<PAGE> 1
EXHIBIT 4.1
SPECIALTY MORTGAGE TRUST, INC.,
Issuer
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
Trustee
INDENTURE
Dated as of January 1, 2001
Related to
SPECIALTY MORTGAGE TRUST, INC.
COLLATERALIZED INVESTMENT NOTES
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PARTIES ..............................................................................1
PRELIMINARY STATEMENT.................................................................1
GRANTING CLAUSE ......................................................................1
ARTICLE I
DEFINITIONS
SECTION 1.01 GENERAL DEFINITIONS...................................................1
ARTICLE II
THE NOTES
SECTION 2.01 FORMS GENERALLY.......................................................8
SECTION 2.02 FORMS OF NOTES AND CERTIFICATE OF AUTHENTICATION......................9
SECTION 2.03 NOTES ISSUABLE; PROVISIONS WITH RESPECT TO PRINCIPAL
AND INTEREST PAYMENTS.................................................9
SECTION 2.04 DENOMINATIONS........................................................10
SECTION 2.05 EXECUTION, AUTHENTICATION, DELIVERY AND DATING.......................10
SECTION 2.06 TEMPORARY NOTES......................................................11
SECTION 2.07 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE..................11
SECTION 2.08 MUTILATED, DESTROYED, LOST OR STOLEN NOTES...........................11
SECTION 2.09 PAYMENTS OF PRINCIPAL AND INTEREST...................................12
SECTION 2.10 PERSONS DEEMED OWNERS................................................13
SECTION 2.11 CANCELLATION.........................................................13
SECTION 2.12 AUTHENTICATION AND DELIVERY OF NOTES.................................13
ARTICLE III
COVENANTS
SECTION 3.01 PAYMENT OF NOTES.....................................................14
SECTION 3.02 MAINTENANCE OF OFFICE OR AGENCY......................................14
SECTION 3.03 ESTABLISHMENT OF NOTE PAYMENT ACCOUNT AND
MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST..........................14
SECTION 3.04 MAINTENANCE OF EXISTENCE; CONSOLIDATION OR MERGER....................14
SECTION 3.05 INSPECTION OF RECORDS................................................15
SECTION 3.06 WARRANTY OF TITLE AND AUTHORITY TO PLEDGE............................15
SECTION 3.07 PROTECTION OF TITLE..................................................15
SECTION 3.08 NEGATIVE COVENANTS...................................................16
SECTION 3.09 ANNUAL STATEMENT AS TO COMPLIANCE....................................16
SECTION 3.10 TAX TREATMENT........................................................17
SECTION 3.11 OPINIONS AS TO TRUST ESTATE..........................................17
SECTION 3.12 FINANCIAL COVENANTS..................................................17
SECTION 3.13 WITHHOLDING..........................................................17
ARTICLE IV
PLEDGED ASSETS
SECTION 4.01 HOLDING OF PLEDGED ASSETS............................................17
SECTION 4.02 DISPOSITION OF PAYMENTS ON PLEDGED ASSETS............................18
SECTION 4.03 CONSENTS, WAIVERS AND MODIFICATIONS..................................18
SECTION 4.04 RIGHTS OF TRUSTEE AND ISSUER AFTER EVENT OF DEFAULT..................19
SECTION 4.05 ESTABLISHMENT OF ELIGIBLE COLLATERAL ACCOUNT AND
INVESTMENT BY TRUSTEE................................................19
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 4.06 PERFORMANCE OF OBLIGATIONS UNDER MANAGEMENT
AGREEMENT............................................................20
SECTION 4.07 VALUATION OF PLEDGED ASSETS..........................................20
SECTION 4.08 MAINTENANCE OF ELIGIBLE COLLATERAL...................................20
SECTION 4.09 WITHDRAWAL OR SUBSTITUTION OF PLEDGED ASSETS.........................21
SECTION 4.10 PROTECTION OF PLEDGED ASSETS.........................................22
ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.01 EVENT OF DEFAULT.....................................................22
SECTION 5.02 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT...................23
SECTION 5.03 COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE...............................................24
SECTION 5.04 REMEDIES.............................................................24
SECTION 5.05 RESERVED.............................................................25
SECTION 5.06 TRUSTEE MAY FILE PROOFS OF CLAIM.....................................25
SECTION 5.07 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES...............25
SECTION 5.08 APPLICATION OF MONEY COLLECTED.......................................26
SECTION 5.09 LIMITATION ON SUITS..................................................26
SECTION 5.10 UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE
PRINCIPAL AND INTEREST...............................................26
SECTION 5.11 RESTORATION OF RIGHTS AND REMEDIES...................................27
SECTION 5.12 RIGHTS AND REMEDIES CUMULATIVE.......................................27
SECTION 5.13 DELAY OR OMISSION NOT WAIVER.........................................27
SECTION 5.14 CONTROL BY NOTEHOLDERS...............................................27
SECTION 5.15 WAIVER OF PAST DEFAULTS..............................................27
SECTION 5.16 UNDERTAKING FOR COSTS................................................28
SECTION 5.17 WAIVER OF STAY OR EXTENSION LAWS.....................................28
SECTION 5.18 SALE OF PLEDGED ASSETS...............................................28
SECTION 5.19 ACTION ON NOTES......................................................29
ARTICLE VI
TRUSTEE
SECTION 6.01 DUTIES OF TRUSTEE....................................................29
SECTION 6.02 NOTICE OF DEFAULT....................................................30
SECTION 6.03 RIGHTS OF TRUSTEE....................................................30
SECTION 6.04 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES....................31
SECTION 6.05 MAY HOLD NOTES.......................................................31
SECTION 6.06 MONEY HELD IN TRUST..................................................32
SECTION 6.07 COMPENSATION AND REIMBURSEMENT.......................................32
SECTION 6.08 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR....................32
SECTION 6.09 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR...............................33
SECTION 6.10 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS OF TRUSTEE...............................................34
SECTION 6.11 DISQUALIFICATION; CONFLICTING INTERESTS..............................34
SECTION 6.12 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY..............................34
SECTION 6.13 PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER.....................34
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS BY TRUSTEE AND ISSUER
SECTION 7.01 ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
NOTEHOLDERS..........................................................34
SECTION 7.02 PRESERVATION OF INFORMATION..........................................35
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
SECTION 7.03 REPORTS BY TRUSTEE...................................................35
SECTION 7.04 REPORTS BY ISSUER....................................................35
ARTICLE VIII
SATISFACTION AND DISCHARGE
SECTION 8.01 SATISFACTION AND DISCHARGE OF INDENTURE..............................36
SECTION 8.02 APPLICATION OF TRUST MONEY...........................................36
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01 SUPPLEMENTAL INDENTURES WITHOUT CONSENT
OF NOTEHOLDERS.......................................................37
SECTION 9.02 SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS..................38
SECTION 9.03 EXECUTION OF SUPPLEMENTAL INDENTURES.................................39
SECTION 9.04 EFFECT OF SUPPLEMENTAL INDENTURES....................................39
SECTION 9.05 REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES........................39
SECTION 9.06 CONFORMITY WITH TRUST INDENTURE ACT .................................39
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01 REDEMPTION...........................................................39
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 COMPLIANCE CERTIFICATES AND OPINIONS.................................39
SECTION 11.02 FORM OF DOCUMENTS DELIVERED TO TRUSTEE...............................40
SECTION 11.03 ACTS OF NOTEHOLDERS..................................................41
SECTION 11.04 NOTICES, ETC. TO TRUSTEE AND ISSUER..................................41
SECTION 11.05 NOTICES AND REPORTS TO NOTEHOLDERS; WAIVER OF NOTICES................41
SECTION 11.06 RULES BY TRUSTEE AND AGENTS..........................................42
SECTION 11.07 EFFECT OF HEADINGS AND TABLE OF CONTENTS.............................42
SECTION 11.08 SUCCESSORS AND ASSIGNS...............................................42
SECTION 11.09 SEPARABILITY.........................................................42
SECTION 11.10 BENEFITS OF INDENTURE................................................42
SECTION 11.11 LEGAL HOLIDAYS.......................................................42
SECTION 11.12 GOVERNING LAW........................................................42
SECTION 11.13 COUNTERPARTS.........................................................43
SECTION 11.14 RECORDING OF INDENTURE...............................................43
SECTION 11.15 ISSUER OBLIGATION....................................................43
SECTION 11.16 USURY................................................................43
SECTION 11.17 CONFLICT WITH TRUST INDENTURE ACT....................................43
EXHIBIT A FORM OF CERTIFICATED NOTE
EXHIBIT B CERTIFICATE OF AVAILABLE ELIGIBLE COLLATERAL
EXHIBIT C TRUSTEE'S CERTIFICATE
EXHIBIT D REASSIGNMENT AND DELIVERY OF PLEDGED ASSETS
EXHIBIT E FORM OF OPINION OF COUNSEL
</TABLE>
iii
<PAGE> 5
PARTIES
INDENTURE, dated as of January 1, 2001 (as amended or supplemented from
time to time as permitted hereby, the "Indenture"), between Specialty Mortgage
Trust, Inc., a Maryland corporation (herein, together with its permitted
successors and assigns, called the "Issuer"), and Bankers Trust Company of
California, N.A., a national banking association, as trustee (together with its
permitted successors hereunder, the "Trustee").
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for its Collateralized Investment Notes (the "Notes"),
issuable as provided in this Indenture. All covenants and agreements made by the
Issuer herein are for the benefit and security of the Holders of the Notes. The
Issuer is entering into this Indenture, and the Trustee is accepting the trusts
created hereby, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged.
All things necessary to make this Indenture a valid agreement of the
Issuer in accordance with its terms have been done.
GRANTING CLAUSE
To secure the payment of the principal of and interest on the Notes and
the performance of the additional covenants contained therein and in this
Indenture, and in consideration of the premises and of the covenants contained
herein and of the purchase of the Notes by the Holders thereof, and for other
good and valuable consideration the receipt hereof which is hereby acknowledged,
the Issuer does hereby grant, bargain, sell, release, convey, assign, pledge,
transfer, mortgage and confirm unto the Trustee, and grant to the Trustee a
security interest in, all and each of the following property: All Mortgage
Loans, Short-Term Money Market Instruments and Cash, as shall be now or
hereafter actually assigned and delivered to the Trustee with respect to the
Notes, in each case delivered or intended to be delivered pursuant to the
provisions of the definition of the term "Delivery" in Article I, together with
all the proceeds thereof and additions thereto (herein collectively referred to
as the "Pledged Assets").
Such Grants are made, however, in trust, to secure the Notes equally
and ratably without prejudice, priority or distinction between any Note and any
other Note by reason of difference in time of issuance or otherwise, and to
secure (i) the payment of all amounts due on the Notes in accordance with their
terms, (ii) the payment of all other sums payable under this Indenture with
respect to the Notes and (iii) compliance with the provisions of this Indenture,
all as provided in this Indenture. All terms used in the foregoing granting
clauses that are defined in Section 1.01 are used with the meanings given in
said Section.
The Trustee acknowledges such Grant, accepts the trusts hereunder in
accordance with the provisions of this Indenture and agrees to perform the
duties herein required.
ARTICLE I
DEFINITIONS
SECTION 1.01. GENERAL DEFINITIONS.
Except as otherwise specified or as the context may otherwise require,
the following terms have the respective meanings set forth below for all
purposes of this Indenture, and the definitions of such terms are applicable to
the singular as well as to the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms. Whenever reference
is made herein to an Event of Default or a Default known to the Trustee or of
which the Trustee has notice or knowledge, such reference shall be construed to
refer only to an Event of Default or Default of which the Trustee is deemed to
have notice or knowledge pursuant to Section 6.01(d).
1
<PAGE> 6
"ACCOUNTANT": A Person engaged in the practice of accounting who
(except when this Indenture provides that an Accountant must be Independent) may
be employed by or affiliated with the Issuer or an Affiliate of the Issuer.
"ACT": With respect to any Noteholder, as defined in Section 11.03.
"AFFILIATE": With respect to any Person, any other Person controlling
or controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"AGENT" means either "Authenticating Agent" or "Paying Agent."
"AUTHENTICATING AGENT" when used with respect to any particular series
of securities means any Person named as Authenticating Agent for said series in
the provisions of this Indenture creating said series until a successor
Authenticating Agent therefor becomes such pursuant thereto, and thereafter
"Authenticating Agent" shall mean such successor.
"AUTHORIZED OFFICER": Any officer of the Issuer or the Manager who is
authorized to act and whose name appears on a list furnished by the Issuer to
the Trustee, as such list may be amended or supplemented from time to time.
"BASIC MAINTENANCE AMOUNT": As of any Valuation Date, the Dollar amount
equal to 100% of the aggregate principal amount of the Notes Outstanding.
"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the board of directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"BUSINESS DAY": Any day other than (i) a Saturday or a Sunday, or (ii)
a day on which banking institutions in the State of Nevada, State of California
and State of New York are authorized or obligated by law or executive order to
be closed.
"CASH": Such coin or currency of the United States of America as at the
time shall be legal tender for payment of public and private debts.
"CERTIFICATE OF AVAILABLE ELIGIBLE COLLATERAL": A certificate,
substantially in the form of Exhibit B hereto, executed by an Authorized Officer
of the Issuer, delivered to the Trustee with respect to any required valuation
of Pledged Assets subject to the Lien of this Indenture.
"COMMISSION": The Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or if at
any time such Commission is not existing and performing the duties now assigned
to it under the Trust Indenture Act, then the body performing such duties at
such time under the Trust Indenture Act or similar legislation replacing the
Trust Indenture Act.
"COMPANY" means Specialty Mortgage Trust, Inc. or Specialty Mortgage.
"CORPORATE TRUST OFFICE": The principal corporate trust office of the
Trustee located at 3 Park Plaza, 16th Floor, Irvine, California 92614 (Attn:
Specialty Mortgage Trust), or at such other address as the Trustee may designate
from time to time by notice to the Noteholders and the Issuer, or the principal
corporate trust office of any successor Trustee.
"DEFAULT": Any occurrence which is, or with notice or the lapse of time
or both would become, an Event of Default.
"DELIVER" OR "DELIVERED" OR "DELIVERY": When used in connection with
Pledged Assets:
(a) with respect to Mortgage Notes or debt obligations that are not
book-entry securities and are susceptible of physical delivery, when such
Pledged Assets, accompanied by the Required Documentation, have been physically
delivered to the Trustee or its nominee (as pledgee) and (i) in the case of
Government Securities in bearer form, have been endorsed in blank or in the name
of the Trustee or its nominee (as pledgee), (ii) in the case of bankers'
acceptances, commercial paper or other debt obligations, have been so registered
or the transfer thereof to the Trustee or its nominee (as pledgee) has been
otherwise effected in such manner that the Trustee or its nominee (as pledgee)
is entitled to receive directly any payments on or with respect to such Pledged
Assets and (iii) in the case of repurchase agreements, has been either (1) so
registered or the transfer thereof to the Trustee or its nominee (as pledgee)
have been otherwise effected in such manner that the Trustee or its nominee (as
pledgee) is
2
<PAGE> 7
entitled to receive directly any payments on or with respect to such repurchase
agreements, or (2) the Trustee or its nominee (as pledgee) has been made a party
to any such repurchase agreement and, if necessary to insure that the Trustee or
its nominee (as pledgee) be entitled to receive directly any payments on or with
respect to such repurchase agreements, is in possession of any collateral
securing such repurchase agreements; in each case in accordance with applicable
law and regulation, including without limitation, regulations of the United
States Government, rules and regulations of FHLMC, FNMA, GNMA and the UCC and
procedures of any issuer or guarantor of, or custodian or registrar for, such
Pledged Assets; or
(b) with respect to book-entry securities, (i) when proper notification
and/or instruction for the transfer of such securities to the Trustee or its
nominee (as pledgee) has been given and the relevant depositary sends the
Trustee or its nominee confirmation of the "purchase" (as such term is defined
in the UCC) of such book-entry securities by the Trustee or its nominee (as
pledgee) and also by book-entry or otherwise identifies such book-entry
securities as belonging to the Trustee or its nominee (as pledgee) has been
otherwise effected in such manner that the Trustee or its nominee (as pledgee)
is entitled to withdraw or to receive directly any payments on or with respect
to such book-entry securities; in each case in accordance with applicable law
and regulation, including, without limitation, regulations of the United States
Government, the UCC and procedures of any issuer or guarantor of, or custodian
or registrar for, such book-entry security; or
(c) with respect to demand deposits, time deposits or non-negotiable
certificates of deposit, (i) when such deposits or certificates of deposit have
been transferred to the name of the Trustee or its nominee (as pledgee) together
with, in the case of non-negotiable certificates of deposit, physical delivery
thereof to the Trustee or its nominee (as pledgee), or (ii) when the transfer of
such deposits or certificates of deposit to the Trustee or its nominee (as
pledgee) has been otherwise effected in such manner that the Trustee or its
nominee (as pledgee) is entitled to withdraw or to receive directly any payments
on or with respect to such deposits or certificates of deposit; in each case in
accordance with applicable law and regulation; or
(d) with respect to Cash, when such Cash is delivered to the Trustee or
its nominee (as pledgee) in accordance with applicable law and regulation;
and, with respect to all such instruments, accompanied by evidence that
appropriate financing statements have been filed in each jurisdiction in which
financing statements are required to be filed.
"DISCOUNTED VALUE": Of any category of Eligible Collateral as of any
date means the quotient of the Market Value of such category of Eligible
Collateral divided by the applicable Discount Factor for such category of
Eligible Collateral, provided, that in no event shall the Discounted Value of
any category of Eligible Collateral as of any date exceed the unpaid principal
balance of such Eligible Collateral as of that date.
"DISCOUNT FACTOR": For each category of Eligible Collateral described
below, the decimal fraction set forth opposite such type of Eligible Collateral
below:
<TABLE>
<S> <C>
Cash and Short-Term Money Market Instruments 1.000
Mortgage Loans 1.500
</TABLE>
The Discount Factor of any item of Eligible Collateral may be changed from that
set forth in the Indenture in accordance with Section 4.10. In the event that
new Eligible Collateral is to be included in the Pledged Assets, the Discount
Factor relating to each item of such new Eligible Collateral will be established
in accordance with the provisions of Section 4.10 and shall be appropriately set
forth in a supplemental indenture to be entered into by the Issuer and the
Trustee pursuant to Section 9.01.
"ELIGIBLE COLLATERAL": means Eligible Mortgage Loans, Short-Term Money
Market Instruments and cash.
3
<PAGE> 8
"ELIGIBLE COLLATERAL ACCOUNT": The trust account created and maintained
pursuant to Section 4.05, which shall be entitled "Bankers Trust Company of
California, N.A., as trustee, in trust for Specialty Mortgage Trust, Inc."
Certain funds deposited in the Eligible Collateral Account shall be held in
trust for the Issuer as more fully described in Section 4.05 as Cash or in
Short-Term Money Market Instruments.
"ELIGIBLE MORTGAGE LOAN": means each mortgage loan, that shall, as of
the date it is first pledged as collateral under the Indenture, among other
things have an unpaid principal balance of not less than $25,000; have had a
loan to value ratio at the most recent appraisal date of not more than 85%; and
shall not be delinquent and have not been delinquent more than once during the
preceding 12-month period. Eligible Mortgage Loan shall include any
participation interest in a mortgage loan meeting the foregoing criteria.
"EVENT OF DEFAULT": The meaning specified in Section 5.01.
"FDIC": The Federal Deposit Insurance Corporation, or any successor
thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.
"FNMA": The Federal National Mortgage Association, a federally
chartered and privately owned corporation organized and existing under the
Federal National Mortgage Association Charter Act, or any successor thereto.
"GAAP": Shall mean generally accepted accounting principles in effect
in the United States.
"GAAP Net Worth": Shall mean the excess of total assets of Specialty
Mortgage Trust, Inc. and its consolidated subsidiaries, if any, over total
liabilities of Specialty Mortgage Trust, Inc. in accordance with GAAP.
"GOVERNMENT SECURITIES": Means direct obligations of the United States
of America or any agency or instrumentality thereof or obligations fully
guaranteed by the United States of America or any agency or instrumentality
thereof; provided that such direct obligations or guarantees are entitled to the
full faith and credit of the United States of America and that any such
obligations, other than United States Treasury Bills, provide that the United
States of America has the obligation to repay, in a full and timely manner, any
such securities.
"GRANT": To grant, bargain, sell, warrant, alienate, remise, release,
convey, assign, transfer, mortgage, pledge, create and grant a security interest
in, deposit, set-over and confirm. A Grant of a Pledged Loan and related
Mortgage Documents, or any other instrument shall include all rights, powers and
options (but none of the obligations) of the Granting party thereunder,
including, without limitation, the immediate and continuing right to claim for,
collect, receive and give receipts for principal and interest payments
thereunder, insurance proceeds, condemnation awards, purchase prices and all
other moneys payable thereunder and all proceeds thereof, 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 which the
Granting party is or may be entitled to do or receive thereunder or with respect
thereto.
"HIGHEST LAWFUL RATE": The meaning specified in Section 11.16.
"HOLDER": The holder of Notes issued pursuant to this Indenture.
"INDENTURE" or "THIS INDENTURE": This instrument as originally executed
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. All references in this instrument to designated
"Articles", "Sections", "Subsections" and other subdivisions are to the
designated Articles, Sections, Subsections and other subdivisions of this
instrument as originally executed. The words "herein", "hereof" and "hereunder"
and other
4
<PAGE> 9
words of similar import refer to this Indenture as a whole and not to any
particular Article, Section, Subsection or other subdivision.
"INDEPENDENT": When used with respect to any specified Person means
such a Person who (i) is in fact independent of the Issuer and any other obligor
upon the Notes, (ii) does not have any direct financial interest or any material
indirect financial interest in the Issuer or in any such other obligor or in an
Affiliate of the Issuer or such other obligor and (iii) is not connected with
the Issuer or any such other obligor as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
Whenever it is herein provided that any Independent Person's opinion or
certificate shall be furnished to the Trustee, such Person shall be appointed by
an Issuer Order and with the approval of the Trustee, which approval shall not
be unreasonably withheld, and such opinion or certificate shall state that the
signer has read this definition and that the signer is Independent within the
meaning hereof.
"ISSUER": Specialty Mortgage Trust, Inc., a Maryland corporation.
"ISSUER ORDER" and "ISSUER REQUEST": A written order or request that is
dated and signed in the name of the Issuer by an Authorized Officer and
delivered to the Trustee.
"LIEN" means any mortgage, lien, charge or encumbrance on or pledge of
or security interest in any of the Trust Estate.
"MANAGER": Specialty Financial, formerly Gonzo Financial, a Nevada
corporation, as manager of the Issuer under the Management Agreement, and its
permitted successors and assigns thereunder.
"MANAGEMENT AGREEMENT": The management agreement dated as of August 23,
1997, between the Issuer and the Manager, pursuant to which the Manager will be
obligated to manage and supervise the administration and servicing of the
Pledged Assets securing the Notes, as such agreement may be amended or
supplemented from time to time as permitted thereby.
"MARKET VALUE": As of any date the amount determined with respect to
specific Eligible Collateral in the manner set forth below:
(a) as to Mortgage Notes, the current aggregate unpaid principal
balance of the Mortgage Note (as determined by the Issuer) or such lower amount
reasonably determined by the Issuer to reflect circumstances such as foreclosure
or other acquisition of title of the related Mortgaged Property;
(b) as to Short-Term Money Market Instruments, the aggregate unpaid
principal amount evidenced by each such instrument (as determined by the Issuer
by any reasonable method which the Issuer believes reliable, which may include
the most recent report related to each such instrument received by the Issuer);
and
(c) as to Cash, the face value thereof.
Notwithstanding the foregoing, the Market Value of any items of
Eligible Collateral of the same type may be calculated in a pooled basis,
applying the foregoing procedures to the aggregate pooled balance or amount
thereof and allocating the aggregate Market Value so obtained to items with
different Discount Factors on a pro rata basis, based on the unpaid principal
amounts or face amounts determined as provided above.
"MATURITY": With respect to any Note, the date on which the entire
unpaid principal amount of such Note becomes due and payable as therein or
herein provided, whether at the Stated Maturity of the final installment of such
principal or by declaration of acceleration or otherwise.
5
<PAGE> 10
"MORTGAGE": The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple or leasehold interest in real property
securing a Mortgage Note.
"MORTGAGE DOCUMENTS": The documents pertaining to a particular Pledged
Loan including the Required Documentation delivered to the Trustee.
"MORTGAGE LOAN": Any loan secured by real property, including
residential, commercial, multifamily, land and construction loans, located in
any state.
"MORTGAGE NOTE": The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
"MORTGAGED PROPERTY": The underlying property securing a Pledged Loan.
"MORTGAGOR": The obligor(s) on a Mortgage Note.
"NOTEHOLDER" OR "HOLDER": The Person in whose name a Note is registered
in the Note Register.
"NOTE INTEREST RATE": means interest rates on the Notes as established
from time to time, with interest payable, at the election of the Noteholder,
either monthly in arrears or, compounding monthly, at maturity.
"NOTE PAYMENT ACCOUNT": The trust account created and maintained
pursuant to Section 3.03, which shall be entitled "Bankers Trust Company of
California, N.A., as trustee, in trust for registered holders of Specialty
Mortgage Trust, Inc. Collateralized Investment Notes." Certain funds deposited
in the Note Payment Account shall be held in trust for the Noteholders as more
fully described in Sections 3.03, 5.02 and 5.08.
"NOTE REGISTER": As defined in Section 2.07.
"NOTE REGISTRAR": The Trustee shall be the Note Registrar for the
purpose of registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer shall promptly appoint a successor
or, if it elects not to make such an appointment, assumes the duties of Note
Registrar.
"NOTES": Any notes authorized by, and issued and delivered under, this
Indenture.
"OFFICERS' CERTIFICATE": A certificate signed by an Authorized Officer.
"OPINION OF COUNSEL": A written opinion of counsel who may, except as
otherwise expressly provided in this Indenture, be counsel for the Issuer, and
who shall be reasonably satisfactory to the Trustee.
"OUTSTANDING": As of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee in trust for the Holders of such Notes;
(iii) Notes in exchange for or in lieu of which other Notes
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Trustee is presented that any such Notes are
held by a bona fide purchaser (as defined by the Uniform Commercial
Code of the applicable jurisdiction); and
(iv) Notes alleged to have been destroyed, lost or stolen for
which replacement Notes have been issued as provided for in Section
2.08; provided, however, that in determining whether the Holders of the
requisite percentage of the aggregate Principal Amount of the
Outstanding Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Notes owned by the
Issuer, any other obligor upon the Notes or any Affiliate of the Issuer
or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes which the Trustee
knows to be so owned shall be so disregarded. Notes so owned which have
been
6
<PAGE> 11
pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so
to act with respect to such Notes and that the pledgee is not the
Issuer, any other obligor upon the Notes or any Affiliate of the Issuer
or such other obligor.
"PAYING AGENT" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Notes on behalf of the
Company.
"PAYMENT DATE": The 20th day of each calendar month after the issuance
of the Notes or, if such 20th day is not a Business Day, the next succeeding
Business Day.
"PERSON": Any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PLEDGED ASSET SCHEDULE": The list of Pledged Assets (as from time to
time amended to reflect the addition of and the deletion of certain Pledged
Assets) granted to the Trustee pursuant to the provisions hereof and from time
to time subject to this Agreement, electronically transmitted from the Issuer to
the Trustee and attached as Schedule I to the Certificate of Available Eligible
Collateral.
"PLEDGED ASSETS": The Eligible Collateral that has been Delivered to
the Trustee or its nominee (as pledgee) and made subject to the Lien of this
Indenture to secure the Notes Outstanding hereunder, including all proceeds
thereof.
"PLEDGED LOANS": Such of the Mortgage Loans Granted to the Trustee
pursuant to the provisions hereof as from time to time are held as a part of the
Pledged Assets, the Mortgage Loans so held being identified in the Pledged Asset
Schedule, notwithstanding foreclosure or other acquisition of title of the
related Mortgaged Property; provided that on the date such mortgage note becomes
subject to the Lien of this Indenture it shall (i) have an unpaid principal
balance of not less than $25,000, (ii) have had a loan-to-value ratio of the
most recent appraisal date of not more than 85%, (iii) be owned by the Issuer,
and (iv) not be delinquent or have been delinquent more than once during the
preceding 12-month period.
"PRINCIPAL AMOUNT": As of any date, the original principal amount of
the Notes reduced by all amounts previously distributed to Noteholders as
payments of principal.
"PROCEEDING": Any suit in equity, action at law or other judicial or
administrative proceeding.
"RECORD DATE": With respect to any Payment Date, the date on which the
Persons entitled to receive any payment of principal of, or interest on, any
Notes (or notice of a payment in full of principal) due and payable on such
Payment Date are determined; such date being the 15th day of the month.
"REQUIRED DOCUMENTATION": With respect to a Mortgage Loan, means:
(a) the mortgage note or other evidence of indebtedness
secured by the mortgage endorsed without recourse in blank or to the
Trustee or other custodian and accompanied by an assignment thereof and
any assumption or modification agreements relating thereto;
(b) a copy of the mortgage, deed of trust, deed to secure debt
or similar security instruments encumbering real property and related
documentation, with evidence of recording or filing thereof, in each
case accompanied by an original assignment thereof, executed in blank
or to the Trustee or other custodian, in recordable form as may be
appropriate in the jurisdiction where the property is located; and
(c) a copy of the ALTA lender's title insurance policy (or, if
not yet available, a preliminary title report which will be acceptable
for a period of 60 days following the Delivery of such mortgage)
stating that the mortgage constitutes a valid lien on the premises
described in such mortgage (which policy (or title report) may be
subject to exceptions for permitted tax liens and other matters to
which like properties are commonly subject which neither individually
nor in the aggregate materially interfere with
7
<PAGE> 12
the benefits of the security interest intended to be provided by such
mortgage and standard exceptions and exclusions from mortgage title
insurance policies).
"RESPONSIBLE OFFICER": With respect to the Trustee, any officer in the
corporate trust department or similar group of the Trustee and also, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his or her knowledge of and familiarity with the
particular subject.
"SALE": The meaning specified in Section 5.18(a).
"SECURITIES ACT": The Securities Act of 1933, as amended.
"SHORT-TERM MONEY MARKET INSTRUMENT": Any of the following instruments,
and then only if (i) on the date such instrument first becomes subject to the
Lien of this Indenture the instrument has a remaining term to maturity not in
excess of 90 days and (ii) the obligor of any of such instruments (or in the
case of a depository institution in a holding company system, the holding
company as to the long-term debt obligation rating) has a short-term commercial
paper or other unsecured short-term rating in the highest rating category and a
long-term debt obligation rating in one of the two highest rating categories set
by a recognized rating agency:
(a) Time deposits of, demand deposits in, certificates of
deposit of, or bankers' acceptances issued by, any FDIC-insured
depository institution;
(b) Repurchase agreements with respect to a Government
Security, FNMA Certificate, FHLMC Certificate or GNMA Certificate
entered into with a depository institution (acting as principal); or
(c) Commercial paper.
"STATED MATURITY": With respect to any and all Notes, as defined in
Section 2.03(b).
"TOTAL INDEBTEDNESS": Shall mean total indebtedness for borrowed monies
of Specialty Mortgage Trust, Inc. and its consolidated subsidiaries, if any,
determined in accordance with GAAP, less the amount of any nonrecourse
indebtedness of Specialty Mortgage Trust, Inc. and its consolidated
subsidiaries.
"TRUST ESTATE" has the meaning stated in the habendum to the Granting
Clause.
"TRUSTEE": Bankers Trust Company of California, N.A., a national
banking association, and any Person succeeding as Trustee hereunder pursuant to
Section 6.12 or any other applicable provision hereof.
"TRUST INDENTURE ACT" or "TIA": The Trust Indenture Act of 1939, as
amended, as in force and effect at the date of execution of this Indenture.
"VALUATION DATE": As to the Pledged Assets, (a) the date of issuance of
the Notes and (b) the 20th day of each month, commencing the month Notes are
first issued.
ARTICLE II
THE NOTES
SECTION 2.01. FORMS GENERALLY.
The Notes and the Trustee's certificate of authentication shall be in
substantially the form required by this Article II. Each Note, issued pursuant
to this Indenture shall be, (i) in the case of certificated Notes, substantially
in the form attached hereto as Exhibit A, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may,
consistently herewith, be determined appropriate by the officers executing such
Notes, as evidenced by their execution thereof, and (ii) in the case of
uncertificated Notes,
8
<PAGE> 13
established by or pursuant to a Board Resolution providing that such Notes shall
fulfill all requirements or state law wherever sold. Any portion of the text of
any certificated Note may be set forth on the reverse thereof with an
appropriate reference on the face of the Note.
The certificated Notes may be produced in any manner determined by the
officers executing such Notes, as evidenced by their execution thereof.
With respect to any Notes to be (i) authenticated and delivered
hereunder in the case of certificated Notes or (ii) registered in the Note
Register in the case of uncertificated Notes, there shall be established in or
pursuant to a Board Resolution and set forth in an Issuer Order, or established
in one or more indentures supplemental hereto,
(a) the date or dates, or the method or methods, if any, by which
such date or dates shall be determined, on which the principal
of such Note(s) is payable;
(b) the denominations in which any of such Notes shall be
issuable;
(c) the rate or rates at which such Notes shall bear interest, if
any, or the method or methods, if any, by which such rate or
rates are to be determined, and the date(s) on which interest
is payable;
(d) if not the Issuer, the identity of the Note Registrar with
respect to such Notes;
(e) any deletions from, modifications of or additions to the
Events of Default or covenants of the Company with respect to
any of such Notes, whether or not such Events of Default or
covenants are consistent with the Events of Default or
covenants set forth herein;
(f) if not the Trustee, the identity of each Paying Agent or
Authenticating Agent with respect to such Notes;
(g) whether the Notes will be certificated or uncertificated; and
(h) any other terms of such Notes (which terms shall not be
inconsistent with the provisions of this Indenture).
The Board Resolution pursuant to which the above terms are established
shall be delivered to the Trustee at or prior to the delivery of the Issuer
Order setting forth the terms of the Notes.
SECTION 2.02. FORMS OF NOTES AND CERTIFICATE OF AUTHENTICATION.
(a) The form of the certificated Notes is attached hereto as
Exhibit A.
(b) The form of the Trustee's certificate of authentication is as
set forth on Exhibit A.
(c) The form of transfer and assignment is as set forth on Exhibit
A.
SECTION 2.03. NOTES ISSUABLE; PROVISIONS WITH RESPECT TO PRINCIPAL AND
INTEREST PAYMENTS.
(a) General.
The Notes shall be designated generally as the Specialty Mortgage
Trust, Inc. Collateralized Investment Notes.
9
<PAGE> 14
The aggregate principal amount of Notes at any time outstanding which
may be executed, authenticated and delivered under this Indenture is limited to
$50,000,000.00.
(b) Stated Maturity and Payment of Principal.
The Notes will mature a minimum of one month and a maximum of twelve
months from the date of issuance, as stated on the face of each Note (the
"Stated Maturity"). The principal of each Note shall be payable at the Stated
Maturity thereof unless the unpaid principal of such Note becomes due and
payable at an earlier date by declaration of acceleration or otherwise. All cash
payments made with respect to any Note shall be applied first to the interest
then due and payable on such Note and then to the principal thereof.
(c) Calculation and Payment of Interest on the Notes.
The Notes will bear interest upon the unpaid principal amount thereof
from the date of issuance of the Notes at the rate per annum fixed by the Issuer
on the date of issuance, computed on a basis of a 360-day year of twelve 30-day
months. Once determined, the rate of interest payable on a Note will remain
fixed until the Note matures. The interest rate on the Notes will in no event be
less than the applicable federal rate which is a rate periodically set by the
Internal Revenue Service as the minimum for short-term borrowings. Interest is
payable to the persons in whose names the Notes are registered at the election
of the Noteholder either (a) monthly in arrears on the 20th day of each month or
such other day as may be provided in the related Issuer Order, or (b)
compounding monthly, at the Stated Maturity.
The Issuer will withhold 31% of any interest paid to any investor who
has not provided a fully executed Form W-9 or satisfactory equivalent or where
the Internal Revenue Service has notified us that back-up withholding is
otherwise required. Any tax or other amounts withheld from interest payments
pursuant to the requirements of a taxing authority will be considered as having
been paid by the Issuer to the Noteholder.
SECTION 2.04. DENOMINATIONS.
The Notes shall be issued in minimum denominations of $25,000. Unless
otherwise provided in or pursuant to this Indenture, certificated Notes shall be
issuable in registered form without coupons. Uncertificated Notes will be
evidenced by a confirmation of book entry and a statement issued by the Issuer
to each Noteholder.
SECTION 2.05. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
Certificated Notes shall be executed on behalf of the Issuer by an
Authorized Officer of the Issuer. The signature of such officer on the Notes may
be manual or facsimile.
Notes bearing the manual or facsimile signature of an individual who
was at any time an Authorized Officer shall bind the Issuer, notwithstanding
that such individual has ceased to hold such office prior to the authentication
and delivery of such Notes or did not hold such office at the date of such
Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Notes executed on behalf of the Issuer to
the Trustee (i) with respect to Notes in certificated form, the certificates
representing such Notes for authentication, together with the Board Resolution
and Officer's Certificate or supplemental indenture with respect to such Notes
and an Issuer's Order for the authentication and delivery of such Notes, and the
Trustee in accordance with the Issuer Order and subject to the provisions hereof
shall authenticate and deliver such Notes and (ii) with respect to Notes in
uncertificated form, the Board Resolution and Officer's Certificate or
supplemental indenture with respect to such Notes.
Each certificated Note shall be dated the date of its authentication.
No certificated Note shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose, unless there appears on
such Note a certificate of authentication substantially in the form provided for
10
<PAGE> 15
herein executed by the Trustee by the manual signature of one of its Authorized
Officers, and such certificate upon any Note shall be conclusive evidence, and
the only evidence, that such certificated Note has been duly authenticated and
delivered hereunder.
SECTION 2.06. TEMPORARY NOTES.
If temporary Notes are issued, the Issuer will cause Notes to be
prepared without unreasonable delay. After the preparation of Notes, the
temporary Notes shall be exchangeable for Notes upon surrender of the temporary
Notes at the office or agency of the Issuer to be maintained as provided in
Section 3.02, without charge to the Holder. Upon surrender or cancellation of
any one or more temporary Notes, the Issuer shall execute and the Trustee shall
authenticate and deliver and exchange therefor a like principal amount of
definitive Notes of authorized denominations. Until so exchanged, the temporary
Notes shall in all respects be entitled to the same benefits under this
Indenture as definitive Notes.
SECTION 2.07. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Issuer shall cause to be kept a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Notes and the registration of transfers of
Notes. The Trustee shall have the right to inspect such Note Register at all
reasonable times and to rely conclusively upon a certificate of the Issuer or of
the Person in charge of the Note Register as to the names and addresses of the
Holders of the Notes and the principal amounts and numbers of such Notes so
held.
Upon surrender for registration of transfer of any certificated Note at
the office or agency of the Issuer to be maintained as provided in Section 3.02,
the Issuer shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Notes of any
authorized denominations and of a like aggregate principal amount.
At the option of the Holder, certificated Notes may be exchanged for
other Notes of any authorized denominations, and of a like aggregate initial
principal amount, upon surrender of the Notes to be exchanged at such office or
agency. Whenever any certificated Notes are so surrendered for exchange, the
Issuer shall execute, and the Trustee shall authenticate and deliver, the Notes
which the Noteholder making the exchange is entitled to receive.
Holders may transfer ownership of a Note on our register only by
written notice to us signed by the owner(s), or the owner's authorized
representative, on a form to be supplied by us.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every certificated Note presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Issuer duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Issuer may require payment of a sum sufficient to
cover any tax or other governmental charge as may be imposed in connection with
any registration of transfer or exchange of Notes, other than exchanges pursuant
to Section 2.08 not involving any transfer.
SECTION 2.08. MUTILATED, DESTROYED, LOST OR STOLEN NOTES.
If (1) any mutilated Note is surrendered to the Trustee or the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note and (2) there is delivered to the Trustee such security or indemnity as may
be required by the Trustee to save the Issuer and the Trustee harmless, then, in
the absence of notice to the Issuer or the Trustee that such Note has been
acquired by a bona fide purchaser, the Issuer shall execute and upon its request
11
<PAGE> 16
the Trustee shall authenticate and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Note, a new Note or Notes of the same
tenor, aggregate initial principal amount bearing a number not contemporaneously
outstanding. If, after the delivery of such new Note, a bona fide purchaser of
the original Note in lieu of which such new Note was issued presents for payment
such original Note, the Issuer and the Trustee shall be entitled to recover such
new Note from the person to whom it was delivered or any person taking
therefrom, except a bona fide purchaser, and shall be entitled to recover upon
the security or indemnity provided therefor to the extent of any loss, damage,
cost or expenses incurred by the Issuer or the Trustee in connection therewith.
If any such mutilated, destroyed, lost or stolen Note shall have become or shall
be about to become due and payable, or shall have become subject to redemption
in full, instead of issuing a new Note, the Issuer may pay such Note without
surrender thereof, except that any mutilated Note shall be surrendered.
Upon the issuance of any new Note under this Section, the Issuer may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other reasonable expenses
(including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Issuer, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.09. PAYMENTS OF PRINCIPAL AND INTEREST.
(a) All payments of principal of and interest on the Notes shall be
made only to the registered Holder thereof and only from the assets of the
Issuer, and each Holder of the Notes, by its acceptance of the Notes, agrees
that it will have recourse solely against such assets of the Issuer and that the
Trustee shall not be personally liable for any amounts payable, or performance
due, under the Notes or this Indenture.
(b) Whenever the Issuer expects that the entire remaining unpaid
principal amount of any certificated Note will become due and payable, it shall,
no later than the Record Date prior to such Payment Date, mail or cause to be
mailed to the Holder of such Note and the Trustee as of the close of the
business on such otherwise applicable Record Date a notice to the effect that:
(i) the Issuer expects that funds sufficient to pay such final
installment will be available on such Payment Date; and
(ii) if such funds are available, such final installment will
be payable on such Payment Date, but only upon presentation and
surrender of such Note at the office or agency of the Issuer maintained
for such purpose pursuant to Section 3.02 (the address of which shall
be set forth in such notice).
(c) The Issuer will send notice to Holders whose Notes are coming due
approximately two weeks prior to the Stated Maturity. The Issuer will
automatically rollover a maturing Note by issuing a new Note in payment of the
maturing Note with a term equal to the maturing Note's original term and at the
current interest rate being offered by the Issuer on Notes of the same term and
duration as the maturing Note unless (a) the Issuer receives notice from the
Noteholder at least one business day before the Stated Maturity of the Note to
pay the maturing Note in cash or (b) the Issuer gave Holder notice at least five
business days before the Note's maturity that the Note will be paid in cash. A
Noteholder whose Note is rolled-over will be paid the interest due at maturity
in cash; only the principal amount will be rolled-over.
12
<PAGE> 17
SECTION 2.10. PERSONS DEEMED OWNERS.
Prior to due presentment for registration of transfer of any Note, the
Issuer, the Trustee, any agent of the Issuer, or the Trustee shall treat the
Person in whose name any Note is registered as the owner of such Note (a) on the
applicable Record Date for the purpose of receiving payments of the principal
of, and interest on, such Note and (b) on any other date for all other purposes
whatsoever, whether or not such Note is overdue, and neither the Issuer, the
Trustee, any agent of the Issuer or the Trustee shall be affected by notice to
the contrary.
SECTION 2.11. CANCELLATION.
All certificated Notes surrendered for payment, registration of
transfer, exchange or redemption shall, if surrendered to any Person other than
the Issuer, be then delivered to the Issuer and shall be promptly cancelled by
it. No Notes shall be authenticated in lieu of or in exchange for any Notes
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Notes shall be delivered to and held by the Trustee in
accordance with its standard retention policy, unless the Issuer shall direct by
an Issuer Order that they be destroyed or returned to it.
SECTION 2.12. AUTHENTICATION AND DELIVERY OF NOTES.
The certificated Notes may be executed by the Issuer and delivered to
the Trustee for authentication, and thereupon the same shall be authenticated
for subsequent delivery to the Noteholders.
Uncertificated Notes will be evidenced by a confirmation of book entry
in the Note Registrar and a statement issued by the Issuer to each Noteholder.
Prior to the initial issuance of any Notes, the Trustee shall have
received the following:
(a) an Issuer Order authorizing the execution, authentication and
delivery of certificated Notes or certifying the issuance of
uncertificated Notes, and, in each case, specifying the Stated
Maturity, the principal amount and the Note Interest Rate, of
such Notes to be issued, together with the related Board
Resolution pursuant to which the terms were established;
(b) evidence of the execution and delivery of this Indenture;
(c) the Pledged Assets together with the Required Documentation;
(d) a Certificate of Available Eligible Collateral; and
(e) upon the initial issuance of Notes and annually thereafter, an
Opinion of Counsel addressed to the Trustee, complying with
the requirements of Section 11.01, reasonably satisfactory in
form and substance to the Trustee, in substantially the form
attached hereto as Exhibit E. Such Opinion of Counsel may
contain such additional limitations and qualifications as
shall be reasonably acceptable to the Trustee.
For subsequent issuances, the Trustee must receive (a), (c) if any
Pledged Assets are being added, and (d) listed above.
13
<PAGE> 18
ARTICLE III
COVENANTS
SECTION 3.01. PAYMENT OF NOTES.
The Issuer will pay or cause to be duly and punctually paid the
principal of, and interest on, the Notes in accordance with the terms of the
Notes and this Indenture.
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY.
The Issuer will maintain in the City of Reno, Nevada, an office or
agency where certificated Notes may be presented or surrendered for payment or
may be surrendered for registration of transfer or exchange, and where notices
and demands to or upon the Issuer in respect of the Notes and this Indenture may
be served. The Issuer will give prompt written notice to the Trustee of the
location and any change in the location, of such office or agency. Until written
notice of any change in the location of such office or agency is delivered to
the Trustee or if at any time the Issuer shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, Notes may be so presented and surrendered, and such notices and demands
may be made or served, at the office of the Trustee.
The Issuer may also from time to time designate one or more other
offices or agencies in or outside the City of Reno where the certificated Notes
may be presented or surrendered for any or all such purposes and may from time
to time rescind such designations. The Issuer will give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
SECTION 3.03. ESTABLISHMENT OF NOTE PAYMENT ACCOUNT AND MONEY FOR NOTE
PAYMENTS TO BE HELD IN TRUST.
The Issuer shall establish and maintain with the Trustee a Note Payment
Account for the benefit of Noteholders. On or prior to each Payment Date of the
principal of or interest on the Notes, the Issuer, if unable to pay a Noteholder
directly such that the payment is unclaimed, shall identify the Noteholder and
deposit with the Trustee a sum sufficient to pay the principal of or interest on
the Notes so becoming due, such sum to be held in trust in the Note Payment
Account for the benefit of the Persons entitled to such principal or interest.
Any money deposited with the Trustee in trust for the payment of the
principal of or interest on any Note which remains unclaimed for two years after
such principal or interest has become due and payable shall be paid to the
Issuer on the Issuer's Request; and the holder of such Note shall thereafter, as
an unsecured general creditor, look only to the Issuer for payment thereof, and
all liability of the Trustee with respect to such deposited amounts shall
thereupon cease; provided, however, that the Trustee, before being required to
make any such repayment, may at the expenses of the Issuer mail to any such
holder notice that such amount remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days after the date of such
mailing, any unclaimed balance of such amount then remaining will be repaid to
the Issuer.
Any money deposited in the Note Payment Account in trust for the
payment of principal of or interest on any Note may be invested by the Trustee
at the direction of the Issuer in Short-Term Money Market Instruments and/or
Government Securities having maturities no greater than thirty (30) days and
subject to redemption at the option of the holder thereof at any time, provided
that any risk of loss on such investments shall be borne by the Noteholder for
whom the investment is held.
SECTION 3.04. MAINTENANCE OF EXISTENCE; CONSOLIDATION OR MERGER.
(a) Subject to subsection (c) below, the Issuer will keep in full
effect its existence, rights and franchises under the laws of the state of its
incorporation.
14
<PAGE> 19
(b) The Issuer will maintain its reporting obligations under the
Securities Exchange Act of 1934 for so long as any of the Notes remain
outstanding or could be issued as provided under this Indenture.
(c) Any corporation into which the Issuer may be merged or with which
it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Issuer shall be a party, shall be the successor
Issuer under this Indenture without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto, anything
herein, or in any agreement relating to such merger or consolidation, by which
any such Issuer may seek to retain certain powers, rights and privileges
therefore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
(d) Upon any consolidation or merger of or other succession to the
Issuer in accordance with this Section 3.04, the Person formed by or surviving
such consolidation or merger (if other than the Issuer) may exercise every right
and power of the Issuer, under this Indenture with the same effect as if such
Person had been named as the Issuer herein.
SECTION 3.05. INSPECTION OF RECORDS.
The Issuer agrees that, on reasonable prior notice, it will permit any
representative of the Trustee, during the Issuer's normal business hours, to
examine all books of account, records, reports and other papers of the Issuer,
to make copies and extracts therefrom, to cause such books to be audited by
Independent Accountants selected by the Trustee, and to discuss its affairs,
finances and accounts with its officers, employees and Independent Accountants
(and by this provision the Issuer hereby authorizes its Accountants to discuss
with such representatives such affairs, finances and accounts), all at such
reasonable times and as often as may be reasonably requested. Any expense
incident to the exercise by the Trustee of any rights under this Section 3.05
shall be borne by the Issuer.
SECTION 3.06. WARRANTY OF TITLE AND AUTHORITY TO PLEDGE.
The Issuer warrants that it is and will be the lawful owner of, and has
and will have good and marketable title to, the Pledged Assets free and clear of
all liens, other than the Lien of this Indenture and liens for taxes either not
yet delinquent or being contested in good faith, and that the Issuer has not
otherwise granted or assigned any security interest, lien or any other interest
or participation in the Pledged Assets (or, if any such interest or
participation has been granted or assigned, it has been released). The Issuer
warrants that it has and will have full power and lawful authority to pledge
such Pledged Assets and to assign, transfer and deliver such Pledged Assets in
the manner and form aforesaid or to cause such Pledged Assets so to be assigned,
transferred and delivered. The Issuer hereby does and, until the Pledged Assets
are reassigned to the Issuer in accordance herewith, will warrant and defend the
title of the Trustee to the Pledged Assets, whether now or hereafter pledged or
assigned by the Issuer, for the benefit of the Holders of the Notes secured by
such Pledged Assets against the claims and demands of all Persons whomsoever,
subject as aforesaid to the Lien of this Indenture and to the aforesaid liens
for taxes.
SECTION 3.07. PROTECTION OF TITLE.
The Issuer will:
(i) promptly pay and discharge, or cause to be paid and
discharged, all taxes, assessments, governmental and other charges
levied, assessed or imposed upon or against any of the Pledged Assets,
including the income or profits therefrom and the interests of the
Trustee and Noteholders in such Pledged Assets.
(ii) duly observe and conform or cause to be observed and
conformed in all material respects to all valid requirements of any
governmental authority imposed upon the Issuer relative to any of the
Pledged Assets; and all covenants, terms and conditions under or upon
which any part thereof is held;
15
<PAGE> 20
(iii) duly and promptly pay and discharge or cause to be paid
and discharged all claims (including, without limitation, income taxes)
which, if unpaid, might become a lien or charge upon the Pledged
Assets;
(iv) as permitted by this Indenture, collect or cause to be
collected all payments due on the Pledged Assets, take or cause to be
taken appropriate action in connection with defaults thereunder, and
otherwise service or cause to be serviced such Pledged Assets, all in
accordance with the Issuer's customary practices; and
(v) do or cause to be done all things and take or cause to be
taken all actions necessary to keep the Lien of this Indenture a valid
lien upon the Pledged Assets and to protect its title to the Pledged
Assets against loss by reason of any foreclosure or other proceeding to
enforce any lien prior to or pari passu with the Lien of this Indenture
to the extent consistent with its normal servicing procedures.
Nothing contained in this Section shall require the payment of any such
tax, assessment, claim, lien or charge or the compliance with any such
requirement if (i) the validity, application or amount thereof shall be
contested in good faith, or (ii) the Issuer has no actual knowledge thereof.
SECTION 3.08. NEGATIVE COVENANTS.
The Issuer shall not:
(a) sell, transfer, exchange or otherwise dispose of any portion of the
Pledged Assets except as expressly permitted by this Indenture;
(b) dissolve or liquidate in whole or in part;
(c) permit the validity or effectiveness of this Indenture or any Grant
to be impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any Person to be
released from any covenants or obligations under this Indenture, except as may
be expressly permitted hereby;
(d) permit any lien, charge, security interest, mortgage or other
encumbrance (other than the lien of this Indenture or as expressly permitted by
this Indenture) to be created on or extended to or otherwise arise upon or
burden the Pledged Assets or any part thereof or any interest therein or the
proceeds thereof;
(e) permit the lien of this Indenture not to constitute a valid
perfected first priority security interest in the Pledged Assets; or
(f) breach any financial covenant set forth in Section 3.12.
SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE.
On or before 120 days after the end of the first fiscal year of the
Issuer (which ends more than three months after the initial issuance of notes),
and each fiscal year thereafter, the Issuer shall deliver to the Trustee a
written statement, signed by an Authorized Officer, stating that:
(1) a review of the fulfillment by the Issuer during such year
of its obligations under this Indenture has been made under such
officer's supervision; and
(2) to the best of such officer's knowledge, based on such
review, the Issuer has fulfilled all of its obligations under this
Indenture throughout such year, or, if there has been a Default in the
fulfillment of any such obligation, specifying each such Default known
to such officer and the nature and status thereof.
16
<PAGE> 21
SECTION 3.10. TAX TREATMENT.
The Issuer intends that each Note be classified as debt for all
purposes, and the Issuer shall treat, and each Noteholder by acceptance of the
Note shall be deemed to have agreed to treat, the Note as debt for all tax
purposes and shall make all reportings and filings in a manner consistent with
such classification unless and to the extent otherwise required by an applicable
taxing authority.
SECTION 3.11 OPINIONS AS TO TRUST ESTATE
(a) Upon the initial issuance of the Notes, the Issuer shall furnish to
the Trustee an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the recording and filing of
this Indenture, any indentures supplemental hereto and any other requisite
documents as is necessary to make effective the lien and security interest of
this Indenture and reciting the details of such action, or stating that, in the
opinion of such counsel, no such action is necessary to make such lien and
security interest effective.
(b) On or before January 31 in each calendar year commencing with
2002, the Issuer shall furnish to the Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and re-filing of this Indenture,
any indentures supplemental hereto and any other requisite documents as is
necessary to maintain the lien and security interest created by this Indenture
and reciting the details of such action or stating that in the opinion of such
counsel no such action is necessary to maintain such lien and security interest.
Such Opinion of Counsel shall also describe the recording, filing, re-recording
and re-filing of this Indenture, any indentures supplemental hereto and any
other requisite documents that will, in the opinion of such counsel, be required
to maintain the lien and security interest of this Indenture until January 31 in
the following calendar year.
SECTION 3.12 FINANCIAL COVENANTS
(a) The ratio of (a) the Total Indebtedness of the Issuer, both secured
and unsecured, to (b) the GAAP Net Worth of the Issuer, is limited to no more
than 5:1.
(b) As of each Payment Date, the Issuer shall maintain sufficient cash
and unused credit facilities to pay all interest and principal due on the Notes
on the subsequent Payment Date.
(c) On each Payment Date, the Issuer will deliver to the Trustee a
certificate setting forth the Issuer's compliance with subsections (a) and (b)
of this Section 3.12.
SECTION 3.13 WITHHOLDING
The Issuer will withhold 31% of any interest payable to any Holder who
has not provided a fully executed Form W-9 or satisfactory equivalent or where
the Internal Revenue Service has notified the Issuer that back-up withholding is
otherwise required. Any tax or other amounts withheld from interest payments
pursuant to the requirements of a taxing authority will be considered as having
been paid by the Issuer to the Noteholder.
ARTICLE IV
PLEDGED ASSETS
SECTION 4.01. HOLDING OF PLEDGED ASSETS.
(a) All Eligible Collateral delivered to the Trustee as Pledged Assets
shall be delivered in accordance with the definition of "Delivery" in Section
1.01 hereof and with respect to any Mortgage Notes, accompanied by the Required
Documentation. The Issuer will deliver promptly to the Trustee such other
documents as the Trustee
17
<PAGE> 22
may reasonably request in connection with the subjection at any time of any
Eligible Collateral to the Lien of this Indenture to the extent contemplated
hereby.
(b) The fact that Pledged Assets are assigned without recourse shall
not alter or impair the obligation of the Issuer, which is absolute and
unconditional, to pay the principal of and interest on the Notes.
(c) The Trustee shall, at the time of the initial issuance of the Notes
and at any time additional Eligible Collateral is delivered to the Trustee,
execute and deliver a certificate to the Issuer in which the Trustee shall (i)
acknowledge the Delivery to and receipt by the Trustee of the Pledged Assets,
together with the accompanying instruments and documents required by this
Indenture, (ii) state that the Trustee acquired possession of such Pledged
Assets in good faith and without actual knowledge or actual notice of any
adverse claim or liens or encumbrances and (iii) certify as to the matters
addressed in Exhibit C hereto related to such Delivery. The Trustee may state in
such certificate that it has not reviewed, analyzed, tested, compared or
verified the information contained in any certificate or instrument representing
any of the Pledged Assets, nor has it examined or compared any signatures
appearing thereon nor otherwise confirmed the validity or genuineness or
enforceability of any such certificate or instrument. In no event shall the
Trustee be required to review more than One Hundred (100) mortgage loan files in
any Business Day, so long as such files and the related data are delivered to
Trustee before the close of business on the preceding Business Day.
SECTION 4.02. DISPOSITION OF PAYMENTS ON PLEDGED ASSETS.
(a) With respect to the Pledged Assets other than Mortgage Notes:
(i) The Trustee shall be entitled to withdraw or receive all
payments or interest on or in respect of such Pledged Assets; and
(ii) Notwithstanding the provisions of Section 4.02(a)(i),
upon receipt of an Issuer Request for release and transfer of any
amount of the payments received and held by the Trustee on or in
respect of such Pledged Assets accompanied by a Certificate of
Available Eligible Collateral dated as of the most recent Valuation
Date, the Trustee shall promptly release and transfer the requested
amounts to the Issuer if, and to the extent that the aggregate
Discounted Value of such Pledged Assets (determined as of the most
recent Valuation Date; but modified to give effect, as of such
Valuation Date, to such Issuer Request) would be at least equal to the
Basic Maintenance Amount (determined as of such Valuation Date), and
provided that no Event of Default shall have occurred and be
continuing.
(b) Unless and until an Event of Default shall have occurred and be
continuing with respect to the Notes, the Issuer shall be entitled to receive
all payments (including, without limitation, payments upon maturity,
prepayments, distributions and payments as a result of default) on or in respect
of any Mortgage Notes securing such Notes, and the Trustee shall pay over to the
Issuer any such payments which may be collected or be received by the Trustee.
Upon the occurrence of such an Event of Default and while it shall be
continuing, the Trustee may notify third parties including mortgagors, servicing
companies, trustees and paying agents of the Trustee's interest in the Pledged
Assets and require that all payments made on such Pledged Assets be paid
directly to it. Upon the occurrence of such an Event of Default and while it
shall be continuing, if the Issuer shall receive any payments (including,
without limitation, payments as a result of default) on or in respect of such
Mortgage Notes, it shall hold such payments in trust for the benefit of the
Trustee and the Holders of the Notes, shall segregate such payments from the
other property of the Issuer, and shall promptly after receipt of such payments,
deliver them in the form received to the Trustee.
SECTION 4.03. CONSENTS, WAIVERS AND MODIFICATIONS.
(a) Unless and until an Event of Default shall have occurred and be
continuing, the Issuer shall have, without the consent of any Holder or the
Trustee, full power and authority in respect of the Pledged Assets securing the
Notes, including, without limitation, the exclusive right to service and
administer the Mortgage Notes, the rights to give consents or waivers upon and
to make modifications respect of all Mortgage Notes, Short-Term Money
18
<PAGE> 23
Market Instruments and other securities included in such Pledged Assets (and
with the same force and effect as if such Mortgage Notes, Short-Term Money
Market Instruments and other securities were not part of such Pledged Assets),
and from time to time were, upon Issuer Request, the Trustee shall, within two
Business Days after such Request, make and deliver or shall cause to be made and
delivered to the Issuer or to its nominees, powers of attorney to give consents
or waivers in respect of any such Mortgage Notes, Short-Term Money Market
Instruments and other securities which have been transferred into the name of or
delivered to the Trustee or its nominee. In addition to other rights to withdraw
Pledged Assets under this Indenture, the Issuer shall be entitled to obtain
delivery and/or reassignment of any Mortgage Note, or assumption documents, with
respect to which there has been a default by the mortgagor thereunder, for the
purposes solely of servicing and administering such defaulted Mortgage Notes by
delivery to the Trustee of an Issuer Request for the delivery or reassignment of
such defaulted Mortgage Note and stating the purpose thereof in reasonable
detail and delivery by the Trustee of a certificate substantially in the form of
Exhibit D. The Issuer shall redeliver and reassign the Mortgage Note (as
modified or supplemented, including, if an additional advance has been made, any
Mortgage Note evidencing such advance) to the Trustee promptly after the related
action has been taken, except as otherwise permitted by this Indenture, so long
as the Mortgage Note then constitutes Eligible Collateral. Without limiting the
generality of the foregoing, unless and until any such Event of Default shall
have occurred and be continuing, the Issuer shall have the right, in its sole
discretion, to determine whether and what, if any, action should be taken in the
event of default under any Mortgage Note, Short-Term Money Market Instrument and
other security, and the Trustee shall execute any release, consent or other
documentation requested by Issuer Request to confirm any action taken by the
Issuer pursuant to this Section or enable such action to be taken by the Issuer.
Any Issuer Request under this Section shall be accompanied by an Officers'
Certificate stating that the action taken is authorized by this Indenture, that
the execution of such release or consent is appropriate to confirm such action
and that no Event of Default has occurred and is continuing. Except as
specifically provided herein (and except for the obligation to exercise
reasonable care in the custody and care of the collateral), so long as no Event
of Default shall have occurred and be continuing, the Trustee shall have no
other duties or responsibilities with regard to any such Mortgage Note,
Short-Term Money Market Instrument and other security assigned to it or the
value of the property subject thereto.
(b) The Issuer covenants that it will give consents and waivers, make
modifications and supplements, and take other action with respect to any
Mortgage Note, Short-Term Money Market Instrument and other security included in
Pledged Assets only (i) in a case by case basis in the ordinary course of its
business in a manner consistent with securities and loans of the same type in
its investment portfolios, (ii) in a manner consistent with the Issuer's
treatment of all securities of the same type in its securities portfolios
generally if such consent, waiver, modification, supplement or other action is
to be other than on a case by case basis and (iii) in a manner consistent with
the provisions and purposes of this Indenture.
SECTION 4.04. RIGHTS OF TRUSTEE AND ISSUER AFTER EVENT OF DEFAULT.
Whenever in this Article it is provided that any right in respect of
obligations or indebtedness forming part of the Pledged Assets delivered to the
Trustee under the Indenture may be exercised by the Issuer only until an Event
of Default or other default shall have occurred and be continuing, such right,
nevertheless, may be exercised by the Issuer in case such an Event of Default or
other default shall have occurred and be continuing if the Trustee shall in
writing consent to such exercise in the specific instance, or more generally in
all instances until further notice, for the purpose of transferring title to the
Pledged Assets to the Trustee, or to the purchaser thereof in a sale by the
Trustee, or otherwise on such conditions as the Trustee may impose.
SECTION 4.05. ESTABLISHMENT OF ELIGIBLE COLLATERAL ACCOUNT AND
INVESTMENT BY TRUSTEE.
The Issuer shall establish and maintain with the Trustee an Eligible
Collateral Account. The Trustee will, if so instructed by the Issuer in writing,
invest or reinvest in the Eligible Collateral Account the Cash at any time
included in the Pledged Assets, if the aggregate Discounted Value of the Pledged
Assets after giving effect to such reinvestment (determined as of the date of
such reinvestment), would be at least equal to the Basic Maintenance Amount
(determined as of such date), such calculation to be calculated and confirmed in
writing by the Issuer.
19
<PAGE> 24
Any money deposited in the Eligible Collateral Account may be invested
by the Trustee at the direction of the Issuer, provided that any risk of loss on
such investments shall be borne by Issuer.
SECTION 4.06. PERFORMANCE OF OBLIGATIONS UNDER MANAGEMENT AGREEMENT.
(a) The Issuer shall punctually perform and observe all of its
obligations and agreements contained in the Management Agreement.
(b) The Issuer shall not take any action and will use its reasonable
good faith efforts not to permit any action to be taken by others that would
release any Person from any of such Person's covenants or obligations under any
of the Mortgage Documents or under any instrument included in the Pledged
Assets, or that would result in the amendment, hypothecation, subordination,
termination or discharge of, or impair the validity or effectiveness of, any of
the Mortgage Documents, except as expressly provided or permitted in this
Indenture or such Mortgage Document or other instrument or unless such action
will not adversely affect the interests of the Holders of the Notes.
(c) The Issuer shall monitor the performance of the Manager under the
Management Agreement, and shall use its reasonable good faith efforts to cause
the Manager duly and punctually to perform all of its duties and obligations
thereunder. Upon the occurrence of a default under the Management Agreement, the
Issuer shall promptly notify the Trustee thereof, and shall specify in such
notice the action, if any, the Issuer is taking in respect of such default.
(d) Upon any termination of the Manager's rights and powers pursuant to
the Management Agreement, the Issuer shall promptly notify the Trustee,
specifying in such notice that a successor Manager has succeeded the Manager,
which notice shall also specify the name and address of any such successor
Manager.
SECTION 4.07. VALUATION OF PLEDGED ASSETS.
(a) Concurrently with or prior to the initial issuance and
authentication of the Notes pursuant to Section 2.12, the Issuer shall complete
and deliver to the Trustee a Certificate of Available Eligible Collateral,
valuing the Pledged Assets as of a date or dates not earlier than the fifth
Business Day preceding the date of authentication.
(b) The Issuer shall on each Valuation Date, calculate the Discounted
Value of the Eligible Collateral as of such Valuation Date. The calculation of
the Discounted Value of the Eligible Collateral shall be based on information
relating to the Eligible Collateral that is dated no more than five (5) Business
Days prior to such Valuation Date. On or before 5:00 p.m., Nevada time, on each
Valuation Date, the Issuer shall complete and deliver to the Trustee a
Certificate of Available Eligible Collateral in the form attached hereto as
Exhibit B, signed by an Authorized Officer of the Issuer and setting forth the
results of such calculations. In the event that the Discounted Value of the
Eligible Collateral as of any Valuation Date is less than the Basic Maintenance
Amount, the Issuer shall immediately notify the Trustee. The Issuer shall, not
later than the month-end following any Valuation Date on which the Basic
Maintenance Amount was not met, take such actions pursuant to Section 4.08 as
may be required to cause the Discounted Value of the Pledged Assets to be
restored to at least the Basic Maintenance Amount.
SECTION 4.08 MAINTENANCE OF ELIGIBLE COLLATERAL.
(a) The Issuer covenants and agrees that, for so long as any of the
Notes are Outstanding, it will maintain, as described herein as Pledged Assets
with the Trustee, Eligible Collateral having an aggregate Discounted Value at
least equal to the Basic Maintenance Amount. In the event that the aggregate
Discounted Value of Eligible Collateral included in the Pledged Assets as of any
Valuation Date or as shown in any Certificate of Available Eligible Collateral
delivered to the Trustee pursuant to Section 4.08(b) with respect to a Valuation
Date is less than the Basic Maintenance Amount shall, not later than the
month-end following such Valuation Date, (1) Deliver to the Trustee sufficient
Eligible Collateral or (2) at the Issuer's election, deliver to the Trustee
Notes
20
<PAGE> 25
registered in the name of the Issuer or any Affiliate thereof or cancelled
Notes, a principal amount of Notes theretofore issued and outstanding and
subsequently acquired by the Issuer or such Affiliate such that (x) the
aggregate Discounted Value of the Pledged Assets (determined as of such
Valuation Date but modified to give effect, as of such Valuation Date, to the
Delivery of any such additional Eligible Collateral) shall be at least equal to
the Basic Maintenance Amount (determined as of such Valuation Date but modified
to give effect, as of such Valuation Date, to any Notes so registered or
cancelled).
(b) Upon delivery of any such additional Eligible Collateral or upon
any such registration or cancellation or other action pursuant to Section
4.08(a), the Issuer shall concurrently deliver to the Trustee a new Certificate
of Available Eligible Collateral conforming to Section 4.07(a) reflecting the
action taken by the Issuer pursuant to Section 4.08(a). The Trustee shall
deliver to the Issuer a certificate of a Responsible Officer relating to any
such additional Eligible Collateral in the form of Exhibit C hereto.
(c) In addition to deliveries of additional Eligible Collateral
required pursuant to this Section, the Issuer, at any time and from time to
time, may Deliver to the Trustee additional Eligible Collateral for inclusion in
the Pledged Assets; provided, however, the Delivery of any such additional
Eligible Collateral shall be accompanied by a Certificate of Available Eligible
Collateral. The Trustee shall, promptly after receipt of any such Eligible
Collateral, prepare and send to the Issuer a certificate executed by a
Responsible Officer relating thereto, in the form of Exhibit C hereto.
SECTION 4.09. WITHDRAWAL OR SUBSTITUTION OF PLEDGED ASSETS.
(a) The Issuer may withdraw Pledged Assets or substitute other Eligible
Collateral for Pledged Assets if, on any Valuation Date the Trustee:
(i) receives an Issuer Request requesting that the Pledged
Assets listed therein be withdrawn in accordance with this Section and
listing any Eligible Collateral requested to be substituted for such
Pledged Assets; and
(ii) based upon the Certificate of Available Eligible
Collateral for such Valuation Date, determines that the aggregate
Discounted Value of the Pledged Assets that would be held by it after
giving effect to the withdrawal of the Pledged Assets listed in the
Issuer Request referred to in Clause (i) above, and inclusion of any
substitute Eligible Collateral listed in such Issuer Request,
determined as of such Valuation Date, would not be less than the Basic
Maintenance Amount determined as of such Valuation Date.
(iii) The Issuer delivers to the Trustee a certificate of fair
value if required by Section 314(d)(1) or Section 314(d)(3) of the TIA.
Upon receiving such Issuer Request, making such determination,
obtaining receipt of the items required by subsection (c) hereof, and taking
Delivery of any substitute Eligible Collateral, the Trustee shall promptly
release, reassign and deliver to the Issuer the Pledged Assets referred to in
clause (i) above.
(b) The Issuer may, at its option, withdraw or substitute other
Eligible Collateral for Pledged Assets at any time pursuant to this Section
4.09(b), rather than pursuant to Section 4.09(a), by delivery to the Trustee of
an Issuer Request requesting that Pledged Assets listed therein be withdrawn,
and listing any Eligible Collateral requested to be substituted therefor, if
any, whereupon the Trustee shall promptly (upon taking Delivery of any Eligible
Collateral to be substituted, if any) release, reassign and deliver to the
Issuer the Pledged Assets to be withdrawn. Notwithstanding the foregoing, the
Issuer may not withdraw Eligible Collateral from the Pledged Assets or
substitute other Eligible Collateral therefor, unless the Trustee determines,
based upon the Officers' Certificate to be delivered pursuant to Section 4.09(c)
and the Certificate of Available Eligible Collateral dated as of the most recent
Valuation Date, that as of such date of withdrawal or substitution, the
aggregate Discounted Value of the Pledged Assets that would be held by the
Trustee after giving effect to such Issuer Request and to any other
21
<PAGE> 26
additions to or withdrawals from the Pledged Assets would be at least equal to
the Basic Maintenance Amount determined as of such Valuation Date.
(c) Delivery to the Trustee of any Eligible Collateral to be
substituted for other Eligible Collateral being withdrawn from Pledged Assets
pursuant to this Section shall be accompanied by a Certificate of Available
Eligible Collateral.
(d) Upon such withdrawal or substitution, the Trustee shall execute and
deliver such instruments of transfer or assignment substantially in the form of
Exhibit D hereto, or take such other action, as the Issuer shall reasonably
request to vest in it full legal title and beneficial ownership of any Pledged
Assets withdrawn pursuant hereto.
(e) Notwithstanding anything in this Section to the contrary, while an
Event of Default shall have occurred and be continuing, the Issuer may not make
any withdrawal or substitution provided for in this Section.
SECTION 4.10. PROTECTION OF PLEDGED ASSETS.
(a) The Issuer will from time to time execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
and will take such other action as may be necessary or advisable to:
(i) Grant more effectively all or any portion of the Pledged
Assets;
(ii) maintain or preserve the lien of this Indenture or carry
out more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture;
(iv) enforce any of the Mortgage Documents; or
(v) preserve and defend title to the Pledged Assets and the
rights of the Trustee, and of the Noteholders, in the Pledged Assets
against the claims of all Persons and parties.
The Issuer hereby designates the Trustee its agent and attorney-in-fact
to execute any financing statement, continuation statement or other instrument
required pursuant to this Section 4.10 upon Issuer's preparation of same and
presentation to Trustee for execution; provided, however, that such designation
shall not be deemed to create a duty in the Trustee to monitor the compliance of
the Issuer with the foregoing covenants.
ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.01. EVENT OF DEFAULT.
"Event of Default", wherever used herein, means, with respect to Notes
issued hereunder, any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) if the Issuer shall default in the payment when and as due of any
installment of principal of or interest on any Note; or
22
<PAGE> 27
(2) if the Issuer shall breach, or default in the due observance, of
any one or more of the covenants set forth in of Section 3.02 through 3.13;
(3) if the Issuer shall breach, or default in the due observance or
performance of, any other of its covenants in this Indenture, and such Default
shall continue for a period of 30 days after there shall have been given, by
registered or certified mail, to the Issuer by the Trustee, or to the Issuer and
the Trustee by the Holders of Notes representing more than two-thirds of the
aggregate Principal Amount, a written notice specifying such Default and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder;
(4) if any representation or warranty of the Issuer made in this
Indenture or any certificate or other writing delivered pursuant hereto or in
connection herewith shall prove to be incorrect in any material respect as of
the time when the same shall have been made and, within 30 days after there
shall have been given, by registered or certified mail, written notice thereof
to the Issuer by the Trustee, or to the Issuer and the Trustee by the Holders of
Notes representing more than two-thirds of the aggregate Principal Amount, the
circumstance or condition in respect of which such representation or warranty
was incorrect shall not have been eliminated or otherwise cured;
(5) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Issuer in an involuntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future
federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or of any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Issuer and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days; or
(6) the commencement by the Issuer of a voluntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other present or
future federal or state bankruptcy, insolvency or similar law, or the consent by
the Issuer to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or of any substantial part of its property or the making by the Issuer of
an assignment for the benefit of creditors or the failure by the Issuer
generally to pay its debts as such debts become due or the taking of corporate
action by the Issuer in furtherance of any of the foregoing.
SECTION 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default occurs and is continuing with respect to the
Notes, then and in every such case the Trustee or the Holders of Notes
representing more than two-thirds of the aggregate Principal Amount may declare
all the Notes to be immediately due and payable, by a notice in writing to the
Issuer (and to the Trustee if given by Noteholders), and upon any such
declaration such Notes shall become immediately due and payable in an amount
equal to:
(i) the aggregate Principal Amount of the Notes, and
(ii) accrued and unpaid interest at the respective Note
interest rates on the aggregate Principal Amount through the date of
acceleration.
At any time after such a declaration of acceleration of maturity of the
Notes has been made and before a judgment or decree for payment of the money due
has been obtained by the Trustee as hereinafter in this Article provided, the
Holders of Notes representing more than a majority of the aggregate Principal
Amount, by written notice to the Issuer and the Trustee, may rescind and annul
such declaration and its consequences if:
(1) the Issuer has paid or deposited with the Trustee in the Note
Payment Account for the benefit of the Persons entitled to such payments a sum
sufficient to pay:
23
<PAGE> 28
(A) all payments of principal of, and interest on, all Notes
and all other amounts which would then be due hereunder or upon such
Notes if the Event of Default giving rise to such acceleration had not
occurred; and
(B) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses and disbursements of the Trustee, its
agents and counsel; and
(2) all Events of Default, other than the nonpayment of the principal
of Notes which have become due solely by such acceleration, have been cured or
waived as provided in Section 5.15.
No such rescission shall affect any subsequent Default or impair any
right consequent thereon.
If any Event of Default shall occur and not be cured or waived within
thirty (30) days thereafter, the rate of interest borne by each outstanding Note
shall be increased by 0.50% per annum, effective on the date of the Event of
Default.
SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
The Issuer covenants that if an Event of Default shall occur and be
continuing in respect to the Notes and the Notes have been declared due and
payable and such declaration and its consequences have not been rescinded and
annulled, the Issuer will, upon demand of the Trustee, pay to the Trustee, for
the benefit of the Holders of the Notes:
(i) the amounts specified in the first paragraph of Section 5.02, and
(ii) in addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
If the Issuer fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
Proceeding for the collection of the sums so due and unpaid, and may prosecute
such Proceeding to judgment or final decree, and may enforce the same against
the Issuer or any other obligor upon the Notes and collect, out of the Pledged
Assets, wherever situated, of the Issuer, the moneys adjudged or decreed to be
payable in the manner provided by law; provided, however, that neither the
Trustee nor any of its agents, officers, directors, employees, successors or
assigns shall be personally liable for any amounts due under the Notes or this
Indenture.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Noteholders by any Proceedings the Trustee deems appropriate to protect and
enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or enforce any other proper remedy, including, without limitation,
instituting a Proceeding prior to any declaration of acceleration of the
Maturity of the Notes for the collection of all amounts then due and unpaid on
such Notes, prosecuting such Proceeding to final judgment or decree, enforcing
the same against the Issuer and collecting out of the property, wherever
situated, of the Issuer the moneys adjudged or decreed to be payable in the
manner provided by law.
SECTION 5.04. REMEDIES.
If an Event of Default shall have occurred and be continuing and the
Notes have been declared due and payable and such declaration and its
consequences have not been rescinded and annulled, the Trustee (subject to
Section 5.18, to the extent applicable) may do one or more of the following:
24
<PAGE> 29
(a) institute Proceedings for the collection of all amounts then
payable on the Notes, or under this Indenture, whether by declaration or
otherwise, enforce any judgment obtained, and collect from the Issuer moneys
adjudged due;
(b) in accordance with Section 5.18, sell the Pledged Assets or any
portion thereof or rights or interest therein, at one or more public or private
Sales called and conducted in any manner permitted by law;
(c) institute Proceedings from time to time for the complete or partial
foreclosure of this Indenture with respect to the Pledged Assets; and
(d) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and enforce the
rights and remedies of the Trustee or the Holders of the Notes hereunder;
provided, however, that prior to exercising the foregoing the Trustee shall have
consulted with the Issuer concerning alternative paydown scenarios and further
shall use reasonable efforts to maximize recovery in respect of the Pledged
Assets.
SECTION 5.05. [RESERVED].
SECTION 5.06. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, composition or other judicial
Proceeding relative to the Issuer or any other obligor upon any of the Notes or
the property of the Issuer or of such other obligor or their creditors, the
Trustee (irrespective of whether the Notes shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Issuer for the payment of any overdue
principal or interest) shall be entitled and empowered, by intervention in such
Proceeding or otherwise to:
(i) file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes and file such other papers or
documents and take such other actions as it deems necessary or advisable in
order to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and of the Noteholders allowed in such Proceeding; and
(ii) collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any receiver,
assignee, trustee, liquidator or sequestrator (or other similar official) in any
such Proceeding is hereby authorized by each Noteholder to make such payments to
the Trustee and, in the event that the Trustee shall consent to the making of
such payments directly to the Noteholders, to pay to the Trustee any amount due
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 6.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment or composition affecting any of the
Notes or the rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Noteholder in any such Proceeding.
SECTION 5.07. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES.
All rights of action and claims under this Indenture or any of the
Notes may be prosecuted and enforced by the Trustee without the possession of
any of the Notes or the production thereof in any Proceeding relating thereto,
and any such Proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall be for
the ratable benefit of the Holders of the Notes in respect of which such
25
<PAGE> 30
judgment has been recovered. Any surplus shall be available, in accordance with
Section 5.08, for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 5.08. APPLICATION OF MONEY COLLECTED.
If the Notes have been declared due and payable following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, any money collected by the Trustee with respect to the Notes pursuant
to this Article or otherwise and any monies that may then be held or thereafter
received by the Trustee with respect to the Notes shall be applied from the Note
Payment Account for the benefit of the Persons entitled to such payments, after
payment to the Trustee of such amounts as may be payable to it under Section
6.07, in the order, at the date or dates fixed by the Trustee and, in case of
the distribution of the entire amount due on account of principal of, and
interest on, such Notes, upon presentation and surrender thereof:
First: To the payment of amounts then due and unpaid to any servicer of
the Pledged Assets, provided that such servicer is not the Issuer and such
amounts are payable pursuant to the terms of a written servicing agreement;
Second: To the payment of amounts of interest and principal then due
and unpaid upon the Outstanding Notes; and
Third: To the payment of the remainder, if any, to the Issuer or any
other Person legally entitled thereto.
SECTION 5.09. LIMITATION ON SUITS.
No Holder of a Note shall have any right to institute any Proceedings,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(2) Holders of Notes representing more than two-thirds of the aggregate
Principal Amount of the Notes shall have made written request to the Trustee to
institute Proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(3) Holder or Holders have offered to the Trustee indemnity in full
against the costs, expenses and liabilities to be incurred in compliance with
such request;
(4) Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such Proceeding; and
(5) direction inconsistent with such written request has not been given
to the Trustee during such 60-day period by the Holders of Notes representing
more than one-third of the aggregate Principal Amount; it being understood and
intended that no one or more Holders of Notes shall have any right in any manner
whatever by virtue of, or by availing themselves of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other Holders of
Notes or to obtain or to seek to obtain priority or preference over any other
Holders or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all the Holders of
Notes.
SECTION 5.10. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL
AND INTEREST.
Notwithstanding any other provision in this Indenture, other than the
provisions hereof limiting the right to recover amounts due on a Note to
recovery from the property of the Issuer, the Holder of any Note shall have the
right, to the extent permitted by applicable law, which right is absolute and
unconditional, to receive payment of each installment of interest on such Note
on the respective Stated Maturities of such installments of interest, to receive
payment of each installment of principal of such Note when due (or, in the case
of any Note called for
26
<PAGE> 31
redemption, on the date fixed for such redemption) and to institute suit for the
enforcement of any such payment, and such right shall not be impaired without
the consent of such Holder.
SECTION 5.11. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Noteholder has instituted any Proceeding to
enforce any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Noteholder, then and in every such case the Issuer, the
Trustee and the Noteholders shall, subject to any determination in such
Proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the
Noteholders shall continue as though no such Proceeding had been instituted.
SECTION 5.12. RIGHTS AND REMEDIES CUMULATIVE.
No right or remedy herein conferred upon or reserved to the Trustee or
to the Noteholders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.13. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Noteholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Noteholders, as the
case may be.
SECTION 5.14. CONTROL BY NOTEHOLDERS.
The Holders of Notes representing more than two-thirds of the aggregate
Principal Amount of the Notes shall have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee; provided, however,
that:
(1) such direction shall not be in conflict with any rule of law or
with this Indenture;
(2) any direction to the Trustee to undertake a Sale of the Pledged
Assets shall be by the Holders of Notes representing the percentage of the
aggregate Principal Amount of the Notes specified in Section 5.18(b); and
(3) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction; provided, however, that, subject
to Section 6.01, the Trustee need not take any action which it determines in
good faith might involve it in personal liability or expenses or would not be in
the best interests of the Noteholders.
SECTION 5.15. WAIVER OF PAST DEFAULTS.
The Holders of Notes representing more than a majority of the aggregate
Principal Amount of the Notes may on behalf of the Holders of all the Notes
waive any past Default hereunder and its consequences, except a Default:
(1) in the payment of any installment of principal of, or interest on,
any Note; or
(2) in respect of a covenant or provision hereof which under Section
9.02 cannot be modified or amended without the consent of the Holder of each
Outstanding Note affected.
27
<PAGE> 32
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
SECTION 5.16. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Note by his
or her acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Noteholder, or group of Noteholders,
holding in the aggregate Notes representing more than 10% of the aggregate
Principal Amount of the Notes, or to any suit instituted by any Noteholder for
the enforcement of the payment of any installment of interest on any Note on or
after the Stated Maturity thereof expressed in such Note or for the enforcement
of the payment of any installment of principal of any Note when due (or, in the
case of any Note called for redemption, on or after the applicable redemption
date).
SECTION 5.17. WAIVER OF STAY OR EXTENSION LAWS.
The Issuer covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension of law wherever enacted,
now or at any time hereafter in force, which may affect the covenants in, or the
performance of, this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 5.18. SALE OF PLEDGED ASSETS.
(a) The power to effect any sale (a "Sale") of any portion of the
Pledged Assets pursuant to Section 5.04 shall not be exhausted by any one or
more Sales as to any portion of the Pledged Assets remaining unsold, but shall
continue unimpaired until all of the Pledged Assets shall have been sold or all
amounts payable on the Notes and under this Indenture with respect thereto shall
have been paid. The Trustee may from time to time postpone any public Sale by
public announcement made at the time and place of such Sale. The Trustee hereby
expressly waives its right to any amount fixed by law as compensation for any
Sale.
(b) To the extent permitted by law, the Trustee shall not in any
private or public Sale sell or otherwise dispose of the Pledged Assets, or any
portion thereof, unless:
(1) the Holders of the Notes representing two-thirds of the
aggregate Principal Amount consent to, or direct the Trustee to make,
such Sale; or
(2) the proceeds of such Sale would be not less than the
entire amount which would be distributable to the Holders of the Notes,
in full payment thereof in accordance with Section 5.08.
(c) In connection with a Sale of all or any portion of the Pledged
Assets:
(1) any Holder or Holders of Notes may bid for and purchase
the property offered for Sale, and upon compliance with the terms of
sale may hold, retain and possess and dispose of such property, without
further accountability, and may, in paying the purchase money therefor,
deliver the Notes or claims for interest thereon in lieu of cash up to
the amount which shall, upon distribution of the net proceeds of such
Sale, be payable thereon, and such Notes, in case the amount so payable
thereon shall be less than the
28
<PAGE> 33
amount due thereon, shall be returned to the Holders thereof after
being appropriately stamped to show such partial payment;
(2) the Trustee may bid for and acquire the property offered
for Sale in connection with any Sale thereof, and, in lieu of paying
cash therefor, may make settlement for the purchase price by crediting
against the gross Sale price the expenses of the Sale and of any
Proceedings in connection therewith which are reimbursable to it;
(3) the Trustee shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion of
the Pledged Assets in connection with a Sale thereof;
(4) the Trustee is hereby irrevocably appointed the agent and
attorney-in-fact of the Issuer to transfer and convey its interest in
any portion of the Pledged Assets in connection with a Sale thereof,
and to take all action necessary to effect such Sale; and
(5) no purchaser or transferee at such a Sale shall be bound
to ascertain the Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any moneys.
SECTION 5.19. ACTION ON NOTES.
The Trustee's right to seek and recover judgment under this Indenture
shall not be affected by the seeking, obtaining or application of any other
relief under or with respect to this Indenture. Neither the lien of this
Indenture nor any rights or remedies of the Trustee or the Holders of Notes
shall be impaired by the recovery of any judgment by the Trustee against the
Issuer or by the levy of any execution under such judgment upon any portion of
the Pledged Assets.
ARTICLE VI
THE TRUSTEE
SECTION 6.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others and no implied
covenants or obligations shall be read into this Indenture; and
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. The Trustee shall, however, examine such certificates
and opinions to determine whether they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of subsection (b)
of this Section;
29
<PAGE> 34
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.14 or Section 5.18.
(d) For all purposes under this Indenture, the Trustee shall not be
deemed to have notice or knowledge of any Event of Default described in Section
5.01(2), 5.01(5) or 5.01(6) or any Default described in Section 5.01(3) or
5.01(4) unless a Responsible Officer assigned to and working in the Trustee's
corporate trust department has actual knowledge thereof or unless written notice
of any event which is in fact such an Event of Default or default is received by
the Trustee at the Corporate Trust Office, and such notice references the Notes
generally, the Issuer, the Pledged Assets or this Indenture.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it. In determining that such repayment or indemnity is
not reasonably assured to it, the Trustee must consider not only the likelihood
of repayment or indemnity by or on behalf of the Issuer but also the likelihood
of repayment or indemnity from amounts payable to it from the Pledged Assets;
provided, however, that, except as provided in the first sentence of this
Section 6.01(e), the Trustee shall not refuse or fail to perform any of its
duties hereunder solely as a result of nonpayment of its reasonable fees and
expenses; and provided further, however, that nothing in this Section 6.01(e)
shall be construed to limit the exercise by the Trustee of any right or remedy
permitted under this Indenture or otherwise in the event of the Issuer's failure
to pay the amounts due the Trustee pursuant to Section 6.07.
(f) Every provision of this Indenture that in any way relates to the
Trustee is subject to the provisions of this Section.
(g) Notwithstanding any extinguishment of all right, title and interest
of the Issuer in and to the Pledged Assets following an Event of Default and a
consequent declaration of acceleration of the Maturity of the Notes, whether
such extinguishment occurs through a Sale of the Pledged Assets to another
Person, the acquisition of the Pledged Assets by the Trustee or otherwise, the
rights, powers and duties of the Trustee with respect to the Pledged Assets (or
the proceeds thereof) and the Noteholders and the rights of Noteholders shall
continue to be governed by the terms of this Indenture.
SECTION 6.02. NOTICE OF DEFAULT.
Within 90 days after the occurrence of any Default known to the
Trustee, the Trustee shall transmit by mail to all Holders of Notes notice of
each such Default, unless such Default shall have been cured or waived;
provided, however, that except in the case of a Default of the type described in
Section 5.01(1), the Trustee shall be protected in withholding such notice if
and so long as the board of directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determine that the withholding of such notice is in the interests of the Holders
of the Notes; and provided, further, that in the case of any Default of the
character specified in Section 5.01(3) or 5.01(4) no such notice to Holders of
the Notes shall be given until at least 30 days after the occurrence thereof.
SECTION 6.03. RIGHTS OF TRUSTEE.
Except as otherwise provided in Section 6.01 hereof:
(a) the Trustee may request and rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, Note,
30
<PAGE> 35
note or other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by an Issuer Request or Issuer Order, and any resolution
of the board of directors may be sufficiently evidenced by a written resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel, and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Noteholders pursuant to this Indenture, unless such Noteholders shall
have offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, Note, note or other
paper or document, but the Trustee, in its discretion may make such further
inquiry or investigation into such facts or matters as it may see fit, and if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled, on reasonable prior notice to the Issuer, to examine the
books, records and premises of the Issuer, personally or by agent or attorney,
during the Issuer's normal business hours; provided that the Trustee shall and
shall cause its agents to hold in confidence all such information except to the
extent disclosure may be required by law and except to the extent that the
Trustee, in its sole judgment, may determine that such disclosure is consistent
with its obligations hereunder;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed and supervised with
due care by it hereunder; and
(h) the Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers.
SECTION 6.04. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES.
The recitals contained herein and in the Notes, except the certificates
of authentication on the Notes, shall be taken as the statements of the Issuer,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations with respect to the Pledged Assets or as to the
validity or sufficiency of this Indenture or of the Notes. The Trustee shall not
be accountable for the use or application by the Issuer of the Notes or the
proceeds thereof or any money paid to the Issuer or upon Issuer Order pursuant
to the provisions hereof.
SECTION 6.05. MAY HOLD NOTES.
The Trustee, any Agent, or any other agent of the Issuer, in its
individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with the Issuer or any Affiliate of the Issuer with the same
rights it would have if it were not the Trustee, Agent or such other agent.
31
<PAGE> 36
SECTION 6.06. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by this Indenture or by law. The
Trustee shall be under no liability for interest on any money received by it
hereunder except as otherwise agreed with the Issuer and except to the extent of
income or other gain on investments which are obligations of the Trustee, in its
commercial capacity, and income or other gain actually received by the Trustee
on investments, which are obligations of others.
SECTION 6.07. COMPENSATION AND REIMBURSEMENT.
The Issuer agrees:
(1) subject to any separate written agreement with the Trustee, to pay
the Trustee from time to time reasonable compensation for all services rendered
by it hereunder (which compensation shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in connection with the performance of its duties
hereunder (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee and its employees, directors, officers and
agents for, and to hold them harmless against, any loss, liability or expense
incurred without negligence or bad faith on their part, arising out of, or in
connection with, the acceptance or administration of this trust, including the
costs and expenses of defending themselves against any claim in connection with
the exercise or performance of any of their powers or duties hereunder, provided
that:
(i) with respect to any such claim, the Trustee shall have
given the Issuer written notice thereof promptly after the Trustee
shall have knowledge thereof;
(ii) while maintaining absolute control over its own defense,
the Trustee shall cooperate and consult fully with the Issuer in
preparing such defense; and
(iii) notwithstanding anything to the contrary in this Section
6.07(3), the Issuer shall not be liable for settlement of any such
claim by the Trustee entered into without the prior consent of the
Issuer which shall not be unreasonably withheld.
As security for the performance of the obligations of the Issuer under
this Section, the Trustee shall have a lien ranking junior to the lien of the
Notes with respect to which any claim of the Trustee under this Section arose
(but senior to all other liens, if any) upon all property and funds held or
collected as part of the Pledged Assets by the Trustee in its capacity as such.
The Trustee shall not institute any Proceeding seeking the enforcement of such
lien against the Trust Estate unless such Proceeding is in connection with a
Proceeding in accordance with Article V for enforcement of the lien of this
Indenture after the occurrence of an Event of Default (other than an Event of
Default arising solely from the Issuer's failure to pay amounts due the Trustee
under this Section 6.07) and a resulting declaration of acceleration of Maturity
of the Notes which has not been rescinded and annulled.
SECTION 6.08. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.09.
(b) The Trustee may resign at any time by giving written notice thereof
to the Issuer. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of
32
<PAGE> 37
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by the Issuer, except if an
Event of Default has occurred and is continuing, by delivery of written notice
to the Trustee or by Act of the Holders representing more than 50% of the
aggregate Principal Amount of the Notes, delivered to the Trustee and to the
Issuer.
(d) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Trustee for any cause,
the Issuer, by an Issuer Order shall promptly appoint a successor Trustee. If
within one year after such resignation, removal or incapability or the
occurrence of such vacancy a successor Trustee shall be appointed by Act of the
Holders of Notes representing more than 50% of the aggregate Principal Amount of
the Notes delivered to the Issuer and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such appointment,
become the successor Trustee and supersede the successor Trustee appointed by
the Issuer. If no successor Trustee shall have been so appointed by the Issuer
or Noteholders and shall have accepted appointment in the manner hereinafter
provided, any Noteholder who has been a bona fide Holder of a Note for at least
six months may, on behalf of itself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(e) The Issuer shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to the Holders of
Notes by mailing written notice of such event to the Noteholders as their names
and addresses appear in the Note Register. Each notice shall include the name of
the successor Trustee and the address of its Corporate Trust Office.
(f) If at any time:
(1) the Trustee shall fail to comply with Section 6.11(a)
after written request therefor by the Issuer or by any Noteholder who has been a
bona fide Holder of a Note for at least six months, or
(2) the Trustee shall cease to be eligible under Section
6.12 and shall fail to resign after written request therefor by the Issuer or by
any such Noteholder, or
(3) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (i) the Issuer by a board resolution may remove
the Trustee, or (ii) subject to Section 5.16 any Noteholder who has been a bona
fide Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
SECTION 6.09. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Issuer and the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee. Notwithstanding the foregoing, on request of the
Issuer or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee, and shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder subject nevertheless to its lien,
if any, provided for in Section 6.07. Upon request of any such successor
Trustee, the Issuer shall execute and deliver any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts.
33
<PAGE> 38
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.10. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS OF TRUSTEE.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Notes have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Notes so authenticated with the same effect as if
such successor Trustee had authenticated such Notes.
SECTION 6.11. DISQUALIFICATION; CONFLICTING INTERESTS.
Irrespective of whether this Indenture is qualified under the TIA, this
Indenture shall always have a Trustee who satisfies the requirements of TIA
Sections 310(a)(1) and 310(a)(5). The Trustee shall always have a combined
capital and surplus as stated in Section 6.12. The Trustee shall be subject to
TIA Section 310(b).
SECTION 6.12. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any State, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $10 million, subject
to supervision or examination by Federal or State authority and having an office
within the United States of America. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the affect hereinafter specified in this Article.
SECTION 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER
If this Indenture is qualified under the TIA, the Trustee shall be
subject to TIA Section 311(a), excluding any creditor relationship listed in TIA
Section 311(b), and a Trustee who has resigned or been removed shall be subject
to TIA Section 311(a) to the extent indicated.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS BY TRUSTEE AND ISSUER
SECTION 7.01. ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
NOTEHOLDERS.
(a) The Issuer shall furnish or cause to be furnished to the Trustee
(i) semi-annually beginning with the initial issuance of Notes, a list, in such
form as the Trustee may reasonably require, of the names and addresses of the
Holders of Notes and (ii) at such other times, as the Trustee may request in
writing, within 30 days after receipt by the Issuer of any such request, a list
of similar form and content as of a date not more than 10 days prior to the time
such list is furnished.
(b) In addition to furnishing to the Trustee the Noteholder lists, if
any, required under subsection (a), the Issuer shall also furnish all Noteholder
lists, if any, required under Section 2.07.
34
<PAGE> 39
SECTION 7.02. PRESERVATION OF INFORMATION.
(a) The Trustee shall hold as confidential and preserve, in as current a
form as is reasonably practicable, the names and addresses of the Holders of
Notes contained in the most recent list, if any, furnished to the Trustee. The
Trustee may destroy any list furnished to it as provided in Section 7.01 upon
receipt of a new list so furnished.
(b) If this Indenture is qualified under the TIA, Noteholders may
communicate pursuant to TIA Section 312(b) with other Noteholders with respect
to their rights under this Indenture or under the Notes.
(c) If this Indenture is qualified under the TIA, the Issuer, the Trustee
and the Note Registrar shall have the protection of TIA Section 312(c).
SECTION 7.03. REPORTS BY TRUSTEE.
(a) If this Indenture is qualified under the TIA, then within 30
days after May 15 of each year (the "reporting date"), commencing with the
year after the issuance of the Notes, (1) in the circumstance required by TIA
Section 313(a), the Trustee shall mail to all Holders a brief report dated as of
such reporting date that complies with TIA Section 313(a), (ii) the Trustee
shall also mail to Holders of Notes with respect to which it has made advances
any reports with respect to such advances that are required by TIA Section
313(b)(2) and (iii) the Trustee shall also mail to Holders of Notes any reports
required by TIA Section 313(b)(1). For purposes of the information required to
be included in any such reports pursuant to TIA Sections 313(a)(3), 313(b)(1)
(if applicable) or 313(b)(2), the principal amount of indenture securities
outstanding on the date as of which such information is provided shall be the
aggregate Principal Amount of the then Notes covered by the report. The Trustee
shall comply with TIA Section 313(c) with respect to any reports required by
this Section 7.03(a).
(b) If this Indenture is qualified under the TIA, a copy of each
report required under this Section 7.03 shall, at the time of such transmission
to Holders of Notes, be filed by the Trustee with the Commission and with each
securities exchange upon which the Notes are listed. The Issuer will notify the
Trustee when the Notes are listed on any securities exchange.
SECTION 7.04. REPORTS BY ISSUER.
If this Indenture is qualified under the TIA, the Issuer (a) shall file
with the Trustee, within 15 days after it files them with the Commission, copies
of the annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may by rules
and regulations prescribe) which the Issuer is required to file with the
Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 and (b) shall also comply with the other provisions of TIA Section 314(a).
The Issuer will send to each Noteholder within 120 days after the end of
each fiscal year an annual report containing audited financial statements of the
Issuer. The Issuer will include with such financial statements a statement
setting forth the remaining balance of the Notes held by each Noteholder on the
last day of the preceding fiscal year.
35
<PAGE> 40
ARTICLE VIII
SATISFACTION AND DISCHARGE
SECTION 8.01. SATISFACTION AND DISCHARGE OF INDENTURE.
Whenever the following conditions shall have been satisfied:
(1) either
(A) all Notes theretofore authenticated and delivered (other than
(i) Notes which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 2.08, and (ii) Notes for whose
payment money has theretofore been deposited in trust and thereafter
repaid to the Issuer, as provided in Section 3.03) have been delivered to
the Trustee for cancellation; or
(B) all Notes not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at the Stated Maturity
of the final installment of the principal thereof,
or
(iii) the Issuer, in the case of clauses (B)(i) or (B)(ii)
above, has deposited or caused to be deposited with
the Trustee, in trust for such purpose, an amount
sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered
to the Trustee for cancellation, for principal and
interest to the Stated Maturity of their entire
unpaid principal amount and in the case of Notes
which were not paid at the Stated Maturity of their
entire unpaid principal amount, for all overdue
principal and all interest payable on such Notes to
the next succeeding Payment Date therefor;
(2) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer; and
(3) the Issuer has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel reasonably satisfactory in form and substance to the
Trustee each stating that all conditions precedent herein providing for the
satisfaction and discharge of this Indenture have been complied with; then, upon
Issuer Request, this Indenture and the lien, rights and interests created hereby
shall cease to be of further effect, and the Trustee and each co-trustee and
separate trustee, if any, then acting as such hereunder shall, at the expense of
the Issuer, execute and deliver all such instruments as may be necessary to
acknowledge the satisfaction and discharge of this Indenture and shall pay, or
assign or transfer and deliver, to the Issuer or upon Issuer Order all Pledged
Loans, cash, securities and other property held by it as part of the Trust
Estate remaining after satisfaction of the conditions set forth in clauses (1)
and (2) above.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Issuer to the Trustee under Section 6.07, the obligations of
the Trustee to the Issuer and the Holders of Notes under Section 3.03, the
obligations of the Trustee to the Holders of Notes under Section 8.02 and the
provisions of Article II with respect to lost, stolen, destroyed or mutilated
Notes, registration of transfers of Notes and rights to receive payments of
principal of, and interest on, the Notes shall survive.
SECTION 8.02. APPLICATION OF TRUST MONEY.
All money deposited with the Trustee pursuant to Sections 3.03 and 4.01
shall be held in trust and applied by it, in accordance with the provisions of
the Notes and this Indenture, to the payment, either directly or through
36
<PAGE> 41
the Issuer or any paying agent, as the Trustee may determine, to the Persons
entitled thereto, of the principal and interest for whose payment such money has
been deposited with the Trustee.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.
Without the consent of the Holders of any Notes, the Issuer and the
Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Trustee, for any of
the following purposes:
(1) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey and confirm
unto the Trustee any property subject or required to be subjected to the lien of
this Indenture, or to subject to the lien of this Indenture additional property
(and to provide for the method of valuation of the same);
(2) to add to the conditions, limitations and restrictions on the
authorized amount, terms and purposes of the issuance, authentication and
delivery of any Notes, as herein set forth, additional conditions, limitations
and restrictions thereafter to be observed;
(3) to evidence the succession of another Person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein and in
the Notes contained;
(4) to add to the covenants of the Issuer, for the benefit of the Holders
of all Notes or to surrender any right or power herein conferred upon the
Issuer;
(5) to provide for an alternative method of valuation of the Pledged
Assets in order to adapt valuation methods provided in this Indenture to changes
in generally accepted methods of valuation of such Pledged Assets, provided such
action is not inconsistent with the purposes of this Indenture and, in such
connection and otherwise, to amend the method of calculation of Market Value or
Discounted Value and the definitions of Eligible Collateral, Basic Maintenance
Amount and Discount Factors, provided that such action shall not adversely
affect the interests of the Holders of the Notes; or
(6) to cure any ambiguity, to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising under
this Indenture, which shall not be inconsistent with the provisions of this
Indenture, provided that such action shall not adversely affect the interests of
the Holders of the Notes.
The Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into any such supplemental indenture that affects the
Trustee's own rights, duties, liabilities or immunities under this Indenture or
otherwise except to the extent required by law.
The Trustee may in its discretion determine whether or not the rights of
the Holder of Notes would be adversely affected by any supplemental indenture,
and any such determination shall be conclusive upon the Holders of all Notes,
whether theretofore or thereafter authenticated and delivered hereunder. In
making such determination, a supplemental indenture shall be conclusively deemed
by the Trustee not to adversely affect the Notes if the supplemental indenture
effects no change in principal payment, interest rates, substitution of Pledged
Assets, Payment Dates, Record Dates, or other payment terms. The Trustee shall
not be liable for any such determination made in good faith.
37
<PAGE> 42
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS.
With the consent of the Holders of Notes representing not less than
two-thirds of the aggregate Principal Amount of the Notes by Act of said Holders
delivered to the Issuer and the Trustee, the Issuer and the Trustee may enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(1) change the Stated Maturity of the final installment of the principal
of, or any installment of interest on, any Note or reduce the principal amount
thereof or the Note Interest Rate thereon, change any place of payment where, or
the coin or currency in which, any Note or any interest thereon is payable, or
impair the right to institute suit for the enforcement of the payment of any
installment of interest due on any Note on or after the Stated Maturity thereof
or for the enforcement of the payment of the entire remaining unpaid principal
amount of any Note on or after the Stated Maturity of the final installment of
the principal thereof;
(2) reduce the percentage of the aggregate Principal Amount of the Notes,
the consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any waiver of
compliance with provisions of this Indenture or Defaults hereunder and their
consequences provided for in this Indenture;
(3) modify any of the provisions of this Section, Section 5.14 or Section
5.18(b) except to increase any percentage specified therein or to provide that
certain other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Note affected thereby;
(4) modify or alter the provisions of the proviso to the definition of
the term "Outstanding";
(5) permit the creation of any lien ranking prior to or on a parity with
the lien of this Indenture with respect to any part of the Pledged Assets
(except as expressly permitted by this Indenture) or terminate the lien of this
Indenture on any property at any time subject hereto or deprive the Holder of
any Note of the security afforded by the lien of this Indenture; or
(6) modify any of the provisions of this Indenture in such manner as to
materially and adversely affect rights of the Holders of the Notes to the
benefits of any provisions for the mandatory redemption of Notes contained
herein.
(7) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to effect the qualification of this Indenture
under the TIA or under any similar federal statute hereafter enacted, and to add
to this Indenture such other provisions as may be expressly required by the TIA.
The Trustee may in its discretion determine whether or not the rights of
the Holders of Notes would be materially and adversely affected by any
supplemental indenture and any such determination shall be conclusive upon the
Holders of all Notes authenticated and delivered hereunder. The Trustee shall
not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section, the Trustee shall mail to the
Holders of the Notes to which such supplemental indenture relates a notice
setting forth in general terms the substance of such supplemental indenture. Any
failure of the Trustee to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
38
<PAGE> 43
SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.01) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes to which such supplemental indenture relates which have theretofore
been or thereafter are authenticated and delivered hereunder shall be bound
thereby.
SECTION 9.05. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and if required by the Trustee shall,
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Issuer shall so determine, new Notes so
modified as to conform, in the opinion of the Trustee and the Issuer, to any
such supplemental indenture may be prepared and executed by the Issuer and
authenticated and delivered by the Trustee in exchange for Notes.
SECTION 9.06. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the TIA as then in effect so long as this
Indenture shall then be qualified under the TIA.
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01. REDEMPTION.
The Notes shall not be subject to redemption at the option of Specialty
Mortgage Trust.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Issuer to the Trustee to take any
action under any provision of this Indenture, the Issuer shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
39
<PAGE> 44
Every certificate, opinion or letter with respect to compliance with a
condition or covenant provided for in this Indenture (including one furnished
pursuant to specific requirements of this Indenture relating to a particular
application or request) shall include:
(1) a statement that each individual signing such certificate, opinion or
letter has read such covenant or condition and the definitions herein relating
thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate, opinion or letter are based;
(3) a statement that, in the opinion of each such individual, he or she
has made such examination or investigation as is necessary to enable such
individual to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents
Any certificate or opinion of an officer of the Issuer may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which this other certificate or opinion is
based are erroneous. Any such Issuer certificate or Opinion of Counsel may be
based, insofar as it relates to factual matters, upon a certificate or opinion
of, or representations by, the officers of the Issuer, stating that the
information with respect to such factual matters is in the possession of the
Issuer, unless such officer or counsel knows, or in the exercise of reasonable
care should know, that the certificate or opinion or representations with
respect to such matters are erroneous. Any Opinion of Counsel may be based on
the written opinion of other counsel, in which event such Opinion of Counsel
shall be accompanied by a copy of such other counsel's opinion and shall include
a statement to the effect that such counsel believes that such counsel and the
Trustee may reasonably rely upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Wherever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's right to rely upon the truth and accuracy of
any statement or opinion contained in any such document as provided in Section
6.01(b)(2).
Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default is a condition
precedent to the taking of any action by the Trustee at the request or direction
of the Issuer, then, notwithstanding that the satisfaction of such condition is
a condition precedent to the Issuer's right to make such request or direction,
the Trustee shall be protected in acting in accordance with such request or
40
<PAGE> 45
direction if it does not have knowledge of the occurrence and continuation of
such Default or Event of Default as provided in Section 6.01(d).
SECTION 11.03. ACTS OF NOTEHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in any evidence by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by an agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.01) conclusive in
favor of the Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgements of deeds, certifying that the individual signing
such instrument or writing acknowledged to him or her the execution thereof.
Whenever such execution is by an officer of a corporation or a member of a
partnership on behalf of such corporation or partnership, such certificate or
affidavit shall also constitute sufficient proof of his or her authority.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, in respect of anything done, omitted or suffered to be done by
the Trustee or the Issuer in reliance thereon, whether or not any notation of
such action is made upon such Notes.
SECTION 11.04. NOTICES, ETC. TO TRUSTEE AND ISSUER.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Noteholders or other documents provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with:
(1) the Trustee by any Noteholder or by the Issuer shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing to or
with and received by the Trustee at its Corporate Trust Office;
(2) the Issuer by the Trustee or by any Noteholder shall be sufficient
for every purpose hereunder (except as provided in Sections 5.01(3) and (4)) if
in writing and mailed, first-class, postage prepaid, to the Issuer addressed to
it c/o Specialty Financial, 6160 Plumas Street, Reno, Nevada 89509, telephone
(775) 826-0809, facsimile (775) 826-0166, or at any other address previously
furnished in writing to the Trustee by the Issuer.
SECTION 11.05. NOTICES AND REPORTS TO NOTEHOLDERS; WAIVER OF NOTICES.
Where this Indenture provides for notice to Noteholders of any event or
the mailing of any report to Noteholders, such notice or report shall be
sufficiently given (unless otherwise herein expressly provided) if mailed,
first-class, postage prepaid, to each Noteholder affected by such event or to
whom such report is required to be mailed, at the address of such Noteholder as
it appears on the Note Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice or the mailing
of such report. In any case where a notice or report to Noteholders is mailed in
the manner provided above, neither the failure to mail such notice or report,
nor any defect in any notice or report so mailed, to any particular Noteholder
shall affect the sufficiency of such notice or report with respect to other
Noteholders, and any notice or report which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given or provided.
41
<PAGE> 46
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waiver of notice by any Noteholder shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for any meeting of Noteholders. Any
Agent may make reasonable rules and set reasonable requirements for its
functions.
SECTION 11.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 11.08. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Issuer shall bind
its successors and assigns, whether so expressed or not.
SECTION 11.09. SEPARABILITY.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.10. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Notes, expressed or implied, shall
give to any Person, other than the parties hereto and their successors hereunder
and the Noteholders, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 11.11. LEGAL HOLIDAYS.
In any case where the date of any Payment Date, or the Stated Maturity or
any other date on which principal of, or interest on, any Note is proposed to be
paid shall not be a Business Day, then (notwithstanding any other provision of
the Notes or this Indenture) payment need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made on the nominal date of any such Payment Date or the Stated Maturity or
other date for the payment of principal of, or interest on, any Note, as the
case may be, and no interest shall accrue for the period from and after any such
nominal date, provided such payment is made in full on such next succeeding
Business Day.
SECTION 11.12. GOVERNING LAW.
This Indenture and each Note shall be construed in accordance with and
governed by the substantive laws of the State of Nevada applicable to agreements
made and to be performed in the State of Nevada and the obligations, rights and
remedies of the parties hereto and the Noteholders shall be determined in
accordance with such laws.
42
<PAGE> 47
SECTION 11.13. COUNTERPARTS.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument.
SECTION 11.14. RECORDING OF INDENTURE.
This Indenture is subject to recording in any appropriate public
recording office, such recording to be effected by the Issuer and at its expense
in compliance with any Opinion of Counsel delivered pursuant to Section 2.12(e).
SECTION 11.15. ISSUER OBLIGATION.
No recourse may be taken, directly or indirectly, against (i) any holder
of a beneficial interest in the Issuer (solely in its capacity as such), (ii)
any incorporator, subscriber to the capital stock, stockholder, partner,
beneficiary, agent, officer, director, employee, or successor or assign of a
holder of a beneficial interest in the Issuer, (iii) the Manager, or any
stockholder, officer, director or employee of the Manager, or any predecessor of
successor of the Manager, or (iv) any incorporator, subscriber to the capital
stock, stockholder, officer, director or employee of the Trustee or any
predecessor or successor of the Trustee with respect to the Issuer's obligation
with respect to the Notes or the obligation of the Issuer or the Trustee under
this Indenture or any certificate or other writing delivered in connection
herewith or therewith.
SECTION 11.16. USURY.
The amount of interest payable or paid on any Note under the terms of
this Indenture shall be limited to an amount which shall not exceed the maximum
nonusurious rate of interest allowed by the applicable laws of the United States
or the State of Nevada (whichever shall permit the higher rate), which could
lawfully be contracted for, charged or received (the "Highest Lawful Rate"). In
the event any payment of interest on any Note exceeds the Highest Lawful Rate,
the Issuer stipulates that such excess amount will be deemed to have been paid
as a result of an error on the part of both the Trustee, acting on behalf of the
Holder of such Note, and the Issuer, and the Holder receiving such excess
payment shall promptly, upon discovery of such error or upon notice thereof from
the Issuer or the Trustee, refund the amount of such excess or, at the option of
the Trustee, apply the excess to the payment of principal of such Note, if any,
remaining unpaid.
SECTION 11.17. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by any of
the provisions of the TIA, such required provision shall control.
43
<PAGE> 48
IN WITNESS WHEREOF, each party has caused this Indenture to be executed
by its duly authorized officer or officers as of the day and year first above
written.
SPECIALTY MORTGAGE TRUST, INC., Issuer
By: /s/ Nello Gonfiantini, III
-------------------------------------
Name: Nello Gonfiantini, III
Title: President
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
On the __th day of ___, 2001, before me, a notary public in and for said
State, personally appeared Nello Gonfiantini, III, known to me to be the person
that executed the within instrument, in an authorized capacity on behalf of the
named corporation, and acknowledged to me that such corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
/s/
----------------------------------------
Notary Public
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.
as Trustee
By: /s/
-------------------------------------
Name:
Title: Assistant Vice President
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
On the __th day of _____, 2001 before me, a notary public in and for said
State, personally appeared ____________, known to me to be the person that
executed the within instrument, in an authorized capacity on behalf of the named
corporation, and acknowledged to me that such corporation executed the within
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
/s/
----------------------------------------
Notary Public
44
<PAGE> 49
EXHIBIT A
[FORM OF FACE OF CERTIFICATED NOTE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IS NOT INSURED BY ANY
GOVERNMENTAL AGENCY.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE INVESTOR ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),
A(2), (A)3 OR (A)(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT OR FOR THE INVESTOR ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR" FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, (E) TO AN INDIVIDUAL "ACCREDITED INVESTOR" AS DEFINED IN
SUBPARAGRAPH (A)(4), (A)(5) OR (A)(6) OF RULE 501 UNDER THE SECURITIES ACT WHO
IS RESIDING IN ONE OF THE JURISDICTIONS AUTHORIZED BY THE COMPANY AND WHO IS
ACQUIRING THE SECURITY FOR HIS OR HER OWN ACCOUNT FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES
(D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION REASONABLY SATISFACTORY TO IT, AND IN EACH OF THE
FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS
SECURITY COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY.
No. _______________ $
-------------
Date of Issuance: ________________
SPECIALTY MORTGAGE TRUST, INC.
Collateralized Investment Notes
SPECIALTY MORTGAGE TRUST, INC., a Maryland corporation (hereinafter
called the "Issuer," which term includes any successor under the Indenture
referred to below), for value received, hereby promises to pay to
____________________________, or its registered assigns (the "Holder") the
principal sum of _________________________ Dollars ($_______) on ____________
(the "Stated Maturity" of said principal sum), and to pay interest upon the
unpaid amount of such principal sum from the date of issuance, monthly on the
20th of each month commencing on ___________________ (each an "Interest Payment
Date"), at the rate of _____% per annum, until the principal is paid in full or
made available for payment. Interest shall be computed on the basis of a 360-day
year of twelve 30-day months. Interest on the Notes will in no event be less
than the applicable federal rate. Capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Indenture dated as of _________,
2001 (the "Indenture") executed by Bankers Trust Company of California, N.A.,
Trustee (the "Trustee," which term includes any successor Trustee under the
Indenture) and the Issuer. Payment of principal and interest on this Note shall
be subject and pursuant to the provisions of the Indenture.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee by manual signature of one of its authorized officers, this Note shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed by an authorized officer of the Issuer as of the date of issuance set
forth above.
SPECIALTY MORTGAGE TRUST, INC.
By:
------------------------------------------
Title:
---------------------------------------
CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A.
as Trustee
By:
------------------------------------------
Authorized Officer
1
<PAGE> 50
[FORM OF REVERSE OF NOTE]
This Note is one of an authorized issue of Notes of the Issuer known as
its "Collateralized Investment Notes" (the "Notes"), limited in aggregate
principal amount up to U.S. $50,000,000 issued and outstanding at any one time.
Reference is hereby made to the Indenture and all indentures supplemental
thereto for a description of the nature and extent of the property assigned,
pledged, delivered, transferred and mortgaged thereunder, the rights, duties and
obligations of the Holders of the Notes, the Trustee and the Issuer, and terms
under which the Notes are authenticated, issued and secured. By receiving and
holding this Note, the Holder hereof accepts and agrees and is subject to all of
the terms and provisions of the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of not less than a majority
in aggregate principal amount of the Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Notes at the time Outstanding,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture, and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holders of
the Notes shall be conclusive and binding upon the holder of this Note and upon
all future holders of this Note and of any Note issued upon the transfer hereof
or in exchange herefor or in lieu hereof whether or not notation of such consent
or waiver is made upon this Note. The Indenture also permits certain amendments,
waivers and consents by the Company and the Trustee without the consent of the
Holders of any of the Notes.
In any case where any Interest Payment Date or the Stated Maturity shall
not be a Business Day in Nevada, then any payment of interest or principal need
not be made on such date but may be made on the next succeeding Business Day in
Nevada with the same force and effect as if made on the Interest Payment Date or
the Stated Maturity, as the case may be, and no interest shall accrue with
respect to such payment for the period from and after such Interest Payment Date
or Stated Maturity to such next succeeding Business Day.
If any Event of Default with respect to the Notes shall occur, the
principal of this Note may become or be declared due and payable, in the manner
and with the effect provided in the Indenture.
The Notes are authorized and issuable only as registered Notes without
coupons in minimum denominations of $25,000. As provided in, and subject to the
provisions of, the Indenture, the Notes are exchangeable for other Notes of a
different authorized denomination or denominations, as requested by the Holder
surrendering the same; provided, however, that the Issuer shall not be required
to issue any Notes of a denomination less than $25,000.
No service charge will be made for any such transfer or exchange, but the
Issuer may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Prior to the due presentment for registration of transfer, the Issuer and
the Trustee and any agent of the Issuer or the Trustee shall treat the person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Note be overdue, and neither the Issuer nor the Trustee nor any agent of
either of them shall be affected by notice to the contrary.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of, and interest on, this Note
at the times, place and rate and in the coin or currency herein prescribed.
As provided in the Indenture, this Note shall for all purposes be
governed by and construed in accordance with the laws of the State of Nevada.
The Issuer intends that each Note be classified as debt for all purposes,
and the Issuer shall treat, and each Noteholder by acceptance of the Note shall
be deemed to have agreed to treat, the Note as debt for all tax purposes and
shall make all reportings and filings in a manner consistent with such
classification unless and to the extent otherwise required by an applicable
taxing authority.
TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _________________________________ (Please print or typewrite name and
address of Assignee) __________________________________ (Please insert Social
Security or tax identification number of Assignee) the within Note, and all
rights thereunder, hereby irrevocably constitution and appointing
_____________________ Attorney to transfer said Note on the books of the Issuer
with full power of substitution in the premises.
Dated:
---------------------- ------------------------------------------
Signature of Transferor
NOTICE: The signature to this transfer must correspond with the name as
written upon the face of this Note in every particular without alteration or
enlargement or any change whatever. If required by the Issuer, the signature
must be guaranteed by a commercial bank or trust company or by a member of a
signature guaranty medallion program. Notarized or witnessed signatures are not
acceptable.
2
<PAGE> 51
EXHIBIT B
CERTIFICATE OF AVAILABLE ELIGIBLE COLLATERAL
DATED _____________
I, the undersigned officer of Specialty Mortgage Trust, Inc. (the
"Issuer"), in connection with the Indenture, dated as of _______, 2001 (the
"Indenture"), between the Issuer and Bankers Trust Company of California, N.A.,
trustee (the "Trustee"), do hereby certify that I am an officer of the Issuer
holding the office set forth beneath my signature below and do hereby certify as
to the following statements below. Capitalized terms used herein that are not
otherwise defined shall have the meanings assigned to them in the Indenture.
(i) that attached hereto is a Pledged Asset Schedule prepared by
the Issuer as of the date of this Certificate (the "Applicable Valuation
Date") and that to the best of my knowledge the information contained in
the Schedule attached hereto is accurate and correct and was prepared in
accordance with the terms of the Indenture;
(ii) the Issuer has calculated the Discounted Value of each item
of the Pledged Assets as of a date within five Business Days of the
Applicable Valuation Date with the related calculations being set forth
in the Schedule attached hereto, determined pursuant to the definitions
of "Market Value" and "Discount Factor" contained in the Indenture;
(iii) the Issuer has calculated the Basic Maintenance Amount for
the Notes as of the Applicable Valuation Date, such calculation being set
forth on the Schedule attached hereto;
(iv) the Issuer has determined that the Discounted Value of the
Pledged Assets equals or exceeds the Basic Maintenance Amount;
(v) as of the Applicable Valuation Date, each item of Pledged
Assets as set forth in the Schedule attached hereto is Eligible
Collateral and each such item of the Pledged Assets set forth in the
Schedule attached hereto conforms in all material respects to the
definition of such item contained in the Indenture;
(vi) as of the Valuation Date:
(a) the Issuer is not in Default under, and the issuance of
the Notes will not result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, the
Indenture or any indenture, mortgage, deed of trust or other
agreement or instrument to which the Issuer is a party or by which
it is bound, or any order of any court or administrative agency
entered in any proceeding to which the Issuer is a party or by
which it may be bound or to which it may be subject, and that all
conditions precedent provided in this Indenture relating to the
authentication and delivery of the Notes have been complied with;
(b) the Issuer is the owner of Pledged Assets, free and
clear of any lien, security interest or charge, has not assigned
any interest or participation in any such Pledged Assets (or, if
any such interest or participation has been assigned, it has been
released) and has the right to Grant each such Pledged Assets to
the Trustee;
1
<PAGE> 52
(c) the Issuer has Granted to the Trustee all of its right,
title and interest in each of the Pledged Assets;
(d) the ratio of (a) the Total Indebtedness of the Issuer,
both secured and unsecured, to (b) the GAAP Net Worth of the
Issuer, is no more than 5:1; and
(e) the Issuer has and will maintain sufficient cash and
unused credit facilities to pay all interest and principal due on
the Notes on the next Payment Date.
IN WITNESS WHEREOF, I have hereunto set my name this _____ day of __________.
----------------------------------------
Name:
Title:
2
<PAGE> 53
SCHEDULE I TO EXHIBIT B
PLEDGED ASSET SCHEDULE
3
<PAGE> 54
EXHIBIT C
TRUSTEE'S CERTIFICATE
Bankers Trust Company of California, N.A., in its capacity as Trustee
(the "Trustee") under the Indenture dated as of _______, 2001 (the "Indenture")
between Specialty Mortgage Trust, Inc. (the "Issuer"), and the Trustee, hereby
certifies that there has been Delivered to the Trustee, or its nominee, and the
Trustee, or its nominee, now has possession of Mortgage Notes, Short-Term Money
Market Instruments and Cash, of the type and with the unpaid principal balance,
set forth in the Pledged Asset Schedule attached hereto, with such exceptions,
if any, shown on an exception report attached thereto. All terms used but not
defined herein shall have the meanings assigned to such terms in the Indenture.
The Trustee further certifies that:
The Trustee has not reviewed, analyzed, tested, compared or verified the
information contained in any certificate or instrument representing this Pledged
Assets nor has it examined or compared any signatures appearing thereon nor
otherwise confirmed the validity or genuineness of any such certificate or
instrument.
IN WITNESS WHEREOF, the undersigned has executed this certificate this
__________ day of __________.
Bankers Trust Company of California, N.A.
By:
------------------------------------------
Authorized Officer
<PAGE> 55
EXHIBIT D
REASSIGNMENT AND DELIVERY OF PLEDGED ASSETS
Bankers Trust Company of California, N.A., Trustee (the "Trustee"), under
the Indenture dated as of _______, 2001, between Specialty Mortgage Trust, Inc.
(the "Issuer") and the Trustee, has received an Officers' Certificate requesting
withdrawal with respect to the Pledged Assets, dated _______________.
The Trustee hereby releases, reassigns and delivers to the Issuer the
property identified in such Officers' Certificate, where appropriate accompanied
by the documentation reasonably requested by the Issuer to effect the
registration of the same in the name of the Issuer, if the Issuer so requests.
The Trustee therefore releases, reassigns and delivers such property to
the Issuer; the Trustee believes (without having undertaken a legal review) that
such release, reassignment and delivery fully releases and discharges the
security interest created under the aforementioned Indenture in such property.
Dated:
------------------------
Bankers Trust Company of California, N.A.,
Trustee
By:
------------------------------------------
Name:
Title:
<PAGE> 56
EXHIBIT E
[TOBIN & TOBIN LETTERHEAD]
_______, 2001
Bankers Trust Company of California, N.A.
3 Park Plaza, 16th Floor
Irvine, CA 92614
(Attn.: Specialty Mortgage Trust, Inc.)
Ladies and Gentlemen:
We have acted as special counsel to Specialty Mortgage Trust, Inc., a
Maryland corporation ("Issuer"), in connection with the transactions
contemplated by the Indenture, dated as of ________, 2001 (the "Indenture"),
between the Issuer and Bankers Trust Company of California, N.A., as trustee
(the "Trustee"). Capitalized terms not otherwise defined herein have the
meanings set forth in the Indenture.
Pursuant to the Indenture, the Issuer will pledge to the Trustee, in
trust, without recourse, all its right, title and interest in, to and under the
Pledged Assets. Thereupon, Collateralized Investment Notes in the principal
amount not to exceed $250,000,000.00 (the "Notes") will be issued. The Issuer
intends to sell the Notes in a public offering pursuant to a Prospectus, dated
________, 2001 (the "Prospectus").
This opinion is rendered pursuant to Sections 2.12(e) of the Indenture.
In this connection, we have examined and are familiar with:
(a) a copy of the Articles of Incorporation of the Issuer, and all
amendments thereto, certified as of a recent date by the State Department of
Taxation and Assessments of the State of Maryland;
(b) a copy of the Bylaws of the Issuer, as amended to date, certified by
the Secretary of the Issuer to be a true and correct copy;
(c) a copy of the resolutions pertaining to the issuance of the Notes,
adopted by the Board of Directors of the Issuer, certified by the Secretary of
the Issuer;
<PAGE> 57
TOBIN & TOBIN
Bankers Trust Company of California, N.A.
_______, 2001
Page 2
(d) signed counterparts of the Indenture;
(e) a copy of the Prospectus; and
(f) a receipt of even date herewith by you or a Custodian on your behalf
acknowledging receipt of the Pledged Assets.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such records of the Issuer and such agreements,
certificates of public officials, certificates of officers, managers or other
representatives of the Issuer and others, and such other documents, certificates
and records as we have deemed necessary or appropriate as a basis for the
opinions set forth herein. As to any facts material to the opinions expressed
herein which were not independently established or verified, we have relied upon
oral or written statements and representations of officers, managers and other
representatives of the Issuer and others.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed by parties other than the Issuer we have
assumed that such parties had the power, corporate or other, to enter into and
perform all obligations thereunder, and we have also assumed the due
authorization by all requisite action, corporate or other, and the valid
execution and delivery by such parties of such documents and the validity,
binding effect and enforceability thereof with respect to such parties.
Unless otherwise indicated, reference in this opinion to:
(1) "Nevada UCC" shall mean the Uniform Commercial Code ("UCC") as in
effect on the date hereof in the State of Nevada;
(2) "California UCC" shall mean the UCC as in effect on the date hereof
in the State of California;
(3) "Applicable UCC" shall mean the Nevada UCC or the California UCC, as
applicable; and
(4) "UCC Search Report" shall mean the reports set forth as Schedule 2 as
to previously filed UCC financing statements.
Members of the firm are admitted to the bar in the States of California
and New York, and we do not express any opinion as to the laws of any other
jurisdictions other than (i) the corporate laws of the State of Maryland, (ii)
the mortgage laws of the State of Nevada, and (iii) the laws of the United
States to the extent specifically addressed herein. In addition, our security
interest opinions in Part B hereof are limited to Articles 8 and 9 of the
Applicable UCC and therefore such opinions do not address (a) laws of
jurisdictions other than Nevada and California and the laws of Nevada and
California except for Articles 8 and 9 of the Applicable UCC, and (b) collateral
of a type not subject to Articles 8 and 9 of the Applicable UCC. With your
permission, we have rendered our opinions with respect to the Nevada UCC based
upon published compilations thereof.
<PAGE> 58
TOBIN & TOBIN
Bankers Trust Company of California, N.A.
_______, 2001
Page 3
Based upon the foregoing, and subject to the qualifications set forth
herein, we are of the opinion that:
1. All instruments furnished to the Trustee by the Issuer pursuant to
Section 2.12 of the Indenture in connection with the Issuer conform in all
material respects to the requirements of the Indenture and constitute all of the
documents required to be delivered under Section 2.12 for the Trustee to
authenticate and deliver the Notes.
2. All conditions precedent provided for in the Indenture relating to the
authentication and delivery of the Notes have been complied with in all material
respects.
3. The Issuer is a corporation duly organized under the laws of the State
of Maryland with full power and authority to enter into and perform its
obligations under the Indenture and the Notes.
4. Assuming due authorization, execution and delivery thereof by the
Trustee, the Indenture will be the legally valid and binding obligation of the
Issuer, enforceable against the Issuer in accordance with its terms.
5. The Notes, when issued, delivered, authenticated and paid for, will be
the legally valid and binding obligations of the Issuer, entitled to the
benefits of the Indenture, and enforceable against the Issuer in accordance with
their terms.
6. With respect to those Mortgages delivered to the Trustee on real
property located in the States of California and Nevada, when the Mortgage Notes
related to such Mortgages are assigned, delivered and pledged to the Trustee,
such Mortgages will continue, under the laws of the States of California and
Nevada, respectively, to secure such Mortgage Notes as though, and to the same
extent as if, such Mortgage Notes had not been assigned, delivered and pledged.
7. It is not necessary to record or file the Indenture or to take any
other action, except as set forth in Part B hereof, in order to make effective
the lien and security interest created by the Indenture in the Mortgage Notes
included in the Pledged Assets.
Our opinions expressed herein are subject to the following
qualifications:
(a) we express no opinion as to whether the Pledged Assets Granted to the
Trustee as security conform to the requirements of the Indenture;
(b) we express no opinion as to whether the amount of cash or other
collateral, if any, delivered to the Trustee pursuant to any subsection of
Section 2.12 of the Indenture is the requisite amount;
(c) enforcement may be subject to or limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally, and (ii) general principles of equity, including
concepts of materiality, reasonableness, good faith and fair dealing (regardless
of whether enforcement is considered in a proceeding in equity or at law);
(d) certain of the remedial provisions, including waivers, with respect
to the exercise of remedies against the collateral contained in the Indenture
may be unenforceable in whole or in part, but the inclusion of such provisions
does not affect the validity of the Indenture, and the Indenture, taken as a
whole, together with applicable law, contains adequate provisions for the
practical realization of the benefits of the security described therein;
<PAGE> 59
TOBIN & TOBIN
Bankers Trust Company of California, N.A.
_______, 2001
Page 4
(e) we have assumed that the Indenture constitutes the legal, valid and
binding obligation of each party to such agreement (other than the Issuer),
enforceable against each such party in accordance with its terms;
(f) we express no opinion as to the effect on the opinions herein stated
of (i) the compliance or noncompliance of any party (other than the Issuer) to
the Indenture with any state or federal or other laws or regulations applicable
to them, or (ii) the legal or regulatory status or the nature of the business of
each such party (other than the Issuer);
(g) we express no opinion as to the enforceability of any rights to
contribution or indemnification, or waivers of or agreements not to assert legal
rights, provided for in the Indenture which are violative of the public policy
underlying any laws, rules or regulations (including federal or state securities
laws, rules or regulations);
(h) we express no opinion as to whether the execution, delivery or
performance by the Issuer to the Indenture will constitute a violation of or a
default under any covenant, restriction or provision with respect to financial
ratios or tests or any aspect of the financial condition or results of
operations of the Issuer; and
(i) we express no opinion as to the enforceability of any provision in
the Indenture with respect to governing law to the extent that it purports to
affect the choice of law governing perfection and the effect of perfection or
nonperfection of security interests.
B. UCC Matters
The Indenture provides for the Grant to the Trustee by the Issuer of a
security interest in the Pledged Assets.
You have asked for our opinions with respect to the security interest in
the Mortgage Notes included in the Pledged Assets. We call to your attention
that under the Applicable UCC, events occurring subsequent to the date hereof
may affect any security interest subject to the Applicable UCC including, but
not limited to, factors of the type identified in Section 9-306 with respect to
proceeds, Section 9-402 with respect to changes in the location of the
collateral and the location of the debtor, Section 9-316 with respect to
subordination agreements; Section 9-403 with respect to continuation statements,
and Sections 9-307, 9-308 and 9-309 with respect to subsequent purchasers of
collateral. In addition, actions taken by the secured party (e.g., voluntarily
releasing, assigning or subordinating a security interest, or delivering
possession of the collateral to the debtor or another person) may affect any
security interest subject to the Applicable UCC.
Based on the foregoing and subject to the qualifications set forth
herein, we are of the opinion that:
1. The Indenture is effective to create, in favor of the Trustee, a valid
security interest under the Applicable UCC in all of the Issuer's right, title
and interest in, to and under the Mortgage Notes to the extent such collateral
constitutes property subject to Article 9 of the Applicable UCC.
2. When the Mortgage Notes are delivered by the Issuer to the Trustee or
its designee, duly endorsed in blank without recourse, the Mortgage Notes will
have been duly and validly assigned, delivered and pledged to the Trustee and
the security interest referred to in paragraph 1 above will constitute a fully
perfected first priority security interest under the Applicable UCC in all
right, title and interest of the Issuer in the Mortgage Notes and the Mortgage
Loans evidenced thereby and all proceeds thereof, and under the Applicable UCC,
no other security interest of any other creditor of the Issuer will be equal or
prior to the security interest of the Trustee in the Mortgage Notes and all
proceeds thereof.
<PAGE> 60
TOBIN & TOBIN
Bankers Trust Company of California, N.A.
_______, 2001
Page 5
3. The UCC Search Report sets forth the proper filing offices and the
proper debtors necessary to identify those Persons who have on file in the State
of Nevada financing statements covering collateral of the Issuer, a security
interest in which is perfected by filing ("Filing Collateral") as of the dates
and times specified on Schedule 2. The UCC Search Report identifies no Person
(other than a Person whose interest in Filing Collateral has been released) who
has filed in the State of Nevada a financing statement describing Filing
Collateral prior to the effective dates of the UCC Search Report.
Our opinions with respect to the security interests in the Pledged Assets
are subject to the following qualifications:
(a) we have assumed that the Mortgage Notes exist and that the Issuer has
sufficient rights in the Mortgage Notes for the security interest of the Trustee
to attach, and we express no opinion as to the Issuer's rights in, or title to,
any of the Mortgage Notes;
(b) we have assumed that there are no agreements between the Issuer and
any account debtor prohibiting, restricting or conditioning the assignment of
any portion of the Mortgage Notes;
(c) we call to your attention that the security interest of the Trustee
may be subject to the rights of account debtors, claims and defenses of account
debtors and the terms of agreements with account debtors;
(d) we have assumed that each Mortgage Note constitutes an instrument
under the Applicable UCC and is represented by only one original document;
(e) with respect to paragraph 2 in this Part B, we express no opinion
with respect to the priority of the security interest of the Trustee in the
Mortgage Notes against any of the following: (i) pursuant to Section 9-301(1) of
the Applicable UCC, a lien creditor or bulk purchaser who attached or levied
prior to the perfection of the security interest; (ii) pursuant to Section
9-301(4) of the Applicable UCC, a lien creditor to the extent that provision
limits the priority afforded future advances; (iii) pursuant to Section 9-312(7)
of the Applicable UCC, another secured creditor to the extent that provision
limits the priority afforded future advances; (iv) pursuant to Sections 9-312(3)
and (4) of the Applicable UCC, a "purchase money security interest" as such term
is defined in Section 9-107 of the Applicable UCC; (v) pursuant to Section
9-312(6) of the Applicable UCC, another secured party with a perfected security
interest in other property of the Issuer to the extent the Mortgage Notes are
proceeds of such other creditor's property; (vi) pursuant to Sections 9-104,
4-208 or 4-210 and 9-302(1) of the Applicable UCC, another creditor not required
to file a financing statement to perfect its interest; and (vii) pursuant to
Section 9-304 of the Applicable UCC, in the case of instruments, certificated
securities and documents, a security interest perfected for twenty-one days
without possession;
(f) we have assumed that the Indenture has been duly authorized, executed
and delivered by the Trustee and that the Indenture constitutes a valid and
binding obligation of the Trustee, enforceable against it in accordance with its
terms;
(g) we have assumed that each Mortgage Note is endorsed in blank;
(h) we have assumed that the Trustee has not received notice of the
interest of any other person in any of the Mortgage Notes prior to receipt of
notification from the Trustee's security interest in such Mortgage Notes;
(i) we have assumed that the chief executive office of the Issuer is and
will be in Reno, Nevada;
<PAGE> 61
TOBIN & TOBIN
Bankers Trust Company of California, N.A.
_______, 2001
Page 6
(j) we call to your attention that the priority of the security interest
in proceeds is subject to Section 9-306 of the Applicable UCC and, in the case
of certain types of proceeds, other parties such as holders in due course, bona
fide purchasers, holders of negotiable documents and buyers in the ordinary
course of business may obtain superior priority;
(k) we call to your attention that in the case of collections in respect
of the Mortgage Notes, a security interest therein will be perfected only if
possession thereof is obtained or other appropriate action is taken in
accordance with the provisions of the Applicable UCC or other applicable law;
(l) we have assumed that all relevant financing statements in which the
Issuer is named as a debtor have been properly filed, indexed and recorded in
the State of Nevada and are identified in the UCC Search Report;
(m) we have assumed that the Mortgage Notes (i) will be continuously
located in the State of California in the possession of the Trustee, (ii) will
be either endorsed to the Trustee or in blank, or registered in the name of the
Trustee, and (iii) will contain only signatures thereon which are genuine; and
(n) for purposes of our opinions we have assumed that the Issuer is not a
broker, securities intermediary or commodity intermediary.
This opinion is expressly subject to there being no material change in
the statutory or decisional law, and there being no additional facts of which we
are not aware that would materially affect the validity of the assumptions set
forth herein (and we are not aware of any such material facts).
This opinion may be relied upon solely by the person or entity to which
it is addressed, and no other person or entity is entitled to rely hereon
without our prior written consent.
Very truly yours,
<PAGE> 62
SCHEDULE 1
UCC FINANCING STATEMENTS
<PAGE> 63
SCHEDULE 2
UCC SEARCH REPORTS
