INDENTURE

 

 

TABLE OF CONTENTS

 

Section				Page
PRELIMINARY STATEMENT				1
GRANTING CLAUSES				1
ARTICLE I  Definitions and Interpretation				2
	1.1.	Definitions		2
	1.2.	Assumptions as to Collateral Debt Securities, Fees, Etc.		57
	1.3.	Rules of Construction		59
ARTICLE II  The Rated Notes				60
	2.1.	Forms Generally		60
	2.2.	Authorized Amount; Applicable Periodic Interest Rate; Stated
		Maturity Date; Denominations		61
	2.3.	Execution, Authentication, Delivery and Dating		62
	2.4.	Registration, Transfer and Exchange of Rated Notes		62
	2.5.	Mutilated, Defaced, Destroyed, Lost or Stolen Rated Notes		70
	2.6.	Payment of Principal and Interest; Rights Preserved		71
ARTICLE III  Conditions Precedent				75
	3.1.	General Provisions		75
	3.2.	Security for the Rated Notes		76
	3.3.	Custodianship; Transfer of Collateral Debt Securities and Eligible
		Investments		78
ARTICLE IV  Satisfaction and Discharge				81
	4.1.	Satisfaction and Discharge of Indenture		81
	4.2.	Application of Trust Money		82
	4.3.	Repayment of Funds Held by Note Paying Agent		83
ARTICLE V  Events of Default; Remedies				83
	5.1.	Events of Default		83
	5.2.	Acceleration of Maturity; Rescission and Annulment		84
	5.3.	Collection of Indebtedness and Suits for Enforcement by Trustee		85
	5.4.	Remedies		87
	5.5.	Preservation of Collateral		89
	5.6.	Trustee May Enforce Claims Without Possession		91
	5.7.	Application of Funds Collected		91
	5.8.	Limitation on Suits		91
	5.9.	Unconditional Rights of Rated Noteholders to Receive Principal and
		Interest		92
	5.10.	Restoration of Rights and Remedies		92
	5.11.	Rights and Remedies Cumulative		92
	5.12.	Delay or Omission Not Waiver		92
	5.13.	Control by Controlling Class		93
	5.14.	Waiver of Past Defaults		93
	5.15.	Undertaking for Costs		94
	5.16.	Waiver of Stay or Extension Laws		94
	5.17.	Sale of Collateral		94
	5.18.	Action on the Rated Notes		95

 

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TABLE OF CONTENTS

(continued)

 

Section				Page
ARTICLE VI  The Trustee				95
	6.1.	Certain Duties and Responsibilities		95
	6.2.	Notice of Default		97
	6.3.	Certain Rights of Trustee		97
	6.4.	Authenticating Agents		99
	6.5.	Not Responsible for Recitals or Issuance of Rated Notes		99
	6.6.	May Hold Rated Notes		100
	6.7.	Funds Held in Trust		100
	6.8.	Compensation and Reimbursement		100
	6.9.	Corporate Trustee Required; Eligibility		101
	6.10.	Resignation and Removal; Appointment of Successor		102
	6.11.	Acceptance of Appointment by Successor		103
	6.12.	Merger, Conversion, Consolidation or Succession to Business of
		Trustee		103
	6.13.	Co-Trustees		103
	6.14.	Certain Duties Related to Delayed Payment of Proceeds; Other
		Notices		104
	6.15.	Representations and Warranties of the Bank		105
	6.16.	Exchange Offers, Proposed Amendments etc.		105
	6.17.	Fiduciary for Rated Noteholders Only; Agent For Other Secured
		Parties		106
	6.18.	Withholding		106
ARTICLE VII  Covenants					107
	7.1.	Payment of Principal and Interest		107
	7.2.	Maintenance of Office or Agency		107
	7.3.	Funds for Rated Note Payments to be Held in Trust		108
	7.4.	Existence of Issuer		109
	7.5.	Protection of Collateral		110
	7.6.	Opinions as to Collateral		111
	7.7.	Performance of Obligations		111
	7.8.	Negative Covenants		113
	7.9.	Statement as to Compliance		114
	7.10.	Issuer May Consolidate, Etc., Only on Certain Terms		114
	7.11.	Successor Substituted		116
	7.12.	No Other Business		116
	7.13.	Change or Withdrawal of Rating		117
	7.14.	Reporting		117
	7.15.	Rated Note Calculation Agent		117
	7.16.	Listing		118
	7.17.	Amendment of Certain Documents		118
	7.18.	Purchase of Collateral; Information Regarding Collateral; Rating
		Confirmation		118
ARTICLE VIII  Supplemental Indentures					120
	8.1.	Supplemental Indentures Without Consent of Rated Noteholders		120
	8.2.	Supplemental Indentures with Consent of Rated Noteholders		122
	8.3.	Execution of Supplemental Indentures		124
	8.4.	Effect of Supplemental Indentures		125
	8.5.	Reference in Rated Notes to Supplemental Indentures		125

 

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TABLE OF CONTENTS

(continued)

 

Section				Page
ARTICLE IX  Redemption of Rated Notes				125
	9.1.	Redemption of Rated Notes		125
	9.2.	Redemption Procedures; Auction		126
	9.3.	Record Date; Notice to Trustee of Redemption		127
	9.4.	Notice of Redemption		128
	9.5.	Notice of Withdrawal		128
	9.6.	Rated Notes Payable on Redemption Date		129
	9.7.	Special Amortization		129
ARTICLE X  Accounts, Accountings and Releases				130
	10.1.	Collection of Funds		130
	10.2.	General Provisions Applicable to Accounts		130
	10.3.	Collateral Account		131
	10.4.	Uninvested Proceeds Account		131
	10.5.	Collection Account		132
	10.6.	Expense Reserve Account		132
	10.7.	Non-Monthly Pay Asset Interest Reserve Account		133
	10.8.	Ramp-Up Interest Reserve Account		133
	10.9.	Payment Account		133
	10.10.	Derivative Contract Counterparty Accounts		134
	10.11.	Derivative Contract Issuer Account		135
	10.12.	Reports by Trustee		136
	10.13.	Accountings		136
	10.14.	Release of Securities		141
	10.15.	Reports by Independent Accountants		142
	10.16.	Reports to Rating Agencies		143
	10.17.	Tax Matters		143
	10.18.	Tax Information		143
ARTICLE XI  Application of Monies				144
	11.1.	Disbursements of Funds from Payment Account; Priority of Payments		144
ARTICLE XII  Purchase and Sale of Collateral Debt Securities				154
	12.1.	Sale of Collateral Debt Securities		154
	12.2.	Portfolio Characteristics		156
	12.3.	Conditions Applicable to all Transactions Involving Sale or Grant		159
ARTICLE XIII  Secured Parties’ Relations				160
	13.1.	Subordination		160
	13.2.	Standard of Conduct		164
ARTICLE XIV  Miscellaneous				164
	14.1.	Form of Documents Delivered to Trustee		164
	14.2.	Acts of Rated Noteholders		165
	14.3.	Notices, Etc., to Trustee, the Issuer and the Rating Agencies		165
	14.4.	Notices and Reports to Rated Noteholders; Waiver		167
	14.5.	Effect of Headings and Table of Contents		167
	14.6.	Successors and Assigns		167
	14.7.	Severability		168
	14.8.	Benefits of Indenture		168

 

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TABLE OF CONTENTS

(continued)

 

Section				Page
	14.9.	Governing Law		168
	14.10.	Submission to Jurisdiction		168
	14.11.	Counterparts		168
	14.12.	Waiver of Jury Trial		168
	14.13.	Judgment Currency		169
	14.14.	Confidential Treatment of Documents		169
ARTICLE XV  Assignment of Agreements, Etc.				169
	15.1.	Assignment		169
	15.2.	No Impairment		170
	15.3.	Termination, Etc.		170
	15.4.	Issuer Agreements, Etc.		170
ARTICLE XVI  Hedge Agreement				170
	16.1.	Hedge Agreements		170

 

Schedules
Schedule A	Schedule of Collateral Debt Securities as of the Closing Date
Schedule B	LIBOR Formula
Schedule C	Schedule of Temporary Ramp-Up Securities
Schedule D-1	S&P’s Recovery Rate Matrix
Schedule D-2	Moody’s Recovery Rate Matrix
Schedule E	Auction Procedures
Schedule F	S&P’s Notching Criteria
Schedule G	S&P’s Types of Asset-Backed Securities ineligible for Notching
Schedule H	S&P’s Industry Classification Groups
Schedule I	Fitch Industry Classification Groups
Exhibits
Exhibit A-1	Form of Regulation S Global Note
Exhibit A-2	Form of Rule 144A Global Note
Exhibit B-1	Form of Definitive Class E Note
Exhibit C-1	Form of Rule 144A Transfer Certificate
Exhibit C-2	Form of Regulation S Transfer Certificate
Exhibit C-3	Form of Definitive Class E Transfer Certificate
Exhibit D	Form of Funding Certificate
Exhibit E-1	Form of Opinion of Clifford Chance US LLP
Exhibit E-2	Form of Opinion of Walkers
Exhibit F	Form of Opinion of Kennedy Covington Lobdell & Hickman, L.L.P.
Exhibit G	Form of Opinion of Thacher Proffitt & Wood LLP
Exhibit H	Form of Opinion of internal counsel to Bank of America, N.A.
Exhibit I	Rated Noteholder’s Certificate

 

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under or arising out of any of the Collateral held for the benefit and security of the Secured Parties, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Trustee may deem to be necessary or advisable in the premises. The power of attorney granted pursuant to this Indenture and all authority hereby conferred are granted and conferred solely to protect the Trustee’s interest in the Collateral held for the benefit and security of the Secured Parties and shall not impose any duty upon the Trustee to exercise any power. This power of attorney shall be irrevocable as one coupled with an interest prior to the payment in full of all the obligations secured hereby.

 

Except to the extent otherwise provided in this Indenture, this Indenture shall constitute a security agreement under the law of the State of New York. Upon the occurrence of any Event of Default and in addition to any other rights available under this Indenture or any other instruments included in the Collateral held for the benefit and security of the Secured Parties or otherwise available at law or in equity, the Trustee shall have all rights and remedies of a secured party on default under the law of the State of New York and other applicable law to enforce the assignments and security interests contained herein and, in addition, shall have the right, subject to compliance with any mandatory requirements of applicable law, to sell or apply any rights and other interests assigned or pledged hereby in accordance with the terms hereof at public or private sale.

 

It is expressly agreed that anything therein contained to the contrary notwithstanding, the Issuer shall remain liable under any instruments included in the Collateral to perform all the obligations assumed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof, and except as otherwise expressly provided herein, the Trustee shall not have any obligations or liabilities under such instruments by reason of or arising out of this Indenture, nor shall the Trustee be required or obligated in any manner to perform or fulfill any obligations of the Issuer under or pursuant to such instruments or to make any payment, to make any inquiry as to the nature or sufficiency of any payment received by it, to present or file any claim, or to take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

 

The designation of the Trustee in any transfer document or record is intended and shall be deemed, first, to refer to the Trustee as custodian on behalf of the Issuer and second, to refer to the Trustee as secured party on behalf of the Secured Parties, provided that the Grant made by the Issuer to the Trustee pursuant to the granting clauses hereof shall apply to any Collateral bearing such designation.

 

The Trustee acknowledges such Grants, accepts the trust hereunder in accordance with the provisions hereof, and agrees to perform the duties herein in accordance with the required standard of care set forth herein such that the interests of the Secured Parties may be protected.

 

Each of the Secured Parties hereby agrees and acknowledges that it shall not have any claim on the funds and property from time to time deposited in or credited to the Income Note Distribution Account and the proceeds thereof.

 

ARTICLE I

 

DEFINITIONS AND INTERPRETATION

 

1.1.                        DEFINITIONS

 

Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Indenture. Whenever any reference is made to an amount the determination of which is governed by Section 1.2, the provisions of Section 1.2

 

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shall be applicable to such determination or calculation, whether or not reference is specifically made to Section 1.2, unless some other method of calculation or determination is expressly specified in the particular provision. In addition, terms defined in Article 9 of the UCC and used but not capitalized herein have the meanings assigned thereto in Article 9 of the UCC.

 

Account means any of the Collection Account (including each Collateral Sub-Account established therein), the Collateral Account, the Uninvested Proceeds Account, the Payment Account, the Ramp-Up Interest Reserve Account, the Non-Monthly Pay Asset Interest Reserve Account the Expense Reserve Account (including each Collateral Sub-Account established therein), each Derivative Contract Issuer Account, if any, and each Derivative Contract Counterparty Account.

 

Account Control Agreement means that certain Account Control Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, among the Issuer, the Trustee and the Custodian.

 

Accountants’ Report means a report of a firm of Independent certified public accountants of recognized national reputation appointed by the Issuer (or the Collateral Manager on its behalf) on the Closing Date pursuant to Section 10.14(a), which may be the firm of Independent accountants that reviews or performs procedures with respect to the financial reports prepared by the Issuer.

 

Accountholder means the holder of the Accounts pursuant to the Account Control Agreement.

 

Act has the meanings specified in Section 14.2.

 

Actual Rating means, with respect to any Collateral Debt Security or Eligible Investment, the actual expressly monitored outstanding public rating assigned by a Rating Agency without reference to any other rating by another Rating Agency.

 

Administrative Expenses means amounts (including any applicable indemnities) due from, or accrued for, the account of the Issuer with respect to any Payment Date to (i) the Trustee for Trustee Expenses; (ii) the Income Note Paying Agent pursuant to the Income Note Paying Agency Agreement; (iii) the Collateral Administrator pursuant to the Collateral Administration Agreement; (iv) the independent accountants, agents and counsel of the Issuer for fees and expenses (including, without limitation, tax reports); (v) the Rating Agencies for fees and expenses in connection with any Class of Notes rated by each such Rating Agency (including, without limitation, expenses for credit estimates and ongoing surveillance of the ratings of the Notes); (vi) the Administrator pursuant to the Corporate Services Agreement; (vii) the Collateral Manager and its counsel for fees, expenses and indemnities under the Transaction Documents to the extent set forth therein (including, without limitation, amounts payable under the Collateral Management Agreement but excluding the Collateral Management Fee); (viii) any other Person in respect of any governmental fee, charge or tax (including all filing, registration and annual return fees payable to the Cayman Islands’ government and registered office fees); and (ix) any other Person in respect of any other fees or expenses permitted under the Indenture and the documents delivered pursuant to or in connection with this Indenture, the Income Note Paying Agency Agreement, the Collateral Management Agreement and the Notes; provided that Administrative Expenses may not include any amounts due or accrued with respect to the actions taken on, or prior to, the Closing Date.

 

Administrator means Walkers SPV Limited and any successor thereto appointed under the Corporate Services Agreement.

 

Affected Party has the meaning given to such term in the applicable Hedge Agreement or Synthetic Security.

 

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Affiliate means any person, directly or indirectly through one or more intermediaries, controlling, controlled by or under common control with the person; provided that (i) with respect to the Issuer, “Affiliate” shall be deemed not to include Walkers SPV Limited or any entity which Walkers SPV Limited controls and (ii) control of a person shall mean the power, direct or indirect, (a) to vote more than 50% of the securities having ordinary voting power for the election of directors of such person or (b) to direct or cause the direction of the management and policies of such person whether by contract or otherwise.

 

Agent Members means members of, or participants in, the Clearing Agencies.

 

Aggregate Fees and Expenses means, on any Payment Date, the sum of (i) the Trustee Fee with respect to such Payment Date and any unpaid Trustee Fee accrued with respect to a previous Payment Date, (ii) the Senior Collateral Management Fee and all expenses of the Collateral Manager payable by the Issuer pursuant to the Collateral Management Agreement with respect to such Payment Date and any unpaid Senior Collateral Management Fee and unpaid expenses of the Collateral Manager accrued with respect to a previous Payment Date, (iii) the Trustee Expenses and other expenses (including other Administrative Expenses) of the Issuer (including the fees to be paid to the Irish Stock Exchange), (iv) taxes payable by the Issuer, if any, and (v) all other expenses of the Issuer (including, without limitation, Administrative Expenses) payable on such Payment Date pursuant to Section 11.1(a)(1) and 11.1(b)(1) (in each case to the extent not included in clauses (i) through (vi) above).

 

Aggregate Outstanding Amount means, when used with respect to any of the Rated Notes at any time, the aggregate principal amount of such Rated Notes Outstanding at such time. Except as otherwise provided herein, (i) the Aggregate Outstanding Amount of any Class C Notes at any time shall include the Class C Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class C Notes at such time, (ii) the Aggregate Outstanding Amount of any Class D Notes at any time shall include the D Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class D Notes at such time and (iii) the Aggregate Outstanding Amount of any Class E Notes at any time shall include the Class E Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class E Notes at such time.

 

Applicable Periodic Interest Rate means, for any Interest Period, (i) with respect to the Class A Notes, the applicable Class A Note Interest Rate, (ii) with respect to the Class B Notes, the applicable Class B Note Interest Rate, (iii) with respect to the Class C Notes, the applicable Class C Note Interest Rate, (iv) with respect to the Class D Notes, the applicable Class D Note Interest Rate and (v) with respect to the Class E Notes, the applicable Class E Note Interest Rate.

 

Applicable Recovery Rate means, with respect to any Collateral Debt Security on any Measurement Date, the Fitch Recovery Rate, the Moody’s Recovery Rate and the S&P Recovery Rate applicable to such Collateral Debt Security on such date.

 

Approved Replacement Person means a replacement or additional Key Manager appointed in accordance with the procedures described in Section 16 of the Collateral Management Agreement.

 

Articles means the Amended and Restated Memorandum and Articles of Association of the Issuer, filed under the Companies Law (2004 Revision) of the Cayman Islands, as modified and supplemented and in effect from time to time.

 

Asset-Backed Securities are debt securities that entitle the holders thereof to receive payments that depend primarily on the cash flow from (i) a specified pool of financial assets, either fixed or revolving, that by their terms convert into cash within a finite time period, together with rights or other assets

 

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designed to assure the servicing or timely distribution of proceeds to holders of such securities (including, for the avoidance of doubt, leases) or (ii) real estate mortgages, either fixed or revolving, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to the holders of such securities.

 

Assumed Reinvestment Rate means, with respect to any Account or fund securing the Rated Notes, the greater of (i) LIBOR minus 0.50% and (ii) zero.

 

Auction has the meaning specified in Section 9.2.

 

Auction Call Redemption has the meaning specified in Section 9.1(c).

 

Auction Date has the meaning specified in Section 9.2; provided that, for the purposes of Section 5.5, “Auction Date” means the date upon which an Auction of the Collateral Debt Securities is conducted in connection with an Event of Default.

 

Auction Procedures has the meaning specified in Section 9.2.

 

Auction Purchase Agreement has the meaning specified in Schedule E.

 

Authenticating Agent means, with respect to the Rated Notes or any Class of the Rated Notes, the Person designated by the Trustee, if any, to authenticate such Rated Notes on behalf of the Trustee pursuant to Section 6.4.

 

Authorized Officer means (i) with respect to the Issuer, any Officer of the Issuer who is authorized to act for the Issuer in matters relating to, and binding upon, the Issuer, (ii) with respect to the Collateral Manager, any officer of the Collateral Manager who is authorized to act for the Collateral Manager in matters relating to, and binding upon, the Collateral Manager, (iii) with respect to the Trustee or any other bank or trust company acting as trustee of an express trust or as custodian, a Trust Officer and (iv) with respect to the Income Note Paying Agent, any officer who is authorized to act for the Income Note Paying Agent in matters relating to, and binding upon, the Income Note Paying Agent. Each party may receive and accept a certification of the authority of any other party as conclusive evidence of the authority of any person to act, and such certification may be considered as in full force and effect until receipt by such other party of written notice to the contrary.

 

Available Funds means, with respect to any Payment Date, the amount of any positive balance (of Cash or Eligible Investments) in the Collection Account as of the Calculation Date relating to such Payment Date and, with respect to any other date, such amount as of that date.

 

Average Life means, on any Calculation Date with respect to any Collateral Debt Security (other than any Trust Preferred Security), the quotient obtained by the Collateral Manager by dividing (i) the sum of the products of (a) the number of years (rounded to the nearest one tenth thereof) from such Calculation Date to the respective dates of each successive distribution of principal of such Collateral Debt Security (assuming that (1) no Collateral Debt Securities default or are sold, (2) any optional redemption of the Collateral Debt Securities occurs in accordance with their respective terms and (3) any extension of the Real Estate Interests is exercised) and (b) the respective amounts of principal of such scheduled distributions by (ii) the sum of all successive scheduled distributions of principal on such Collateral Debt Security. The Average Life of any Trust Preferred Security on any Calculation Date occurring on or after the Closing Date, to and including the Payment Date in June 2018, shall be the call date of such Trust Preferred Security or, in the event the call is not exercised on or prior to such call date, the excess of 20 years over the period of time from the Closing Date of such Trust Preferred Security to the date such

 

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Trust Preferred Security is acquired by the Issuer (rounded to the nearest 0.5 year) and for any Calculation Date thereafter shall be reduced by 0.5 years for every six month period thereafter.

 

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

 

Bank means LaSalle Bank National Association, a national banking association organized under the laws of the United States, in its individual capacity and not as Trustee.

 

Bankruptcy Code means the U.S. Bankruptcy Code, Title 11 of the United States Code, as amended or where the context requires, the applicable insolvency provisions of the laws of the Cayman Islands.

 

BAS means Banc of America Securities LLC.

 

Beneficial Owner means, with respect to any Global Note, each Person that appears on the records of a Clearing Agency (other than each such Clearing Agency to the extent that it is an accountholder with the other Clearing Agency for the purpose of operating the “bridge” between them) as entitled to a particular amount of Notes by reason of an interest in a Global Note (for all purposes other than with respect to the payment of principal of and interest on the Rated Notes, the right to which will be vested, as against the Issuer and the Trustee, solely in the Person in whose name the Global Note is registered in the Note Register (in the case of the Notes) or the Income Note Register (in the case of the Income Notes)); provided that the Trustee and the Income Note Paying Agent may conclusively rely upon the certificate of a Clearing Agency as to the identity of such Persons holding an interest in a Global Note.

 

Benefit Plan Investor means (i) an “employee benefit plan” (as defined in Section 3(3) of ERISA), whether or not subject to Title I of ERISA, including without limitation governmental plans, foreign plans and church plans, (ii) a “plan” (as defined in Section 4975(e)(1) of the Code), whether or not subject to Section 4975 of the Code, including, without limitation, individual retirement accounts and Keogh plans or (iii) an entity whose underlying assets include plan assets by reason of such an employee benefit plan’s or plan’s investment in such entity, including, without limitation, as applicable, an insurance company general account.

 

Board of Directors means, with respect to the Issuer, the directors of the Issuer duly appointed in accordance with the Articles.

 

Board Resolution means, with respect to the Issuer, a resolution of the Board of Directors of the Issuer.

 

Business Day means any day that is not a Saturday, Sunday or other day on which commercial banking institutions in New York, New York, Chicago, Illinois or any other city in which the Corporate Trust Office of the Trustee is located are authorized or obligated by law or executive order to be closed; provided that, if any action is required of the Irish Paying Agent, solely for purposes of determining when such action of the Irish Paying Agent is required, days on which commercial banking institutions in Dublin, Ireland are authorized or obligated by law or executive order to be closed will also be considered in determining whether such day is a “Business Day”; provided, further that if any action is required of the Issuer (or of the Administrator on its behalf), solely for purposes of determining when such action of the Issuer is required, days on which commercial banking institutions in the Cayman Islands are authorized or obligated by law or executive order to be closed will also be considered in determining whether such day is a “Business Day.”

 

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Calculation Date means, with respect to any Payment Date, the last day of the related Due Period.

 

Call Period has the meaning specified in Section 9.1(a) hereof.

 

Cash means such funds denominated with currency of the United States as at the time shall be legal tender for payment of all public and private debts, including funds credited to a deposit account or a Securities Account.

 

Cash Release Conditions has the meaning specified in Section 12.1(c).

 

Cashflow Hedge Agreement means any Hedge Agreement entered into for the purpose of protecting the Issuer against a cashflow timing mismatch with respect to one or more Collateral Debt Securities.

 

CDO of CDO Securities means securities that entitle the Holders thereof to receive payments that depend on the cash flow from a portfolio of assets, the majority in principal amount of which are collateralized debt obligations.

 

CDS Principal Balance means, prior to the Effective Date, not less than U.S.$467,500,000, and thereafter, the aggregate Principal Balance of (i) Collateral Debt Securities included in the Collateral (including any Collateral Debt Securities that have become Defaulted Securities or Written Down Securities) and (ii) Eligible Investments, in each case, purchased with the proceeds of the issuance of the Notes or thereafter with Collateral Principal Collections.

 

Certificated Security has the meaning specified in Section 8-102(a)(4) of the UCC.

 

Certificate of Authentication has the meaning specified in Section 2.3(f).

 

Class   means each of the classes comprised of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Income Notes.

 

Class A Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class A Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class A Notes.

 

Class A Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class A Note Scenario Default Rate from the Class A Note Break-Even Default Rate.

 

Class A Note Interest Rate means the Class A-1 Note Interest Rate, the Class A-2 Note Interest Rate or the Class A-3 Note Interest Rate, as applicable.

 

Class A Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class A Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor.

 

Class A Notes means the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes.

 

Class A-1 Note Interest Rate means LIBOR plus 0.27%.

 

Class A-1 Notes means the U.S.$338,250,000 aggregate principal amount of Class A-1 Floating Rate Notes due 2051.

 

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Class A-2 Note Interest Rate means LIBOR plus 0.32%.

 

Class A-2 Notes means the U.S.$54,250,000 aggregate principal amount of Class A-2 Floating Rate Notes due 2051.

 

Class A-3 Note Interest Rate means LIBOR plus 0.33%.

 

Class A-3 Notes means the U.S.$50,000,000 aggregate principal amount of Class A-3 Floating Rate Notes due 2051.

 

Class A/B Coverage Tests means the Class A/B Interest Coverage Test and the Class A/B Principal Coverage Test.

 

Class A/B Interest Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes and the Class B Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Non-Monthly Pay Asset Interest Reserve Account for the Payment Date immediately following such Measurement Date.

 

Class A/B Interest Coverage Test means, for so long as any Class A Notes or Class B Notes remain Outstanding, a test that is satisfied as of any Measurement Date if the Class A/B Interest Coverage Ratio as of such date of determination is equal to or greater than 115.0%; provided that for any Measurement Date occurring on the Effective Date through the Payment Date immediately subsequent to the Effective Date, the Class A/B Interest Coverage Test will be satisfied if Class A/B Interest Coverage Ratio is equal to or greater than 100%.

 

Class A/B Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such Measurement Date and (ii) is the sum of the Aggregate Outstanding Amount of the Class A Notes and the Class B Notes Outstanding as of such Measurement Date.

 

Class A/B Principal Coverage Test means, for so long as any Class A Notes or Class B Notes remain Outstanding, a test satisfied on any Measurement Date if the Class A/B Principal Coverage Ratio as of such date of determination is equal to or greater than 106.3%.

 

Class B Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class B Notes in full by their Stated Maturity Date and the timely payment of interest on such Class B Notes.

 

Class B Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class B Note Scenario Default Rate from the Class B Note Break-Even Default Rate.

 

Class B Note Interest Rate means LIBOR plus 0.38%.

 

Class B Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class B Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor.

 

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Class B Notes means the U.S.$30,300,000 aggregate principal amount of Class B Floating Rate Notes due 2051.

 

Class C Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class C Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes or Class B Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class C Notes.

 

Class C Coverage Tests means the Class C Interest Coverage Test and the Class C Principal Coverage Test.

 

Class C Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class C Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum.

 

Class C Interest Coverage Ratio means on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes, the Class B Notes and the Class C Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Non-Monthly Pay Asset Interest Reserve Account for the Payment Date immediately following such Measurement Date.

 

Class C Interest Coverage Test means, for so long as any Class A Notes, Class B Notes or Class C Notes are Outstanding, a test that is satisfied as of any Measurement Date when the Class C Interest Coverage Ratio is equal to or greater than 110.0%; provided that for any Measurement Date occurring on the Effective Date through the Payment Date immediately subsequent to the Effective Date, the Class C Interest Coverage Test will be satisfied if Class C Interest Coverage Ratio is equal to or greater than 100%.

 

Class C Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class C Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class C Notes.

 

Class C Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class C Note Scenario Default Rate from the Class C Note Break-Even Default Rate.

 

Class C Note Interest Rate means LIBOR plus 0.60%.

 

Class C Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class C Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor.

 

Class C Notes means the U.S.$22,000,000 aggregate principal amount of Class C Deferrable Floating Rate Notes due 2051.

 

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after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class D Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class D Notes.

 

Class D Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class D Note Scenario Default Rate from the Class D Note Break-Even Default Rate.

 

Class D Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class D Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor.

 

Class   D Notes means collectively the Class D-FL Notes and the Class D-FX Notes.

 

Class D Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such Measurement Date and (ii) is the sum of the Aggregate Outstanding Amount of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes Outstanding as of such Measurement Date.

 

Class D Principal Coverage Test means a test that is satisfied as of any date of determination when the Class D Principal Coverage Ratio is equal to or exceeds 102.6%.

 

Class E Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class E Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class E Notes.

 

Class E Coverage Tests means the Class E Interest Coverage Test and the Class E Principal Coverage Test.

 

Class E Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class E Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum.

 

Class E Interest Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Non-Monthly Pay Asset Interest Reserve Account for the Payment Date immediately following such Measurement Date.

 

Class E Interest Coverage Test means, for so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding, a test that is satisfied as of any Measurement Date when the Class E Interest Coverage Ratio is equal to or greater than 102.5%; provided that for any Measurement Date occurring on the Effective Date through the Payment Date immediately subsequent to the Effective Date, the Class E Interest Coverage Test will be satisfied if Class E Interest Coverage Ratio is equal to or greater than 100%.

 

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Class E Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class E Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class E Notes.

 

Class E Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class E Note Scenario Default Rate from the Class E Note Break-Even Default Rate.

 

Class E Note Interest Rate means 8.232%.

 

Class E Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class E Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor.

 

Class E Notes means the U.S.$16,200,000 aggregate principal amount of Class E Deferrable Fixed Rate Notes due 2051.

 

Class E Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such Measurement Date and (ii) is the sum of the Aggregate Outstanding Amount of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes Outstanding as of such Measurement Date.

 

Class E Principal Coverage Test means a test that is satisfied as of any date of determination when the Class E Principal Coverage Ratio is equal to or exceeds 101.8%.

 

Clearing Agency means DTC, Euroclear or Clearstream.

 

Clearing Corporation has the meaning specified in Section 8-102(a)(5) of the UCC.

 

Clearstream means Clearstream Banking, société anonyme.

 

Closing Date means June 22, 2006.

 

CMBS Conduit Securities means Commercial Mortgage Backed Securities (a) issued by a single-seller or multi-seller conduit under which the holders of such Commercial Mortgage Backed Securities have recourse to a specified pool of assets (but not other assets originated by the conduit that support payments on other series of securities) and (b) that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Commercial Mortgage Backed Securities) on the cash flow from a pool of commercial mortgage loans.

 

CMBS Credit Tenant Lease Securities means Commercial Mortgage Backed Securities (other than CMBS Large Loan Securities and CMBS Conduit Securities) that entitle the holders thereof to receive payments that depend on the cash flow from a pool of commercial mortgage loans made to finance the acquisition, construction and improvement of properties leased to corporate tenants (or on the cash flow from such leases); provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the CMBS Securities such as a financial guaranty insurance policy.

 

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CMBS Franchise Securities means Commercial Mortgage Backed Securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such Commercial Mortgage Backed Securities) on the cash flow from (a) a pool of franchise loans made to operators of franchises that provide oil, gasoline, restaurant or food services and provide other services related thereto and (b) leases or subleases of equipment to such operators for use in the provision of such goods and services.

 

CMBS Large Loan Securities means Commercial Mortgage Backed Securities (other than CMBS Conduit Securities) that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Commercial Mortgage Backed Securities) on the cash flow from a commercial mortgage loan or a small pool of commercial mortgage loans made to finance the acquisition or improvement of real properties.

 

CMBS Re-REMIC Securities means any security that is secured directly by, referenced to or representing ownership of, a pool consisting primarily of CMBS Conduit Securities, other CMBS Securities or certificates representing a beneficial interest therein, but not including any Synthetic Security. For the avoidance of doubt, a CMBS Re-REMIC Security shall include any security backed by more than one credit default swap or referencing more than one Reference Obligation or a synthetic collateralized debt obligation or a synthetic resecuritization that (in each case) references more than one CMBS Conduit Security or other CMBS Security or certificates representing a beneficial interest therein.

 

CMBS Securities means CMBS Conduit Securities, CMBS Franchise Securities, CMBS Large Loan Securities, CMBS Single Borrower Securities, CMBS Re-REMIC Securities or CMBS Credit Tenant Lease Securities, as the case may be.

 

CMBS Single Borrower Securities means CMBS Securities (other than CMBS Large Loan Securities and CMBS Credit Tenant Lease Securities) that entitle the holders thereof to receive payments that depend on the cash flow from one or more loans with a single borrower or group of affiliated borrowers secured by one or more properties; provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the CMBS Securities such as a financial guaranty insurance policy.

 

Code means the Internal Revenue Code of 1986, as amended.

 

Collateral has the meaning specified in the Granting Clauses.

 

Collateral Administration Agreement means the Collateral Administration Agreement, dated June 22, 2006, by and among the Issuer, the Collateral Manager and the Collateral Administrator, as the same may be amended and modified from time to time in accordance with its terms.

 

Collateral Administrator means LaSalle Bank National Association, solely in its capacity as Collateral Administrator under the Collateral Administration Agreement, unless a successor Person shall have become the Collateral Administrator pursuant to the applicable provisions of Collateral Administration Agreement, in which case Collateral Administrator shall mean such successor Person.

 

Collateral Assignment of Hedge Agreement means the collateral assignment of Hedge Agreement, dated the date that the Issuer enters into the Hedge Agreement, among the Issuer, the Trustee and the Initial Hedge Counterparty, and any other Collateral Assignment of the Hedge Agreement in respect of any Hedge Agreement entered into between the Issuer, the Trustee and a Hedge Counterparty after the Closing Date.

 

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Collateral Concentration Limitations will be satisfied if, as of any Measurement Date after the Effective Date, and after giving effect to each purchase of a Collateral Debt Security, each of the following conditions (collectively, the “Collateral Concentration Limitations”) is satisfied in the aggregate (or, in the case of a Collateral Concentration Limitation not satisfied immediately prior to such purchase, such purchase maintains or improves compliance with such Collateral Concentration Limitation):

 

(i)                                    General Limitations

 

(a)                                   the aggregate Principal Balance of all Collateral Debt Securities that are PIK Bonds does not exceed 6.0% of the CDS Principal Balance;

 

(b)                                  the aggregate Principal Balance of all Collateral Debt Securities that are Deemed Floating Rate Collateral Debt Securities does not exceed 17.5% of the CDS Principal Balance;

 

(c)                                   the aggregate Principal Balance of all Fixed Rate Collateral Debt Securities does not exceed 75.0% of the CDS Principal Balance;

 

(d)                                  the aggregate Principal Balance of all Collateral Debt Securities that provide for periodic payments of interest in Cash less frequently than monthly does not exceed 35.0% of the CDS Principal Balance;

 

(e)                                   the aggregate Principal Balance of all Collateral Debt Securities that mature after the Stated Maturity Date does not exceed 15.0% of the CDS Principal Balance;

 

(ii)                                 Collateral Debt Security Type Limitations

 

(a)                                   the aggregate Principal Balance of all Collateral Debt Securities that are CMBS Securities does not exceed 85.0% of the CDS Principal Balance; provided that no more than 25.0% of the CDS Principal Balance shall consist of CMBS Large Loan Securities, no more than 7.5% of the CDS Principal Balance shall consist of CMBS Credit Tenant Lease Securities and no more than 20.0% of the CDS Principal Balance shall consist of CMBS Re-REMIC Securities;

 

(b)                                  the sum of the aggregate Principal Balances of all REIT Debt Securities, Trust Preferred Securities and CRE Debt Obligations does not exceed 25.0% of the CDS Principal Balance; provided that not more than 2.75% of the CDS Principal Balance shall consist of Trust Preferred Securities and not more than 10.0% of the CDS Principal Balance shall consist of CRE Debt Obligations;

 

(c)                                   the aggregate Principal Balance of all Collateral Debt Securities that are Real Estate CDO Securities does not exceed 6.0% of the CDS Principal Balance;

 

(d)                                  the aggregate Principal Balance of all Collateral Debt Securities that are Real Estate Interests does not exceed 15.0% of the CDS Principal Balance;

 

(e)                                   the aggregate Principal Balance of all Collateral Debt Securities that are Synthetic Securities does not exceed 5.0% of the CDS Principal Balance;

 

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(iii)                              Ratings Limitations

 

(a)                                   the aggregate Principal Balance of all Collateral Debt Securities with an Actual Rating from S&P or Fitch below “BBB-” or an Actual Rating from Moody’s below “Baa3” does not exceed 35.0% of the CDS Principal Balance;

 

(b)                                  the aggregate Principal Balance of all Collateral Debt Securities with an Actual Rating from S&P or Fitch below “BB-” or an Actual Rating from Moody’s below “Ba3” does not exceed 7.0% of the CDS Principal Balance;

 

(iv)                            Single Issue Limitations

 

(a)                                   the aggregate Principal Balance of all Collateral Debt Securities with an Actual Rating from S&P or Fitch of higher than “BB+” or an Actual Rating from Moody’s of higher than “Ba1” that are part of the same Issue does not exceed 3.0% of the CDS Principal Balance, except for up to four Issues not to exceed 4.0% of the CDS Principal Balance; and

 

(b)                                  the aggregate Principal Balance of all Collateral Debt Securities that have an Actual Rating from S&P or Fitch of below “BBB-” or an Actual Rating from Moody’s of below “Baa3” that are part of the same Issue does not exceed 2.0% of the CDS Principal Balance, except for up to three Issues not to exceed 3.0% of the CDS Principal Balance;

 

(v)                                  Servicer Limitations: with respect to the servicer of the security being acquired, the aggregate Principal Balance of all Collateral Debt Securities serviced by such servicer does not exceed 20.0% of the CDS Principal Balance, except that the aggregate Principal Balance of all Collateral Debt Securities serviced by servicers rated “Below Average” by S&P, or if there is no servicer rating by S&P, having long-term unsecured debt securities rated “BB” or lower, shall not exceed 5.0% of the CDS Principal Balance.

 

(vi)                               Property Type Limitations: the aggregate Principal Balance of all CMBS Conduit Securities and CMBS Large Loan Securities related to Mortgaged Properties that are classified as: (A) multifamily properties does not exceed 40.0% of the CDS Principal Balance; (B) retail properties does not exceed 40.0% of the CDS Principal Balance; (C) office properties does not exceed 45.0% of the CDS Principal Balance; (D) lodging properties does not exceed 35.0% of the CDS Principal Balance; (E) healthcare properties does not exceed 20.0% of the CDS Principal Balance; (F) industrial properties does not exceed 15.0% of the CDS Principal Balance; (G) manufactured housing properties does not exceed 10.0% of the CDS Principal Balance; (H) self storage properties does not exceed 10.0% of the CDS Principal Balance; and (I) any other property type other than those specified in clauses (A) through (H) above does not exceed 15.0% of the CDS Principal Balance;

 

(vii)                            Geographic Limitations: the aggregate Principal Balance of all CMBS Conduit Securities and CMBS Large Loan Securities related to Mortgaged Properties located in: (A) California does not exceed 30.0% of the CDS Principal Balance; (B) New York does not exceed 30.0% of the CDS Principal Balance; (C) Texas does not exceed 30.0% of the CDS Principal Balance; (D) Florida does not exceed 30.0% of the CDS Principal Balance; and (E) any other single state other than California, New York, Texas and Florida does not exceed 15.0% of the CDS Principal Balance;

 

For purposes of determining compliance with any Collateral Concentration Limitation, (a) all calculated percentages will be rounded to the nearest hundredth of 1% (e.g., 5.13%), (b) Temporary Ramp-Up Securities will be excluded from the calculation of the Collateral Concentration Limitations and (c) with respect to Synthetic Securities, satisfaction of the Collateral Concentration Limitations shall be based on

 

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the Synthetic Security itself and not on the related Reference Obligations. During the Ramp-Up Period, the Collateral Concentration Limitations will not be taken into account for the purpose of determining compliance by the Issuer with any requirements under the Indenture.

 

Collateral Debt Security means an item of Collateral which satisfies the Eligibility Criteria specified in Section 12.2.

 

Collateral Interest Collections means, with respect to any Due Period and the related Payment Date, without duplication, the sum of (i) (a) all cash payments of interest with respect to any Collateral Debt Securities and Eligible Investments included in the Collateral (including any Sale Proceeds of a Collateral Debt Security sold at a price greater than or equal to its Principal Balance representing unpaid interest accrued thereon to the date of the sale thereof to the extent not treated as Collateral Principal Collections at the option of the Collateral Manager and (b) all Synthetic Security Periodic Payments payable to the Issuer under a Synthetic Security, net, in the case of a Derivative Contract, of any Synthetic Security Periodic Payments payable by the Issuer to the Derivative Contract Counterparty during the related Collection Period, but excluding in the case of the foregoing clauses (a) and (b) all funds received on a Defaulted Security (including any unpaid interest) and any unpaid interest accrued on a Deferred Interest PIK Bond or a Written Down Security to the date of sale) which are received during the related Due Period, (ii) all payments on Eligible Investments purchased with Collateral Interest Collections, (iii) payments received or scheduled to be received from a Hedge Counterparty under any Hedge Agreement (including the Initial Hedge Agreement) on the related Payment Date, excluding any payments received from a Hedge Counterparty upon reduction of the notional amount and any termination payments ( provided that so long as the Notes are Outstanding, any termination payments received from a Hedge Counterparty will be used to enter into a substitute Hedge Agreement to the extent required to maintain the then-current rating of the Notes by each Rating Agency), (iv) all amendment and waiver fees, all late payment fees and all other fees and commissions received during the related Due Period (other than fees and commissions received in connection with the sale, restructuring, workout or default of Collateral Debt Securities or in connection with Defaulted Securities or Written Down Securities) (excluding any payments representing exit fees, extension fees or prepayment premiums paid in connection with Real Estate Interests), (v) the Principal Balance of any Eligible Investments purchased with Collateral Interest Collections, (vi) all interest accrued on the Closing Date on Collateral Debt Securities included in the Collateral, (vii) any amounts on deposit in the Non-Monthly Pay Asset Interest Reserve Account, (viii) any amounts in the Ramp-Up Interest Reserve Account that are transferred to the Payment Account, (ix) after the Effective Date, at the option of the Collateral Manager, any amount on deposit in the Expense Reserve Account in excess of U.S.$25,000, (x) all income received during the related Due Period on any Eligible Investments then in any Derivative Contract Counterparty Accounts, to the extent transferred to the Collection Account pursuant to and in accordance with Section 10.9 and (xi) all proceeds from the foregoing; provided, however, that Collateral Interest Collections shall not include (i) the funds and other property (including, without limitation, the paid-up share capital of the Issuer) with respect to the Income Notes and the bank account in which such funds and the proceeds thereof are held, (ii) principal of any Collateral Debt Security representing capitalized interest after the date of purchase thereof by the Issuer, (iii) Purchased Accrued Interest or (iv) any amounts contributed by the Income Noteholders as capital contributions pursuant to Section 4.5 of the Income Note Paying Agency Agreement.

 

Collateral Management Agreement means the Collateral Management Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, between the Issuer and the Collateral Manager.

 

Collateral Management Fee means the Senior Collateral Management Fee and the Subordinate Collateral Management Fee.

 

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Collateral Manager means NS Advisors, LLC, a Delaware limited liability company, unless a successor Person shall have become Collateral Manager pursuant to the applicable provisions of the Collateral Management Agreement, in which case Collateral Manager shall mean such successor Person.

 

Collateral Principal Collections means, with respect to any Due Period and the related Payment Date, all amounts received by the Issuer during such Due Period that do not constitute Collateral Interest Collections. Collateral Principal Collections shall include, without limitation, (A) principal of any Collateral Debt Security representing capitalized interest after the date of purchase thereof by the Issuer, (B) any Uninvested Proceeds which have not been invested on or prior to the Effective Date and (C) any amounts contributed by the Income Noteholders as capital contributions pursuant to Section 4.5 of the Income Note Paying Agency Agreement.

 

Collateral Principal Collections Sub-Account has the meaning specified in Section 10.5(a)(1) hereof.

 

Collateral Principal Payments means Collateral Principal Collections excluding Sale Proceeds and any amounts received in respect of Eligible Investments.

 

Collateral Quality Tests will be satisfied if, as of any Measurement Date, the Collateral Debt Securities comply, in the aggregate, with all of the requirements set forth below (collectively, the “Collateral Quality Tests”):

 

(1)                                   the Fitch Weighted Average Rating Factor does not exceed 8.50;

 

(2)                                   (a) the Weighted Average Fixed Rate Coupon as of such date equals or exceeds 5.70% and (b) the Weighted Average Spread as of such date equals or exceeds 2.07%;

 

(3)                                   the Weighted Average Life Test is satisfied;

 

(4)                                   the S&P CDO Monitor Test is satisfied;

 

(5)                                   the S&P Minimum Weighted Average Recovery Rate Test is satisfied;

 

(6)                                   the Moody’s WARF Test is satisfied;

 

(7)                                   the Moody’s Recovery Rate Test is satisfied; and

 

(8)                                   the Herfindahl Score of the Collateral Debt Securities is at least 41;

 

provided that Temporary Ramp-Up Securities will be excluded from the calculation of the Collateral Quality Tests.

 

Collateral Sub-Account means any sub-account established within an Account.

 

Collateralization Event means, provided that no Substitution Event has occurred, any of the following events: (a) the Hedge Ratings Determining Party’s short-term rating from Moody’s is lower than “P-1” or its long-term rating is withdrawn, suspended or downgraded below “Al”, (b) the Hedge Ratings Determining Party’s short-term rating from Fitch is lower than “Fl” or the long-term rating of the Hedge Ratings Determining Party from Fitch is withdrawn, suspended or downgraded below “A”, or (c) the short term rating of the Hedge Ratings Determining Party from S&P is lower than “A-1” or, if the Hedge Ratings Determining Party does not have a short term rating from S&P, the long term rating of such Hedge Ratings Determining Party is lower than “A+”.

 

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Collection Account means the Securities Account designated the “Collection Account” and established in the name of the Trustee pursuant to Section 10.5, including the Collateral Principal Collections Sub-Account.

 

Collections means, with respect to any Payment Date, the sum of (i) the Collateral Interest Collections collected during the applicable Due Period and (ii) the Collateral Principal Collections collected during the applicable Due Period.

 

Commercial Mortgage Backed Security means securities backed by obligations (including certificates of participations in obligations) that are principally secured by mortgages on real property or interests therein having a multifamily or commercial use, such as regional malls, retail space, office buildings, warehouse or industrial properties, hotels, nursing homes and senior living centers.

 

Commission means the United States Securities and Exchange Commission.

 

Controlling Class   means the Class A-1 Notes voting as a single Class, so long as any Class A-1 Notes are Outstanding, and then the Class A-2 Notes, so long as any Class A-2 Notes are Outstanding, and then the Class A-3 Notes, so long as any Class A-3 Notes are Outstanding, and then the Class B Notes, so long as any Class B Notes are Outstanding, and then the Class C Notes, so long as any Class C Notes are Outstanding, and then the Class D Notes, so long as any Class D Notes are Outstanding, and then the Class E Notes, so long as any Class E Notes are Outstanding, in each case, based on the Aggregate Outstanding Amount thereof.

 

Controlling Class Objection means written notice to the Collateral Manager by the Holders of a majority in aggregate principal amount of Outstanding Notes of the Controlling Class objecting in their reasonable discretion to a proposed replacement Key Manager.

 

Controlling Person means any other person (other than a Benefit Plan Investor) that has discretionary authority or control with respect to the assets of the Issuer, a person who provides investment advice for a fee (direct or indirect) with respect to the assets of the Issuer, or any “affiliate” (within the meaning of 29 C.F.R. Section 2510.3-101(f)(3)) of any such person.

 

Corporate Services Agreement means that certain Corporate Services Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, between the Issuer and the Administrator.

 

Corporate Trust Office means the designated corporate trust office of the Trustee, currently located at 181 West Madison Street, 32 nd  Floor, Chicago, Illinois 60602, Attention: CDO Trust Services Group — N-Star Real Estate CDO VII Ltd., telephone number 312-904-4047, fax number 312-602-3935, or such other address as the Trustee may designate from time to time by notice to the Rated Noteholders, the Income Noteholders, the Collateral Manager and the Issuer or the principal corporate trust office of any successor Trustee.

 

Coverage Tests means the Class A/B Coverage Tests, the Class C Coverage Tests, the Class D Coverage Tests and the Class E Coverage Tests.

 

CRE Debt Obligations means interests in a secured or unsecured, senior or senior subordinated term bank or non-bank loans or other debt obligations, whether in loan or security form, or participations (senior or subordinate) therein, that are obligations (direct or by way of guarantee) of corporations, partnerships or other entities organized under the laws of the United States (or any State thereof) whose business is significantly related to real estate, real estate management and/or real estate ownership; provided that no

 

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Real Estate Interests, Mezzanine Loans, REIT Debt Securities or Trust Preferred Securities shall constitute CRE Debt Obligations.

 

Credit Lease Loans means mortgage loans secured by mortgages on commercial real estate properties that are subject to a lease to a single tenant.

 

Credit Risk Event means, with respect to any Collateral Debt Security, (i) such Collateral Debt Security has been put on watch for possible downgrade, or has been downgraded, by any Rating Agency, (ii) such Collateral Debt Security has experienced an increase in credit spread of 10% or more (due to credit related reasons as determined by the Collateral Manager in its reasonable business judgment) compared to the credit spread at which such Collateral Debt Security was purchased by the Issuer, determined by reference to an applicable index selected by the Collateral Manager or (iii) there has been an event or circumstance that constitutes a change in the condition of the issuer of such Collateral Debt Security (or of available information with respect to such issuer) that evidences, in the good faith judgment of the Collateral Manager, (a) a significant risk of such Collateral Debt Security materially declining in credit quality, or (b) a significant risk, with a lapse of time, of such Collateral Debt Security becoming a Defaulted Security or a Written Down Security.

 

Credit Risk Security means any Collateral Debt Security with respect to which there shall have occurred a Credit Risk Event.

 

Credit Support Annex means the ISDA Credit Support Annex to a Hedge Agreement between a Hedge Counterparty and the Issuer.

 

Current Portfolio means the portfolio (measured by Principal Balance) of (a) the Pledged Collateral Debt Securities and the proceeds of the disposition thereof held as Cash and (b) Eligible Investments purchased with proceeds of the disposition of Pledged Collateral Debt Securities, existing immediately prior to the sale, maturity or other disposition of a Pledged Collateral Debt Security or immediately prior to the acquisition of a Pledged Collateral Debt Security, as the case may be.

 

Custodian has the meaning specified in Section 3.3(a).

 

Daily Official List means the Daily Official List of the Irish Stock Exchange.

 

Deemed Floating Asset Hedge means, with respect to a Fixed Rate Collateral Debt Security, an interest rate swap having (i) a notional schedule equal to the Principal Balance as it is reduced by expected amortization of such Fixed Rate Collateral Debt Security over time and (ii) payment dates identical to the Payment Dates of the Issuer under the Indenture; provided that, (w) at the time of entry into the Deemed Floating Asset Hedge, (i) the expected principal payments on the Fixed Rate Collateral Debt Security comprising a Deemed Floating Rate Collateral Debt Security will not extend beyond the Stated Maturity Date and (ii) the scheduled notional amount of such Deemed Floating Asset Hedge at any time is equal to the expected principal amount of the related Fixed Rate Collateral Debt Security (as calculated at such time), (x) the Rating Agencies and the Trustee are notified prior to the Issuer’s entry into a Deemed Floating Asset Hedge, and each will be provided with the identity of the proposed hedge counterparty and copies of the hedge documentation and notional schedule, (y) such Deemed Floating Asset Hedge will require Rating Agency Confirmation from S&P to the extent the applicable master agreement or schedule attached thereto is not a hedge agreement with respect to which the documentation thereof conforms in all material respects to a form in respect of which Rating Agency Confirmation was previously obtained by the Issuer and (z) such Deemed Floating Asset Hedge is priced at then-current market rates.

 

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the case of any other default or event of default, such default or event of default is no longer continuing ( provided that no event of default has been waived with respect to (A) a default in the payment of principal or interest or (B) insolvency in the event that all outstanding amounts have not been paid) and such security satisfies the criteria for inclusion of securities in the definition of “Collateral Debt Security”;

 

(ii)                                 that ranks pari passu with or subordinate to any other indebtedness for borrowed money owing by the issuer of such security, if any (for purposes hereof, “Other Indebtedness”; provided, however, that such Other Indebtedness of such issuer will not include series of such Other Indebtedness that may be issued or owing by a separate special purpose entity and is not guaranteed by the issuer) if such issuer had defaulted in the payment of principal or interest in respect of such Other Indebtedness (without giving effect to any applicable notice or grace period or waiver, unless the Collateral Manager certifies to the Trustee that in the Collateral Manager’s judgment such default of up to the lesser of (a) three Business Days and (b) the grace period provided for in the Underlying Instruments is due to non-credit and non-fraud related reasons and the Collateral Manager has so certified in writing to the Trustee), unless, in the case of a default or event of default consisting of a failure of the obligor on such security to make required interest payments and/or scheduled principal payments, such Other Indebtedness has resumed current payments of interest and scheduled principal (including all due interest and scheduled principal) in cash (whether or not any waiver or restructuring has been effected) and, in the Collateral Manager’s judgment, will continue to make such current payments of interest and scheduled principal in cash; provided that a security shall be considered a Defaulted Security pursuant to this clause (ii) only if the Collateral Manager knows, after due inquiry as required pursuant to the Collateral Management Agreement, that the issuer thereof is (or is reasonably expected by the Collateral Manager to be, as of the next scheduled payment distribution date) in default (without giving effect to any applicable grace period or waiver) as to payment of principal and/or interest on another obligation (and such default has not been cured or waived) which is senior or pari passu in right of payment to such Collateral Debt Security;

 

(iii)                             with respect to which any bankruptcy, insolvency or receivership proceeding has been initiated in respect of the issuer of such Collateral Debt Security, or there has been proposed or effected any distressed exchange or other debt restructuring where the issuer of such Collateral Debt Security has offered the debt holders a new security or package of securities that, in the judgment of the Collateral Manager either (a) amounts to a diminished financial obligation or (b) has the purpose of helping the issuer to avoid default. For the avoidance of doubt in applying and interpreting this definition of Defaulted Security, the Collateral Manager shall be deemed to have knowledge of all information that Authorized Officers of the Collateral Manager have actually received, and shall be responsible under the Collateral Management Agreement for obtaining and reviewing information available to it either in its capacity as an investment manager of national standing or as holder of such Collateral Debt Security;

 

(iv)                             if such Collateral Debt Security has been rated “C” or lower by Moody’s or “CC” or lower by S&P or Fitch or if S&P has withdrawn its rating and has not provided the Issuer with a shadow rating;

 

(v)                                  which is a Written Down Security unless S&P has affirmed its rating of such Written Down Security; or

 

(vi)                             that is a Synthetic Security that has a single Reference Obligation (A) the Reference Obligation of which would (if owned by the Issuer) constitute a Defaulted Security or (B) the Derivative

 

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Contract Counterparty with respect to which is a “Defaulting Party” or the sole “Affected Party” (as such terms are defined therein) thereunder.

 

Defaulting Party has the meaning given to such term in the applicable Hedge Agreement or Synthetic Security.

 

Deferred Interest PIK Bond means (A) a PIK Bond (other than a Trust Preferred Security) with respect to which interest has been deferred or capitalized or does not pay interest when scheduled (other than a Defaulted Security) for each consecutive payment date occurring over a period of the lesser of (i) six months or (ii) two consecutive payment dates, but only until such time as payment of interest on such PIK Bond has resumed and all capitalized and deferred interest and any interest thereon has been paid in cash in accordance with the terms of the Underlying Instruments; or (B) a PIK Bond that is a Trust Preferred Security with respect to which interest has been deferred or capitalized and remains outstanding.

 

Deferred Interest PIK Bond Amount means, with respect to each Deferred Interest PIK Bond in the Collateral, the lesser of (i) the product of the Principal Balance of such Deferred Interest PIK Bond and the lowest of the Applicable Recovery Rates of such Deferred Interest PIK Bond and (ii) the product of the Principal Balance of such Deferred Interest PIK Bond and the Market Value of such Deferred Interest PIK Bond.

 

Definitive Class A-D Note has the meaning specified in Section 2.1(c).

 

Definitive Class E Note has the meaning specified in Section 2.1(d).

 

Definitive Class E Note Transfer Certificate has the meaning specified in Section 2.4(d)(1).

 

Definitive Income Notes means Income Notes issued in the form of physical certificates in definitive, fully registered form.

 

Depositary means, with respect to the Rated Notes issued in the form of one or more Global Notes, the Person designated as Depositary pursuant to Section 2.2(e), or any successor thereto, appointed pursuant to the applicable provisions of this Indenture.

 

Depositary Participant means a broker, dealer, bank or other financial institution or other Person for whom from time to time the Depositary effects book-entry transfers and pledges of notes deposited with the Depositary.

 

Derivative Contract means a credit derivative, total return swap or other similar contract or agreement executed by the Issuer with a Derivative Contract Counterparty, in respect of which the Issuer has exposure synthetically through such contract to one or more (including a pool of) Reference Obligations or obligors; provided that any Derivative Contract executed by the Issuer shall (i) contain appropriate limited recourse and non-petition provisions equivalent ( mutatis mutandis ) to those set forth herein and Rating Agency Confirmation from S&P shall have been obtained before entering into such Derivative Contract and (ii) require the Issuer to deposit into the Derivative Contract Counterparty Account an amount equal to its maximum potential exposure under such Derivative Contract.

 

Derivative Contract Counterparty means an entity required to make periodic premium payments to the Issuer pursuant to the terms of a Derivative Contract and which satisfies the Derivative Contract Counterparty Rating Requirement.

 

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Derivative Contract Counterparty Account means each account established for the benefit of a Derivative Contract Counterparty in connection with a Derivative Contract pursuant to Section 10.9 hereof.

 

Derivative Contract Counterparty Rating Requirement means the requirement that an entity will satisfy if it has (or its guarantor under a guarantee meeting S&P’s then-current criteria for guarantees has) (A) (i) a long term debt rating of at least “Aa3” by Moody’s or (ii) a long term debt rating of at least “Al” by Moody’s and a short-term debt rating of “P-1” and (B) a short term rating of at least “A-1+” by S&P (or “A-1” by S&P if the premium (and any other relevant amount (such as coupon) required under the relevant Derivative Contract) to be paid by such Derivative Contract Counterparty is posted one payment period in advance for the term of the Derivative Contract) and is not on negative watch.

 

Derivative Contract Issuer Account means each account established for the benefit of the Issuer in connection with a Derivative Contract pursuant to Section 10.10 hereof.

 

Derivative Security means a security in the form of a credit-linked note, trust certificate, collateralized bond obligation or collateralized loan or similar obligation in respect of which the Issuer has exposure synthetically to one or more (including a pool of) Reference Obligations or obligors through a swap or other agreement executed by the issuer of such security with a person other than the Issuer and in respect of which the Issuer has no ongoing payment obligations; provided, however that a Derivative Security shall not include any security backed by more than one credit default swap or referencing more than one Reference Obligation or a synthetic collateralized debt obligation or synthetic resecuritization that (in each case) references CMBS Conduit Securities or other CMBS Securities or certificates representing a beneficial interest therein (which, for the avoidance of doubt, shall (in each case) be treated as a CMBS Re-REMIC Security).

 

Distribution means any payment of principal, interest or fee or any dividend or premium payment made on, or any other distribution in respect of, an obligation or security.

 

Dollar or U.S.$ means currency of the United States as at the time shall be legal tender for all debts, public and private.

 

DTC means The Depository Trust Company, and its nominees and their respective successors.

 

Due Date means each date on which a Distribution is due on a Pledged Security.

 

Due Period means, with respect to each Payment Date, the period beginning on the day following the last day of the preceding Due Period relating to the preceding Payment Date (or, in the case of the Due Period that is applicable to the first Payment Date, beginning on the Closing Date) and ending at the later of (i) the close of business on the fourth Business Day preceding such Payment Date and (ii) the close of business on the fourth Business Day following the 11th day of the same calendar month as such Payment Date, or if the 11th day of such calendar month is not a Business Day, the fifth Business Day following the 11th day of such calendar month.

 

Effective Date means the date that is the earliest of (i) the 120 days following the Closing Date, (ii) the date on which the Issuer has purchased Collateral Debt Securities, excluding Temporary Ramp-Up Securities, having an aggregate par amount of U.S.$ 550,000,000 or (iii) such earlier date (if any) that is designated by the Collateral Manager by notice to the Trustee under the Indenture; provided that in the event that such day does not fall on a Business Day, the Effective Date shall be the next succeeding Business Day.

 

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Eligibility Criteria has the meaning specified in Section 12.2.

 

Eligible Investments means any U.S. dollar denominated investment that, at the time it is delivered to the Trustee, is one or more of the following obligations or securities, including, without limitation, those investments for which the Trustee or an Affiliate of the Trustee provides services:

 

(i)                                      cash;

 

(ii)                                 direct Registered obligations of, and Registered obligations the timely payment of principal of and interest on which is fully and expressly guaranteed by, the United States of America, or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America;

 

(iii)                             demand and time deposits in, interest bearing trust accounts and certificates of deposit of, bankers’ acceptances issued by, or federal funds sold by any depository institution or trust company (including the Trustee) incorporated under the laws of the United States of America or any state thereof and subject to the supervision and examination by federal and/or state banking authorities so long as the commercial paper and/or debt obligations of such depository institution or trust company (or, in the case of the principal depository institution in a holding company system, the commercial paper or debt obligations of such holding company) at the time of such investment or contractual commitment providing for such investment have a credit rating of:

 

(a)                                   in the case of long-term debt obligations, not less than “Aa2” by Moody’s, “AA+” by S&P and “AA” if rated by Fitch; or

 

(b)                                  in the case of commercial paper and short-term debt obligations including time deposits, “P-1” by Moody’s, “A-1+” by S&P and “Fl” if rated by Fitch ( provided that, in the case of commercial paper and short-term debt obligations with a maturity of longer than 91 days, the issuer thereof must also have at the time of such investment a long-term credit rating of not less than “AA+” by S&P and a short- and long-term credit rating of not less than “F1+” and “AA”, respectively, if rated by Fitch; provided, however , that (1) so long as LaSalle Bank National Association is rated at least “A-1” by S&P and not on negative watch and (2) LaSalle Bank National Association is the Trustee, overnight time deposits with LaSalle Bank National Association shall be an Eligible Investment);

 

(iv)                             Registered securities other than mortgage-backed securities bearing interest or sold at a discount issued by any corporation under the laws of the United States of America or any state thereof that have a credit rating of “Aa2” by Moody’s, “AA+” by S&P and “AA” if rated by Fitch at the time of such investment or contractual commitment providing for such investment;

 

(v)                                  unleveraged repurchase obligations (if treated as debt for tax purposes by the issuer) with respect to any security described in clause (ii) above, entered into with a depository institution or trust company (acting as principal) described in clause (iii) or entered into with broker-dealers registered with the Commission (acting as principal) whose short-term debt has a credit rating of “P-1” by Moody’s, “A-1+” by S&P and “F1+” if rated by Fitch at the time of such investment in the case of any repurchase obligation for a security having a maturity not more than 183 days from the date of its issuance or whose long-term debt has a credit rating of at least “Aa2” by Moody’s, “AA+” by S&P and “AA” if rated by Fitch at the time of such investment in the case of any repurchase obligation for a security having a maturity more than 183 days from the date of its issuance;

 

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(vi)                             commercial paper or other short-term obligations having at the time of such investment a credit rating of (a) (1)“F1” by Fitch and that have a maturity of not more than 30 days from its date of issuance or (2) “F1+” by Fitch and that have a maturity of more than 30 days but less than one year from its date of issuance and (b) “P-1” by Moody’s and “A-1+” by S&P that are registered and are either bearing interest or are sold at a discount from the face amount thereof and that have a maturity of not more than 183 days from its date of issuance; provided that in the case of commercial paper with a maturity of longer than 91 days, the issuer of such commercial paper (or, in the case of a principal depository institution in a holding company system, the holding company of such system), if rated by the Rating Agencies, must have at the time of such investment a long-term credit rating of at least “Aa2” by Moody’s, “AA+” by S&P and “AA” if rated by Fitch;

 

(vii)                          money market funds with respect to any investments described in clauses (ii) through (vi) above having, at the time of such investment, a credit rating of not less than “Aaa” by Moody’s, “AAA/AAAm/AAAm-G” by S&P (if such funds are rated by S&P) and a credit rating of “AAA” if rated by Fitch, respectively (including those for which the Trustee is investment manager or advisor), provided that such fund or vehicle is formed and has its principal office outside the United States; and

 

(viii)                      any other investments approved in writing by the Rating Agencies;

 

provided that (a) Eligible Investments purchased with funds in the Collection Account will be held until maturity except as otherwise specifically provided herein and will include only such obligations or securities as mature no later than the Business Day prior to the Payment Date next succeeding the date of investment in such obligations or securities, unless such Eligible Investments are investments of the type described in clause (i) or (iii) above, in which event such Eligible Investments may mature on such Payment Date and (b) none of the foregoing obligations or securities will constitute Eligible Investments if all, or substantially all, of the remaining amounts payable thereunder will consist of interest and not principal payments, if such security is purchased at a price in excess of 100% of par, if such security is subject to substantial non-credit related risk, as determined by the Collateral Manager in its judgment, if any income from or proceeds of disposition of the obligation or security is or will be subject to deduction or withholding for or on account of any withholding or similar tax or the acquisition (including the manner of acquisition), ownership, enforcement or disposition of the obligation or security will subject the Issuer to net income tax in any jurisdiction outside its jurisdiction of incorporation, or if such security has an assigned rating with an “r”, “t”, “p”, “pi” or “q” subscript, or if such security is a mortgage-backed security or if such security is subject to an Offer.

 

Eligible SPV Jurisdiction means Bahamas, Bermuda, the Cayman Islands, the Channel Islands, the Netherlands Antilles, Luxembourg or any other similar jurisdiction (so long as Rating Agency Confirmation is obtained in connection with the inclusion of such other jurisdiction) generally imposing either no or nominal taxes on the income of companies organized under the laws of such jurisdiction.

 

Emerging Market Issue r means a sovereign or non-sovereign issuer located in a country that is in Latin America, Asia, Africa, Eastern Europe or the Caribbean or in a country the dollar-denominated sovereign debt obligations of which are rated lower than “Aa” by Moody’s, “AA” by S&P and “AA” by Fitch; provided that an issuer of Asset-Backed Securities located in any Eligible SPV Jurisdiction shall not be an Emerging Market Issuer for purposes hereof if the underlying collateral of such Asset-Backed Securities consists solely of obligations of obligors located in the United States and Qualifying Foreign Obligors.

 

Entitlement Holder has the meaning specified in Section 8-102(a)(7) of the UCC.

 

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Entitlement Order has the meaning specified in Section 8-102(a)(8) of the UCC.

 

Equity Security means any security that does not entitle the holder thereof to receive periodic payments of interest and one or more installments of principal acquired by the Issuer as a result of the exercise or conversion of Collateral Debt Securities, in conjunction with the purchase of Collateral Debt Securities or in exchange for a Collateral Debt Security.

 

ERISA means the U.S. Employee Retirement Income Security Act of 1974, as amended.

 

Euroclear means Euroclear Bank S.A/N.V., as operator of the Euroclear system.

 

Event of Default has the meaning specified in Section 5.1.

 

Excepted Property means the U.S.$1,000 of capital contributed to the Issuer in respect of the Issuer’s Ordinary Shares in accordance with the Articles and U.S.$1,000 representing a profit fee to the Issuer.

 

Exchange Act means the United States Securities Exchange Act of 1934, as amended.

 

Expense Reserve Account means the Securities Account designated the “Expense Reserve Account” and established in the name of the Trustee pursuant to Section 10.6.

 

Fee Basis Amount means an amount equal, for any Payment Date, to the average of the aggregate CDS Principal Balance (excluding the aggregate Principal Balance of Defaulted Securities) on the first day of the related Due Period and the aggregate CDS Principal Balance (excluding the aggregate Principal Balance of Defaulted Securities) on the last day of such Due Period.

 

Financial Asset has the meaning specified in Section 8-102(a)(9) of the UCC.

 

Financing Statement means a financing statement relating to the Collateral naming the Issuer as debtor and the Trustee on behalf of the Secured Parties as secured party.

 

Fitch means Fitch, Inc. and any successor or successors thereto.

 

Fitch Industry Classification Group means any of the Fitch industry and sub-industry classification groups as currently set forth in “Global Rating Criteria for Collateralised Debt Obligations” available at www.fitchratings.com. Fitch may, from time to time, modify or replace this criteria which may have modified or replaced this report if Fitch provides notice thereof to the Issuer, the Collateral Manager and the Trustee.

 

Fitch Rating means (A) with respect to any Collateral Debt Security other than a Trust Preferred Security, for determining the Fitch Rating as of any date of determination:

 

(i)                                      if such Collateral Debt Security is rated by Fitch, the Fitch Rating shall be such rating as published in any publicly available source;

 

(ii)                                   if such Collateral Debt Security is not rated by Fitch, or the Fitch Rating cannot be determined by the method in clause (i) above, and a rating is publicly available from both S&P and Moody’s, the Fitch Rating shall be the lower of such ratings; and if a rating is publicly available from only one of S&P and Moody’s, the Fitch Rating shall be the equivalent of such rating by S&P or Moody’s, as the case may be; and

 

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(iii)                             in all other circumstances, the Fitch Rating shall be the private rating assigned by Fitch upon request of the Collateral Manager;

 

(B)                               with respect to any Collateral Debt Security that is a Trust Preferred Security, (i) if the issuing entity (or the direct or indirect parent of such issuing entity) of such Trust Preferred Security has a public rating by Fitch, that public rating shall apply, or (ii) if such Trust Preferred Security has no public rating by Fitch, it shall be the private rating assigned by Fitch upon request of the Collateral Manager.

 

provided that (a) if such Collateral Debt Security has been put on rating watch negative for possible downgrade by any Rating Agency, then the rating used to determine the Fitch Rating under clause (ii) above shall be one (1) rating subcategory below such rating by that Rating Agency, (b) if such Collateral Debt Security has been put on rating watch positive for possible upgrade by any Rating Agency, then the rating used to determine the Fitch Rating under clause (ii) above shall be one rating subcategory above such rating by that Rating Agency and (c) notwithstanding the rating definition described above, Fitch reserves the right to issue a rating estimate for any Collateral Debt Security at any time.

 

Fitch Rating Factor means, for the purpose of computing the Fitch Weighted Average Rating Factor, with respect to any Collateral Debt Security or Eligible Investment on any relevant date, the number set forth in the table below opposite the Fitch Rating of such Collateral Debt Security or Eligible Investment:

 

Fitch Rating		Fitch Rating Factor		Fitch Rating		Fitch Rating Factor
AAA		.019		BB		13.53
AA+		.057		BB-		18.46
AA		.089		B+		22.84
AA-		1.15		B		27.67
A+		1.65		B-		34.98
A		1.85		CCC+		43.36
A-		2.44		CCC		48.52
BBB+		3.13		CC		77.00
BBB		3.74		C		95.00
BBB-		7.26		DDD-D		100.00
BB+		10.18

 

Fitch Recovery Rate means, with respect to a Collateral Debt Security on any Calculation Date, an amount equal to the percentage corresponding to the domicile, original rating, seniority and tranche thickness of such item of Collateral Debt Security as currently set forth on the Closing Date in “Global Rating Criteria for Collaterised Debt Obligations” available at www.fitchratings.com. Fitch may, from time to time, modify or replace this criteria and Fitch may apply the current criteria which may have modified or replaced this report if Fitch provides notice thereof to the Issuer, the Collateral Manager and the Trustee.

 

Fitch Weighted Average Rating Factor means the number determined on any Calculation Date by dividing (i) the summation of the series of products obtained (a) for any Collateral Debt Security that is not a Defaulted Security or Deferred Interest PIK Bond, by multiplying (1) the Principal Balance on such Calculation Date of each such Collateral Debt Security by (2) its respective Fitch Rating Factor on such Calculation Date and (b) for any Defaulted Security or Deferred Interest PIK Bond, by multiplying (1) the Applicable Recovery Rate for such Defaulted Security or Deferred Interest PIK Bond by (2) the

 

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Principal Balance on such Calculation Date of each such Defaulted Security or Deferred Interest PIK Bond by (3) its respective Fitch Rating Factor on such Calculation Date by (ii) the sum of (a) the aggregate Principal Balance on such Calculation Date of all Collateral Debt Securities and Eligible Investments that are not Defaulted Securities or Deferred Interest PIK Bonds, plus (b) the summation of the series of products obtained by multiplying (1) the Applicable Recovery Rate for each Defaulted Security or Deferred Interest PIK Bond by (2) the Principal Balance on such Calculation Date of such Defaulted Security or Deferred Interest PIK Bond, and rounding the result up to the nearest whole number.

 

Fixed Rate Collateral Debt Security means any Collateral Debt Security which bears a fixed rate of interest.

 

Fixed Rate Excess means, as of any Measurement Date, a fraction (expressed as a percentage), the numerator of which is equal to the product of (a) the greater of zero and the excess, if any, of the Weighted Average Fixed Rate Coupon for such Measurement Date over 5.70%, and (b) the aggregate Principal Balance of all Collateral Debt Securities that are Fixed Rate Collateral Debt Securities (excluding, in each case, Defaulted Securities, Written Down Securities, Deferred Interest PIK Bonds and Deemed Floating Rate Collateral Debt Securities) and the denominator of which is the aggregate Principal Balance of all Collateral Debt Securities that are Floating Rate Collateral Debt Securities or Deemed Floating Rate Collateral Debt Securities (excluding, in each case, Defaulted Securities, Written Down Securities and Deferred Interest PIK Bonds).

 

Fixed Rate Notes means the Class D-FX Notes and the Class E Notes.

 

Floating Rate Collateral Debt Security means any Collateral Debt Security which bears interest based upon LIBOR, prime rate or another floating rate index.

 

Floating Rate Notes means, collectively, the Class A Notes, the Class B Notes, the Class C Notes and the Class D-FL Notes.

 

Form-Approved Hedge Agreement means a Hedge Agreement relating to a specific Hedge Counterparty with respect to which (a) the related Collateral Debt Security could be purchased by the Issuer without any required action by the Rating Agencies and (b) the documentation of which conforms in all material respects to a form for such Hedge Counterparty which does not require Rating Agency Confirmation (as certified to the Trustee by the Collateral Manager, following receipt of confirmation by the Collateral Manager from the Hedge Counterparty and the Rating Agencies); provided that (i) such Form-Approved Hedge Agreement shall not provide for any upfront payments to be made to any Hedge Counterparty (other than the Initial Hedge Counterparty), (ii) any revised Form-Approved Hedge Agreement with respect to a particular Hedge Counterparty shall be approved by each of the Rating Agencies at least ten days prior to the initial use thereof, (iii) any Rating Agency may withdraw its consent to the use of a particular Form-Approved Hedge Agreement by written notice to the Trustee, the Collateral Manager and the relevant Hedge Counterparty ( provided that such withdrawal of consent shall not affect any existing Hedge Agreement entered into with such Hedge Counterparty) and (iv) the Issuer (or the Collateral Manager on its behalf) shall deliver to the Trustee and each Rating Agency a copy of each Form-Approved Hedge Agreement specifying the Hedge Counterparty to which it relates upon receipt of Rating Agency Confirmation with respect thereto, and the Trustee’s records (when taken together with any correspondence received from the Rating Agencies pursuant to clause (ii)) shall be conclusive evidence of such form.

 

Four-Month Period means, at any time during the Reinvestment Period, the period of four months following the earliest date as of which the number of Key Managers that are employed on a substantially

 

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full-time basis in the position of managing director or other management-level employee by the Collateral Manager (or any of its successors or assigns permitted pursuant to Section 16 of the Collateral Management Agreement) becomes less than one.

 

GAAP has the meaning specified in Section 6.3(k).

 

Global Notes means the Rule 144A Global Notes and the Regulation S Global Notes.

 

Grant means to grant, bargain, sell, warrant, alienate, remise, demise, release, convey, assign, transfer, mortgage, pledge, create and grant a security interest in and right of set-off against, deposit, set over and confirm. A Grant of the Pledged Securities, or of any other instrument, shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate continuing right to claim for, collect, receive and receipt for principal, interest and fee payments in respect of the Pledged Securities or such other instruments, and all other amounts payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise, and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto.

 

Hedge Agreemen t means, collectively, any of one or more interest rate protection agreements (including the Initial Hedge Agreements) or any Cashflow Hedge Agreement, as amended from time to time, together with any replacement hedge agreements on substantially identical terms (or that otherwise satisfies the conditions of Section 16.1(d)), entered into pursuant to Section 16.1 or a Deemed Floating Asset Hedge.

 

Hedge Counterparty means (a) with respect to each Initial Hedge Agreement entered into on the Closing Date, the Initial Hedge Counterparty (or any permitted assignee or successor) and (b) any hedge counterparty (or any permitted assignee or successor) under a Hedge Agreement (including under a Deemed Floating Asset Hedge or any Cashflow Hedge Agreement) that satisfies the Hedge Counterparty Ratings Requirement.

 

Hedge Counterparty Collateral Account means each Securities Account designated the “Hedge Counterparty Collateral Account” and established in the name of the Trustee pursuant to Section 16.1(f).

 

Hedge Counterparty Ratings Requirement means, with respect to any Hedge Ratings Determining Party: (a) either (x) (1) a rating on the short-term obligations of the Hedge Ratings Determining Party of “P-1” and (2) a rating on the long-term unsecured, senior debt obligations of the Hedge Ratings Determining Party of at least “Al” by Moody’s or (y) if there is no short-term rating by Moody’s, a rating on the long-term unsecured, senior debt obligations of the Hedge Ratings Determining Party of at least “Aa3” by Moody’s; (b) both (x) the short-term rating of such Hedge Ratings Determining Party by Fitch is not lower than “Fl” and (y) the long-term rating of such Hedge Ratings Determining Party by Fitch is not withdrawn, suspended or downgraded below “A”; and (c) either (i) the short-term rating of such Hedge Ratings Determining Party is not lower than “A-1” by S&P or (ii) if such Hedge Ratings Determining Party does not have a short-term rating from S&P, the long-term rating of such Hedge Ratings Determining Party by S&P is not lower than “A+”.

 

Hedge Payment Amount means, with respect to the Hedge Agreement and any Payment Date, the amount, if any, then payable by the Issuer to the Hedge Counterparty, including any amounts so payable in respect of a termination of any Hedge Agreement.

 

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receive in connection with such Tax Redemption or Auction Call Redemption an amount equal to (x) the Income Notes Stated Amount minus (y) the aggregate amount of all cash distributions on the Income Notes (whether in respect of distributions or redemption payments made to the Income Note Paying Agent for distribution to the Income Noteholders) on or prior to the relevant Auction Date.

 

Income Note Register means, with respect to the Income Notes, the Income Note Register maintained by the Income Note Registrar.

 

Income Note Registrar means LaSalle Bank National Association, and any successors or assigns in its capacity as Income Note Registrar under the Income Note Paying Agency Agreement.

 

Income Noteholder means, with respect to any Income Note, the Person in whose name such Income Note is registered in the Income Note Register.

 

Income Notes means the U.S.$23,000,000 Income Notes due 2051.

 

Income Notes Stated Amount means U.S.$23,000,000.

 

Indenture means this instrument and, if from time to time supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, as so supplemented or amended.

 

Independent means, as to any Person, any other Person (including, in the case of an accountant, or lawyer, a firm of accountants or lawyers and any member thereof) who (i) does not have and is not committed to acquire any material direct or any material indirect financial interest in such Person or in any Affiliate of such Person, (ii) is not connected with such Person as an Officer, employee, promoter, underwriter, voting trustee, partner, director or Person performing similar functions and (iii) if required to deliver an opinion or certificate to the Trustee pursuant to this Indenture, states in such opinion or certificate that the signer has read this definition and that the signer is Independent within the meaning hereof. “Independent” when used with respect to any accountant may include an accountant who audits the books of such Person if in addition to satisfying the criteria set forth above the accountant is independent with respect to such Person within the meaning of Rule 101 of the Code of Ethics of the American Institute of Certified Public Accountants.

 

Initial Hedge Agreements mean, collectively, each of the interest rate swap agreements entered into between the Issuer and the Initial Hedge Counterparty on the Closing Date.

 

Initial Hedge Counterparty means Bank of America, N.A. under the Initial Hedge Agreement and any of its successors, assigns or replacements under the Initial Hedge Agreement appointed in accordance with the terms of this Indenture and the Initial Hedge Agreement.

 

Initial Payment Date means the Payment Date occurring in July 2006.

 

Instrument has the meaning specified in Section 9-102(a)(47) of the UCC.

 

Interest Coverage Amount means, as of any Measurement Date, an amount equal to (i) the amount received or scheduled to be received as Collateral Interest Collections during the related Due Period, less (ii) (a) the amount payable as Aggregate Fees and Expenses on the related Payment Date, (b) any amounts paid or scheduled to be paid to the Hedge Counterparty on the related Payment Date (excluding any termination payments) and (c) for purposes of calculating the Class A/B Interest Coverage Ratio, the Class C Interest Coverage Ratio, the Class D Interest Coverage Ratio and the Class E Interest Coverage

 

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Ratio, any amounts scheduled to be paid to the Non-Monthly Pay Asset Interest Reserve Account on the related Payment Date; provided that (a) following the date on which a Collateral Debt Security becomes a Defaulted Security, scheduled Collateral Interest Collections shall not include any amount scheduled to be received on Defaulted Securities or any amount scheduled to be received on securities that are currently deferring interest until (1) such scheduled amounts are actually received in Cash or (2) the cumulative aggregate amounts actually received on a Defaulted Security exceed the Principal Balance of such Defaulted Security, (b) the expected interest income on Floating Rate Collateral Debt Securities and Eligible Investments shall be calculated using the then-current interest rate applicable thereto and (c) with respect to any Written Down Security, the Interest Coverage Amount shall exclude any interest accrued on any Written Down Amount.

 

Interest Coverage Tests means the Class A/B Interest Coverage Test, the Class C Interest Coverage Test, the Class D Interest Coverage Test and the Class E Interest Coverage Test.

 

Interest Only Security means any security that by its terms provides for periodic payments of interest and does not provide for the repayment of a stated principal amount.

 

Interest Period means (i) with respect to the Initial Payment Date, the period from and including the Closing Date to but excluding the Initial Payment Date and (ii) thereafter with respect to each Payment Date, the period beginning on the first day following the end of the preceding Interest Period and ending on (and including) the day before the next Payment Date.

 

Investment Advisers Act means the United States Investment Advisers Act of 1940, as amended.

 

Investment Company Act means the United States Investment Company Act of 1940, as amended.

 

Irish Listing Agent means NCB Stockbrokers Limited.

 

Irish Paying Agent means NCB Stockbrokers Limited.

 

Issue of Collateral Debt Securities means Collateral Debt Securities issued by the same issuer secured by the same collateral pool.

 

Issuer means N-Star Real Estate CDO VII Ltd., an exempted company incorporated and existing under the law of the Cayman Islands, unless a successor Person shall have become the Issuer pursuant to the applicable provisions of this Indenture, and thereafter “Issuer” shall mean such successor Person.

 

Issuer Order and Issuer Request mean, respectively, a written order or a written request, which may be in the form of a standing order or request in each case dated and signed in the name of the Issuer (or, as expressly provided herein, the Collateral Manager on its behalf) by an Authorized Officer of the Issuer (or, as expressly provided herein, the Collateral Manager).

 

Key Manager means any of David T. Hamamoto, Jean-Michel (Mitch) Wasterlain or any such other additional person as may be appointed Key Managers in accordance with the Collateral Management Agreement (or if David T. Hamamoto, Jean-Michel (Mitch) Wasterlain or any such additional Key Managers have been replaced with one or more Approved Replacement Persons, such Approved Replacement Persons).

 

Key Manager Event means any of the following: (a) the failure by the Collateral Manager to propose a replacement Key Manager within the applicable Four-Month Period, (b) the failure by the Collateral Manager, within the Four-Month Period, to propose a different replacement Key Manager following

 

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receipt of a Controlling Class Objection or (c) the receipt of another Controlling Class Objection within ten Business Days after delivery of such a proposal for a different replacement Key Manager to the Holders of the Notes of the Controlling Class.

 

LIBOR means, with respect to each Interest Period (other than the first Interest Period), a floating rate equal to the London interbank offered rate for one-month U.S. Dollar deposits determined in the manner described in Schedule B. LIBOR for the first Interest Period will be determined on the second London Banking Day prior to the Closing Date.

 

LIBOR Calculation Date has the meaning specified in Schedule B.

 

Listed Bidders has the meaning specified in Schedule E.

 

London Banking Day has the meaning specified in Schedule B.

 

Majority means (a) with respect to any Class or Classes of Rated Notes, the Holders of more than 50% of the Aggregate Outstanding Amount of the Rated Notes of such Class or Classes of Rated Notes, as the case may be and (b) with respect to Income Notes, the Holders of more than 50% of the Income Notes Stated Amount.

 

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

 

Market Value means, on any date of determination, the average of three or more bid-side prices expressed as a percentage of the par amount, obtained from independent, nationally recognized financial institutions in the relevant market for one or more Collateral Debt Securities, each unaffiliated with each other and the Collateral Manager, as certified by the Collateral Manager (to the extent that such bid-side prices may be obtained by the Collateral Manager using its commercially reasonable efforts and commercially reasonable business judgment). If three or more bid-side prices cannot be so obtained, then the Market Value on such date of determination will be the lower of two bid-side prices, if two bid-side prices are obtained in the manner described above, and the sole bid-side price if only one bid-side price is obtained in the manner described above. If no bids can be obtained in the manner described above, the Market Value will be (1) in respect of an amount equal to but not greater than 7.5% of the Principal Balance of the Proposed Portfolio, the price, expressed as a percentage of the par amount, as determined by the Collateral Manager in its commercially reasonable judgment or (2) the S&P Recovery Rate with respect to such Collateral Debt Security, to the extent not calculated pursuant to clause (1) above.

 

Measurement Date means any of the following: (a) the Effective Date; (b) any date after the Effective Date upon which the Issuer disposes or acquires (which date of acquisition shall be deemed to be the date on which the Issuer enters into commitments to acquire such Collateral Debt Security) any Collateral Debt Security; (c) each Calculation Date; (d) the last Business Day of each calendar month (other than the calendar month preceding the month in which a Calculation Date occurs and any calendar month prior to and including the month in which the Effective Date occurs); and (e) with reasonable notice to the Issuer, the Collateral Manager and the Trustee, any other Business Day that any Rating Agency or Holders of more than 50% of the then Aggregate Outstanding Amount of any Class of Rated Notes requests to be a “Measurement Date”; provided that if any such date would otherwise fall on a day that is not a Business Day, the relevant Measurement Date will be the next succeeding day that is a Business Day; provided further that for the purposes of determining the Issuer’s compliance with any Coverage Test, the Measurement Date will be on or subsequent to the Effective Date.

 

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Mezzanine Loans means mezzanine loans secured by ownership interests in entities owning commercial properties.

 

Moneyline Telerate Page 3750 means the display page so designated on Moneyline Telerate Service (or such other page as may replace that page on that service, or such other service as may be nominated as the information vendor, for the purposes of displaying rates comparable to LIBOR).

 

Monitoring Fee means, with respect to each Payment Date, an amount equal to 0.10% per annum of the Fee Basis Amount payable to the Collateral Manager pursuant to the Collateral Management Agreement.

 

Moody’s means Moody’s Investors Service, Inc.

 

Moody’s Rating of any Collateral Debt Security will be determined as follows:

 

(i)             (x) if such Collateral Debt Security is publicly rated by Moody’s, the Moody’s Rating will be such rating, or, (y) if such Collateral Debt Security is not publicly rated by Moody’s, but the Issuer has requested that Moody’s assign a rating to such Collateral Debt Security, the Moody’s Rating will be the rating so assigned by Moody’s;

 

(ii)            with respect to a CMBS Security, REIT Debt Security, Trust Preferred Security, CRE Debt Obligation or Real Estate CDO Security, if such CMBS Security, REIT Debt Security, Trust Preferred Security, CRE Debt Obligation or Real Estate CDO Security is not rated by Moody’s, then the Moody’s Rating of such CMBS Security, REIT Debt Security or Real Estate CDO Security, as applicable, may be determined using any one of the methods below:

 

(A)           with respect to any REIT Debt Security, Trust Preferred Security or CRE Debt Obligation not publicly rated by Moody’s that is a REIT Debt Security, Trust Preferred Security or CRE Debt Obligation, as applicable, if such REIT Debt Security, Trust Preferred Security or CRE Debt Obligation, as applicable, is publicly rated by S&P, then the Moody’s Rating thereof will be (x) one subcategory below the Moody’s equivalent rating assigned by S&P if the rating assigned by S&P is “BBB-” or greater and (y) two rating subcategories below the Moody’s equivalent rating assigned by S&P if the rating assigned by S&P is below “BBB-”;

 

(B)            with respect to any CMBS Conduit Security or CMBS Credit Tenant Lease Security not publicly rated by Moody’s, (x) if Moody’s has rated a tranche or class of CMBS Conduit Security or CMBS Credit Tenant Lease Security senior to the relevant issue, then the Moody’s Rating thereof will be one and one-half rating subcategories below the Moody’s equivalent of the lower of the rating assigned by S&P and Fitch to such CMBS Conduit Security or CMBS Credit Tenant Lease Security and (y) if Moody’s has not rated any such tranche or class and S&P and Fitch have rated the subject CMBS Conduit Security or CMBS Credit Tenant Lease Security, then the Moody’s Rating thereof will be two rating subcategories below the Moody’s equivalent of the lower of the rating assigned by S&P and Fitch;

 

(C)            with respect to any CMBS Large Loan Security or CMBS Re-REMIC Security not publicly rated by Moody’s, the Issuer or the Collateral Manager on behalf of

 

34

 

the Issuer will request Moody’s to assign a rating to such CMBS Large Loan Security or CMBS Re-REMIC Security on a case-by-case basis;

 

(D)           with respect to any other type of CMBS Security, REIT Debt Security or Real Estate CDO Security not referred to in clauses (A) through (C) above will be determined pursuant to subclause (y) of clause (i) above;

 

(iii)           with respect to corporate guarantees on any REIT Debt Security, if such corporate guarantees are not publicly rated by Moody’s but another security or obligation of the guarantor or obligor (an Other Security ) is publicly rated by Moody’s, and no rating has been assigned in accordance with clause (i) above, the Moody’s Rating of such Collateral Debt Security will be determined as follows:

 

(A)           if the corporate guarantee is a senior secured obligation of the guarantor or obligor and the other security is also a senior secured obligation, the Moody’s Rating of such Collateral Debt Security will be the rating of the other security;

 

(B)            if the corporate guarantee is a senior unsecured obligation of the guarantor or obligor and the other security is a senior secured obligation, the Moody’s Rating of such Collateral Debt Security will be one rating subcategory below the rating of the other security;

 

(C)            if the corporate guarantee is a subordinated obligation of the guarantor or obligor and the other security is a senior secured obligation that is: (1) rated “Ba3” or higher by Moody’s, the Moody’s Rating of such corporate guarantee will be three rating subcategories below the rating of the other security; or (2) rated “Bl” or lower by Moody’s, the Moody’s Rating of such corporate guarantee will be two rating subcategories below the rating of the other security;

 

(D)           if the corporate guarantee is a senior secured obligation of the guarantor or obligor and the other security is a senior unsecured obligation that is: (1) rated “Baa3” or higher by Moody’s, the Moody’s Rating of such corporate guarantee will be the rating of the other security; or (2) rated “Bal” or lower by Moody’s, the Moody’s Rating of such corporate guarantee will be one rating subcategory above the rating of the other security;

 

(E)            if the corporate guarantee is a senior unsecured obligation of the guarantor or obligor and the other security is also a senior unsecured obligation, the Moody’s Rating of such corporate guarantee will be the rating of the other security;

 

(F)            if the corporate guarantee is a subordinated obligation of the guarantor or obligor and the other security is a senior unsecured obligation that is: (1) rated “Bl” or higher by Moody’s, the Moody’s Rating of such corporate guarantee will be two rating subcategories below the rating of the other security; or (2) rated “B2” or lower by Moody’s, the Moody’s Rating of such corporate guarantee will be one rating subcategory below the rating of the other security;

 

(G)            if the corporate guarantee is a senior secured obligation of the guarantor or obligor and the other security is a subordinated obligation that is: (1) rated “Baa3” or higher by Moody’s, the Moody’s Rating of such corporate guarantee will be one rating subcategory above the rating of the other security; (2) rated

 

35

 

below “Baa3” but not rated “B3” by Moody’s, the Moody’s Rating of such corporate guarantee will be two rating subcategories above the rating of the other security; or (3) rated “B3” by Moody’s, the Moody’s Rating of such corporate guarantee will be “B2”;

 

(H)           if the corporate guarantee is a senior unsecured obligation of the guarantor or obligor and the other security is a subordinated obligation that is: (1) rated “Baa3” or higher by Moody’s, the Moody’s Rating of such corporate guarantee will be one rating subcategory above the rating of the other security; or (2) rated “Bal” or lower by Moody’s, the Moody’s Rating of such corporate guarantee will also be one rating subcategory above the rating of the other security; and

 

(I)             if the REIT Debt Security is a subordinated obligation of the guarantor or obligor and the other security is also a subordinated obligation, the Moody’s Rating of such corporate guarantee will be the rating of the other security;

 

(iv)           with respect to a Real Estate Interest, if such Real Estate Interest is not rated by Moody’s, the Moody’s Rating will be the rating so assigned by Moody’s; or

 

(v)            if such Collateral Debt Security is a Real Estate CDO Security, no notching is permitted and the Moody’s Rating will be the rating so assigned by Moody’s.

 

Moody’s Rating Factor means with respect to any Collateral Debt Security, the number set forth in the table below opposite the Moody’s Rating of such Collateral Debt Security.

 

			Moody’s Rating				Moody’s Rating
	Moody’s Rating		Factor		Moody’s Rating		Factor
	Aaa		1		Bal		940
	Aal		10		Ba2		1,350
	Aa2		20		Ba3		1,766
	Aa3		40		B1		2,220
	Al		70		B2		2,720
	A2		120		B3		3,490
	A3		180		Caal		4,770
	Baal		260		Caa2		6,500
	Baa2		360		Caa3		8,070
	Baa3		610		Ca or lower		10,000

 

Moody’s Recovery Rate means, with respect to a Collateral Debt Security on any Calculation Date, an amount equal to the percentage for such Collateral Debt Security set forth in the Moody’s Recovery Rate Matrix attached as Schedule D-2 hereto.

 

Moody’s Recovery Rate Test means a test that will be satisfied as of any Measurement Date if the Moody’s Weighted Average Recovery Rate is at least 20%.

 

Moody’s WARF means, as of any Measurement Date, the number obtained by summing the products obtained by multiplying the Principal Balance of each Collateral Debt Security which is not a Defaulted Security held by the Issuer as of such Measurement Date by its Moody’s Rating Factor, dividing such sum by the aggregate Principal Balance of all such Collateral Debt Securities (excluding Defaulted Securities) and rounding the result to the nearest whole number.

 

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Moody’s WARF Test means a test that will be satisfied on the Effective Date and on any Measurement Date thereafter if the WARF is not more than 850.

 

Moody’s Weighted Average Recovery Rate means the rate on any Measurement Date calculated as a fraction (expressed as a percentage rounded to the nearest 0.1%) the numerator of which is the sum of the products obtained by multiplying the Principal Balance of each Collateral Debt Security (excluding Defaulted Securities) by the applicable Moody’s Recovery Rate and the denominator of which is the CDS Principal Balance (excluding Defaulted Securities).

 

Mortgaged Property means with respect to any CMBS Conduit Security, CMBS Large Loan Security or other applicable CMBS Security, the real property encumbered by any mortgage, deed of trust or other similar security instrument securing such loan and creating a lien on the related borrower’s fee estate or leasehold estate in one or more properties.

 

Non-Monthly Pay Asset Interest Reserve Account means the account established by the Trustee, held in the name of the Trustee for the benefit and on behalf of the Secured Parties and into which the Trustee will deposit, on each Payment Date, the Non-Monthly Pay Asset Interest Reserve Amount, if any, in accordance with the Priority of Payments.

 

Non-Monthly Pay Asset Interest Reserve Amount means the following:

 

(i)             on the Closing Date, U.S.$0;

 

(ii)            as of any Calculation Date after the Effective Date, the sum of (i) the aggregate amount of Quarterly Pay Security Interest Reserve Amounts for the related Due Period plus (ii) the aggregate amount of Semi-Annual Pay Security Interest Reserve Amounts for the related Due Period.

 

Note Paying Agent means any Person authorized by the Issuer to pay the principal of or interest on any Rated Notes on behalf of the Issuer as specified in Section 7.2.

 

Note Register and Note Registrar have the respective meanings specified in Section 2.4(a).

 

Note Transfer Agent has the meaning specified in Section 2.4(a).

 

Note Valuation Report has the meaning specified in Section 10.12(a).

 

Notes means, collectively, the Rated Notes and the Income Notes.

 

Offer means, with respect to any security, (a) any offer by the issuer of such security or by any other Person made to all of the holders of such security to purchase or otherwise acquire such security (other than pursuant to any redemption in accordance with the terms of the related Underlying Instruments) or to convert or exchange such security into or for Cash, securities or any other type of consideration or (b) any solicitation by the issuer of such security or any other Person to amend, modify or waive any provision of such security or any related Underlying Instrument.

 

Offering means the offering of the Rated Notes and the Income Notes under the Offering Circular.

 

Offering Circular means the Offering Circular, prepared and delivered on or prior to the Closing Date in connection with the offer and sale of the Rated Notes and the Income Notes, as amended or supplemented from time to time.

 

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Officer means, (a) with respect to the Issuer and any corporation, the Chairman of the Board of Directors (or, with respect to the Issuer, any director), the President, any Vice President, the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of such entity; and (b) with respect to any bank or trust company acting as trustee of an express trust or as custodian, any Trust Officer.

 

Opinion of Counsel means a written opinion addressed to the Trustee and each Rating Agency (each, a Recipient ), in form and substance reasonably satisfactory to each Recipient, of an attorney at law admitted to practice before the highest court of any state of the United States or the District of Columbia (or the Cayman Islands, in the case of an opinion relating to the laws of the Cayman Islands), which attorney may, except as otherwise expressly provided in this Indenture, be inside or outside counsel for the Issuer and which attorney shall be reasonably satisfactory to the Trustee. Whenever an Opinion of Counsel is required hereunder, such Opinion of Counsel may rely on opinions of other counsel who are so admitted and so satisfactory which opinions of other counsel shall accompany such Opinion of Counsel and shall either be addressed to each Recipient or shall state that each Recipient shall be entitled to rely thereon.

 

Optional Redemption has the meaning specified in Section 9.1(a).

 

Ordinary Shares means the 1,000 ordinary shares, par value U.S.$1.00 per share issued by the Issuer.

 

Outstanding means with respect to the Notes as of any Measurement Date, any and all Notes theretofore authenticated and delivered under the Indenture and the Income Note Paying Agency other than Notes cancelled, redeemed, exchanged or replaced in accordance with the terms of the Indenture or the Income Note Paying Agency Agreement, as applicable; provided that in determining whether the Holders of the requisite percentage of Notes have given any direction, notice, consent, approval or objection, any Notes held or beneficially owned by the Collateral Manager or any of its Affiliates or by an account or fund for which the Collateral Manager or any of its Affiliates acts as the investment advisor with discretionary authority will be disregarded with respect to any vote or consent relating to the removal or termination of the Collateral Manager or the assignment by the Collateral Manager of its rights and obligations under the Collateral Management Agreement, except for any assignments or transfers by the Collateral Manager of its rights and obligations to Affiliates of the Collateral Manager, subject to any applicable requirements under the Investment Advisers Act.

 

Paying Agents means, collectively, the Note Paying Agent and the Income Note Paying Agent.

 

Payment Account means the Securities Account designated the “Payment Account” and established in the name of the Trustee pursuant to Section 10.8.

 

Payment Date means the 25 th  day of each calendar month, or if such day is not a Business Day, the next succeeding Business Day, commencing in July 2006 and ending on the applicable Stated Maturity Date (which shall be the final Payment Date).

 

Periodic Interest means the amount of interest payable (i) in respect of each Class of Floating Rate Notes, calculated with respect to each such Class for the relevant Interest Period by multiplying the Applicable Periodic Interest Rate by the Aggregate Outstanding Amount of the related Class at the close of the Business Day immediately preceding the relevant Payment Date, multiplying the resulting figure by the actual number of days in such Interest Period, dividing by 360 and rounding the resulting figure to the nearest U.S.$0.01 (U.S.$0.005 being rounded upwards), and (ii) in respect of each Class of Fixed Rate Notes, calculated with respect to each such Class for the relevant Interest Period by multiplying the Applicable Periodic Interest Rate by the Aggregate Outstanding Amount of the related Class at the close of the Business Day immediately preceding the relevant Payment Date, multiplying the resulting figure

 

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by (a) for the first Interest Period, 33 days, and (b) for every other Interest Period, 30 days, dividing by 360 and rounding the resulting figure to the nearest U.S.$0.01 (U.S.$0.005 being rounded upwards).

 

Permitted NS Purchaser means (i) NorthStar OS VII, LLC or (ii) NS Advisors, LLC or any “affiliate” thereof within the meaning of Rule 405 under the Securities Act that is an “accredited investor” within the meaning of Rule 501(a) under the Securities Act.

 

Person means any individual, corporation, partnership, limited liability partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof or any similar entity.

 

PIK Bond means any security that, pursuant to the terms of the related Underlying Instruments, permits the payment of interest thereon to be deferred or capitalized as additional principal thereof or not pay interest when scheduled (but without being a Defaulted Security) or that issues identical securities in lieu of payments of interest in Cash.

 

Placement Agent means Banc of America Securities LLC.

 

Placement Agreement means the agreement, dated as of the Closing Date, between the Issuer and the Placement Agent relating to the placement of the Notes.

 

Pledged Collateral Debt Security means as of any date of determination, any Collateral Debt Security that has been Granted to the Trustee and has not been released from the lien of this Indenture pursuant to Section 10.13.

 

Pledged Securities means on any date of determination, (a) the Collateral Debt Securities, Temporary Ramp-Up Securities, Equity Securities and the Eligible Investments that have been Granted to the Trustee and (b) all non-Cash proceeds thereof, in each case, to the extent not released from the lien of this Indenture pursuant hereto.

 

Pledgee Counterparty has the meaning specified in Section 10.9.

 

Pledgor Counterparty has the meaning specified in Section 10.10.

 

Principal Balance means, with respect to any Collateral Debt Security or Eligible Investment, as of any date of determination, the outstanding principal amount of such Collateral Debt Security or Eligible Investment; provided that the Principal Balance of (i) any Collateral Debt Security which permits the deferral or capitalization of interest will not include any outstanding balance of the deferred and/or capitalized interest, (ii) any Equity Security will be zero, (iii) any putable Collateral Debt Security which matures after the Stated Maturity Date will be the lower of the put price and the outstanding principal amount, (iv) any Collateral Debt Security or Eligible Investment in which the Trustee does not have a first priority perfected security interest shall be deemed to be zero and (v) except as otherwise expressly specified herein, the Principal Balance of a Synthetic Security which is a Derivative Contract shall be equal to the notional amount of such Synthetic Security.

 

Principal Coverage Amount means, on any Measurement Date, an amount equal to the sum of:

 

(i)             the aggregate Principal Balance of all Collateral Debt Securities (other than Defaulted Securities, Written Down Securities and Deferred Interest PIK Bonds) included in the Collateral on such date;

 

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Coverage Test, for interest payments on the Class C Notes, the Class D Notes and the Class E Notes, (v) in the case of a failure to satisfy either the Class C Interest Coverage Test or the Class C Principal Coverage Test, for interest payments on the Class D Notes and the Class E Notes, (vi) in the case of a failure to satisfy either the Class D Interest Coverage Test or the Class D Principal Coverage Test, for interest payments on the Class E Notes, and (vii) in the case of a failure to satisfy either the Class E Interest Coverage Test or the Class E Principal Coverage Test, for payments of Income Note Excess Funds, that are instead applied on the related Payment Date, in each case to the extent necessary to satisfy such Coverage Test as of the related Calculation Date, to principal payments on each Class of Notes, starting with the most senior Class of Notes then Outstanding, until such Coverage Test is satisfied as of the related Calculation Date or the Notes are paid in full.

 

Priority of Payments means, collectively, the priority of payments specified in Section 11.1(a), (b) and (c) or upon an Event of Default, the priority of payments in connection therewith.

 

Proceeding means any suit in equity, action at law or other judicial or administrative proceeding.

 

Prohibited Asset means any of the following asset types: aircraft lease securities, enhanced equipment trust certificates, structured settlement securities, tobacco settlement securities, manufactured housing securities, 12(b)-1 fee securities, future flow securities, emerging markets securities, sub and re-performing credit card securities, franchise loan securities, market value collateralized debt obligations, collateralized loan obligations or CDO of CDO Securities.

 

Proposed Portfolio means the portfolio (measured by Principal Balance) of (a) the Pledged Collateral Debt Securities and the proceeds of disposition thereof held as Cash, (b) Uninvested Proceeds held as Cash and (c) Eligible Investments purchased with Uninvested Proceeds or the proceeds of disposition of Pledged Collateral Debt Securities resulting from the sale, maturity or other disposition of a Pledged Collateral Debt Security or a proposed acquisition of a Collateral Debt Security, as the case may be.

 

Purchased Accrued Interest means all payments of interest received, or amounts collected that are attributable to interest received on Collateral Debt Securities and Eligible Investments, to the extent such payments or amounts constitute accrued interest purchased with Collateral Principal Collections or Uninvested Proceeds except for purchased accrued interest on Collateral Debt Securities purchased on the Closing Date.

 

Qualified Bidder List means a list of not less than three Persons that are Independent from one another and the Issuer prepared by the Collateral Manager and delivered to the Trustee prior to an Auction, as may be amended and supplemented by the Collateral Manager from time to time upon written notice to the Trustee; provided that (i) the Qualified Bidder List may include the Collateral Manager as a Qualified Bidder if it is Independent from the other Persons on such list and (ii) any such notice referred to above shall only be effective on any Auction Date if it was received by the Trustee at least two Business Days prior to such Auction Date.

 

Qualified Bidders means the Persons whose names appear from time to time on the Qualified Bidder List.

 

Qualified Institutional Buyer has the meaning given in Rule 144A under the Securities Act.

 

Qualified Purchaser means (i) a “qualified purchaser” as defined in Section 2(a)(51) of the Investment Company Act and the rules thereunder, (ii) a “knowledgeable employee” with respect to the Issuer as defined in rule 3c-5 under the Investment Company Act or (iii) a company beneficially owned exclusively by one or more “qualified purchasers” and/or “knowledgeable employees” with respect to the Issuer.

 

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Qualifying Foreign Obligor means a corporation, partnership or other entity organized or incorporated under the law of any of Australia, Canada, France, Germany, Ireland, Italy, New Zealand, Sweden, Switzerland or the United Kingdom, so long as the unguaranteed, unsecured and otherwise unsupported long-term U.S. Dollar-denominated sovereign debt obligations of such country are rated “AA” or better by S&P and “AA” or better by Fitch.

 

Quarterly Pay Security means a security that provides for periodic payments of interest in cash quarterly.

 

Quarterly Pay Security Interest Reserve Amount means, with respect to each Collateral Debt Security that is a Quarterly Pay Security and not entitled to the benefit of a Cashflow Hedge Agreement, as of any Calculation Date, the amount equal to (i) the amount of interest received by the Issuer on the most recent payment date with respect to such Quarterly Pay Security multiplied by (ii) (A) three minus the number of months since the most recent payment date with respect to such Quarterly Pay Security (rounded up to the nearest whole number) divided by (B) three; provided that for any Quarterly Pay Security with respect to which no scheduled interest payments remain, the Quarterly Pay Security Interest Reserve Amount shall be zero.

 

Ramp-Up Collateral Debt Security means each additional Collateral Debt Security selected by the Collateral Manager for purchase by the Issuer and pledged to the Trustee during the Ramp-Up Period.

 

Ramp-Up Interest Reserve Account means the account established by the Trustee, held in the name of the Trustee for the benefit and on behalf of the Secured Parties and into which the Trustee will deposit the Ramp-Up Interest Reserve Amount on the Closing Date.

 

Ramp-Up Interest Reserve Amount means, on the Closing Date, U.S.$1,000,000.

 

Ramp-Up Period means the period commencing on the Closing Date and ending on the Effective Date.

 

Rated Note Calculation Agent has the meaning specified in Section 7.15.

 

Rated Notes means, collectively, the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes.

 

Rated Notes Interest Shortfall Amount means, on any Calculation Date until (but excluding) the first Calculation Date after the Effective Date, the aggregate amount of interest due and payable (without giving effect to any applicable deferments of interest) on the Rated Notes for which Collateral Interest Collections (excluding, prior to the first Calculation Date after the Effective Date, amounts in the Ramp-Up Interest Reserve Account) are insufficient to make payments in full thereon in accordance with the Priority of Payments.

 

Rated Noteholder means, with respect to any Rated Note, the Person in whose name such Note is registered; provided that Beneficial Owners or Agent Members will have no rights under the Indenture with respect to Global Notes, and the Rated Noteholder may be treated by the Issuer and the Trustee (and any agent of any of the foregoing) as the owner of such Global Notes for all purposes whatsoever.

 

Rating means, as the context requires, a Fitch Rating, a Moody’s Rating or an S&P Rating.

 

Rating Agency means each of Fitch, Moody’s and S&P.

 

Rating Agency Confirmation means, with respect to any specified action or determination, for so long as any of the Rated Notes are Outstanding and rated by Moody’s, S&P or Fitch, respectively, the receipt of

 

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written confirmation by Moody’s, S&P and Fitch, that such specified action or determination will not result in the reduction or withdrawal or other adverse action with respect to their then-current ratings on the Rated Notes (including any private or confidential rating) unless Rating Agency Confirmation is specified herein to be required by only Moody’s, S&P or Fitch, in which case such Rating Agency Confirmation will be sufficient. For the purposes of this definition, “Rating Agencies” will be deemed to not include Fitch except with respect to the Effective Date; provided that notification will be made to Fitch within 30 days of any instance in which Rating Agency Confirmation is required by either Moody’s or S&P.

 

Rating Confirmation has the meaning specified in Section 7.18(e).

 

Rating Confirmation Failure has the meaning specified in Section 7.18(e).

 

Real Estate CDO Securities means securities that entitle the holders thereof to receive payments that depend on the cash flow from or the credit exposure to a portfolio consisting primarily of (i) REIT Debt Securities, (ii) CMBS Securities, (iii) other Specified Types or (iv) a combination of the foregoing; provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the Real Estate CDO Securities such as a financial guaranty insurance policy; provided, that a Real Estate CDO Security shall not include a CMBS Re-REMIC Security.

 

Real Estate Interests means interests (other than CRE Debt Obligations, REIT Debt Securities, Real Estate Trust Preferred Securities and Real Estate CDO Securities but including Tenant Lease Loan Interests) that entitle the holders thereof to receive payments that depend primarily on the cash flow from or sale proceeds of mortgage loans on commercial and multifamily properties, including senior and subordinate mortgage loans, participation interests in mortgage loans on commercial and multifamily properties, including subordinate interests, mezzanine loans secured by ownership interests in entities owning commercial properties, mortgage loans secured by mortgages on commercial real estate properties that are subject to a lease to a single tenant or trust certificates representing beneficial ownership interests in the foregoing.

 

Real Estate Trust Preferred Securities means securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities) on the cash flow from either an individual trust security or a pool of trust securities issued (in each case) by a wholly-owned trust subsidiary of an entity whose business is significantly related to real estate, real estate management or real estate ownership and that issues an obligation to such trust subsidiary in exchange for the net issuance proceeds of such securities.

 

Record Date means the date on which the Holders of Rated Notes entitled to (i) vote with respect to any matters under the Indenture are determined, such date being the 15 th  day (whether or not a Business Day) prior to the date the Trustee delivers notice with respect to such vote and (ii) receive a payment in respect of principal or interest on the succeeding Payment Date or Redemption Date are determined, such date as to any Payment Date or Redemption Date being the 15 th  day (whether or not a Business Day) prior to such Payment Date or Redemption Date.

 

Redemption means an Optional Redemption, an Auction Call Redemption or a Tax Redemption.

 

Redemption Date means the Payment Date upon which the Rated Notes are redeemed pursuant to an Optional Redemption, an Auction Call Redemption or a Tax Redemption.

 

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