on the exemption from Securities Act registration provided by Rule 144A, or to an Accredited Investor, in each case, in accordance with any applicable securities laws of any state of the United States or any other jurisdiction and (b) the transferee in the form provided for in the Indenture to the effect that, among other things, the transferee is a Qualified Purchaser and is either (i) a Qualified Institutional Buyer or (ii) an Accredited Investor (subject to the delivery of such certifications, legal opinions or other information as the Issuer may reasonably require to confirm that such transfer of Restricted Definitive Class F Notes or Restricted Global Class F Notes is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act).

No Restricted Definitive Class F Note may be transferred to a person who takes delivery in the form of a Restricted Global Class F Note.

No transfer of any Restricted Class F Note to a transferee that has represented that it is a Benefit Plan Investor or a Controlling Person will be effective, and the Issuer, the Trustee, the Transfer Agent and the Note Registrar will not recognize such transfer, if such transfer would result in (a) Benefit Plan Investors owning 25% or more of the total value of any such Class of Notes (including the Class F Notes acquired on the Closing Date by

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Permitted Plans) (determined pursuant to 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA) or (b) a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code. For purposes of calculating the percentage of the total value of the Class F Notes 100% of the aggregate principal amount of the Restricted Global Class F Notes shall be deemed to be held by Benefit Plan Investors.

No Regulation S Class F Notes may be transferred to a Benefit Plan Investor or a Controlling Person and none of the Issuer, the Trustee, the Transfer Agent or the Note Registrar will recognize any transfer of Regulation S Class F Notes if such transfer is made to a Benefit Plan Investor or a Controlling Person except to Permitted Plans on the Closing Date.

No Class F Note may be transferred to a transferee that is a governmental or church plan subject to Similar Law, and none of the Issuer, the Trustee, the Transfer Agent or the Note Registrar will recognize any transfer of a Class F Note to such a transferee, if such transfer would result in a non-exempt violation of any Similar Law.

Transfer and Exchange of Subordinated Notes

Transfers by a Holder of a beneficial interest in Regulation S Subordinated Notes to a transferee who takes delivery of such interest through Restricted Subordinated Notes will be made only in accordance with the Applicable Procedures and upon receipt by the Note Registrar of written certifications (a) from the transferor of such beneficial interest in the form provided in the Indenture to the effect that, among other things, such transfer is being made to an Accredited Investor or to a person whom the transferor reasonably believes is a Qualified Institutional Buyer, purchasing for its own account, to whom notice is given that the resale, pledge or other transfer is being made in reliance on the exemption from Securities Act registration provided by Rule 144A, and in each case, in accordance with any applicable securities laws of any state of the United States or any other jurisdiction and (b) from the transferee of such beneficial interest in the form provided in the Indenture to the effect that, among other things, the transferee is a Qualified Purchaser and is either (i) a Qualified Institutional Buyer or (ii) an Accredited Investor (subject to the delivery of such certifications, legal opinions or other information as the Issuer may reasonably require to confirm that such transfer of Restricted Subordinated Notes is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act).

Transfers by a Holder of a beneficial interest in Regulation S Subordinated Notes to a transferee who takes delivery of such interest through Regulation S Subordinated Notes will be made only to a transferee that is acquiring such interest in an offshore transaction (within the meaning of Regulation S) in accordance with Rule 904 of Regulation S and only in accordance with the Applicable Procedures.

Transfers by a Holder of Restricted Subordinated Notes to a transferee who takes delivery of such interest through an interest in Regulation S Subordinated Notes will be made only upon receipt by the Note Registrar of written certification from the transferor in the form provided in the Indenture to the effect that such transfer is being made in an offshore transaction (within the meaning of Regulation S) in accordance with Rule 904 of Regulation S. Exchanges or transfers by a Holder of Restricted Subordinated Notes to a transferee who takes delivery of such Subordinated Notes through a Regulation S Subordinated Notes will be made no later than 60 days after the receipt by the Note Registrar or Transfer Agent of the Restricted Subordinated Notes to be so exchanged or transferred only in accordance with the Applicable Procedures, and upon receipt by the Note Registrar of a written certification from the transferor in the form provided in the Indenture.

Transfers by a Holder of Restricted Subordinated Notes to a transferee who takes delivery of Restricted Subordinated Notes will be made only upon receipt by the Note Registrar of written certifications from (a) the transferor in the form provided in the Indenture to the effect that, among other things, such transfer is being made to, a person whom the transferor reasonably believes is a Qualified Institutional Buyer, purchasing for its own account, to whom notice is given that the resale, pledge or other transfer is being made in reliance on the exemption from Securities Act registration provided by Rule 144A or to an Accredited Investor, in each case, in accordance with any applicable securities laws of any state of the United States or any other jurisdiction and (b) the transferee in the form provided for in the Indenture to the effect that, among other things, the transferee the transferee is a Qualified Purchaser and is either (i) a Qualified Institutional Buyer or (ii) an Accredited Investor (subject to the delivery of such certifications, legal opinions or other information as the Issuer may reasonably require to confirm that such

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transfer of Restricted Subordinated Notes is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act).

Definitive Regulation S Subordinated Notes and Restricted Subordinated Notes may be exchanged or transferred in whole or in part in the principal amount of authorized denominations by surrendering such Definitive Regulation S Subordinated Notes or Restricted Subordinated Notes, as the case may be, at the office of the Note Registrar or the Transfer Agent with a written instrument of transfer as provided in the Indenture. In addition, additional certifications to the effect that such exchange or transfer is in compliance with the restrictions contained in such legend may be required. With respect to any transfer of a portion of Definitive Regulation S Subordinated Notes or Restricted Subordinated Notes, the transferor will be entitled to receive, at any aforesaid office, new Definitive Regulation S Subordinated Notes or Restricted Subordinated Notes, as the case may be, representing the principal amount retained by the transferor after giving effect to such transfer. Definitive Regulation S Subordinated Notes and Restricted Subordinated Notes issued upon any such exchange or transfer (whether in whole or in part) will be made available at the office of the Transfer Agent.

The Indenture provides that if, notwithstanding the restrictions on transfer contained therein, the Issuer determines that any beneficial owner of a Subordinated Note (a) is not a person or entity that acquired such interest in a transaction that was made in accordance with the terms of Regulation S and (b) is not a Qualified Purchaser that is also (i) a Qualified Institutional Buyer or (ii) an Accredited Investor, then the Issuer may require, by notice to such Holder, that such Holder sell all of its right, title and interest to such Subordinated Notes (or interest therein) to a Person that is a Qualified Purchaser and either a Qualified Institutional Buyer or an Accredited Investor, with such sale to be effected within 30 days after notice of such sale requirement is given; provided that any such transfer to an Accredited Investor that is not also a Qualified Institutional Buyer shall be subject to the delivery of such certifications, legal opinions or other information as the Issuer may reasonably require to confirm that such transfer of Restricted Subordinated Notes is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. If such beneficial owner fails to effect the transfer required within such 30-day period, (A) upon direction from the Issuer, the Trustee (on behalf of and at the expense of the Issuer) shall cause such beneficial owner’s interest in such Subordinated Notes to be transferred in a commercially reasonable sale (conducted by the Administrator in accordance with Section 9-610(b) of the UCC) to a person who certifies to the Trustee, the Issuer and the Collateral Manager, in connection with such transfer, that such person is Qualified Purchaser who is either a Qualified Institutional Buyer or an Accredited Investor (provided that any such transfer to an Accredited Investor that is not also a Qualified Institutional Buyer shall be subject to the delivery of such certifications, legal opinions or other information as the Issuer may reasonably require to confirm that such transfer of Restricted Subordinated Notes is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act) and (B) pending such transfer, no further payments will be made in respect of such Subordinated Notes held by such beneficial owner.

In addition, no Reg Y Institution may transfer any Subordinated Notes held by it to any person other than (a) a Controlling Party, (b) a person or persons designated by a Controlling Party, (c) in amounts such that, after giving effect thereto, no single transferee and its affiliates will hold more than 2% of the Aggregate Outstanding Principal Amount of Subordinated Notes (including all options, warrants and similar rights exercisable or convertible into Subordinated Notes) or (d) as otherwise permitted by applicable U.S. federal banking law and regulations. See “Transfer Restrictions.”

No transfer of any Restricted Subordinated Note to a transferee that has represented that it is a Benefit Plan Investor or a Controlling Person will be effective, and the Issuer, the Trustee, the Transfer Agent and the Note Registrar will not recognize such transfer, if such transfer would result in (a) Benefit Plan Investors owning 25% or more of the total value of any such Class of Notes (including the Class F Notes and Regulation S Subordinated Notes acquired on the Closing Date by Permitted Plans) (determined pursuant to 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA) or (b) a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.

No Regulation S Subordinated Notes may be transferred to a Benefit Plan Investor or a Controlling Person and none of the Issuer, the Trustee, the Transfer Agent or the Note Registrar will recognize any transfer of Regulation S Subordinated Notes if such transfer is made to a Benefit Plan Investor or a Controlling Person except to Permitted Plans on the Closing Date.

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No Subordinated Note may be transferred to a transferee that is a governmental or church plan subject to Similar Law, and none of the Issuer, the Trustee, the Transfer Agent or the Note Registrar will recognize any transfer of a Subordinated Note to such a transferee, if such transfer would result in a non-exempt violation of any Similar Law.

Transfer and Exchange of Notes - General

Transfers between Participants in DTC will be effected in the ordinary manner in accordance with the Applicable Procedures and will be settled in immediately available funds. Transfers between participants in Euroclear and Clearstream will be effected in the ordinary manner in accordance with their respective rules and operating procedures.

No service charge will be made for exchange or registration of transfer of any Note but the Trustee may require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith and expenses of delivery (if any) not made by regular mail.

Senior Notes and Subordinated Notes issued upon any exchange or registration of transfer of securities shall be valid obligations of the Co-Issuers or the Issuer, as applicable, evidencing the same debt, and entitled to the same benefits, as the Senior Notes or Subordinated Notes, as the case may be, surrendered upon exchange or registration of transfer.

The Note Registrar, along with the Transfer Agent, will effect exchanges and transfers of Notes. In addition, the Note Registrar will keep in the Note Register records of the ownership, exchange and transfer of Notes.

The laws of some states require that certain persons take physical delivery of securities in definitive form. Consequently, any transfer of beneficial interests in a Note represented by a Global Senior Note or a Restricted Global Class F Note to such persons may require that such interests in a Global Senior Note or Restricted Global Class F Note be exchanged for Definitive Senior Notes. Because DTC can only act on behalf of Participants, which in turn act on behalf of Indirect Participants and certain banks, the ability of a person having a beneficial interest in a Global Senior Note or Restricted Global Class F Note to pledge such interest to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interest, may require that such interest in a Global Senior Note or Restricted Global Class F Note be exchanged for Definitive Senior Notes. Interests in a Global Senior Note or a Restricted Global Class F Note will be exchangeable for Definitive Senior Notes only as described above.

Under the terms of the Indenture, the Issuer and the Trustee will treat the persons in whose names the Notes are registered (including Notes represented by a Global Senior Note or a Restricted Global Class F Note) as the owners thereof for the purpose of receiving payments and for any and all other purposes whatsoever; provided that with respect to remedies, consents, determinations and other information and reports deliverable to a Noteholder, a beneficial owner of an interest in a Note that provides certification of ownership in the form required by the Indenture will be considered an owner of such Note to the extent of such investor’s beneficial interest therein. Payments in respect of the principal of, and interest on, a Global Senior Note or a Restricted Global Class F Note registered in the name of a nominee of DTC will be payable by the Trustee to DTC or its nominee as the registered Noteholder under the Indenture. Consequently, none of the Issuer, the Trustee, the Insurer or any of their respective agents has or will have any responsibility or liability for (a) any aspect of DTC’s records or any direct participant’s or indirect participant’s records relating to, or payments made on account of, beneficial ownership interests in any Global Senior Note or Restricted Global Class F Note or for maintaining, supervising or reviewing any of DTC’s records or any direct participant’s or indirect participant’s records relating to the beneficial ownership interests in any Global Senior Note or Restricted Global Class F Note or (b) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants.

Subject to compliance with the transfer restrictions applicable to the Notes described above and under “Transfer Restrictions,” cross market transfers between DTC, on the one hand, and directly or indirectly through Euroclear or Clearstream participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary; however, such cross market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty

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in such system in accordance with its rules and procedures and within its established deadlines (Brussels time). Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in a Regulation S Global Senior Note or Regulation S Global Subordinated Note, as the case may be, in DTC and making or receiving payment in accordance with normal procedures for same day funds settlement applicable to DTC. Clearstream participants and Euroclear participants may not deliver instructions directly to the depositaries of Euroclear or Clearstream.

Because of time zone differences, cash received in Euroclear or Clearstream as a result of sales of interests in a Regulation S Global Senior Note or Regulation S Subordinated Note, as the case may be, by or through a Euroclear or Clearstream participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Euroclear or Clearstream cash account only as of the business day following settlement in DTC.

DTC has advised the Co-Issuers that it will take any action permitted to be taken by a Noteholder (including, without limitation, the presentation of Notes for exchange as described above) only at the direction of one or more Participants to whose account with the DTC interests in the Global Senior Notes. Restricted Global Class F Notes or Regulation S Global Subordinated Notes, as the case may be, are credited and only in respect of such portion of the Aggregate Outstanding Principal Amount of the Notes as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the Notes, DTC will exchange the Global Senior Notes and Restricted Global Class F Notes for Definitive Senior Notes and the Regulation S Global Subordinated Notes for Definitive Regulation S Subordinated Notes legended, in each case, as appropriate, which it will distribute to its Participants.

DTC has advised the Co-Issuers as follows: DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the UCC and a Clearing Agency. DTC was created to hold securities for its Participants and facilitate the clearance and settlement of securities transactions between Participants through electronic book-entry changes in accounts of its Participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (“Indirect Participants”). The address of DTC is 55 Water Street, New York, New York 10041. The address for Clearstream is Clearstream Banking, L-2967, Luxembourg. The address for Euroclear is Euroclear Bank S.A./N.V., 1 Boulevard du Roi Albert II, Brussels B-1210, Belgium.

Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures in order to facilitate transfers of interests in Global Senior Notes and Regulation S Global Subordinated Notes among participants of DTC, Euroclear and Clearstream, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of the Issuer, the Co-Issuer, the Insurer or the Trustee will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective direct or indirect participants of their respective obligations under the rules and procedures governing their operations.

No Gross-Up

All payments made by the Co-Issuers with respect to the 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 then in effect, as modified by the practice of any relevant governmental revenue authority. 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. Similarly, the Insurer will not be required to “gross up” Insured Payments payable under the Policy to cover any withholding tax imposed on the Class A-1B Notes.

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The Indenture

The following summary describes certain provisions of the Indenture. The summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Indenture.

Events of Default

An “Event of Default” is defined in the Indenture as each of the following (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 in the payment of any interest (i) on any Class A-1 Note or Class A-2 Note or Class A-1A Commitment Fee, (ii) if there are no Class A-1 Notes or Class A-2 Notes outstanding, on any Class B Note, (iii) if there are no Class A-1 Notes, Class A-2 Notes or Class B Notes outstanding, on any Class C Note, (iv) if there are no Class A-1 Notes, Class A-2 Notes, Class B Notes or Class C Notes outstanding, on any Class D Note, (v) if there are no Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes or Class D Notes outstanding, on any Class E Note, or (vi) if there are no Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes outstanding, on any Class F Note, in each case when the same becomes due and payable (in the case of clause (i), without giving effect to any payments made under the Policy), which default continues for a period of five Business Days (or, in the case of a default in payment resulting solely from an administrative error or omission by the Trustee, a Paying Agent or the Note Registrar, such default continues for a period of seven days);

(b) a default in the payment of principal of any Note when the same becomes due and payable at its Stated Maturity or Redemption Date (or, in the case of a default in payment resulting solely from an administrative error or omission by the Trustee, a Paying Agent or the Note Registrar, such default continues for a period of seven days);

(c) the failure on any Distribution Date to disburse amounts available in the Interest Collection Account or Principal Collection Account in accordance with the order of priority set forth above under “—Priority of Payments” (other than a default in payment described in clause (a) or (b) above), which failure continues for a period of five Business Days (or, in the case of a failure resulting solely from an administrative error or omission by the Trustee, a Paying Agent or the Note Registrar, such default continues for a period of seven days);

(d) the Issuer, the Co-Issuer or the pool of Collateral becomes an investment company required to be registered under the 1940 Act;

(e) (i) a default in the performance, or a breach, of any other covenant or other agreement (it being understood, without limiting the generality of the foregoing, that any failure to satisfy the Coverage Tests or the Collateral Quality Tests shall not be an Event of Default) of the Issuer under the Indenture or (ii) any representation or warranty of the Issuer made in the Indenture or in any certificate or other writing delivered pursuant thereto or in connection therewith proves to be incorrect in any material respect when made, and, in the case of both clauses (i) and (ii) above, the continuation of such default or breach for a period of 30 days (or, if such default or breach has an adverse effect on the validity, perfection or priority of the security interest granted under the Indenture, 15 days) after the Issuer or the Collateral Manager has actual knowledge that such default or breach has occurred or after written notice thereof to the Issuer and the Collateral Manager by the Trustee, or to the Issuer, the Collateral Manager and the Trustee by the Holders of at least 66-2/3% of the Aggregate Outstanding Principal Amount of the Controlling Class (which will be the Insurer if no Insurer Default has occurred and is continuing and (x) the Insured Notes are Outstanding or (y) any Accrued Insurance Liabilities or Premiums are due and owing) or any

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Hedge Counterparty, specifying such default, breach or failure and requiring it to be remedied and stating that such notice is a “Notice of Default” under the Indenture;

(f) certain events of bankruptcy, insolvency, receivership or reorganization of the Issuer (as set forth in the Indenture);

(g) the failure, on any Measurement Date for so long as any Class A Notes are Outstanding or any Accrued Insurance Liabilities or Premium remain unpaid, of the Class A Overcollateralization Ratio to be equal to or greater than 102%; or

(h) an Insurance Agreement Event of Default.

If the Trustee has actual knowledge that an Event of Default has occurred and is continuing, the Trustee shall, within five Business Days after obtaining such knowledge, notify the Issuer, the Collateral Manager, the Noteholders, the Insurer, each Hedge Counterparty and each Rating Agency in writing of such Event of Default.

If either the Issuer, the Co-Issuer or the Collateral Manager shall obtain actual knowledge that an Event of Default, or an event that, with the passage of time or the giving of notice would constitute an Event of Default, has occurred and is continuing, the Issuer, the Co-Issuer or the Collateral Manager, as applicable, shall promptly notify the Issuer (if the Collateral Manager is providing such notification), the Trustee, the Initial Purchaser, the Collateral Manager (if the Issuer or Co-Issuer is providing such notification), the Noteholders, each Hedge Counterparty, the Insurer and each Rating Agency in writing of such Event of Default or incipient Event of Default.

If an Event of Default occurs and is continuing (other than an Event of Default described in clause (f) under “Events of Default” above), with the consent of the Holders of at least 66-2/3% of the Aggregate Outstanding Principal Amount of the Notes of the Controlling Class (which will be the Insurer if no Insurer Default has occurred and is continuing and (x) the Insured Notes are Outstanding or (y) any Accrued Insurance Liabilities or Premiums are due and owing), the Trustee may, and at the direction of the Holders of at least 66-2/3% of the Aggregate Outstanding Principal Amount of the Notes of the Controlling Class, the Trustee will, declare the principal of and accrued and unpaid interest on all of the Notes, and with respect to the Class A-1A Notes, the Class A-1A Commitment Fee, to be immediately due and payable. If an Event of Default described in clause (f) above under “Events of Default” occurs, such an acceleration will occur automatically and without any further action. Notwithstanding the foregoing, if the sole Event of Default is an Event of Default described in clauses (a) or (b) above under “Events of Default” with respect to a default in the payment of any principal of or interest on the Notes of a Class other than the Controlling Class, neither the Trustee nor the Holders of such non-Controlling Class will have the right to declare such principal and other amounts to be immediately due and payable.

The “Controlling Class” means the Class A-1 Notes or, if there are no Class A-1 Notes Outstanding, the Class A-2 Notes or, if there are no Class A Notes Outstanding, the Class B Notes or, if there are no Class A Notes or Class B Notes Outstanding, the Class C Notes or, if there are no Class A Notes, Class B Notes or Class C Notes Outstanding, the Class D Notes or, if there are no Class A Notes, Class B Notes, Class C Notes or Class D Notes Outstanding, the Class E Notes or, if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes Outstanding, the Class F Notes 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, the Subordinated Notes; provided that if (a) any Insured Notes are Outstanding or any Accrued Insurance Liabilities or Premium are due and owing to the Insurer and (b) no Insurer Default exists, then the “Controlling Class,” the “Holders of at least 25% of the Aggregate Outstanding Principal Amount of the Controlling Class,” the “Holders of at least a Majority of the Controlling Class” or the “Holders of at least 66-2/3% of the Aggregate Outstanding Principal Amount of the Controlling Class” shall, for all purposes, be the Insurer, and the Insurer shall be entitled to exercise all of the rights of the Controlling Class and (except with respect to any supplemental indenture that requires the consent of 100% of the Insured Noteholders) the Class A-1B Noteholders, the Holders of at least 25% of the Aggregate Outstanding Principal Amount of the Controlling Class, the Holders of at least a Majority of the Controlling Class or the Holders of at least 66-2/3% of the Aggregate Outstanding Principal Amount of the Controlling Class, as applicable, that are provided for herein. In addition to the foregoing, the Insurer’s right to exercise all of the rights of the Controlling Class, the Holders of at least 25% of the Aggregate Outstanding Principal Amount of the Controlling Class, the Holders of at least a Majority of the Controlling Class or the Holders of at least 66-2/3% of the Aggregate Outstanding Principal Amount

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of the Controlling Class, as applicable, shall be reinstated if a Preference Claim is made for as long as any such Preference Claim is pending during the applicable statutory preference period or, if the Insurer is required to pay the amount of any Preference Amount, for so long as any Accrued Insurance Liabilities owing to the Insurer have not been paid in full. Any declaration of acceleration may under certain circumstances be rescinded by the Holders of at least 66-2/3% of the Aggregate Outstanding Principal Amount of the Controlling Class.

If an Event of Default occurs and is continuing when any Note is outstanding, the Trustee will retain the Collateral intact and collect all payments in respect of the Collateral and continue making payments in the manner described under “—Priority of Payments” unless:

(a) the Trustee determines that the anticipated net proceeds of a sale or liquidation of such Collateral would be sufficient to discharge in full the amounts then due and unpaid on the Senior Notes for principal and interest (including Defaulted Interest, interest on Defaulted Interest, if any, and any Class B Deferred Interest, if any, Class C Deferred Interest, if any, Class D Deferred Interest, if any, Class E Deferred Interest, if any, Class F Deferred Interest, if any, and interest on Deferred Interest, if any), certain due and unpaid Administrative Expenses and any accrued and unpaid amounts payable by the Issuer pursuant to the Hedge Agreements, including termination payments, if any (assuming, for this purpose, that the Hedge Agreements have been terminated by reason of an event of default or termination with respect to the Issuer) and all amounts owing to the Insurer under the Insurance Documents; or

(b) the Holders of at least a Majority of the Aggregate Outstanding Principal Amount of the Senior Notes voting as a single Class direct or consent to, subject to the provisions of the Indenture, the sale and liquidation of the Collateral.

Any amount of money collected by the Trustee as a result of any such sale or liquidation will be applied in accordance with the Priority of Payments, at the date or dates fixed by the Trustee.

The Holders of at least 66-2/3% of the Aggregate Outstanding Principal Amount of the Notes of the Controlling Class (which will be the Insurer if the Class A-1B Notes are Outstanding and no Insurer Default has occurred and is continuing or any Accrued Insurance Liabilities or Premium remain unpaid) will have the right to direct the Trustee in the conduct of any proceedings for any remedy available to the Trustee; provided that: (a) such direction will not conflict with any rule of law or the Indenture; (b) the Trustee may take any other action not inconsistent with such direction; (c) the Trustee has been provided with indemnity reasonably satisfactory to it (and the Trustee need not take any action that it determines might involve it in liability unless it has received such indemnity against such liability); and (d) any direction to undertake a sale of the Collateral may be made only in accordance with the terms of the Indenture, including without limitation the terms described in the preceding paragraphs.

Pursuant to the Indenture, as security for the payment by the Issuer of the compensation and expenses of the Trustee and any sums the Trustee may be entitled to receive as indemnification by the Issuer, the Issuer will grant the Trustee a lien on the Collateral, which lien is senior to the lien of the other Secured Parties. The Trustee’s lien will be exercisable by the Trustee only if the Notes have been declared due and payable following an Event of Default and such acceleration has not been rescinded or annulled.

Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request of any Noteholders, unless such Holders have offered to the Trustee reasonable security or indemnity.

The Holders of at least 66-2/3% of the Aggregate Outstanding Principal Amount of the Controlling Class (which will be the Insurer if the Class A-1B Notes are Outstanding and no Insurer Default has occurred and is continuing or any Accrued Insurance Liabilities or Premium remain unpaid) , and to the extent any Hedge Counterparty would be adversely affected, acting with the prior written consent of each such Hedge Counterparty, may, prior to the time a judgment or decree for the payment of money due has been obtained by the Trustee, waive any past default on behalf of the Noteholders and its consequences, except a default in the payment of the principal

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of any Note or in the payment of interest (including any Defaulted Interest, interest on Defaulted Interest or, in the case of the Class B Notes, interest on Class B Deferred Interest, in the case of the Class C Notes, interest on Class C Deferred Interest, in the case of the Class D Notes, interest on Class D Deferred Interest, in the case of the Class E Notes, interest on Class E Deferred Interest and in the case of the Class F Notes, interest on Class F Deferred Interest) on the Class A-1 Notes or Class A-2 Notes or, after the Class A-1 Notes and Class A-2 Notes have been paid in full, the Class B Notes, or, after the Class A-1 Notes, Class A-2 Notes and Class B Notes have been paid in full, the Class C Notes, or, after the Class A-1 Notes, Class A-2 Notes, Class B Notes and Class C Notes have been paid in full, the Class D Notes, or, after the Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes and Class D Notes have been paid in full, the Class E Notes, or, after the Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes have been paid in full, the Class F Notes, or in respect of a provision of the Indenture that cannot be modified or amended without the waiver or consent of the Holder of each outstanding Note affected thereby, or arising as a result of an event described in clause (f) of the definition of Event of Default.

No Noteholder will have the right to institute any proceeding with respect to the Indenture unless (a) such Holder previously has given to the Trustee written notice of an Event of Default, (b) except in certain cases of a default in the payment of principal or interest, the Holders of at least a Majority in Aggregate Outstanding Principal Amount of the Notes of the Controlling Class (which will be the Insurer if the Class A-1B Notes are Outstanding and no Insurer Default has occurred and is continuing or any Accrued Insurance Liabilities or Premium remain unpaid) 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, (c) the Trustee has for 30 days after its receipt of such notice, request and offer of indemnity failed to institute any such proceeding and (d) except in certain cases of a default in the payment of principal or interest, 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 Notes of the Controlling Class.

If the Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Noteholders of the Controlling Class (or the Insurer if the Class A-1B Notes are Outstanding and no Insurer Default has occurred and is continuing or any Accrued Insurance Liabilities or Premium remain unpaid), each representing less than a Majority of the Controlling Class, the Trustee shall follow the instructions of the group representing the higher percentage of interest in the Controlling Class.

Except in the case of an enforcement action taken with respect to any Defaulted Security in accordance with the provisions hereof or as otherwise required hereby, if an Event of Default has occurred and is continuing, the Issuer shall not take any action, and shall use its best efforts not to permit any action to be taken by others, that would release any Person from such Person’s covenants or obligations under any instrument included in the Collateral unless the Issuer shall have provided at least two Business Days prior written notice thereof to the Controlling Class.

Unless otherwise expressly provided in determining whether the Holders of the requisite percentage of any Notes have given any direction, notice or consent, Notes owned by the Issuer or any affiliate thereof shall be disregarded and deemed not to be Outstanding.

Notices

Notices to the Noteholders will be given by first-class mail, postage prepaid, to the registered Holders at their address appearing in the Note Register. In addition, for so long as any Class of Notes is listed on the Irish Stock Exchange and the rules of such exchange so require, notice will also be given to the Company Announcements Office of the Irish Stock Exchange.

Modification of the Indenture

The Indenture provides that the Co-Issuers and the Trustee may not enter into any supplemental indenture unless the Rating Condition shall have been satisfied with respect to such supplemental indenture (unless each Hedge Counterparty and each Holder of 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 Notes held by such Holder, consented to such supplemental indenture). For purposes of consenting to any

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modification of the Indenture, each Class of Notes containing multiple Tranches will vote together as a single Class unless one or more Tranches would suffer a materially adverse effect that does not also materially adversely affect the Holders of any other Tranche of the same Class, in which case each Tranche that would suffer a materially adverse effect shall vote separately, and “Class” shall be construed accordingly in the next three paragraphs.

With the prior written consent of (a) the Holders of not less than a Majority of the outstanding Notes of each Class materially adversely affected thereby, (b) the Collateral Manager, (c) each Hedge Counterparty materially adversely affected thereby and (d) the Insurer (if (i) any Insured Notes are Outstanding or any Accrued Insurance Liabilities or Premiums remain unpaid and (ii) no Insurer Default has occurred and is continuing), the Trustee and the Issuer may, subject to the terms of the Indenture, enter into one or more supplemental indentures to add provisions to, or change in any manner or eliminate any provisions of, the Indenture or modify in any manner the rights of the Noteholders or any of the Hedge Counterparties, as the case may be, under the Indenture. Unless notified by Holders of a Majority of any Class or Tranche of Notes or any Hedge Counterparty that such Class or Tranche of Notes or such Hedge Counterparty, as the case may be, will be materially adversely affected (in a notice that sets forth a basis for such determination and identifies therein the reason for such determination in detail), the Trustee may, consistent with the written advice of counsel and/or an officer’s certificate delivered by the Collateral Manager, determine whether Noteholders of such Class or Tranche or the Hedge Counterparties would be materially adversely affected by such change (after giving notice of such change to the Holders of such Class or Tranche of Notes and the Hedge Counterparties). Such determination shall be conclusive and binding on all present and future Noteholders and the Hedge Counterparties.

Notwithstanding the foregoing, the Trustee may not enter into any supplemental indenture without the prior written consent of (a) each Holder of each outstanding Note of each Class adversely affected thereby, (b) if (i) any Insured Notes are Outstanding or any Accrued Insurance Liabilities or Premiums remain unpaid and (ii) no Insurer Default has occurred and is continuing, the Insurer, (c) each Hedge Counterparty adversely affected thereby and (d) the Collateral Manager, if such supplemental indenture (i) changes the Stated Maturity of the principal of or the due date of any installment of interest on any Note, reduces the principal amount thereof or the rate of interest thereon, or the redemption price with respect thereto, changes the earliest date on which the Co-Issuers may redeem any Note, changes the provisions of the Indenture relating to the application of proceeds of any Collateral to the payment of principal of or interest on the Senior Notes, changes any place where, or the coin or currency in which, any Note or the principal thereof or interest thereon is payable, or impairs the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the applicable redemption date), (ii) reduces the percentage in Aggregate Outstanding Principal Amount of Noteholders of each Class 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, (iii) permits the creation of any lien ranking prior to or on a parity with the lien created by the Indenture with respect to any part of the Collateral or terminates such lien on any property at any time subject thereto (other than in connection with the sale thereof in accordance with the Indenture) or deprives any Noteholder of the security afforded by the lien created by the Indenture, (iv) reduces the percentage of the Aggregate Outstanding Principal Amount of Noteholders of each Class whose consent is required to request that the Trustee preserve the Collateral pledged under the Indenture or rescind the Trustee’s election to preserve the Collateral or to sell or liquidate the Collateral pursuant to the Indenture, (v) modifies any of the provisions of the Indenture with respect to supplemental indentures requiring the consent of the Noteholders, the Hedge Counterparties or certain other parties, except to increase any applicable percentage or to provide that other provisions of the Indenture cannot be modified or waived without the consent of the Holder of each outstanding Note affected thereby, (vi) modifies the definitions of the terms “Controlling Class” or “Outstanding” or the subordination or priority of payment provisions of the Indenture, (vii) changes the permitted minimum denominations of any Class of Notes, (viii) modifies any provisions of the Indenture concerning the Policy or the Insurer, or (ix) modifies any provision of the Indenture in such a manner as to affect the calculation of the amount of any payment of Class A-1A Commitment Fee, interest on or principal of any Note or the right of the Noteholders to the benefit of any provisions for the redemption of such Notes contained therein.

The Co-Issuers and the Trustee may also enter into supplemental indentures without obtaining the consent of the Noteholders or the Hedge Counterparties (but with the consent of the Collateral Manager and, so long as any Insured Notes are Outstanding or any Accrued Insurance Liabilities or Premium remain unpaid and so long as no Insurer Default has occurred and is continuing, the Insurer) in order to (a) evidence the succession of any person to the Issuer and the assumption by such successor of the covenants in the Indenture and the Notes, (b) add to the

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covenants of the Issuer or the Trustee for the benefit of the Secured Parties or to surrender any right or power conferred upon the Issuer, (c) convey, transfer, assign, mortgage or pledge any property to or with the Trustee, (d) evidence and provide for the acceptance of appointment by a successor trustee that meets the requirements of the Indenture and to add to or change any of the provisions of the Indenture as shall be necessary to facilitate the administration of the trusts under the Indenture by more than one Trustee, (e) correct or amplify the description of any property at any time subject to the lien created by the Indenture, or to better assure, convey and confirm unto the Trustee any property subject or required to be subject to the lien created by the Indenture (including, without limitation, any and all actions necessary or desirable as a result of changes in law or regulations) or to subject to the lien created by the Indenture any additional property, (f) modify the restrictions on and procedures for resales and other transfers of the Notes to reflect any changes in 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 1940 Act or to remove restrictions on resale and transfer to the extent not required thereunder, (g) correct any inconsistency, defect or ambiguity in the Indenture or to conform the provisions of the Indenture to the final Offering Circular, (h) make non-material administrative changes as the Issuer deems appropriate, (i) avoid imposition of tax on the net income of the Issuer or the Insurer or to avoid the Issuer, the Co-Issuer or the pool of Collateral being required to register as an investment company under the 1940 Act, (j) permit the use of Sale Proceeds and Principal Proceeds to acquire Additional Collateral Debt Securities after the Closing Date in excess of the 25% limitation described in “Security for the Senior Notes—Changes in Composition of the Collateral Debt Securities” herein, (k) to make any change that does not materially adversely affect the rights of the Holders of the Notes, other than any change that would require the consent of any Holder of Notes under the Indenture; (l) modify the REIT/REOC Coverage Tests, the Real Estate Entity Trigger Events and the related definitions thereunder, (m) accommodate the acquisition of Synthetic Securities so long as the related changes are administrative or mechanical in nature, or to amend the definition of “Synthetic Security” (other than subclause (i), (ii) or (iii) of such definition) or “Reference Obligation” if any of the Rating Agencies changes its methodologies with respect to Synthetic Securities to reflect such changes, or (n) evidence or implement any change to the Indenture required by regulations or guidelines enacted to support the USA PATRIOT Act or any terrorism-related law or regulation of the United States or any other similar applicable laws and regulations in the Cayman Islands; provided that in the case of supplemental indentures described in clauses (a) through (m) above, such supplemental indenture would not materially adversely affect any Noteholders or any Hedge Counterparty. Unless notified by (i) Holders of a Majority of Notes of any Class or Tranche that such Class or Tranche will be materially adversely affected or (ii) any Hedge Counterparty that such Hedge Counterparty will be materially adversely affected, the Trustee may, consistent with the written advice of counsel and/or an officer’s certificate delivered by the Collateral Manager, determine whether the interests of any Noteholders would be materially adversely affected or any Hedge Counterparty would be materially adversely affected by any such supplemental indenture (after giving notice of such change to each Noteholder and the Hedge Counterparties). The Trustee may not enter into any supplemental indenture described in this paragraph that could reasonably be expected to materially and adversely affect the Collateral Manager unless the Collateral Manager gives written consent to the Trustee and the Issuer to such supplemental indenture at least one (1) Business Day prior to such execution and delivery. The Trustee shall not enter into any such supplemental indenture if, with respect to such supplemental indenture, the Rating Condition would not be satisfied; provided that the Trustee may, with the consent of the Holders of 100% of the Aggregate Outstanding Principal Amount of each Class of Senior Notes and each Hedge Counterparty, enter into any such supplemental indenture notwithstanding any such reduction or withdrawal of the ratings of any outstanding Tranche of Senior Notes.

Modification of Certain Other Documents

Prior to entering into any amendment to the Collateral Management Agreement, the Collateral Administration Agreement or any Hedge Agreement, the Issuer is required by the Indenture to obtain the written confirmation of each Rating Agency that the entry by the Issuer into such amendment satisfies the Rating Condition. Prior to entering into any waiver in respect of any of the foregoing agreements, the Issuer is required to provide each Rating Agency, each Hedge Counterparty and the Trustee with written notice of such waiver. The amendment to and waiver of provisions of the Collateral Management Agreement are also subject to additional restrictions as described herein under “The Collateral Management Agreement.”

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Consolidation, Merger or Transfer of Assets

Except under the limited circumstances set forth in the Indenture, the Issuer may not consolidate or merge with or into, or transfer or convey all or substantially all of its assets to, any other corporation, partnership, trust or other person or entity.

Petitions for Bankruptcy

The Indenture provides that the Secured Parties agree not to cause the filing of a petition for winding up or a petition in bankruptcy against the Issuer before one year and one day have elapsed since the final payments to the Senior Noteholders or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

Satisfaction and Discharge of Indenture

The Indenture will be discharged with respect to the Collateral upon delivery to the Trustee for cancellation of all of the Notes, or, within certain limitations (including the obligation to pay principal and interest and with respect to the Class A-1A Notes, the Class A-1A Commitment Fee on the Aggregate Undrawn Amount of Class A-1A Notes, including Defaulted Interest and interest on Defaulted Interest), upon deposit with the Trustee of funds sufficient for the payment or redemption of the Notes and the payment by the Issuer of all other amounts due under the Notes, the Indenture, the Hedge Agreements, the Collateral Administration Agreement, the Insurance Documents, the Collateral Management Agreement and each of the other documents executed in connection therewith.

Trustee

The Bank of New York Trust Company, National Association will be the Trustee under the Indenture and the trustee under the Master Trust Agreement. The Issuer, the Collateral Manager and their respective affiliates may maintain other banking relationships in the ordinary course of business with the Trustee. The payment of the fees and expenses of the Trustee is solely the obligation of the Issuer. The Trustee and its affiliates may receive compensation in connection with the investment of trust assets in certain Eligible Investments as provided in the Indenture. Eligible Investments may include investments for which the Trustee and/or its affiliates provide services. The Indenture contains provisions for the indemnification of the Trustee for any loss, liability or expense incurred without negligence, willful misconduct or bad faith on its part, arising out of or in connection with the acceptance or administration of the Indenture. Pursuant to the Indenture, the Issuer has granted to the Trustee a lien senior to that of the Noteholders to secure payment by the Issuer of the compensation and expenses of the Trustee and any sums the Trustee may be entitled to receive as indemnification by the Issuer under the Indenture (subject to the dollar limitations set forth in the Priority of Payments with respect to any Distribution Date), which lien the Trustee is entitled to exercise only under certain circumstances. In the Indenture, the Trustee will agree not to cause the filing of a petition for winding up or a petition in bankruptcy against the Issuer for nonpayment to the Trustee of amounts payable thereunder until at least one year and one day, or if longer, the applicable preference period then in effect, after the payment in full of all of the Senior Notes.

Pursuant to the Indenture, the Trustee may resign at any time by providing 30 days’ notice and the Trustee may be removed at any time by the Holders of a Majority of the Senior Notes (voting as a single class) or, at any time when an Event of Default shall have occurred and be continuing, by the Holders of at least 66-2/3% of the Aggregate Outstanding Principal Amount of the Controlling Class (which will be the Insurer if no Insurer Default has occurred and is continuing and (x) the Insured Notes are Outstanding or (y) any Accrued Insurance Liabilities or Premiums are due and owing). However, no resignation or removal of the Trustee will become effective until the acceptance of appointment by a successor trustee pursuant to the terms of the Indenture. The Indenture will require that any successor trustee or additional trustee (i) be a bank or trust company, (ii) have at all times an aggregate capital, surplus and undivided profits of at least $200,000,000 (provided that if such trustee publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, for purposes of such requirement, the aggregate capital, surplus and undivided profits of such trustee shall be deemed to be its aggregate capital, surplus and undivided profits as set forth in its most recent report of condition so published), (iii) is not affiliated (as such term is defined in Rule 405 under the Securities Act) with the Issuer or with any person

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involved with the organization or operation of the Issuer, (iv) does not offer or provide credit or credit enhancement to the Issuer, and (v) enter into an indenture (or agree to be bound by the terms of the Indenture) that provides that the trustee shall not resign until either (A) the Pledged Securities have been completely liquidated and the proceeds of such liquidation have been distributed to the Noteholders or (B) a successor trustee meeting the requirements of such indenture or the Indenture has been designated and has accepted such trusteeship.

Tax Characterization of the Senior Notes

The Issuer intends to treat the Senior Notes as indebtedness of the Issuer for U.S. federal, state and local income tax purposes. The Indenture will provide that each Holder thereof, by accepting a Senior Note, agrees, and each beneficial owner of Senior Notes is deemed to have agreed, to such treatment and agrees to report all income (or loss) in accordance with such characterization.

Governing Law

The Notes, the Indenture, the Collateral Management Agreement, the Collateral Administration Agreement, the Hedge Agreements, the Insurance Agreement, the Policy and the Purchase and Placement Agency Agreement will be governed by, and construed in accordance with, the law of the State of New York. The Issuer Charter, the declaration of trust executed in connection with the ordinary shares of the Issuer and the Administration Agreement will be governed by, and construed in accordance with, the law of the Cayman Islands.

USE OF PROCEEDS

The gross proceeds received from the issuance and sale of the Notes will be approximately $506,500,000 (including all Draws under the Class A-1A Notes). A portion of such proceeds (in addition to any up-front payment, if any, made to the Issuer under the Hedge Agreement) will be used (a) to pay the organizational fees and expenses of the Co-Issuers (including, without limitation, the legal fees and expenses of counsel to the Co-Issuers, the Initial Purchaser and the Collateral Manager), (b) to pay expenses relating to the acquisition of the Collateral Debt Securities (including the reimbursement of the Collateral Manager, its members and its affiliates and the Initial Purchaser for such expenses), (c) to pay the expenses of offering the Notes (including Initial Purchaser fees or similar fees payable in connection with the placement of the Notes), (d) to pay the Up-Front Collateral Management Fee to the Collateral Manager, (e) to make an initial deposit into the Expense Account of up to $100,000, (f) to make a deposit into the Discretionary Interest Shortfall Reserve Account of $500,000 and (g) to pay any up-front payments, if any, made in respect of the Hedge Agreements.

The proceeds received from the sale and issuance of the Notes, net of the foregoing, will be approximately $500,000,000 (including all Draws under the Class A-1A Notes) and will be used by the Issuer to purchase a diversified portfolio of securities that will satisfy the investment criteria described herein and will initially consist of:

(a) approximately $192,620,618 aggregate principal amount of Trust Preferred Securities and Real Estate Entity Securities issued by issuers related to (or issued directly by) REITs;

(b) approximately $197,033,767 aggregate principal amount of Trust Preferred Securities and Real Estate Entity Securities issued by issuers related to (or issued directly by) REOCs;

(c) approximately $82,958,000 aggregate principal amount of Trust Preferred Securities and Real Estate Entity Securities issued by issuers related to (or issued directly by) Homebuilding Companies;

(d) approximately $0 aggregate principal amount of Real Estate Entity Securities issued by issuers related to (or issued directly by) Limited Real Estate Entities;

(e) approximately $7,500,000 aggregate principal amount of CMBS and CMBS CDO Securities;

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(f) approximately $0 aggregate principal amount of Synthetic Securities referencing CMBS, CMBS CDO Securities or Real Estate Entity Securities issued by Homebuilding Companies; and

(g) approximately $75,251,385 aggregate principal amount of Loans.

The Issuer expects that, as of the Closing Date, it will have purchased (or entered into agreements to purchase for settlement following the Closing Date) Collateral Debt Securities having an aggregate Principal Balance of not less than U.S.$398,000,000. Any such proceeds not invested in Collateral Debt Securities or deposited into the Expense Account or the Discretionary Interest Shortfall Reserve Account will be deposited by the Trustee in the Uninvested Proceeds Account and invested in Eligible Investments pending the use of such proceeds for the purchase of Collateral Debt Securities as described herein, and, in certain limited circumstances described herein, for the payment of the Notes. The Issuer expects that, no later than the 180th day following the Closing Date, it will have purchased Collateral Debt Securities having an aggregate principal balance at least equal to the Aggregate Ramp-Up Par Amount. See “Security for the Senior Notes.”

RATINGS OF THE NOTES

It is a condition to the issuance of the Notes that the Senior Notes receive the following ratings:

Class of Notes S&P Moody’s Fitch

Class A-1A Notes AAA Aaa AAA Class A-1B Notes (1) AAA Aaa AAA Class A-2 Notes AAA Aaa AAA Class B Notes AA Aa2 AA Class C-1 Notes A A2 A Class C-2 Notes A A2 A Class D Notes A- NR(2) A- Class E-1 Notes BBB NR BBB Class E-2 Notes BBB NR BBB Class F Notes BB NR BB

(1) The Class A-1B Notes will be rated without giving effect to the Policy. (2) “NR” means this Class of Notes is not rated by this Rating Agency.

The ratings of the Senior Notes address the likelihood of ultimate payment to the Senior Noteholders of all distributions of stated interest and the ultimate payment in full of the principal amount of each Tranche of Senior Notes not later than the Stated Maturity.

A security rating is not a recommendation to buy, sell or hold securities and is subject to withdrawal at any time. There is no assurance that a rating will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by the assigning Rating Agency if in its judgment circumstances in the future so warrant.

The ratings assigned to the Senior Notes of each Tranche by each Rating Agency are based upon its assessment of the probability that the Collateral Debt Securities will provide sufficient funds to pay the Senior Notes of such Tranche (based upon the interest rate and principal balance of such Tranche). The ratings assigned to the Senior Notes of each Tranche by each Rating Agency are based largely upon such Rating Agency’s statistical analysis of historical default rates on debt securities with various ratings, the terms of the Indenture, the asset and interest coverage required for the Senior Notes (which is achieved through the subordination of the Subordinated Notes and certain Classes of Senior Notes as described herein), and the investment criteria which must be satisfied in order to acquire additional Collateral Debt Securities.

Within 7 Business Days after the Ramp-Up Completion Date, the Issuer (or the Collateral Manager on behalf of the Issuer) will be required to deliver an officer’s certificate to the Trustee, each Hedge Counterparty and each Rating Agency demonstrating compliance by the Issuer with its obligations under the Indenture and each

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applicable Coverage Test and each Collateral Quality Test, and certifying the satisfaction of the Collateral Debt Security Criteria and the Eligibility Criteria with respect to each Collateral Debt Security or, if on the Ramp-Up Completion Date, the Issuer shall be in default in the performance of its obligations under the Indenture or any of the Coverage Tests or Collateral Quality Tests shall fail to be satisfied, or any of the Collateral Debt Security Criteria or Eligibility Criteria shall fail to be satisfied with respect to any Collateral Debt Security, the Issuer (or the Collateral Manager on behalf of the Issuer) shall deliver an officer’s certificate to the Trustee, each Hedge Counterparty and each Rating Agency specifying details of such default or failure. In addition, the Issuer (or the Collateral Manager on behalf of the Issuer) will be required to notify each Rating Agency when a Collateral Debt Security becomes a Defaulted Security.

In the event the Issuer, or the Collateral Manager on behalf of the Issuer, provides a Ramp-Up Notice to the Rating Agencies, the Issuer, or the Collateral Manager on behalf of the Issuer, will request a Ratings Confirmation. Together with any Ramp-Up Notice, the Issuer (or the Collateral Manager on its behalf) shall also deliver to S&P the items specified in the Indenture and a copy of the Ramp-Up Completion Date Report. The Issuer will be deemed to have obtained a confirmation of the ratings assigned by a Rating Agency (other than S&P) on the Closing Date if (a) such Rating Agency does not notify the Issuer in writing within 30 days after receipt of a Ramp-Up Notice that any such rating (including shadow, private or confidential ratings, if any) has been reduced or withdrawn and (b) all Coverage Tests and Collateral Quality Tests are satisfied on the Ramp-Up Completion Date. In the event of a Ramp-Up Ratings Confirmation Failure, the Issuer will prepay principal of the Senior Notes as and to the extent necessary for each Rating Agency to confirm the rating assigned by it on the Closing Date, if any, to each Class of Notes. See “Description of the Notes—Mandatory Redemption” and “—Priority of Payments.” Notwithstanding the above, in the event the Issuer acquires Collateral Debt Securities on the Closing Date with an aggregate principal amount at least equal to the Aggregate Ramp-Up Par Amount, a Ratings Confirmation will be deemed to have occurred on the Closing Date.

To the extent required by applicable stock exchange rules, the Issuer will inform any such exchange on which any of the Notes are listed if any rating assigned by Moody’s, S&P or Fitch to such Notes is reduced or withdrawn.

The “S&P CDO Monitor” is the dynamic, analytical computer model developed by S&P and used to estimate default risk of Collateral Debt Securities and provided to the Collateral Manager and the Trustee on or before the Closing Date, as it may be modified by S&P in connection with its confirmation of the ratings of the Senior Notes following the Closing Date. The S&P CDO Monitor calculates the cumulative default rate of a pool of Collateral Debt Securities and Eligible Investments consistent with a specified benchmark rating level based upon S&P’s proprietary corporate debt default studies. In calculating the Class A Scenario Default Rate, the Class B Scenario Default Rate, the Class C Scenario Default Rate and the Class D Scenario Default Rate, the S&P CDO Monitor considers each obligor’s S&P Rating, the number of obligors in the portfolio, the obligor and industry concentration in the portfolio and the remaining weighted average maturity of the Collateral Debt Securities and Eligible Investments and calculates a cumulative default rate based on the statistical probability of distributions or defaults on the Collateral Debt Securities and Eligible Investments.

There can be no assurance that actual defaults of the Collateral Debt Securities or the timing of defaults will not exceed those assumed in the application of the S&P CDO Monitor or that recovery rates with respect thereto will not differ from those assumed in the S&P CDO Monitor Test. S&P makes no representation that actual defaults will not exceed those determined by the S&P CDO Monitor. None of the Collateral Manager or the Co-Issuers makes any representation as to the expected rate of defaults of the Collateral Debt Securities or the timing of defaults or as to the expected recovery rate or the timing of recoveries.

MATURITY, PREPAYMENT AND YIELD CONSIDERATIONS

As stated elsewhere herein, the redemption of the Subordinated Notes will not occur until the Senior Notes have been paid in full. The Stated Maturity of the Notes is the Distribution Date in October 2042. The Notes will mature at their Stated Maturity unless redeemed or repaid prior thereto. However, the average lives of the Notes may be less than the number of years until the Stated Maturity. Accordingly, prospective investors should make their own determinations of the expected weighted average lives and maturity of the Notes and, accordingly, their own

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evaluation of the merits and risks of an investment in the Notes. See “Risk Factors—Relating to the Notes—The Average Lives of the Notes May Vary.”

Average life refers to the average number of years that will elapse from the date of delivery of a security until each Dollar of the principal of such security will be paid to the investor.

The average lives of the Notes will be determined by the amount and frequency of principal payments, which are dependent upon any payments received at or in advance of the scheduled maturity of Collateral Debt Securities (whether through prepayment, sale, maturity, redemption, default or other liquidation or disposition). The actual average lives of the Notes will also be affected by the financial condition of the issuers of the underlying Collateral Debt Securities and the characteristics of such obligations, including the existence and frequency of exercise of any optional or mandatory redemption or prepayment features, the prevailing level of interest rates, the redemption price, the actual default rate and the actual level of recoveries on any Defaulted Securities and the frequency of tender or exchange offers for such Collateral Debt Securities, as well as the characteristics of Collateral Debt Securities acquired by the Issuer following the Closing Date. Any disposition of a Collateral Debt Security may change the composition and characteristics of the Collateral Debt Securities and the rate of payment thereon, and, accordingly, may affect the actual average lives of the Notes. The rate of future defaults and the amount and timing of any cash realization from Defaulted Securities also will affect the average lives of the Notes.

THE CO-ISSUERS

General

The Issuer was incorporated under The Companies Law (2004 Revision) of the Cayman Islands as an exempted company with limited liability for the sole purpose of acquiring the Collateral Debt Securities, issuing the Notes and engaging in certain related transactions. The Issuer was incorporated on September 27, 2006 and is in good standing under the laws of the Cayman Islands, with registered number 174787. The registered office of the Issuer is at the offices of Maples Finance Limited, P.O. Box 1093 GT, Queensgate House, South Church Street, George Town, Grand Cayman, Cayman Islands, telephone number (345) 945-7099. The Issuer is a special purpose entity and has no prior operating experience and the Issuer will not have any substantial assets other than the Collateral pledged to secure the Senior Notes and the Issuer’s other obligations to the Secured Parties.

The entire authorized share capital of the Issuer will consist of 50,000 ordinary shares, par value $1.00 per share (250 of which will be issued to and held in trust for charitable purposes by Maples Finance Limited, a licensed trust company incorporated in the Cayman Islands, under the terms of a declaration of trust).

Paragraph 3 of the Memorandum and Articles of Association of the Issuer (the “Issuer Charter”) sets out the objects of the Issuer, which are unrestricted and include the business to be carried out by the Issuer in connection with the issuance of the Notes.

Maples Finance Limited will act as the administrator (in such capacity, the “Administrator”) of the Issuer. The office of the Administrator will serve as the registered office of the Issuer. Through such office and pursuant to the terms of an administration agreement by and between the Administrator and the Issuer (the “Administration Agreement”), the Administrator will perform various administrative functions in the Cayman Islands on behalf of the Issuer, including the provision of certain clerical, administrative and other services until termination of the Administration Agreement. In consideration of the foregoing, the Administrator will receive various fees and other charges payable by the Issuer at rates provided for in the Administration Agreement and will be reimbursed for expenses.

The Administrator will be subject to the overview of the Board of Directors of the Issuer. The directors of the Issuer are Helen Allen and Christopher Watler, each of whom is an officer of the Administrator and each of whose offices are at P.O. Box 1093 G.T., Queensgate House, South Church Street, George Town, Grand Cayman, Cayman Islands. The Administration Agreement may be terminated by either the Issuer (acting upon the recommendation of the Collateral Manager) or the Administrator in accordance with the provisions thereof. Upon such termination, the Issuer will promptly appoint a replacement administrator.

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The Administrator’s principal office is at P.O. Box 1093 G.T., Queensgate House, South Church Street, George Town, Grand Cayman, Cayman Islands.

The Co-Issuer, a special purpose vehicle, was formed by the Issuer in the State of Delaware on November 27, 2006, with the State Identification No. 4257351 pursuant to a Certificate of Formation and a limited liability company agreement dated January 18, 2007 and is in good standing under the laws of the State of Delaware. The registered office of the Co-Issuer will be c/o The Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, DE, County of New Castle, Zip Code 19801. The sole member of the Co-Issuer will be the Issuer. The manager of the Co-Issuer will be Donald Puglisi and may be contacted at the registered office of the Co-Issuer. The telephone number is: +1 (302) 738-6680. The Co-Issuer will have no prior operating experience. It will be capitalized solely to the extent of the contribution by its member, will have no other assets other than such contribution, will have no debt other than as the Co-Issuer of the Co-Issued Notes and will not pledge any assets to secure the Notes. The Co-Issuer will not have any interest in the Collateral Debt Securities or other assets held by the Issuer. The Co-Issuer will not co-issue the Class F Notes or the Subordinated Notes.

The Co-Issued Notes are obligations only of the Co-Issuers, and the Class F Notes and the Subordinated Notes are obligations only of the Issuer. None of the Notes are obligations of the Trustee, the Collateral Manager, the Initial Purchaser, any Hedge Counterparty, the Insurer, any shareholder of the Issuer or the Co-Issuer or any of their respective affiliates or any directors or officers of the Issuer or the Co-Issuer.

Capitalization

The initial capitalization of the Issuer as of the Closing Date, after giving effect to the issuance of the Notes, but before deducting expenses of the offering of the Notes and the organizational expenses of the Issuer, is expected to be as follows:

Class A-1A Notes $150,000,000 Class A-1B Notes $100,000,000 Class A-2 Notes $100,000,000 Class B Notes $34,000,000 Class C-1 Notes $16,000,000 Class C-2 Notes $15,000,000 Class D Notes $10,000,000 Class E-1 Notes $15,000,000 Class E-2 Notes $7,000,000 Class F Notes $24,000,000 Subordinated Notes $35,500,000

Total Debt $506,500,000 Ordinary Shares $250

Total Equity $250 Total Capitalization $506,500,250

The Issuer will not have any material assets other than the Collateral and its membership interests in the Co-Issuer.

As of the Closing Date, the authorized share capital of the Issuer will be 50,000 ordinary shares, par value $1.00 per share, 250 of which will be issued and fully-paid.

The Co-Issuer will be capitalized solely to the extent of the contribution by its member, will have no other assets other than such contribution, will have no debt other than as Co-Issuer of the Co-Issued Notes and will not pledge any assets to secure the Notes. The Indenture will restrict the Issuer from taking any action that would constitute an abuse of its control of the Co-Issuer.

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Business

The Indenture will provide that the activities of the Issuer are limited to (a) investing in and disposing of Collateral Debt Securities and Eligible Investments, (b) entering into and performing its obligations under the Indenture, the Collateral Management Agreement, the Collateral Administration Agreement and the Purchase and Placement Agency Agreement, (c) entering into and performing its obligations under the Hedge Agreements, (d) issuing and selling the Notes, (e) pledging the Collateral as security for its obligations in respect of the Senior Notes and otherwise for the benefit of the Secured Parties, (f) owning the Co-Issuer, (g) other activities incidental to the foregoing and paying the expenses of the Issuer incurred in the ordinary course of its business otherwise permitted under the Indenture and (h) doing or performing any action or thing which is required by or ancillary to the attainment of the objects specified in clauses (a) through (g) above, including supplementing or restructuring the transactions contemplated by the objects specified in clauses (a) through (g) above or any of the agreements, deeds or other documents entered into by the Issuer pursuant thereto, and entering into further agreements, understandings and contracts and executing certificates, affidavits, notices and any other documentation in respect of the transactions contemplated by the activities specified in clauses (a) through (g) above. The Issuer has no employees and no subsidiaries other than the Co-Issuer.

The Co-Issuer’s Certificate of Formation provides that the activities of the Co-Issuer are limited to the issuance of the Co-Issued Notes, and the Co-Issuer is prohibited from undertaking any other business. The Co-Issuer will not pledge any assets to secure the Notes and will not have any interest in the Collateral held by the Issuer.

There can be no assurance that the Notes will be repaid before their Stated Maturity. See “Maturity, Prepayment and Yield Considerations.” The Trustee will, if and for so long as the Notes are listed on the Irish Stock Exchange, (a) cause notice of the dissolution of the Issuer to be delivered to the Company Announcements Office of the Irish Stock Exchange not less than 30 days prior to the date thereof and (b) deliver a notice of withdrawal to the Company Announcements Office of the Irish Stock Exchange not less than three Business Days prior to the scheduled date of dissolution.

Consolidation, Merger or Transfer of Assets

Except under the limited circumstances set forth in the Issuer Charter and the Indenture, the Issuer may not consolidate with, merge into, or transfer or convey all or substantially all of its assets to, any other corporation, partnership, trust or other person or entity.

SECURITY FOR THE SENIOR NOTES

General

The Collateral securing the Senior Notes will consist of: (a) the Collateral Debt Securities and the Equity Securities; (b) the rights of the Issuer under the Hedge Agreements; (c) the Payment Account, the Interest Collection Account, the Principal Collection Account, the Uninvested Proceeds Account, if any, the Hedge Counterparty Collateral Accounts, the Expense Account, the Synthetic Security Collateral Account, the Discretionary Interest Shortfall Reserve Account, the Semi-Annual Interest Reserve Account, amounts on deposit therein and Eligible Investments purchased with funds on deposit in such accounts; (d) solely for the benefit of the Insured Noteholders, the Insurance Documents, to the extent of any rights of the Issuer therein; (e) the rights of the Issuer under the Collateral Management Agreement and the Collateral Administration Agreement; (f) all cash and money delivered to the Trustee; and (g) all proceeds of the foregoing.

Collateral Debt Securities

The description of certain terms of the Collateral Debt Securities contained herein contains summaries of certain material documents. The summaries do not purport to be complete and are qualified in their entirety by reference to such documents, copies of which will be made available to offerees upon request. In addition, the description of Collateral Debt Securities contained herein contains generalizations and the specific terms of any particular Collateral Debt Security may vary from the general descriptions contained herein. Requests and inquiries

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regarding this Offering Circular or such material documents should be directed to Merrill Lynch, Pierce, Fenner & Smith Incorporated, 4 World Financial Center, 7th Floor, New York, New York 10281, Attention: Structured Credit Products.

Collateral Debt Securities consist of U.S. dollar denominated (a) Trust Preferred Securities issued by trust subsidiaries of real estate entities qualifying and electing to be treated as REITs for U.S. federal income tax purposes or any subsidiaries thereof, by REOCs or by Homebuilding Companies or any subsidiary thereof, (b) Senior Securities issued by Senior Securities Issuers, (c) Subordinated Securities issued by Subordinated Securities Issuers, (d) CMBS issued by CMBS Issuers, (e) CMBS CDO Securities issued by CMBS CDO Issuers that primarily own a portfolio of CMBS and/or commercial real estate loans, (f) Synthetic Securities referencing CMBS, CMBS CDO Securities or Real Estate Entity Securities issued by Homebuilding Companies that are issued by or entered into with Synthetic Security Counterparties and (g) Senior Secured Loans, Specified Second Position Loans, Senior Unsecured Loans, Non-Senior Loans or one or more trust certificates, each of which represents an ownership interest in a newly formed grantor trust into which such Loans have been deposited under a Master Trust Agreement. The Trust Preferred Securities, Senior Securities, Subordinated Securities, CMBS, CMBS CDO Securities, Synthetic Securities and Loans are referred to herein collectively as the “Collateral Debt Securities”; provided that, in order for a security to be a Collateral Debt Security when purchased or committed to be purchased, it must meet the criteria to qualify as a Collateral Debt Security and satisfy other Eligibility Criteria applicable to such security. If the Corresponding Debentures issued by a Real Estate Entity are exchanged for related Trust Preferred Securities, thereafter such Corresponding Debentures will become “Collateral Debt Securities”.

A substantial portion of the Collateral Debt Securities pledged to secure the Senior Notes is expected to consist of Trust Preferred Securities that, at the time of purchase, meet the criteria necessary to qualify as a Collateral Debt Security and satisfy the Eligibility Criteria. Trust Preferred Securities are securities that have characteristics that are common both to preferred stock and debt securities. Trust Preferred Securities of the type to be acquired by the Issuer are generally issued by a statutory trust (each, a “Trust Preferred Securities Issuer”) sponsored by a Real Estate Entity (other than a Limited Real Estate Entity) or a holding company of one or more of such entities that owns a portion (generally 3%) of the total capital of the underlying trust. The property of each Trust Preferred Securities Issuer consists primarily of Corresponding Debentures of the applicable Real Estate Entity. As a general matter, proceeds of the issuance of the Notes (net of applicable fees and expenses) will finance the purchase of the Trust Preferred Securities, either directly or indirectly, from the Trust Preferred Securities Issuer, which in turn finances the purchase by the Trust Preferred Securities Issuer of the Corresponding Debentures from the Real Estate Entity.

On the Closing Date, the Issuer expects to purchase or identify for purchase $398,074,296 in aggregate Principal Balance of Collateral Debt Securities consisting of approximately (by aggregate Principal Balance) 28.59% Trust Preferred Securities, 50.64% Real Estate Entity Securities, 0% CMBS, 1.88% CMBS CDO Securities, 0% Synthetic Securities referencing CMBS, CMBS CDO Securities or Real Estate Entity Securities issued by Homebuilding Companies and 18.88% Loans.

The Aggregate Ramp-Up Par Amount to be achieved on or prior to the Ramp-Up Completion Date is approximately $500,000,000. The purchase of any Collateral Debt Security is further subject to compliance with the other Eligibility Criteria. See “—Acquisition of Collateral Debt Securities after the Closing Date.”

A security will be eligible to be a Collateral Debt Security if it is a U.S. dollar-denominated (a) Trust Preferred Security issued by a Trust Preferred Securities Issuer that meets the requirements set forth in the Indenture, (b) a Senior Security issued by a Senior Securities Issuer that meets the requirements set forth in the Indenture, (c) a Subordinated Security issued by a Subordinated Securities Issuer that meets the requirements set forth in the Indenture, (d) CMBS issued by a CMBS Issuer that meets the requirements set forth in the Indenture, (e) a CMBS CDO Security issued by a CMBS CDO Issuer that meets the requirements set forth in the Indenture, (f) a Synthetic Security that meets the requirements set forth in the Indenture or (g) a Senior Secured Loan, Specified Second Position Loan or Senior Unsecured Loan that meets the requirements set forth in the Indenture, in each case, at the time of its initial purchase by the Issuer and pledge to the Trustee:

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(i) provides for periodic payment of interest thereon in cash no less frequently than semi-annually (subject, in the case of certain Trust Preferred Securities, to deferrals thereof in accordance with clause (vii) below);

(ii) provides for a fixed amount of principal to be payable on or before the maturity thereof;

(iii) is not a Defaulted Security or a Credit Risk Security;

(iv) is not the subject of an offer to acquire, exchange or tender;

(v) matures (including as a result of any put right to either the issuer thereof or any other put counterparty with a public senior unsecured rating from each of S&P and Moody’s at least equal to the senior unsecured rating of the issuer thereof) on or before the Stated Maturity Date of the Notes or, in the case of CMBS or CMBS CDO Securities, has an expected maturity occurring prior to the Stated Maturity of the Notes;

(vi) is not a debt obligation pursuant to which future advances may be required to be made to the obligor, except a Synthetic Security for which the Issuer has deposited or is required to deposit in the Synthetic Security Collateral Account an amount sufficient to meet such future payment obligations;

(vii) in the case of certain Trust Preferred Securities that permit deferrals, provides that distributions of interest thereon may not at any time be deferred for a Deferral Period of more than eighteen (18) months; provided that (A) such deferral of interest may not extend past the maturity date of such Collateral Debt Security and (B) all deferred and capitalized interest shall have been paid in cash before a subsequent Deferral Period may begin;

(viii) does not have payments subject to, and, in the case of Trust Preferred Securities, the related Corresponding Debenture does not have payments subject to, foreign or United States withholding tax, unless the related obligor or paying agent is required to pay to the Issuer or the Trust Preferred Securities Issuer, as applicable, such additional amount as is necessary to ensure that the net amount actually received by the Issuer or the Trust Preferred Securities Issuer, as applicable (free and clear of taxes, whether assessed against such obligor, the Issuer or the Trust Preferred Securities Issuer), will equal the full amount that the Issuer or the Trust Preferred Securities Issuer, as applicable, would have received had no deduction or withholding occurred;

(ix) is in registered form for U.S. federal income tax purposes and was issued (and any related Corresponding Debenture was issued) after July 18, 1984;

(x) is not an Equity Security and is not by its terms exchangeable for, or convertible into, an Equity Security;

(xi) would not cause the Issuer, the Co-Issuer or the pool of Collateral to be required to register under the 1940 Act;

(xii) is not Margin Stock;

(xiii) is not currently deferring or capitalizing interest, and, unless such deferred or capitalized interest is currently being repaid on a timely basis, no such deferred or capitalized interest is outstanding and unpaid;

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(xiv) in the case of a Trust Preferred Security, provides for the distribution of the related Corresponding Debenture to holders of the applicable Trust Preferred Security in the event of any dissolution of the Trust Preferred Securities Issuer;

(xv) in the case of a Trust Preferred Security, Senior Security, Subordinated Security or CMBS CDO Security, is a security with respect to which any of the following is true: (A) the Issuer has received an opinion of counsel opining that the ownership of such security will not subject the Issuer to net income tax in the United States for federal income tax purposes; (B) the Issuer has received an opinion of counsel opining that such security will be treated as debt for U.S. federal income tax purposes; (C) the Issuer has received the tax opinion rendered at the issuance of such security opining that such security will be treated as debt for U.S. federal income tax purposes or includes a statement that such security will be treated as debt for U.S. federal income tax purposes; (D) the Issuer has received documents pursuant to which such security was offered, if any, that include or refer to an opinion of counsel opining that such security will be treated as debt for U.S. federal income tax purposes; (E) if there are no offering documents relating to such security, the Issuer has received both a copy of a placement agency agreement or purchase agreement (or other equivalent document) relating to such security, which agreement requires the delivery of an opinion of counsel opining that such security will be treated as debt for U.S. federal income tax purposes prior to the issuance of such security, and a written certification or confirmation from the initial purchaser (or other equivalent party) for such security stating that such condition precedent to the issuance of such security was not waived; (F) such security is a Senior Security and the Issuer or the Collateral Manager reasonably believes that such security will be treated as debt for U.S. federal income tax purposes; or (G) if such security is a certificate of beneficial interest in a trust treated (as evidenced by an opinion of counsel or a reference to an opinion of counsel in documents pursuant to which such security was offered) as a grantor trust for U.S. federal income tax purposes, then any of the conditions specified in clauses (A), (B), (C), (D), (E) or (F) may be satisfied by reference to each asset held pursuant to such grantor trust arrangement rather than by reference to such beneficial ownership interest; provided that a limited amount of Collateral Debt Securities not to exceed 10% of the aggregate Principal Balance of Collateral Debt Securities as of the Ramp-Up Completion Date may be purchased by the Issuer in the secondary market if the opinions described in clauses (A), (B), (C), (D) or (E) were not rendered but the Issuer or the Collateral Manager otherwise reasonably believes (based on advice of nationally recognized tax counsel experienced in such matters) that such security will be treated as debt for U.S. federal income tax purposes and will not cause the Issuer to be engaged in the conduct of a trade or business in the United States;

(xvi) in the case of CMBS, has a public rating or credit estimate of at least “Baa3” and is not on watch for credit downgrade by Moody’s and has a rating of at least “BBB-” by S&P;

(xvii) in the case of CMBS CDO Securities, has a public rating or credit estimate of at least “Ba3” and is not on watch for credit downgrade by Moody’s and has a rating of at least “BB-” by S&P;

(xviii) in the case of CMBS, an opinion from tax counsel states that the issuer either qualifies as a REMIC or will not be subject to net income tax, in each case for U.S. federal income tax purposes; and

(xix) is not assigned by S&P a rating that includes the subscript “r,” “t,” “p,” “pi,” or “q”.

The purchase of any Collateral Debt Security is further subject to compliance with the Eligibility Criteria. The criteria set forth above in clause (i) through (xix) are sometimes referred to herein as the “Collateral Debt Security Criteria”. In addition, no Additional Collateral Debt Security may be purchased on any date after the

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Ramp-Up Completion Date unless the criteria set forth in “—Criteria for Purchase of Collateral—Additional Eligibility Criteria for Additional Collateral Debt Securities” are satisfied.

The Portfolio

It is expected that on the Closing Date, the Issuer will have purchased (or entered into agreements to purchase for settlement following the Closing Date) Collateral Debt Securities having an aggregate Principal Balance of not less than $398,000,000. In addition, unless the Issuer has on the Closing Date acquired (or entered into agreements to purchase for settlement following the Closing Date) Collateral Debt Securities with an aggregate principal amount at least equal to the Aggregate Ramp-Up Par Amount, the Issuer will, pursuant to the terms of the Indenture, purchase additional Collateral Debt Securities, such that the total par amount of Collateral Debt Securities held by the Issuer following such purchase will be approximately equal to the Aggregate Ramp-Up Par Amount. There can be no assurance, however, that the Collateral Debt Securities held by the Issuer on the Ramp-Up Completion Date will be equal to such amounts. See “Risk Factors—Relating to the Notes—The Notes Are Non-Recourse Obligations; Investors Must Rely on Available Collections from the Collateral Debt Securities and Will Have No Other Source for Payment.”

Certain Terms of the Collateral Debt Securities

Certain Terms of the Trust Preferred Securities

On the Closing Date, the Issuer expects to have purchased approximately $113,800,000 in aggregate Principal Balance of Trust Preferred Securities issued by Trust Preferred Securities Issuers of 9 different Real Estate Entities.

The following brief summary of certain terms and provisions that are typical of Trust Preferred Securities refers only to the Trust Preferred Securities to be acquired by the Issuer on the Closing Date, does not purport to be complete and is subject to, and qualified in its entirety by reference to, the actual provisions of the respective Trust Agreement and Corresponding Debenture. Copies of the form of Trust Agreement and the form of Corresponding Debenture may be obtained by Noteholders upon request in writing to the Trustee at its Corporate Trust Office and by prospective purchasers of Notes from the Initial Purchaser.

The Trust Preferred Securities issued by each Trust Preferred Securities Issuer have been or will be issued pursuant to the terms of an Amended and Restated Trust Agreement (in respect of such Trust Preferred Securities Issuer, the “Trust Agreement”). Each Trust Preferred Securities Issuer will be organized as a statutory trust. The Real Estate Entity of each Trust Preferred Securities Issuer will own all of the beneficial interests represented by common securities of such Trust Preferred Securities Issuer (in respect of such Trust Preferred Securities Issuer, the “Common Securities”, and together with the related Trust Preferred Securities, the “Trust Preferred Issuer Securities”). The Issuer will own less than 100% of the principal balance of many of the Trust Preferred Securities issued under a Trust Agreement and therefore may not be able to control any matters, including payment-related matters, as to which holders of the related Trust Preferred Securities are entitled to vote, give their consent or take action. The voting, consent and similar requirements applicable to the foregoing vary from transaction to transaction.

Each Trust Preferred Securities Issuer has used or will use the proceeds from its sale of its Trust Preferred Securities to purchase the Corresponding Debentures. Each Trust Preferred Securities Issuer’s only source of cash to make payments on its Trust Preferred Securities will be the payments it receives from its Real Estate Entity on its Corresponding Debentures that are allocable to such Trust Preferred Securities. In each case where the Real Estate Entity is a Subsidiary of the related REIT, REOC or Homebuilding Company, the parent of the related Real Estate Entity (the “Parent Real Estate Entity”) will provide a guarantee with respect to the Corresponding Debentures issued by the subsidiary Real Estate Entity (in respect of such Real Estate Entity, the “Parent Guarantee”). See “—Terms of the Parent Guarantees”. The Parent Guarantee, when taken together with the Real Estate Entity’s obligations under the Corresponding Debentures, the related Real Estate Entity Indenture and the related Trust Agreement, will provide a full and unconditional guarantee on a subordinated basis by such Real Estate Entity of amounts due on the Trust Preferred Securities of the subsidiary Trust Preferred Securities Issuer.

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The Trust Preferred Securities will be issued in definitive and/or global form and will be denominated in a liquidation amount that will be equal to the principal amount of the Corresponding Debentures less the liquidation amount of the Common Securities, and the liquidation amount of such Trust Preferred Securities is referred to herein as the “Principal Balance” of such Trust Preferred Securities.

Distributions

Distributions on the Trust Preferred Securities will be payable quarterly or semi-annually in arrears on the respective payment dates set forth in the applicable Trust Agreement (each such date, subject to the second succeeding paragraph, a “Trust Preferred Securities Distribution Date”). Distributions on the Trust Preferred Securities will be payable only to the extent that interest payments are made in respect of the related Corresponding Debentures and to the extent the related Trust Preferred Securities Issuer has funds legally available therefor.

The period (a) from, and including, the date of original issuance of the Trust Preferred Securities to, but excluding, the initial Trust Preferred Securities Distribution Date and (b) thereafter, from, and including, the first day following the end of the preceding Distribution Period to, but excluding, the Trust Preferred Securities Distribution Date or, in the case of the last Distribution Period, the optional redemption date for the related Trust Preferred Securities (the “Trust Preferred Securities Optional Redemption Date”), Trust Preferred Securities Special Redemption Date or Trust Preferred Securities Maturity Date, as applicable, are the “Distribution Periods” for the Trust Preferred Securities.

If any Trust Preferred Securities Distribution Date falls on a day that is not a Business Day, then distributions payable on such date will be paid on the next succeeding Business Day. If any Trust Preferred Securities Maturity Date, Trust Preferred Securities Optional Redemption Date or Trust Preferred Securities Special Redemption Date falls on a day that is not a Business Day, then the principal, premium, if any, and interest payable on such date will be paid on the next succeeding Business Day, and no additional interest will accrue in respect of such payment made on such next succeeding Business Day.

Certain Real Estate Entities will have the right to defer payments of interest on their Corresponding Debentures by extending the interest payment period thereunder, at any time, and from time to time, for generally up to four (4) (or, in certain cases, six (6) or more) consecutive quarterly periods (each, an “Extension Period”). No Extension Period will end on a date other than a Trust Preferred Securities Distribution Date of the related Trust Preferred Securities or extend beyond the Trust Preferred Securities Maturity Date, any Trust Preferred Securities Optional Redemption Date or the Trust Preferred Securities Special Redemption Date of the related Trust Preferred Securities. During any Extension Period, interest will continue to accrue on the Corresponding Debentures at their applicable rate, and interest on such deferred accrued interest will also accrue at the applicable rate from the date such accrued interest would have been payable were it not for the Extension Period, each to the extent permitted by law (“Deferred Interest”). At the end of any such Extension Period, such Real Estate Entity will be required to pay to the Trust Preferred Securities Issuer, and such Trust Preferred Securities Issuer will be required to pay to the Issuer, to the extent allocable to the Trust Preferred Securities, all interest then accrued and unpaid on the Corresponding Debentures (including Deferred Interest).

Prior to the termination of any Extension Period, the applicable Real Estate Entity may further extend such Extension Period; provided that such Extension Period, together with all such previous and further consecutive extensions thereof, generally may not exceed four (4) (or, in certain cases, six (6) or more) consecutive quarterly periods and may not end on a date other than a Trust Preferred Securities Distribution Date of the related Trust Preferred Securities or extend beyond the Trust Preferred Securities Maturity Date, any Trust Preferred Securities Optional Redemption Date or the Trust Preferred Securities Special Redemption Date of the related Trust Preferred Securities. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest (including Deferred Interest), such Real Estate Entity may commence a new Extension Period, subject to the foregoing requirements.

During any Extension Period, (a) the applicable Real Estate Entity may not, except in certain limited circumstances, make any payment of principal of or premium, if any, or interest on or repay, repurchase or redeem any of its debt securities that rank pari passu in all respects with or junior in interest to its Corresponding Debentures and (b) any Parent Real Estate Entity may not, except in certain limited circumstances, make any

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payment under any of its guarantees that rank pari passu in all respects with or junior in interest to its Parent Guarantee.

During any Extension Period, the Trust Preferred Securities Issuer holding the related Corresponding Debentures will similarly defer distributions on its Trust Preferred Securities. If distributions on any Trust Preferred Securities are deferred as a result of an Extension Period, the distributions otherwise due during such Extension Period will be paid on the date that such Extension Period terminates to the extent that the related Trust Preferred Securities Issuer has funds legally available therefor.

Redemption

Each Trust Preferred Securities Issuer will redeem its Trust Preferred Securities when the related Corresponding Debentures are paid at maturity (in each case, the “Trust Preferred Securities Maturity Date”).

Each Real Estate Entity may redeem its Corresponding Debentures at its option, in whole or in part, on any Trust Preferred Securities Distribution Date on or after the date specified therein. In addition, each Real Estate Entity may redeem its Corresponding Debentures at the Trust Preferred Securities Special Redemption Price, in whole but not in part, upon the occurrence and continuation of a Trust Preferred Securities Special Event (the “Trust Preferred Securities Special Redemption Date”).

The right of a Real Estate Entity to redeem its Corresponding Debentures prior to maturity is generally subject to the giving of not less than thirty (30) nor more than sixty (60) days’ prior written notice, and the Property Trustee will have given not less than thirty (30) nor more than sixty (60) days’ prior written notice of such redemption to the holders of the Trust Preferred Securities.

Upon the maturity or earlier redemption, in whole or in part, of the Corresponding Debentures of any Real Estate Entity (other than in connection with the distribution of Corresponding Debentures to holders of the related Trust Preferred Securities), the proceeds paid upon such maturity or redemption to the related Trust Preferred Securities Issuer shall concurrently be applied to redeem, on a pro rata basis (except as otherwise specified below under “—Subordination of Common Securities”), at the Trust Preferred Securities Redemption Price, its Trust Preferred Securities and Common Securities having an aggregate Principal Balance equal to the aggregate principal amount of the related Corresponding Debentures repaid upon such maturity or redemption.

Trust Preferred Securities Optional Redemption Price

In the event of an optional redemption with respect to any Trust Preferred Securities on any Trust Preferred Securities Optional Redemption Date, the redemption price of the related Corresponding Debentures (the “Trust Preferred Securities Optional Redemption Price”) required to be paid by the applicable Real Estate Entity to its subsidiary Trust Preferred Securities Issuer and by such Trust Preferred Securities Issuer to redeem its Trust Preferred Securities and Common Securities, on a pro rata basis (except as otherwise specified below under “—Subordination of Common Securities”), will be an amount in cash equal to 100% of the principal amount of such Corresponding Debentures being redeemed plus unpaid interest accrued thereon to the related Trust Preferred Securities Optional Redemption Date.

Trust Preferred Securities Special Redemption Price

In the event of a redemption as a result of a Trust Preferred Securities Special Event, the redemption price of the related Corresponding Debentures (the “Trust Preferred Securities Special Redemption Price”) required to be paid by the applicable Real Estate Entity to its subsidiary Trust Preferred Securities Issuer and by such Trust Preferred Securities Issuer to redeem its Trust Preferred Securities and Common Securities, on a pro rata basis (except as otherwise specified below under “—Subordination of Common Securities”), generally will be an amount in cash equal to the principal amount of such Corresponding Debentures multiplied by the “Redemption Factor” determined with reference to the date of such redemption, plus unpaid interest accrued thereon to the Trust Preferred Securities Special Redemption Date. Generally, the “Redemption Factor” for the Trust Preferred Securities will be

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107.5%, for Trust Preferred Securities Redemption Dates occurring prior to the Trust Preferred Securities Optional Redemption Date, and will generally be 100% thereafter.

Trust Preferred Securities Maturity Redemption Price

In the event of a mandatory redemption of Trust Preferred Securities on the Trust Preferred Securities Maturity Date, the price for the related Corresponding Debentures (the “Trust Preferred Securities Maturity Redemption Price”, and together with the Trust Preferred Securities Optional Redemption Price and the Trust Preferred Securities Special Redemption Price, the “Trust Preferred Securities Redemption Price”) required to be paid by the applicable Real Estate Entity to its subsidiary Trust Preferred Securities Issuer and by such Trust Preferred Securities Issuer to redeem its Trust Preferred Securities will be an amount in cash equal to 100% of the outstanding principal amount of such Corresponding Debentures plus all unpaid interest accrued thereon to the related Trust Preferred Securities Maturity Date.

Liquidation and Distribution upon Dissolution

In the event of the voluntary or involuntary liquidation, dissolution, winding-up or termination of a Trust Preferred Securities Issuer (each, a “Liquidation”), holders of the Trust Preferred Securities of such Trust Preferred Securities Issuer will be entitled to receive out of the assets of such Trust Preferred Securities Issuer legally available for distribution to holders of such Trust Preferred Securities, after satisfaction of liabilities to creditors of such Trust Preferred Securities Issuer (to the extent not satisfied by the applicable Real Estate Entity), an amount in cash equal to the Principal Balance of such Trust Preferred Securities plus unpaid distributions accrued thereon to the date of payment (such amount being the “Liquidation Distribution”), unless (a) the related Corresponding Debentures have been redeemed in full in accordance with their terms or (b) the related Corresponding Debentures in an aggregate principal amount equal to the aggregate Principal Balance of such Trust Preferred Securities and related Common Securities have been distributed on a pro rata basis to holders of the related Trust Preferred Securities in exchange therefor as discussed below.

After satisfaction of liabilities to creditors of such Trust Preferred Securities Issuer, each Real Estate Entity has the right at any time to dissolve its subsidiary Trust Preferred Securities Issuer and to cause all of the related Corresponding Debentures to be distributed to holders of the related Trust Preferred Securities on a pro rata basis in accordance with the aggregate principal balance thereof.

Each Trust Preferred Securities Issuer will dissolve on the first to occur of the following: (a) the expiration of the term of such Trust Preferred Securities Issuer; (b) the bankruptcy of its Real Estate Entity or such Trust Preferred Securities Issuer; (c) the filing of a certificate of dissolution of its Real Estate Entity or the revocation of the charter of its Real Estate Entity (other than in connection with a permitted merger, consolidation or similar transaction); (d) the distribution to holders of its Trust Preferred Securities of the related Corresponding Debentures as permitted in the preceding paragraph; (e) the entry of a decree of a judicial dissolution of such Trust Preferred Securities Issuer or its Real Estate Entity; or (f) when all of its Trust Preferred Securities are then subject to redemption and the amounts necessary for redemption thereof shall have been paid to the holders in accordance with the terms of such Trust Preferred Securities. As soon as practicable after the dissolution of a Trust Preferred Securities Issuer and upon completion of the winding up of such Trust Preferred Securities Issuer, such Trust Preferred Securities Issuer shall terminate upon the filing of a certificate of cancellation with the Secretary of State of the state where the trust was formed.

If a Liquidation of a Trust Preferred Securities Issuer occurs as described in clauses (a), (b), (c) or (e) above, such Trust Preferred Securities Issuer shall be liquidated by distributing to the holders of its Trust Preferred Issuer Securities, after satisfaction of liabilities to creditors of such Trust Preferred Securities Issuer, to the extent not satisfied by its Real Estate Entity, all of the related Corresponding Debentures on a pro rata basis, unless such distribution is determined by the Property Trustee of such Trust Preferred Securities Issuer not to be practical, in which event such holders will be entitled to receive out of the assets of such Trust Preferred Securities Issuer legally available for distribution to such holders, after satisfaction of liabilities to creditors of such Trust Preferred Securities Issuer to the extent not satisfied by its Real Estate Entity and except as otherwise specified below under “—Subordination of Common Securities,” an amount in cash equal to the Liquidation Distribution. A Liquidation of the related Trust Preferred Securities Issuer pursuant to clause (d) above shall occur only if the Property Trustee of

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such Trust Preferred Securities Issuer determines that the distribution to the holders of its Trust Preferred Issuer Securities, after satisfaction of liabilities to creditors of such Trust Preferred Securities Issuer, of the related Corresponding Debentures is practical, and such distribution occurs. As used herein, the term “Property Trustee” means the trustee pursuant to the Trust Agreement for the Trust Preferred Securities Issuers.

If, upon any Liquidation, the Liquidation Distribution can be paid only in part because the related Trust Preferred Securities Issuer has insufficient assets available to pay in full the aggregate Liquidation Distribution on its Trust Preferred Issuer Securities, then amounts payable directly by such Trust Preferred Securities Issuer on such Trust Preferred Issuer Securities shall be paid to the holders of the Trust Preferred Securities and Common Securities on a pro rata basis except as otherwise specified below under “—Subordination of Common Securities”.

Subordination of Common Securities

The rights of holders of such Common Securities to receive payment of distributions and payments upon Liquidation, redemption and otherwise are subordinated to the rights of the holders of such Trust Preferred Securities, with the result that no payment of any distribution on, or any amount payable upon the redemption of, any such Common Security, and no payment to the holder of any such Common Security on account of the Liquidation of such Trust Preferred Securities Issuer, shall be made unless payment in full in cash of (a) all accrued and unpaid distributions on such Trust Preferred Securities for all Distribution Periods terminating on or prior thereto, (b) all amounts payable on such Trust Preferred Securities then subject to redemption and (c) all amounts payable upon such Trust Preferred Securities in the event of the Liquidation of such Trust Preferred Securities Issuer, in each case, shall have been made or provided for, and all funds immediately available to the Property Trustee of such Trust Preferred Securities Issuer shall first be applied to the payment in full in cash of the amounts specified in clauses (a), (b) and (c) above that are then due and payable.

Mergers, Consolidations or Amalgamations

Each Trust Agreement will provide that the related Trust Preferred Securities Issuer may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to, any corporation or other person, except as described above under “—Liquidation and Distribution Upon Dissolution” or as described below. A Trust Preferred Securities Issuer may, with the consent of the administrators of such Trust Preferred Securities Issuer and without the consent of the Property Trustee or the holders of its Trust Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to, a trust organized as such under the laws of any state of the United States; provided that (a) if such Trust Preferred Securities Issuer is not the survivor, such successor entity either (i) expressly assumes all of the obligations of such Trust Preferred Securities Issuer under its Trust Preferred Issuer Securities or (ii) substitutes for its Trust Preferred Issuer Securities other securities having substantially the same terms as its Trust Preferred Issuer Securities (the “Successor Securities”), so that the Successor Securities rank the same as its Trust Preferred Issuer Securities with respect to distributions and payments upon Liquidation, redemption and otherwise, (b) a trustee of any such successor entity possessing substantially the same powers and duties as the Property Trustee as holder of the related Corresponding Debentures is appointed by the related Real Estate Entity or Real Estate Entity Indenture, as applicable, (c) its Trust Preferred Securities continue to be listed or quoted, or any Successor Securities to such Trust Preferred Securities will be listed or quoted upon notification of issuance, on any national securities exchange or with any organization on which its Trust Preferred Securities were previously listed or quoted, (d) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause its Trust Preferred Securities or any Successor Securities to be downgraded or withdrawn by any nationally recognized statistical rating organization, if its Trust Preferred Securities or any Successor Securities are then rated, (e) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of its Trust Preferred Securities or any Successor Securities in any material respect (other than with respect to any dilution of the holders’ interest in any such successor entity), (f) any such successor entity has a purpose substantially identical to that of such Trust Preferred Securities Issuer, (g) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, such Trust Preferred Securities Issuer has received an opinion of counsel experienced in such matters to the effect that (i) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of its Trust Preferred Securities or any Successor Securities in any material respect (other than with respect to any dilution

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of the holders’ interest in any such successor entity), (ii) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither such Trust Preferred Securities Issuer nor any such successor entity will be required to register as an investment company under the 1940 Act and (iii) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, such Trust Preferred Securities Issuer or any such successor entity will continue to be classified as a grantor trust for United States federal income tax purposes and (h) the related Parent Real Estate Entity, if any, guarantees the obligations of any such successor entity to the same extent provided in the related Parent Guarantee.

Terms of the Corresponding Debentures

The following summary of the material terms and provisions of the Corresponding Debentures does not purport to be complete and is subject to, and qualified by reference to, the actual provisions of the respective Real Estate Entity Indentures of the Real Estate Entities and such Corresponding Debentures. Copies of the form of Real Estate Entity Indenture, as applicable, may be obtained by Noteholders upon request in writing to the Trustee at its Corporate Trust Office and by prospective purchasers of Notes from the Initial Purchaser.

Concurrently with the issuance of its Trust Preferred Securities, each Trust Preferred Securities Issuer will invest the proceeds thereof, together with the consideration paid by the related Real Estate Entity for its Common Securities, in the Corresponding Debentures. The Corresponding Debentures will represent junior subordinated, unsecured debt of the related Real Estate Entities and will be issued pursuant to separate Real Estate Entity Indentures. Each Corresponding Debenture will be issued in definitive and/or global form.

The Real Estate Entity Indentures and Corresponding Debentures will not contain provisions that limit the amount of indebtedness, whether secured or unsecured, that the related Real Estate Entity may issue or that afford the related Trust Preferred Securities Issuer, as the holder of the Corresponding Debentures, protection in the event of a highly leveraged transaction or other similar transaction involving the related Real Estate Entity that may adversely affect it.

Subordination

Each Real Estate Entity Indenture will provide that the related Corresponding Debentures will be subordinated and junior in right of payment to the prior payment in full of all present and future Senior Indebtedness of the applicable Real Estate Entity. No payment of principal of or premium, if any, or interest or any other payment due on the related Corresponding Debentures may be made if (a) any payment due on any Senior Indebtedness of the applicable Real Estate Entity is not paid when due and any applicable grace period with respect to a payment default under such Senior Indebtedness has ended and such default has not been cured or waived or ceased to exist or (b) the maturity of any Senior Indebtedness of such Real Estate Entity has been accelerated because of a default and such acceleration has not been rescinded or cancelled and such Senior Indebtedness had not been paid in full. In addition, Real Estate Entities may be parties to agreements with holders of Senior Indebtedness that have the practical effect of further subordinating the rights of holders of the related Corresponding Debentures to such holders of Senior Indebtedness under certain circumstances.

As used herein, “Senior Indebtedness” means:

(a) with respect to any Real Estate Entity issuing Corresponding Debentures, (i) the principal, premium, if any, and interest in respect of (A) indebtedness of such Real Estate Entity for money borrowed and (B) indebtedness evidenced by securities, debentures, notes, bonds or other similar instruments issued by such Real Estate Entity; (ii) all capital lease obligations of such Real Estate Entity; (iii) all obligations of such Real Estate Entity issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Real Estate Entity and all obligations of such Real Estate Entity under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of such Real Estate Entity for the reimbursement of any letter of credit, any banker’s acceptance, any security purchase facility, any repurchase agreement or similar arrangement, any interest rate swap, any other hedging arrangement, any obligation under options or any similar credit or other transaction; (v) all obligations of the type referred to in clauses (i) through (iv) above of other persons for the

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payment of which such Real Estate Entity is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) above of other persons secured by any lien on any property or asset of such Real Estate Entity (whether or not such obligation is assumed by such Real Estate Entity), whether incurred on or prior to the date of the related Real Estate Entity Indenture or thereafter incurred, unless it is provided in the instrument creating or evidencing the same or pursuant to which the same is outstanding that such obligations are not superior or are pari passu in right of payment to the Corresponding Debentures of such Real Estate Entity; provided that, notwithstanding the foregoing, “Senior Indebtedness” shall not include (A) any Additional Junior Indebtedness, (B) Corresponding Debentures issued pursuant to the related Real Estate Entity Indentures and guarantees in respect of such Corresponding Debentures or (C) trade accounts payable of the Real Estate Entity arising in the ordinary course of business (such trade accounts payable being pari passu in right of payment to the Corresponding Debentures). Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness; and

(b) with respect to any Subordinated Securities Issuer, the principal of and any premium on the following, whether outstanding on the date of execution of the Subordinated Security Indenture or thereafter created, assumed or incurred: (i) any obligation of, or any obligation guaranteed by, such Subordinated Securities Issuer for the repayment of borrowed money, whether or not evidenced by bonds, debentures, notes or other written instruments, and similar obligations arising from off-balance sheet guarantees and direct credit substitutes, (ii) obligations under bankers’ acceptances and letters of credit, (iii) obligations associated with derivative products such as interest rate and foreign exchange rate contracts, commodity and currency contracts and similar arrangements, (iv) any deferred obligations of, or any such obligation guarantees by, such Subordinated Securities Issuer for the payment of the purchase price of property or assets, (v) obligations of such Subordinated Securities Issuer as lessee under any lease of real or personal property required to be capitalized under generally accepted accounting principles at the time, and (vi) any amendments, deferrals, renewals, extensions or refundings of any such indebtedness or obligations referred to in clauses (i) or (ii) through (v) above, provided that Senior Indebtedness will not include (A) obligations, renewals, extensions or refundings referred to in clause (i) or (iii) through (vi) that specifically by their terms rank junior to, or equally with, the Subordinated Securities of the related Subordinated Securities Issuer in right of payment in the event of certain events of bankruptcy, insolvency receivership or reorganization of such Subordinated Securities Issuer and (B) the Subordinated Securities of the related Subordinated Securities Issuer.

Upon any distribution of assets of the applicable Real Estate Entity to creditors upon any dissolution, winding-up, liquidation or reorganization, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all amounts due on all Senior Indebtedness of such Real Estate Entity must be paid in full before the holders of the related Corresponding Debentures are entitled to receive or retain any payment. Upon payment in full of all such Senior Indebtedness then outstanding, the rights of the holders of such Corresponding Debentures will be subrogated to the rights of the holders of Senior Indebtedness of such Real Estate Entity to receive payments or distributions applicable to such Senior Indebtedness until all amounts due on such Corresponding Debentures are paid in full. There is no limit to the aggregate amount of Senior Indebtedness that may be issued by any Real Estate Entity.

Under each Real Estate Entity Indenture, the trustee (the “Indenture Trustee”) is authorized to act on behalf of each holder of Corresponding Debentures to take such action as may be necessary or appropriate to effectuate, as between such holders and holders of Senior Indebtedness, the subordination provisions contained in such Real Estate Entity Indenture.

The right of a Real Estate Entity to participate in any distribution of assets of any of its subsidiaries upon any such subsidiary’s liquidation or reorganization or otherwise is subject to the claims of creditors, except to the extent that such Real Estate Entity may itself be recognized as a creditor of such subsidiary. Accordingly, each Real Estate Entity’s obligations under its Corresponding Debentures will be effectively subordinated to all existing and

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future liabilities of its subsidiaries, and claimants may look only to the assets of such Real Estate Entity for payments.

Maturity; Redemption

All of the Corresponding Debentures are redeemable prior to maturity as described under “—Redemption.”

Interest

Each Corresponding Debenture will bear interest at the corresponding Trust Preferred Securities interest rate. The amount of interest payable with respect to any Corresponding Debentures supporting (a) floating rate Trust Preferred Securities and (b) fixed/floating rate Trust Preferred Securities for any period commencing on or after the applicable fixed-rate expiration date will be computed on the basis of a 360-day year and the actual number of days in such period. See “—Distributions.”

Option to Extend Interest Payment Period

Certain Real Estate Entities will have the right to defer payments of interest on its Corresponding Debentures as described in “—Distributions.”

Additional Amounts

If at any time as a result of a Trust Preferred Securities Tax Event a Trust Preferred Securities Issuer is required to pay, or withhold from payments to holders of related Trust Preferred Issuer Securities, additional taxes (including withholding taxes), duties, assessments or other governmental charges, then, in any such case, the related Real Estate Entity will pay such additional amounts (“Additional Amounts”) on the related Corresponding Debentures or Trust Preferred Issuer Securities, as the case may be, as shall be required so that the net amounts received and retained by the holders thereof, after payment of all such taxes (including withholding taxes), duties, assessments or other governmental charges, will equal the amounts such holders would have received and retained had no such taxes, duties, assessments or other governmental charges been imposed.

Certain Covenants

If (a) there has occurred and is continuing an event of default under a Real Estate Entity Indenture, or (b), if applicable, a Real Estate Entity has given notice of its election to defer payments of interest on its Corresponding Debentures by extending the interest payment period as provided in a Real Estate Entity Indenture relating to such Corresponding Debentures, or any such Extension Period is continuing, then, except in limited circumstances, such Real Estate Entity may not, among other restrictions, (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock and (ii) make any payment of principal of or premium, if any, or interest on or repay, repurchase or redeem any of its debt securities that rank in all respects pari passu with or junior in interest to such Corresponding Debentures.

The Real Estate Entity of each Trust Preferred Securities Issuer will, for so long as any Trust Preferred Issuer Securities remain outstanding, maintain 100% ownership of the Common Securities of such Trust Preferred Securities Issuer; provided that any permitted successor of a Real Estate Entity may succeed to such Real Estate Entity’s ownership of such Common Securities.

Limitation on Consolidations, Mergers and Sales of Assets

No Real Estate Entity may consolidate or merge with or into another entity (whether or not affiliated with such Real Estate Entity), or sell, convey, transfer or otherwise dispose of all or substantially all of its property to another entity (whether or not affiliated with such Real Estate Entity) authorized to acquire and operate the same unless (a) upon any such consolidation, merger (where such Real Estate Entity is not the surviving entity), sale, conveyance, transfer or other disposition, the successor entity is organized and existing under the laws of the United States or any state thereof or the District of Columbia, (b) any such successor entity expressly assumes all

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obligations of such Real Estate Entity under its Corresponding Debentures, the related Real Estate Entity Indenture, as applicable, and the related Trust Agreement and (c) after giving effect to any such transaction, no event of default and no event that, after notice or lapse of time, or both, would constitute an event of default under such Real Estate Entity Indenture shall have occurred and be continuing.

Events of Default, Waiver and Notice

The Real Estate Entity Indentures generally provide that any event described below which has occurred and is continuing with respect to the Corresponding Debentures issued under the related Real Estate Entity Indenture constitutes an “event of default” with respect to such Corresponding Debentures:

(a) default for 30 days in the payment of any interest on such Corresponding Debentures when due (it being understood that commencement and continuation of an Extension Period, if applicable, in accordance with the terms of such Corresponding Debentures shall not constitute a default under this clause);

(b) default in the payment of all or any part of the principal of or premium, if any, on such Corresponding Debentures when due, whether at maturity, upon redemption, by acceleration of maturity or otherwise;

(c) default by the applicable Real Estate Entity in the performance of, or breach of, certain of its covenants or agreements in such Real Estate Entity Indenture, if applicable, which shall not have been remedied for a period of 30 days after written notice to such Real Estate Entity by the Indenture Trustee or to such Real Estate Entity and the Indenture Trustee by the holders of not less than 25% in aggregate principal amount of such Corresponding Debentures then outstanding;

(d) certain events of bankruptcy, insolvency or reorganization of the applicable Real Estate Entity; or

(e) the Liquidation of the applicable Real Estate Entity’s subsidiary Trust Preferred Securities Issuer, except in connection with the distribution of the Corresponding Debentures of such Real Estate Entity to the holders of the related Trust Preferred Issuer Securities in Liquidation of the Trust Preferred Securities Issuer, the redemption of all of such Trust Preferred Issuer Securities, or certain mergers, consolidations or amalgamations, each as permitted by the related Trust Agreement.

If an event of default shall have occurred and be continuing, either the Indenture Trustee or the holders of not less than 25% in aggregate principal amount of the related Corresponding Debentures then outstanding may declare the principal of and premium, if any, and accrued interest on all such Corresponding Debentures to be due and payable immediately. Upon certain conditions any such acceleration may be annulled and past defaults may be waived (except defaults in payments of principal of or premium, if any, or interest on such Corresponding Debentures, which must be cured or paid in full) by the holders of a majority in aggregate principal amount of such Corresponding Debentures then outstanding.

The right of the holder of any Corresponding Debenture to receive payment of the principal of and premium, if any, and interest on such Corresponding Debenture when due, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such holder.

An event of default under a Real Estate Entity Indenture also constitutes an event of default under the related Trust Agreement (a “Trust Agreement Event of Default”). Upon the occurrence of one or more of the Trust Agreement Events of Default, the Property Trustee, so long as it is the sole holder of the related Corresponding Debentures, will have the right to declare the principal of and premium, if any, and accrued interest on the Corresponding Debentures to be immediately due and payable. A waiver of any event of default under a Real Estate Entity Indenture will constitute a waiver of the related Trust Agreement Event of Default.

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Because the Issuer may own less than 100% of the Principal Balance of the Trust Preferred Securities issued by the subsidiary Trust Preferred Securities Issuer of a Real Estate Entity, the Issuer may not be able to control any matters in respect of such Trust Preferred Securities as to which holders thereof are entitled to vote, give their consent or take action.

Terms of the Parent Guarantees

In each case where the Real Estate Entity is a subsidiary of the related REIT, REOC or Homebuilding Company, the Parent Real Estate Entity will execute a Parent Guarantee. Each Parent Guarantee will be a guaranty by the related Parent Real Estate Entity of the due and punctual payment of the principal of and premium, if any, and interest to holders of the Corresponding Debentures issued by the subsidiary Real Estate Entity (without duplication of amounts previously paid by such Real Estate Entity). A Parent Real Estate Entity’s obligation to make a payment under its Parent Guarantee may be satisfied by direct payment of the required amounts by such Parent Real Estate Entity to the holders of the related Trust Preferred Securities or by causing an affiliate to pay such amounts to such holders. Because each Parent Guarantee is a guarantee of payment and not of collection, holders of Trust Preferred Securities may proceed directly against the related Parent Real Estate Entity, rather than having to proceed against the related Trust Preferred Securities Issuer before attempting to collect from such Parent Real Estate Entity under the terms of the related Parent Guarantee.

Effect of Obligations Under the Trust Preferred Securities and the Corresponding Debentures

As long as interest and other payments are made when due on the Corresponding Debentures of a Real Estate Entity, such payments will be sufficient to cover distributions and other payments due on the related Trust Preferred Securities because of the following factors: (a) the aggregate principal amount of such Corresponding Debentures will be equal to the aggregate Principal Balance of the related Trust Preferred Securities; (b) the interest rate (or manner of calculating such rate) and the payment dates on such Corresponding Debentures will correspond to the distribution rate (or manner of calculating such rate) and payment dates for the related Trust Preferred Securities; and (c) such Real Estate Entity will be obligated to pay all, and its subsidiary Trust Preferred Securities Issuer will not be obligated to pay directly or indirectly any, costs, expenses, debts, and other obligations of such Trust Preferred Securities Issuer (other than payments due on its Trust Preferred Issuer Securities).

If a Real Estate Entity fails to make interest or other payments on the related Corresponding Debentures when due (after giving effect to any grace period or Extension Period, if applicable) or another event of default under the related Real Estate Entity Indenture has occurred and is continuing, the related Trust Agreement provides a mechanism whereby the holder of the Trust Preferred Securities (which will be the Trustee) may direct the Property Trustee, to the fullest extent permitted by law, to enforce its rights under the related Corresponding Debentures. If the Property Trustee fails to enforce its rights under the related Corresponding Debentures after a majority in Principal Balance of the related Trust Preferred Securities have so directed, the Trustee, as holder of the Trust Preferred Securities, or any other holder of the Trust Preferred Securities, may to the fullest extent permitted by law institute a legal proceeding against such Real Estate Entity to enforce the Property Trustee’s rights under such Corresponding Debentures without first instituting any legal proceedings against the Property Trustee or any other person or entity. Notwithstanding the foregoing, if a Trust Agreement Event of Default has occurred and is continuing and such event is attributable to the failure of a Real Estate Entity to pay principal of or premium, if any, or interest on the related Corresponding Debentures on the respective dates such principal, premium or interest is payable (or, in the case of redemption, on the Trust Preferred Securities Optional Redemption Date or Trust Preferred Securities Special Redemption Date), then a holder of the related Trust Preferred Securities may institute a direct cause of action against such Real Estate Entity for payment on or after the respective due dates specified in such Corresponding Debentures (or, in the case of redemption, on the Trust Preferred Securities Optional Redemption Date or Trust Preferred Securities Special Redemption Date). The provisions described above are intended to enable the Trustee to effectively enforce the rights of Noteholders if a default occurs on any Trust Preferred Securities or related Corresponding Debentures. The Indenture will provide that if such a default occurs, the Trustee will attempt to maximize the recovery value to the Noteholders by engaging in restructuring efforts, bringing enforcement proceedings and/or taking any other measures that the Trustee may deem appropriate. Because of the illiquid nature of the Trust Preferred Securities, it is unlikely that the Trustee would be able to sell the defaulted Trust Preferred Securities, or upon a Liquidation, the Corresponding Debentures, on economically acceptable terms. In certain cases, the Trustee will be the holder of all of the Trust Preferred Securities issued by

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each Trust Preferred Securities Issuer. Therefore, it will also be responsible for approving or disapproving any waiver or amendment of the terms of those Trust Preferred Securities that may be requested by a Trust Preferred Securities Issuer, and the terms of those Trust Preferred Securities will require the Trustee’s consent to any waiver or material amendment to the Corresponding Debentures. See also “Risk Factors—Relating to the Collateral Debt Securities—Relating to the Trust Preferred Securities.” In determining any action to be taken with respect to a defaulted Trust Preferred Securities or any response to a waiver or amendment request concerning any Trust Preferred Securities or Corresponding Debenture, the Trustee may retain advisors selected by it (including legal advisors and investment banking or asset management firms), whose fees will constitute Administrative Expenses payable from Collections and the Trustee will be fully protected with respect to any action taken by it in reasonable good faith reliance on advice provided by such advisors.

Certain Terms of the Subordinated Securities

The following summary of certain terms and provisions of the Subordinated Securities refers only to the Subordinated Securities to be acquired by the Issuer on the Closing Date, does not purport to be complete and is subject to, and qualified in its entirety by reference to, the actual provisions of the respective Subordinated Security Indentures of the Subordinated Securities Issuers and such Subordinated Securities. Copies of the form of Subordinated Security Indenture may be obtained by Noteholders upon request in writing to the Trustee at its Corporate Trust Office and by prospective initial purchasers of Notes from the Initial Purchaser.

Each Subordinated Security will represent subordinated, unsecured debt of the related Subordinated Securities Issuer and will be issued pursuant to an indenture (each, a “Subordinated Security Indenture”). Interest on the Subordinated Securities will be payable quarterly or semi-annually in arrears.

Subordination

Each Subordinated Security Indenture will provide that the Subordinated Securities will be subordinate and junior in right of payment to the prior payment in full of all present and future Senior Indebtedness of the applicable Subordinated Securities Issuer. No payment of principal of or premium, if any, or interest or any other payment due on the related Subordinated Securities and no redemption, exchange, retirement, purchase or other acquisition of any Subordinated Securities may be made if (a) any payment due on any Senior Indebtedness of the applicable Subordinated Securities Issuer is not paid when due and any applicable grace period with respect to a payment default under such Senior Indebtedness has ended and such default has not been cured or waived or ceased to exist or (b) the maturity of any Senior Indebtedness of such Subordinated Securities Issuer has been accelerated because of a default and such acceleration has not been rescinded or cancelled and such Senior Indebtedness has not been paid in full. In addition, Subordinated Securities Issuers may be parties to agreements with holders of their Senior Indebtedness that have the practical effect of further subordinating the rights of holders of the related Subordinated Securities to such holders of Senior Indebtedness under certain circumstances.

Upon any distribution of assets of the applicable Subordinated Securities Issuer to creditors upon any rehabilitation, liquidation, conservation or dissolution, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all amounts due on all Senior Indebtedness of such Subordinated Securities Issuer must be paid in full before the holders of the related Subordinated Securities are entitled to receive or retain any payment. Upon payment in full or satisfaction of all Senior Indebtedness of such Subordinated Securities Issuer then outstanding, the rights of the holders of such Subordinated Securities will be subrogated to the rights of the persons to whom such Subordinated Securities Issuer is obligated under such Senior Indebtedness to receive payments or distributions applicable to such Senior Indebtedness until all amounts owing on such Subordinated Securities are paid in full.

Certain Terms of the Senior Securities

The Senior Securities included in the portfolio of Collateral Debt Securities on the Closing Date will be purchased by the Issuer in secondary market transactions from the sellers thereof, which will not be the issuers of such securities. Any Senior Security that is included in the portfolio of Collateral Debt Securities will have been issued pursuant to a participation agreement, a trust agreement, an indenture or similar agreement.

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Enhancement in the form of reserve funds, subordination or other forms of credit support may be provided with respect to the Senior Securities. The type, characteristics and amount of such credit support, if any, will be a function of certain characteristics and generally will have been established for the Senior Securities on the basis of requirements of either any rating agency that may have assigned a rating to the Senior Securities or the initial purchasers of the Senior Securities.

Certain Terms of the Loans

The Loans may include Senior Secured Loans, Specified Second Position Loans, Senior Unsecured Loans and Non-Senior Loans. However, as of the Closing Date, the portfolio of Collateral Debt Securities will not include Senior Unsecured Loans.

Certain Terms of the CMBS

The CMBS included in the portfolio of Collateral Debt Securities on the Closing Date will be purchased by the Issuer in secondary market transactions from the sellers thereof. Any CMBS that is included in the portfolio of Collateral Debt Securities will have been issued pursuant to a pooling and servicing agreement, a participation agreement, a trust agreement, an indenture or similar agreement (a “CMBS Agreement”). The CMBS Issuer and/or servicer of the underlying mortgage loans (or underlying CMBS) will have entered into the CMBS Agreement with a trustee or a custodian under the CMBS Agreement, if any, or with the original purchaser of the interest in the underlying mortgage loans or CMBS evidenced by the CMBS. A CMBS Issuer typically is an entity (usually a trust) that qualifies to elect for federal income tax purposes to be treated as a REMIC.

Enhancement in the form of reserve funds, subordination or other forms of credit support may be provided with respect to the CMBS. The type, characteristics and amount of such credit support, if any, will be a function of certain characteristics of the underlying mortgage loans or underlying CMBS evidenced by or securing such CMBS and other factors and generally will have been established for the CMBS on the basis of requirements of either any rating agency that may have assigned a rating to the CMBS or the initial purchasers of the CMBS.

Certain Terms of the CMBS CDO Securities

The following summary of certain terms and provisions of the CMBS CDO Securities refers only to the CMBS CDO Securities to be acquired by the Issuer on the Closing Date, does not purport to be complete and is subject to, and qualified in its entirety by reference to, the actual provisions of the respective CMBS CDO Security Indentures of the CMBS CDO Issuers and such CMBS CDO Securities.

Each of the CMBS CDO Securities will represent debt obligations of a CMBS CDO Issuer and a CMBS CDO Co-Issuer. Each CMBS CDO Issuer has no substantial assets other than the property subject to the lien of the indenture relating to the related CMBS CDO Securities, which property includes, among other things, a portfolio of commercial mortgage-backed securities and various hedge agreements. Each CMBS CDO Co-Issuer has no substantial assets. Consequently, the Issuer, as holder of the CMBS CDO Securities, must rely solely on distributions on the underlying collateral securing the CMBS CDO Securities or proceeds thereof for payment of the CMBS CDO Securities, If distributions on the underlying collateral securing a CMBS CDO Security are not sufficient to make payments on the CMBS CDO Security, no other assets will be available for payment of the deficiency, and following realization on that collateral, the obligation of the related CMBS CDO Co-Issuers to pay such deficiency will be extinguished. The CMBS CDO Securities of each CMBS CDO Issuer will be subordinate to other securities issued by such CMBS CDO Issuer and to most expenses of the related CMBS CDO Co-Issuers.

Payments on the CMBS CDO Securities

The CMBS CDO Co-Issuers will only make payments on their CMBS CDO Securities to the extent that sufficient funds are available therefor after payment of certain expenses of such CMBS CDO Co-Issuers. In addition, each of the CMBS CDO Securities will be subordinate, in right of payment of principal and interest, to the more senior notes issued by the related CMBS CDO Co-Issuers. Generally, for so long as any of the more senior notes of any CMBS CDO Co-Issuer are outstanding, to the extent that funds are not available on any related

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payment date to pay in full current interest on the CMBS CDO Security, the unpaid interest amounts due on such CMBS CDO Security that would otherwise be due and payable will not be due and payable on such date, but will be added to the principal amount of the related CMBS CDO Security. Consequently, the failure to pay any interest due on any such CMBS CDO Securities will not be an event of default so long as any of the senior notes of the related CMBS CDO Co-Issuers are outstanding.

Redemption and Prepayment of the CMBS CDO Securities

In general, no payments of principal will be made on a CMBS CDO Security unless the aggregate principal amount of the more senior classes of securities issued by the related CMBS CDO Co-Issuers have been reduced to zero.

Voting

The Issuer will own less than a majority of the Principal Balance of each CMBS CDO Issuer’s securities eligible to vote on matters relating to such CMBS CDO Issuer. Consequently, the Issuer will not be able to control any matters as to which the Issuer is requested to vote or give its consent in respect of such CMBS CDO Issuers and their CMBS CDO Securities.

Certain Terms of the Synthetic Securities

Synthetic Securities may expose the Issuer to the credit risks associated with Reference Obligations that consist of CMBS, CMBS CDO Securities or Real Estate Securities issued by Homebuilding Companies. However, the Issuer will usually have a contractual relationship only with the counterparty of such Synthetic Security, and not with the Reference Obligor. Generally, the Issuer will have no right to directly enforce compliance by the Reference Obligor with the terms of the Reference Obligation nor any rights of set-off against the Reference Obligor. The Issuer may be subject to set-off rights exercised by the Reference Obligor against the counterparty. The Issuer will not have any voting rights with respect to the Reference Obligation. The Issuer will not directly benefit from any collateral that may support the Reference Obligation and will not have the benefit of the remedies that would normally be available to a holder of such Reference Obligation. In addition, in the event of the insolvency of the counterparty, the Issuer will be treated as a general creditor of such counterparty, and will not have any claim with respect to the Reference Obligation. Consequently, the Issuer will be subject to the credit risk of the counterparty as well as that of the Reference Obligor. As a result, concentrations of Synthetic Securities in any one counterparty subject the Synthetic Securities to an additional degree of risk with respect to defaults by such counterparty as well as by the Reference Obligor. Although the Collateral Manager will not perform independent credit analyses of the counterparties, any such counterparty, or an entity guaranteeing such counterparty, individually and in the aggregate shall satisfy the required ratings set forth under “—Criteria for Purchase of Collateral”. The Rating Agencies may downgrade (without giving effect to the Policy) any of the Notes if a Synthetic Security Counterparty has been downgraded by any of the Rating Agencies such that the Issuer is not in compliance with the Synthetic Security Counterparty rating requirements. It is expected that the Initial Purchaser and/or one or more of its affiliates, with acceptable credit support arrangements, if necessary, may act as counterparty with respect to all or a portion of the Synthetic Securities, which may create certain conflicts of interest.

Certain Matters Relating to Synthetic Securities

General

Synthetic Securities will be purchased or entered into by the Issuer for such purposes as:

(a) structuring an investment in Reference Obligations with a desired maturity, currency or interest rate which otherwise may be inconsistent with the criteria for purchasing Collateral Debt Securities;

(b) achieving yield enhancement based on the coupon payments by a Reference Obligor; or

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(c) establishing recovery floors or other means of interest rate and credit protection as a result of interest shortfalls, writedowns and defaults on Reference Obligations.

Synthetic Securities will not be used as a means of leveraging credit risk, whether through the use of a basket of Reference Obligations or otherwise (which, if not leveraged, may be permitted consistent with the definition of Collateral Debt Security), and except as otherwise permitted herein will not be used as a means of making future advances to a Synthetic Security Counterparty (it being understood that a payment of Synthetic Security Collateral in exchange for Deliverable Obligations (as defined below) does not constitute such an advance).

The Issuer’s exposure to a particular Synthetic Security Counterparty will be subject to the limitations described in the definition of Synthetic Security Counterparty. As part of the purchase of a Synthetic Security, the Issuer may be required to purchase or post Synthetic Security Collateral.

The Collateral Quality Tests

The “Collateral Quality Tests” will be used, together with the Eligibility Criteria and the Collateral Debt Security Criteria, primarily as criteria for purchasing Collateral Debt Securities. The Collateral Quality Tests will consist of the Moody’s Asset Correlation Test, the Moody’s Implied Weighted Average Rating Factor Test, the Fitch Weighted Average Rating Factor Test, the Weighted Average Coupon Test, the Weighted Average Life Test and the Weighted Average Spread Test.

Measurement of the degree of compliance with the Collateral Quality Tests will be required on the Closing Date and on the Ramp-Up Completion Date.

Moody’s Asset Correlation Test. The “Moody’s Asset Correlation Test” is a test that will be satisfied on any date of determination if the Moody’s Asset Correlation Factor (rounded to the nearest second decimal) as of such date of determination is no greater than 7.00% in accordance with the terms of the Indenture; provided that, for purposes of calculating the Moody’s Asset Correlation Test, it will be assumed there are 50 Collateral Debt Securities, subject to any modifications necessary to comply with changes in the Moody’s then-current ratings methodology. The “Moody’s Asset Correlation Factor” is a single number determined by the Collateral Manager in accordance with the asset correlation methodology provided to the Collateral Manager by Moody’s.

Moody’s Implied Weighted Average Rating Factor Test. The “Moody’s Implied Weighted Average Rating Factor Test” is a test that is satisfied on (a) the Closing Date, (b) the Ramp-Up Completion Date and (c) each Determination Date if the Collateral Debt Securities have a Moody’s Implied Weighted Average Rating Factor of not more than 1615 in accordance with the terms of the Indenture on such date.

Fitch Weighted Average Rating Factor Test. The “Fitch Weighted Average Rating Factor Test” is a test that will be satisfied on any Measurement Date on or after the Ramp-Up Completion Date if the Fitch Weighted Average Rating Factor of the Collateral Debt Securities (calculated in accordance with procedures prescribed by Fitch) does not exceed 18.

Weighted Average Coupon Test. The “Weighted Average Coupon Test” is a test that will be satisfied on the Closing Date and on the Ramp-Up Completion Date if the Weighted Average Coupon is equal to or greater than 7.0% on such date.

Weighted Average Life Test. The “Weighted Average Life Test” is a test that will be satisfied on the Closing Date, on the Ramp-Up Completion Date or on any date on which an Additional Collateral Debt Security is to be acquired by the Issuer, if the Weighted Average Life of all Collateral Debt Securities as of such date is less than or equal to 17.0.

Weighted Average Spread Test. The “Weighted Average Spread Test” is a test that will be satisfied on the Closing Date and on the Ramp-Up Completion Date if the Weighted Average Spread is equal to or greater than 2.49% on such date.

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Criteria for Purchase of Collateral

In addition to the other limitations set forth herein, the purchase of the Collateral Debt Securities on the Closing Date and on each date thereafter is subject in each case to compliance with certain specified guidelines consisting of (a) the Eligibility Criteria and (b) the Coverage Tests (collectively, the “Purchase Criteria”).

Eligibility Criteria

After giving effect to the purchase of any Collateral Debt Security, including any Additional Collateral Debt Security, at the times specified below, the following “Eligibility Criteria” must be met:

(a) With respect to the Ramp-Up Completion Date, the Aggregate Principal Balance of Pledged Securities that evidence obligations of a single issuer must not exceed 3.75% of the Aggregate Principal Balance on such date and, with respect to the date on which any Additional Collateral Debt Security is purchased, except as provided below, the purchase of such Additional Collateral Debt Security must not cause the aggregate Principal Balance of Pledged Securities that evidence obligations of a single obligor to exceed 3.75% of the aggregate Principal Balance on such date; provided that for purposes of the above calculations, (i) any Trust Preferred Securities the payments of which are guaranteed (to the limited extent described elsewhere in this Offering Circular) by the same Real Estate Entity shall be deemed to have been issued by a single issuer and (ii) any Subordinated Security that is issued by a wholly-owned subsidiary of a Real Estate Entity shall be deemed to have been issued by the same issuer as any Trust Preferred Security the payments of which are guaranteed (to the limited extent described elsewhere in this Offering Circular) by such Real Estate Entity.

(b) On the date of any acquisition of any Collateral Debt Security, each Collateral Debt Security, when acquired by the Issuer and pledged to the Trustee, must have been:

(i) individually reviewed by S&P and Fitch for the purpose of receiving a credit estimate rating (including in respect of any public rating thereof);

(ii) in the case of Trust Preferred Securities:

(A) when initially acquired by the Issuer and pledged to the Trustee on or prior to the Ramp-Up Completion Date, must be, or have been, issued by a Trust Preferred Securities Issuer whose parent is a Real Estate Entity (other than a Limited Real Estate Entity);

(B) has been individually statistically reviewed and has been determined, as a result of such review, to have a Moody’s implied rating factor equivalent to not more than 3490 (which is equivalent to a Moody’s Rating of approximately “B3”); provided that such review and such determination of a Moody’s implied rating factor equivalent shall in no way imply, and it shall not pursuant to this clause (B) be required, that a Moody’s Rating has been or will be assigned to such issuer (as the assignment of such a rating would be based on a probability of default and an expected recovery rate of 25.0%, which factors were not necessarily considered in connection with the determination of a Moody’s Rating factor equivalent); or

(C) has received a long-term senior unsecured rating from Moody’s equal to at least “B3”;

(iii) in the case of Senior Secured Loans, (A) secured by a valid and perfected first priority security interest in collateral that the Collateral Manager determines has a value equal to or greater than the outstanding principal balance of such Senior Secured Loan, and (B)

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not able by its terms to be subordinated in right of payment to any outstanding unsecured debt of the same Real Estate Entity obligor;

(iv) in the case of Synthetic Securities, assigned a Moody’s Implied Weighted Average Rating Factor and a Moody’s Recovery Rate by Moody’s; and

(v) in the case of Loans, does not cause the aggregate Principal Balance of all Loans to exceed 20.0% of the aggregate Principal Balance of Collateral Debt Securities as of the Ramp-Up Completion Date.

(c) With respect to the Ramp-Up Completion Date, the aggregate Principal Balance of Pledged Securities that are CMBS and CMBS CDO Securities must not be more than 10% of the aggregate Principal Balance on such date and, with respect to the date on which any Additional Collateral Debt Security is purchased, the purchase of such Additional Collateral Debt Security must not cause the aggregate Principal Balance of Pledged Securities that are (i) CMBS CDO Securities, to be more than 5% of the aggregate Principal Balance on such date and (ii) CMBS and CMBS CDO Securities to be more than 10% of the aggregate Principal Balance on such date; provided that if prior to the acquisition of such Additional Collateral Debt Security the Issuer (or the Collateral Manager on behalf of the Issuer) receives the consent of the Insurer and the Rating Condition is satisfied by each Rating Agency with respect thereto, the Issuer (or the Collateral Manager on behalf of the Issuer) may purchase Additional Collateral Debt Securities such that the Aggregate Principal Balance of Pledged Securities that are CMBS exceeds 5% of the Aggregate Principal Balance of Pledged Securities on such date and the Aggregate Principal Balance of Pledged Securities that are CMBS and CMBS CDO Securities exceeds 10% of the Aggregate Principal Balance of Pledged Securities on such date.

(d) With respect to the Ramp-Up Completion Date, the aggregate Principal Balance of Pledged Securities that are Synthetic Securities must not exceed 10% of the aggregate Principal Balance on such date and, with respect to the date on which any Additional Collateral Debt Security is purchased, the purchase of such Additional Collateral Debt Security must not cause the aggregate Principal Balance of Pledged Securities that are Synthetic Securities to exceed 10% of the aggregate Principal Balance on such date.

Notwithstanding the foregoing, one or more issuers of Collateral Debt Securities that do not satisfy the Eligibility Criteria may be deemed to satisfy the Eligibility Criteria in the event that Moody’s, S&P and Fitch confirm that any exceptions to the Eligibility Criteria will not adversely affect the ratings assigned to the Senior Notes (and with respect to the Class A-1B Notes, without giving effect to the Policy) on the Closing Date.

Additional Eligibility Criteria for Additional Collateral Debt Securities

In addition to the other limitations set forth herein, the acquisition of any Additional Collateral Debt Security after the Ramp-Up Completion Date with Permitted Sale Proceeds or Permitted Principal Proceeds is subject in each case to compliance with the following guidelines:

(a) such Additional Collateral Debt Security meets the Collateral Debt Security Criteria;

(b) the Eligibility Criteria shall be satisfied with respect thereto;

(c) each Coverage Test shall be satisfied after giving effect to such acquisition (or, if the Coverage Tests are not satisfied prior to the acquisition of such Additional Collateral Security, the Coverage Tests will be maintained or improved after giving effect to such purchase);

(d) no Default or Event of Default exists or will exist after giving effect to such acquisition (unless such Collateral Debt Security was the subject of a commitment to purchase of the Issuer prior to the occurrence of such Default or Event of Default);

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(e) each such Additional Collateral Debt Security is evidenced by documentation in a form customary for the type of security that meets the Eligibility Criteria and that is proposed to be purchased;

(f) after giving effect to the purchase of such Additional Collateral Debt Security, (i) the Moody’s Implied Weighted Average Rating Factor Test shall be satisfied or the Moody’s Implied Weighted Average Rating Factor shall be maintained or improved after giving effect to such purchase and (ii) the Fitch Weighted Average Rating Factor Test shall be satisfied or the Fitch Weighted Average Rating Factor shall be maintained or improved after giving effect to such purchase;

(g) after giving effect to the purchase of such Additional Collateral Debt Security, the Moody’s Asset Correlation Factor Test shall be satisfied after giving effect to such purchase or the Moody’s Asset Correlation Factor shall be maintained or improved after giving effect to such purchase;

(h) the Weighted Average Life Test shall be satisfied after giving effect to such acquisition or maintained or improved after giving effect to such acquisition;

(i) the Additional Collateral Debt Security bears interest, at the time of the acquisition thereof (i) at a fixed rate or a floating rate if the Collateral Debt Security which gave rise to the Permitted Sale Proceeds or Permitted Principal Proceeds (the “Prior Security”) to be used to acquire such Additional Collateral Debt Security was bearing interest at a fixed rate at the time of disposition, payment or prepayment thereof or (ii) if the Prior Security was bearing interest at a floating rate at the time of disposition, payment or prepayment thereof, (A) at a floating rate or (B) at a fixed rate, provided that the Rating Condition shall be satisfied and, if any existing Hedge Agreement is not sufficient to cover such Additional Collateral Debt Security, a Hedge Agreement shall be entered into with respect thereto;

(j) after giving effect to the purchase of a fixed-rate Additional Collateral Debt Security, the Weighted Average Coupon is equal to or greater than 7.0% or is maintained or increased after giving effect to such purchase;

(k) after giving effect to the purchase of a floating rate Additional Collateral Debt Security, the Weighted Average Spread is equal to or greater than 2.49% or is maintained or increased after giving affect to such purchase;

(l) such Additional Collateral Debt Security shall have been granted to the Trustee pursuant to the Indenture, the procedures identified in the Indenture relating to the perfection of the Trustee’s security interest in such Additional Collateral Debt Security shall have taken place and the Trustee shall have a first priority, perfected security interest therein;

(m) such Additional Collateral Debt Security shall be acquired by the Issuer in accordance with the procedures set forth in the Indenture;

(n) the purchase price for each such Additional Collateral Debt Security (by Principal Balance) shall be at least 85% (in the case of floating rate Additional Collateral Debt Securities) and 80% (in the case of fixed-rate Additional Collateral Debt Securities);

(o) such Additional Collateral Debt Security shall have a rating not lower than “B-” by S&P;

(p) if such Additional Collateral Debt Security is a Trust Preferred Security, such Additional Collateral Debt Security does not cause the aggregate Principal Balance of all Trust Preferred Securities to exceed 60% of the aggregate Principal Balance of Collateral Debt Securities as of the date the Issuer acquires such securities;

(q) if such Additional Collateral Debt Security provides for periodic payment of interest thereon on a semi-annual basis (a “Semi-Annual Pay Security”), such Additional Collateral Debt Security shall

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be acquired with Permitted Sale Proceeds or Permitted Principal Proceeds of a Collateral Debt Security that is a Semi-Annual Pay Security;

(r) if such Additional Collateral Debt Security is a Semi-Annual Pay Security, the Semi-Annual Interest Smoothing Test shall be satisfied or be maintained or improved in connection with the purchase of such Additional Collateral Debt Security; and

(s) the S&P CDO Monitor Test shall be satisfied after giving effect to such acquisition.

Semi-Annual Interest Smoothing Test

The “Semi-Annual Interest Smoothing Test” is a test that will be satisfied with respect to any acquisition of an Additional Collateral Debt Security that is a Semi-Annual Pay Security if, after giving effect to such acquisition, the Acquired Security Payment Period of such Additional Collateral Debt Security shall occur in (a) the Lower Semi-Annual Pay Quarter or (b) the Higher Semi-Annual Pay Quarter if the Higher Semi-Annual Pay Quarter Percentage shall not exceed 50% after giving effect to such acquisition.

Notwithstanding the above, the Issuer may acquire an Additional Collateral Debt Security without regard to the requirements set forth in clause (m) above if the Issuer first obtains an opinion of nationally recognized tax counsel experienced in such matters concluding that the acquisition by the Issuer of such Additional Collateral Debt Security will not cause the Issuer to be treated as engaged in the conduct of a trade or business in the United States.

Notwithstanding anything contained herein to the contrary, if the Class A-1 Notes, Class A-2 Notes, Class B Notes or Class C Notes are downgraded by Moody’s by one or more rating subcategories, then the Issuer shall be prohibited from acquiring any Additional Collateral Debt Securities as set forth above, unless and until (a) a Majority of the Controlling Class and (b) a Majority of the Holders of all other Notes voting as a single Class consent to the reinstatement of the Issuer’s right to make such acquisitions as set forth above.

Coverage Tests

On the Ramp-Up Completion Date and on the date of any acquisition of any Additional Collateral Debt Security following the Ramp-Up Completion Date, after giving effect to the purchase of the Collateral Debt Securities to be included in the Collateral, the Coverage Tests must be met (or, with respect to the acquisition of Additional Collateral Debt Securities following the Ramp-Up Completion Date, maintained or improved).

Changes in Composition of the Collateral Debt Securities

Collateral Debt Securities may be retired prior to their respective final maturities due to, among other things, the existence and frequency of exercise of any optional or mandatory redemption features of such securities. In addition, subject to the terms of the Indenture and the Collateral Management Agreement, including the restrictions described herein, (a) the Collateral Manager may sell any Collateral Debt Security (or permit the issuer thereof to redeem such Collateral Debt Security) as described under “—Disposition of Collateral Debt Securities,” (b) a Majority of the Subordinated Noteholders may, at any time during the life of the Notes, direct the Trustee to sell any equity security acquired by the Issuer as a result of the exercise or conversion of a Collateral Debt Security, in conjunction with the purchase of a Collateral Debt Security or in exchange for a Defaulted Security (any of the foregoing, an “Equity Security”; provided that no Trust Preferred Security shall constitute an Equity Security) and apply the proceeds in accordance with the Priority of Payments, and (c) the Issuer may acquire Additional Collateral Debt Securities following the Ramp-Up Completion Date as described herein under “—Acquisition of Collateral Debt Securities after the Closing Date.”

Collections may be invested at any time in Eligible Investments maturing not later than the next Distribution Date.

The Issuer may not acquire or dispose of any Collateral Debt Security unless such acquisition or disposition is made on an “arm’s-length basis” for fair market value (as determined at the time the Issuer first enters into a binding commitment to acquire or dispose of such Collateral Debt Security) or, in the case of a Collateral Debt

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Security acquired by the Warehouse Entity pursuant to the Merrill Lynch Warehouse described herein and sold to the Issuer on the Closing Date, on the date the Warehouse Entity acquires such Collateral Debt Security. Any purchase or disposition of a Collateral Debt Security will be conducted in accordance with the requirements of the Collateral Management Agreement, and, if effected with the Collateral Manager, the Issuer, the Trustee or any affiliate of any of the foregoing, will be effected in a secondary market transaction on terms as favorable to the Noteholders as would be the case if such person were not so affiliated. Unless the Collateral Manager is required by the terms of the Indenture to sell a Collateral Debt Security or an Eligible Investment, the Collateral Manager may refrain from directing the sale of securities of (a) Persons of which the Collateral Manager, its affiliates or any of its or its affiliates’ officers, directors or employees are directors or officers; (b) Persons for which the Collateral Manager or any of its affiliates act as financial advisor or underwriter or (c) Persons about which the Collateral Manager or any of its affiliates have information which the Collateral Manager deems confidential or non-public or otherwise might prohibit it from trading such securities in accordance with applicable law. If the Collateral Manager or any affiliate thereof with respect to which the Collateral Manager exercises investment control over the investment decisions of itself or any other Person (such Person, a “Manager Party”) owns any security that is issued by the same issuer as, and is substantially similar in terms of seniority, security (including available guarantees or other credit support) and right of payment to, a Collateral Debt Security owned by the Issuer (such security owned by a Manager Party, a “Corresponding Security”) and a Manager Party intends to dispose of such Corresponding Security, the Collateral Manager shall have no obligation to cause the Issuer to sell the related Collateral Debt Security held by the Issuer and the Collateral Manager shall not be liable to the Issuer, any Noteholder or any other person for its decision not to sell the related Collateral Debt Security held by the Issuer if in the reasonable business judgment of the Collateral Manager the retention of such Collateral Debt Security is in the best interests of the Issuer. The Trustee shall have no responsibility to oversee compliance with the above conditions by the other parties.

The Indenture provides that a Collateral Debt Security may be exchanged for another Collateral Debt Security solely for purposes of effecting an A/B Exchange (as defined below). An “A/B Exchange” means an exchange of one security (the “A Security”) for another security (the “B Security”) of the same issuer or issuers, which security shall have substantially identical terms (including the same interest rate, ranking and maturity) to the A Security, except that one or more transfer restrictions applicable to the A Security are inapplicable to the B Security.

Disposition of Collateral Debt Securities

Pursuant to the terms and conditions set forth in the Indenture and, with respect to clause (b) only, so long as no Event of Default has occurred and is continuing, the Collateral Manager may, but shall not be obligated to, direct the Trustee to sell (a) any applicable Defaulted Security, Credit Risk Security or Equity Security (in each case, at any time) and (b) subject to the following provisos, any other applicable security (that is not a Defaulted Security, Credit Risk Security or Equity Security) at any time, and if the Collateral Manager so elects to sell any of the foregoing securities, shall direct the Trustee in writing to sell, and the Trustee shall sell such securities in the manner directed by the Collateral Manager in writing, which writing shall specify whether such security is a Defaulted Security, Credit Risk Security, Equity Security or other security, if applicable, and, if such security is not a Defaulted Security, Credit Risk Security or Equity Security, include a statement that the sale of such security is permitted pursuant to the Indenture; provided however, that the aggregate principal amount of securities sold pursuant to clause (b) above shall not exceed 25% of the aggregate Principal Balance of all Collateral Debt Securities on the Ramp-Up Completion Date; provided further that for so long as Moody’s shall rate any Class of Notes, the Collateral Manager will have no discretion to sell any Collateral Debt Security (other than a Defaulted Security, Appreciated Collateral Debt Security, Equity Security or Credit Risk Security) if any Class of Notes rated by Moody’s shall have been downgraded, unless and until (a) a Majority of the Controlling Class and (b) a Majority of the Holders of all other Notes voting as a single Class consent to the reinstatement of the Issuer’s right to make such acquisitions as set forth above.

In the event of an Auction Call Redemption, Optional Redemption or Tax Redemption of the Notes, the Collateral Manager may direct the Trustee to sell Collateral Debt Securities without regard to the limitations specified in the preceding paragraph otherwise applicable to such sales; provided that (a) the proceeds thereof will be, in the case of an Optional Redemption or a Tax Redemption, at least equal to the Total Senior Redemption Amount and, in the case of an Auction Call Redemption, at least equal to the Auction Call Redemption Amount; and

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(b) such proceeds are used to make such a redemption. See “Description of the Notes—Auction Call Redemption” and “—Optional Redemption and Tax Redemption.”

Acquisition of Collateral Debt Securities after the Closing Date

In the event the aggregate principal amount of Collateral Debt Securities acquired by the Issuer on the Closing Date is less than the Aggregate Ramp-Up Par Amount, the Issuer will be authorized to use Uninvested Proceeds to purchase or enter into agreements to purchase additional Collateral Debt Securities so that the total amount of Collateral Debt Securities held by the Issuer following such purchase will be approximately equal to the Aggregate Ramp-Up Par Amount. The Issuer will only use Uninvested Proceeds to purchase Collateral Debt Securities if: (i) such securities meet the Collateral Debt Security Criteria; (ii) the Eligibility Criteria are satisfied with respect thereto; (iii) no Event of Default exists or will exist after giving effect to such acquisition (unless such Collateral Debt Security was the subject of a commitment to purchase of the Issuer prior to the occurrence of such Event of Default); (iv) certain procedures identified in the Indenture relating to the perfection of the Trustee’s security interest in the Collateral Debt Securities have taken place; and (v) such Collateral Debt Security complies with the procedures set forth in the Indenture.

Pursuant to the terms and conditions set forth in the Indenture, during the Reinvestment Period the Issuer will be permitted to use Sale Proceeds (to the extent that such Sale Proceeds are obtained from the sale of any (a) Appreciated Collateral Debt Securities (as defined and subject to the criteria set forth in the Indenture), (b) Collateral Debt Securities which have been the subject of any prepayment, or (c) Credit Risk Securities (such Sale Proceeds, “Permitted Sale Proceeds”) and Principal Proceeds pursuant to clauses (a), (b), (d), (e), (f), (g) and (h) of the definition thereof (“Permitted Principal Proceeds”) to acquire additional Collateral Debt Securities (each, an “Additional Collateral Debt Security”), which acquisitions will be based on recommendations made by the Collateral Manager, in an aggregate principal amount not to exceed 25% of the Principal Balance of Collateral Debt Securities on the Ramp-Up Completion Date; provided that during such period the Issuer may, pursuant to the terms and conditions set forth in the Indenture, use Permitted Sale Proceeds and Permitted Principal Proceeds to acquire Additional Collateral Debt Securities in an aggregate principal amount not to exceed 35% of the Principal Balance of all Collateral Debt Securities on the Ramp-Up Completion Date if, in addition to the satisfaction of each of the conditions set forth above prior to such acquisition, (i) the Rating Condition shall have been satisfied by each Rating Agency with respect thereto and (ii) the Class A-1B Noteholders shall have been provided 30 days’ prior written notice thereof and at least a Majority thereof shall not have objected during such 30 day period to such proposed acquisition of Additional Collateral Debt Securities in excess of the above 25% limitation.

If the Issuer has previously entered into a commitment to acquire an obligation or security for inclusion in the Collateral, then the Issuer need not comply with any of the Eligibility Criteria on the date of such acquisition if the Issuer was in compliance with each of the Eligibility Criteria on the date on which the Issuer entered into such commitment.

Notwithstanding the foregoing provisions, if an Event of Default shall have occurred and be continuing, no Collateral Debt Security may be acquired unless it was the subject of a commitment entered into by the Issuer prior to the occurrence of such Event of Default.

In addition, when the Collateral Manager causes to be purchased any Collateral Debt Security which is not rated by Moody’s, the Collateral Manager shall, if so requested by Moody’s, provide Moody’s with such information as Moody’s shall require to rate such Collateral Debt Security.

The Hedge Agreements

On or before the Closing Date, the Issuer may enter into one or more Hedge Agreements (as defined below). In addition to the above, the Indenture will permit the Issuer to enter into additional Hedge Agreements or increase the notional amount of existing Hedge Agreements if such Hedge Agreements are necessary in order to meet the requirements of the Rating Agencies and meet the other requirements set forth in the Indenture. The Indenture will also permit the Issuer to enter into additional Hedge Agreements, or increase the notional amount of existing Hedge Agreements, in connection with any acquisition of Additional Collateral Debt Securities in

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accordance with the terms of the Indenture, so long as, if a tax opinion is delivered in connection with such acquisition, such opinion includes an opinion that the Issuer’s activities with respect to such Hedge Agreement would not subject the Issuer to net income tax or cause the Issuer to be treated as engaged in a trade or business within the United States for U.S. federal income tax purposes. Each of the above agreements (including, without limitation, an interest rate swap), and any replacements therefor entered into in accordance with the Indenture, are referred to herein as the “Hedge Agreements.” Each such Hedge Agreement will be entered into with one or more counterparties with respect to which the Rating Condition has been satisfied (each, a “Hedge Counterparty” and, together with any permitted successors or assigns under the Hedge Agreements with respect to which the Rating Condition has been satisfied, the “Hedge Counterparties”). Pursuant to the Priority of Payments, scheduled payments required to be made by the Issuer under the Hedge Agreements, together with any termination payments payable by the Issuer other than by reason of an “Event of Default” or “Termination Event” with respect to which the applicable Hedge Counterparty is the “Defaulting Party” or the sole “Affected Party,” will be payable pursuant to Paragraph (4) under “Description of the Notes—Priority of Payments—Interest Proceeds.” The Hedge Agreements will be governed by New York law. The Hedge Agreement that will be in effect on the Closing Date may provide that the Hedge Counterparty will make an up-front payment to the Issuer. See “Risk Factors—Relating to the Notes—The Notes Will Be Affected By Interest Rate Risk, Including Mismatches Between the Notes and the Collateral Debt Securities.” The Indenture will provide that, with respect to the Hedge Agreements entered into after the Closing Date, the Issuer, and each Hedge Counterparty will comply with the following eight paragraphs.

If any Hedge Counterparty (or any affiliate of such Hedge Counterparty that unconditionally and absolutely guarantees the obligations of such Hedge Counterparty) fails to satisfy the Posting Threshold and such failure is continuing, such Hedge Counterparty shall (a) post collateral pursuant to a credit support annex, to be dated as of the Closing Date, between the Issuer and such Hedge Counterparty, if applicable, or enter into an agreement with the Issuer providing for the posting of collateral, which agreement shall satisfy the Rating Condition, (b) transfer its rights and obligations under the transaction to a substitute Hedge Counterparty (a “Substitute Counterparty”) selected by such Hedge Counterparty so long as (i) such Substitute Counterparty satisfies the Ratings Threshold, (ii) such Substitute Counterparty, as of the date of such transfer, will not, as a result of such transfer, be required to withhold or deduct on account of tax under any Hedge Agreement, (iii) such transfer does not lead to a termination event or event of default occurring under any Hedge Agreement as a result of such transfer and (iv) such Substitute Counterparty assumes the obligations of such Hedge Counterparty under such Hedge Agreement (through an assignment and assumption agreement in form and substance reasonably satisfactory to the Issuer) or (c) obtain a guarantor that satisfies the Posting Threshold; provided that such right shall be subject to the assumption by the Substitute Counterparty of all of the obligations of such Hedge Counterparty thereunder and subject to the payment to such Hedge Counterparty by the Substitute Counterparty or by such Hedge Counterparty to the Substitute Counterparty (as applicable) of a substitute transfer amount, or such lesser or greater amount as such Hedge Counterparty and such Substitute Counterparty may agree which in either case shall be the only amount payable by or to such Hedge Counterparty in connection with such transfer, and the Substitute Counterparty shall have agreed that the Issuer shall have no payment obligation with respect to such transfer.

If any Hedge Counterparty (or any affiliate of such Hedge Counterparty that unconditionally and absolutely guarantees the obligations of such Hedge Counterparty) fails to satisfy the Ratings Threshold (or shall not have a long-term or short-term debt rating from S&P), such Hedge Counterparty shall, within thirty days (or, in the case of a failure to meet the requirements of clause (a) of the definition of Ratings Threshold, within 10 days), transfer its rights and obligations under the transaction to a Substitute Counterparty selected by such Hedge Counterparty so long as (a) such Substitute Counterparty satisfies the Ratings Threshold, (b) such Substitute Counterparty, as of the date of such transfer, will not, as a result of such transfer, be required to withhold or deduct on account of tax under any Hedge Agreement, (c) such transfer does not lead to a termination event or event of default occurring under any Hedge Agreement as a result of such transfer and (d) such Substitute Counterparty assumes the obligations of such Hedge Counterparty under such Hedge Agreement (through an assignment and assumption agreement in form and substance reasonably satisfactory to the Issuer); provided that such right shall be subject to the assumption by the Substitute Counterparty of all of the obligations of such Hedge Counterparty thereunder and subject to the payment to such Hedge Counterparty by the Substitute Counterparty or by such Hedge Counterparty to the Substitute Counterparty (as applicable) of a substitution transfer amount, or such lesser or greater amount as such Hedge Counterparty and such Substitute Counterparty may agree which in either case shall be the only amount payable by or to such Hedge Counterparty in connection with such transfer, and the Substitute Counterparty shall have agreed that the Issuer shall have no payment obligation with respect to such transfer. Notwithstanding any requirements set

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forth above, if such Hedge Counterparty shall not have obtained a Substitute Counterparty as set forth in clause (a) above within 30 days of the failure to satisfy the Ratings Threshold, then such Hedge Counterparty shall, on or prior to the expiration of such period, (i) post collateral pursuant to a credit support annex, dated as of the Closing Date, between the Issuer and such Hedge Counterparty, if applicable, or (ii) enter into an agreement with the Issuer providing for the posting of collateral, which agreement, in either case, shall satisfy the Rating Condition. Following such posting of collateral, such Hedge Counterparty shall continue to search in good faith for a Substitute Counterparty which satisfies the Ratings Threshold and the above requirements. Notwithstanding anything contained herein to the contrary, if any Hedge Counterparty is required to transfer its rights and obligations under the transaction pursuant to this paragraph as a result of a rating issued by S&P, such Hedge Counterparty shall, at all times prior to such transfer, be required to post collateral in accordance with an agreement of the type described in clauses (i) or (ii) above.

The Trustee shall deposit all collateral received from any Hedge Counterparty under the Hedge Agreements in a securities account in the name of the Trustee that will be designated the “Hedge Counterparty Collateral Account”. Amounts on deposit in the Hedge Counterparty Collateral Account will be invested in Eligible Investments maturing not later than the Business Day immediately preceding the next Distribution Date. The Hedge Counterparty Collateral Account will be maintained for the benefit of the Secured Parties.

The Hedge Agreements will each be subject to termination upon the earlier to occur of (a) an Event of Default followed by the receipt by such Hedge Counterparty of a notice from the Trustee regarding the commencement of the liquidation of the Collateral in accordance with the Indenture, (b) any Auction Call Redemption, Optional Redemption, or Tax Redemption, (c) failure by a Hedge Counterparty to comply with the downgrade provisions described in the four preceding paragraphs, (d) the amendment of the Indenture without the consent of the Hedge Counterparty when the Indenture requires such consent and (e) the failure of the Issuer to reduce the notional amount of a Hedge Agreement when such reduction is required by the Hedge Agreement and has been consented to by the Rating Agencies. In the event that amounts are applied to the redemption of Notes on any Distribution Date in accordance with the Priority of Payments by reason of a failure to satisfy any of the Coverage Tests, then, subject to the satisfaction of the Rating Condition, the floating-fixed rate interest swaps under the Hedge Agreements will be subject to partial termination on such Distribution Date with respect to a portion of the notional amount thereof equal to the Aggregate Outstanding Principal Amount of Notes so redeemed on such Distribution Date. In addition, subject to the satisfaction of the Rating Condition with respect to such reduction, the Collateral Manager may on any Distribution Date direct the Issuer to reduce the notional amount of any interest rate swap, basis swap or cap outstanding under any Hedge Agreement. Upon any such termination or reduction of a notional amount, a termination payment with respect to the notional amount terminated or reduced may become payable by the Hedge Counterparty or the Issuer to the other party under the Hedge Agreements, with such termination payment being calculated as described below.

Amounts payable upon any such termination or reduction will be based upon standard replacement transaction valuation methodology set forth in the 1992 ISDA Master Agreement published by the International Swaps and Derivatives Association, Inc. If any amount is payable by the Issuer to any Hedge Counterparty in connection with the occurrence of any such partial termination or notional amount reduction, such amount, together with interest on such amount for the period from and including the date of termination to but excluding the date of payment at a rate per annum (calculated using a 30/360 Day Count Fraction) equal to the cost of funds therefor, as determined in accordance with each Hedge Agreement, shall be payable on such Distribution Date to the extent funds are available for such purpose in accordance with the Priority of Payments, and any amount not so paid on such Distribution Date shall be payable on the first Distribution Date on which such amount may be paid in accordance with the Priority of Payments.

To the extent that any upfront payments are received from a Substitute Counterparty as a result of entering into replacement transaction(s), such amounts shall be used to pay any termination payments owing to the Hedge Counterparty that is being replaced. Any remaining amounts in excess of such termination payments shall constitute Principal Proceeds and shall be applied in accordance with the Priority of Payments.

The obligations of the Issuer under the Hedge Agreements are non-recourse obligations payable solely from the Collateral pursuant to the Priority of Payments.

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The Accounts

Collection Accounts

All distributions on the Collateral Debt Securities and any proceeds received from the disposition of any such Collateral Debt Securities, to the extent such distributions or proceeds constitute Interest Proceeds and any amounts payable to the Issuer by the Hedge Counterparties under the Hedge Agreements (other than amounts received by the Issuer by reason of an event of default or termination event under the Hedge Agreements or other comparable event that are required to be used for the purchase by the Issuer of one or more replacement Hedge Agreements), if any, will (unless simultaneously reinvested in Eligible Investments) be remitted to a single, segregated account established and maintained under the Indenture by the Trustee (the “Interest Collection Account”). All distributions on the Collateral Debt Securities (except for distributions to the Synthetic Security Collateral Account) and any proceeds received from the disposition of any such Collateral Debt Securities to the extent such distributions or proceeds constitute Sale Proceeds (unless reinvested in Additional Collateral Debt Securities to the extent permitted herein) or Principal Proceeds (unless simultaneously reinvested in Eligible Investments or reinvested in Additional Collateral Debt Securities) will be remitted to a single, segregated account established and maintained under the Indenture by the Trustee (the “Principal Collection Account” and, together with the Interest Collection Account, the “Collection Accounts”). The Collection Accounts shall be maintained for the benefit of the Secured Parties and amounts on deposit therein will be available, together with reinvestment earnings thereon, for application in the order of priority set forth above under “Description of the Notes—Priority of Payments.”

Amounts received in the Collection Accounts during a Due Period and amounts received in prior Due Periods and retained in the Collection Accounts under the circumstances set forth above in “Description of the Notes—Priority of Payments” will be invested in Eligible Investments with stated maturities no later than the Business Day immediately preceding the next Distribution Date. All such proceeds will be retained in the Collection Accounts unless otherwise used in a manner permitted under the Indenture. See “—Criteria for Purchase of Collateral.”

Payment Account

On or prior to the Business Day prior to each Distribution Date, the Trustee will deposit into a single, segregated account established and maintained by the Trustee under the Indenture (the “Payment Account”) for the benefit of the Secured Parties all funds in the Collection Accounts required for payments to the Noteholders and payments of fees and expenses (including the Premium and Accrued Insurance Liabilities) in accordance with the priority described under “Description of the Notes—Priority of Payments.”

Uninvested Proceeds Account

In the event the Issuer has not acquired Collateral Debt Securities on the Closing Date having an aggregate principal amount at least equal to the Aggregate Ramp-Up Par Amount, the Trustee will establish a single, segregated account to be maintained by the Trustee under the Indenture (the “Uninvested Proceeds Account”). In such event, the Trustee will, on the Closing Date, deposit all Uninvested Proceeds (other than the organizational fees and other expenses of the Issuer incurred in connection with the effectuation of the transactions contemplated hereby on the Closing Date (including, without limitation, the legal fees and expenses of counsel to the Co-Issuers, the Initial Purchaser and the Collateral Manager), the expenses of offering the Notes and amounts deposited in the Expense Account) in such account. The Issuer may, prior to the Ramp-Up Completion Date, use funds on deposit in the Uninvested Proceeds account to acquire Collateral Debt Securities; provided that such acquisitions are made only in accordance with the terms of the Indenture. Prior to the use of such funds by the Issuer to acquire Collateral Debt Securities in accordance with the terms of the Indenture, the Collateral Manager on behalf of the Issuer may direct the Trustee to, and upon such direction the Trustee shall, invest funds in the Uninvested Proceeds Account in Eligible Investments. Interest and other income from such investments shall be deposited in the Interest Collection Account. Any loss resulting from such investments shall be charged to the Uninvested Proceeds Account. Other than as set forth in the preceding sentence, on or prior to the Ramp-Up Completion Date, the Trustee will transfer any Uninvested Proceeds remaining on deposit in the Uninvested Proceeds Account to the Payment Account (a) if a

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Ratings Confirmation has occurred, to be treated as Principal Proceeds, to be distributed in accordance with the Priority of Payments, and (b) in the event of a Ramp-Up Ratings Confirmation Failure, to be treated as Uninvested Proceeds to the extent the Rating Agencies require that Uninvested Proceeds be used to make payments in respect of principal on Notes and to be treated as Principal Proceeds, to be distributed in accordance with the Priority of Payments, to the extent such funds are in excess of the amount of funds necessary to meet the requirements of the Rating Agencies. Promptly following the Ramp-Up Completion Date, the Trustee shall cause the Uninvested Proceeds Account to be closed.

Discretionary Interest Shortfall Reserve Account

On the Closing Date, $500,000 from the proceeds of the offering of the Notes will be deposited by the Trustee into a single, segregated securities account established and maintained by the Trustee under the Indenture (the “Discretionary Interest Shortfall Reserve Account”). Any and all funds at any time on deposit in, or otherwise to the credit of, the Discretionary Interest Shortfall Reserve Account will be held in trust by the Trustee for the benefit of the Secured Parties. Any funds on deposit in the Discretionary Interest Shortfall Reserve Account during the initial Due Period will constitute Interest Proceeds on the first Distribution Date and any funds on deposit in the Discretionary Interest Shortfall Reserve Account on the second Due Period will either constitute Interest Proceeds or, at the Collateral manager’s discretion, be used to purchase Additional Collateral Debt Securities in accordance with the provisions of the Indenture as described herein under “Security for the Senior Notes—Priority of Payments”.

The Semi-Annual Interest Reserve Account

The Trustee will, on or prior to the Closing Date, cause to be established a single, segregated securities account maintained by the Trustee under the Indenture (the “Semi-Annual Interest Reserve Account”). After the Distribution Date in October 2007 the Trustee shall from time to time deposit into the Semi-Annual Interest Reserve Account an amount equal to 50% of all Interest Proceeds received by the Issuer with respect to the Semi-Annual Pay Securities (and any Interest Proceeds not so deposited into the Semi-Annual Interest Reserve Account shall be deposited into the Collection Account). At least one Business Day prior to each Distribution Date, the Trustee shall transfer all amounts deposited in the Semi-Annual Interest Reserve Account on or prior to the Determination Date preceding the last Distribution Date (including any interest accrued on any such amount) to the Collection Account for application as Interest Proceeds and such transfer shall be the only permitted withdrawal from, or application of funds on deposit in, or otherwise standing to the credit of, the Semi-Annual Interest Reserve Account.

Expense Account

On the Closing Date, after payment of the organizational fees and other expenses of the Co-Issuers (including, without limitation, the legal fees and expenses of counsel to the Co-Issuers, the Initial Purchaser and the Collateral Manager) and the expenses of offering the Notes, $100,000 from the proceeds of the offering of the Notes will be deposited by the Trustee into a single, segregated securities account established and maintained by the Trustee under the Indenture (the “Expense Account”). On each Distribution Date, to the extent that funds are available for such purpose in accordance with the Priority of Payments and subject to the dollar limitation set forth in Paragraph (2) under “Description of the Notes—Priority of Payments—Interest Proceeds,” the Trustee will deposit into the Expense Account an amount from Interest Proceeds (and, to the extent that Interest Proceeds are insufficient, from Principal Proceeds) such that the amount on deposit in the Expense Account (after giving effect to such deposit) will equal $100,000. Amounts on deposit in the Expense Account may be withdrawn from time to time to pay accrued and unpaid expenses of the Co- Issuers (other than fees and expenses of the Trustee or the Collateral Management Fee, but including other amounts payable by the Co-Issuers to the Collateral Manager under the Collateral Management Agreement or the Indenture); provided that the aggregate amount of such payments during any four consecutive Interest Periods may not exceed $400,000. All funds on deposit in the Expense Account will be invested in Eligible Investments. All amounts remaining on deposit in the Expense Account at the time when substantially all of the Issuer’s assets have been sold or otherwise disposed of (as determined by the Collateral Manager) will be deposited by the Trustee into the Payment Account for application as Interest Proceeds on the immediately succeeding Distribution Date.

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Synthetic Security Collateral Account

If and to the extent that any Synthetic Security requires the Issuer to secure its obligations to the Synthetic Security Counterparty, the Issuer shall, (a) subject to the second succeeding sentence, direct the Trustee to, and the Trustee shall (subject to a mutual agreement between the Synthetic Security Counterparty and the Trustee), establish with the Securities Intermediary, in respect of any such Synthetic Security, a single, segregated account which shall be held in trust for the benefit of the related Synthetic Security Counterparty and over which the Trustee as agent for the related Synthetic Security Counterparty (the “Synthetic Security Collateral Account”) or the related Synthetic Security Counterparty shall have exclusive control and the sole right of withdrawal (except upon maturity of the Synthetic Security) in accordance with the applicable Synthetic Security and the Indenture or (b) cause the establishment of a segregated trust account in respect of any Synthetic Security at an organization or entity (other than the Trustee) organized and doing business under the laws of the United State of America or of any state thereof, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $200,000,000, subject to supervision or examination by federal or state authority, having a rating of (i) at least “Baa1” by Moody’s, (ii) at least “BBB+” by S&P and (iii) if rated by Fitch, a long-term credit rating of “A” and a short-term credit rating of “F1” by Fitch and having an office within the United States. Any such account set forth in clause (b) shall also constitute a Synthetic Security Counterparty Account and, except upon maturity of the Synthetic Security, the related Synthetic Security Counterparty shall have exclusive control over, and the sole right of withdrawal from, such account in accordance with the applicable Synthetic Security. In addition, the Issuer may, in lieu of establishing a Synthetic Security Counterparty Account, provide cash or Securities to the Synthetic Security Counterparty to be held and distributed in accordance with the applicable Synthetic Security.

As directed by the Collateral Manager and in accordance with the applicable Synthetic Securities, amounts on deposit in the Synthetic Security Collateral Account on behalf of a Synthetic Security Counterparty shall be invested in Eligible Investments which are permitted by the applicable Synthetic Securities and any related credit support documents. Income received on amounts on deposit in the Synthetic Security Collateral Account may, as directed by the Collateral Manager, either (a) be retained in the Synthetic Security Collateral Account if the aggregate Principal Balance of all remaining Eligible Investments in such account is not in excess of the aggregate Principal Balance of any and all outstanding Synthetic Securities entered into between the Issuer and such Synthetic Security Counterparty and such Synthetic Security so provides and may, if so provided, be used to pay amounts owing to such Synthetic Security Counterparty or (b) be withdrawn from such account and deposited in the Collection Account for distribution in accordance with the priority described under “Description of the Notes—Priority of Payments.” Principal payments received on amounts on deposit in the Synthetic Security Collateral Account prior to the release of the Synthetic Security Collateral will, if so required under the terms of the applicable Synthetic Security and any related credit support documents and as directed by the Collateral Manager, be reinvested and maintained as Synthetic Security Collateral in accordance with the terms of such Synthetic Security and any related credit support documents, or, if not so required, withdrawn from such account and deposited in the Collection Account for distribution in accordance with the priority described under “Description of the Notes—Priority of Payments.” For the avoidance of doubt, any cash received from the liquidation of Synthetic Security Collateral and not paid to the Synthetic Security Counterparty will be deposited into the Collection Account and be treated as: (i) a recovery on an impaired interest in the event that the Synthetic Security was terminated as a result of a credit event, an event of default or a termination event (each as defined in the applicable Synthetic Security); (ii) unscheduled principal payments in the event that the Synthetic Security was subject to an agreed-upon termination prior to its scheduled termination, or (iii) a distribution in accordance with the priority described under “Description of the Notes—Priority of Payments” in the event that the Synthetic Security was terminated at its scheduled maturity. Such cash will be deposited in the Collection Account.

Amounts contained in the Synthetic Security Collateral Account (other than scheduled interest payments due on Eligible Investments therein) shall not be considered to be an asset of the Issuer for purposes of any of the Collateral Debt Securities Criteria or the Collateral Quality Tests, but the Synthetic Securities will be considered an asset of the Issuer. If and to the extent that any Synthetic Securities or any related credit support documents so provide, upon the occurrence of a credit event or an event of default or a termination event (each as defined in the applicable Synthetic Security), amounts in the Synthetic Security Collateral Account will, except in the case of an event of default (as defined in the applicable Synthetic Security) as to which the Synthetic Security Counterparty is the defaulting party, be liquidated and the proceeds thereof paid to the related Synthetic Security Counterparty, in any such case, only to the extent necessary to satisfy the obligations of the Issuer to the related Synthetic Security

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Counterparty in accordance with the terms of such Synthetic Security as directed by the Collateral Manager. For the avoidance of doubt, the payment by the Issuer of the proceeds of any liquidation of Eligible Investments contained in the Synthetic Security Collateral Account to a Synthetic Security Counterparty to the extent necessary to satisfy the obligations of the Issuer to the related Synthetic Security Counterparty in accordance with the terms of such Synthetic Security, will not be deemed to be a violation of the restriction set forth in subclause (vi) of the definition of “Collateral Debt Security Criteria.”

Policy Payment Account

The Trustee shall deposit all amounts received from the Insurer under the Policy in the “Policy Payment Account”, over which the Trustee will have exclusive dominion and control and sole right of withdrawal in accordance with the Indenture. Amounts held in the Policy Payment Account shall not be invested, unless otherwise instructed in writing by the Insurer. The only permitted withdrawal from or application of funds on deposit in, or otherwise to the credit of, the Policy Payment Account shall be to make payments in respect of the amounts due on the Insured Notes on the related Distribution Date in respect of which such funds are paid, to the extent such amounts are not paid pursuant to the Priority of Payments. Any monies held in the Policy Payment Account after the distributions made pursuant to the Indenture on any Distribution Date shall promptly be remitted (but in no event later than two Business Days after such Distribution Date) to the Insurer. None of the Issuer nor any other person (except the Insured Noteholders) will have any legal or beneficial interest in the Policy Payment Account.

Confirmation of Non-Public Ratings and Credit Estimates

In January of each year (commencing in January 2008) the Issuer (or the Collateral Manager on behalf of the Issuer) will submit a request to Moody’s to confirm each non-public rating and credit estimate previously received from Moody’s and then being relied on with respect to any Collateral Debt Security then owned by the Issuer, unless such rating or estimate was obtained during the prior calendar year (in which case submission will not be required until January of the next year). So long as any Senior Notes remain Outstanding, prior to or immediately following the acquisition of any Additional Collateral Debt Security not publicly rated by S&P, and in January of each year (commencing in January 2008), the Issuer (or the Collateral Manager on behalf of the Issuer) shall submit a request to S&P to confirm each non-public rating and credit estimate previously received from S&P and continuing to be relied on with respect to any Collateral Debt Security then owned by the Issuer together with all information reasonably required by S&P to perform such estimate, unless such rating or estimate was obtained during the prior calendar year (in which case submission will not be required until January of the next year); provided that a Collateral Debt Security that has a rating that is being notched off a Moody’s Rating does not require a credit estimate from S&P. The Issuer will pay all applicable fees related to such submission as Administrative Expenses.

THE COLLATERAL MANAGER

The information appearing in this section has been prepared by the Collateral Manager and has not been independently verified by the Initial Purchaser or the Co-Issuers and none of the foregoing (other than the Collateral Manager) assumes any responsibility for the accuracy, completeness or applicability of such information; provided that the Co-Issuers assume responsibility for the accurate reproduction herein of such information provided by the Collateral Manager.

General Information

AMG, founded in August 2005, is a joint venture between an affiliate of FSI and Sandelman, each with extensive experience in the trust preferred securities, real estate and structured products and specialty finance sectors. An affiliate of FSI is the managing member of AMG, and except for certain limited situations requiring the approval of the members, has full, complete and exclusive authority, power and discretion to manage and control the business, affairs and properties of AMG, to make all decisions regarding those matters and to perform any and all other acts or activities relating to AMG’s business. Sandelman and FSI may restructure their relationship with respect to the Collateral Manager.

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FSI is an investment adviser registered under the Advisers Act. FSI and its affiliates manage investments, primarily in financial services companies, including banks and thrifts, insurance companies, REITs, commercial and consumer finance, leasing, brokerage, and financial technology businesses. FSI and its affiliates invest in both publicly traded and privately issued securities through entities in which FSI or an affiliate serves as general partner or investment manager. Those entities include Attentus Partners, LLC, Financial Stocks Limited Partnership, Vine Street Partners L.P., Financial Stocks Offshore Fund, Ltd., Financial Stocks Capital Partners II L.P., Financial Stocks Capital Partners III L.P., Financial Stocks Capital Partners IV L.P., Financial Stocks Capital Partners IV Offshore Fund Ltd. and FS Finance Partners, LLC. FSI is an experienced CDO manager and has completed nine bank trust preferred security CDOs and bank/insurance trust preferred security CDOs and one bank/insurance/real estate trust preferred security CDO, totaling approximately $3.6 billion, through its joint venture, Trapeza Capital Management, LLC and its affiliates and has completed two REIT trust preferred security CDOs, totaling approximately $1 billion, through AMG.

Copies of FSI’s Form ADV Part I may be obtained from the SEC’s Investment Adviser Public Disclosure website, www.adviserinfo.sec.gov. Such website does not constitute part of this Offering Circular.

Sandelman is a multi-strategy investment management firm. Sandelman manages investments, primarily in capital markets, structured products and CDO investments. Sandelman has a dedicated structured products team of investment professionals with extensive experience in structured products and credit securities. Other than Sandelman’s veto right with respect to prospective acquisitions of Collateral Debt Securities by the Collateral Manager for the Warehouse Entity, Sandelman’s membership interest in the Collateral Manager does not allow Sandelman to manage or control the Collateral Manager nor does such membership interest provide Sandelman with any authority to act on behalf of the Collateral Manager in connection with any matter.

The AMG Team

Financial Stocks, Inc.

Steven N. Stein – Founder, Chairman & Chief Executive Officer of FSI and a Managing Director of AMG. In addition to his management of FSI, for the past 11 years, Steven N. Stein has been the President, a director and a principal shareholder of Belvedere Corporation, a real estate development and management company. Belvedere Corporation has also been the manager of Belvedere Hotels, Ltd. since its formation in 1995. Mr. Stein is a founder and Managing Director of Trapeza Capital Management, LLC. He is a director of The Bancorp Inc. (NASDAQ: TBBK), a Philadelphia-region bank holding company and a director of Privee LLC, a Florida-based bank holding company. In April 2006 he became a director of R&G Acquisition Holdings Corp. and R-G Crown Bank, a Florida-based thrift. Previously, he served as a Director of Signal Bancorp, a $1.6 billion bank holding company, from 1989 until its sale in 1999 and was a partner in Taft, Stettinius & Hollister LLP, a Cincinnati-based law firm. He received a B.A. in mathematics, summa cum laude, from Williams College in 1975, and a J.D., magna cum laude, from Harvard Law School in 1978.

John M. Stein, CFA – Founder, President, Chief Operating Officer of FSI and a Managing Director of AMG. John M. Stein has served as President and Chief Operating Officer of FSI since its inception. He is a founder and Managing Director of Trapeza Capital Management, LLC. Mr. Stein has been a director of Civitas BankGroup, a Franklin, Tennessee-based bank holding company, since April of 2006, and a director of Great Florida Bank, a Florida state chartered bank based in Miami, Florida since December 2005. Prior to founding FSI, he served as Vice President and Manager of the Market Risk Analytics Group of Bankers Trust Company from 1993-1995. Prior to joining Bankers Trust, he was a commercial and investment banking consultant in the Financial Services Strategy Practice of The MAC Group/Gemini Consulting. From 1998 through its sale in 2003, Mr. Stein was a director of Superior Financial Corp., a $1.7 billion unitary thrift holding company headquartered in Arkansas. He received a B.A. in Public Policy from the University of Chicago in 1988 and has been a Chartered Financial Analyst since 1997.

Stephan R. Kuppenheimer – Managing Director and Head of Structured Finance of FS Research, Inc. (“FS Research”). Mr. Kuppenheimer joined FS Research in July 2006 as the Head of Structured Finance. This role includes the oversight of the Trapeza and Attentus programs as well as identifying new market opportunities in

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structured finance. Prior to joining FS Research, Mr. Kuppenheimer was a Director and Co-Head of the U.S. Structured Credit Products Group at Merrill Lynch where his team consistently led the CDO league tables and was awarded CDO House of the Year in 2005. Previously, he was responsible for Investment Grade Corporate CDOs at Credit Suisse, including trust preferred CDOs, managed synthetic CDOs and corporate bond CDOs. He began his career as an attorney for Brown & Wood, LLP in New York focused on structured credit derivative transactions. Mr. Kuppenheimer received a B.A., with Honors, in Philosophy from Colgate University in 1993 and a J.D., with Distinction, from Emory University in 1997. He is currently a member of the CDO Committee for the American Securitization Forum.

Eric S. Stein – Vice President of FS Research and a Managing Director of AMG. Eric S. Stein joined FS Research, an affiliate of FSI, in 2003 with responsibility for identifying, analyzing, and structuring private debt and equity investments. He is also a Managing Director of Trapeza Capital Management, LLC. Prior to joining FS Research and Trapeza Capital Management, LLC, Mr. Stein was an Analyst in the mergers, acquisitions, and restructuring department of the Financial Institutions Group at Morgan Stanley & Co. in New York. Mr. Stein received a B.A. from Williams College in 2002.

Laura Heins – Vice President & Senior Analyst of FS Research and a Managing Director of AMG. Laura Heins joined FS Research in 2005 with responsibility for credit and financial analysis of REIT transactions. Prior to joining FS Research, Ms. Heins was Vice President of Investment Grade Credit Research at Morgan Stanley Inc., focusing on the REIT, specialty finance and bank sectors. Ms. Heins was the lead real estate research analyst in 2003 when Institutional Investor magazine ranked Morgan Stanley #2 for ABS Real Estate. Prior to her positions at Morgan Stanley, she was Chief of Staff of Global Fixed Income & Capital Markets for Citicorp Securities, and held various positions in risk management, CMO structuring and mortgage research. She received a B.A. in History from the University of Pennsylvania in 1992 and an M.B.A. from The Wharton School, University of Pennsylvania in 1999.

THE COLLATERAL MANAGEMENT AGREEMENT

General

Pursuant to the Collateral Management Agreement, the Collateral Manager will agree to perform, on behalf of the Issuer, certain duties specifically delegated to it in the Collateral Management Agreement and the Indenture. The Collateral Manager will (a) determine, upon the request of the Trustee, when payments received in respect of the Collateral Debt Securities and the Hedge Agreements shall be applied as Principal Proceeds and when such payments shall be applied as Interest Proceeds, such determination to be made in accordance with the Indenture, (b) facilitate the acquisition and settlement of Collateral Debt Securities by the Issuer, (c) administer Collateral Debt Securities, (d) advise the Issuer with respect to the disposition of Collateral Debt Securities in accordance with the terms of the Indenture, (e) advise the Issuer with respect to the selection of Eligible Investments, (f) monitor the Hedge Agreements and advise the Issuer with respect to entering into, assigning, transferring and terminating the Hedge Agreements and (g) take certain other actions on behalf of the Issuer in accordance with the terms of the Collateral Management Agreement.

In addition, pursuant to the terms of the Collateral Administration Agreement, the Issuer will retain the Collateral Administrator to prepare certain reports with respect to the Collateral Debt Securities. The compensation paid to the Collateral Administrator by the Issuer for such services will be in addition to the fees paid to the Collateral Manager and to The Bank of New York Trust Company, National Association, in its capacity as Trustee, will be treated as an expense of the Co-Issuers under the Indenture and will be subject to the priorities set forth under “Description of the Notes—Priority of Payments.”

Pursuant to the Collateral Management Agreement, the Collateral Manager will be required to perform its duties and obligations thereunder and under the Indenture, subject to the terms and conditions thereof, with reasonable care, using a degree of skill and attention no less than that which the Collateral Manager exercises with respect to comparable assets that it administers for itself and for others in accordance with its standards, practices and procedures relating to assets of the nature and character of the Collateral and in a manner consistent with practices and procedures that the Collateral Manager reasonably believes to be customarily followed by reasonable

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and prudent institutional managers, if any, of national standing relating, and to the extent applicable, to assets of the nature and character of the Collateral, except as expressly provided otherwise in the Collateral Management Agreement or the Indenture. The Collateral Manager will be entitled to indemnification by the Issuer under certain circumstances (as described more fully below), which indemnification amounts will be payable in accordance with the Priority of Payments.

Pursuant to the terms of the Collateral Management Agreement, none of the Collateral Manager, its Affiliates, its Owners or their respective Related Persons will assume any responsibility other than to render the services called for thereunder and under the terms of the Indenture applicable to it in good faith and subject to the standard of conduct described therein. The Collateral Manager will not be responsible for any action of the Issuer or the Trustee in following or declining to follow any advice, recommendation or direction of the Collateral Manager. The Indemnified Parties (as defined below) will not be liable to the Co-Issuers, the Trustee, the Noteholders, the Insurer, the Hedge Counterparty, the Initial Purchaser, any Synthetic Security Counterparty, any of their respective Affiliates, Owners or Related Persons, or any other person for any act, omission, error of judgment, mistake of law, or for any claim, loss, liability, damage, settlement, cost, or other expense (including attorneys’ fees and expenses and court costs) arising out of any investment, or for any other act or omission in the performance of the Collateral Manager’s obligations under or in connection with the Collateral Management Agreement or the terms of any other transaction document applicable to the Collateral Manager, incurred as a result of actions taken or recommended or for any omissions of the Collateral Manager, or for any decrease in the value of the Collateral, except, for liability to which the Collateral Manager would be subject (a) by reason of acts constituting bad faith, willful misconduct or gross negligence in the performance of, or reckless disregard of, its duties under the Collateral Management Agreement and under the terms of the Indenture or (b) with respect to the information herein under the heading “The Collateral Manager”, such information containing any untrue statement of a material fact or omitting to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (the preceding clauses (a) and (b) collectively referred to as the “Collateral Manager Breaches”). In addition, the Collateral Manager will not be liable for any consequential, punitive, exemplary or treble damages or lost profits under the Collateral Management Agreement or under the Indenture.

Pursuant to the terms of the Collateral Management Agreement, the Issuer shall indemnify and hold harmless the Collateral Manager, its Affiliates and Owners and their respective Related Persons (each, an “Indemnified Party”) from and against any and all losses, claims, damages, judgments, assessments, costs or other liabilities (collectively, “Losses”) and will promptly reimburse each such Indemnified Party for all reasonable fees and expenses (including reasonable fees and expenses of counsel) arising out of or in connection with the issuance of the Notes (including, without limitation, any untrue statement of material fact contained herein or omission or alleged omission to state herein a material fact necessary in order to make the statements herein, in the light of the circumstances under which they were made, not misleading), the transactions contemplated by this Offering Circular, the Indenture or the Collateral Management Agreement and any acts or omissions of any such Indemnified Party; provided that such Indemnified Party shall not be indemnified for any Losses or fees or expenses incurred as a result of any Collateral Manager Breach. The obligations of the Issuer to indemnify any Indemnified Party for any Losses or fees or expenses are non-recourse obligations of the Issuer and shall be payable solely out of the Collateral in accordance with the Priority of Payments.

Except as set forth in this paragraph and the following paragraph, the Collateral Manager may not assign, or be deemed for the purposes of Section 205(a)(1) of the Advisers Act to have assigned, its rights or responsibilities under the Collateral Management Agreement, unless (a) such assignment has received the consent of the Issuer, the Holders of a Majority of the Controlling Class (which will be the Insurer if no Insurer Default has occurred and is continuing and (x) the Insured Notes are Outstanding or (y) any Accrued Insurance Liabilities or Premiums are due and owing) a Majority of Subordinated Noteholders, and (b) the Rating Condition has been satisfied with respect to such assignment. Notwithstanding the foregoing sentence, the Collateral Manager shall be permitted, without the consent of the Issuer, the Noteholders or satisfaction of the Rating Condition, to assign any or all of its rights and delegate any or all of its obligations under the Collateral Management Agreement to an entity that is an Affiliate or Owner of the Collateral Manager, or the wholly-owned subsidiary of an Affiliate or Owner of the Collateral Manager, so long as such entity that is an Affiliate or Owner or such wholly-owned subsidiary (i) has demonstrated an ability to professionally and competently perform duties similar to those imposed upon the Collateral Manager under the Collateral Management Agreement, (ii) is legally qualified and has the capacity to act as Collateral Manager under the Collateral Management Agreement and (iii) immediately after the assignment or delegation,

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employs principal personnel performing the duties required under the Collateral Management Agreement who are the same individuals who would have performed such duties had the assignment or delegation not occurred.

In providing services under the Collateral Management Agreement, the Collateral Manager may, without the prior consent of any Person, (a) employ third parties, including, without limitation, its Affiliates and Owners, to render advice and assistance and (b) delegate to any employee, agent or third party, including, without limitation, its Affiliates and Owners, any or all of its duties thereunder; provided that the Collateral Manager will not be relieved of any of delegated duties thereunder regardless of the performance of any services by any such employee, agent or third party.

The Collateral Management Agreement may not be amended without the consent of the Issuer, the Collateral Manager, the Insurer (so long as it is the Controlling Class), the Noteholders that would be sufficient to meet the voting requirements for such an amendment if it were made to the Indenture and the satisfaction of the Rating Condition.

The Collateral Manager may resign upon 90 days’ (or such shorter notice as is acceptable to the Issuer) prior written notice to the Issuer, the Trustee and the Rating Agencies.

The Collateral Manager may be removed for cause upon ten days’ prior written notice by the Issuer or the Trustee, at the direction of (a) the Holders of a Majority of the Controlling Class (which will be the Insurer if no Insurer Default has occurred and is continuing and (x) the Insured Notes are Outstanding or (y) any Accrued Insurance Liabilities or Premiums are due and owing) or (b) the Holders of at least 66-2/3% in the Aggregate Outstanding Principal Amount of the Subordinated Notes. No such removal will be effective until the Effective Collateral Manager Substitution Date. For purposes of the Collateral Management Agreement, “cause” will mean: (i) the Collateral Manager willfully and intentionally violates in bad faith any provision of the Collateral Management Agreement or the Indenture applicable to it (including, without limitation, any representation contained in the Collateral Management Agreement) and such violation has had or is reasonably expected to have a material adverse effect on the Holders of the Notes of any Tranche; (ii) the Collateral Manager breaches in any respect any provision of the Collateral Management Agreement or any terms of the Indenture applicable to it (other than as covered by clause (i) and it being understood that failure to satisfy any Coverage Test (other than upon and as a direct result of the purchase of any particular Collateral Debt Security) is not a breach of this clause (ii)) and such breach has had or is reasonably expected to have a material adverse effect on the Noteholders of any Tranche and fails to cure such breach within 30 days after notice of such failure is given to the Collateral Manager unless, if such failure is remediable, the Collateral Manager has taken action that the Collateral Manager in good faith believes will remedy such failure within 60 days after its becoming aware of, or its receiving notice of, such failure; (iii) the failure of any representation, warranty, certification or statement made or delivered by the Collateral Manager in or pursuant to the Collateral Management Agreement or the Indenture to be correct in any respect when made and such failure has had or is reasonably expected to have a material adverse effect on the Noteholders of any Tranche (in their capacity as Noteholders) and, if capable of being cured, is not cured within 30 days after the Collateral Manager becomes aware of, or its receipt of notice from the Issuer or the Trustee of, such failure; (iv) the Collateral Manager is wound up or dissolved or there is appointed over it or a substantial portion of its assets in connection with any winding up, liquidation, reorganization or other relief under any bankruptcy, insolvency, receivership or similar law, a receiver, administrator, administrative receiver, trustee or similar officer; or such Collateral Manager (A) ceases to be able to, or admits in writing its inability to, pay its debts as they become due and payable, or makes a general assignment for the benefit of, or enters into any composition or arrangement with, its creditors generally; (B) applies for or consents (by admission of material allegations of a petition or otherwise) to the appointment of a receiver, trustee, assignee, custodian, liquidator or sequestrator (or other similar official) of the Collateral Manager or of any substantial part of its properties or assets in connection with any winding up, liquidation, reorganization or other relief under any bankruptcy, insolvency, receivership or similar law, or authorizes such an application or consent, or proceedings seeking such appointment are commenced without such authorization, consent or application against the Collateral Manager and continue undismissed for 60 days; (C) authorizes or files a voluntary petition in bankruptcy, or applies for or consents (by admission of material allegations of a petition or otherwise) to the application of any bankruptcy, reorganization, arrangement, readjustment of debt, insolvency or dissolution, or authorizes such application or consent, or proceedings to such end are instituted against the Collateral Manager without such authorization, application or consent and are approved as properly instituted and remain undismissed for 60 days or result in adjudication of bankruptcy or insolvency; or (D) permits or suffers all or any substantial part

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of its properties or assets to be sequestered or attached by court order and the order remains undismissed for 60 days; (v) the occurrence of an Event of Default which substantially results from any material breach by the Collateral Manager of its duties under the Collateral Management Agreement or under the Indenture which breach or default is not cured within any applicable cure period; or (vi) the occurrence of an act by the Collateral Manager or any of its executive officers primarily responsible for administration of the Collateral Debt Securities (in the performance of his or her investment management duties) that constitutes fraud or criminal activity in the performance of its obligations under the Collateral Management Agreement, or the Collateral Manager or any of its executive officers primarily responsible for administration of the Collateral Debt Securities (in the performance of his or her investment management duties) being indicted for a criminal offense related to its primary business.

Any Notes held by, or with respect to which discretionary voting rights are held by, the Collateral Manager, its affiliates or any fund or account over which the Collateral Manager or any of its affiliates acts as investment advisor or otherwise has discretionary voting rights will have no voting rights with respect to any vote in connection with the removal of the Collateral Manager or the replacement of the Collateral Manager with an affiliate and will be deemed to not be outstanding in connection with any such vote; provided that any Notes held by, or with respect to which discretionary voting rights are held by, any such entity will have voting rights with respect to all other matters as to which the Noteholders are entitled to vote, including, without limitation, any vote in connection with the appointment or approval of a replacement Collateral Manager that is not affiliated with the existing Collateral Manager in accordance with the Collateral Management Agreement.

Any resignation or removal of the Collateral Manager at any time while any of the Notes are outstanding will be effective upon (a) the appointment by the Issuer, subject to the approval of a Majority of the Subordinated Notes (subject to the limitations on the voting rights of the Collateral Manager set forth in the preceding paragraph), of an institution as replacement collateral manager; provided that (i) neither the Holders of a Majority of the Controlling Class (which will be the Insurer if no Insurer Default has occurred and is continuing and (x) the Insured Notes are Outstanding or (y) any Accrued Insurance Liabilities or Premiums are due and owing) nor the Holders of a Majority of the Senior Notes (other than the Controlling Class) voting as a single class disapprove such institution within 30 days of notice of such appointment; (ii) such institution has demonstrated an ability to professionally and competently perform duties similar to those imposed upon the Collateral Manager under the Collateral Management Agreement, (iii) such institution is legally qualified and has the capacity to act as successor to the collateral manager under the Collateral Management Agreement and with respect to which the Rating Condition is satisfied, and (iv) the appointment of such institution does not cause the Issuer, the Co-Issuer or the pool of Collateral to become required to register as an investment company under the 1940 Act and (b) the execution of a collateral management agreement on terms substantially similar to those contained in the Collateral Management Agreement by such successor Collateral Manager and the Issuer (such date, the “Effective Collateral Manager Substitution Date”).

In the event that (a) the Collateral Manager shall have resigned or been removed pursuant to a notice as described in the Collateral Management Agreement, and (b) neither the Issuer nor the Trustee shall have appointed a successor on or prior to (i) in the case of a removal of the Collateral Manager for Cause, the date that is 60 days following the date of the notice delivered in accordance with the Collateral Management Agreement and (ii) in the case of any resignation of the Collateral Manager or any other termination of the Collateral Management Agreement, the resignation or termination date specified in the applicable notice, then the removed or resigning Collateral Manager will be entitled to appoint a successor and will so appoint a successor within 60 days thereafter, subject to the requirements set forth in clauses (a)(i) through (iv) and (b) in the preceding paragraph. In lieu of the immediately preceding sentence, or, if the successor collateral manager appointed by the resigning or removed Collateral Manager is disapproved, the resigning or removed Collateral Manager may petition any court of competent jurisdiction for the appointment of a successor collateral manager, which appointment shall not require the consent of, nor be subject to the disapproval of, the Issuer or any Noteholder. If no successor collateral manager is in place by the date that is 90 days following the date of such removal, resignation or termination notice (as the case may be), and the resigning or removed Collateral Manager has not petitioned any court for the appointment of a successor collateral manager in accordance with the terms of the Collateral Management Agreement, then a Majority of the Controlling Class (which will be the Insurer if no Insurer Default has occurred and is continuing and (x) the Insured Notes are Outstanding or (y) any Accrued Insurance Liabilities or Premiums are due and owing) shall have the right to appoint a successor collateral manager.

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No compensation payable to a successor collateral manager from payments on the Collateral shall be greater than that paid to the Collateral Manager that was so replaced without the prior written consent of a Majority of the Controlling Class (which will be the Insurer if no Insurer Default has occurred and is continuing and (x) the Insured Notes are Outstanding or (y) any Accrued Insurance Liabilities or Premiums are due and owing) and of a Majority of the Subordinated Noteholders. Upon the later to occur of expiration of the applicable notice period with respect to any removal or resignation specified in the Collateral Management Agreement, and the Effective Collateral Manager Substitution Date, all authority and power of the resigning or removed Collateral Manager under the Collateral Management Agreement and the Indenture, whether with respect to the Collateral or otherwise, shall automatically and without further action by any person or entity pass to and be vested in the successor collateral manager upon the appointment thereof; provided that AMG shall have the right to require the Issuer to remove the word “Attentus” from its name in connection with such termination.

Conflicts of Interest

The Collateral Management Agreement generally permits the Collateral Manager or any of its Affiliates or Owners to acquire or sell securities, for its own account or for the accounts of its customers, without either requiring or precluding the offering of such securities to, or sale of such securities for the account of, the Issuer. Unless expressly prohibited by the Collateral Management Agreement, the Collateral Manager may execute transactions in the Collateral Debt Securities and Eligible Investments as part of concurrent authorizations to purchase the same security for its own account or other accounts served by the Collateral Manager if such aggregation shall not be disadvantageous to the Issuer in any material respect in the reasonable judgment of the Collateral Manager. The Collateral Management Agreement provides that if, in light of market conditions and investment objectives, the Collateral Manager determines that it would be advisable to facilitate the sale or purchase of the same Collateral Debt Security both for the Issuer and for either the proprietary account of the Collateral Manager or any Affiliate or Owner of the Collateral Manager or for another client of the Collateral Manager, the sales or purchases will be allocated in a manner believed by the Collateral Manager to be equitable and consistent with the Collateral Manager’s obligations thereunder, its standard practices and applicable law. See “Risk Factors—Relating to Certain Conflicts of Interest—The Issuer Will Be Subject to Various Conflicts of Interest Involving the Collateral Manager.”

Nothing in the Collateral Management Agreement will prevent the Collateral Manager or any of its Affiliates or Related Persons from engaging in other businesses, or from rendering services of any kind to the Issuer, the Trustee, any Noteholder or any of their respective affiliates or any other Person or entity. The Collateral Manager and any of its Affiliates or Related Persons will be free, in its or their sole discretion, to make recommendations to others and to effect transactions on behalf of itself or for others, which may be the same as or different from those effected with respect to the Collateral. In addition, nothing in the Collateral Management Agreement will preclude the Collateral Manager or its Affiliates or Related Persons from acting as principal, agent or fiduciary for other clients in connection with securities simultaneously held by the Issuer or of the type eligible for investment by the Issuer. The Indenture places restrictions on the Collateral Manager’s ability to sell Collateral Debt Securities on behalf of the Issuer. Accordingly, during certain periods or in certain circumstances, the Collateral Manager may be unable to acquire securities, sell securities or to take other actions that it might consider to be in the best interests of the Issuer or the Noteholders, as a result of such restrictions. See “Risk Factors—Certain Conflicts of Interest—The Issuer Will Be Subject to Various Conflicts of Interest Involving the Collateral Manager.”

Disclosure and Consent Provisions Relating to “Principal Trades” and Certain Related Matters

Subject to any applicable requirements of the Advisers Act, the Collateral Manager may sell items of Collateral Debt Securities from its own account, or an account under its control, to the Issuer.

In accordance with this Indenture and the Collateral Management Agreement, the Collateral Manager may also purchase any Collateral Debt Security for inclusion in the Collateral directly from any account or portfolio for which the Collateral Manager, its members or any of their respective Affiliates serves as investment advisor, or sell directly any Collateral Debt Security to any account or portfolio for which the Collateral Manager, its members or any of their respective Affiliates serves as investment advisor, subject to any limits specified in this Indenture and

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compliance with all applicable law. Pursuant to the Indenture and the Collateral Management Agreement, the Board of Directors of the Issuer (so long as a majority of its members are not affiliated with the Collateral Manager) is authorized, on a non-exclusive basis, to receive the disclosure and grant the consent contemplated by Section 206(3) of the Advisers Act. Each Holder is deemed to consent to the grant of any such consent by the Issuer’s Board of Directors.

Subject to the Collateral Management Agreement, the Collateral Manager is authorized to execute so much or all of the transactions for the Issuer’s account with or through itself, its Clients or any of its Affiliates or Owners as agent or as principal as the Collateral Manager in its sole discretion will determine, and may execute transactions in which the Collateral Manager, its Clients, its Affiliates, its Owners and/or their personnel have interests. In all such dealings, the Collateral Manager, its Clients and any of its Affiliates and Owners will be authorized and entitled to retain any remuneration or profits which may be made in such transactions and shall not be liable to account for the same to the Issuer, and the Collateral Manager’s fees as set forth in the Collateral Management Agreement will not be abated thereby.

The Issuer authorizes the Collateral Manager to execute “cross transactions” for the Issuer’s account and the Issuer understands that such authorization is terminable at the Issuer’s option without penalty, effective upon receipt by the Collateral Manager of written notice from the Issuer.

Compensation

On each Distribution Date, the Issuer will pay, subject to the Priority of Payments, to the Collateral Manager as compensation for the performance of its obligations under the Collateral Management Agreement, a fee, payable in arrears on each Distribution Date in an amount equal to 0.20% per annum of the Quarterly Asset Amount for such Due Period and subject to the Priority of Payments (such fee, the “Base Collateral Management Fee”) and a fee, payable in arrears on each Distribution Date in an amount equal to 0.20% per annum of the Quarterly Asset Amount for such Due Period and subject to the Priority of Payments (such fee, the “Subordinate Collateral Management Fee”), payable in arrears and subject to the Priority of Payments, as set forth below. At the Collateral Manager’s discretion, on or prior to the Business Day prior to each Distribution Date, the Collateral Manager may, by providing notice to the Trustee, defer all or a portion of the Subordinate Collateral Management Fee due to it on such Distribution Date and the Trustee shall distribute such amount to the Subordinated Noteholders. In the event that the Collateral Manager elects to defer all or a portion of the Subordinate Collateral Management Fee the amount so deferred shall be paid on the next Distribution Date subject to the Priority of Payments. In addition, on the Closing Date the Issuer will pay an up-front collateral management fee to the Collateral Manager in an amount equal to approximately $2,000,000 (the “Up-Front Collateral Management Fee”).

If amounts distributable on any Distribution Date in accordance with the Priority of Payments are insufficient to pay the Collateral Management Fees in full, then a portion of such fees, as applicable, equal to the shortfall will be deferred and will be payable on subsequent Distribution Dates on which funds are available therefor in accordance with the Priority of Payments, and interest will accrue thereon at a rate of three-month LIBOR per annum. Any interest due on such unpaid and deferred fees will thereupon constitute accrued and unpaid Collateral Management Fees, as applicable.

THE POLICY AND THE INSURANCE AGREEMENT

The Policy

The following summary of the terms and conditions of the Policy does not purport to be complete and is qualified in its entirety by reference to the Policy and the Insurance Agreement.

Simultaneously with the issuance of the Insured Notes, the Insurer will deliver the Policy to the Trustee for the benefit of the Insured Noteholders. In consideration of the payment of the Premium and pursuant to the terms of the Policy, the Insurer will unconditionally and irrevocably agree to pay each and every Insured Amount which will become Due for Payment, but will be unpaid by reason of Nonpayment (as such terms are defined below).

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In the event that the payment of any amount in respect of any Insured Amount is accelerated or must otherwise be paid by the Issuer in advance of the scheduled payment date therefor, nothing in the Policy will be deemed to require the Insurer to make any payment thereunder in respect of any such Insured Amount prior to the date such Insured Amount otherwise would have been Due for Payment without giving effect to such acceleration, unless the Insurer in its sole discretion elects to make any prior payment, in whole or in part, with respect to any such Insured Amount.

The Policy will be irrevocable and will not be cancelable for any reason, including, without limitation, the non-payment of Premium. The Policy and the obligations of the Insurer thereunder will terminate, subject to the conditions in the Policy, on the day that is one year and one day following the earlier to occur of (a) the date on which all amounts required to be paid on the Insured Notes have been paid in full, and (b) the Stated Maturity.

Following receipt by the Insurer of a notice for payment of claims on the Policy (which notice is in the form attached to the Policy and delivered in the manner specified therein), the Insurer will pay any amounts payable under the Policy (other than amounts payable as a result of an avoidable preference and which are discussed below) to the Trustee on the later to occur of (a) the date on which such payment becomes due or (b) the third Business Day following receipt by the Insurer on a Business Day of such notice relating to such payment of a claim under the Policy. Under the Indenture, the Trustee will be required to make a claim on the Policy if, on the date that is the third Business Day prior to any Distribution Date, the amounts then on deposit and available for distribution (or scheduled to be on deposit and available for distribution on the Distribution Date) in the Collection Accounts are insufficient (based on the information set forth in the note valuation report prepared as of the Determination Date related to such Distribution Date) to pay the Insured Amounts in respect of the Insured Notes on such Distribution Date in accordance with the Priority of Payments.

Subject to and conditional upon payment of any interest or principal with respect to the Insured Notes by or on behalf of the Insurer, the Trustee will assign to the Insurer all rights to the payment of interest and principal on or with respect to the Insured Notes, which are then due for payment to the extent of all payments made by the Insurer, and the Insurer may exercise any option, vote, right or power to the extent it has made a principal payment pursuant to the Policy in addition to its other rights under the Indenture.

In the event the Insurer is required under law to deduct or withhold any tax or similar charge from or in respect of any amount payable under or in respect of the Policy, the Insurer will make all such deductions and withholdings and pay the full amount deducted or withheld to the relevant taxation authority in accordance with law, but the Insurer will not “gross-up” or otherwise pay additional amounts in respect of such taxes, and the Insurer’s payments to the Trustee, the receiver, conservator, administrator, debtor-in-possession or trustee in bankruptcy named in the Order (as defined below) relating to a Preference Amount, or the Insured Noteholders, as the case may be, will be amounts that are net of such deductions or withholdings.

If any amount or property paid, credited, transferred or delivered to the Trustee under the terms of the Indenture becomes a Preference Amount, the Insurer will pay the amount of such Preference Amount when due to be paid pursuant to the Order referred to below, but in any event no earlier than the fourth Business Day following receipt (as specified in the Policy) by the Insurer from the Trustee of (a) a certified copy of the final, non-appealable order of the court or other body which exercised jurisdiction in the related insolvency proceeding by or against the Issuer to the effect that an Insured Noteholder or the Trustee is required to return or repay all or any portion of a Preference Amount (the “Order”), (b) an opinion of counsel satisfactory to the Insurer and a certificate by the Trustee that the Order has been entered and is not subject to any stay, (c) an assignment in form and substance satisfactory to the Insurer, duly executed and delivered by the Trustee on behalf of the affected Holders, irrevocably assigning to the Insurer all rights and claims of the Trustee on behalf of the affected Holders against the estate of the Issuer or otherwise, which rights and claims relate to or arise under or with respect to the subject Preference Amount and (d) a notice of claim with respect to such preference payment, which notice is in the form specified in the Policy and appropriately completed and executed by the Trustee. In no event will the Insurer be obligated to make any payment in respect of any Preference Amount prior to the date the Insured Amount related to such Preference Amount is Due for Payment. Such payment will be disbursed to the receiver, conservator, administrator, debtor-in possession or trustee in bankruptcy named in the Order and not to the Trustee directly, unless the Insured Noteholder or the Trustee has previously paid the Preference Amount over to such court or receiver, conservator, administrator, debtor-in-possession or trustee in bankruptcy named in the Order, in which case the Insurer will pay the Trustee

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subject to the delivery of (i) the items referred to in clauses (a), (b), (c) and (d) above to the Insurer, and (ii) evidence satisfactory to the Insurer that payment has been made to such court or receiver, conservator, administrator, debtor-in-possession or trustee in bankruptcy named in the Order. So long as no Insurer Default has occurred and is continuing, the Insurer will have the right to direct all matters relating to an insolvency proceeding with respect to the Issuer.

The Policy may not be assigned by the Trustee without the prior written consent of the Insurer.

Subject to the terms of the Indenture and the Insurance Agreement, the Insurer will be entitled to be reimbursed by the Issuer for the payments made under the Policy (see “—The Insurance Agreement” below).

The Insurer’s obligation under the Policy in respect of Insured Amounts will be discharged to the extent that funds are transferred by the Insurer to the Trustee (or in the case of a Preference Amount, to the receiver, conservator, administrator, debtor-in-possession or trustee in bankruptcy named in the Order), regardless of whether such funds are properly applied by the Trustee or such other party.

In addition to the rights provided to the Insurer in the transaction documents, upon and to the extent of any payment by the Insurer under the Policy, the Insurer will become the Insured Noteholder, any appurtenant coupon thereto and right to payment of principal thereof and interest thereon, and will be fully subrogated to the Trustee’s and each Insured Note Noteholder’s right, title and interest thereunder, including the right to receive payments in respect of the Insured Notes. Any rights of subrogation acquired by the Insurer as a result of any payment of Insured Amounts made under the Policy will be subject to the Priority of Payments. Any payment made by or on behalf of the Co-Issuers to, and any amounts received under the Related Documents for the benefit of, any Insured Noteholder in respect of any Insured Amount forming the basis of a claim thereunder (which claim will have been paid by the Insurer) will be received and held in trust for the benefit of the Insurer and will be paid over to the Insurer. The Trustee and each Insured Noteholder will cooperate with any request by the Insurer for action to preserve or enforce the Insurer’s, the Trustee’s and any Insured Note Noteholder’s rights and remedies in respect of the Co-Issuers and the Collateral Manager under the Insured Notes, any related security arrangements or otherwise, including without limitation any request to (a) institute or participate in any suit, action or other proceeding, (b) enforce any judgment obtained and collect from the Co-Issuers and the Collateral Manager any amounts adjudged due or (c) transfer to the Insurer, via absolute legal assignment, the Trustee’s or any Insured Note Noteholder’s rights in respect of any Insured Amount which may form the basis of a claim thereunder. For a discussion of the rights and powers of the Insurer upon an Event of Default, see “Description of the Notes—Events of Default”.

To the fullest extent permitted by applicable law, the Insurer will waive, in each case for the benefit of the Insured Noteholders only, all rights and defenses of any kind (including, without limitation, the defense of fraud in the inducement or in fact or any other circumstance that would have the effect of discharging a surety, guarantor or any other Person in law or in equity) that may be available to the Insurer to deny or avoid payment of its obligations under the Policy in accordance with the express provisions thereof. Nothing in such waiver will be construed (i) to waive, limit or otherwise impair, and the Insurer expressly reserves, the Insurer’s rights and remedies, including, without limitation: its right to assert any claim or to pursue recoveries (based on contractual rights, securities law violations, fraud or other causes of action) against any person or entity, in each case, whether directly or acquired as a subrogee, assignee or otherwise, subsequent to making any payment to the Trustee in accordance with the express provisions thereof, and/or (ii) to require payment by the Insurer of any amounts that have been previously paid or that are not otherwise due in accordance with the express provisions of the Policy. The Insurer will not waive its right to seek payment of all amounts to which it is entitled pursuant to the Insurance Agreement, the premium letter or any other Related Document.

Notwithstanding any provision of the Indenture, by acceptance of an Insured Note each Insured Noteholder will be deemed to have agreed that the Insurer as representative of such Holder may exercise any rights and remedies that are available to such Holder at law or in equity, including, without limitation, under the Securities Act and/or the Exchange Act at any time and without preconditions or the further consent of such Holder or the Trustee. All proceeds received by such Holder arising out of any such action or proceeding (including any settlement proceeds in respect of any such action or proceeding) including, without limitation, an action or proceeding by the Controlling Class as plaintiff representative pursuant to the Indenture, will be applied in an amount equal to the amount so received by such Holder (a) first, to make a payment to the Insurer of any amount then due and payable

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under the Insurance Agreement and (b) second, to redeem the Insured Notes at par plus accrued and unpaid interest thereon.

THE POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.

The Insurance Agreement

The Co-Issuers and the Insurer will enter into the Insurance Agreement dated as of the Closing Date. Pursuant to the Insurance Agreement and the Indenture, the Co-Issuers will agree to pay or reimburse the Insurer for “Accrued Insurance Liabilities”, which generally will consist of:

(a) all amounts paid by the Insurer under the Policy for the benefit of the Insured Noteholders (unless such amounts have previously been repaid to the Insurer);

(b) all amounts advanced or paid by the Insurer (but not in the form of a payment under the Policy) under the Indenture or any substitute therefor (unless such amounts have previously been repaid to the Insurer);

(c) all reasonable costs and expenses reasonably incurred by the Insurer in connection with the transactions contemplated by the Related Documents, which costs and expenses shall include, but not be limited to,

(i) rating agency fees; and

(ii) attorneys’ and accountants’ fees, costs and expenses and other out of pocket expenses, including travel costs, in connection with:

(A) any accounts established to facilitate payments under the Policy, the Insurance Agreement or the Indenture,

(B) the administration, enforcement, defense or preservation of any rights in respect of the Related Documents or the Policy,

(C) the foreclosure against or sale or other disposition of any Collateral or pursuit of any other remedies under any of the Indenture or the other Related Documents (to the extent such costs and expenses are not recovered from such foreclosure, sale or other disposition of the Collateral),

(D) any amendment, waiver or other action with respect to or related to the Indenture or the other Related Documents or the Policy, whether or not executed or completed,

(E) any action taken by the Insurer to cure a default or termination or similar event (or to mitigate the effect thereof) under any Related Document, or

(F) any review or approval by the Insurer in connection with the delivery of additional Collateral to the extent the Insurer has such a review or appeal right thereunder (in each case, to the extent such amounts have not previously been reimbursed to the Insurer).

The Co-Issuers will pay interest accrued on the foregoing amounts at the Accrued Insurance Liabilities Interest Rate (as defined in the Insurance Agreement) for the period from the date the Insurer paid or advanced such amounts until the date such amounts are paid in full. In addition, the Co-Issuers will, jointly and severally, agree to pay and to protect, indemnify and save harmless, the Insurer and its officers, directors, shareholders, employees,

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agents and each person, if any, who controls the Insurer within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against losses incurred by reason of:

(a) any statement, omission or action (other than of or by the Insurer) in connection with the offering, issuance, sale or delivery of the Notes;

(b) the negligence, bad faith, willful misconduct, misfeasance, malfeasance or theft committed by any director, officer, employee, agent or advisor of the Issuer or the Co-Issuer in connection with the transactions or relating to each Related Document to which it is a party or the gross negligence, bad faith or willful misconduct in the performance, or reckless disregard of the obligations, of the Collateral Manager or the Trustee in connection with the transactions or relating to any of the Indenture, the Collateral Management Agreement, the Collateral Administration Agreement, the Insurance Documents, the Hedge Agreement, the Account Control Agreement (as defined in the Indenture), the Issuer Charter and the Notes;

(c) the violation by the Issuer or the Co-Issuer of any domestic or foreign law, rule or regulation, including, but not limited to, any securities or banking law, rule or regulation in connection with any issuance, offer and sale of the Notes, or any judgment, order or decree applicable to it;

(d) (i) the breach by the Issuer or the Co-Issuer of any representation, warranty or covenant under any of the Related Documents, or (ii) any event of default under any Related Document or any event which, with the giving of notice or the lapse of time or both, would constitute an event of default thereunder; or

(e) any untrue statement or alleged untrue statement of a material fact contained herein or any omission or alleged omission to state herein a material fact required to be stated herein or necessary to make the statements herein, in light of the circumstances under which they were made, not misleading, except insofar as such claims arise out of or are based upon any untrue statement or alleged untrue statement or omission or alleged omission in information included herein furnished by the Insurer in writing expressly for use herein (all such information so furnished being referred to herein as “Insurer Information”), it being understood that the Insurer Information so furnished by the Insurer expressly for use herein is limited solely to the information included under the caption “The Insurer” and any information expressly incorporated by reference under such caption.

The Co-Issuers will agree to pay to the Insurer on each Distribution Date the Premium in accordance with the terms of the Insurance Agreement and the Indenture.

All amounts owing by the Co-Issuers under the Insurance Agreement will be payable in accordance with the Priority of Payments. In accordance with the Priority of Payments, the Premium will be payable prior to any payments to Class A Noteholders on each Distribution Date. Premium payable to the Insurer will cease to accrue on any date on which the Policy is terminated or otherwise ceases to be outstanding and in full force and effect.

The occurrence of an Insurance Agreement Event of Default will constitute an Event of Default under the Indenture so long as the Insurer constitutes the Controlling Class and will allow the Insurer, among other things, to direct the Trustee to declare the principal of and interest on the Senior Notes immediately due and payable. See “Description of the Notes—Events of Default”.

The occurrence of any of the following events shall constitute an “Event of Default” under the Insurance Agreement (each, an “Insurance Agreement Event of Default”):

(a) the occurrence of an Event of Default or an “event of default” under any of the Collateral Management Agreement, the Collateral Administration Agreement, the Insurance Documents, the Hedge Agreement, the Account Control Agreement (as defined in the Indenture), the Issuer Charter and the Notes;

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(b) any demand for payment shall be made under the Policy;

(c) any representation or warranty made by either of the Co-Issuers under any Related Document to which it is a party, or in any certificate, report, instrument or other document furnished under any such Related Document, shall prove to have been untrue, inaccurate or incorrect in any material respect when made, and the Issuer or the Co-Issuer, as applicable, shall fail to cure such breach of representation or warranty within the time period specified in such Related Document or, if no such cure period is specified, within 15 calendar days, for any representation or warranty regarding the Collateral, or within 30 calendar days, for any other representation or warranty, in each case after the date which is the earlier of (i) the date on which the Issuer or the Co-Issuer, as applicable, has actual knowledge of such breach or (ii) the date on which notice thereof was given to the Issuer or the Co-Issuer, as applicable, and in each case, which breach or breaches (individually or collectively) has or can be reasonably be expected to have a material adverse effect on the Insurer;

(d) (i) either of the Co-Issuers shall fail to pay when due any amount payable by it under any Related Document to which it is a party in accordance with the terms thereof, including, without limitation, any grace period thereunder the nonpayment of which amount has or can reasonably be expected to have a material adverse effect on the Insurer; (ii) either of the Co-Issuers shall have asserted that any of the Related Documents to which it is a party is not valid and binding on any party thereto; or (iii) any court, governmental authority or agency having jurisdiction over any of the parties to any of the Related Documents or any property thereof shall find or rule that any material provision of any of the Related Documents is not valid and binding on any of the parties thereto (other than the Insurer); or

(e) either of the Co-Issuers shall fail to perform or observe in any material respect any other covenant or agreement to be performed or observed by it under the Insurance Agreement or under any Related Document to which it is a party (except for the obligations described under clauses (c) or (d) above) and such failure shall continue for a period of 30 calendar days after the date which is the earlier of (i) the date on which the Issuer or the Co-Issuer, as applicable, has actual knowledge of such failure or (ii) the date on which written notice thereof was given to the Issuer or the Co-Issuer, as applicable; provided that if such failure shall be of a nature that it cannot be cured within 30 calendar days, such failure shall not constitute an Insurance Agreement Event of Default if within such 30 calendar-day period the Issuer or the Co-Issuer, as applicable, shall have given written notice to the Insurer of corrective action it proposes to take, which corrective action shall have been agreed in writing by the Insurer to be satisfactory and the Issuer or the Co-Issuer, as applicable, shall thereafter pursue such corrective action diligently until such default is cured.

Pursuant to the Indenture, so long as it is the Controlling Class, the Insurer will have the right to exercise all the rights of the Insured Noteholders under the Indenture and, except in certain limited circumstances, the Insured Noteholders will not be permitted to exercise any such rights without the consent of the Insurer.

The Insurance Agreement will be governed by and construed in accordance with the laws of the State of New York.

CERTAIN INCOME TAX CONSIDERATIONS

General

The following summary describes the principal U.S. federal income tax and Cayman Islands tax considerations expected to be applicable to the purchase, ownership and disposition of the Notes, but does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase the Notes. In particular, special tax considerations that may apply to certain types of taxpayers, including securities dealers, banks, tax-exempt investors, insurance companies, partnerships and other pass-through entities, U.S Holders (as defined below) having a "functional currency" other than the U.S. dollar, and subsequent purchasers of Notes,

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are not addressed. In addition, this summary does not describe any tax consequences arising under the laws of any state, locality or taxing jurisdiction other than the U.S. federal government and the Cayman Islands. In general, the summary assumes that a Holder acquires the Notes at original issuance for the original offering price thereof and holds such Notes as a capital asset and not as part of a hedge, straddle, conversion transaction or other integrated transaction.

This summary is based on the U.S. and Cayman Islands tax laws, regulations, rulings and decisions in effect or available on the date of this Offering Circular. All of the foregoing are subject to change, which change may apply retroactively and could affect the continued validity of this summary. If a partnership or other entity taxable as a partnership holds Notes, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partners in partnerships holding Notes should consult their tax advisors regarding the tax consequences of the ownership and disposition of the Notes.

PROSPECTIVE PURCHASERS OF THE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO U.S. FEDERAL INCOME TAX AND CAYMAN ISLANDS TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE POSSIBLE APPLICATION OF STATE, LOCAL, FOREIGN OR OTHER TAX LAWS.

For purposes of this discussion, a "U.S. Holder" is a beneficial Holder that is, for U.S. federal income tax purposes, (i) a citizen or resident of the United States, (ii) a corporation or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (iii) a trust subject to the control of one or more U.S. persons and the primary supervision of a U.S. court or (iv) an estate the income of which is subject to United States federal income taxation regardless of its source. In addition, for purposes of this discussion, a "Non-U.S. Holder" is a beneficial Holder that is a nonresident alien individual or foreign corporation for U.S. federal income tax purposes.

U.S. Federal Income Tax Considerations

Internal Revenue Service Circular 230 Notice

To ensure compliance with Internal Revenue Service Circular 230, prospective investors are hereby notified that: (a) any discussion of federal tax issues contained or referred to in this Offering Circular is not intended or written to be used, and cannot be used, by prospective investors for the purpose of avoiding penalties that may be imposed on them under the Internal Revenue Code; (b) such discussion is written in connection with the promotion or marketing by the Issuer and the Initial Purchaser of the transactions or matters addressed herein; and (c) prospective investors should seek advice based on their particular circumstances from an independent tax advisor.

U.S. Taxation of the Issuer

For U.S. federal income tax purposes, the Issuer, and not the Co-Issuer, will be treated as the Issuer of the Notes.

The Issuer, as a foreign corporation, will be subject to U.S. federal income taxes on its net income (1) only if it is treated as having a trade or business within the United States and (2) then only to the extent its net income is treated as “effectively connected” with such U.S. trade or business. Under a safe harbor for securities trading set forth in the Internal Revenue Code of 1986, as amended (the "Code") and the Treasury regulations thereunder, a foreign corporation will be treated as not having a U.S. trade or business if it restricts its activities in the United States to investing or trading in “stocks and securities” (and any other activity closely related thereto) for its own account, whether such activities are conducted directly by the corporation or through agents (provided the corporation is not a dealer in stocks or securities). Although the Issuer intends to rely on this safe harbor and other authorities that it should not have a U.S. trade or business, this conclusion is not free from doubt. If the Issuer were treated as having a U.S. trade or business, only its income that is effectively connected with its U.S. trade or business would be subject to U.S. federal income tax on a net basis. The Treasury regulations include a special set of rules for foreign corporations that are engaged in the active conduct of a banking, financing or similar business in

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the United States. Income from such a U.S. trade or business is treated as effectively connected income only if it is attributable to a U.S. office. The Issuer intends to rely on this special rule.

In this regard, prior to the issuance of the Notes, the Issuer will receive an opinion from Weil, Gotshal & Manges LLP, special U.S. federal income tax counsel to the Issuer, to the effect that, in its judgment, although no activity closely comparable to that contemplated by the Issuer has been the subject of any U.S. Treasury regulation, revenue ruling or judicial decision, the Issuer will not be treated as having income that is effectively connected with a trade or business within the United States and, consequently, the Issuer’s profits will not be subject to U.S. federal income tax on a net income basis (including the branch profits tax). The opinion is based on the assumption that the Issuer and other transaction parties will comply with the terms of the Indenture, the Collateral Management Agreement and the other transaction documents, as well as certain assumptions and certain representations and agreements of such parties. The opinion represents only special tax counsel’s professional judgment, and is not binding on the Internal Revenue Service ("IRS"). There can be no assurance that the IRS would not assert a contrary position. If, notwithstanding special tax counsel’s opinion, it were determined that the Issuer was engaged in a U.S. trade or business and had taxable income that is effectively connected with such U.S. trade or business, then the Issuer would be subject under the Code to the regular corporate income tax on such effectively connected taxable income and to the 30% branch profits tax as well. Such taxes would reduce the amounts available to make payments on the Notes. There can be no assurance that in such circumstance remaining payments on the Collateral Debt Securities would be sufficient to make timely payments of interest on, and payment of principal at the applicable Stated Maturity of, the Notes. In addition, interest paid on the Notes and payments with respect to the Subordinated Notes to a Non-U.S. Holder could in such circumstance be subject to a 30% U.S. withholding tax.

U.S. Withholding Tax

The Issuer believes that for U.S. federal income tax purposes, (i) the Corresponding Debentures will be treated as indebtedness, (ii) each Trust Preferred Securities Issuer will be treated as a grantor trust and, accordingly, the Issuer generally will be considered the owner of a pro rata undivided interest in the Corresponding Debentures and (iii) the CMBS, Senior Securities, Subordinated Securities and Senior Secured Loans will be treated as indebtedness. Generally, U.S. source interest income received by a foreign corporation not engaged in a trade or business within the United States is subject to U.S. withholding tax at the rate of 30% of the amount thereof. However, the Code provides an exception for interest that constitutes "portfolio interest" that is exempt from withholding tax. The term "portfolio interest" is generally defined as interest paid with respect to debt issued after July 18, 1984, unless the interest is paid to a 10% stockholder of the payor, to a controlled foreign corporation related to the payor, or to a bank with respect to a loan entered into in the ordinary course of its business. For purposes of applying the 10% stockholder and related controlled foreign corporation rules, certain constructive ownership rules contained in the Code apply. The Issuer believes that the Collateral Debt Securities do not violate these rules. Furthermore, the Issuer believes that all of the purchased Collateral Debt Securities of U.S. issuers will pay interest qualifying as "portfolio interest" for which withholding is not otherwise applicable. Accordingly, the Issuer does not expect that payments on the Collateral Debt Securities securing the Notes will be subject to the imposition of U.S. withholding tax. There can be no assurance that the Issuer will not become subject to such withholding as a result of a change in or the adoption of a tax statute, or any change in or the issuance of a regulation or equivalent authority or otherwise. In addition, if any of the Corresponding Debentures, CMBS, Senior Securities, Subordinated Securities or Senior Secured Loans do not constitute debt for U.S. federal income tax purposes, payments on such securities would be expected to be subject to material amounts of U.S. withholding tax and could possibly subject U.S. Holders of Subordinated Notes to other adverse U.S. tax consequences. In the event of imposition of such withholding, it is generally anticipated that the related obligors would not be required to pay any compensating gross-up payments, unless, in the case of Trust Preferred Securities, such imposition of withholding tax results from a change in law. Any change, adoption or issuance of tax law affecting withholding tax on payments on the Collateral Debt Securities or determination of the non-debt status of the Corresponding Debentures, CMBS, Senior Securities, Subordinated Securities or Senior Secured Loans, as the case may be, could result in the occurrence of a Tax Event under the Indenture pursuant to which the Notes may be redeemed. See "Description of the Notes—Optional Redemption and Tax Redemption."

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Tax Treatment of U.S. Holders of the Senior Notes

Prior to the issuance of the Notes, Weil, Gotshal & Manges LLP, special U.S. federal income tax counsel to the Issuer, will render its opinion to the effect that the Co-Issued Notes will be treated as debt for U.S. federal income tax purposes and the Class F Notes should be treated as debt for U.S. federal income tax purposes. The Issuer will treat the Senior Notes as debt for U.S. federal income tax purposes, and each U.S. Holder is required not to take any action inconsistent with such treatment for U.S. federal income tax purposes. The following discussion is based on the rules governing original issue discount ("OID") that are set forth in sections 1271-1273 and 1275 of the Code and in Treasury regulations issued thereunder. These regulations, however, do not adequately address certain issues relevant to securities such as the Senior Notes.

Taxation of Interest Income and Class A-1A Commitment Fee

Stated interest on the Senior Notes that is considered "unconditionally payable" (as described below) and the Class A-1A Commitment Fee will be includible in income by a U.S. Holder when received or accrued in accordance with such Holder’s method of tax accounting.

If the "issue price" of any Senior Note is less than the "stated redemption price at maturity" ("SRPM") of such Note, the excess of the SRPM over the issue price may constitute OID. Under a de minimis rule, if the excess of the SRPM of such Senior Note over its issue price is less than one fourth of one percent of the SRPM multiplied by the weighted average maturity determined under applicable Treasury regulations of such Note, such Note will not be treated as issued with OID. If any Senior Notes are in fact issued at a greater than de minimis discount or are otherwise treated as having been issued with OID, the excess of the SRPM of such Notes over their issue price will constitute OID. Under the Code, U.S. Holders of such Senior Notes would be required to include the daily portions of OID, if any, in income as interest over the term of such Notes under a constant yield method that reflects the time value of money, regardless of such U.S. Holder’s method of accounting and without regard to the timing of actual payments. Treasury regulations applicable to debt instruments issued with OID do not provide rules for accruals of OID on debt instruments the payments on which are contingent as to time, such as the Senior Notes. In the absence of definitive guidance, any OID may be reported using a prepayment assumption (as described in more detail with respect to the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes (the “Deferrable Notes”) in the second succeeding paragraph below).

Treasury regulations provide, for purposes of determining whether a debt instrument is issued with OID, that stated interest must be included in the SRPM of the debt instrument if such interest is not "unconditionally payable." Interest is considered "unconditionally payable" if reasonable legal remedies exist to compel timely payment or terms and conditions of the debt instrument make the likelihood of late payment (other than late payment that occurs within a reasonable grace period) or nonpayment (ignoring the possibility of nonpayment due to default, insolvency or similar circumstances) a remote contingency. The Issuer intends, pursuant to its interpretation of the foregoing rules, to take the position that payments of interest on the Class A Notes are considered unconditionally payable, and thus not included in the SRPM of such Notes and should be treated as "qualified stated interest." However, because interest on the Deferrable Notes is subject to deferral (and the possibility of deferral may not be remote), the Issuer will take the position that payments of stated interest on the Deferrable Notes should be included in the SRPM and the Deferrable Notes should be treated as issued with OID.

If the Deferrable Notes are issued at an issue price equal to their principal amount, the Issuer intends not to calculate OID under the PAC Method referred to below, and instead to take the position that the amount of OID that accrued on such Notes in each accrual period is equal to the amount of interest (including any Deferred Interest) that accrues on such Notes during such period. Unless the Deferrable Notes are issued at an issue price equal to their principal amount, the Issuer intends, absent definitive guidance, to treat the Deferrable Notes as subject to an income accrual method analogous to the methods applicable to debt instruments having payments that are subject to acceleration (prescribed by section 1272(a)(6) of the Code) using an assumption as to the expected prepayments on the Deferrable Notes (the "PAC Method"), which assumption will be reflected on a projected payment schedule prepared by the Issuer. The projected payment schedule will be utilized solely to determine the amount of OID to be included in income annually by U.S. Holders of the Deferrable Notes. As such, the calculation of the projected payment schedule would be based on a number of assumptions and estimates and is not a prediction of the actual

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amounts of payments on the Deferrable Notes or of the actual yield of the Deferrable Notes. In any case, however, the Issuer’s determination would not be binding on the IRS.

Sale or Disposition of Senior Notes

In general, a U.S. Holder of a Senior Note will have an adjusted tax basis in such Note equal to the cost of the Note to such U.S. Holder, increased by any amount previously included in income by such U.S. Holder as OID and reduced by any payments of principal or interest on its Note (other than payments of qualified stated interest that are not required to be included in the SRPM of such Note).

Upon the sale, exchange or retirement of a Senior Note, a U.S. Holder will recognize taxable gain or loss, if any, generally equal to the difference between the amount realized on the sale, exchange or retirement (other than accrued qualified stated interest that was not required to be included in the SRPM of such Note, which interest will, if not previously included in income, be treated as interest paid on the Note) and such U.S. Holder’s adjusted tax basis in such Note. Any such gain or loss will generally be long-term capital gain or loss provided that such Senior Note was a capital asset in the hands of the U.S. Holder and had been held for the requisite period. In certain circumstances, U.S. Holders that are not corporations may be entitled to preferential treatment for net long-term capital gains; however, the ability of U.S. Holders to offset capital losses against ordinary income is limited.

Tax Treatment of U.S. Holders of the Subordinated Notes

For purposes of Cayman Islands law, the Subordinated Notes will be characterized as debt of the Issuer. Under U.S. federal income tax principles, however, a strong likelihood exists that the Subordinated Notes will be treated as equity of the Issuer. It is the intention of the Issuer that, for U.S. federal income tax purposes, the Subordinated Notes will be treated as equity of the Issuer; each purchaser of Subordinated Notes agrees to such treatment and agrees to take no action inconsistent with such treatment. Except as otherwise indicated, this summary assumes such treatment.

Passive Foreign Investment Company Rules

The Issuer will constitute a "passive foreign investment company" ("PFIC") for U.S. federal income tax purposes, and the Subordinated Notes will be treated as equity in a PFIC. In general, a U.S. Holder may desire to make an election to treat the Issuer as a "qualified electing fund" ("QEF") with respect to such U.S. Holder in order to avoid the application of certain potentially adverse U.S. tax rules (discussed below) applicable to ownership of PFIC equity by U.S. persons. Generally, a QEF election should be made with the filing of a U.S. Holder’s federal income tax return for the first taxable year for which it holds Subordinated Notes. If a timely QEF election is made, an electing U.S. Holder would be required to include in gross income such Holder’s pro rata share of the Issuer’s ordinary earnings, and as long-term capital gain such Holder’s pro rata share of the Issuer’s net capital gain, if any, whether or not distributed, assuming that the Issuer does not constitute a "controlled foreign corporation" with respect to which the Holder is treated as a "U.S. Shareholder" as discussed further below. The use of investment proceeds to fund reserves or retire all or a portion of certain Classes of Senior Notes or investment by the Issuer in Collateral Debt Securities that result in taxable income in excess of cash distributions could cause a U.S. Holder to recognize income in excess of amounts it actually receives. In addition, if any portion of a given Class of Senior Notes is not ultimately paid upon maturity, the Issuer may recognize cancellation of indebtedness income without any corresponding offsetting losses (due to tax character differences or otherwise), in which case U.S. Holders also may have additional “phantom” income. In certain cases in which a QEF does not distribute all of its earnings in a taxable year, U.S. Holders may also be permitted to elect to defer payment of some or all of the taxes on the QEF’s income subject to an interest charge on the deferred amount. The Issuer will provide, upon request, all information and documentation that a U.S. Holder making a QEF election is required to obtain for U.S. federal income tax purposes (e.g., the U.S. Holder’s pro rata share of ordinary income and net capital gain, and a "PFIC Annual Information Statement" as described in Treasury regulations).

If a U.S. Holder does not make a timely QEF election, a U.S. Holder that has held Subordinated Notes would generally be required to report under the PFIC rules any gain on disposition of such Subordinated Notes (including any deemed disposition resulting from the use of such Subordinated Notes as security for a loan) as

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ordinary income rather than capital gain and to compute the tax liability on such gain and certain "excess" distributions as if the items had been earned ratably over each day in the U.S. Holder’s holding period for the securities and would be subject to the highest ordinary income tax rate for each taxable year (other than the current year of the U.S. Holder) in which the items were treated as having been earned, regardless of the rate otherwise applicable to the U.S. Holder. Such U.S. Holder would also be liable for an additional tax equal to an interest charge on the tax liability attributable to income that is treated as allocated to prior years as if such liability had actually been due in each such prior year.

U.S. HOLDERS OF SUBORDINATED NOTES SHOULD CONSIDER CAREFULLY WHETHER TO MAKE A QEF ELECTION WITH RESPECT TO SUCH SUBORDINATED NOTES AND THE POTENTIAL ADVERSE CONSEQUENCES OF NOT MAKING SUCH AN ELECTION.

Controlled Foreign Corporation Rules

In general, a foreign corporation will constitute a controlled foreign corporation (a "CFC") if more than 50% of the shares of the corporation, measured by reference to combined voting power or value, is held, directly or indirectly, by U.S. Shareholders. A "U.S. Shareholder" for this purpose is any U.S. person who owns, actually or constructively, 10% or more of the combined voting power of all classes of shares of a corporation. It is possible that the IRS would assert that the Subordinated Notes are de facto voting securities and that U.S. Holders owning, actually or constructively, 10% or more of the aggregate outstanding principal amount of such Subordinated Notes are U.S. Shareholders. If this argument were successful and more than 50% of the Subordinated Notes (determined with respect to aggregate value or aggregate outstanding principal amount) are held (actually or constructively) by such U.S. Shareholders, the Issuer would be treated as a CFC. In such circumstances, any U.S. Shareholder holding Subordinated Notes would be required to include income in respect of the Subordinated Notes under the CFC rules rather than the rules described above.

If the Issuer were a CFC, a U.S. Shareholder of the Issuer will be required, subject to certain exceptions, to include in gross income at the end of the taxable year of the Issuer an amount equal to that person’s pro rata share of the "subpart F income" and certain U.S. source income of the Issuer. Among other items, and subject to certain exceptions, "subpart F income" includes interest, gains from the sale of securities, and income from certain transactions with related parties. It is likely that, if the Issuer were to constitute a CFC, all or substantially all of its income would be subpart F income.

If the Issuer were treated as a CFC for the period during which a U.S. Holder of Subordinated Notes is a U.S. Shareholder of the Issuer, such U.S. Holder would be taxable on the subpart F income of the Issuer under rules described in the preceding paragraph and not under the PFIC rules previously described. As a result, to the extent subpart F income of the Issuer includes net capital gains, such gains would be treated as ordinary income of the U.S. Shareholder under the CFC rules, notwithstanding the fact that the character of such gains generally would otherwise be preserved under the PFIC rules if a QEF election were made. In addition, the PFIC rule permitting the deferral of tax on undistributed earnings would not apply.

In general, a U.S. Holder that is not initially a U.S. Shareholder and that does not elect to treat the Issuer as a QEF but that subsequently becomes a U.S. Shareholder (e.g., as a result of increased overall ownership of Subordinated Notes by U.S. Holders or an increase in the Holder’s own security holdings) and therefore becomes subject to the CFC inclusion rules as described above, would nevertheless also be required to treat the Issuer as a PFIC that was not a QEF. In such case, for purposes of applying the deemed interest charge rules described above, the U.S. Holder would continue to treat the date on which it acquired the Subordinated Notes as the date on which its holding period began. If, however, the U.S. Holder had made the QEF election before becoming a U.S. Shareholder, such U.S. Holder would be treated as acquiring an interest in a QEF on the day following any later day on which it ceased to be a U.S. Shareholder but remained a U.S. Holder (e.g., if the Holder disposes of some but not all of its Subordinated Notes, or changes in the overall ownership of Subordinated Notes by U.S. Holders result in termination of the Issuer’s status as a CFC).

Similarly, if a U.S. Holder of Subordinated Notes constitutes a U.S. Shareholder at issuance but subsequently ceases to be a U.S. Shareholder while continuing to hold such Subordinated Notes (e.g., as a result of changes in the Holder’s ownership of Subordinated Notes or in the status of the Issuer, as described above), then

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such U.S. Holder will be treated as acquiring an interest in a PFIC as of the day following the date of cessation of the U.S. Holder’s status as a U.S. Shareholder. Because such Subordinated Notes would thereafter be treated as equity in a PFIC, if there was no QEF election in effect with respect to the U.S. Holder’s taxable year that includes the date of cessation of its status as a U.S. Shareholder, the U.S. Holder would become subject to the adverse rules applicable to non-QEF PFICs described above.

Distributions on the Subordinated Notes

The treatment of actual distributions of cash on Subordinated Notes, in very general terms, will vary depending on whether a U.S. Holder has made a timely QEF election as described above. See "—Passive Foreign Investment Company Rules" above. If a timely QEF election has been made, dividends, which are distributions up to the amount of current and accumulated earnings and profits of the Issuer, should be allocated first to amounts previously taxed pursuant to the QEF election and to this extent would not be taxable to U.S. Holders. Distributions in excess of such previously taxed amounts will be taxable to U.S. Holders as ordinary income upon receipt, to the extent of any remaining amounts of untaxed current and accumulated earnings and profits of the Issuer. Distributions in excess of previously taxed amounts and any remaining current and accumulated earnings and profits will be treated first as a nontaxable return of capital, to the extent of the Holder’s tax basis in the Subordinated Notes, and then as capital gain.

In the event that a U.S. Holder does not make a timely QEF election, some or all of any distributions with respect to the Subordinated Notes may constitute "excess" distributions, taxable as previously described. See "—Passive Foreign Investment Company Rules" above.

The above-described consequences may vary materially for a particular U.S. Holder to the extent the CFC rules have been or are applicable.

Dividends and/or distributions on the Subordinated Notes will not be eligible for either the dividends-received deduction for corporations or the reduced tax rate on qualified dividends available to certain noncorporate shareholders.

Sale, Redemption or Other Disposition of the Subordinated Notes

In general, and subject to the discussion below regarding U.S. Holders that do not elect to make a timely QEF election, a U.S. Holder of Subordinated Notes will recognize gain or loss upon the sale or exchange of such Subordinated Notes equal to the difference between the amount realized and such Holder’s adjusted tax basis in the Subordinated Notes. Such gain or loss will be long-term capital gain or loss if the U.S. Holder has held the Subordinated Notes for the requisite holding period at the time of the disposition.

The tax basis of a U.S. Holder will generally equal the amount it paid for its Subordinated Note, increased by amounts taxable to such Holder by virtue of a QEF election, and decreased by actual distributions from the Issuer that are deemed to consist of such previously taxed amounts or represent a return of capital.

If a U.S. Holder does not make a timely QEF election as described above, any gain realized on the sale or exchange of a Subordinated Note (or any gain deemed to accrue prior to the time a non-timely QEF election is made) will be treated as an excess distribution, taxed as ordinary income and subject to an additional tax reflecting a deemed interest charge under the special tax rules described above. See "—Passive Foreign Investment Company Rules" above.

The above-described consequences may vary materially for a particular U.S. Holder to the extent the CFC rules have been or are applicable. As a result of this and other uncertainties regarding the U.S. federal income tax consequences to U.S. Holders of Subordinated Notes and the complexity of the foregoing rules, each U.S. Holder is urged to consult its own tax advisor regarding the U.S. federal income tax consequences of the U.S. Holder’s investment in the Subordinated Notes.

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U.S. Federal Income Taxation of Non-U.S. Holders

In general, payments on the Notes (regardless of whether such Notes are debt or equity) to a Non-U.S. Holder, and gain realized on the sale, exchange or redemption of the Notes by such Non-U.S. Holder, will not be subject to U.S. federal income or withholding tax, as the case may be, unless such income is effectively connected with a trade or business conducted by such Non-U.S. Holder in the United States or, in the case of gain, such Non-U.S. Holder is a nonresident alien individual who holds the Notes as a capital asset and who is present in the United States for 183 days or more during the taxable year of the sale and certain other conditions are satisfied. A Non-U.S. Holder will not be considered to be engaged in a U.S. trade or business solely by reason of holding the Notes. However, if as discussed above, it were determined that the Issuer was engaged in a U.S. trade or business and has taxable income that is effectively connected with such U.S. trade or business, interest on the Senior Notes and distributions on the Subordinated Notes paid to a Non-U.S. Holder could be subject to a 30% U.S. withholding tax.

Withholding, Information Reporting and Related Matters

Information reporting to the IRS generally will be required with respect to payments of principal, interest (including any OID) and the Class A-1A Commitment Fee, as well as distributions, on the Notes and proceeds of the sale of the Notes to Holders other than corporations and other exempt recipients. A "backup" withholding tax at rates prescribed below will generally apply to those payments if such Holder fails to provide certain identifying information (such as such Holder’s taxpayer identification number) to the Trustee. Non-U.S. Holders may be required to comply with applicable certification procedures to establish that they are not U.S. Holders in order to avoid the application of such information reporting requirements and backup withholding.

The current backup withholding rate of 28% applies to payments made through the year 2010. For payments made after the taxable year of 2010, the backup withholding rate will be increased to 31%.

Transfer Reporting Requirements

A U.S. Holder (including a U.S. tax-exempt entity) that acquires equity of a non-U.S. corporation (such as the Subordinated Notes) at issuance will be required to file a Form 926 or a similar form with the IRS. In the event that a U.S. Holder fails to file any such required form, the U.S. Holder could be subject to a penalty (generally up to a maximum of $100,000), computed in the amount of 10% of the fair market value of the Subordinated Notes purchased by such U.S. Holder.

Special Considerations for Tax-Exempt U.S. Holders

Special considerations apply to pension plans and other investors that are subject to tax only on their unrelated business taxable income ("UBTI"). A tax-exempt U.S. Holder’s interest income and gain on the Notes generally would not be treated as UBTI provided such U.S. Holder’s investment in the Notes is not debt-financed. However, a tax-exempt U.S. Holder that owns more than 50% of the Subordinated Notes and also owns Senior Notes should consider the possible application of the special UBTI rules for interest received from controlled entities. Each prospective tax-exempt U.S. Holder should consult its own tax advisor regarding the tax consequences of its investment in the Notes.

Disclosure Requirements for U.S. Holders Recognizing Significant Losses, and for Certain Subordinated Noteholders

Any U.S. Holder of Notes that claims significant losses in respect of such Notes (generally $2 million or more for individuals and partnerships with one or more noncorporate partners, and $10 million or more for corporations and partnerships consisting solely of corporate partners), on a gross basis, in any taxable year may be required to report such transactions on IRS Form 8886. In addition, a U.S. Holder of 10% of the Subordinated Notes could be subject to these disclosure requirements if the Issuer recognizes losses of $10 million or more with respect to a transaction or enters into a transaction that is offered under conditions of confidentiality in any taxable year. Should the Issuer become aware that a U.S. Holder’s investment in Subordinated Notes has become such a "reportable transaction," the Issuer will so inform the holders of Subordinated Notes receiving "PFIC Annual

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Information Statements" as described above in "—Passive Foreign Investment Company Rules" and provide, or cause its accountants to provide, all information available to it which is necessary for such Holders to comply with these disclosure requirements. Prospective investors should consult their tax advisers concerning any possible disclosure obligation with respect to the Notes.

Cayman Islands Tax Considerations

Under existing Cayman Islands laws:

(a) payments of principal and interest in respect of, or distributions on, Notes will not be subject to taxation in the Cayman Islands and no withholding will be required on such payments to any Noteholder and gains derived from the sale of Notes will not be subject to Cayman Islands income or corporation tax. The Cayman Islands currently has no income, corporation or capital gains tax and no estate duty, inheritance tax or gift tax; and

(b) certificates evidencing the Notes, in registered form, to which title is not transferable by delivery, will not attract Cayman Islands stamp duty; provided that the relevant certificate constitutes evidence of entitlement only and does not constitute a promissory note. However, an instrument transferring title to a Note or a Note which constitutes a promissory note, if brought to or executed in the Cayman Islands, would be subject to Cayman Islands stamp duty.

The Issuer has been incorporated under the laws of the Cayman Islands as an exempted company with limited liability and, as such, has obtained, an undertaking from the Governor In Cabinet of the Cayman Islands in substantially the following form:

The Tax Concessions Law (1999 Revision)

Undertaking as to Tax Concessions

In accordance with Section 6 of The Tax Concessions Law (1999 Revision), the Governor In Cabinet undertakes with:

ATTENTUS CDO III, LTD. (THE “COMPANY”)

(a) that no Law which is hereafter enacted in the Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to the Company or its operations; and

(b) in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable

(i) on or in respect of the shares debentures or other obligations of the Company; or

(ii) by way of the withholding in whole or in part of any relevant payment as defined in Section 6(3) of The Tax Concessions Law (1999 Revision).

These concessions shall be for a period of TWENTY years from the date of issue.

Governor In Cabinet

The Cayman Islands does not have an income tax treaty arrangement with the U.S. or any other country.

THE PRECEDING DISCUSSION IS ONLY A SUMMARY OF CERTAIN OF THE TAX IMPLICATIONS OF AN INVESTMENT IN THE NOTES. PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS PRIOR TO INVESTING TO DETERMINE THE TAX IMPLICATIONS OF SUCH INVESTMENT IN LIGHT OF SUCH INVESTOR’S CIRCUMSTANCES.

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CERTAIN ERISA CONSIDERATIONS

IRS Circular 230 Notice

TO ENSURE COMPLIANCE WITH INTERNAL REVENUE SERVICE CIRCULAR 230, TAXPAYERS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF U.S. FEDERAL TAX ISSUES IN THIS OFFERING CIRCULAR IS NOT INTENDED OR WRITTEN BY US TO BE RELIED UPON, AND CANNOT BE RELIED UPON BY TAXPAYERS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON TAXPAYERS UNDER THE INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS WRITTEN IN CONNECTION WITH THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) TAXPAYERS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

General

ERISA, or certain provisions of the Code, impose certain restrictions on:

(a) (i) employee benefit plans subject to Title I of ERISA, (ii) plans subject to Section 4975 of the Code, including individual retirement accounts and Keogh plans, and (iii) entities whose underlying assets include plan assets by reason of an employee benefit plan’s or plan’s investment in the entities (each of the plans and entities referred to in clauses (i), (ii) and (iii), a “Plan”); and

(b) persons that have certain specified relationships to the Plans (“Parties-in-Interest” under ERISA and “Disqualified Persons” under the Code).

Moreover, based on the reasoning of the United States Supreme Court in John Hancock Mutual Life Ins. Co. v. Harris Trust and Sav. Bank, 810 U.S. 86 (1993), an insurance company’s general account may be deemed to include assets of the Plans investing in the general account (e.g., through the purchase of an annuity contract), and the insurance company might be treated as a Party-in-Interest with respect to a Plan by virtue of the investment.

ERISA and the Code prohibit a Party-in-Interest or Disqualified Person from engaging in various transactions involving the assets of a Plan. A Party-in-Interest or Disqualified Person that engages in a non-exempt prohibited transaction may be subject to non-deductible excise taxes and other penalties and liabilities under ERISA and the Code. In certain circumstances, if a Plan invests in an investment vehicle such as the Issuer, the assets of the vehicle may be deemed, for certain purposes of ERISA and the Code, to be assets of the Plan, or “plan assets”. Each of the Issuer, any Placement Agent, the Trustee and the Investment Manager, as a result of their own activities or because of the activities of an affiliate, may be considered a Party-in-Interest or a Disqualified Person with respect to Plans. Accordingly, prohibited transactions within the meaning of Section 406 of ERISA and Section 4975 of the Code may arise if Notes are acquired by a Plan with respect to which any of the Issuer, any Placement Agent, the Trustee the Investment Manager, the obligors on the Collateral or any of their respective affiliates is a Party-in-Interest or Disqualified Person. In addition, if a Party-in-Interest or Disqualified Person with respect to a Plan owns or acquires a beneficial interest in the Issuer, the acquisition or holding of Notes by or on behalf of the Plan could be considered to constitute an indirect prohibited transaction. Moreover, the acquisition or holding of Notes or other securities issued by the Issuer by or on behalf of a Party-in-Interest or Disqualified Person with respect to a Plan that owns or acquires a beneficial interest in the Issuer also could give rise to an indirect prohibited transaction. However, certain exemptions from the prohibited transaction rules could be applicable, depending in part upon the type of Plan fiduciary making the decision to acquire a Note or other indebtedness and the circumstances in which the decision is made. Included among these exemptions are PTCE 90-1, regarding investments by insurance company pooled separate accounts; PTCE 91-38, regarding investments by bank collective investment funds; PTCE 84-14, regarding transactions effected by a “qualified professional asset manager”; PTCE 96-23, regarding investments by certain in-house asset managers; PTCE 95-60, regarding investments by insurance company general accounts; and the service provider exemption under new Section 408(b)(17) of ERISA and new Section 4975(d)(20) of the Code. Even if the conditions specified in one or more of these exemptions are satisfied, the scope of the relief provided by these exemptions might or might not cover all acts which might be construed as prohibited transactions.

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If a purchase or holding of Notes were to be a non-exempt prohibited transaction, the purchase might have to be rescinded.

Government plans and certain church plans, while not subject to the fiduciary responsibility provisions of ERISA or the provisions of Section 4975 of the Code, may nevertheless be subject to Similar Law. Fiduciaries of any plans should consult with their counsel before purchasing any Notes.

Plan Asset Considerations; Purchase and Transfer Restrictions

New Section 3(42) of ERISA and a regulation (collectively, the “Plan Asset Regulation”) issued by the United States Department of Labor, the government agency primarily responsible for administering the ERISA fiduciary rules and the prohibited transaction rules under ERISA and the Code, requires, in specified circumstances, plan fiduciaries, and entities with certain specified relationships to a Plan, to “look through” investment vehicles (such as the Issuer) and treat as an “asset” of the Plan each underlying investment made by the investment vehicle. However, the Plan Asset Regulation provides that, if equity participation in any entity by Benefit Plan Investors is not significant, the “look-through” rule will not apply to the entity. For this purpose, an equity interest is defined as any interest other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features. Equity participation by Benefit Plan Investors in an entity is significant if, immediately after the most recent acquisition of any equity interest in the entity, 25% or more of the total value of any class of equity interests in the entity (excluding the value of any interests held by Controlling Persons) is held, in the aggregate, by Benefit Plan Investors (the “Benefit Plan 25% Threshold”). Note that in calculating this percentage, a proportionality rule applies to investments by one entity in another entity.

Although there is no guidance under ERISA on how this definition applies generally, and in particular to securities issued by special-purpose pools of assets such as the Issuer, the Issuer believes that, at the time of their issuance, the Co-Issued Notes should be treated as indebtedness without substantial equity features for purposes of the Plan Asset Regulation. This belief is based in part on the traditional debt features of the Co-Issued Notes, as well as the absence of conversion rights, warrants, and other typical equity features. It should be noted that the debt treatment of the Co-Issued Notes for ERISA purposes could change after their issuance (i.e., they could be treated as equity) if, for instance, the Issuer incurs losses. The risk of such change is enhanced for the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, which are subordinated to the Class A Notes.

It is likely that the Class F Notes and the Subordinated Notes will constitute “equity interests” in the Issuer. The Class F Notes and the Subordinated Notes are referred to herein as “Deemed Equity Interests”, and each such Class is referred to herein as an “ERISA Class” of Deemed Equity Interests. The Issuer intends to limit participation in the Issuer by Benefit Plan Investors to ownership of less than 25% of each ERISA Class of Deemed Equity Interest by (a) limiting the percentage of each ERISA Class of Deemed Equity Interest that may be held by Benefit Plan Investors to less than 25% (as determined under the Plan Asset Regulation, which requires the exclusion of any Deemed Equity Interests held by Controlling Persons who are not Benefit Plan Investors, including the Collateral Manager and its affiliates) and (b) requiring Benefit Plan Investors and Controlling Persons to comply with the additional restrictions set forth below. For purposes of calculating the percentage of the total value of the Class F Notes 100% of the aggregate principal amount of the Restricted Global Class F Notes shall be deemed to be held by Benefit Plan Investors.

Each initial investor in a Deemed Equity Interest and each transferee of a Deemed Equity Interest will be required to make additional representations and warranties in a writing to be delivered to the Issuer, the Trustee and the Indenture Registrar that the investor or transferee, as applicable:

(a) is not, and will not be, a Benefit Plan Investor or a Controlling Person; or

(b) is a Benefit Plan Investor or a Controlling Person and the acquisition or transfer, as applicable, has been consented to by the Issuer.

Each purchaser and transferee after the Closing Date of Regulation S Subordinated Notes or Regulation S Class F Notes will be deemed to represent and warrant that it is not a Benefit Plan Investor or a Controlling Person.

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Notwithstanding these restrictions, there can be no assurance that ownership of each of the Deemed Equity Interests will always remain below the Benefit Plan 25% Threshold applicable to each ERISA Class and thus no assurance that the assets of the Issuer will not be deemed to be “plan assets”. If for any reason the assets of the Issuer were deemed to be “plan assets” of a Plan subject to ERISA or Section 4975 of the Code, and no statutory or administrative exemptions were applicable, certain transactions that the Issuer might enter into, or may have entered into, in the ordinary course of its business might constitute non-exempt “prohibited transactions” under Section 406 of ERISA or Section 4975 of the Code and might have to be rescinded. In addition, the payment of certain of the fees payable to the Investment Manager might be considered to be a non-exempt “prohibited transaction” under Section 406 of ERISA or Section 4975 of the Code, and other provisions of ERISA could be implicated as well. In addition, Section 404(b) of ERISA, which generally provides that no fiduciary may maintain the indicia of ownership of any assets of a plan outside the jurisdiction of the district courts of the United States, would need to be satisfied or one or more of the exceptions to this requirement in 29 C.F.R. Section 2550.404b-1 would need to be available.

Regardless of the treatment of the Notes under the Plan Asset Regulation, each purchaser of a Note and each transferee of a Co-Issued Note will be required to acknowledge, represent and agree in writing (and each purchaser of a Note that is not required to acknowledge, represent, and agree in writing and each transferee of a Co-Issued Note represented by a Global Note will be deemed to have acknowledged, represented, and agreed) that at the time of its purchase or acquisition and throughout the period of its holding and disposition of the Note, either it is not, and it will not be, a Plan (including an Insurance Company General Account Investor) or acting on behalf of or using the assets of any Plan (including an Insurance Company General Account Investor) or its purchase, holding, and disposition of such Note will not constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.

Each purchaser and transferee of a Note that is a governmental or church plan subject to Similar Law will be deemed to represent and warrant that its purchase and ownership of such security will not constitute or result in a non-exempt violation of any Similar Law.

The sale of any Note to a Plan is in no respect a representation by the Issuer, any Placement Agent or any of their respective affiliates, that (a) the investment meets all relevant legal requirements with respect to investments by Plans generally or any particular Plan or (b) the investment is appropriate for a Plan generally or any particular Plan.

Any Plan fiduciary that proposes to cause a Plan to purchase Notes should consult with its own legal and tax advisors with respect to the potential applicability of ERISA and the Code to the investments, the consequences of an investment under ERISA and the Code and the ability to make the representations described above. Moreover, each plan fiduciary should determine whether, under the general fiduciary standards of ERISA, an investment in the securities is appropriate for the Plan, taking into account the overall investment policy of the Plan and the composition of the Plan’s investment portfolio.

Any Plan fiduciary considering the purchase of Class A-1A Notes should note that any purchaser of Class A-1A Notes during the Initial Investment Period must satisfy the Rating Criteria.

Any purchaser of Notes that is an insurance company using the assets of an insurance company general account should note that the Small Business Job Protection Act of 1996 added Section 401(c) of ERISA relating to the status of the assets of insurance company general accounts under ERISA and Section 4975 of the Code. Pursuant to Section 401(c), the Department of Labor issued final regulations with respect to insurance policies issued on or before December 31, 1998 that are supported by an insurer’s general account. As a result of these regulations, assets of an insurance company general account will not be treated as “plan assets” for purposes of the fiduciary responsibility provisions of ERISA and Section 4975 of the Code to the extent that such assets relate to contracts issued to employee benefit plans on or before December 31, 1998 and the insurer satisfies various conditions. The plan asset status of insurance company separate accounts is unaffected by the new Section 401(c) of ERISA, and separate account assets continue to be treated as the plan assets of any plan invested in a separate account.

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Nature of Discussion

The discussion of ERISA and Section 4975 of the Code in this Offering Circular is, of necessity, general and does not purport to be complete. Moreover, the provisions of ERISA and Section 4975 of the Code are subject to extensive and continuing administrative and judicial interpretation and review. Therefore, the matters discussed above may be affected by future regulations, rulings and court decisions, some of which may have retroactive application and effect.

EACH PURCHASER AND TRANSFEREE OF A CO-ISSUED NOTE WILL BE REQUIRED TO REPRESENT AND WARRANT (OR, IN CERTAIN CIRCUMSTANCES, BE DEEMED TO REPRESENT AND WARRANT) EITHER THAT (A) IT IS NOT (AND FOR SO LONG AS IT HOLDS SUCH NOTE WILL NOT BE), AND IS NOT ACTING ON BEHALF OF (AND FOR SO LONG AS IT HOLDS SUCH NOTE WILL NOT BE ACTING ON BEHALF OF), AN “EMPLOYEE BENEFIT PLAN” SUBJECT TO TITLE I OF ERISA, A “PLAN” SUBJECT TO SECTION 4975 OF THE CODE, AN ENTITY WHOSE UNDERLYING ASSETS WOULD BE DEEMED TO INCLUDE PLAN ASSETS BY REASON OF INVESTMENT BY AN “EMPLOYEE BENEFIT PLAN” OR “PLAN” IN THE ENTITY, OR A GOVERNMENTAL OR CHURCH PLAN SUBJECT TO SIMILAR LAW, OR (B) ITS PURCHASE AND OWNERSHIP OF SUCH NOTE WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE (OR, IN THE CASE OF A GOVERNMENTAL OR CHURCH PLAN SUBJECT TO SIMILAR LAW, A NON-EXEMPT VIOLATION OF ANY SIMILAR LAW).

THE ACQUISITION OF A RESTRICTED SUBORDINATED NOTE OR A RESTRICTED CLASS F NOTE BY, OR ON BEHALF OF, OR WITH THE ASSETS OF (A) ANY BENEFIT PLAN INVESTOR, OR (B) ANY CONTROLLING PERSON WILL NOT BE EFFECTIVE, AND THE ISSUER, THE TRUSTEE, THE TRANSFER AGENT AND THE NOTE REGISTRAR WILL NOT RECOGNIZE SUCH ACQUISITION, IF SUCH ACQUISITION WOULD RESULT IN (1) BENEFIT PLAN INVESTORS OWNING 25% OR MORE OF THE TOTAL VALUE OF ANY SUCH CLASS OF NOTES (INCLUDING THE REGULATION S SUBORDINATED NOTES AND REGULATION S CLASS F NOTES, IN EACH CASE ACQUIRED ON THE CLOSING DATE BY CERTAIN PERMITTED PLANS THAT OBTAINED THE PRIOR WRITTEN CONSENT OF THE ISSUER) OR (2) A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE. FOR PURPOSES OF CALCULATING THE PERCENTAGE OF THE TOTAL VALUE OF THE CLASS F NOTES, IT IS UNDERSTOOD THAT 100% OF THE AGGREGATE PRINCIPAL AMOUNT OF THE RESTRICTED GLOBAL CLASS F NOTES SHALL BE DEEMED TO BE HELD BY BENEFIT PLAN INVESTORS.

NO REGULATION S SUBORDINATED NOTE OR REGULATION S CLASS F NOTE MAY BE ACQUIRED BY, OR ON BEHALF OF, OR WITH THE ASSETS OF, ANY BENEFIT PLAN INVESTOR OR CONTROLLING PERSON. NOTWITHSTANDING THE FOREGOING, PERMITTED PLANS WILL BE PERMITTED TO PURCHASE REGULATION S SUBORDINATED NOTES AND REGULATION S CLASS F NOTES ON THE CLOSING DATE. EACH PERMITTED PLAN WILL BE DEEMED TO REPRESENT, WARRANT AND COVENANT THAT ITS PURCHASE, HOLDING AND DISPOSITION OF SUCH NOTE WILL NOT RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE.

EACH PURCHASER AND TRANSFEREE OF A SUBORDINATED NOTE AND CLASS F NOTE WILL BE REQUIRED TO REPRESENT AND WARRANT (OR, IN CERTAIN CIRCUMSTANCES, WILL BE DEEMED TO REPRESENT AND WARRANT) EITHER THAT IT IS NOT (AND FOR SO LONG AS IT HOLDS SUCH NOTE OR AN INTEREST THEREIN WILL NOT BE), AND IS NOT ACTING ON BEHALF OF (AND FOR SO LONG AS IT HOLDS SUCH NOTE OR AN INTEREST THEREIN WILL NOT BE ACTING ON BEHALF OF), A GOVERNMENTAL OR CHURCH PLAN SUBJECT TO SIMILAR LAW, OR (B) ITS PURCHASE AND OWNERSHIP OF SUCH NOTE WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT VIOLATION OF ANY SIMILAR LAW.

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PLAN OF DISTRIBUTION

Offers and Sales of Notes

Subject to the terms and conditions contained in a purchase and placement agency agreement (the “Purchase and Placement Agency Agreement”) to be entered into among the Co-Issuers and the Initial Purchaser, (a) the Co-Issuers will agree to sell, and the Initial Purchaser will agree to purchase, the Co-Issued Notes and (b) the Initial Purchaser will agree to act as placement agent with respect to the Class F Notes and the Subordinated Notes. In addition, on the Closing Date, the members of the Collateral Manager will collectively be obligated to purchase, or cause one or more of their respective affiliates to purchase, at least $10,000,000 aggregate principal amount of the Subordinated Notes, and may, but will not be obligated to purchase Class F Notes, but the members of the Collateral Manager and their respective affiliates will not be obligated to retain such ownership.

The Co-Issued Notes will be offered by the Initial Purchaser from time to time for sale to investors in negotiated transactions at varying prices to be determined in each case at the time of sale. The Class F Notes and the Subordinated Notes will be offered through the Initial Purchaser, in each case as placement agent for the Issuer, from time to time in negotiated transactions at varying prices to be determined in each case at the time of sale.

The Purchase and Placement Agency Agreement provides that the obligations of the Initial Purchaser to pay for and accept delivery of the Co-Issued Notes and to act as placement agent for the Issuer thereunder with respect to the Class F Notes and the Subordinated Notes is subject to certain conditions.

In the Purchase and Placement Agency Agreement the Co-Issuers will agree, subject to the Priority of Payments, to indemnify the Initial Purchaser against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the Initial Purchaser may be required to make in respect thereof. In addition, the Issuer will agree to reimburse the Initial Purchaser for certain of its expenses incurred in connection with the closing of the transactions contemplated hereby.

The offering of the Notes has not been and will not be registered under the Securities Act and may not be offered or sold in the United States or to, or for the account or benefit of, a U.S. Person except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

No action has been taken or is being contemplated by the Issuer or the Co-Issuer, as applicable, that would permit a public offering of the Notes or possession or distribution of this Offering Circular or any amendment thereof, or supplement thereto or any other offering material relating to the Notes in any jurisdiction (other than Ireland) where, or in any other circumstances in which, action for those purposes is required. No offers, sales or deliveries of any Notes, or distribution of this Offering Circular or any other offering material relating to the Notes, may be made in or from any jurisdiction except in circumstances that will result in compliance with any applicable laws and regulations and will not impose any obligations on the Issuer or the Initial Purchaser. Because of the restrictions contained in the front of this Offering Circular, purchasers are advised to consult legal counsel prior to making any offer, resale, pledge or transfer of the Notes.

Application has been made to the Irish Stock Exchange for the Notes (other than the Insured Notes) to be admitted to the Official List of the Irish Stock Exchange and to trading on the regulated market of the Irish Stock Exchange. Application has been made to the Irish Stock Exchange for the Insured Notes to be admitted to the Official List of the Irish Stock Exchange and to trading on the alternative securities market of the Irish Stock Exchange. There can be no assurance that the IFSRA or the Irish Stock Exchange will in fact accept the listing of the Notes or that the listing, if granted, will be maintained.

In the Purchase and Placement Agency Agreement, the Initial Purchaser will agree that (a) it or one or more of its Affiliates will sell the Co-Issued Notes only to, and (b) it or one or more of its Affiliates will place the Class F Notes and the Subordinated Notes only to or with, (i) in the United States or to or for the account or benefit of a U.S. Person, Qualified Purchasers that are (A) Qualified Institutional Buyers, purchasing for their own account, to whom notice is given that the resale, pledge or other transfer is being made in reliance on the exemption from Securities Act registration provided by Rule 144A, (B) in the case of the Co-Issued Notes in connection with the initial

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offering of the Notes, Institutional Accredited Investors, (C) in the case of the Restricted Global Class F Notes in connection with the initial offering of the Notes, Accredited Investors or (D) in the case of the Restricted Definitive Class F Notes and the Subordinated Notes, Accredited Investors, in each case, in reliance on the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof and (ii) outside the United States, certain non-U.S. Persons in offshore transactions in reliance on Regulation S and, in each case, in accordance with any other applicable law.

Resales of the Notes are restricted as described under the “Transfer Restrictions.” Beneficial interests in a Regulation S Global Senior Note or Regulation S Global Subordinated Note may not be held by a U.S. Person at any time, and resales of the Notes offered in offshore transactions to non-U.S. Persons in reliance on Regulation S may be effected only in accordance with the transfer restrictions described herein. As used in this paragraph, the terms “United States” and “U.S.” have the meanings given to them by Regulation S.

The Initial Purchaser has agreed that it: (a) has not offered or sold and will not offer or sell any Offered Notes to persons in the United Kingdom except to investment professionals falling within Article 19(5) of the 2005 Order and high net worth entities, and other persons to whom they may lawfully be offered, falling within Article 49(2)(a) to (e) of the 2005 Order, or otherwise in circumstances which have not resulted and will not result in an offer of transferable securities to the public within the meaning of Section 102B of the FSMA, (b) is an investment professional falling under Article 19(5) of the 2005 Order, (c) has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with any issue of or sale of the Offered Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer, or to the persons to whom such communication may otherwise be lawfully made and (d) has complied and will comply with all applicable provisions of the FSMA and regulations made thereunder with respect to anything done by it in relation to the Offered Notes in, from or otherwise involving the United Kingdom.

The Notes are a new issue of securities for which there is currently no market. The Initial Purchaser is under no obligation to make a market in any Class of Notes and any market-making activity, if commenced, may be discontinued at any time. There can be no assurance that a secondary market for any Class of Notes will develop, or if one does develop, that it will continue. Accordingly, no assurance can be given as to the liquidity of or trading market for the Notes.

In connection with the offering of the Notes, the Initial Purchaser may, as permitted by applicable law, over-allot or effect transactions that stabilize or maintain the market price of the Notes at a level which might not otherwise prevail in the open market. The stabilizing, if commenced, may be discontinued at any time.

European Economic Area

In relation to each Relevant Member State, Merrill Lynch has represented and agreed that with effect from and including the Relevant Implementation Date it has not made and will not make an offer of Notes to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Notes which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of Notes to the public in that Relevant Member State at any time:

(a) to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities;

(b) to any legal entity which has two or more of (i) an average of at least 250 employees during the last financial year; (ii) a total balance sheet of more than EUR 43,000,000 and (iii) an annual net turnover of more than EUR 50,000,000, as shown in its last annual or consolidated accounts; or

(c) in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.

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For the purposes of this provision, the expression an “offer of Notes to the public” in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State.

Purchaser Inquiries

Each prospective purchaser is hereby offered the opportunity to ask questions of, and receive answers from, the Co-Issuers or the Collateral Manager concerning the terms and conditions of this offering and to obtain additional information that the Co-Issuers or the Collateral Manager possess or can acquire without unreasonable effort or expense. Inquiries concerning such additional information should be directed to:

Attentus Management Group, LLC 441 Vine Street, Suite 507 Cincinnati, Ohio 45202 Facsimile: 513.241.1026 Attention: Steven Stein

Merrill Lynch, Pierce, Fenner & Smith Incorporated 4 World Financial Center, 7th Floor New York, New York 10281 Attention: Structured Credit Products

If the prospective purchaser does not purchase the Offered Notes or the offering is terminated, each prospective purchaser, by accepting delivery of this Offering Circular, agrees to return it and all related documents to:

Merrill Lynch, Pierce, Fenner & Smith Incorporated 4 World Financial Center, 7th Floor New York, New York 10281 Attention: Structured Credit Products

ANTI-MONEY LAUNDERING AND ANTI-TERRORISM REQUIREMENTS AND DISCLOSURES

In order to comply with U.S. laws and regulations, including the USA PATRIOT Act, aimed at the prevention of money laundering and the prohibition of transactions with certain countries, organizations and individuals, the Issuer and/or the Co-Issuer (or the Initial Purchaser, the Collateral Manager or the Trustee on their behalf) may request from an investor or a prospective investor such information as it reasonably believes is necessary to verify the identity of such investor or prospective investor, and to determine whether such investor or prospective investor is permitted to be an investor in the Issuer, the Co-Issuer or the Notes pursuant to such laws and regulations. In the event of the delay or failure by any investor or prospective investor in the Notes to deliver to the Co-Issuers any such requested information, the Issuer and/or the Co-Issuer (or the Initial Purchaser, the Collateral Manager or the Trustee on their behalf) may (a) require such investor to immediately transfer any Notes, or beneficial interest therein, held by such investor to an investor meeting the requirements of this Offering Circular and the Indenture, (b) refuse to accept the subscription of a prospective investor, or (c) take any other action required to comply with such laws and regulations. In addition, following the delivery of any such information, the Issuer and/or the Co-Issuer (or the Initial Purchaser, the Collateral Manager or the Trustee on their behalf) may take any of the actions identified in clauses (a) through (c) above. In certain circumstances, the Issuer, the Co-Issuer, the Trustee, the Collateral Manager or the Initial Purchaser may be required to provide information about investors to regulatory authorities and to take any further action as may be required by law. None of the Issuer, the Co-Issuer, the Trustee, the Collateral Manager, the Initial Purchaser, the Insurer or any shareholder of the Issuer, the Co-Issuer or the Insurer will be liable for any loss or injury to an investor or prospective investor that may occur as a result of

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disclosing such information, refusing to accept the subscription of any potential investor, redeeming any investment in a Note or taking any other action required by law.

TRANSFER RESTRICTIONS

Representations and Agreements

Each purchaser of Notes, and (except where otherwise specified) each transferee, shall be required to make the representations and agreements set forth below as specified in the following table. Where the manner of representation is described as “Deemed”, by its purchase of such Notes the purchaser or transferee shall be deemed to have made such representations and agreements. Where the manner of representation is described as “Letter”, the purchaser or transferee shall be required to make such representations and agreements by delivering a transferee certificate or investor representation letter (substantially in the form provided in the Indenture) to the Trustee. The Co-Issuers, the Trustee, the Administrator, the Initial Purchaser and the Collateral Manager are presumed to have relied on such representations and agreements.

Class of Notes* Form of Notes Manner of Representation**

Required Representations and Agreements

Co-Issued Notes Global Rule 144A Deemed 1, 2, 3, 4(a), 5(a), 6, 7, 8(a), 8(b), 9, 10, 12(a), 12(e), 14, 15, 16, 17, 18, 20

Co-Issued Notes Global Regulation S Deemed 1, 2, 3, 4(b), 5(a), 7, 8(a), 8(b), 9, 10(b), 11, 12(a), 12(e), 14, 15, 16, 17

Co-Issued Notes Physical Letter 1, 2, 3, 4(b), 5(a), 6, 7, 8(a), 8(b), 9, 12(a), 12(e), 14, 15, 16, 17, 19, 20, and either 10 and 18, or 11

Class F Notes*** Global Regulation S Deemed 1, 2, 3, 4(b), 5(b), 7, 8(b), 9, 10(b), 11, 12(d), 12(e), 13, 14, 15, 16, 17

Class F Notes*** Global Rule 144A Deemed 1, 2, 3, 4(a), 5(b), 6, 7, 8(c), 9, 10, 12(b), 12(c), 12(e), 13, 14, 15, 16, 17, 18, 19, 20

Class F Notes Physical Letter 1, 2, 3, 4(b), 5(b), 6, 7, 8(c), 9, 12(b), 12(c), 12(e), 13, 14, 15, 16, 17, 19, 20, and either 10 and 18, or 11

Subordinated Notes Global Regulation S Deemed 1, 2, 3, 4(b), 5(b), 7, 8(b), 9, 10(b), 11, 12(d), 12(e), 13, 14, 15, 16, 17, 20, 21

Subordinated Notes Physical Letter 1, 2, 3, 4(b), 5(b), 6, 7, 8(c), 9, 12(b), 12(c), 12(e), 13, 14, 15, 16, 17, 19, 20, 21, and either 10 and 18, or 11

___________________________ * With respect to all numbered representations, references to “Applicable Notes” shall be replaced with the

relevant Class of Notes, as appropriate. ** With respect to numbered representations made (or deemed to be made) with respect to a transfer,

references to “purchaser” shall be replaced with “transferee”, as appropriate, unless otherwise specified. *** On the Closing Date, the purchaser of such Notes shall deliver such representations and agreements by

delivering an investor representation letter to the Trustee.

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Terms used in the following representations and agreements that are defined in Rule 144A or Regulation S are used herein as defined therein.

(1) No Governmental Approval. The purchaser understands that the Applicable Notes have not been approved or disapproved by the SEC or any other governmental authority or agency of any jurisdiction, nor has the SEC or any other governmental authority or agency passed upon the accuracy or adequacy of this Offering Circular. Any representation to the contrary is a criminal offense.

(2) Certification Upon Transfer. If required by the Indenture, the purchaser will, prior to any sale, pledge or other transfer by it of any Applicable Note (or any interest therein), obtain from the transferee and deliver to the Issuer, the Co-Issuer and the Note Registrar a duly executed transferee certificate addressed to each of the Trustee, the Issuer, the Co-Issuer, the Note Registrar and the Collateral Manager in the form of the relevant exhibit attached to the Indenture and such other certificates and other information as the Issuer, the Co-Issuer, the Collateral Manager, the Trustee or the Note Registrar may reasonably require to confirm that the proposed transfer substantially complies with the transfer restrictions contained in this Offering Circular and the Indenture.

(3) Minimum Denominations. The purchaser agrees that the Applicable Notes (or any interest therein) may not be sold, pledged or otherwise transferred in a denomination of less than the applicable minimum denomination set forth in the Indenture and described herein.

(4) Securities Law Limitations on Resale.

(a) The purchaser understands that the Applicable Notes have not been registered under the Securities Act and, therefore, cannot be offered or sold unless they are registered under the Securities Act or unless an exemption from registration is available. Accordingly, if in the future the purchaser decides to offer, resell, pledge or otherwise transfer the Applicable Notes, such Notes may be offered, resold, pledged or otherwise transferred only in accordance with the legend on the certificate representing such Applicable Notes and in accordance with the terms of the Indenture. The purchaser understands that the Co-Issuers have no obligation to register any of the Applicable Notes under the Securities Act or to comply with the requirements for any exemption from the registration requirements of the Securities Act (other than to supply information specified in Rule 144A(d)(4) of the Securities Act as required by the Indenture).

(b) The purchaser understands that the Applicable Notes have not been registered under the Securities Act and, therefore, cannot be offered or sold unless they are registered under the Securities Act or unless an exemption from registration is available. Accordingly, if in the future the purchaser decides to offer, resell, pledge or otherwise transfer the Applicable Notes, such Notes may be offered, resold, pledged or otherwise transferred only in accordance with the legend on the certificate representing such Applicable Notes and in accordance with the terms of the Indenture. The purchaser acknowledges that no representation is made by the Issuer, the Collateral Manager or the Initial Purchaser or any of their respective affiliates as to the availability of any exemption under the Securities Act or any other securities laws for resale of the Applicable Notes.

(5) Initial Purchaser Status.

(a) The initial purchaser is (i) a Qualified Institutional Buyer that is acquiring the Applicable Notes for its own account in reliance on the exemption from Securities Act registration provided by Rule 144A thereunder; (ii) an Institutional Accredited Investor acquiring the Applicable Notes for its own account for investment purposes and not with a view to the distribution thereof; or (iii) a person that is not a U.S. Person that is acquiring the Applicable Notes in reliance on the exemption from Securities Act registration provided by Regulation S.

(b) The initial purchaser is (i) a Qualified Institutional Buyer that is acquiring the Applicable Notes for its own account in reliance on the exemption from Securities Act registration provided by Rule 144A thereunder; (ii) an Accredited Investor acquiring the Applicable Notes in reliance on the exemption from registration provided by Section 4(2) of the Securities Act for its own account for investment purposes and not with a view to the distribution thereof, nor for the account of any family or other trust, any family member or any other person,

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subject to the delivery of such certifications, legal opinions or other information as the Issuer may reasonably require to confirm that such transfer of the Applicable Notes is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act; or (iii) a person that is not a U.S. Person that is acquiring the Applicable Notes in reliance on the exemption from Securities Act registration provided by Regulation S.

(6) Qualified Institutional Buyer. If the purchaser is a Qualified Institutional Buyer, it is (a) not (i) a broker dealer described in paragraph (a)(1)(ii) of Rule 144A that owns and invests on a discretionary basis less than $25,000,000 in securities of issuers that are not affiliated persons of the dealer or (ii) a plan referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(F) of Rule 144A, that holds the assets of such a plan, if investment decisions with respect to the plan are made by the beneficiaries of the plan, and (b) aware that the sale of the Applicable Notes to it may be being made in reliance on the exemption from registration provided by Rule 144A under the Securities Act.

(7) Purchaser Sophistication; Non-Reliance; Suitability; Access to Information.

(a) The purchaser, (i) in making such investment is not relying on the advice or recommendations of the Initial Purchaser, the Issuer, the Co-Issuer, the Trustee, the Collateral Manager or any of their respective affiliates (or any representative of any of the foregoing) and (ii) has determined that an investment in the Applicable Notes is suitable and appropriate for it. The purchaser has received, and has had an adequate opportunity to review the contents of, this Offering Circular. The purchaser has had access to such financial and other information concerning the Issuer, the Co-Issuer and the Applicable Notes as it has deemed necessary to make its own independent decision to purchase such Applicable Notes, including the opportunity, at a reasonable time prior to its purchase of such Applicable Notes, to ask questions and receive answers from the Issuer and the Collateral Manager.

(b) (i) None of the Co-Issuers, the Initial Purchaser, the Collateral Manager, the Insurer or any of their respective affiliates is acting as a fiduciary or financial or investment adviser for the purchaser; (ii) the purchaser is not relying (for purposes of making any investment decision or otherwise) upon any advice, counsel or representations (whether written or oral) of the Issuer, the Co-Issuer, the Initial Purchaser, the Collateral Manager, the Insurer or any of their respective affiliates other than as set forth herein; (iii) none of the Co-Issuers, the Initial Purchaser, the Collateral Manager, the Insurer or any of their respective affiliates has given the purchaser (directly or indirectly through any other person or documentation for the Applicable Notes) any assurance, guarantee or representation whatsoever as to the expected or projected success, profitability, return, performance, result, effect, consequence or benefit (including legal, regulatory, tax, financial, accounting or otherwise) of the Applicable Notes or of the Indenture or the Issuer Charter; (iv) the purchaser has consulted with its own legal, regulatory, tax, business, investment, financial, and accounting advisers to the extent it has deemed necessary, and it has made its own investment decisions (including decisions regarding the suitability of any transaction pursuant to the documentation for the Applicable Notes) based upon its own judgment and upon any advice from such advisers as it has deemed necessary and not upon any view expressed by the Issuer, the Co-Issuer, the Initial Purchaser, the Collateral Manager, the Insurer or any of their respective affiliates; (v) the purchaser has determined that the rates, prices or amounts and other terms of the purchase and sale of such Applicable Notes reflect those in the relevant market for similar transactions; (vi) if the purchaser is acting for the account of another investor, the purchaser represents that the investment on behalf of such account is based on a determination that the investment is suitable based on the risks referred to herein (including, without limitation, the “Risk Factors” and the “Transfer Restrictions”), given the investment objectives of the account for which the purchase is being made, and that the investment is consistent with any applicable legal requirements; (vii) the purchaser is purchasing the Applicable Notes with a full understanding of all of the terms, conditions and risks thereof (economic and otherwise), and it is capable of assuming and willing to assume (financially and otherwise) those risks; (viii) the purchaser is a sophisticated investor familiar with transactions similar to its investment in the Applicable Notes; and (ix) the purchaser 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 Applicable Notes, and it (and each account for which it is acting) is financially able to bear such risks.

(c) The purchaser is not purchasing the Applicable Notes with a view to the resale, distribution or other disposition thereof in violation of the Securities Act. The purchaser has read and understood this Offering

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Circular, including without limitation the “Risk Factors” section herein. The purchaser understands that an investment in the Applicable Notes involves certain risks, including the risk of loss of all or a substantial part of its investment. The purchaser has had access to such financial and other information concerning the Issuer, the Applicable Notes and the Collateral as it deemed necessary or appropriate in order to make an informed investment decision with respect to its purchase of the Applicable Notes, including the opportunity, at a reasonable time prior to its purchase of such Applicable Notes, to ask questions of and request information from the Issuer.

(8) Additional Resale Limitations.

(a) The purchaser understands that the Applicable Notes (or any interest therein) may not be offered, sold, pledged or otherwise transferred to a transferee acquiring a Restricted Definitive Senior Note, or an interest in a Restricted Global Co-Issued Note except (i) to a transferee that the seller reasonably believes is a Qualified Institutional Buyer, purchasing for its own account, to whom notice is given that the resale, pledge or other transfer is being made in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A, (ii) to a Qualified Purchaser, (iii) if such transfer is made in compliance with the certification and other requirements set forth in the Indenture and (iv) if such transfer is made in accordance with any applicable securities laws of any state of the United States and any other relevant jurisdiction.

(b) The purchaser understands that the Applicable Notes (or any interest therein) may not be offered, sold, pledged or otherwise transferred to a transferee acquiring an interest in a Regulation S Senior Note except (i) to a transferee that is acquiring such interest in an offshore transaction (within the meaning of Regulation S) in accordance with Rule 904 of Regulation S, (ii) to a transferee that is not a U.S. Person, (iii) if such transfer is made in compliance with the other requirements set forth in the Indenture and (iv) if such transfer is made in accordance with any applicable securities laws of any state of the United States and any other relevant jurisdiction.

(c) The purchaser agrees that it will not offer or sell, transfer, assign, or otherwise dispose of the Applicable Notes or any interest therein except (i) pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any applicable state securities laws or the applicable laws of any other jurisdiction and (ii) in accordance with the Indenture, to which provisions the purchaser hereby agrees it is subject.

(9) Limited Liquidity. The purchaser understands that there is no market for the Applicable Notes and that no assurance can be given as to the liquidity of any trading market for the Applicable Notes and that it is unlikely that a trading market for any of the Applicable Notes will develop. The purchaser further understands that, although the Initial Purchaser may from time to time make a market in Applicable Notes, the Initial Purchaser is not under any obligation to do so and, following the commencement of any market-making, may discontinue such market-making at any time. Accordingly, the purchaser must be prepared to hold the Applicable Notes for an indefinite period of time or until their maturity or (if earlier) redemption.

(10) 1940 Act.

(a) (i) The purchaser of the Applicable Notes is a Qualified Purchaser who is acquiring the Applicable Securities as principal for its own account for investment and not for sale in connection with any distribution thereof; (ii) the purchaser was not formed solely for the purpose of investing in the Applicable Notes and is not a (w) corporation, (x) partnership, (y) common trust fund or (z) special trust, profit sharing, pension fund or other retirement plan in which shareholders, partners, equity owners, beneficiaries or participants, as applicable, may designate the particular investments to be made or the allocation of any investment among such shareholders, partners, equity owners, beneficiaries or participants, and the purchaser agrees that it shall not hold such Applicable Notes for the benefit of any other person and shall be the sole beneficial owner thereof for all purposes and that, in accordance with the provisions therefor in the Indenture, it shall not sell participation interests in the Applicable Notes or enter into any other arrangement pursuant to which any other person shall be entitled to a beneficial interest in the distributions on the Applicable Notes; and (iii) the Applicable Notes purchased directly or indirectly by it constitute an investment of no more than 40% of its assets, or, if the Applicable Notes do constitute an investment of more than 40% of its assets, each beneficial owner of the purchaser is a Qualified Purchaser. If the purchaser would be an investment company but for the exclusions from the 1940 Act provided by Section 3(c)(1) or Section 3(c)(7) thereof (an “Excepted Investment Company”), (A) all of the beneficial owners of its outstanding securities (other

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than short-term paper) that acquired such securities on or before April 30, 1996 (“pre-amendment beneficial owners”), have consented to its treatment as a Qualified Purchaser and (B) all of the pre-amendment beneficial owners of a company that would be an investment company but for the exclusions from the 1940 Act provided by Section 3(c)(1) or Section 3(c)(7) thereof and that directly or indirectly owned any of its outstanding securities (other than short-term paper) have consented to its treatment as a Qualified Purchaser. The purchaser understands and agrees that any purported transfer of the Applicable Notes to a purchaser that does not comply with the requirements of this clause (10) shall be null and void ab initio.

(b) The purchaser agrees that no sale, pledge or other transfer of Applicable Notes (or any interest therein) may be made to a U.S. Person or a Person acquiring Applicable Notes or an interest therein in the United States (i) unless the transferee thereof represents that (x) it is a Qualified Purchaser, (y) if such transferee is not a natural person or individual retirement account, it has provided representations and assurances, in a form and in substance satisfactory to the Issuer, that clauses (i) through (iii) of the preceding clause 10(a) are true and complete with respect to such transferee and (z) if the transferee is a company that, at the time of transfer, is an Excepted Investment Company, it has provided representations and assurances, in a form and manner satisfactory to the Issuer, that all of the representations set forth in the preceding paragraph are true and complete with respect to such transferee, or (ii) if such transfer would have the effect of requiring the Issuer or the Collateral to register as an investment company under the 1940 Act.

(c) The purchaser understands that if, notwithstanding the restrictions on transfer contained therein, either Co-Issuer determines that any Holder of an interest in the Applicable Notes (or any interest therein) is not both a Qualified Purchaser and either (i) a Qualified Institutional Buyer, (ii) in the case of the Co-Issued Notes, an Institutional Accredited Investor that purchased an interest therein in connection with the initial distribution thereof, or (iii) in the case of Restricted Class F Notes and Restricted Subordinated Notes, an Accredited Investor, then either Co-Issuer (in the case of the Co-Issued Notes) or the Issuer (in the case of the Class F Notes and the Subordinated Notes) may require, by notice to such Holder, that such Holder sell all of its right, title and interest in such Senior Note (or interest therein) to a Person that is both a Qualified Purchaser and either (x) a Qualified Institutional Buyer or (y) in the case of Class F Notes and Subordinated Notes, an Accredited Investor (with such sale to be effected within 30 days after notice of such sale requirement is given). If such Holder fails to effect the transfer required within such 30 day period, (i) upon written direction from the Issuer or the Co-Issuer, as applicable, the Trustee (on behalf of and at the expense of the Co-Issuers) shall cause such Holder’s interest in such Applicable Notes to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Section 9-610(b) of the UCC) to a person that certifies to the Trustee, the Co-Issuers and the Collateral Manager, in connection with such transfer, that such person is both a Qualified Purchaser and either (A) a Qualified Institutional Buyer or (B) in the case of Class F Notes and Subordinated Notes, an Accredited Investor and (ii) pending such transfer, no further payments will be made in respect of such Applicable Notes held by such Holder.

(11) Regulation S. The purchaser is not, and will not be, a U.S. Person or a U.S. resident for purposes of the Investment Company Act, and its purchase of the Applicable Notes will comply with all applicable laws in any jurisdiction in which it resides or is located. The purchaser is aware that the sale of Applicable Notes to it is being made in reliance on the exemption from registration provided by Regulation S.

(12) ERISA.

(a) The purchaser represents that either (i) it is not (and for so long as it holds Applicable Notes will not be), and is not acting on behalf of (and for so long as it holds such Applicable Notes will not be acting on behalf of), (A) an “employee benefit plan” subject to Title I of ERISA, (B) a “plan” subject to Section 4975 of the Code, (C) an entity whose underlying assets would be deemed to constitute plan assets by reason of investment by an “employee benefit plan” or “plan” in such entity, or (D) a governmental or church plan subject to Similar Law, or (ii) its purchase and holding of such Note will not constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of a governmental or church plan subject to Similar Law, a non-exempt violation of any Similar Law).

(b) The purchaser, whether or not such purchaser represents and warrants that it is a Benefit Plan Investor or a Controlling Person, the Issuer, the Trustee, the Transfer Agent and the Note Registrar will not recognize a purchaser if such transfer would result in (a) Benefit Plan Investors owning 25% or more of the total

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value of the Applicable Notes (determined pursuant to 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA) or (b) a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.

(c) No purchase or transfer of an Applicable Note by a purchaser that is a governmental or church plan subject to Similar Law will be effective, and the Issuer, the Trustee, the Transfer Agent and the Note Registrar will not recognize such purchase or transfer, if such purchase or transfer would result in a non-exempt violation of any Similar Law.

(d) In the case of each purchaser of Applicable Notes (other than a Permitted Plan), such purchaser is not a Benefit Plan Investor or a Controlling Person. Notwithstanding the foregoing, Permitted Plans will be permitted to purchase Applicable Notes on the Closing Date. Each Permitted Plan shall be deemed to represent, warrant and covenant that either (a) its purchase, holding and disposition of the Applicable Notes (or interest therein) will not result in a nonexempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code. In the case of each purchaser that is an employee benefit plan maintained outside of the United States primarily for the benefit of persons substantially all of whom are nonresident aliens of the United States such purchaser not subject to any law, rule or regulation in the jurisdiction in which such employee benefit plan was established or is maintained that would, as a result of its purchase, holding or disposition of an Applicable Note (or an interest therein), subject the Issuer to any obligation or liability (other than those contemplated by the Indenture), penalty or tax.

(e) The purchaser understands that the representations made in this clause (12) will be deemed made on each day from the date on which such representation is first made through and including the date on which the purchaser disposes of its interests in the Applicable Notes.

(13) Certain Prohibited Transfers. The purchaser understands and agrees that (i) no transfer of any such Applicable Note that is a Restricted Class F Note or Restricted Subordinated Note to a transferee that has represented that it is a Benefit Plan Investor or a Controlling Person (other than a transfer on the Closing Date to a Permitted Plan) will be effective, and the Issuer, the Trustee, the Transfer Agent and the Note Registrar will not recognize such transfer, if such transfer would result in (x) Benefit Plan Investors owning 25% or more of the Applicable Notes (determined pursuant to 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA) or (y) a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code; (ii) no transfer of any Applicable Note to a transferee that is a governmental or church plan subject to Similar Law will be effective, and the Issuer, the Trustee, the Transfer Agent and the Note Registrar will not recognize such transfer, if such transfer would result in a non-exempt violation of any Similar Law; and (iii) no transfer may be made to a transferee that wishes to take delivery in the form of a Regulation S Global Class F Note or Regulation S Global Subordinated Note that has represented that it is a Benefit Plan Investor or a Controlling Person. The purchaser further understands and agrees that any transfer in violation of the applicable provisions of the Indenture will be void.

(14) Certain Transfers Void. The purchaser agrees that (a) no transfer may be made that would result in any person or entity holding beneficial ownership in any Applicable Notes in less than the minimum denomination set forth herein; (b) no transfer of Applicable Notes that would have the effect of requiring either of the Co-Issuers or the pool of Collateral to register as an investment company under the 1940 Act will be permitted; any sale, pledge or other transfer of Applicable Notes (or any interest therein) made in violation of the transfer restrictions contained in this Offering Circular and in the Indenture, or made based upon any false or inaccurate representation made by the purchaser to the Issuer, the Co-Issuer, the Trustee or the Note Registrar, will be void and of no force or effect, and (c) none of the Issuer, the Co-Issuer, the Trustee or the Note Registrar has any obligation to recognize any sale, pledge or other transfer of Applicable Notes (or any interest therein) made in violation of any such transfer restriction or made based upon any such false or inaccurate representation.

(15) Treatment of Issuer as a Qualified Purchaser. The purchaser acknowledges and consents to the treatment of the Issuer as a Qualified Purchaser for purposes of acquiring Collateral Debt Securities.

(16) Cayman Islands. The purchaser is not a member of the public in the Cayman Islands.

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(17) List of Participants. The purchaser acknowledges and understands that the Co-Issuers, or the Trustee on behalf of the Co-Issuers, may receive a list of participants holding positions in its securities from one or more book-entry depositories.

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

(19) Notice to Transferees. The purchaser will provide notice to each Person to whom it proposes to transfer any interest in the Applicable Notes of the transfer restrictions and representations set forth in the Indenture, including the exhibits referenced in such Indenture.

(20) Tax Status. The purchaser, or if the purchaser is purchasing with a view to resale to a beneficial owner, such owner, if not a United States person as defined in Section 7701(a)(30) of the Code, either (a) is not a bank (within the meaning of Section 881(c)(3)(A) of the Code) or an affiliate of a bank or (b) is a person (or a wholly owned affiliate of a person) that is eligible for benefits under an income tax treaty with the United States that eliminates United States federal income taxation of United States source interest not attributable to a permanent establishment in the United States.

(21) Limitation on Sales of Applicable Notes to Reg Y Institutions. No Reg Y Institution may transfer any Applicable Notes held by it to any person other than (a) a Controlling Party, (b) a person or persons designated by a Controlling Party, (c) in a widespread public distribution as part of a public offering, (d) in amounts such that, after giving effect thereto, no single transferee and its affiliates will hold more than 2% of the aggregate principal amount of Subordinated Notes (including all options, warrants and similar rights exercisable or convertible into such Applicable Notes) or (e) as otherwise permitted by applicable U.S. federal banking law and regulations.

Legends

The Notes will bear legends to the following effect unless the Co-Issuers, with respect to the Co-Issued Notes, or the Issuer, with respect to the Class F Notes and the Subordinated Notes, determine otherwise in compliance with applicable law.

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[The following paragraphs will be included in the legend for the Co-Issued Notes] THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION, AND NEITHER THE ISSUER NOR THE CO-ISSUER HAS BEEN REGISTERED UNDER THE U.S. INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE “1940 ACT”). THIS NOTE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO A TRANSFEREE THAT IS (I) A “QUALIFIED PURCHASER” (AS DEFINED IN SECTION 2(a)(51) OF THE 1940 ACT AND RELATED RULES), OR A COMPANY BENEFICIALLY OWNED EXCLUSIVELY BY ONE OR MORE “QUALIFIED PURCHASERS,” THAT, IN EITHER CASE, THE TRANSFEROR REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN RELIANCE ON THE EXEMPTION FROM SECURITIES ACT REGISTRATION PROVIDED BY SUCH RULE, OR (II) A PERSON THAT IS NOT A “U.S. PERSON” (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (B) TO A PERSON WHO IS ABLE TO MAKE EACH OF THE CERTIFICATIONS AND REPRESENTATIONS REQUIRED BY THE INDENTURE REFERRED TO HEREIN, WHETHER IN THE FORM OF DEEMED CERTIFICATIONS AND REPRESENTATIONS OR CERTIFICATIONS AND REPRESENTATIONS MADE IN THE APPLICABLE TRANSFER CERTIFICATE (IF REQUIRED BY THE INDENTURE) ATTACHED AS AN EXHIBIT TO THE INDENTURE, (C) IN COMPLIANCE WITH THE CERTIFICATION AND OTHER REQUIREMENTS SPECIFIED IN THE INDENTURE, (D) IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE

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JURISDICTION, (E) IN A TRANSACTION THAT WOULD NOT HAVE THE EFFECT OF REQUIRING THE ISSUER, THE CO-ISSUER OR THE COLLATERAL TO REGISTER AS AN INVESTMENT COMPANY UNDER THE 1940 ACT AND (F) IN PERMITTED DENOMINATIONS SPECIFIED IN THE INDENTURE. NEITHER THE TRUSTEE NOR THE NOTE REGISTRAR WILL RECOGNIZE ANY TRANSFER THAT DOES NOT COMPLY WITH SUCH RESTRICTIONS.

EACH PURCHASER OF A GLOBAL NOTE OR ANY BENEFICIAL INTEREST THEREIN WILL BE DEEMED TO HAVE MADE, AND EACH PURCHASER OF A DEFINITIVE NOTE (OR ANY INTEREST THEREIN) WILL BE REQUIRED TO MAKE, THE REPRESENTATIONS AND AGREEMENTS SET FORTH IN SECTION 2.4 OF THE INDENTURE. TRANSFERS OF NOTES OR ANY BENEFICIAL INTEREST THEREIN MUST GENERALLY BE ACCOMPANIED BY APPROPRIATE TAX AND ERISA TRANSFER DOCUMENTATION AND ARE SUBJECT TO RESTRICTIONS AS PROVIDED IN THE INDENTURE. ANY TRANSFER IN VIOLATION OF THE FOREGOING WILL BE OF NO FORCE AND EFFECT, WILL BE VOID AB INITIO, AND WILL NOT OPERATE TO TRANSFER ANY RIGHTS TO THE TRANSFEREE, NOTWITHSTANDING ANY INSTRUCTIONS TO THE CONTRARY TO THE ISSUER, THE CO-ISSUER, THE TRUSTEE OR ANY INTERMEDIARY. IF AT ANY TIME THE ISSUER OR THE CO-ISSUER DETERMINES OR IS NOTIFIED THAT THE HOLDER HEREOF OR OF A BENEFICIAL INTEREST HEREIN WAS IN BREACH, AT THE TIME GIVEN, OF ANY OF THE REPRESENTATIONS SET FORTH IN THE INDENTURE, THE CO-ISSUERS MAY CONSIDER THE ACQUISITION OF THIS NOTE OR SUCH INTEREST HEREIN VOID AND REQUIRE THAT THIS NOTE OR SUCH INTEREST HEREIN BE TRANSFERRED TO A PERSON DESIGNATED BY THE CO-ISSUERS.

EACH HOLDER HEREOF WILL BE REQUIRED TO REPRESENT AND WARRANT (OR, IN CERTAIN CIRCUMSTANCES, BE DEEMED TO REPRESENT AND WARRANT) THAT EITHER (A) IT IS NOT (AND FOR SO LONG AS IT HOLDS SUCH NOTE WILL NOT BE), AND IS NOT ACTING ON BEHALF OF (AND FOR SO LONG AS IT HOLDS SUCH NOTE WILL NOT BE ACTING ON BEHALF OF), AN “EMPLOYEE BENEFIT PLAN” SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), A “PLAN” SUBJECT TO SECTION 4975 OF THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), AN ENTITY WHOSE UNDERLYING ASSETS WOULD BE DEEMED TO INCLUDE PLAN ASSETS BY REASON OF INVESTMENT BY AN “EMPLOYEE BENEFIT PLAN” OR “PLAN” IN THE ENTITY, OR A GOVERNMENTAL OR CHURCH PLAN SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS SUBSTANTIALLY SIMILAR TO THE PROHIBITED TRANSACTION PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR THE PROVISIONS OF ERISA UNDER WHICH THE ASSETS OF AN ISSUER MAY BE DEEMED TO INCLUDE PLAN ASSETS (“SIMILAR LAW”), OR (B) ITS PURCHASE AND OWNERSHIP OF SUCH NOTE WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE (OR, IN THE CASE OF A GOVERNMENTAL OR CHURCH PLAN SUBJECT TO SIMILAR LAW, A NON-EXEMPT VIOLATION OF ANY SIMILAR LAW).

THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN MAY BE TRANSFERRED ONLY IN PERMITTED DENOMINATIONS SPECIFIED IN THE INDENTURE. ACCORDINGLY, AN INVESTOR IN THIS NOTE MUST BE PREPARED TO BEAR THE ECONOMIC RISK OF SUCH INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

[The following paragraphs will be included in the legend for the Restricted Co-Issued Notes.] IF, NOTWITHSTANDING THE RESTRICTIONS ON TRANSFER CONTAINED IN THE INDENTURE, EITHER OF THE CO-ISSUERS DETERMINES THAT ANY HOLDER HEREOF (OR ANY INTEREST HEREIN) IS NOT BOTH A QUALIFIED PURCHASER AND EITHER (A) A QUALIFIED INSTITUTIONAL BUYER OR (B) AN INSTITUTIONAL ACCREDITED INVESTOR THAT PURCHASED THIS NOTE OR AN INTEREST HEREIN IN CONNECTION WITH THE INITIAL DISTRIBUTION HEREOF, THEN EITHER OF THE CO-ISSUERS MAY REQUIRE, BY NOTICE TO SUCH HOLDER, THAT SUCH HOLDER SELL ALL OF ITS RIGHT, TITLE AND INTEREST HEREIN TO A PERSON THAT IS BOTH A QUALIFIED PURCHASER AND A QUALIFIED INSTITUTIONAL BUYER, 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, (I) UPON WRITTEN DIRECTION FROM THE ISSUER OR THE CO-ISSUER, THE TRUSTEE (ON BEHALF OF AND AT THE EXPENSE OF THE CO-ISSUERS) SHALL CAUSE SUCH BENEFICIAL OWNER’S INTEREST IN SUCH NOTE TO BE TRANSFERRED IN A COMMERCIALLY REASONABLE SALE (CONDUCTED BY THE TRUSTEE IN

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ACCORDANCE WITH SECTION 9-610(b) OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN THE STATE OF NEW YORK) TO A PERSON THAT CERTIFIES TO THE TRUSTEE, THE NOTE REGISTRAR, THE CO-ISSUERS AND THE COLLATERAL MANAGER, IN CONNECTION WITH SUCH TRANSFER, THAT SUCH PERSON IS BOTH A QUALIFIED PURCHASER AND A QUALIFIED INSTITUTIONAL BUYER AND (II) PENDING SUCH TRANSFER, NO FURTHER PAYMENTS WILL BE MADE IN RESPECT OF SUCH NOTE HELD BY SUCH HOLDER.

IN ADDITION, NO TRANSFER OF THIS NOTE (OR ANY INTEREST HEREIN) MAY BE MADE (AND NONE OF THE TRUSTEE, THE NOTE REGISTRAR OR THE ISSUER WILL RECOGNIZE ANY SUCH TRANSFER) IF SUCH TRANSFER WOULD BE MADE TO A U.S. PERSON THAT IS A QUALIFIED INSTITUTIONAL BUYER AND (A) A DEALER DESCRIBED IN PARAGRAPH (a)(1)(ii) OF RULE 144A WHICH OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS THAN $25,000,000 IN SECURITIES OF ISSUERS THAT ARE NOT AFFILIATED PERSONS OF THE DEALER OR (B) A PLAN REFERRED TO IN PARAGRAPH (a)(1)(i)(D) OR (a)(1)(i)(E) OF RULE 144A OR A TRUST FUND REFERRED TO IN PARAGRAPH (a)(1)(i)(F) OF RULE 144A THAT HOLDS THE ASSETS OF SUCH A PLAN, UNLESS INVESTMENT DECISIONS WITH RESPECT TO THE PLAN ARE MADE SOLELY BY THE FIDUCIARY, TRUSTEE OR SPONSOR OF SUCH PLAN. THE TRANSFEREE, AND EACH ACCOUNT FOR WHICH IT IS PURCHASING, IS REQUIRED TO HOLD AND TRANSFER AT LEAST THE MINIMUM DENOMINATIONS OF THE NOTES. EACH TRANSFEREE HEREOF IS REQUIRED TO PROVIDE WRITTEN NOTICE OF THE TRANSFER RESTRICTIONS APPLICABLE HERETO TO ANY SUBSEQUENT TRANSFEREES.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (“DTC”) TO THE NOTE REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

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[The following paragraphs will be included in the legend for the Class F Notes and Subordinated Notes.] THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION, AND THE ISSUER HAS NOT BEEN REGISTERED UNDER THE U.S. INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE “1940 ACT”). THIS NOTE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO A TRANSFEREE THAT IS (I) A “QUALIFIED PURCHASER” (AS DEFINED IN SECTION 2(a)(51) OF THE 1940 ACT AND RELATED RULES), OR A COMPANY BENEFICIALLY OWNED EXCLUSIVELY BY ONE OR MORE “QUALIFIED PURCHASERS,” WHO, IN EITHER CASE, THE TRANSFEROR REASONABLY BELIEVES IS EITHER (a) AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501(a) UNDER THE SECURITIES ACT, PURCHASING FOR ITS OWN ACCOUNT (SUBJECT TO THE DELIVERY OF SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE ISSUER MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT), OR (b) A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN RELIANCE ON THE EXEMPTION FROM SECURITIES ACT REGISTRATION PROVIDED BY SUCH RULE, OR (2) TO A PERSON THAT IS NOT A “U.S. PERSON” (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (B) TO A PERSON WHO IS ABLE TO MAKE EACH OF THE CERTIFICATIONS AND REPRESENTATIONS REQUIRED BY THE INDENTURE REFERRED TO HEREIN, IN THE FORM OF CERTIFICATIONS AND REPRESENTATIONS MADE IN THE APPLICABLE TRANSFER CERTIFICATE (IF REQUIRED BY THE INDENTURE) ATTACHED AS AN EXHIBIT TO THE INDENTURE (C) IN COMPLIANCE WITH THE CERTIFICATION AND OTHER REQUIREMENTS SPECIFIED IN THE INDENTURE (D) IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION, (E) IN A TRANSACTION THAT

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WOULD NOT HAVE THE EFFECT OF REQUIRING THE ISSUER OR THE COLLATERAL TO REGISTER AS AN INVESTMENT COMPANY UNDER THE 1940 ACT AND (F) IN PERMITTED DENOMINATIONS SPECIFIED IN THE INDENTURE. ANY TRANSFER IN VIOLATION OF THE FOREGOING WILL BE OF NO FORCE AND EFFECT, WILL BE VOID AB INITIO, AND WILL NOT OPERATE TO TRANSFER ANY RIGHTS TO THE TRANSFEREE, NOTWITHSTANDING ANY INSTRUCTIONS TO THE CONTRARY TO THE ISSUER, THE TRUSTEE OR ANY INTERMEDIARY. ACCORDINGLY, AN INVESTOR IN THIS NOTE MUST BE PREPARED TO BEAR THE ECONOMIC RISK OF SUCH INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

IN ADDITION, NO TRANSFER OF THIS NOTE (OR ANY INTEREST HEREIN) MAY BE MADE (AND NONE OF THE TRUSTEE, THE NOTE REGISTRAR OR THE ISSUER WILL RECOGNIZE ANY SUCH TRANSFER) IF SUCH TRANSFER WOULD BE MADE TO A U.S. PERSON THAT IS A QUALIFIED INSTITUTIONAL BUYER AND (A) A DEALER DESCRIBED IN PARAGRAPH (a)(1)(ii) OF RULE 144A WHICH OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS THAN $25,000,000 IN SECURITIES OF ISSUERS THAT ARE NOT AFFILIATED PERSONS OF THE DEALER OR (B) A PLAN REFERRED TO IN PARAGRAPH (a)(1)(i)(D) OR (a)(1)(i)(E) OF RULE 144A OR A TRUST FUND REFERRED TO IN PARAGRAPH (a)(1)(i)(F) OF RULE 144A THAT HOLDS THE ASSETS OF SUCH A PLAN, UNLESS INVESTMENT DECISIONS WITH RESPECT TO THE PLAN ARE MADE SOLELY BY THE FIDUCIARY, TRUSTEE OR SPONSOR OF SUCH PLAN. THE TRANSFEREE, AND EACH ACCOUNT FOR WHICH IT IS PURCHASING, IS REQUIRED TO HOLD AND TRANSFER AT LEAST THE MINIMUM DENOMINATIONS OF THE NOTES. EACH TRANSFEREE HEREOF IS REQUIRED TO PROVIDE WRITTEN NOTICE OF THE TRANSFER RESTRICTIONS APPLICABLE HERETO TO ANY SUBSEQUENT TRANSFEREES.

[The following paragraph will be included in the legend for the Restricted Class F Notes and Restricted Subordinated Notes.] IF, NOTWITHSTANDING THE RESTRICTIONS ON TRANSFER CONTAINED IN THE INDENTURE, THE ISSUER DETERMINES THAT ANY HOLDER HEREOF (OR ANY INTEREST HEREIN) IS NOT BOTH A QUALIFIED PURCHASER AND EITHER (A) A QUALIFIED INSTITUTIONAL BUYER OR (B) AN ACCREDITED INVESTOR, THEN THE ISSUER MAY REQUIRE, BY NOTICE TO SUCH HOLDER, THAT SUCH HOLDER SELL ALL OF ITS RIGHT, TITLE AND INTEREST HEREIN TO A PERSON THAT IS A QUALIFIED PURCHASER AND EITHER (1) A QUALIFIED INSTITUTIONAL BUYER OR (2) AN ACCREDITED INVESTOR 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, (I) UPON WRITTEN DIRECTION FROM THE ISSUER, THE TRUSTEE (ON BEHALF OF AND AT THE EXPENSE OF THE ISSUER) SHALL CAUSE SUCH BENEFICIAL OWNER’S INTEREST IN THIS NOTE TO BE TRANSFERRED IN A COMMERCIALLY REASONABLE SALE (CONDUCTED BY THE TRUSTEE IN ACCORDANCE WITH SECTION 9-610(b) OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN THE STATE OF NEW YORK) TO A PERSON THAT CERTIFIES TO THE TRUSTEE, THE NOTE REGISTRAR, THE ISSUER AND THE COLLATERAL MANAGER, IN CONNECTION WITH SUCH TRANSFER, THAT SUCH PERSON IS BOTH A QUALIFIED PURCHASER AND EITHER (x) A QUALIFIED INSTITUTIONAL BUYER OR (y) AN ACCREDITED INVESTOR AND (II) PENDING SUCH TRANSFER, NO FURTHER PAYMENTS WILL BE MADE IN RESPECT OF SUCH NOTE HELD BY SUCH HOLDER.

[The following paragraph will be included in the legend for the Restricted Definitive Class F Notes.] THE ACQUISITION OF THIS NOTE (OR ANY INTEREST HEREIN) BY, OR ON BEHALF OF, OR WITH THE ASSETS OF ANY PURCHASER OR TRANSFEREE THAT REPRESENTS AND WARRANTS THAT IT IS (A) AN “EMPLOYEE BENEFIT PLAN” SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), (B) A “PLAN” SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), (C) AN ENTITY WHOSE UNDERLYING ASSETS WOULD BE DEEMED TO INCLUDE “PLAN ASSETS” BY REASON OF THE INVESTMENT BY AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN IN THE ENTITY WITHIN THE MEANING OF 29 C.F.R. SECTION 2510.3-101, AS MODIFIED BY SECTION 3(42) OF ERISA (EACH OF THE FOREGOING, A “BENEFIT PLAN INVESTOR”), OR (D) THE ISSUER, THE COLLATERAL MANAGER OR ANY OTHER PERSON (OTHER THAN A BENEFIT PLAN INVESTOR) THAT HAS DISCRETIONARY AUTHORITY OR CONTROL WITH RESPECT TO THE ASSETS OF THE ISSUER OR A PERSON WHO PROVIDES INVESTMENT ADVICE FOR A FEE (DIRECT OR INDIRECT) WITH RESPECT TO THE ASSETS OF THE ISSUER, OR ANY “AFFILIATE” (AS DEFINED IN 29 C.F.R. SECTION 2510.3-

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101(f)(3)) OF ANY OF THE FOREGOING PERSONS (EACH, A “CONTROLLING PERSON”) WILL NOT BE EFFECTIVE, AND THE ISSUER, THE TRUSTEE, THE TRANSFER AGENT AND THE NOTE REGISTRAR WILL NOT RECOGNIZE SUCH ACQUISITION, IF SUCH ACQUISITION WOULD RESULT IN (1) BENEFIT PLAN INVESTORS OWNING 25% OR MORE OF THE TOTAL VALUE OF THE CLASS OF NOTES OF WHICH THIS NOTE IS A PART (DETERMINED PURSUANT TO 29 C.F.R. SECTION 2510.3-101, AS MODIFIED BY SECTION 3(42) OF ERISA) OR (2) A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE.

[The following paragraph will be included in the legend for the Class F Notes.] DISTRIBUTIONS OF PRINCIPAL PROCEEDS AND INTEREST PROCEEDS TO THE HOLDER OF THIS NOTE ARE SUBORDINATE TO THE PAYMENT ON EACH DISTRIBUTION DATE OF PRINCIPAL OF AND INTEREST ON THE CO-ISSUED NOTES AND THE PAYMENT OF CERTAIN OTHER AMOUNTS, TO THE EXTENT AND AS DESCRIBED IN THE INDENTURE REFERRED TO HEREIN.

[The following paragraph will be included in the legend for the Subordinated Notes.] DISTRIBUTIONS OF PRINCIPAL PROCEEDS AND INTEREST PROCEEDS TO THE HOLDER OF THIS NOTE ARE SUBORDINATE TO THE PAYMENT ON EACH DISTRIBUTION DATE OF PRINCIPAL OF AND INTEREST ON THE SENIOR NOTES AND THE PAYMENT OF CERTAIN OTHER AMOUNTS, TO THE EXTENT AND AS DESCRIBED IN THE INDENTURE REFERRED TO HEREIN.

[The following paragraph will be included in the legend for the Restricted Definitive Class F Notes, Restricted Subordinated Notes, Definitive Regulation S Class F Notes (if issued) and Definitive Regulation S Subordinated Notes (if issued)] EACH TRANSFEREE THAT DESIRES TO TAKE DELIVERY OF THIS NOTE WILL BE REQUIRED TO DELIVER A TRANSFER CERTIFICATE IN A FORM PRESCRIBED IN THE INDENTURE.

[The following paragraph will be included in the legend for the Restricted Class F Notes, Restricted Subordinated Notes, Definitive Regulation S Class F Notes (if issued) and Definitive Regulation S Subordinated Notes (if issued)] EACH HOLDER HEREOF WILL BE REQUIRED TO REPRESENT AND WARRANT (OR, IN CERTAIN CIRCUMSTANCES, BE DEEMED TO REPRESENT AND WARRANT) THAT EITHER (A) IT IS NOT (AND FOR SO LONG AS IT HOLDS SUCH NOTE WILL NOT BE), AND IS NOT ACTING ON BEHALF OF A GOVERNMENTAL OR CHURCH PLAN SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS SUBSTANTIALLY SIMILAR TO THE PROHIBITED TRANSACTION PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR THE PROVISIONS OF ERISA UNDER WHICH THE ASSETS OF AN ISSUER MAY BE DEEMED TO INCLUDE PLAN ASSETS (“SIMILAR LAW”), OR (B) ITS PURCHASE AND OWNERSHIP OF SUCH NOTE WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT VIOLATION OF ANY SIMILAR LAW.

[The following paragraph will be included in the legend for the Restricted Global Class F Notes, Regulation S Class F Notes and the Regulation S Subordinated Notes.] EACH PURCHASER OF THIS NOTE OR A BENEFICIAL INTEREST HEREIN WILL, IF REQUIRED BY THE INDENTURE, BE REQUIRED TO DELIVER A TRANSFER CERTIFICATE IN A FORM PRESCRIBED IN THE INDENTURE OR WILL BE DEEMED TO HAVE MADE THE REPRESENTATIONS AND AGREEMENTS SET FORTH IN SECTION 2.4 OF THE INDENTURE.

[The following paragraph will be included in the legend for the Regulation S Class F Notes and the Regulation S Subordinated Notes] THIS NOTE MAY NOT BE ACQUIRED BY, OR ON BEHALF OF, OR WITH THE ASSETS OF (A) AN “EMPLOYEE BENEFIT PLAN” SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), (B) A “PLAN” SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), (C) AN ENTITY WHOSE UNDERLYING ASSETS WOULD BE DEEMED TO INCLUDE “PLAN ASSETS” BY REASON OF THE INVESTMENT BY AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN IN THE ENTITY WITHIN THE MEANING OF 29 C.F.R. SECTION 2510.3-101, AS MODIFIED BY SECTION 3(42) OF ERISA (EACH OF THE FOREGOING, A “BENEFIT PLAN INVESTOR”), OR (D) THE ISSUER, THE INITIAL PURCHASER, THE COLLATERAL MANAGER OR ANY OTHER PERSON (OTHER THAN A BENEFIT PLAN INVESTOR) THAT HAS DISCRETIONARY AUTHORITY OR CONTROL WITH RESPECT TO THE ASSETS OF THE ISSUER OR A PERSON WHO PROVIDES INVESTMENT ADVICE FOR A FEE (DIRECT OR INDIRECT) WITH RESPECT TO THE ASSETS OF THE ISSUER, OR ANY “AFFILIATE” (AS DEFINED IN 29 C.F.R. SECTION 2510.3-101(f)(3)) OF ANY SUCH PERSON, UNLESS THE PURCHASER

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REPRESENTS THAT IT IS A PERMITTED PLAN PURCHASING SUCH NOTE ON THE CLOSING DATE IN ACCORDANCE WITH THE INDENTURE.

EACH HOLDER HEREOF WILL BE REQUIRED TO REPRESENT AND WARRANT (OR, IN CERTAIN CIRCUMSTANCES, BE DEEMED TO REPRESENT AND WARRANT) THAT EITHER (A) IT IS NOT (AND FOR SO LONG AS IT HOLDS SUCH NOTE WILL NOT BE), AND IS NOT ACTING ON BEHALF OF A GOVERNMENTAL OR CHURCH PLAN SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS SUBSTANTIALLY SIMILAR TO THE PROHIBITED TRANSACTION PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR THE PROVISIONS OF ERISA UNDER WHICH THE ASSETS OF AN ISSUER MAY BE DEEMED TO INCLUDE PLAN ASSETS (“SIMILAR LAW”), OR (B) ITS PURCHASE AND OWNERSHIP OF SUCH NOTE WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT VIOLATION OF ANY SIMILAR LAW.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (“DTC”) TO THE NOTE REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

LISTING AND GENERAL INFORMATION

1. Application has been made to the IFSRA, as competent authority under Directive 2003/71/EC, for the Prospectus to be approved. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on (a) in the case of the Insured Notes, its alternative securities market and (b) in the case of all other Notes, its regulated market. It is expected that the total expenses relating to the application for admission of the Notes to the official list of the Irish Stock Exchange and to trading on (i) in the case of the Insured Notes, its alternative securities market and (ii) in the case of all other Notes, the regulated market, will be approximately EUR 15,440. Copies of this Offering Circular, the Issuer Charter, the Collateral Management Agreement, the Hedge Agreements, the Purchase and Placement Agency Agreement, the Collateral Administration Agreement, the Certificate of Formation and LLC Agreement of the Co-Issuer, the Insurance Documents and the Indenture will be available for inspection at the registered office of the Issuer, in electronic format for the life of this document. It is not intended that any information be provided regarding any Notes admitted to the Official List and trading on (A) in the case of the Insured Notes, the alternative securities market of the Irish Stock Exchange and (B) in the case of all other Notes, the regulated market of the Irish Stock Exchange, or performance of the underlying collateral.

2. Copies of the Issuer Charter, the Certificate of Formation and LLC Agreement of the Co-Issuer, the resolutions of the Board of Directors of the Issuer authorizing the issuance of the Notes and the resolutions of the sole member of the Co-Issuer authorizing the issuance of the Co-Issued Notes, the Indenture and the Collateral Management Agreement may be obtained free of charge upon request within 30 days of the date of the final Offering Circular at the office of the Trustee on behalf of the Issuer.

3. Each of the Co-Issuers represents that there has been no material adverse change in its financial position since its date of creation. The Co-Issuers are not, and have not since formation, been, involved in any legal, governmental or arbitration proceedings relating to the Notes or claims in amounts which may have or have had a material effect on the Co-Issuers in the context of the issue of the Notes, nor, so far as each such Co-Issuer is aware, is any such legal, governmental or arbitration involving it pending or threatened.

4. The issuance of the Notes will be authorized by the Board of Directors of the Issuer by resolutions to be passed on or about January 17, 2007. The issuance of the Co-Issued Notes will be authorized by the sole member of the Co-Issuer by resolutions to be passed on or about January 17, 2007. Since formation, neither the Issuer nor the Co-Issuer has commenced trading, prepared any financial statements or established any accounts, except as disclosed herein or accounts used to hold amounts received with respect to share capital and fees.

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6. The Co-Issuer is not required by the law of the State of Delaware, and the Co-Issuer does not intend, to publish annual reports and accounts. The Issuer is not required by Cayman Islands law, and the Issuer does not intend, to publish annual reports and accounts. The Indenture requires the Issuer to provide the Trustee with written confirmation, on an annual basis, that to the best of its knowledge following review of the activities of the prior year no Event of Default or Default or other matter required to be brought to the Trustee’s attention has occurred or, if one has, specifying the same.

7. The Hedge Counterparty providing an interest rate swap is Merrill Lynch Capital Services.

8. Dillon Eustace is acting solely in its capacity as listing agent (the “Listing Agent”) for the Co-Issuers in connection with the Notes and is not itself seeking admission of the Notes to the Official List of the Irish Stock Exchange or to trading on (a) in the case of the Insured Notes, the alternative securities market of the Irish Stock Exchange and (b) in the case of all other Notes, the regulated market of the Irish Stock Exchange, for the purposes of the Prospectus Directive. Application has been made to list the Notes on the Irish Stock Exchange by the Issuer, through the Listing Agent. The Listing Agent is not seeking admission to listing on the Irish Stock Exchange for the purposes of the Prospectus Directive.

9. Notes sold in offshore transactions in reliance on Regulation S and represented by Regulation S Global Notes, as applicable, have been accepted for clearance through Euroclear and Clearstream.

The CUSIP Numbers and International Securities Identification Numbers (ISIN) for the Global Notes and the Certificated Notes are as set forth below:

Regulation S Note CUSIP Numbers

Restricted Note CUSIP Numbers

Regulation S Note ISIN Restricted Note ISIN

Class A-1A Notes (funded)

G0693QAA5 04973PAA7 USG0693QAA51 US04973PAA75

Class A-1A Notes (unfunded)

N/A 04973PAL3 N/A US04973PAL31

Draw 1 N/A 04973PAM1 N/A US04973PAM14 Draw 2 N/A 04973PAN9 N/A US04973PAN96 Draw 3 N/A 04973PAP4 N/A US04973PAP45 Class A-1B Notes G0693QAB3 04973PAB5 USG0693QAB35 US04973PAB58 Class A-2 Notes G0693QAC1 04973PAC3 USG0693QAC18 US04973PAC32 Class B Notes G0693QAD9 04973PAD1 USG0693QAD90 US04973PAD15 Class C-1 Notes G0693QAE7 04973PAE9 USG0693QAE73 US04973PAE97 Class C-2 Notes G0693QAH0 04973PAH2 USG0693QAH05 US04973PAH29 Class D Notes G0693QAF4 04973PAF6 USG0693QAF49 US04973PAF62 Class E-1 Notes G0693QAG2 04973PAG4 USG0693QAG22 US04973PAG46 Class E-2 Notes G0693QAJ6 04973PAJ8 USG0693QAJ60 US04973PAJ84 Class F Notes G06901AA3 04973MAA4 USG06901AA31 US04973MAA45 Subordinated Notes G06901AC9 04973MAC0 USG06901AC96 US04973MAC01

CERTAIN LEGAL MATTERS

Certain United States legal matters with respect to the Notes will be passed upon for the Co-Issuers by Dechert LLP. Certain United States federal income tax matters with respect to the Notes will be passed upon for the Co-Issuers by Weil, Gotshal & Manges LLP. Certain Cayman Islands legal matters with respect to the Issuer will be passed upon by Maples and Calder. Certain United States legal matters with respect to the Collateral Manager will be passed upon by Dechert LLP. Mayer, Brown, Rowe & Maw LLP has represented the Initial Purchaser. Other than as stated in the immediately preceding sentence, no separate counsel has been appointed to represent purchasers of any of the Notes.

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GLOSSARY OF CERTAIN DEFINED TERMS

“Acquired Security Payment Period”: With respect to any Additional Collateral Debt Security that is a Semi-Annual Pay Security, the Due Period in which scheduled interest on such Additional Collateral Debt Security is next due to be paid, which shall be either the Lower Semi-Annual Pay Quarter or the Higher Semi-Annual Pay Quarter.

“Additional Junior Indebtedness”: With respect to a Real Estate Entity, without duplication and other than the related Corresponding Debentures, any indebtedness, liabilities or obligations of the Real Estate Entity, or any Subsidiary (as defined in the related Real Estate Entity Indenture, as applicable) of the Real Estate Entity, under debt securities (or guarantees in respect of debt securities) initially issued after the date of the related Real Estate Entity Indenture, as applicable to any trust, or a trustee of a trust, partnership or other entity affiliated with the Real Estate Entity that is, directly or indirectly, a finance subsidiary (as such term is defined in Rule 3a-5 under the 1940 Act) or other financing vehicle of the Real Estate Entity, or any Subsidiary of the Real Estate Entity in connection with the issuance by that entity of preferred securities or other securities that are issued on a pari passu basis with the related Corresponding Debentures (or, in the case of a few Real Estate Entities, either junior and subordinate to or on a pari passu basis with the related Corresponding Debentures).

“Additional Subordinated Debt”: As defined in the Underlying Instruments relating to any Collateral Debt Security or the Real Estate Entity Indenture relating to any Corresponding Debenture, as applicable, as the following: with respect to an Underlying Issuer or a Real Estate Entity, without duplication and other than the related Collateral Debt Securities or Corresponding Debentures, as the case may be, any indebtedness, liabilities or obligations of the Underlying Issuer or Real Estate Entity, or any subsidiary thereof, under debt securities (or guarantees in respect of debt securities) initially issued after the date of the related Underlying Instrument or Real Estate Entity Indenture, as applicable, to any trust, or a trustee of a trust, partnership or other entity affiliated with the Underlying Issuer or Real Estate Entity that is, directly or indirectly, a finance subsidiary (as such term is defined in Rule 3a-5 under the 1940 Act) or other financing vehicle of the Underlying Issuer or Real Estate Entity, or any subsidiary thereof in connection with the issuance by that entity of preferred securities or other securities that are issued on a pari passu basis with the related Collateral Debt Securities or Corresponding Debentures, as the case may be (or either junior and subordinate to or on a pari passu basis with the related Collateral Debt Securities or Corresponding Debentures, as the case may be).

“Administrative Expenses”: Amounts (including indemnities) due or accrued with respect to any Distribution Date and payable by the Issuer or the Co-Issuer to:

(a) the Trustee or any co-trustee appointed pursuant to the Indenture or to the trustee pursuant to the Master Trust Agreement and any grantor trust thereunder;

(b) the Administrator under the Administration Agreement;

(c) the Collateral Administrator under the Collateral Administration Agreement;

(d) the independent accountants, agents and counsel of the Issuer for reasonable fees and expenses (including amounts payable in connection with the preparation of tax forms on behalf of the Co-Issuers);

(e) the Rating Agencies for fees and expenses in connection with any rating (including the annual or ongoing surveillance fee payable with respect to the monitoring of any rating) of the Senior Notes, including fees and expenses due or accrued in connection with any rating or credit estimate of the Collateral Debt Securities;

(f) the Collateral Manager under the Indenture and the Collateral Management Agreement (including amounts payable pursuant to Section 10 of the Collateral Management Agreement);

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(g) the Insurer in respect of Accrued Insurance Liabilities under the Insurance Agreement (other than Accrued Insurance Liabilities constituting amounts paid by the Insurer under the Policy as set forth in clause (i) of the definition of the term Accrued Insurance Liabilities in the Insurance Agreement);

(h) any other Person in respect of any governmental fee, charge or tax in relation to the Issuer or the Co-Issuer (in each case as certified by an officer of the Issuer or the Co-Issuer to the Trustee); and

(i) any other Person in respect of any other fees or expenses (including indemnities) permitted under the Indenture, the Collateral Administration Agreement and the documents delivered pursuant to or in connection with the Indenture, the Collateral Administration Agreement and the Notes, including any amounts due in respect of the listing of the Notes on any stock exchange or trading system and any costs associated with producing Definitive Senior Notes or Definitive Regulation S Subordinated Notes;

provided, that Administrative Expenses shall not include (i) any amounts due or accrued with respect to the actions taken on or in connection with the Closing Date, (ii) amounts payable in respect of the Notes (other than amounts set forth in clause (h) above), (iii) amounts payable under the Hedge Agreements and (iv) any Collateral Management Fees payable pursuant to the Collateral Management Agreement.

Notwithstanding anything in the foregoing definition to the contrary, in connection with the payment of Administrative Expenses pursuant to “Description of the Notes—Priority of Payments—Interest Proceeds (25)” and “Description of the Notes—Priority of Payments—Principal Proceeds (21)”, Administrative Expenses payable to the Insurer shall be paid prior to the payment of any other Administrative Expenses (and such remaining Administrative Expenses shall be paid in the order set forth above).

“Affiliate”: with respect to a specified Person, means (a) any other Person who, directly or indirectly, is in control of, or controlled by, or is under common control with, such Person or (b) any other Person who is a director, Officer, employee, member or general partner of such Person. For the purposes of this definition, “control” of a Person means the power, direct or indirect, (i) to vote more than 50% of the securities having ordinary voting power for the election of directors of such Person or (ii) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. For purposes of this definition, the management of an account by one Person for the benefit of any other Person shall not constitute “control” of such other Person and no entity shall be deemed an Affiliate of the Issuer or the Co-Issuer solely because the Administrator or its Affiliates acts as administrator and/or share trustee for such entity.

“Aggregate Drawn Amount”: At any time, with respect to the Class A-1A Notes the aggregate amount of funded Class A-1A Commitments in respect of all Class A-1A Notes.

“Aggregate Outstanding Principal Amount”: When used with respect to any of the Notes at any time, the aggregate principal amount of such Notes Outstanding at such time; provided that with respect to the Class A-1A Notes as a whole on any date of determination during the Initial Investment Period, the Aggregate Outstanding Principal Amount thereof shall be the Aggregate Drawn Amount of all Class A-1A Notes as of such date (and with respect to any specified Class A-1A Notes, the pro rata amount of the Aggregate Drawn Amount applicable to such specified Class A-1A Notes). Except as otherwise provided herein, the Aggregate Outstanding Principal Amount of any Class B Note at any time shall include all Class B Deferred Interest applicable to such Note at such time, the Aggregate Outstanding Principal Amount of any Class C Note at any time shall include all Class C Deferred Interest applicable to such Note at such time, the Aggregate Outstanding Principal Amount of any Class D Note at any time shall include all Class D Deferred Interest applicable to such Note at such time, the Aggregate Outstanding Principal Amount of any Class E Note at any time shall include all Class E Deferred Interest applicable to such Note at such time and the Aggregate Outstanding Principal Amount of any Class F Note at any time shall include all Class F Deferred Interest applicable to such Note at such time.

“Aggregate Undrawn Amount”: At any time, with respect to the Class A-1A Notes the unutilized Class A-1A Commitments available to be drawn by the Issuer.

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“Applicable Note”: The applicable Class of Notes as to which representations and agreements are being provided by a purchaser or transferee of such Class of Notes.

“Applicable Recovery Rate”: With respect to any Collateral Debt Security on any Determination Date, the lesser of the Moody’s Recovery Rate, the S&P Recovery Rate and the Fitch Recovery Rate.

“Appreciated Collateral Debt Security”: A Collateral Debt Security that (a) in the Collateral Manager’s reasonable business judgment (i) has a market price that is greater than the price that is warranted by its terms and credit characteristics, or improved in credit quality since its acquisition by the Issuer or (ii) satisfies any of the Appreciated Criteria, and (b) if any rating assigned by Moody’s on the Closing Date to the Class A Notes has been reduced or withdrawn or the ratings assigned by Moody’s on the Closing Date to the Class B Notes or the Class C Notes have been reduced by two subcategories or more or withdrawn, a Collateral Debt Security may be an Appreciated Collateral Debt Security only if it satisfies at least one of the Appreciated Criteria.

“Appreciated Criteria”: The following criteria, which will be considered in determining whether a Collateral Debt Security is an Appreciated Collateral Debt Security:

(a) on any date of determination, the difference between its market price (expressed as a percentage of par value) on such date and its purchase price is greater than 1%;

(b) it has a projected cash flow interest coverage ratio (earnings before interest and taxes divided by cash interest expense as estimated by the Collateral Manager) of the underlying borrower or other obligor of such Collateral Debt Security that is expected to be more than 1.15 times the current year’s projected cash flow interest coverage ratio;

(c) it has been placed under review for upgrade or has been upgraded by Moody’s or it has been upgraded or placed by S&P on a credit watch list with potential of developing positive credit implications or improvement in its rating;

(d) with respect to fixed-rate Collateral Debt Securities, there has been a decrease in the difference between its yield compared to the yield on the relevant United States Treasury security of more than 0.75% since the date of purchase; or

(e) there has been a reduction in its spread over the applicable reference rate since the date of purchase by 0.125% or more due to an improvement in the related borrower’s financial ratios or financial results in accordance with the related Underlying Instrument.

“Assigned Moody’s Rating”: The monitored publicly available rating or the monitored estimated rating expressly assigned to a debt obligation (or facility) by Moody’s that addresses the full amount of the principal and interest promised. Notwithstanding the foregoing, if the Assigned Moody’s Rating is on watch for downgrade or upgrade by Moody’s, such rating or ratings will be adjusted down one subcategory (if on watch for downgrade) or up one subcategory (if on watch for upgrade). If the debt obligation is a CMBS or CMBS CDO Security and is on watch for downgrade or upgrade by Moody’s, such rating or ratings will be adjusted down two subcategories (if on watch for downgrade) or up two subcategories (if on watch for upgrade).

“Average Life”: On any Determination Date with respect to any Collateral Debt Security, the quotient obtained by the Collateral Manager by dividing (a) the sum of the products of (i) the number of years (rounded to the nearest one tenth thereof) from such Determination Date to the respective dates of each successive scheduled distribution of principal of such Collateral Debt Security (assuming that (A) no Collateral Debt Securities default or are sold and (B) no optional redemption of the Collateral Debt Securities occurs) and (ii) the respective amounts of principal of such successive scheduled distributions; provided that in the case of CMBS, such calculation shall be made from the relevant Determination Date to the expected balloon payment date occurring prior to the Stated Maturity of the Notes, by (b) the sum of all successive scheduled distributions (or payments, as applicable) of principal on such Collateral Debt Security.

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“Caa Excess”: The amount, if any, by which the Aggregate Principal Balance of the Caa Real Estate Entity Securities exceeds 2.5% of the Aggregate Principal Balance as of the then current Determination Date. The Caa Real Estate Entity Securities with the lowest Market Value shall be deemed to constitute such Caa Excess.

“Caa Real Estate Entity Security”: A Collateral Debt Security (other than a Defaulted Security, Deferred Interest PIK Security, CMBS or CMBS CDO Security) issued or sponsored by a Real Estate Entity with a Moody’s Rating of “Caa1” or lower or “B3” (and on watch for possible downgrade).

“Calculation Amount”: At any time, with respect to (a) any Defaulted Security (other than a Trust Preferred Security) or Deferred Interest PIK Security, the lower of (i) the product of the Applicable Recovery Rate and the Principal Balance of such Collateral Debt Security and (ii) the Market Value of such Collateral Debt Security, and (b) any Defaulted Security that is a Trust Preferred Security, the product of the Applicable Recovery Rate and the Principal Balance of such Defaulted Security.

“Capitalized Leases”: All leases that have been or should be, in accordance with GAAP, recorded as capitalized leases.

“Class A Coverage Tests”: The Class A Overcollateralization Test and the Class A Interest Coverage Test.

“Class A Interest Coverage Test”: On any Measurement Date occurring after the first Distribution Date and on which any Class A-1 Notes or Class A-2 Notes remain outstanding, a test that is satisfied if the Class A Interest Coverage Ratio on such Measurement Date is equal to or greater than 125.00%.

“Class A Overcollateralization Ratio”: As of any Measurement Date, the number (expressed as a percentage) calculated by dividing (a) the Net Outstanding Portfolio Collateral Balance on such Measurement Date by (b) the sum of the Aggregate Outstanding Principal Amount of the Class A Notes.

“Class A Overcollateralization Test”: On any Measurement Date occurring on or after the Ramp-Up Completion Date on which any Class A-1 Notes or Class A-2 Notes remain outstanding, a test that is satisfied if the Class A Overcollateralization Ratio on such Measurement Date is equal to or greater than 122.86%.

“Class A-1A Commitment Fee Amount”: With respect to the Class A-1A Notes as of any Distribution Date, the sum of (a) the aggregate amount of Class A-1A Commitment Fees accrued during the related Due Period plus (b) any Class A-1A Commitment Fee due but not paid on any prior Distribution Date plus (c) interest on any Class A-1A Commitment Fee Amount due but not paid on any prior Distribution Date which interest shall accrue at the applicable interest rate for the Class A-1A Notes.

“Class A-1A Commitment Period”: The period starting on and including the Closing Date and ending on the Commitment Period Termination Date.

“Class A-1A Noteholder”: Any Holder of Class A-1A Notes.

“Class B Coverage Tests”: The Class B Overcollateralization Test and the Class B Interest Coverage Test.

“Class B Interest Coverage Test”: On any Measurement Date occurring after the first Distribution Date and on which any Class B Notes remain outstanding, a test that is satisfied if the Class B Interest Coverage Ratio on such Measurement Date is equal to or greater than 120.00%.

“Class B Overcollateralization Ratio”: As of any Measurement Date, the number (expressed as a percentage) calculated by dividing (a) the Net Outstanding Portfolio Collateral Balance on such Measurement Date by (b) the sum of the Aggregate Outstanding Principal Amount of the Class A Notes plus the Aggregate Outstanding Principal Amount of the Class B Notes.

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“Class B Overcollateralization Test”: On any Measurement Date occurring on or after the Ramp-Up Completion Date on which any Class B Notes remain outstanding, a test that is satisfied if the Class B Overcollateralization Ratio on such Measurement Date is equal to or greater than 114.21%.

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

“Class C Interest Coverage Test”: On any Measurement Date occurring after the first Distribution Date and on which any Class C Notes remain outstanding, a test that is satisfied if the Class C Interest Coverage Ratio on such Measurement Date is equal to or greater than 115.00%.

“Class C Overcollateralization Ratio”: As of any Measurement Date, the number (expressed as a percentage) calculated by dividing (a) the Net Outstanding Portfolio Collateral Balance on such Measurement Date by (b) the sum of the Aggregate Outstanding Principal Amount of the Class A Notes plus the Aggregate Outstanding Principal Amount of the Class B Notes plus the Aggregate Outstanding Principal Amount of the Class C Notes.

“Class C Overcollateralization Test”: On any Measurement Date occurring on or after the Ramp-Up Completion Date on which any Class C Notes remain outstanding, a test that is satisfied if the Class C Overcollateralization Ratio on such Measurement Date is equal to or greater than 110.48%.

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

“Class D Interest Coverage Test”: On any Measurement Date occurring after the first Distribution Date and on which any Class D Notes remain outstanding, a test that is satisfied if the Class D Interest Coverage Ratio on such Measurement Date is equal to or greater than 113.00%.

“Class D Overcollateralization Ratio”: As of any Measurement Date, the number (expressed as a percentage) calculated by dividing (a) the Net Outstanding Portfolio Collateral Balance on such Measurement Date by (b) the sum of the Aggregate Outstanding Principal Amount of the Class A Notes plus the Aggregate Outstanding Principal Amount of the Class B Notes plus the Aggregate Outstanding Principal Amount of the Class C Notes plus the Aggregate Outstanding Principal Amount of the Class D Notes.

“Class D Overcollateralization Test”: On any Measurement Date occurring on or after the Ramp-Up Completion Date on which any Class D Notes remain outstanding, a test that is satisfied if the Class D Overcollateralization Ratio on such Measurement Date is equal to or greater than 109.65%.

“Class E Coverage Tests”: The Class E Overcollateralization Test and the Class E Interest Coverage Test.

“Class E Interest Coverage Test”: On any Measurement Date occurring after the first Distribution Date and on which any Class E Notes remain outstanding, a test that is satisfied if the Class E Interest Coverage Ratio on such Measurement Date is equal to or greater than 110.00%.

“Class E Overcollateralization Ratio”: As of any Measurement Date, the number (expressed as a percentage) calculated by dividing (a) the Net Outstanding Portfolio Collateral Balance on such Measurement Date by (b) the sum of the Aggregate Outstanding Principal Amount of the Class A Notes plus the Aggregate Outstanding Principal Amount of the Class B Notes plus the Aggregate Outstanding Principal Amount of the Class C Notes plus the Aggregate Outstanding Principal Amount of the Class D Notes plus the Aggregate Outstanding Principal Amount of the Class E Notes.

“Class E Overcollateralization Test”: On any Measurement Date occurring on or after the Ramp-Up Completion Date on which any Class E Notes remain outstanding, a test that is satisfied if the Class E Overcollateralization Ratio on such Measurement Date is equal to or greater than 107.86%.

“Class F Coverage Tests”: The Class F Overcollateralization Test and the Class F Interest Coverage Test.

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“Class F Interest Coverage Test”: On any Measurement Date occurring after the first Distribution Date and on which any Class F Notes remain outstanding, a test that is satisfied if the Class F Interest Coverage Ratio on such Measurement Date is equal to or greater than 105.00%.

“Class F Overcollateralization Ratio”: As of any Measurement Date, the number (expressed as a percentage) calculated by dividing (a) the Net Outstanding Portfolio Collateral Balance on such Measurement Date by (b) the sum of the Aggregate Outstanding Principal Amount of the Class A Notes plus the Aggregate Outstanding Principal Amount of the Class B Notes plus the Aggregate Outstanding Principal Amount of the Class C Notes plus the Aggregate Outstanding Principal Amount of the Class D Notes plus the Aggregate Outstanding Principal Amount of the Class E Notes plus the Aggregate Outstanding Principal Amount of the Class F Notes.

“Class F Overcollateralization Test”: On any Measurement Date occurring on or after the Ramp-Up Completion Date on which any Class F Notes remain outstanding, a test that is satisfied if the Class F Overcollateralization Ratio on such Measurement Date is equal to or greater than 104.16%.

“Class Scenario Loss Rate”: With respect to any Class of Notes rated by S&P, at any time, an estimate of the cumulative default rate for the Collateral Debt Securities consistent with S&P Rating of such Class of Notes on the Closing Date, determined by application of the S&P CDO Monitor at such time.

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

“Client” means, with respect to any specified Person, any Person or account to which the specified Person provides investment management services or investment advice.

“Collateral Administration Agreement”: The Collateral Administration Agreement dated as of January 18, 2007, between the Issuer, the Collateral Manager and the Collateral Administrator.

“Collateral Administrator”: The Bank of New York Trust Company, National Association, a limited purpose national banking association with trust powers, and its successors and permitted assigns.

“Collateral Management Agreement”: The Collateral Management Agreement, dated as of the Closing Date, between the Issuer and the Collateral Manager relating to the Notes and the Collateral, as amended, supplemented and otherwise modified and in effect from time to time.

“Collateral Management Fees”: Collectively, the Base Collateral Management Fee and the Subordinate Collateral Management Fee.

“Commitment Period Termination Date”: The earliest to occur of (i) July 11, 2007; (ii) the redemption of the Class A-1A Notes in full; (iii) the first date on which the Aggregate Undrawn Amount of the Class A-1A Notes has been reduced to zero; (iv) the date of the occurrence of certain bankruptcy or insolvency related Events of Default specified in the Indenture; (v) the sale, foreclosure or other disposition of the Collateral pursuant to Section 5.4 of the Indenture; or (vi) the satisfaction and discharge of the Indenture as provided therein; provided that, if a Class A-1A Noteholder has failed as of the Commitment Period Termination Date to make any advance required to be made by it pursuant to the applicable Class A-1A Note Purchase Agreement, such Class A-1A Noteholder shall remain obligated to make such advance notwithstanding that the Commitment Period Termination Date has occurred.

“Coverage Tests”: Collectively, the Class A Coverage Tests, the Class B Coverage Tests, the Class C Coverage Tests, the Class D Coverage Tests, the Class E Coverage Tests and the Class F Coverage Tests.

“Credit Risk Security”: Any Pledged Security that satisfies any of the following criteria: (a) so long as no rating of any Class of Senior Notes has been reduced or withdrawn by any Rating Agency, the Collateral Manager believes, using its commercially reasonable business judgment (as of the date of the Collateral Manager’s determination based upon currently available information) that such Pledged Security has a material risk (i) of

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declining in credit quality or (ii) with the passage of time, of becoming a Defaulted Security; or (b) if at the time of such determination, the rating of any Class of Senior Notes has been reduced or withdrawn by any Rating Agency, then with respect to such Pledged Security, any default or event of default under the related Underlying Instrument that will accelerate or will entitle the holder thereof, with the giving of notice or passage of time or both, to accelerate the maturity (whether or not enforcement of accelerated payment may be restricted by any third party consent or standstill provision) of all or a portion of the principal amount of such Pledged Security is imminent; provided that any such security shall be considered a Credit Risk Security only until such time as such default or event of default is no longer imminent.

“Current Pay Obligation”: Any Loan that is a Defaulted Security (a) as to which all prior cash interest and principal payments due were paid in cash and the Collateral Manager reasonably expects that the next interest payment due will be paid in cash, (b) that, if the obligor of such Loan is subject to a bankruptcy proceeding, a bankruptcy court has authorized the payment of interest due and payable on such Loan and (c) whose Market Value (which, for this purpose shall be calculated pursuant to clause (b) of the definition of Market Value) is at least (i) with respect to a Loan that has a Moody’s Rating of at least “Caa1”, 80% of its par value and (ii) with respect to a Loan that has a Moody’s Rating of “Caa2”, 85% of its par value (provided that the Aggregate Principal Balance of all such Loans that constitute “Current Pay Obligations” may not exceed 5% of the Aggregate Principal Balance of all Collateral Debt Securities).

If the Aggregate Principal Balance of Loans that would otherwise be Current Pay Obligations exceeds 5% of the Aggregate Principal Balance, one or more such Loans that would otherwise be Current Pay Obligations with an Aggregate Principal Balance equal to or greater than the amount of excess shall not be Current Pay Obligations. The Collateral Manager shall designate in writing to the Trustee the Loans that shall not be Current Pay Obligations pursuant to the preceding sentence, which for the avoidance of doubt shall be deemed to be Defaulted Securities.

For the avoidance of doubt, a Deferred Interest PIK Security will not be deemed to be a Current Pay Obligation for purposes of the Indenture.

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

“Defaulted Interest”: Any interest due and payable in respect of any Senior Note that is not punctually paid or duly provided for on the applicable Distribution Date or at Stated Maturity and which remains unpaid. Defaulted Interest will not include Class B Deferred Interest, Class C Deferred Interest, Class D Deferred Interest, Class E Deferred Interest or Class F Deferred Interest.

“Defaulted Premium”: Any Premium due and payable with respect to the Insured Notes that is not punctually paid or duly provided for on the applicable Distribution Date and that remains unpaid, including interest thereon at the Accrued Insurance Liabilities Interest Rate (as defined in the Insurance Agreement).

“Defaulted Security”: Any Pledged Security with respect to which (a) a payment default, other than deferred interest or deferred distribution permitted by the Underlying Instruments, has occurred and is continuing, (b) other than as set forth in clause (a), there has occurred and is continuing any default or event of default under the related Underlying Instrument which entitles the holders thereof, with the giving of notice or passage of time or both, to accelerate the maturity of all or a portion of the principal amount of such Pledged Security (whether or not enforcement of accelerated payment may be restricted by any third party consent or standstill provision), (c) any bankruptcy, insolvency or receivership proceeding has been initiated in connection with the issuer of such Collateral Debt Security or Eligible Security or there has been effected any distressed exchange or any other debt restructuring where the issuer or obligor of such Collateral Debt Security has offered the debt holders a new security or package of securities that does not meet the Collateral Debt Security Criteria, (d) the Collateral Manager knows the issuer thereof or obligor thereon is 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; provided that any such security shall be considered a Defaulted Security only until such time as the default or event of default has been cured or waived and such security otherwise satisfies the criteria for inclusion of securities in the Collateral described in the definition of “Collateral Debt Security” or “Eligible Investments,” as applicable to such security, (e) such Pledged Security has

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credit rating of “CC”, “D” or “SD” by S&P or S&P has withdrawn its rating on such Pledged Security, such Pledged Security has a Moody’s Rating of “Ca” or “C” by or such Pledged Security has credit rating of “CC” or lower by Fitch or (f) such Pledged Security is a Synthetic Security referencing a Reference Obligation that would, if the Reference Obligation were a Collateral Debt Security, be a Defaulted Security under any of clauses (b) through (f) above or with respect to which the Synthetic Security Counterparty has defaulted in the performance of any of its payment obligations under the Synthetic Security.

“Deferred Interest PIK Security”: A PIK Security with respect to which payment of interest either in whole or in part has been deferred or capitalized, but only until such time as payment of interest on such PIK Security has resumed and all current interest and deferred and capitalized interest (including interest thereon) has been paid in cash and such repayment is in accordance with the terms of the Underlying Instruments, regardless of any prior capitalization of such interest.

“Definitive Senior Note”: A certificated Senior Note in definitive, fully registered form without interest coupons.

“Deliverable Obligation”: A debt obligation or other security that is delivered to the Issuer upon the occurrence of certain “credit events” under a Synthetic Security that satisfies the definition of Collateral Debt Security at the time it is delivered to the Issuer, except that such debt obligation or other security may be a Credit Risk Security or a Defaulted Security at the time delivered to the Issuer; provided that notwithstanding any provision to the contrary contained herein, the Issuer may accept the delivery of a Deliverable Obligation that does not meet the foregoing requirements if (a) the terms of the related Synthetic Security otherwise satisfy the definition of “Deliverable Obligation” at the time it is purchased by or entered into by the Issuer and (b) it would be impractical or impossible for the Synthetic Security Counterparty to deliver a Deliverable Obligation that satisfies the requirements set forth in the definition of “Deliverable Obligation” and cash settlement is not permitted; and provided further, that in the event the Issuer accepts a Deliverable Obligation that does not meet the requirements of this definition (a “Substitute Deliverable Obligation”) because it is impractical or impossible for the Synthetic Security Counterparty to deliver a Deliverable Obligation meeting such requirements, the market value, as determined by the Collateral Manager, of the Substitute Deliverable Obligation must be at least as high as the Deliverable Obligation that could not be delivered. If any security shall be delivered to the Issuer other than in accordance with the requirements set forth in this paragraph, such security shall be deemed to be an Equity Security.

“Distribution Agent”: Merrill Lynch, in its capacity as Distribution Agent under the Class A-1A Note Purchase Agreements, together with its permitted successors and assigns.

“Due for Payment”: With respect to an Insured Amount, (a) scheduled interest on the Insured Notes when due and payable (after the expiration of any applicable or deemed grace period (after the satisfaction of any conditions precedent to the commencement of such grace period)) in accordance with the terms of the Indenture and (b) final payment of principal of the Insured Notes on the Distribution Date in October 2042 (in each of clauses (a) and (b), in accordance with the original terms of the Insured Notes when issued and without regard to any subsequent amendment or modification of the Insured Notes that has not been consented to in writing by the Insurer).

“EBITDA”: For any Real Estate Entity and its subsidiaries for any period, the consolidated net income for such Real Estate Entity and its subsidiaries for such period (determined in accordance with generally accepted accounting principles), plus (a) all amounts, if any, deducted in arriving at such consolidated net income amount for such period for interest expense and for federal, state and local income tax expense and for amortization of intangibles and for depreciation of property, plant and equipment, and (b) normalized gains or losses on sales in accordance with generally accepted accounting principles; provided that EBITDA shall exclude all amounts in respect of extraordinary items and nonrecurring expenses.

“Eligible Investments”: Any Dollar-denominated investment that is one or more of the following (and may include investments for which the Trustee, the Collateral Manager and/or one or more of their respective Affiliates provides services or receives compensation):

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(a) 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;

(b) demand and time deposits in, and certificates of deposit of, bankers acceptances issued by, or federal funds sold by any depository institution or trust company (including the Trustee) organized 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 “Aa3” by Moody’s, “AA-” by S&P and “AA-” by Fitch, in the case of debt obligations, or “P-1” by Moody, “A- 1+” by S&P and “F1+” by Fitch or better, in the case of commercial paper;

(c) registered 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 “Aa3” by Moody’s, “AA-” by S&P and “AA-” by Fitch at the time of such investment or contractual commitment providing for such investment;

(d) unleveraged repurchase obligations with respect to any security described in clause (a) above, entered into with a depository institution or trust company (acting as principal) described in clause (b) or entered into with a corporation (acting as principal) whose short-term debt has a credit rating of “P-1” by Moody’s, “A-1+” by S&P and “F1+” by Fitch or better 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 “Aa3” by Moody’s, “AA-” by S&P and “AA-” by Fitch or better 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;

(e) commercial paper or other short-term obligations having at the time of such investment a credit rating of “P-1” by Moody’s, “A-1+” by S&P and, “F1+” by Fitch or better and either are 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 Agency, must have at the time of such investment a long-term credit rating of “Aa3” by Moody’s, “AA-” by S&P and, “AA-” by Fitch;

(f) offshore money market funds with respect to any investments described in clauses (a) through (e) above having, at the time of such investment, a credit rating of not less than “Aaa” and “MR1+” by Moody’s, “AAAm” or “AAAm-g” by S&P and, “AA” by Fitch; and

(g) so long as The Bank of New York Trust Company, National Association’s short term debt obligations are rated at least “A-1” by S&P, “P-1” by Moody’s and “F1+” by Fitch, interest bearing demand cash accounts held at The Bank of New York Trust Company, National Association and, at any time that The Bank of New York Trust Company, National Association’s short term debt obligations are not rated at least “A-1” by S&P, “P-1” by Moody’s and “F1+” by Fitch, interest bearing demand cash accounts at any bank located in the United States, the short term debt obligations of which are rated at least “A-1” by S&P, “P-1” by Moody’s and “F1+” by Fitch; provided that (i) the aggregate amount of funds invested in interest bearing demand cash accounts held at any bank rated “A-1” by S&P shall not at any time exceed an amount equal to 20% of the aggregate Outstanding Principal Amount of the Class A-1 Notes at such time and (ii) no such investment shall have a maturity of greater than 30 days;

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provided that Eligible Investments purchased with funds on deposit in the Collection Account, the Discretionary Interest Shortfall Reserve Account or the Hedge Counterparty Collateral Account shall be held until maturity except as otherwise specifically provided in the Indenture and shall include only such obligations or securities as mature no later than the Business Day prior to the Distribution Date next succeeding the date of investment in such obligations or securities, unless such Eligible Investments are issued by the Trustee in its capacity as a banking institution, in which event such Eligible Investments may mature on such Distribution Date; and provided further that Eligible Investments (A) shall not have payments subject to foreign or United States withholding tax, (B) shall not be “mortgage-backed securities,” (C) shall not have a S&P Rating which contains a subscript “p,” “pi,” “q,” “r” or “t”, (D) shall not be subject to an offer, (E) shall not be purchased at a price in excess of the par amount thereof, (F) shall not be a security the repayment of which is subject to substantial non-credit related risk as determined in the sole judgment of the Collateral Manager and (G) shall not have all, or substantially all, of the remaining amounts payable thereunder consist of interest and not principal payments.

“Excess Caa Adjustment Amount”: As of any date of determination, an amount equal to the excess, if any, of:

(a) the Aggregate Principal Balance of all Caa Real Estate Entity Securities included in the Caa Excess, over

(b) the sum of the Market Values of all Caa Real Estate Entity Securities included in the Caa Excess.

“Fitch”: Fitch, Inc., Fitch Ratings Ltd. and their subsidiaries including Derivative Fitch, Inc. and Derivative Fitch Ltd. and any successor or successors thereto.

“Fitch Rating Factor”: With respect to any Collateral Debt Security on any Measurement Date, the number set forth in the table below opposite the Fitch Rating of such Collateral Debt Security:

Fitch Rating Fitch Rating Factor

AAA 0.19 AA+ 0.57 AA 0.89 AA- 1.15 A+ 1.65 A 1.85 A- 2.44

BBB+ 3.13 BBB 3.74 BBB- 7.26 BB+ 10.18 BB 13.53 BB- 18.46 B+ 22.84 B 27.67 B- 34.98

CCC+ 43.36 CCC 48.52 CC 77.00 C 95.00

DDD/D 100.00 NR 9999999

“Fitch Recovery Rate”: With respect to any Collateral Debt Security on any Determination Date, an amount

equal to the percentage for such Collateral Debt Security set forth in the Fitch Recovery Rate Matrix then in effect and published on Fitch’s website at www.fitchratings.com in the applicable row in such table below the Fitch Rating

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(or, in the case of a Defaulted Security, the Fitch Rating of such Collateral Debt Security immediately prior to default).

“Fitch Weighted Average Rating Factor”: As of any Measurement Date, the number determined by the Collateral Manager on behalf of the Issuer on any Measurement Date by dividing (a) the summation of the series of products obtained (i) for any Collateral Debt Security that is not a Defaulted Security or Deferred Interest PIK Security, by multiplying (A) the Principal Balance on such Measurement Date of each such Collateral Debt Security by (B) its respective Fitch Rating Factor on such Measurement Date and (ii) for any Deferred Interest PIK Security, by multiplying (A) the Applicable Recovery Rate for such Deferred Interest PIK Security, by (B) the Principal Balance on such Measurement Date of each such Deferred Interest PIK Security but not including any deferred interest by (C) its respective Fitch Rating Factor on such Measurement Date by (b) the sum of (i) the aggregate Principal Balance on such Measurement Date of all Collateral Debt Securities that are not Defaulted Securities or Deferred Interest PIK Securities plus (ii) the summation of the series of products obtained by multiplying (A) the Applicable Recovery Rate for each Deferred Interest PIK Security, by (B) the Principal Balance on such Measurement Date of such Deferred Interest PIK Security but not including any deferred interest, and rounding the result up to the nearest hundredth.

“Fixed Charge Coverage Ratio”: With respect to any Real Estate Entity, as of the last day of the preceding fiscal quarter determined (a) on a four quarter trailing basis, or (b) with respect to the preceding fiscal quarter, whichever is greater, the ratio of (i) EBITDA of such Real Estate Entity and its subsidiaries determined on a consolidated basis to (ii) the sum of (A) Interest Expense of such Real Estate Entity and its subsidiaries determined on a consolidated basis and (B) without duplication, for such Real Estate Entity and its subsidiaries, determined on a consolidated basis, the aggregate amount of dividends paid or payable with respect to Preferred Interests that are not Qualified Preferred Stock, during such period. For the purpose of this definition, EBITDA of any Real Estate Entity that has completed a formation transaction (i.e., an initial public offering or a recapitalization) within the preceding 18 months shall be adjusted in order to reflect net operating income on a fully ramped up basis.

“Fixed Rate Excess”: As of any date of determination, a fraction (expressed as a percentage) the numerator of which is the product of (a) the greater of zero and the excess of the Weighted Average Coupon for such date of determination over the minimum percentage necessary to pass the Weighted Average Coupon Test on such date of determination and (b) the aggregate Principal Balance of all fixed rate Collateral Debt Securities (excluding any Defaulted Securities) held by the Issuer as of such date of determination, and the denominator of which is the aggregate Principal Balance of all floating rate Collateral Debt Securities (excluding any Defaulted Securities) held by the Issuer as of such date of determination. In computing the Fixed Rate Excess on any date of determination, the Weighted Average Coupon for such date will be computed as if the Spread Excess were equal to zero.

“Fixed Rate Period”: The period from and including the Closing Date to but excluding the Fixed Rate Period Termination Date.

“Fixed Rate Period Termination Date”: The Distribution Date in July 2012.

“Form-Approved Synthetic Security”: A Synthetic Security (a) the Reference Obligation of which (or the relevant obligation(s) of the Reference Obligor), if it were a CMBS, CMBS CDO Security or Real Estate Entity Security issued by a Homebuilding Company, could be purchased by the Issuer without any required action by the Rating Agencies or which would not cause the Rating Condition not to be satisfied; and (b) the documentation of which conforms (but for the amount and timing of periodic payments, the name of the Reference Obligation and/or Reference Obligor, the notional amount, the premium, the effective date, the termination date or maturity and other similarly necessary changes) to a form previously approved and not subsequently revoked by the Rating Agencies for use in this transaction.

“Higher Semi-Annual Pay Quarter”: With respect to the two Due Periods (each, for purposes of this definition, a “Preceding Due Period”) preceding the Due Period in which an Additional Collateral Debt Security that is a Semi-Annual Pay Security is to be acquired, the second Due Period following the Preceding Due Period in which the aggregate amount of scheduled interest due to be paid in respect of Collateral Debt Securities which are Semi-Annual Pay Securities shall have been higher.

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“Higher Semi-Annual Pay Quarter Percentage”: With respect to any date on which an Additional Collateral Debt Security that is a Semi-Annual Pay Security is to be acquired, the aggregate Principal Balance of Semi-Annual Pay Securities (after giving effect to the acquisition of such Additional Collateral Debt Security) as to which scheduled interest is due to be paid in the Higher Semi-Annual Pay Quarter, expressed as a percentage of the aggregate Principal Balance of all Collateral Debt Securities.

“Indemnification Agreement”: The Indemnification Agreement, dated as of the Closing Date, among the Co-Issuers, the Insurer and the Initial Purchaser, as modified, amended or supplemented and in effect from time to time.

“Initial Investment Period”: The period beginning on the Closing Date and ending on the Ramp-Up Completion Date.

“Insurance Company General Account Investor”: An insurance company acting on behalf of its general account that satisfies each of the following requirements:

(a) less than 25% of the assets of the general account are “plan assets” for purposes of Title I of ERISA and Section 4975 of the Code;

(b) the insurance company is not a Controlling Person;

(c) without limiting the remedies for a breach of the foregoing assurances, the insurance company agrees that if, after its initial acquisition of the Deemed Equity Interest, at any time during any calendar quarter 25% or more of the assets of the general account are “plan assets” for purposes of Title I of ERISA or Section 4975 of the Code or it becomes a Controlling Person, then the insurance company will, in a manner consistent with the restrictions on transfer applicable to the relevant Notes, dispose of all Deemed Equity Interests held in its general account by the end of the next following calendar quarter unless an exemption or exception pursuant to Section 401(c) of ERISA and the related final regulations or under an exemption or regulation issued by the U.S. Department of Labor under ERISA exists such that its continued holding of such notes could not subject any person to liability on the basis of a claim that the assets of the Issuer are “plan assets”; and

(d) the insurance company’s purchase, holding and disposition of the Deemed Equity Interest will not constitute or result in a non-exempt transaction under Section 406 of ERISA or Section 4975 of the Code.

“Insurance Documents”: The Policy, the Insurance Agreement, the Indemnification Agreement and the premium letter entered into between the Co-Issuers and the Insurer on the Closing Date.

“Insured Amounts”: The following amounts owing on the Closing Date or which may thereafter be owing by the Issuer under the terms of the Indenture and with respect to the Insured Notes: (a) scheduled interest on the Insured Notes when due and payable (after the expiration of any applicable or deemed grace period (after the satisfaction of any conditions precedent to the commencement of such grace period)) in accordance with the terms of the Indenture and (b) final payment of principal of the Insured Notes on the Distribution Date in October 2042 in a principal amount not to exceed $100,000,000. “Insured Amounts” will not include, nor will coverage be provided under the Policy in respect of:

(i) any amounts due in respect of the Insured Notes attributable to any increase in interest rate, penalty or other sum payable by the Issuer by reason of any default under the Indenture or Event of Default in respect of the Insured Notes, or by reason of any deterioration of the creditworthiness of the Issuer;

(ii) any present or future taxes, withholding, deduction, assessment or other charge imposed by the United States, any other sovereign state, or any political subdivision or

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governmental or taxing authority thereof (including interest and penalties in respect of such taxes, withholding, deduction, assessment or other charge) with respect to any payment due under the Insured Notes or any payment due to the Issuer under any Collateral securing the Insured Notes;

(iii) any default, redemption or other make whole premium with respect to the Insured Notes;

(iv) the failure of the Trustee to make any disbursements required under the Indenture to any Holder or the failure of the Trustee to apply, disburse, transfer or direct any amounts actually paid by the Insurer in respect of Insured Amounts or other amounts or otherwise remit funds to any other party (including interest and penalties as a result of any such failure);

(v) in the case of the election by the Holders of 100% of the aggregate outstanding principal amount of the Insured Notes to receive less than 100% of the portion of the Redemption Price that would otherwise be payable to such Holders in connection with any redemption of the Insured Notes, the amount by which the Redemption Price exceeds such lesser amount to be received by such Holders;

(vi) any risk other than Nonpayment; or

(vii) any preference relating to clauses (i) through (vi) above.

“Insured Noteholder”: A Holder of Insured Notes.

“Insurer Default”: The occurrence and continuation of any one of the following events:

(a) the Insurer fails to make a payment required under the Policy in accordance with its terms;

(b) the Insurer (i) files any petition or commences any case or Proceeding under any provision or chapter of the Bankruptcy Law or any other similar federal or state law relating to the insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii) makes a general assignment for the benefit of its creditors, or (iii) has an order for relief entered against it under the Bankruptcy Law or any other similar federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization which is final and nonappealable; or

(c) a court of competent jurisdiction, the New York Department of Insurance or other competent regulatory authority enters a final and nonappealable order, judgment or decree (i) appointing a custodian, trustee, agent or receiver for the Insurer or for all or any material portion of its property or (ii) authorizing the taking of possession by a custodian, trustee, agent or receiver of the Insurer (or the taking of possession of all or any material portion of the property of the Insurer).

“Interest Expense”: For any Real Estate Entity and each of its subsidiaries, for any period, the aggregate of all cash interest expense with respect to all outstanding debt, as determined in accordance with generally accepted accounting principles for such period.

“Interest Proceeds”: With respect to any Due Period, the sum (without duplication) of: (a) all payments of interest (including cash payments in respect of interest that has previously been capitalized or deferred and cash payments in respect of interest on such capitalized or deferred interest) with respect to any Pledged Security (other than Eligible Investments made with funds on deposit in the Discretionary Interest Shortfall Reserve Account and interest on Semi-Annual Pay Securities transferred to the Semi-Annual Interest Reserve Account) received during such Due Period (including, without limitation, any amounts received in respect of accrued interest on Collateral Debt Securities purchased on the Closing Date), (b) the Reinvestment Income, if any, representing interest or other earnings on amounts deposited in the Collection Accounts which is received during the related Due Period, (c) the portion of any payments of interest received during the related Due Period on the Pledged Securities (other than

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Eligible Investments made with funds on deposit in the Discretionary Interest Shortfall Reserve Account) representing interest accrued prior to the date of purchase, (d) all amendments 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 purchase of Additional Collateral Debt Securities or in connection with Defaulted Securities), (e) all payments received pursuant to the Hedge Agreements (excluding any payments received by reason of an event of default or termination event that are required to be used for the purchase of one or more replacement Hedge Agreements) less any deferred premium payments payable by the Issuer under the Hedge Agreements during such Due Period, (f) all premiums (including call premiums from tender) received during such Due Period, (g) Sale Proceeds of any Pledged Security to the extent such Sale Proceeds were received as consideration for accrued interest on such Pledged Security; provided that Interest Proceeds shall exclude Sale Proceeds of any Defaulted Security to the extent such Sale Proceeds were received as consideration for accrued interest on such Defaulted Security; provided that Interest Proceeds shall exclude all amounts received in respect of this clause (g) to the extent such amounts are used during such Due Period to acquire Additional Collateral Debt Securities in accordance with the terms of the Indenture, (h) all funds received on or with respect to Defaulted Securities in excess of the par amount thereof, (i) with respect to the first Due Period, and if not otherwise used to acquire Additional Collateral Debt Securities in accordance with the Indenture, the second Due Period, all amounts on deposit in the Discretionary Interest Shortfall Reserve Account and any interest or other amounts received in respect to Eligible Investments made with funds on deposit in such account during each such Due Period and (j) all amounts on deposit in the Semi-Annual Interest Reserve Account that are transferred to the Collection Account for application as Interest Proceeds.

“Investment Company Event”: With respect to any Trust Preferred Securities, the receipt by the applicable Real Estate Entity and its subsidiary Trust Preferred Securities Issuer of an opinion of counsel experienced in such matters to the effect that, as a result of a change in law or regulation or written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that such Trust Preferred Securities Issuer is or, within 90 days of the date of such opinion will be, considered an “investment company” that is required to be registered under the 1940 Act, which change becomes effective or would become effective, as the case may be, on or after the date of original issuance of the related Corresponding Debentures.

“LIBOR Business Day”: A day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London.

“Liquidity Facility”: As to any Class A-1A Noteholder as of any date, a liquidity loan or asset purchase agreement in a form reasonably acceptable to the Collateral Manager (on behalf of the Issuer) and each Rating Agency pursuant to which the Liquidity Providers party thereto have committed (for the express benefit of the Class A-1A Noteholder, the Co-Issuers and the Trustee) to make loans to, or purchase interests in Class A-1A Notes from, such Holder in an aggregate principal amount at any one time outstanding equal to or greater than the aggregate unfunded Class A-1A Commitment with respect to Class A-1A Notes held by such Holder (which commitments are not scheduled to terminate, or which may be drawn in their entirety upon a failure to extend such commitments, prior to the Commitment Period Termination Date); provided that no Class A-1A Noteholder shall enter into any asset purchase agreement with respect to the Class A-1A Notes and such Holder’s Commitment that provides for any Liquidity Provider to purchase an interest in the Class A-1A Notes unless each such Liquidity Provider is an entity that is eligible to purchase the Class A-1A Notes held by the relevant Holder in accordance with the terms of the Indenture.

“Liquidity Provider”: One or more banks or other financial institutions providing a Liquidity Facility that meet the Rating Criteria and that are Qualified Purchasers that are Qualified Institutional Buyers.

“Lower Semi-Annual Pay Quarter”: With respect to the two Due Periods (each, for purposes of this definition, a “Preceding Due Period”) preceding the Due Period in which an Additional Collateral Debt Security that is a Semi-Annual Pay Security is to be acquired, the second Due Period following the Preceding Due Period in which the aggregate amount of scheduled interest due to be paid in respect of Collateral Debt Securities which are Semi-Annual Pay Securities shall have been lower.

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“Majority”: With respect to any Tranche, Tranches, Class or Classes of Notes, subject to the rights of the Insurer set forth in the next succeeding sentence, the Holders of more than 50% of the Aggregate Outstanding Principal Amount of the Notes of such Tranche, Tranches, Class or Classes, as the case may be. If the Insurer is the “Controlling Class”, then when used with respect to the Class A-1B Notes and the Controlling Class, the term “Majority” shall refer to the Insurer.

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

“Market Value”: On any Determination Date with respect to any Deferred Interest PIK Security or Defaulted Security (other than a Trust Preferred Security), at the option of the Collateral Manager, either (a) the price supplied to the Collateral Manager by Interactive Data Corporation, Mark-It Partners, Loan Pricing Corporation or another independent, nationally recognized pricing service, or (b) the average of three bid-side market values obtained from independent broker-dealers (at least one of which is not Merrill Lynch or an Affiliate thereof and none of which shall be the Collateral Manager or an Affiliate thereof) or, if three such bids are not available, the lower of two bid-side market values obtained by the Collateral Manager from independent broker/dealers (one of which may be Merrill Lynch or an Affiliate thereof and none of which shall be the Collateral Manager or an Affiliate thereof) or, if two such bid-side market values are not available, the bid-side market value obtained from one independent broker/dealer (which may be Merrill Lynch or an Affiliate thereof but which shall not be the Collateral Manager or an Affiliate thereof). If the Market Value of a Collateral Debt Security cannot be determined by application of either clauses (a) or (b), its Market Value shall be the lowest of (i) the product of the S&P Recovery Rate and the Principal Balance of such Collateral Debt Security, (ii) the product of the Moody’s Recovery Rate and the Principal Balance of such Collateral Debt Security and (iii) such lower amount as determined by the Collateral Manager based upon its reasonable judgment; provided that if the Market Value of any such Collateral Debt Security cannot be determined by application of either clauses (a) or (b) within 30 days, the Market Value will be zero.

“Master Trust Agreement”: The Master Trust Agreement dated as of January 18, 2007, as the same may be amended or supplemented from time to time, between the Issuer, as depositor, and the Underlying Trustee.

“Moody’s”: Moody’s Investors Service, Inc. and any successor thereto.

“Moody’s Default Probability Rating”: With respect to any Collateral Debt Security, as of any date of determination, is the rating determined in accordance with the following, in the following order of priority:

(a) with respect to a Moody’s Senior Secured Loan:

(i) if the Collateral Debt Security Obligor has a corporate family rating from Moody’s such corporate family rating;

(ii) if the preceding clause does not apply, the Moody’s Obligation Rating of such Collateral Debt Security;

(iii) if the preceding clauses do not apply, the Moody’s rating that is one rating subcategory above the current outstanding Assigned Moody’s Rating for a senior unsecured obligation of the Obligor of such Collateral Debt Security; and

(iv) if the preceding clauses do not apply, the Moody’s rating that is one rating subcategory above the Moody’s Equivalent Senior Unsecured Rating of such Collateral Debt Security;

(b) with respect to a Moody’s Non Senior Secured Loan:

(i) if the Obligor has a senior unsecured obligation with an Assigned Moody’s Rating, such rating; and

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(ii) if the preceding clause does not apply, the Moody’s Equivalent Senior Unsecured Rating of the Collateral Debt Security;

(c) with respect to CMBS and CMBS CDO Securities, the Assigned Moody’s Rating;

(d) if the preceding clauses do not apply, the published financial ratios will be used to determine the pool-wide default probability.

Notwithstanding the foregoing, if the Moody’s rating or ratings used to determine the Moody’s Default Probability Rating are on watch for downgrade or upgrade by Moody’s, such rating or ratings will be adjusted down one subcategory (if on watch for downgrade) or up one subcategory (if on watch for upgrade). If the debt obligation is a CMBS or CMBS CDO Security and is on watch for down grade or upgrade by Moody’s, such rating or ratings will be adjusted down two subcategories (if on watch for downgrade) or up two subcategories (if on watch for upgrade).

“Moody’s Equivalent Senior Unsecured Rating”: With respect to any Collateral Debt Security and the Obligor thereof as of any date of determination, is the rating determined in accordance with the following, in the following order of priority:

(a) if the Obligor has a senior unsecured obligation with an Assigned Moody’s Rating, such Assigned Moody’s Rating;

(b) if the preceding clause does not apply, the Moody’s “Issuer Rating” for the Obligor;

(c) if the preceding clauses do not apply, but the Obligor has a subordinated obligation with an Assigned Moody’s Rating, then:

(i) if such Assigned Moody’s Rating is a least “B3” (and, if rated “B3,” not on watch for downgrade), the Moody’s Equivalent Senior Unsecured Rating shall be the rating that is one rating subcategory higher than such Assigned Moody’s Rating; or

(ii) if such Assigned Moody’s Rating is less than “B3”(or rated “B3” and on watch for downgrade), the Moody’s Equivalent Senior Unsecured Rating shall be such Assigned Moody’s Rating;

(d) if the preceding clauses do not apply, but the Obligor has a senior secured obligation with an Assigned Moody’s Rating, then:

(i) if such Assigned Moody’s Rating is at least “Caa3” (and, if rated “Caa3,” not on watch for downgrade), then the Moody’s Equivalent Senior Unsecured Rating shall be the rating that is one subcategory below such Assigned Moody’s Rating; and

(ii) if such Assigned Moody’s Rating is less than “Caa3” (or rated “Caa3” and on watch for downgrade), then the Moody’s Equivalent Senior Unsecured Rating shall be “C”;

(e) if the preceding clauses do not apply, but such Obligor has a corporate family rating from Moody’s the Moody’s Equivalent Senior Unsecured Rating shall be one rating subcategory below such corporate family rating;

(f) if the preceding clauses do not apply, the published financial ratios will be used to determine the pool-wide default probability.

“Moody’s Implied Weighted Average Rating Factor”: As of any date of determination, the number obtained by summing the products obtained by multiplying the Principal Balance of each Collateral Debt Security by its Moody’s Rating Factor and dividing such sum by the aggregate Principal Balance of all such Collateral Debt

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Securities and rounding the result to the nearest whole number. For purposes of the Moody’s Implied Weighted Average Rating Factor, the Principal Balance of a Defaulted Security and Deferred Interest PIK Security will be excluded from the calculation thereof. Any review and determination of a Moody’s Implied Weighted Average Rating Factor equivalent shall in no way imply, and it shall not be required, that a Moody’s Rating has been or will be assigned to any issuer of the Collateral Debt Securities (as the assignment of such a rating would be based on a probability of default and an expected recovery rate which were not necessarily considered in connection with the determination of a Moody’s Implied Weighted Average Rating Factor equivalent).

“Moody’s Non Senior Secured Loan”: Any Collateral Debt Security that is not (i) a Moody’s Senior Secured Loan, nor (ii) a Collateral Debt Security described in clause (d) of the definition of Moody’s Senior Secured Loan.

“Moody’s Obligation Rating”: With respect to any Collateral Debt Security, as of any date of determination, is the rating determined in accordance with the following, in the following order of priority:

(a) with respect to a Moody’s Senior Secured Loan:

(i) if it has an Assigned Moody’s Rating, such Assigned Moody’s Rating; or

(ii) if the preceding clause does not apply, the rating that is one rating subcategory above the Moody’s Equivalent Senior Unsecured Rating; and

(b) with respect to a Moody’s Non Senior Secured Loan:

(i) if it has an Assigned Moody’s Rating, such Assigned Moody’s Rating; or

(ii) if the preceding clause does not apply, the Moody’s Equivalent Senior Unsecured Rating.

Notwithstanding the foregoing, if the Moody’s rating or ratings used to determine the Moody’s Default Probability Rating are on watch for downgrade or upgrade by Moody’s, such rating or ratings will be adjusted down one subcategory (if on watch for downgrade) or up one subcategory (if on watch for upgrade). If the debt obligation is a CMBS or CMBS CDO Security and is on watch for downgrade or upgrade by Moody’s, such rating or ratings will be adjusted down two subcategories (if on watch for downgrade) or up two subcategories (if on watch for upgrade).

“Moody’s Rating”: The Moody’s Default Probability Rating; provided that with respect to the Pledged Securities generally, if at any time Moody’s or any successor to it ceases to provide rating services, references to rating categories of Moody’s shall be deemed instead to be references to the equivalent categories of any other nationally recognized investment rating agency selected by the Issuer (with written notice to the Trustee), 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.

“Moody’s Rating Factor”: For purposes of computing the Moody’s Implied Weighted Average Rating Factor for each Collateral Debt Security, the number assigned in the table below to the applicable Moody’s Rating of such Collateral Debt Security. For purposes of the Moody’s Rating Factor, a Defaulted Security and Deferred Interest PIK Security will be excluded from the calculation thereof.

Moody’s Rating Moody’s Rating Factor

Aaa 1 Aa1 10 Aa2 20 Aa3 40 A1 70 A2 120

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Moody’s Rating Moody’s Rating Factor

A3 180 Baal 260 Baa2 360 Baa3 610 Ba1 940 Ba2 1350 Ba3 1766 B1 2220 B2 2720 B3 3490

Caa1 4770 Caa2 6500 Caa3 8070

Ca or lower 10000

“Moody’s Recovery Rate”: With respect to any Collateral Debt Security, an amount equal to the percentage for such Collateral Debt Security set forth in the recovery rate assumptions for Moody’s attached as a schedule to the Indenture; provided that Defaulted Securities which have been defaulted for more than 3 years shall be deemed to have a Moody’s Recovery Rate of 0%.

“Moody’s Senior Secured Loan”: (a) A Loan that:

(i) is not (and cannot by its terms become) subordinate in right of payment to any other obligation of the Obligor of the Loan;

(ii) is secured by a valid first priority perfected security interest or lien in, to or on specified collateral securing the Obligor’s obligations under the Loan; and

(iii) the value of the collateral securing the Loan together with other attributes of the Obligor (including, without limitation, its general financial condition, ability to generate cash flow available for debt service and other demands for that cash flow) is adequate (in the commercially reasonable judgment of the Collateral Manager) to repay the Loan in accordance with its terms and to repay all other loans of equal seniority secured by a first lien or security interest in the same collateral); or

(b) a Collateral Debt Security that:

(i) is not (and cannot by its terms become) subordinate in right of payment to any other obligation of the Obligor of the Collateral Debt Security, other than, with respect to a Collateral Debt Security described in clause (a) above, with respect to the liquidation of such Obligor or the collateral for such Collateral Debt Security;

(ii) is secured by a valid second priority perfected security interest or lien in, to or on specified collateral securing the Obligor’s obligations under the Collateral Debt Security; and

(iii) the value of the collateral securing the Collateral Debt Security together with other attributes of the Obligor (including, without limitation, its general financial condition, ability to generate cash flow available for debt service and other demands for that cash flow) is adequate (in the commercially reasonable judgment of the Collateral Manager) to repay the Collateral Debt Security in accordance with its terms and to repay all other obligations of equal seniority secured by a first or second lien or security interest in the same collateral); and

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(c) the Assigned Moody’s Rating is not lower than the Collateral Debt Security’s Moody’s Default Probability Rating; and

(d) the Collateral Debt Security is not:

(i) a Collateral Debt Security for which the security interest or lien (or the validity or effectiveness thereof) in substantially all of its collateral attaches, becomes effective, or otherwise “springs” into existence after the origination thereof; or

(ii) a type of loan that Moody’s has identified as having unusual terms and with respect to which its Moody’s Recovery Rate has been or is to be determined on a case-by-case basis.

“Net Outstanding Portfolio Collateral Balance”: On any Measurement Date, an amount equal to (a) the aggregate Principal Balance on such Measurement Date of all Collateral Debt Securities pledged to the Trustee pursuant to the Indenture (and not released in accordance with the terms of the Indenture), plus (b) the aggregate Principal Balance of all Principal Proceeds and Uninvested Proceeds held as cash and Eligible Investments purchased with Principal Proceeds or Uninvested Proceeds and any amount on deposit at such time in the Principal Collection Account or the Uninvested Proceeds Account, minus (c) the aggregate Principal Balance on such Measurement Date of all Collateral Debt Securities pledged to the Trustee pursuant to the Indenture (and not released in accordance with the terms of the Indenture) that are Defaulted Securities or Deferred Interest PIK Securities, plus (d) for each Defaulted Security or Deferred Interest PIK Security, the Calculation Amount with respect to such Defaulted Security or Deferred Interest PIK Security minus (e) the Excess Caa Adjustment Amount.

“Nonpayment”: With respect to an Insured Amount at a time when such Insured Amount is Due for Payment, that the funds, if any, available under the terms of the Indenture are insufficient for payment in full of such Insured Amount. In addition to and without limiting the foregoing, “Nonpayment” applies to any portion of any Insured Amount that has become a Preference Amount.

“Note Break-Even Default Rate”: With respect to any Class of Notes rated by S&P, at any time, the maximum percentage of defaults (as determined by the Collateral Manager through application of the S&P CDO Monitor) which the Collateral Debt Securities can sustain such that, after giving effect to S&P assumptions on recoveries and timing and to the Priority of Payments, will result in sufficient funds remaining for the ultimate payment of principal of and interest on such Class of Notes in full by its Stated Maturity and the timely payment of interest on such Class of Notes.

“Note Class Default Differential”: With respect to any Class of Notes rated by S&P, at any time, the rate calculated by subtracting the Class Scenario Loss Rate at such time from the Note Break-Even Default Rate for such Class of Notes at such time.

“Note Register”: The register kept by the Trustee in which the Trustee shall provide for the registration of the Notes and the registration of transfers of the Notes.

“Note Registrar”: The Trustee.

“Obligor”: The issuer of, or obligor under, a Collateral Debt Security.

“Outstanding”: With respect to the Notes or the Notes of a particular Tranche, as of any date of determination,

(a) all of the Notes theretofore authenticated and delivered under the Indenture or

(b) all of the Notes of such Tranche theretofore authenticated and delivered under the Indenture, except, in each case:

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(i) Notes theretofore canceled by a Note Registrar or delivered to a Note Registrar for cancellation;

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

(iii) Notes in exchange for, or in lieu of, other Notes which have been authenticated and delivered pursuant to the Indenture, unless proof satisfactory to the Trustee is presented that any such Notes are held by a protected purchaser (within the meaning of Section 8-303 of the UCC); and

(iv) Notes alleged to have been mutilated, destroyed, lost or stolen for which replacement Notes have been issued in accordance with the terms of the Indenture;

provided that in determining whether the Holders of the requisite Aggregate Outstanding Principal Amount have given any request, demand, authorization, direction, notice, consent or waiver hereunder (A) Notes beneficially owned by the Issuer shall be disregarded and deemed not to be outstanding and (B) Notes held by, or with respect to which discretionary voting rights are held by, the Collateral Manager, its Affiliates or any fund or account over which the Collateral Manager or any of its Affiliates acts as investment advisor or otherwise has discretionary voting rights shall be disregarded and deemed not to be outstanding with respect to any vote regarding (1) the removal of the Collateral Manager or (2) the replacement of the Collateral Manager with an affiliate of the Collateral Manager; provided that in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that the Trustee knows to be beneficially owned in the manner indicated in clauses (A) or (B) above shall be so disregarded. Notes owned in the manner indicated in clauses (A) or (B) above that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right to so act with respect to such Notes and that the pledgee is not the Issuer, the Co-Issuer, the Collateral Manager or any other obligor upon the Notes or any affiliate of the Issuer, the Co-Issuer, the Collateral Manager or such other obligor or an account with respect to which the Collateral Manager or an affiliate of the Collateral Manager acts as investment adviser or otherwise has discretionary voting rights. To the extent any Insured Notes have been paid with proceeds of the Policy and subject to the Indenture, such Insured Notes shall continue to remain Outstanding for purposes of the Indenture until the Insurer has been paid as subrogee thereunder and reimbursed pursuant to the Insurance Agreement, as evidenced by a written notice from the Insurer delivered to the Trustee, and the Insurer shall be deemed the Holder thereof, to the extent of any payments thereon made by the Insurer.

“Owner” means, with respect to any Person, any direct or indirect shareholder, member, partner or other equity or beneficial owner thereof.

“Paying Agent”: The paying agent appointed pursuant to the Indenture with respect to the Notes and, if and for so long as any Class of Notes is listed on the stock exchange which so requires, an institution to be appointed by the Issuer, or any successor thereto, as the paying agent with respect to the Notes in the country in which such stock exchange is located.

“PIK Security”: Any Collateral Debt Security that, pursuant to the terms of the related Underlying Instruments, permits the payment of interest thereon to be deferred or capitalized or to be made in the form of additional securities.

“Pledged Securities”: As of any date of determination, (a) the Collateral Debt Securities, the Eligible Investments and the Equity Securities that have been granted to the Trustee pursuant to the Indenture and (b) all non-cash proceeds thereof, in each case, to the extent not released from the lien of the Indenture in accordance with the terms thereof.

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“Posting Threshold”: With respect to any Hedge Counterparty, (a) for so long as any Notes rated by Moody’s are outstanding, (i) the unsecured, unguaranteed and otherwise unsupported long-term senior debt obligations of such Hedge Counterparty (or any affiliate of such Hedge Counterparty that unconditionally and absolutely guarantees the obligations of such Hedge Counterparty) are rated at least “A1” by Moody’s or if rated “A1” by Moody’s such rating is not on watch for possible downgrade and (ii) the unsecured, unguaranteed and otherwise unsupported short-term debt obligations of such Hedge Counterparty (or any affiliate of such Hedge Counterparty that unconditionally and absolutely guarantees the obligations of such Hedge Counterparty) are rated at least “P-1” by Moody’s or if rated “P-1” by Moody’s such rating is not on watch for possible downgrade, (b) for so long as any Notes rated by Moody’s are outstanding, if such Hedge Counterparty (or any affiliate of such Hedge Counterparty that unconditionally and absolutely guarantees the obligations of such Hedge Counterparty under any Hedge Agreement) does not have a short-term rating from Moody’s, the unsecured, unguaranteed and otherwise unsupported long-term senior debt obligations of such Hedge Counterparty (or any affiliate of such Hedge Counterparty that unconditionally and absolutely guarantees the obligations of such Hedge Counterparty under any Hedge Agreement) are rated at least “Aa3” by Moody’s or if rated “Aa3” by Moody’s such rating is not on watch for possible downgrade, (c) for so long as any Notes rated by S&P are outstanding, (i) the unsecured, unguaranteed and otherwise unsupported short-term debt obligations of such Hedge Counterparty (or any affiliate of such Hedge Counterparty that unconditionally and absolutely guarantees the obligations of such Hedge Counterparty) are rated at least “A-1” by S&P, and (ii) if such Hedge Counterparty (or any affiliate of such Hedge Counterparty that unconditionally and absolutely guarantees the obligations of such Hedge Counterparty) does not have a short-term rating from S&P, the unsecured, unguaranteed and otherwise unsupported long-term senior debt obligations of such Hedge Counterparty (or any affiliate of such Hedge Counterparty that unconditionally and absolutely guarantees the obligations of such Hedge Counterparty) are rated at least “A+” by S&P or (d) for so long as any Notes rated by Fitch are outstanding, (i) the unsecured, unguaranteed and otherwise unsupported long-term senior debt obligations of such Hedge Counterparty (or any affiliate of such Hedge Counterparty that unconditionally and absolutely guarantees the obligations of such Hedge Counterparty) are rated at least “A” by Fitch and (ii) the unsecured, unguaranteed and otherwise unsupported short-term debt obligations of such Hedge Counterparty (or any affiliate of such Hedge Counterparty that unconditionally and absolutely guarantees the obligations of such Hedge Counterparty) are rated at least “F-1” by Fitch.

“Preference Amount”: Any amount that is paid, credited, transferred or delivered to the Trustee under the terms of the Indenture in respect of any Insured Amount, which amount has been rescinded or recovered from or otherwise required to be returned or repaid by the Trustee as a result of insolvency proceedings by or against the Issuer.

“Preferred Interests”: With respect to any Real Estate Entity, equity interests issued by such Real Estate Entity that are entitled to a preference or priority over any other equity interests issued by such Real Estate Entity upon any distribution of such Real Estate Entity’s property and assets, whether by dividend or upon liquidation.

“Principal Balance”: With respect to any Pledged Security other than as described in the paragraph below, as of any date of determination, the outstanding principal amount of such Pledged Security; provided that

(a) the Principal Balance of a Collateral Debt Security received upon acceptance of an Offer for another Collateral Debt Security, which Offer expressly states that failure to accept such Offer may result in a default under the Underlying Instruments, shall be deemed to be the Calculation Amount of such other Collateral Debt Security until such time as Interest Proceeds and Principal Proceeds, as applicable, are received when due with respect to such other Collateral Debt Security;

(b) the Principal Balance of any Equity Security shall be deemed to be zero;

(c) the Principal Balance of any PIK Security (including any Deferred Interest PIK Security) shall be equal to the outstanding principal amount thereof (exclusive of any principal thereof representing capitalized interest);

(d) the Principal Balance of any Eligible Investment that does not pay cash interest on a current basis (other than a PIK Security) will be the accreted value of such Eligible Investment (as reported by the Collateral Manager to the Trustee on the date of purchase of such Eligible Investment);

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(e) the Principal Balance of any Pledged Securities in which the Trustee does not have a perfected security interest shall be deemed to be zero;

(f) the Principal Balance of a Synthetic Security (i) as to which a credit event has not occurred thereunder shall be the notional amount or the outstanding principal amount, as the case may be, specified in such Synthetic Security and (ii) as to which a credit event has occurred thereunder, for purposes of calculating (A) the Collateral Quality Tests, shall be zero; and (B) the amounts payable to the Trustee and the Collateral Manager, shall be the notional amount or the outstanding principal amount, as the case may be, specified in such Synthetic Security;

(g) solely for purposes of calculating the Net Outstanding Portfolio Collateral Balance, to the extent that any two of the three REIT/REOC Coverage Tests reported by the Collateral Manager are not satisfied as of the Measurement Date with respect to any Real Estate Entity (other than a Real Estate Entity (i) with a Moody’s Rating or (ii) the related Collateral Debt Security of which has a Moody’s Rating), the Principal Balance of the related Collateral Debt Security shall be deemed to be equal to 80% of the outstanding principal amount of such Collateral Debt Security; provided that with respect to the calculation of the Class D Overcollateralization Ratio, the Class E Overcollateralization Ratio and Class F Overcollateralization Ratio, each such amount shall be deemed to be equal to 100%;

(h) solely for purposes of calculating the Net Outstanding Portfolio Collateral Balance, to the extent any two Real Estate Entity Trigger Events occur with respect to any Real Estate Entity (other than a Real Estate Entity (i) with a Moody’s Rating or (ii) the related Collateral Debt Security of which has a Moody’s Rating), the Principal Balance of the related Collateral Debt Security shall be deemed to be equal to 50% of the outstanding principal amount of such Collateral Debt Security; provided that with respect to the calculation of the Class D Overcollateralization Ratio, the Class E Overcollateralization Ratio and Class F Overcollateralization Ratio, each such amount shall be deemed to be equal to 100%; provided further that if both clause (g) above and this clause (h) shall apply simultaneously, only this clause (h) shall be deemed to apply; and

(i) solely for purposes of calculating the Net Outstanding Portfolio Collateral Balance, with respect to any CMBS or CMBS CDO Security: the lesser of (a)(i) if the Moody’s Rating of such CMBS or CMBS CDO Security is “Caa1”, “Caa2” or “Caa3”, 50% of the outstanding principal amount of such CMBS or CMBS CDO Security, (ii) if the Moody’s Rating of such CMBS or CMBS CDO Security is “B1”, “B2” or “B3”, 80% of the outstanding principal amount of such CMBS or CMBS CDO Security and (iii) if the Moody’s Rating of such CMBS or CMBS CDO Security is “Ba1”, “Ba2” or “Ba3” and the aggregate principal amount of all CMBS and CMBS CDO Securities with such Moody’s Rating exceeds 10% of the aggregate Principal Balance of the Collateral Debt Securities, 90% of the outstanding principal amount of such CMBS or CMBS CDO Security; and (b)(i) if the S&P Rating of such CMBS or CMBS CDO Security is “CCC”, 70% of the outstanding principal amount of such CMBS or CMBS CDO Security, (ii) if the S&P Rating of such CMBS or CMBS CDO Security is “B”, 80% of the outstanding principal amount of such CMBS or CMBS CDO Security, and (iii) if the S&P Rating of such CMBS or CMBS CDO Security is “BB” and the aggregate principal amount of all CMBS and CMBS CDO Securities with such S&P Rating exceeds 5% of the aggregate Principal Balance of the Collateral Debt Securities, 90% of the outstanding principal amount of such CMBS or CMBS CDO Security.

“Principal Proceeds”: With respect to any Due Period, the sum (without duplication) of: (a) all principal payments (including amortization payments and prepayments) received during the related Due Period on the Pledged Securities (excluding Eligible Investments purchased with Interest Proceeds or funds on deposit in the Discretionary Interest Shortfall Reserve Account and excluding Uninvested Proceeds), (b) all funds received (including interest payments, but excluding for purposes of this clause (b), Sale Proceeds), up to the par amount thereof, on Defaulted Securities, (c) all Sale Proceeds; provided that Principal Proceeds shall exclude (i) Sale Proceeds of any sale of any Defaulted Security to the extent such Sale Proceeds are in excess of the par amount thereof and (ii) Sale Proceeds of any Pledged Security to the extent such Sale Proceeds were received as consideration for accrued interest on such Pledged Security; provided further that, notwithstanding the immediately

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preceding proviso, Principal Proceeds shall include Sale Proceeds of any Defaulted Security to the extent such Sale Proceeds were received as consideration for accrued interest on such Defaulted Security, (d) any proceeds resulting from the termination and liquidation of any Hedge Agreement received during such Due Period, to the extent such proceeds exceed the cost of entering into one or more replacement Hedge Agreements in accordance with the requirements set forth in the Indenture, in the event one or more replacement Hedge Agreements is entered into, (e) any amounts received in respect of accrued interest on Additional Collateral Debt Securities purchased with Principal Proceeds, (f) notwithstanding clause (a) above, any Uninvested Proceeds on deposit in the Payment Account following a Ratings Confirmation, (g) notwithstanding clause (a) above, any Uninvested Proceeds on deposit in the Payment Account following a Ramp-Up Ratings Confirmation Failure, to the extent such funds are in excess of the amount of Uninvested Proceeds that must be used to make payments in respect of principal on the Notes in order to obtain a Ratings Confirmation and (h) any other payments received with respect to the Collateral and not included in Interest Proceeds; provided that (i) all distributions on the Synthetic Securities will be remitted to the Synthetic Security Collateral Account and (ii) Principal Proceeds shall exclude amounts received in respect of clause (c) above and amounts in the Discretionary Interest Shortfall Reserve Account to the extent such amounts are used during such Due Period to acquire Additional Collateral Debt Securities in accordance with the Indenture.

“Qualified Preferred Stock”: Any Preferred Interest of the related Real Estate Entity in respect of which no dividends thereon (other than dividends payable solely in kind) shall be required to be paid at any time or to the extent that such payment would be prohibited by the terms of any credit agreement, and that is not redeemable prior to the tenth anniversary of the effective date under such credit agreement under any circumstance.

“Quarterly Asset Amount”: With respect to any Distribution Date, an amount equal to (a) the aggregate Principal Balance of all Pledged Securities, plus (b) the sum of (i) all Principal Proceeds and Uninvested Proceeds held as cash and (ii) the aggregate outstanding principal amount of all Eligible Investments purchased with Principal Proceeds or Uninvested Proceeds and any amount on deposit at such time in the Principal Collection Account or the Uninvested Proceeds Account, in each case, on the first day of the related Due Period or, in the case of the first Due Period, on the Closing Date.

“Ramp-Up Completion Date”: The day that is the earlier of (a) 174 days following the Closing Date and (b) the day on which the aggregate par amount of the Collateral Debt Securities held by the Issuer is at least equal to the Aggregate Ramp-Up Par Amount; provided that for the avoidance of doubt, if the Issuer acquires Collateral Debt Securities on the Closing Date with an aggregate principal amount at least equal to the Aggregate Ramp-Up Par Amount, the Closing Date will be deemed to be the Ramp-Up Completion Date.

“Rating Condition”: With respect to any action taken or proposed to be taken under the Indenture, or under any transaction document or any other circumstance specified in the Indenture, a condition that is satisfied when each Rating Agency other than Fitch (or, if one or more Rating Agencies (other than Fitch) are specified, each such Rating Agency) has confirmed in writing to the Issuer, the Trustee, each Hedge Counterparty and the Collateral Manager that such action or circumstance, will not result in the withdrawal, reduction or other adverse action with respect to its then-current rating (including any private or confidential rating) of any Class of Notes (in the case of the Class A-1B Notes, without giving effect to the Policy); provided that, in order for the Rating Condition to be satisfied with respect to any action or circumstance, within 30 days after the Issuer (or any other party on behalf of the Issuer) provides notice to any Rating Agency of any such action, circumstance, or proposed action, the Issuer shall deliver or cause to be delivered to Fitch a written notice of such action, circumstance, or proposed action.

“Rating Criteria”: The criteria that will be satisfied on any date with respect to any Holder of Class A-1A Notes if (a) the short-term debt, deposit or similar obligations of such Holder, or an affiliate of such Holder that unconditionally and absolutely guarantees (with such form of guarantee satisfying S&P’s then-published criteria with respect to guarantees) the obligations of such Holder, are on such date rated “A-1” by S&P, “P-1” by Moody’s and “F1” by Fitch or the long-term debt obligations of such Holder, or an affiliate of such Holder that unconditionally and absolutely guarantees (with such form of guarantee satisfying S&P’s then-published criteria with respect to guarantees) the obligations of such Holder, are on such date rated at least “AAA” by S&P, “Aaa” by Moody’s and “AAA” by Fitch or (b) such Holder is then entitled under a Liquidity Facility to borrow loans from, or sell Class A-1A Notes to, one or more Liquidity Providers; provided that the short-term debt, deposit or similar obligations of each such Liquidity Provider are rated at least “A-1” by S&P, “P-1” by Moody’s and “F1” by Fitch.

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“Ratings Threshold”: With respect to any Hedge Counterparty, (a) for so long as any Notes rated by S&P are outstanding, the unsecured, unguaranteed and otherwise unsupported short-term debt obligations of any Hedge Counterparty (or any affiliate of such Hedge Counterparty that unconditionally and absolutely guarantees the obligations of such Hedge Counterparty) are rated at least “A-3” by S&P, or if such Hedge Counterparty does not have a short-term debt rating from S&P, the unsecured, unguaranteed and otherwise unsupported long-term senior debt obligations of such Hedge Counterparty (or any affiliate of such Hedge Counterparty that unconditionally and absolutely guarantees the obligations of such Hedge Counterparty under any Hedge Agreement) are rated at least “BBB-” by S&P, (b) for so long as any Notes rated by Moody’s are outstanding (i) the unsecured, unguaranteed and otherwise unsupported long-term senior debt obligations of such Hedge Counterparty (or any affiliate of such Hedge Counterparty that unconditionally and absolutely guarantees the obligations of such Hedge Counterparty) are rated at least “A3” by Moody’s; provided that the Ratings Threshold shall not be satisfied if such obligations are rated “A3” by Moody’s and such rating is on watch for possible downgrade, or (ii) the unsecured, unguaranteed and otherwise unsupported short-term debt obligations of such Hedge Counterparty (or any affiliate of such Hedge Counterparty that unconditionally and absolutely guarantees the obligations of such Hedge Counterparty) are rated at least “P-2” by Moody’s; provided that the Ratings Threshold shall not be satisfied if such obligations are rated “P-2” by Moody’s and such rating is on watch for possible downgrade and (c) for so long as any Notes rated by Fitch are outstanding, (i) the unsecured, unguaranteed and otherwise unsupported long-term senior debt obligations of such Hedge Counterparty (or any affiliate of such Hedge Counterparty that unconditionally and absolutely guarantees the obligations of such Hedge Counterparty) are rated at least “A” by Fitch or (ii) the unsecured, unguaranteed and otherwise unsupported short-term debt obligations of such Hedge Counterparty (or such affiliate) are rated at least “F1” by Fitch. For the purpose of this definition, no direct or indirect recourse against one or more shareholders of any Hedge Counterparty (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 such Hedge Counterparty.

“Real Estate Entity Indenture”: With respect to each Corresponding Debenture, the indenture between the related Real Estate Entity and the trustee with respect thereto, under which such Corresponding Debenture was issued.

“Real Estate Entity Trigger Event”: With respect to any Real Estate Entity, the occurrence of any of the following events, as determined by the Collateral Manager:

(a) in connection with any Real Estate Entity that is a REIT or a REOC, the failure by such REIT or REOC to pay dividends on its common stock for two consecutive calendar quarters so long as such distribution is required for purposes of satisfying Sections 856 through 860 (or any successor sections thereto) of the Code;

(b) the failure to maintain a Fixed Charge Coverage Ratio of 1:1 or more as of each Measurement Date; and

(c) the failure to cure any monetary default with respect to any indebtedness owed by the related Real Estate Entity within 30 days of the occurrence of the same.

“Reference Banks”: The four major banks in the London interbank market, selected by the Calculation Agent.

“Reference Obligation”: A debt security or an obligation upon which a Synthetic Security is based, provided that such debt security or other obligation:

(a) is not itself a Synthetic Security;

(b) (i) satisfies (and, if owned by the Issuer, would satisfy) the Collateral Debt Security Criteria (except for clauses (d), (g), (h), (i), (n), (o) or (q) of the definition thereof) or (ii) the Issuer has received an opinion of tax counsel of nationally recognized standing in the United States experienced in such matters (or, in the case of such debt security or other obligation issued by a

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non-U.S. obligor, other tax counsel admitted in such jurisdiction of nationally recognized standing in such jurisdiction experienced in such matters) to the effect that the purchase or entering into of a Synthetic Security based upon such debt security or other obligation (A) will not cause the Issuer to be subject to any United States federal (or such other applicable jurisdiction) withholding or income tax and (B) will not cause any beneficial owner of Notes to be treated as having sold or exchanged its Notes in a taxable transaction for the United States federal (or such other applicable jurisdiction) withholding or income tax with respect to the Notes solely as a result of owning such Notes;

(c) is not an Equity Interest;

(d) is not denominated in a currency other than U.S. Dollars; and

(e) is CMBS, a CMBS CDO Security or a Real Estate Entity Security issued by a Homebuilding Company.

“Reference Obligor”: An obligor of the Reference Obligation in accordance with the terms of the applicable Synthetic Security.

“Reg Y Institution”: Any Subordinated Noteholder that is, or is controlled by a person that is, subject to the provisions of Regulation Y of the Board of Governors of the Federal Reserve Systems of the United States or any successor to such regulation, but excludes, in any event, (a) any “qualifying foreign banking organization” within the meaning of Regulation Y of the Board of Governors of the Federal Reserve Systems (12 C.F.R. Section 211.23) that has booked its investment in the Subordinated Notes outside the United States and (b) any financial holding company or subsidiary of a financial holding company authorized to engage in merchant banking activities pursuant to Section 4(k)(4)(H) of the Bank Holding Company Act of 1956, as amended.

“Reinvestment Designation”: A designation that shall remain in effect with respect to Permitted Sale Proceeds and Permitted Principal Proceeds and each Distribution Date during the Reinvestment Period unless the Collateral Manager shall deliver to the Trustee on or prior to the related Determination Date written notice that Permitted Sale Proceeds and Permitted Principal Proceeds shall be applied as available Principal Proceeds in accordance with the Priority of Payments. Subsequent to such notice, on or prior to any Determination Date during the Reinvestment Period (other than the last such Determination Date during the Reinvestment Period), the Collateral Manager may deliver written notice to Trustee that the Reinvestment Designation shall be reinstated. Any Permitted Sale Proceeds and Permitted Principal Proceeds not applied in accordance with the Priority of Payments due to a Reinvestment Designation may be reinvested by the Issuer in accordance with the provisions described herein under “Security for the Senior Notes—Acquisition of Collateral Debt Securities after the Closing Date.”

“Reinvestment Income”: Any interest or other earnings on Eligible Investments in the Collection Accounts, including any amount representing the accreted portion of a discount from the face amount of an Eligible Investment and all payments of principal, including prepayments, on Eligible Investments purchased with amounts from the Interest Collection Account.

“REIT/REOC Coverage Tests”: The REIT/REOC Interest Coverage Test, the Total Debt to Total Capitalization Test and the Tangible Net Worth Test.

“REIT/REOC Interest Coverage Ratio”: As determined (a) on a four quarter trailing basis or (b) with respect to the preceding fiscal quarter, whichever is greater, the ratio of (i) EBITDA of the related Real Estate Entity and its subsidiaries determined on a consolidated basis to (ii) Interest Expense of such Real Estate Entity and its subsidiaries determined on a consolidated basis during such period, as determined by the Collateral Manager.

“REIT/REOC Interest Coverage Test”: A test that is satisfied on any Measurement Date occurring on or after the Ramp-Up Completion Date if the REIT/REOC Interest Coverage Ratio, determined as of the last day of the preceding fiscal quarter, is equal to or greater than (a) 1.5:1 with respect to each Real Estate Entity that is an equity

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REIT or equity REOC and (b) 1.35:1 with respect to Real Estate Entities that are mortgage REITs or mortgage REOCs.

“Related Documents”: Collectively, the Insurance Documents, the Indenture, the Notes, the Collateral Management Agreement, the Collateral Administration Agreement, the Administration Agreement, the Purchase and Placement Agency Agreement and, without duplication, any other agreement executed by the Issuer or the Co-Issuer in connection with the transactions contemplated by any of the foregoing.

“Related Persons” means, with respect to any Person, the Owners, subsidiaries, directors, officers, employees, agents and professional advisors thereof.

“Restricted Senior Note”: A Restricted Co-Issued Note or Restricted Class F Note.

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

“S&P CDO Monitor Test”: A test that is satisfied on the Ramp-Up Completion Date if after giving effect to the purchases of Collateral Debt Securities after the Closing Date but on or prior to such Ramp-Up Completion Date, and on any Measurement Date thereafter if after giving effect to the purchases of Collateral Debt Securities after the Ramp-Up Completion Date, the Note Class Default Differential of the Collateral Debt Securities is positive or if the Note Class Default Differential of the Collateral Debt Securities is negative prior to giving effect to such purchases, the extent of compliance is improved after giving effect to the purchases of such Collateral Debt Securities.

“S&P Rating”: The rating by S&P of any Collateral Debt Security determined as follows:

(a) For any Collateral Debt Security other than Trust Preferred Securities, CMBS or CMBS CDO Securities, determined as follows:

(i) (A) if there is an issuer credit rating of the issuer of such Collateral Debt Security by S&P as published by S&P, or the guarantor which unconditionally and irrevocably guarantees such Collateral Debt Security then the S&P Rating shall be such rating (regardless of whether there is a published rating by S&P on the Collateral Debt Securities of such issuer held by the Issuer) or (B) if there is no issuer credit rating of the issuer by S&P but (1) if there is a senior unsecured rating on any obligation or security of the issuer, the S&P Rating of such Collateral Debt Security shall equal such rating; (2) if there is a senior secured rating on any obligation or security of the issuer, then the S&P Rating of such Collateral Debt Security shall be one sub-category below such rating; and (3) if there is a subordinated rating on any obligation or security of the issuer, then the S&P Rating of such Collateral Debt Security shall be one sub-category above such rating if such rating is “BB+” or lower, and shall be two sub-categories above such rating if such rating is higher than “BB+”;

(ii) with respect to any Collateral Debt Security that is a Synthetic Security, the S&P Rating shall be the rating assigned thereto by S&P in connection with the acquisition thereof by the Issuer upon request of the Issuer or the Collateral Manager (or, in the case of a Form-Approved Synthetic Security, shall be the lower of the S&P Rating of the related Reference Obligation and the rating assigned by S&P to the Synthetic Security Counterparty);

(iii) if there is not a rating by S&P on the issuer or on an obligation of the issuer, then the S&P Rating may be determined pursuant to clauses (A) through (C) below:

(A) if the Collateral Debt Security is publicly rated by Moody’s, then the S&P Rating will be based upon such Moody’s Rating except that the S&P Rating of such obligation will be (1) one sub-category below the S&P equivalent of the

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Moody’s Rating if such Moody’s Rating is “Baa3” or higher and (2) two sub-categories below the S&P equivalent of the Moody’s Rating if such Moody’s rating is “Ba1” or lower; provided that such Moody’s Rating is not determined in accordance with a ratings estimate;

(B) the Issuer or the Collateral Manager on behalf of the Issuer may apply to S&P for a credit estimate which shall be its S&P Rating; provided that for a period of up to forty five (45) days from the date of such application pending receipt from S&P of such estimate, such Collateral Debt Security shall have an S&P Rating of “B-” if the Collateral Manager certifies to the Trustee that it believes that such estimate will be at least “B-”; or

(C) with respect to a Collateral Debt Security that is not a Defaulted Security, the S&P Rating of such Collateral Debt Security will at the election of the Issuer (at the direction of the Collateral Manager) be “CCC-”.

(b) For Trust Preferred Securities, CMBS or CMBS CDO Securities, determined as follows:

(i) if such Collateral Debt Security is rated either publicly or privately (with appropriate consents) by S&P, the S&P Rating shall be such rating,

(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, or

(iii) otherwise, the rating thereof determined in accordance with Schedule G.

“S&P Recovery Rate”: With respect to any Collateral Debt Security on any Determination Date, an amount equal to the percentage for such Collateral Debt Security set forth in the S&P Recovery Rate Matrix attached as a schedule to the Indenture.

“Sale Proceeds”: All proceeds received from the redemption, call, sale or other disposition of any Collateral Debt Security in accordance with the terms of the Indenture and the Collateral Management Agreement, net of any reasonable amounts expended by the Collateral Administrator or the Trustee in connection with such redemption, call, sale or other disposition; provided that for purposes of any Auction Call Redemption, Optional Redemption or Tax Redemption, the term “Sale Proceeds” will mean all proceeds received from the redemption, call, sale or other disposition of any Collateral Debt Security net of any reasonable amounts expended by the Collateral Administrator or the Trustee in connection with such redemption, call, sale or other disposition.

“Senior Noteholder”: A Holder of Senior Notes.

“Series Trust Agreement”: A Series Trust Agreement as defined in the Master Trust Agreement.

“Spread Excess”: As of any date of determination, a fraction (expressed as a percentage) the numerator of which is the product of (a) the greater of zero and the excess of the Weighted Average Spread for such date of determination over the minimum percentage necessary to pass the Weighted Average Spread Test on such date of determination and (b) the aggregate Principal Balance of all floating rate Collateral Debt Securities (excluding any Defaulted Securities) held by the Issuer as of such date of determination, and the denominator of which is the aggregate Principal Balance of all fixed rate Collateral Debt Securities (excluding any Defaulted Securities) held by the Issuer as of such date of determination. In computing the Spread Excess on any date of determination, the Weighted Average Spread for such date will be computed as if the Fixed Rate Excess were equal to zero.

“Subordinated Noteholder”: A Holder of Subordinated Notes.

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“Synthetic Security”: Any derivative financial instrument purchased or entered into by the Issuer with or from a Synthetic Security Counterparty, which may contain:

(a) a maturity, interest rate, currency and other non-credit characteristics and recovery rates that may be different from that of one or more Reference Obligations (or the relevant obligation(s) of one or more Reference Obligors) to which the credit risk of the Synthetic Security relates; or

(b) terms that require the Issuer to make payments to a Synthetic Security Counterparty upon the occurrence of a floating amount event, a credit event, an event of default or a termination event (each as defined in such Synthetic Security);

provided that:

(i) the Issuer shall at no time during any taxable year of the Issuer hold a Synthetic Security that is treated as insurance or a financial guarantee for tax or regulatory purposes, where the Issuer is the seller of insurance or a financial guarantor, as the case may be, unless, the Issuer has obtained an opinion or advice of tax counsel of nationally recognized standing in the United States experienced in such matters to the effect that the acquisition, disposition or ownership by the issuer of such Synthetic Security will not cause the Issuer to be treated as engaged in a United States trade or business or subject to United States income tax on a net basis;

(ii) each Synthetic Security shall provide that no Deliverable Obligation may be delivered to the Issuer in settlement of the Synthetic Security if delivery thereof to the Issuer or transfer thereof by the Issuer to a third party would require or cause the Issuer to assume, or to subject the Issuer to, any obligation or liability (other than immaterial, nonpayment obligations);

(iii) each Synthetic Security contains appropriate limited recourse and non-petition provisions (to the extent that the Issuer has contractual payment or other obligations to the Synthetic Security Counterparty) equivalent (mutatis mutandis) to those contained in the Indenture;

(iv) each Rating Agency may revoke its consent to the form of documentation underlying a Form-Approved Synthetic Security upon 30 days prior written notice (and which revocation shall only take effect prospectively and not retroactively with respect to any Form-Approved Synthetic Securities then included in the Collateral Debt Securities); and

(v) unless the Synthetic Security is a Form-Approved Synthetic Security, the Rating Condition shall have been satisfied; provided that:

(A) a Synthetic Security shall not be used as a means of making future advances to a Synthetic Security Counterparty;

(B) each Synthetic Security that is a credit default swap shall provide that upon the occurrence of a credit event thereunder, such Synthetic Security may be settled only through a physical settlement of a Deliverable Obligation to the Issuer and not in cash; and

(C) each Synthetic Security and any Reference Obligation relating thereto, and all payment obligations of the Issuer and any counterparty or issuer of such Synthetic Security, shall be denominated in U.S. dollars.

“Synthetic Security Collateral”: Collateral required to be pledged to a Synthetic Security Counterparty as collateral pursuant to the terms of a Synthetic Security that either (a) meets the definition of Eligible Investments or (b) the Rating Condition is satisfied with respect to S&P for such collateral.

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“Synthetic Security Counterparty”: An entity required to make payments on a Synthetic Security pursuant to the terms of such Synthetic Security or any guarantee thereof to the extent that a Reference Obligor makes payments on a related Reference Obligation, (a) which counterparty, or the long-term senior unsecured debt of such counterparty (or its secured debt if such counterparty is a trust and its debt is secured by a reference obligation), shall individually and, together with all other Synthetic Security Counterparties, in the aggregate satisfy the required debt ratings set forth in the Indenture, and (b) with respect to which the Rating Condition is satisfied.

“Tangible Net Worth”: The total amount of assets of a REIT or REOC and its subsidiaries on a consolidated basis, less (a) intangible assets and (b) total liabilities of such REIT or REOC and its subsidiaries, all as reflected in the balance sheet of such REIT or REOC and its subsidiaries as of the end of the fiscal quarter immediately preceding such date, as determined by the Collateral Manager.

“Tangible Net Worth Test”: A test that is satisfied with respect to any REIT or REOC on any Measurement Date occurring on or after the Ramp-Up Completion Date if the Tangible Net Worth of such REIT or REOC and its subsidiaries on a consolidated basis is equal to or greater than $75,000,000.

“Tax Event”: The occurrence of (a) any obligor, paying agent or Hedge Counterparty is required to deduct or withhold from any payment under any Collateral Debt Security or Hedge Agreement to the Issuer or under any Corresponding Debenture for or on account of any tax for whatever reason, whether or not as a result of any change in law or interpretation, and the related obligor, paying agent or 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 occurred, (b) a net income, profits or similar tax is imposed on any Trust Preferred Securities Issuer or (c) a net income, profits or similar tax is imposed on the Issuer.

“Tax Materiality Condition”: A condition that will be satisfied during any 12-month period if the sum of (a) the aggregate amount deducted or withheld during such 12-month period for or on account of any tax by all obligors, paying agents or Hedge Counterparties from payments to the Issuer under any Collateral Debt Security or Hedge Agreement or under any Corresponding Debenture (net of any gross-up payment made with respect thereto), (b) the aggregate amount of any net income, profits or similar tax imposed on the Issuer during such 12-month period and (c) the aggregate reductions in amounts paid by a Trust Preferred Securities Issuer to the Issuer as a consequence of the Tax Event described in clause (b) of the definition thereof during such 12-month period exceeds $2,000,000.

“Total Capitalization”: With respect to any Real Estate Entity and its subsidiaries on a consolidated basis, as of the last day of the preceding fiscal quarter of such Real Estate Entity and its subsidiaries, the sum of: (a) the Total Debt as of such day plus (b) the greater of (i) the net worth of such Real Estate Entity (on a consolidated basis) as of such day or (ii) the product of (A) the total number of common shares issued and outstanding and (B) the closing price per share as of such day plus (c) without duplication of clause (b), the sum of minority interests in other Persons held by such Real Estate Entity (on a consolidated basis) plus (d) without duplication of clause (b), Preferred Interests as of such day.

“Total Debt”: With respect to any REIT or REOC and its subsidiaries on a consolidated basis, as of the last day of the preceding fiscal quarter of such REIT or REOC and its subsidiaries, the aggregate outstanding principal amount of debt of such REIT or REOC (on a consolidated basis) as of such day.

“Total Debt to Total Capitalization Ratio”: As of the last day of the preceding fiscal quarter of the related Real Estate Entity, the ratio (expressed as a decimal) of: (a) the Total Debt of such Real Estate Entity as of such day to (b) the Total Capitalization of such Real Estate Entity as of such day, as reported by the Collateral Manager.

“Total Debt to Total Capitalization Test”: A test that is satisfied on any Measurement Date occurring on or after the Ramp-Up Completion Date if the Total Debt to Total Capitalization Ratio is equal to or less than (a) 75% with respect to each Real Estate Entity that is an equity REIT or equity REOC and (b) 95% with respect to Real Estate Entities that are mortgage REITs or mortgage REOCs.

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“Transfer Agent”: Initially, the Trustee, and thereafter the person or persons authorized by the Issuer to exchange or register the transfer of Notes.

“Trust Preferred Securities Special Event”: With respect to any Trust Preferred Securities, a Trust Preferred Securities Tax Event or an Investment Company Event applicable to such Trust Preferred Securities.

“Trust Preferred Securities Tax Event”: With respect to any Trust Preferred Securities, the receipt by the applicable Real Estate Entity and its subsidiary Trust Preferred Securities Issuer of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement (including any private letter ruling, technical advice memorandum, regulatory procedure, notice or announcement (an “Administrative Action”)) or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving such Real Estate Entity or such Trust Preferred Securities Issuer and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the related Corresponding Debentures, there is more than an insubstantial risk that: (a) such Trust Preferred Securities Issuer is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on such Corresponding Debentures; (b) interest payable by such Real Estate Entity on such Corresponding Debentures is not, or within 90 days of the date of such opinion, will not be, deductible by such Real Estate Entity, in whole or in part, for United States federal income tax purposes; or (c) such Trust Preferred Securities Issuer is, or will be within 90 days of the date of such opinion, subject to or otherwise required to pay, or required to withhold from distributions to holders of such Trust Preferred Securities, more than a de minimis amount of other taxes (including withholding taxes), duties, assessments or other governmental charges.

“U.S. Person”: Except as otherwise defined herein, a “U.S. person” within the meaning of Regulation S under the Securities Act.

“U.S. Related Person”: (a) A “controlled foreign corporation” for U.S. federal income tax purposes, (b) a foreign person 50% or more of whose gross income from all sources for the three-year period ending with the close of its taxable year preceding the payment (or for such part of the period that the broker has been in existence) is derived from activities that are effectively connected with the conduct of a U.S. trade or business, or (c) a foreign partnership if at any time during its tax year one or more of its partners are United States persons who, in the aggregate, hold more than 50% of the income or capital interest of the partnership or if, at any time during its taxable year, the partnership is engaged in the conduct of a U.S. trade or business.

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

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

“Underlying Trustee”: The Bank of New York Trust Company, National Association, as trustee under the Master Trust Agreement and any Series Trust Agreement.

“Uninvested Proceeds”: 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 been deposited into the Expense Account or the Discretionary Interest Shortfall Reserve Account or invested in Collateral Debt Securities in accordance with the terms of the Indenture. If the Issuer acquires Collateral Debt Securities on the Closing Date with an aggregate principal amount at least equal to the Aggregate Ramp-Up Par Amount, it is expected that there will not be any Uninvested Proceeds.

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“Weighted Average Coupon”: As of any date of determination is the fraction (expressed as a percentage) obtained by (a) multiplying the principal balance of each fixed rate Collateral Debt Security by the current per annum rate at which it pays interest, (b) summing the amounts determined pursuant to clause (a) for all fixed rate Collateral Debt Securities held by the Issuer as of such date of determination, (c) dividing such sum by the aggregate Principal Balance of all fixed rate Collateral Debt Securities (excluding any Deferred Interest PIK Securities and any Defaulted Securities) held by the Issuer as of such date of determination and (d) if the result obtained in clause (c) is less than the minimum percentage necessary to pass the Weighted Average Coupon Test, adding to such sum the amount of the Spread Excess, if any, as of such date of determination. For fixed rate Collateral Debt Securities, if any, whose fixed rate changes over the life of such fixed rate Collateral Debt Security, the per annum rate of interest for purposes of calculating the Weighted Average Coupon shall be the current interest rate on such fixed rate Collateral Debt Security. For Deferred Interest PIK Securities and Defaulted Securities, the current interest rate shall be zero for the purposes of calculating the Weighted Average Coupon.

“Weighted Average Life”: On any Determination Date with respect to all Collateral Debt Securities (excluding any Defaulted Security or Credit Risk Security), the number obtained by the Collateral Manager by (a) summing the products obtained by multiplying (i) the Average Life at such time of each Collateral Debt Security by (ii) the outstanding Principal Balance of such Collateral Debt Security and (b) dividing such sum by the aggregate Principal Balance at such time of all Collateral Debt Securities.

“Weighted Average Spread”: As of any date of determination, is a fraction (expressed as a percentage) obtained by (a) multiplying the principal balance of each floating rate Collateral Debt Security by the rate per annum at which it pays interest in excess of LIBOR or such other floating rate index upon which such floating rate Collateral Debt Security bears interest, (b) summing the amounts determined pursuant to clause (a) for all floating rate Collateral Debt Securities held by the Issuer as of such date of determination, (c) dividing such sum by the aggregate Principal Balance of the floating rate Collateral Debt Securities (excluding any Deferred Interest PIK Securities and any Defaulted Securities) held by the Issuer as of such date of determination, and (d) if the result obtained in clause (c) is less than the minimum percentage necessary to pass the Weighted Average Spread Test, adding to such sum the amount of the Fixed Rate Excess, if any, as of such date of determination. For floating rate Collateral Debt Securities, if any, that provide for the payment of interest only after the expiration of a specified period or that by their terms provide for the payment of interest at a rate that increases after the expiration of a specified period of time prior to its maturity, the per annum rate of interest for purposes of calculating the Weighted Average Spread shall be the current interest rate on such floating rate Collateral Debt Security. For Collateral Debt Securities that bear interest at a fixed rate until a specified date and then bear interest at a floating rate thereafter, the per annum rate of interest for purposes of calculating the Weighted Average Spread shall be the floating rate at which such Collateral Debt Security will eventually bear interest, as if such rate were in effect on the date of determination. For Deferred Interest PIK Securities and Defaulted Securities the current interest rate shall be zero for the purposes of calculating Weighted Average Spread.

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INDEX OF DEFINED TERMS

$

$................................................................................vi

1

1940 Act ............................................................Cover

2

2005 Order.............................................................. vii

A

A Security..............................................................128 A/B Exchange........................................................128 Accredited Investors ..........................................Cover Accrued Insurance Liabilities ................................145 Acquired Security Payment Period........................179 ADA ........................................................................36 Additional Amounts ..............................................117 Additional Collateral Debt Security ......................129 Additional Junior Indebtedness .............................179 Additional Subordinated Debt ...............................179 Administration Agreement ....................................104 Administrative Action ...........................................208 Administrative Expenses .......................................179 Administrator.........................................................104 Advisers Act ............................................................54 Affected Class .........................................................13 Affiliate .................................................................180 Aggregate Drawn Amount.....................................180 Aggregate Outstanding Principal Amount.............180 Aggregate Ramp-Up Par Amount ...........................14 Aggregate Undrawn Amount.................................180 AMG..................................................................Cover Applicable Note.....................................................181 Applicable Recovery Rate .....................................181 Appreciated Collateral Debt Security ....................181 Appreciated Criteria ..............................................181 Assigned Moody’s Rating .....................................181 Auction ....................................................................70 Auction Call Redemption ........................................71 Auction Call Redemption Amount ..........................71 Auction Date............................................................70 Auction Procedures..................................................70 Average Life..........................................................181

B

B Security ..............................................................128 Base Collateral Management Fee ..........................142 Benefit Plan 25% Threshold..................................159 Benefit Plan Investor ................................................ ii Business Day ...........................................................74

C

Caa Excess.............................................................182 Caa Real Estate Entity Security .............................182 Calculation Agent ....................................................67 Calculation Amount...............................................182 Capitalized Leases .................................................182 cause ......................................................................139 CFC .......................................................................154 Class ..........................................................................3 Class A Coverage Tests .........................................182 Class A Interest Coverage Ratio..............................83 Class A Interest Coverage Test..............................182 Class A Notes ....................................................Cover Class A Overcollateralization Ratio ......................182 Class A Overcollateralization Test ........................182 Class A-1 Notes .................................................Cover Class A-1A Commitment ..........................................4 Class A-1A Commitment Fee..................................11 Class A-1A Commitment Fee Amount..................182 Class A-1A Commitment Period ...........................182 Class A-1A Note Purchase Agreement......................4 Class A-1A Noteholder .........................................182 Class A-1A Notes ..............................................Cover Class A-1B Notes ..............................................Cover Class A-2 Notes .................................................Cover Class B Coverage Tests .........................................182 Class B Deferred Interest...........................................8 Class B Interest Coverage Ratio ..............................83 Class B Interest Coverage Test..............................182 Class B Notes ....................................................Cover Class B Overcollateralization Ratio.......................182 Class B Overcollateralization Test ........................183 Class C Coverage Tests .........................................183 Class C Deferred Interest...........................................8 Class C Interest Coverage Ratio ..............................83 Class C Interest Coverage Test..............................183 Class C Notes ....................................................Cover Class C Overcollateralization Ratio.......................183 Class C Overcollateralization Test ........................183 Class C-1 Deferred Interest .......................................8 Class C-1 Notes .................................................Cover Class C-2 Deferred Interest .......................................8 Class C-2 Notes .................................................Cover Class D Coverage Tests .........................................183 Class D Deferred Interest ..........................................8 Class D Interest Coverage Ratio..............................83 Class D Interest Coverage Test..............................183 Class D Notes ....................................................Cover Class D Overcollateralization Ratio ......................183 Class D Overcollateralization Test ........................183 Class E Coverage Tests .........................................183 Class E Deferred Interest ...........................................9

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Class E Interest Coverage Ratio ..............................83 Class E Interest Coverage Test ..............................183 Class E Notes.....................................................Cover Class E Overcollateralization Ratio.......................183 Class E Overcollateralization Test.........................183 Class E-1 Deferred Interest........................................9 Class E-1 Notes .................................................Cover Class E-2 Deferred Interest........................................9 Class E-2 Notes .................................................Cover Class F Coverage Tests..........................................183 Class F Deferred Interest ...........................................9 Class F Interest Coverage Ratio ..............................83 Class F Interest Coverage Test ..............................184 Class F Notes.....................................................Cover Class F Overcollateralization Ratio .......................184 Class F Overcollateralization Test.........................184 Class Scenario Loss Rate.......................................184 Clearing Agency....................................................184 Clearstream..............................................................20 Closing Date ..............................................................5 CMBS......................................................................15 CMBS Agreement .................................................121 CMBS CDO Co-Issuer ............................................47 CMBS CDO Co-Issuers...........................................47 CMBS CDO Issuer ..................................................15 CMBS CDO Securities ............................................15 CMBS Issuer ...........................................................15 Code.................................................................. ii, 151 Co-Issued Notes.................................................Cover Co-Issuer............................................................Cover Co-Issuers ..........................................................Cover Collateral .................................................................14 Collateral Administration Agreement....................184 Collateral Administrator ........................................184 Collateral Debt Securities ........................................15 Collateral Debt Security Criteria ...........................109 Collateral Management Agreement .......................184 Collateral Management Fees .................................184 Collateral Manager ............................................Cover Collateral Manager Breaches.................................138 Collateral Quality Tests .........................................123 Collection Accounts ..............................................132 Commitment Period Termination Date..................184 Common Securities................................................110 Controlling Class .....................................................95 Controlling Person.................................................... ii Corresponding Debentures ......................................18 Corresponding Security .........................................128 Coverage Tests ......................................................184 Credit Risk Security...............................................184 Current Pay Obligation..........................................185

D

Deemed Equity Interests........................................159 Default ...................................................................185

Defaulted Interest ..................................................185 Defaulted Premium................................................185 Defaulted Security .................................................185 Deferrable Notes....................................................152 Deferral Period ........................................................16 Deferred Interest ....................................................111 Deferred Interest PIK Security ..............................186 Definitive Regulation S Subordinated Note ............86 Definitive Senior Note...........................................186 Deliverable Obligation ..........................................186 Determination Date....................................................6 Discretionary Interest Shortfall Reserve Account .133 Disqualified Persons ..............................................158 Distribution Agent .................................................186 Distribution Date .......................................................6 Distribution Periods...............................................111 Dollars ......................................................................vi Draw ..........................................................................4 Draw Date..................................................................4 DTC.........................................................................20 Due for Payment....................................................186 Due Period .................................................................6

E

EBITDA ................................................................186 Effective Collateral Manager Substitution Date ....140 Eligibility Criteria..................................................124 Eligible Investments ..............................................186 Equity Security ......................................................127 ERISA ...................................................................... ii ERISA Class..........................................................159 Euroclear..................................................................20 Event of Default ......................................................94 Excepted Investment Company .............................169 Excess Caa Adjustment Amount ...........................188 Exchange Act......................................................... viii Expense Account ...................................................133 Extension Period....................................................111

F

FAS 150...................................................................62 FASB.......................................................................62 FIN 46......................................................................62 Fitch.......................................................................188 Fitch Rating Factor ................................................188 Fitch Recovery Rate ..............................................188 Fitch Weighted Average Rating Factor .................189 Fitch Weighted Average Rating Factor Test .........123 Fixed Charge Coverage Ratio................................189 Fixed Rate Excess..................................................189 Fixed Rate Notes .......................................................3 Fixed Rate Period ..................................................189 Fixed Rate Period Termination Date .....................189 Fixed/Floating Rate Notes .........................................3 Floating Rate Notes ...................................................3

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Form-Approved Synthetic Security .......................189 FS Research ...........................................................136 FSI ...........................................................................34 FSMA ..................................................................... vii

G

Global Senior Notes.................................................20

H

Hedge Agreements ................................................130 Hedge Counterparties ............................................130 Hedge Counterparty...............................................130 Hedge Counterparty Collateral Account................131 Higher Semi-Annual Pay Quarter..........................189 Higher Semi-Annual Pay Quarter Percentage .......190 Holder .......................................................................vi Homebuilding Company..........................................15

I

IFSRA................................................................Cover Indemnification Agreement ...................................190 Indemnified Party ..................................................138 Indenture....................................................................3 Indenture Trustee...................................................116 Indirect Participants.................................................93 Initial Investment Period .......................................190 Initial Purchaser.................................................Cover Institutional Accredited Investors......................Cover Insurance Agreement...............................................13 Insurance Agreement Event of Default .................146 Insurance Company General Account Investor .....190 Insurance Documents ............................................190 Insured Amounts....................................................190 Insured Noteholder ................................................191 Insured Notes.....................................................Cover Insurer................................................................Cover Insurer Default.......................................................191 Insurer Information................................................146 Interest Collection Account ...................................132 Interest Expense.....................................................191 Interest Period............................................................5 Interest Proceeds....................................................191 Investment Company Event...................................192 Investment Guidelines .............................................14 Irish Paying Agent .....................................................2 IRS.........................................................................151 Issuer .................................................................Cover Issuer Charter.........................................................104

L

LIBOR.....................................................................67 LIBOR Business Day ............................................192 LIBOR Determination Date.....................................67 Limited Real Estate Entity.......................................15

Liquidation ............................................................113 Liquidation Distribution ........................................113 Liquidity Provider..................................................192 Listing Agent .........................................................177 Listing Particulars..............................................Cover Loans .......................................................................16 Losses ....................................................................138 Lower Semi-Annual Pay Quarter ..........................192

M

Majority .................................................................193 Manager Party .......................................................128 Margin Stock .........................................................193 Market Value .........................................................193 Master Trust Agreement ........................................193 Measurement Date.....................................................6 Merrill Lynch.....................................................Cover Merrill Lynch Companies........................................54 Merrill Lynch Company ..........................................54 Moody’s.................................................................193 Moody’s Asset Correlation Factor.........................123 Moody’s Asset Correlation Test ............................123 Moody’s Default Probability Rating......................193 Moody’s Equivalent Senior Unsecured Rating......194 Moody’s Implied Weighted Average Rating Factor..............................................................................194

Moody’s Implied Weighted Average Rating Factor Test.......................................................................123

Moody’s Non Senior Secured Loan.......................195 Moody’s Obligation Rating ...................................195 Moody’s Rating .....................................................195 Moody’s Rating Factor..........................................195 Moody’s Recovery Rate ........................................196 Moody’s Senior Secured Loan ..............................196 Mortgaged Property.................................................39

N

NASD ......................................................................87 Net Outstanding Portfolio Collateral Balance .......197 Nonpayment ..........................................................197 Non-Senior Loans....................................................16 Non-U.S. Holder....................................................150 Note Break-Even Default Rate ..............................197 Note Class Default Differential .............................197 Note Interest Rate ......................................................7 Note Register .........................................................197 Note Registrar........................................................197 Notes..................................................................Cover

O

Obligor...................................................................197 Offering ....................................................................iv Offering Circular .......................................................1 OID........................................................................152

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Optional Redemption...............................................13 Order......................................................................143 Outstanding............................................................197

P

PAC Method..........................................................153 Parent Guarantee....................................................110 Parent Real Estate Entity .......................................110 Participants ..............................................................86 Parties-in-Interest...................................................158 Paying Agent .........................................................198 Payment Account...................................................132 Permitted Plans ......................................................... ii Permitted Principal Proceeds.................................129 Permitted Sale Proceeds ........................................129 PFIC.......................................................................153 PIK Security ..........................................................198 Placement Agent................................................Cover Plan........................................................................158 Plan Asset Regulation............................................159 plan assets..............................................................158 Pledged Securities..................................................198 Policy.................................................................Cover Policy Payment Account .......................................135 PORTAL..................................................................87 Posting Threshold ..................................................199 Preference Amount ................................................199 Preferred Interests..................................................199 Premium ....................................................................2 Principal Balance...................................................199 Principal Collection Account.................................132 Principal Proceeds .................................................200 Prior Security.........................................................126 Priority of Payments ................................................75 Property Trustee ....................................................114 Prospectus..........................................................Cover Prospectus Directive ............................................... vii Purchase and Placement Agency Agreement ........162 Purchase Criteria ...................................................124

Q

QEF .......................................................................153 Qualified Bidders.....................................................70 Qualified Institutional Buyers............................Cover Qualified Preferred Stock ......................................201 Qualified Purchasers..........................................Cover Quarterly Asset Amount ........................................201

R

Ramp-Up Completion Date ...................................201 Ramp-Up Notice......................................................30 Ramp-Up Ratings Confirmation Failure..................30 Rating Agencies........................................................vi Rating Agency ..........................................................vi

Rating Condition ...................................................201 Rating Criteria .......................................................201 Ratings Confirmation ..............................................30 Ratings Threshold..................................................202 Real Estate Entities ..................................................15 Real Estate Entity Indenture ..................................202 Real Estate Entity Securities....................................15 Real Estate Entity Trigger Event ...........................202 Record Date ...............................................................6 Redemption Date .....................................................73 Redemption Price ....................................................74 Reference Banks ....................................................202 Reference Obligation.............................................202 Reference Obligor..................................................203 Reg Y Institution ...................................................203 Regulation S ......................................................Cover Regulation S Class F Notes .....................................20 Regulation S Definitive Senior Note .......................87 Regulation S Global Class F Note ...........................21 Regulation S Global Senior Notes ...........................20 Regulation S Global Subordinated Note..................22 Regulation S Senior Note ........................................20 Regulation S Subordinated Notes ............................22 Reinvestment Designation .....................................203 Reinvestment Income ............................................203 Reinvestment Period..................................................6 REIT ........................................................................15 REIT/REOC Coverage Tests.................................203 REIT/REOC Interest Coverage Ratio....................203 REIT/REOC Interest Coverage Test......................203 Related Documents................................................204 Related Persons .....................................................204 Relevant Implementation Date ............................... vii Relevant Member State .......................................... vii Relevant Persons..................................................... vii REMICs...................................................................45 REOC ......................................................................15 Restricted Class F Note ...........................................20 Restricted Co-Issued Note .......................................20 Restricted Definitive Class F Notes.........................20 Restricted Definitive Senior Note............................87 Restricted Global Class F Notes ..............................20 Restricted Global Co-Issued Notes..........................20 Restricted Senior Note...........................................204 Restricted Subordinated Notes ................................22 RSA 421-B .................................................................i Rule 144A...................................................................i

S

S&P .......................................................................204 S&P CDO Monitor ................................................103 S&P CDO Monitor Test ........................................204 S&P Rating............................................................204 S&P Recovery Rate ...............................................205 Sale Proceeds.........................................................205

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Sandelman ...............................................................34 SEC........................................................................... II Secured Parties ..........................................................3 Securities Act.....................................................Cover Security Issuers........................................................15 Semi-Annual Interest Reserve Account.................133 Semi-Annual Interest Smoothing Test...................127 Semi-Annual Pay Security.....................................126 Senior Indebtedness...............................................115 Senior Loans............................................................16 Senior Noteholder..................................................205 Senior Notes ......................................................Cover Senior Notes Redemption Price...............................74 Senior Secured Loans ..............................................15 Senior Securities ......................................................15 Senior Securities Issuer ...........................................15 Senior Unsecured Loans..........................................16 Series Trust Agreement .........................................205 Similar Law .............................................................. ii Specified Second Position Loans.............................15 Spread Excess........................................................205 SRPM ....................................................................152 Stated Maturity ........................................................12 Subordinate Collateral Management Fee...............142 Subordinated Noteholder .......................................205 Subordinated Notes............................................Cover Subordinated Notes Redemption Price ....................74 Subordinated Securities ...........................................15 Subordinated Securities Issuer.................................15 Subordinated Security Indenture ...........................120 Substitute Counterparty .........................................130 Substitute Deliverable Obligation..........................186 Successor Securities ..............................................114 Synthetic Security..................................................206 Synthetic Security Collateral .................................206 Synthetic Security Collateral Account...................134 Synthetic Security Counterparty............................207

T

Tangible Net Worth ...............................................207 Tangible Net Worth Test .......................................207 Tax Event...............................................................207 Tax Materiality Condition .....................................207 Tax Redemption ......................................................13 Total Capitalization ...............................................207 Total Debt..............................................................207 Total Debt to Total Capitalization Ratio................207 Total Debt to Total Capitalization Test .................207 Total Senior Redemption Amount...........................72 Tranche......................................................................3

Transfer Agent.......................................................208 Treasury...................................................................56 Trust Agreement ....................................................110 Trust Agreement Event of Default.........................118 Trust Preferred Issuer Securities............................110 Trust Preferred Securities ........................................15 Trust Preferred Securities Distribution Date..........111 Trust Preferred Securities Issuer............................107 Trust Preferred Securities Maturity Date...............112 Trust Preferred Securities Maturity Redemption Price..............................................................................113

Trust Preferred Securities Optional Redemption Date..............................................................................111

Trust Preferred Securities Optional Redemption Price..............................................................................112

Trust Preferred Securities Redemption Price.........113 Trust Preferred Securities Special Event ...............208 Trust Preferred Securities Special Redemption Date..............................................................................112

Trust Preferred Securities Special Redemption Price..............................................................................112

Trust Preferred Securities Tax Event.....................208 Trustee ...................................................................... II

U

U.S............................................................................vi U.S. Dollars ..............................................................vi U.S. Holder............................................................150 U.S. Person ............................................................208 U.S. Related Person ...............................................208 UBTI......................................................................156 UCC.......................................................................208 Underlying Instruments .........................................208 Underlying Trustee ................................................208 Uninsured Notes ................................................Cover Uninvested Proceeds..............................................208 Uninvested Proceeds Account ...............................132 United States.............................................................vi Up-Front Collateral Management Fee ...................142 USA PATRIOT Act.................................................56

W

Warehouse Entity ....................................................51 Weighted Average Coupon....................................209 Weighted Average Coupon Test............................123 Weighted Average Life .........................................209 Weighted Average Life Test..................................123 Weighted Average Spread .....................................209 Weighted Average Spread Test .............................123

PRINCIPAL OFFICES OF THE CO-ISSUERS

ISSUER CO-ISSUER Attentus CDO III, Ltd. Attentus CDO III, LLC

c/o Maples Finance Limited c/o Puglisi & Associates P.O. Box 1093GT 850 Library Avenue, Suite 204 Queensgate House Newark, Delaware 19711

South Church Street, George Town Grand Cayman, Cayman Islands

COLLATERAL TRUSTEE, PAYING AGENT AND MANAGER NOTE REGISTRAR

Attentus Management

Group, LLC The Bank of New York Trust Company,

National Association 441 Vine Street, Suite 507 601 Travis Street, 16th Floor

Cincinnati, Ohio 45202 Houston, Texas 77002

IRISH LISTING AGENT IRISH PAYING AGENT

Dillon Eustace Custom House Administration and 33 Sir John Rogerson’s Quay Corporate Services Limited

Dublin 2, Ireland 25 Eden Quay Dublin 1, Ireland

INSURER

Assured Guaranty Corp. 1325 Avenue of the Americas New York, New York 10019

LEGAL ADVISORS

To the Co-Issuers as to United States Law To the Initial Purchaser as to United States Law Dechert LLP Mayer, Brown, Rowe & Maw LLP

100 North Tryon Street, Suite 4000 71 South Wacker Drive Charlotte, North Carolina 28202 Chicago, Illinois 60606

To the Co-Issuers as to United States Federal Income Tax Law

Weil, Gotshal & Manges LLP 767 Fifth Avenue

New York, New York 10153

To the Collateral Manager To the Issuer as to Cayman Islands Law Dechert LLP Maples and Calder

100 North Tryon Street, Suite 4000 P.O. Box 309 GT Charlotte, North Carolina 28202 Ugland House

South Church Street, George Town Grand Cayman, Cayman Islands