<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1994
-----------------------------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
----------------------- ---------------------
Commission file number 2-81457
-----------------------------------------------
AMERICAN SOUTHWEST FINANCIAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Arizona 86-0439495
- ------------------------------ ------------------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
2390 East Camelback Road, Suite 225, Phoenix, Arizona 85016
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602)381-8960
----------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None
- ---------------------------- ------------------------------------------
Securities registered pursuant to section 12(g) of the Act:
None
-------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K /X/.
Aggregate market value of voting stock held by non-affiliates of the
registrant as of August 31, 1994: No Active Market
Number of shares of common stock outstanding as of September 15, 1994:
Class A - 18,000 Class B - 35,200
<PAGE> 2
AMERICAN SOUTHWEST FINANCIAL CORPORATION
PART I.
Item 1. Business.
American Southwest Financial Corporation (the "Company") was
organized for the purpose of issuing mortgage- collateralized bonds ("Bonds")
in series ("Series") consisting of one or more classes (each a "Class") to
facilitate the financing of long-term residential mortgage loans secured by
single-family residences and is not permitted to engage in any business or
investment activities other than those described in its Articles of
Incorporation. Article III of the Company's Articles of Incorporation limits
the Company's business to the issuance of Bonds secured by mortgage collateral
which may include Government National Mortgage Association Certificates,
Federal Home Loan Mortgage Corporation Certificates, Federal National Mortgage
Association Certificates, pledged loans, mortgage pass-through certificates and
mortgage collateralized obligations issued by any person or entity or other
interests in mortgages, and to the extent any such mortgage collateral
represents an interest in or is secured by mortgage loans, such mortgage loans;
to hold, transfer, assign, pledge, finance and otherwise deal with such
mortgage collateral; to loan the proceeds from the sale of Bonds for use in
connection with the funding or acquisition of such mortgage collateral; and to
conduct activities incidental and necessary for such purposes. Article XII of
the Company's Articles of Incorporation prohibits the Company, without the
prior written consent of the trustee under each indenture to which it is a
party, from (i) engaging in any business or activity other than in
connection with or relating to the issuance of Bonds secured by mortgage
collateral, (ii) incurring, assuming or guaranteeing any indebtedness of
any entity, except for such indebtedness as may be incurred by the Company
in connection with the issuance of Bonds by the Company secured by mortgage
collateral and rated in one of the two highest rating categories by
2
<PAGE> 3
at least one nationally recognized rating agency, (iii) incurring, assuming or
guaranteeing any indebtedness of any entity other than in connection with the
issuance of Bonds by the Company secured by mortgage collateral, unless such
indebtedness is completely subordinated to the indebtedness evidenced by such
Bonds, (iv) merging or consolidating with another corporation unless the
Company's successor shall expressly assume the Company's obligations under any
indenture to which the Company is a party, or (v) amending Articles III or XII
of the Company's Articles of Incorporation.
As a result of changes in the mortgage securitization
industry including, among other factors, changes in federal and state tax laws
during 1986 and 1987, the creation of real estate mortgage investment conduits
("REMICs") in 1987 and the emergence of FNMA and FHLMC as the largest domestic
issuers of mortgage-collateralized securities, the Company has not issued any
mortgage- collateralized Bonds since September 29, 1988. Currently, the
Company earns substantially all of its net income from redemptions of its
outstanding Bonds and from other interest income. In the event the Company
does not issue Bonds in the future or does not earn significant redemption
income due to changes in interest rates which reduce opportunities for
profitable redemptions or there are significant reductions in the amount of
outstanding Bonds, the Company may sustain losses. See the Financial
Statements included as part of Item 8 of this Report for information with
respect to the amounts of revenue, operating profits and identifiable assets
including the outstanding principal balance of Bonds at June 30, 1994.
The Company and American Southwest Financial Services, Inc. ("ASFS"), an
affiliate of the Company, are parties to an agreement (the "Mortgage
Securities Issuance and Administration Agreement") dated as of
January 1, 1988, and amended on May 13, 1992, pursuant to which ASFS provides
various services
3
<PAGE> 4
in connection with the issuance and administration of each Series of Bonds
issued by the Company. The Mortgage Securities Issuance and Administration
Agreement generally provides for the Company to pay ASFS, on a quarterly basis,
the shortfall between the total fees earned by ASFS for both the securities
issuance services and the securities administration services it performs and
110% of the overhead of ASFS, subject to scheduled adjustments.
The Mortgage Securities Issuance and Administration Agreement
may be terminated by either party upon three months' prior written notice to
the other party, except that ASFS may not terminate securities administration
services provided as to any Series of Bonds which has closed prior to the date
of termination without the consent of the Company.
Item 2. Properties.
None.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of shareholders of the Company was held on
May 16, 1994. The Class A voting shareholders elected the Board of Directors
of the Company by unanimous vote for the ensuing year or until their successors
are elected and have qualified. The names of the Directors elected at the
meeting are as follows:
Jon A. Grove Alan D. Hamberlin
G. Thomas Eggebrecht Kirby Korth
Philip J. Polich Michael H. Feinstein
J. Larry Sorsby
4
<PAGE> 5
AMERICAN SOUTHWEST FINANCIAL CORPORATION
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
There is no trading market for the Company's common stock.
At September 15, 1994, there were 18 Class A and 37 Class B shareholders
of common stock. The Company has never paid a dividend on its common stock.
The Company's Articles of Incorporation provide that only the holders of
Class A stock are entitled to receive dividends.
Item 6. Selected Financial Data.
The data presented herein is for the Company's last five
fiscal years ending June 30.
Summary of Operations
June 30,
(In thousands of dollars, except Earnings per Share)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues $162,782 $252,513 $354,387 $419,602 $479,721
======== ======== ======== ======== ========
Income (Loss) Before
Taxes $ 3,611 $ 349 $ 5,175 $ 667 $ (439)
Provision (Benefit)
for Income Taxes 1,430 140 2,051 288 (202)
-------- -------- -------- -------- --------
Net Income (Loss)
before
Extraordinary Item 2,181 209 3,124 379 (237)
Extraordinary Item 37
-------- -------- -------- -------- --------
Net Income (Loss) $ 2,181 $ 209 $ 3,124 $ 416 $ (237)
======== ======== ======== ======== ========
Per Share of Class A
Common Stock
Earnings (Loss) before
Extraordinary Item
$117.88 $ 9.91 $ 127.69 $ 15.33 $ (9.49)
Extraordinary Item 1.50
------- -------- -------- -------- --------
Net Earnings (Loss) $117.88 $ 9.91 $ 127.69 $ 16.83 $ (9.49)
======= ======== ======== ======== ========
</TABLE>
5
<PAGE> 6
Financial Position
June 30,
(In thousands of dollars)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total Assets $979,826 $2,089,179 $3,200,588 $4,128,745 $4,642,890
======== ========== ========== ========== ==========
Cash, Cash
Equivalents
and
Investments $ 1,434 $ 3,990 $ 4,204 $ 1,860 $ 939
======== ========== ========== ========== ==========
Receivables
Pursuant
to Funding
Agreements,
net $345,427 $ 904,618 $1,496,475 $1,980,283 $2,248,325
======== ========== ========== ========== ==========
Mortgage
Securities,
net $615,851 $1,146,695 $1,646,536 $2,079,467 $2,316,673
======== ========== ========== ========== ==========
Bonds Payable,
net $956,980 $2,050,490 $3,135,761 $4,059,750 $4,564,998
======== ========== ========== ========== ==========
Other
Obligations $ $ $ 4,497 $ $
======== ========== ========== ========== ==========
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Company was organized for the purpose of issuing various
Series of Bonds to facilitate the financing of long-term residential
mortgage loans secured by single-family residences. The Company does
not have and is not expected to have any significant assets other than
cash and the assets pledged to secure specific Series of Bonds. On the
closing of a Series of Bonds issued by the Company, the Company applies the
net proceeds from the sale of the Bonds toward the simultaneous purchase
or the repayment of indebtedness with respect to the mortgage collateral
("Mortgage Collateral") securing such Series of Bonds or to fund loans to
participating finance companies ("Finance Companies") pursuant to funding
agreements ("Funding Agreements"). See Note 2 of the Financial Statements
included in this Report. The Company last issued a Series of Bonds
6
<PAGE> 7
in September 1988. Issuance fees charged for each Series of Bonds issued by the
Company are used to pay Bond offering expenses.
Each Series of Bonds that has been issued is a nonrecourse obligation of
the Company, payable solely form the Mortgage Collateral and other collateral
(togehter the "Collateral") pledged to secure such Series of Bonds. Neither
the Company nor the Finance Companies guarantee or are obligated to pay the
Bonds of a Series except from the proceeds of the Collateral securing such
Series of Bonds. The Company has made elections to treat the arrangements by
which the Collateral securing certain Series of Bonds is held as REMICs for
federal income tax purposes.
Results of Operations
The Company's net income for the fiscal years ended June 30,1994, 1993
and 1992 was $2,180,855 ($117.88 per share), $209,410 ($9.91 per share) and
$3,124,042 ($127.69 per share), respectively. The Company's net income for
the fiscal year ended June 30, 1994 primarily resulted from redemption income
and other interest income.
The Company's principal sources of revenue are interest pursuant to
Funding Agreements and interest from Mortgage Securities, the total of which
are substantially offset by interest expense on Bonds. See Note 2 of the
accompanying Financial Statements. This interest income and related interest
expense has declined over the last three fiscal years due to (i) regular
payments and prepayments on the Mortgage Collateral securing the various
series of Bonds, (ii) the sale of Mortgage Collateral in conjunction with Bond
redemptions and (iii) the time-out calls (defined below) on certain Classes of
Bonds. These same factors also caused reductions in the outstanding amounts of
Collateral and Bonds.
7
<PAGE> 8
The Company anticipates that its interest income and related
interest expense will continue to decline due to future redemptions, time-out
calls and the fact that the Company has not issued a new Series of Bonds since
1988.
Other interest income consists primarily of (i) interest
earned on the reinvestment of the monthly payments on the Collateral (for
certain non-REMIC Series of Bonds issued by the Company) prior to the assumed
deposit date for such Series as defined in the related indenture supplements
(the "Series Supplements") and (ii) to a much lesser degree, interest earned
from investing the Company's cash. Other interest income is lower in the
fiscal year ended June 30, 1994 as compared to the fiscal years ended June 30,
1993 and 1992 primarily due to the reductions of Collateral securing the
Company's non-REMIC Bonds earning reinvestment income. In the long-term, other
interest income attributable to reinvested payments is expected to continue to
decrease since the Collateral securing the Company's non-REMIC Bonds is reduced
over time and the amount of the monthly payments on the Collateral which may be
reinvested by the trustee the ("Trustee") prior to the assumed deposit date
also will decrease. It is not likely the collateral will increase since the
Company is not likely to issue additional non-REMIC Series of Bonds as a result
of changes in the Internal Revenue Code.
The Company derives management fee revenue from fees charged
to the Finance Companies for management of current Bond administration funds.
Fees vary depending on investment returns on these funds held by the Company
specifically for payment of current Bond administration expenses. At the time
of a full redemption of a Series of Bonds (see below), excess current Bond
administration funds are returned to the Finance Companies. This reduction of
funds, and to a lesser extent the current short-term interest rate environment,
accounts for
8
<PAGE> 9
the reduced management fee revenue for the fiscal year ended June 30, 1994 as
compared to the fiscal years ended June 30, 1993 and 1992. Current Bond
administration funds are a portion of funds ("Escrowed Reserve Funds")
administered and invested on behalf of the Finance Companies by the Company.
See Note 8 of the Financial Statements included in this Report.
The Series Supplements relating to certain Series of Bonds
issued by the Company contain redemption provisions which give the Company the
option to redeem such Bonds in whole or in part when specific criteria are met.
With respect to other Series of Bonds, the Company may effect a redemption only
at the direction of the holder of the residual interest. The following table
sets forth certain information with respect to redemptions by the Company of
various Series of Bonds or Classes of Bonds during the fiscal year ended June
30, 1994:
<TABLE>
<CAPTION>
SERIES PRINCIPAL PORTION
DATE (CLASS) OF BONDS REDEEMED DESCRIPTION
---- ------- ----------------- -----------
<S> <C> <C> <C>
07/01/93 N(4) $14,727,504 Redemption of Series
07/15/93 2 274,000 Redemption of Series
07/15/93 7 774,043 Redemption of Series
08/01/93 D(4) 8,062,895 Redemption of Series
09/01/93 F(4) 1,641,897 Partial Redemption of Class
09/01/93 42(4) 454,000 Partial Redemption of Class
09/20/93 F(4) 650,709 Redemption of Series
09/23/93 52 20,969,000 Redemption of Series
09/27/93 45(B,C) 26,762,767 Redemption of Class
09/30/93 54 3,336,000 Partial Redemption
10/08/93 E(4) 2,474,733 Redemption of Series
11/01/93 O(4) 11,606,038 Redemption of Series
11/01/93 47(B) 13,585,000 Redemption of Series
12/30/93 59 10,639,000 Redemption of Series
04/29/94 53(D,E) 40,198,322 Redepmtion of Series
05/25/94 40(4,5) 16,580,082 Redemption of Series
05/25/94 42(5) 13,359,395 Redemption of Series
05/25/94 43(D) 11,236,000 Redemption of Series
05/25/94 54 2,593,000 Redemption of Series
05/31/94 M(4) 9,414,192 Redemption of Series
05/31/94 P(4) 9,880,276 Redemption of Series
06/25/94 50(B,C) 27,241,073 Redemption of Series
</TABLE>
9
<PAGE> 10
At the time of a redemption, with the Company's and Trustee's
consent, the underlying collateral is sold and the proceeds from the sale are
used to redeem the Bonds. The Company remits the remainder either to (i) the
participating Finance Companies after charging each a prepayment fee (included
in redemption and modification income) or (ii) to the holder of the residual
interest in the REMIC, as applicable. Prepayment fees received from the
Finance Companies in connection with redemptions during the fiscal year ended
June 30, 1994 were $4,098,297 as compared to $1,852,453 for the fiscal year
ended June 30, 1993 and $843,176 for the fiscal year ended June 30, 1992.
During the fiscal year ended June 30, 1994, a certain Finance
Company elected not to sell its collateral and participate in certain
redemptions. The Company nevertheless effected the full redemption of these
related Series of Bonds, and utilized corporate cash to redeem the
non-participating Finance Company's proportionate share of the Bonds.
Subsequent to these redemptions the Company earns all interest income and
receives all principal payments on funding notes owed by the non-participating
Finance Company without offsetting liabilities on the Bonds.
Additionally, during the fiscal years ended June 30, 1994,
1993 and 1992, the Company exercised its rights (pursuant to the indenture and
the applicable Series Supplements) to effect the optional Class redemptions
(known as "time-out calls") of the remaining outstanding amounts of certain
Classes of Bonds, utilizing corporate cash, Escrowed Reserve Funds and funds
borrowed from affiliates. Pursuant to the time-out calls, payments of
principal and interest that would otherwise be payable to the holders of Bonds
so redeemed are paid by the Trustee to the Company. During the fiscal year
ended June 30, 1994, the Company borrowed funds from affiliates to effect
certain time-out calls, and paid
10
<PAGE> 11
interest to such affiliates at the prime rate of interest as published in the
Wall Street Journal. All borrowings from affiliates for time-out calls had
been repaid at June 30, 1994. During the fiscal years ended June 30, 1993 and
1992, to the extent Escrowed Reserve Funds were utilized to effect the time-out
calls, the Company credited all principal and interest (presented as interest
on other obligations) to the Escrowed Reserve Funds. At June 30, 1994, the
Company had invested $2,076,963 of corporate cash in outstanding time-out calls
with a weighted average yield of 9.25% compared to $823,143 with a weighted
average yield of 8.75% at June 30, 1993. Interest expense on Bonds is less
than interest income related to Funding Agreements and Mortgage Securities for
the fiscal years ended June 30, 1994, 1993 and 1992 due to these time-out calls
and due to the Funding Agreements that remained in place after certain
redemptions of Series of Bonds in the 1994 fiscal year.
During the fiscal year ended June 30, 1992, the Company and
the Trustee, in agreement with Bondholders and pursuant to the indenture and as
supplemented by the applicable Series Supplements, modified the redemption
rights of the Series H Class H-4 Bonds, the Series I Class I-3 Bonds, the
Series J Class J-3 Bonds and the Series K Class K-3 Bonds through amendments of
the applicable Series Supplements. The Company earned $5,170,709 from these
modifications which is included in redemption and modification income for the
fiscal year ended June 30, 1992. The Company also modified the redemption
rights for the Series G Class G-4 Bonds in May 1991. The Company did not
modify the redemption rights relating to any Series of Bonds during the
fiscal years ended June 30, 1994 and 1993.
Although redemption and modification opportunities were
favorable in the past few years, the benefits of redemptions and modifications
are not predictable
11
<PAGE> 12
and may not be favorable in the future due to a variety of factors including
uncertainty of the time at which the Company may effect redemptions or
modifications of the outstanding Bonds, prevailing interest rates, other
similar market factors and, in certain circumstances, limitations under
agreements entered into by the Company.
The amount of interest income received on the Collateral
securing the various Series of Bonds issued by the Company, the rate at which
principal prepayments are made on such Collateral, the amount of other interest
income earned from the reinvestment of monthly payments on such Collateral, the
amount of other interest income earned on the Company's corporate cash, the
interest rates payable by the Company on certain Classes of Bonds issued by it,
and the amounts ("Surplus") distributed to the Finance Companies or to the
holders of the residual interests in the REMICs depend upon prevailing interest
rates and are significantly affected by interest rate fluctuations. However,
since Surplus (generally, the right to receive the remaining cash flow
available on Collateral after debt service and payment of administrative
expenses on Bonds) is payable to the Finance Companies or to the holders of the
residual interests in the REMICs, the risks associated with fluctuations in
interest rates are borne primarily by the Finance Companies and the holders of
the residual interests in the REMICs rather than by the Company.
Primary expenditures of the Company consist of management
fees paid to ASFS, professional fees, interest on other obligations and
interest paid to affiliates. The Company receives the use of office space,
equipment, and certain managerial, administrative, financial and other services
pursuant to the terms of the Mortgage Securities Issuance and Administration
Agreement between the Company and ASFS. The Mortgage Securities Issuance and
Administration Agreement
12
<PAGE> 13
generally provides for the Company to pay ASFS management fees for certain
services it performs (see Item 1 of this Report). Management fees increased in
the fiscal year ended June 30, 1994 as compared to the fiscal year ended June
30, 1993 but decreased as compared to the fiscal year ended June 30, 1992.
These variances are a function of the operating overhead of ASFS, offset by
issuance fees and other revenues earned by ASFS, both of which directly affect
the amount of management fees as explained in Item 1 of this Report.
Liquidity and Capital Resources
At June 30, 1994, the Company had cash and cash equivalents
of $1,434,442 as compared to $3,989,969 at June 30, 1993. The Company had
$2,076,963 and $2,221,452 invested in time-out calls and funding notes,
respectively, at June 30, 1994 as compared to $823,143 invested in time-out
calls and no funding notes at June 30, 1993. Funds used for time-out calls and
funding notes earned interest at rates ranging from 8.75% to 10.2% per annum
for various periods of time during the current fiscal year.
The Company believes that scheduled payments of principal and
interest on the Collateral pledged to secure each Series of Bonds, together
with amounts available from reserve funds established for such Bonds and any
reinvestment income on such amounts, will provide sufficient funds (i) to pay
principal and interest on such Bonds when due and to retire such Bonds not
later than their respective stated maturities and (ii) to pay related Bond
administration expenses.
The Company anticipates that funds to meet its current and future
operating needs will be provided from current cash and future operations.
13
<PAGE> 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (cont'd).
Impact of Inflation and Changing Prices
The primary revenue producing activities of the Company
(issuance, redemptions and modifications) are all impacted by interest rates,
which in turn are affected by numerous factors. These factors include
conditions in financial markets, the fiscal and monetary policies of the United
States government and the Board of Governors of the Federal Reserve System,
international economic and financial conditions and other factors, none of
which can be predicted with any certainty.
Virtually all of the assets and liabilities of the Company
are monetary in nature. As a result, interest rates have a more significant
impact on the performance of the Company than the effects of general levels of
inflation since changes in prevailing interest rates will affect the
availability, cost and expected maturity of Collateral. This in turn will
affect the Company's ability to issue new Series of Bonds and earn new fees.
Changes in interest rates (particularly long-term interest rates) also affect
the timing and profit potential of Bond redemptions and Bond modifications,
with lower rates being a positive factor and higher rates being a negative
factor. Interest rates do not necessarily move in the same direction or in the
same magnitude as the price of goods and services, since such prices are
affected by inflation while interest rates generally are not affected to the
same degree. Nevertheless, neither changes in interest rates nor inflationary
pressures are expected to significantly affect the ability of the Company to
meet its obligations as they become due because (i) each Series of Bonds is
secured by Collateral paying interest at fixed rates, and (ii) interest on each
Class of Bonds is paid at fixed rates, or at rates based on specified formulas
subject to specific maximum limitations.
14
<PAGE> 15
<TABLE>
<CAPTION>
Item 8. Financial Statements and Supplementary Data.
<S> <C>
Index to Financial Statements
Report of Independent Certified Public
Accountants....................................................16
Balance Sheets, June 30, 1994 and 1993...........................17
Statements of Income, For each of the three years
ended June 30, 1994, 1993 and 1992.............................19
Statements of Shareholders' Equity, For each of
the three years ended June 30, 1994, 1993
and 1992 ......................................................20
Statements of Cash Flows, For each of the three
years ended June 30, 1994, 1993 and 1992.......................21
Notes to Financial Statements....................................22
15
</TABLE>
<PAGE> 16
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders and Board of Directors
American Southwest Financial Corporation
We have audited the accompanying balance sheets of American Southwest Financial
Corporation as of June 30, 1994 and 1993, and the related statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended June 30, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Southwest Financial
Corporation as of June 30, 1994 and 1993, and the results of its operations and
its cash flows for each of the three years in the period ended June 30, 1994 in
conformity with generally accepted accounting principles.
KENNETH LEVENTHAL & COMPANY
Phoenix, Arizona
August 26, 1994
16
<PAGE> 17
AMERICAN SOUTHWEST FINANCIAL CORPORATION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30 June 30
1994 1993
----------- --------------
<S> <C> <C>
Cash and cash equivalents $ 1,434,442 $ 3,989,969
Receivables pursuant to Funding
Agreements - Note 2
Principal - (Net of issue
discount of $11,431,310 and $22,885,638,
respectively) 345,427,233 904,618,248
Interest 8,196,380 20,100,416
Mortgage Securities - Note 2
Principal - (Net of purchase
discount of $28,199,383 and $52,776,968,
respectively) 615,850,786 1,146,695,390
Interest 7,108,709 12,683,480
Other receivables - Note 6 54,170 431,685
Advances to affiliates - Note 5 1,753,824 660,000
-------------- --------------
Total Assets $979,825,544 $2,089,179,188
============ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 18
AMERICAN SOUTHWEST FINANCIAL CORPORATION
BALANCE SHEETS (CONT'D)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30 June 30
1994 1993
------------ --------------
<S> <C> <C>
Liabilities
Bonds Payable - Notes 2 and 3
Principal - (Net of issue
discount of $39,630,694 and $75,662,606,
respectively) $956,979,605 $2,050,490,494
Interest 15,265,766 32,771,892
Accounts payable - Note 6 32,371 229,316
Payable to affiliates - Note 5 225,000 400,000
------------ --------------
Total Liabilities 972,502,742 2,083,891,702
------------ --------------
Commitments and Contingencies - Note 5
Shareholders' Equity
Class A Common Stock, $.10 par
value; 100,000 shares authorized; 25,000 shares
issued; 18,000 shares outstanding at June 30,
1994 and 19,000 shares outstanding at June 30,
1993
2,500 2,500
Class B Common Stock, $.10 par
value; 50,000 shares authorized; 36,200 shares
issued; 35,200 shares outstanding at June 30,
1994 and 36,200 shares outstanding at June 30,
1993 3,620 3,620
Capital in excess of par value 99,480 99,480
Retained earnings 7,431,461 5,250,606
------------ --------------
7,537,061 5,356,206
Less: Treasury stock - at cost,
Class A Common Stock, 7,000 shares at June 30,
1994 and 6,000 shares at June 30, 1993; Class B
Common Stock 1,000 shares at June 30, 1994-Note
4 214,259 68,720
------------ --------------
Total Shareholders' Equity 7,322,802 5,287,486
------------ --------------
Total Liabilities and
Shareholders' Equity $979,825,544 $2,089,179,188
============ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 19
AMERICAN SOUTHWEST FINANCIAL CORPORATION
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the year ended For the year ended For the year ended
June 30, 1994 June 30, 1993 June 30, 1992
----------------- ------------------ ------------------
<S> <C> <C> <C>
REVENUES
Interest
Pursuant to Funding Agreements -
Note 2 $ 64,712,455 $120,262,793 $177,375,457
Mortgage Securities - Note 2 92,855,805 128,818,512 169,251,428
Other - Note 5 1,053,626 1,502,005 1,558,802
Management fees 62,112 76,833 187,160
Redemption and modification
income - Notes 2 and 3 4,098,297 1,852,453 6,013,885
------------- ------------ ------------
162,782,295 252,512,596 354,386,732
------------- ------------ ------------
COSTS AND EXPENSES
Interest on Bonds - Note 2 157,207,077 248,819,722 346,078,389
Interest on other obligations -
Note 2 114,555 491,945
Interest on loan from affiliates -
Note 2 44,343
Management fees - Note 5 1,825,000 1,400,000 2,175,000
Other expenses - Note 2 95,020 1,828,909 466,356
---------- ----------- -----------
159,171,440 252,163,186 349,211,690
----------- ----------- -----------
INCOME BEFORE TAXES 3,610,855 349,410 5,175,042
Provision for Income Taxes -
Note 6 1,430,000 140,000 2,051,000
---------- ---------- ------------
NET INCOME $ 2,180,855 $ 209,410 $ 3,124,042
============ ========== ============
EARNINGS PER SHARE OF
CLASS A COMMON STOCK - Note 7 $ 117.88 $ 9.91 $ 127.69
============ ========== ============
Weighted average number of Class A
shares outstanding 18,501 21,140 24,464
============ ========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 20
AMERICAN SOUTHWEST FINANCIAL CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
Number of Capital in
Shares Par Excess of Retained Treasury Total
Outstanding Value Par Value Earnings Stock Equity
----------- ------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at
June 30, 1991 65,200 $6,620 $ 99,480 $1,917,154 $ (7,272) $2,015,982
Net Income 3,124,042 3,124,042
Acquisition of
Treasury Stock:
Class A (8,000) (67,590) (67,590)
Class B (4,000) (400) (400)
Sale of Class A
Treasury Stock 6,000 47,833 47,833
Retirement of
Class B Treasury Stock
(400) 400
----------- ------- ---------- ---------- ---------- -----------
Balance at
June 30, 1992 59,200 6,220 99,480 5,041,196 (27,029) 5,119,867
Net Income 209,410 209,410
Acquisition of
Treasury Stock:
Class A (3,000) (41,691) (41,691)
Class B (1,000) (100) (100)
Retirement of
Class B
Treasury Stock (100) 100
----------- -------- ----------- ---------- ---------- -----------
Balance at
June 30, 1993 55,200 6,120 99,480 5,250,606 (68,720) 5,287,486
Net Income 2,180,855 2,180,855
Acquisition of
Treasury Stock:
Class A (1,000) (145,439) (145,439)
Class B (1,000) (100) (100)
---------- ------ ----------- ---------- ------------ -----------
Balance at
June 30, 1994 53,200 $6,120 $ 99,480 $7,431,461 $ (214,259) $7,322,802
========== ====== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 21
AMERICAN SOUTHWEST FINANCIAL CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the year Ended For the year Ended For the year Ended
June 30, 1994 June 30, 1993 June 30, 1992
------------------ ------------------ -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 2,180,855 $ 209,410 $ 3,124,042
------------- ------------ ----------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Decrease in interest receivable on
Mortgage Collateral 17,478,807 18,695,076 15,391,408
Decrease (increase) in other
receivables 377,515 (70,954) (95,536)
(Increase) decrease in advances to
affiliates (1,093,824) 872,551 (1,532,551)
Decrease in interest payable - Bonds (17,506,126) (18,547,767) (15,550,721)
(Decrease) increase in accounts payable
and interest payable on other obligations (196,944) (2,833,751) 3,029,010
(Decrease) increase in payable to
affiliates (175,000) (427,387) 752,387
------------ ------------ --------------
Total Adjustments (1,115,572) (2,312,232) 1,993,997
------------ ------------- --------------
Net cash provided by (used in) operating
activities 1,065,283 (2,102,822) 5,118,039
------------ ------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Collection of Mortgage Collateral 1,146,023,758 1,159,392,900 985,571,343
Maturity of investments, net 1,204,118
------------- ------------- --------------
Net cash provided by investing activities 1,146,023,758 1,159,392,900 986,775,461
------------- ------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal reduction of Bonds Payable (1,149,499,029) (1,152,965,120) (992,822,266)
(Decrease) increase in other obligations (4,497,028) 4,497,028
Acquisition of Treasury Stock (145,539) (41,791) (67,990)
Sale of Class A Treasury Stock 47,833
------------- ------------- ---------------
Net cash used in financing activities (1,149,644,568) (1,157,503,939) (988,345,395)
------------- ------------- ---------------
Net (decrease) increase in cash and cash
equivalents (2,555,527) (213,861) 3,548,105
Cash and cash equivalents at beginning of
period 3,989,969 4,203,830 655,725
------------- ------------- ---------------
Cash and cash equivalents at end
of period $ 1,434,442 $ 3,989,969 $ 4,203,830
============= ============ ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for income taxes $ 1,235,000 $ 2,131,172 $ 244,503
============== ============== ==============
Cash paid for interest $ 138,725,633 $ 234,688,607 $ 337,652,584
============== ============= ==============
</TABLE>
Disclosure of accounting policy:
For purposes of the statements of cash flows, the Company considers all highly
liquid investments purchased with maturities of three months or less to be cash
equivalents.
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 22
AMERICAN SOUTHWEST FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1994 AND 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
Organization
American Southwest Financial Corporation (the "Company") was
organized for the purpose of issuing mortgage- collateralized bonds ("Bonds")
in series ("Series") consisting of one or more classes (each a "Class") to
facilitate the financing of long-term residential mortgage loans secured by
single-family residences. The Company last issued a Series of Bonds in
September 1988. The Bonds are collateralized by certificates of the Government
National Mortgage Association, the Federal National Mortgage Association and
the Federal Home Loan Mortgage Corporation (collectively, all such certificates
are referred to as "Mortgage Certificates") and by conventional mortgage loans
(together with Mortgage Certificates referred to as "Mortgage Collateral").
The Company does not have and is not expected to have any significant assets
other than cash and the assets pledged to secure specific Series of Bonds.
Each Series of Bonds that has been issued is a nonrecourse obligation
of the Company payable solely from the Mortgage Collateral and other collateral
(together the "Collateral") pledged to secure such Series of Bonds. Neither
the Company, the participating finance companies ("Finance Companies") nor the
holders of the residual interest in the REMICs (defined below), as applicable,
have guaranteed, or otherwise are obligated to pay the Bonds of a Series except
from the proceeds of the Collateral securing such Series of Bonds. The Company
has made elections to treat the arrangements by which the Collateral securing
certain Series of Bonds is held as "real estate mortgage investment conduits"
("REMICs") for federal income tax purposes. The residual interests in the
REMICs (generally, the right to receive the remaining cash flow available on
Collateral
22
<PAGE> 23
after debt service and payment of administrative expenses on Bonds) are owned
by persons other than the Company.
Discounts on Receivables Pursuant to Funding Agreements, Mortgage Securities
and Bonds
Discounts incurred in connection with the issuance of Bonds and the
acquisition of related Collateral are amortized using the interest method over
the estimated life of the Bonds.
Fair Value of Financial Instruments
The carrying value of the Company's financial instruments approximates
fair value.
NOTE 2 - MORTGAGE COLLATERAL AND BONDS PAYABLE
As a result of the elections by the Company to treat the arrangement
by which the Collateral securing certain Series of Bonds is held as REMICs, the
related income and expense of each such Series is reported as a separate entity
for federal income tax purposes. For financial statement purposes, the
Mortgage Collateral securing the Bonds of a Series is presented on the balance
sheets as (i) "Receivables Pursuant to Funding Agreements" (defined below) if
the Mortgage Collateral securing such Series is owned by Finance Companies and
pledged by such Finance Companies to the Company pursuant to funding
agreements, or (ii) "Mortgage Securities" if the Mortgage Collateral securing
such Series is owned by the Company. The Bonds secured by the Mortgage
Collateral are presented as "Bonds Payable".
With respect to a Series of Bonds for which the Mortgage Collateral
securing such Series is owned by the Finance Companies and pledged to the
Company, the Company and each Finance Company participating in such Series
enter
23
<PAGE> 24
into a funding agreement ("Funding Agreement") with respect to such Series
pursuant to which the Company lends and such Finance Company borrows all or a
portion of the proceeds from the sale of the Bonds of such Series. Each
participating Finance Company agrees to repay its loan from the Company by
causing payments to be made to the trustee (the "Trustee") for the related
Series of Bonds on behalf of the Company in such amounts as are necessary to
pay the principal of and interest on the Finance Company's loan from the
Company as it becomes due, and each Finance Company pledges to the Company
Collateral as security for its loan. The Company assigns to the Trustee its
entire right, title and interest in the Collateral and all proceeds thereof
pledged under the Funding Agreements as security for such Series of Bonds. At
June 30, 1994, the Company had $2,221,452 in Receivables Pursuant to Funding
Agreements that were not pledged as security for Series of Bonds, having paid
off the related Series of Bonds utilizing corporate cash. At June 30, 1994 and
1993, various funds held by the Trustee pursuant to Funding Agreements such as
expense reserve funds and debt service funds together with deposits of funds
received from payments on Mortgage Collateral, were approximately $40,850,000
and $111,526,000, respectively.
Payments on the Mortgage Collateral and withdrawals from the
debt service funds are the sources of funds for payments of principal and
interest on the Bonds. Each Mortgage Certificate and mortgage loan is assigned
an initial funding amount which in the aggregate is at least equal to the
principal amount of the Bonds at the issue date. The interest rates and
stated maturities for the Mortgage Collateral are similar to the Bonds Payable.
24
<PAGE> 25
Funds generated by principal and interest payments on the Mortgage
Collateral securing a Series of Bonds are held by the Trustee. If Bonds are
outstanding, the Trustee holds the funds until the payment dates for the Bonds
of such Series, makes the payments to the bondholders and remits the surplus
cash to the Company. The surplus is used to pay current fees and expenses,
held in reserve funds for future fees and expenses, held in special reserve
funds securing the Bonds, paid to the Finance Companies pursuant to the Funding
Agreements, if any, or paid to the purchaser of the residual interest in the
REMIC, if any, with respect to such Series.
In the case where the Company has paid off the Bonds of a Series and
has retained the Receivable Pursuant to Funding Agreements, the Trustee,
through a separate custodial agreement, acts only as a custodian of the
principal and interest payments on the Mortgage Collateral and remits the
entire amount to the Company monthly. The Company, in turn, holds these funds
as escrowed reserve funds (see Note 8) and applies the funds to principal and
interest payments on the Finance Company's Funding Agreements as they become
due and pays administration costs. The Company periodically remits any surplus
funds to the Finance Company pursuant to the Funding Agreements.
As of June 30, 1994, the Company had issued 68 Series of Bonds, of
which 37 Series were outstanding with stated maturities ranging from years
2004 through 2019. The Bonds that bear interest at fixed rates have rates
ranging from 7.50% to 12.50%. Certain Classes of Bonds bear interest at
variable rates, determined monthly or quarterly, equal to a stated percentage
above either (i) the London Interbank Offered Rate (LIBOR) or (ii) the Cost of
Funds Index (COFI), subject, in each case, to a maximum interest rate ceiling
established at the issuance
25
<PAGE> 26
date. Certain Classes of Bonds are entitled to receive principal payments only
and do not bear interest.
Under the applicable indenture supplements (the "Series Supplements"),
the unpaid principal balances of certain Classes of "compound interest" Bonds
are increased by the amount of interest accrued but not yet payable on each
payment date. The amount of principal to be paid at each payment date is
based on the distributions received from the Collateral since the prior
payment date. Interest rates on mortgage loans underlying the Mortgage
Collateral pledged to secure the Bonds affect the rate of repayment on
the Mortgage Collateral and the timing of the return of principal to the
Bondholders. The following table demonstrates the Bond principal
reduction experienced by the Company:
<TABLE>
<CAPTION>
(In Thousands of Dollars)
Remaining
Balance
Percentage
Remaining Principal of Original
Original Outstanding June 30 Issue at
Series Bond ------------------- June 30
Issued Principal 1992 1993 1994 1994
- ------ ---------- ---------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Fiscal Years
Ended:
June 30, 1985
and Prior $1,208,517 $ 143,101 $ 51,965 $ 22,504 1.9%
June 30, 1986 1,550,615 481,670 261,732 109,616 7.1%
June 30, 1987 1,488,780 812,556 550,407 199,549 13.4%
June 30, 1988 2,751,268 1,510,318 1,052,744 550,701 20.0%
June 30, 1989 400,350 296,571 209,305 114,240 28.5%
---------- ---------- ---------- -------- -----
Total $7,399,530 $3,244,216 $2,126,153 $996,610 13.5%
========== ========== ========== ======== =====
</TABLE>
The Series Supplements relating to certain Series of Bonds
issued by the Company contain redemption provisions which give the Company the
option to redeem such Bonds in whole or in part when specific criteria are met.
With respect to
26
<PAGE> 27
other Series of Bonds, the Company may effect a redemption only at the
direction of the holders of the residual interest. The Company exercised the
right to redeem the outstanding Bonds (or portions of the outstanding Bonds) of
numerous Series during the fiscal years ended June 30, 1994, 1993 and 1992. At
the time of a redemption, with the Company's and Trustee's consent, the
underlying collateral is sold and the proceeds from the sale are used to redeem
the Bonds. The Company remits the remainder, if any, either to (i) the
participating Finance Companies after charging each a prepayment fee (included
in redemption and modification income) or (ii) to the holder of the residual
interest in the REMIC, as applicable. During the fiscal year ended June 30,
1994, a certain Finance Company elected not to sell its collateral and
participate in certain redemptions. The Company nevertheless effected the full
redemption of these related Series of Bonds, and utilized corporate cash to
redeem the non-participating Finance Company's proportionate share of the
Bonds. Prepayment fees charged to the Finance Companies which elected to sell
their collateral, including fees charged to affiliates, are assessed in
accordance with specific policies established by the Company. Any deviation
from these policies necessary to address unique Bond structures, Collateral or
other factors requires approval of the Company's Board of Directors including a
majority of the Directors who have no financial or other interest in the
matter. Expenses related to the redemptions are included in other expenses.
Although redemption opportunities were favorable in the past few years,
the benefits of redemptions are not predictable and may not be favorable
in the future due to a variety of factors including uncertainty of the
time at which the Company may effect redemptions of the outstanding Bonds,
prevailing interest rates, other similar market factors
27
<PAGE> 28
and, in certain circumstances, limitations under agreements entered into by the
Company.
Additionally, during the fiscal years ended June 30, 1994, 1993 and
1992, the Company exercised its right (pursuant to the indenture and the
applicable Series Supplements) to effect the
optional Class redemptions (known as "time-out calls") of the remaining
outstanding amounts of certain Classes of Bonds, utilizing corporate cash,
Escrowed Reserve Funds (Note 8) and funds borrowed from affiliates. Pursuant
to the time-out calls, payments of principal and interest that would otherwise
be payable to the holders of Bonds so redeemed are paid by the Trustee to the
Company. During the fiscal year ended June 30, 1994, the Company borrowed
funds from affiliates to effect certain time-out calls, paying interest to such
affiliates at the prime rate of interest as published in the Wall Street
Journal. All borrowings from affiliates for time-out calls had been repaid at
June 30, 1994. During the fiscal years ended June 30, 1993 and 1992, to the
extent Escrowed Reserve Funds were utilized to effect the time- out calls, the
Company credited all principal and interest (presented as interest on other
obligations) to the Escrowed Reserve Funds. Interest expense on Bonds is less
than interest income related to Funding Agreements and Mortgage Securities due
to these time-out calls and due to the Funding Agreements that remained in
place after certain redemptions of Series of Bonds in the 1994 fiscal year.
NOTE 3 - BOND MODIFICATIONS
During the fiscal year ended June 30, 1992, the Company and
the Trustee, in agreement with Bondholders and pursuant to the indenture and as
supplemented by the applicable Series Supplements, modified the redemption
rights of the
28
<PAGE> 29
Series H Class H-4 Bonds, the Series I Class I-3 Bonds, the Series J Class J-3
Bonds and the Series K Class K-3 Bonds through amendments of the applicable
Series Supplements. In connection with these modifications, the Company
recorded income of $5,170,709 which is included in redemption and modification
income for the fiscal year ended June 30, 1992. The Company also modified the
redemption rights for the Series G Class G-4 Bonds in May 1991. The Company
did not modify the redemption rights relating to any Series of Bonds during the
fiscal years ended June 30, 1994 and 1993.
NOTE 4 - TREASURY STOCK
The Company acquired 1,000 shares of Class A Common Stock
from one shareholder during the fiscal year ended June 30, 1994. During the
fiscal year ended June 30, 1993, the Company acquired from three shareholders a
total of 3,000 shares of Class A Common Stock. During the fiscal year ended
June 30, 1992, the Company acquired from eight shareholders a total of 8,000
shares of Class A Common Stock and sold a total of 6,000 Class A shares at cost
to Directors. In each case, the shareholder who sold the shares to the Company
simultaneously sold to two affiliates of the Company, the shareholder's shares
in such affiliates. The total purchase price for the shares of all three
companies, in each case, was allocated to the shares based on the relative book
value of the companies on the date of the purchase. The Company also acquired
1,000 shares of Class B Common Stock during the fiscal year ended June 30, 1994;
acquired and subsequently retired 1,000 shares of Class B Common Stock during
the fiscal year ended June 30, 1993; and utilized the cost method of accounting
in all cases for the acquisitions of the Class A and Class B shares.
29
<PAGE> 30
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company receives the use of office space, equipment, and
certain managerial, administrative, financial and other services from an
affiliate, American Southwest Financial Services, Inc. ("ASFS") pursuant to the
terms of an agreement (the "Mortgage Securities Issuance and Administration
Agreement") between the Company and ASFS. The Mortgage Securities Issuance and
Administration Agreement generally provides for the Company to pay ASFS, on a
quarterly basis, the shortfall between the total fees earned for both the
securities issuance services and the securities administration services ASFS
performs, and 110% of the overhead of ASFS, subject to scheduled adjustments.
Management fees payable to ASFS at June 30, 1994 and 1993 are $225,000 and
$400,000, respectively, and are included in payable to affiliates. For each
outstanding Series of Bonds, ASFS also receives administration fees which are
paid from the cash held as Escrowed Reserve Funds or by the Trustee and are not
expenses of the Company. The holders of Class A Stock of the Company and of
American Southwest Finance Co., Inc. ("ASFCI"), an affiliate, own 100% of the
Class A Stock of American Southwest Affiliated Companies ("ASAC"), parent
company of ASFS and various other affiliates.
During the fiscal years ended June 30, 1994, 1993 and 1992,
the net assets of certain Finance Companies were acquired by subsidiaries of
ASAC.
Additionally, the Company made advances to ASAC during the
fiscal years ended June 30, 1994, 1993 and 1992. The advances were collectible
upon demand and the amounts presented on the balance sheets include interest
accrued at prime. Interest income of $28,527, $81,836 and $68,282 was earned
on the advances during the fiscal years ended June 30, 1994, 1993 and 1992,
30
<PAGE> 31
respectively, and is included in other interest income. Subsequent to June 30,
1994, the advances were paid in full with interest.
During the fiscal years ended June 30, 1994, 1993 and 1992,
certain Finance Companies, including subsidiaries of ASAC, sold portfolios of
single-family mortgage loans (the "Mortgage Loans") at their cost to SecurNet
Financial Corporation ("SecurNet", a subsidiary of ASAC) in connection with
certain Bond redemptions. To effect the purchases, SecurNet borrowed funds
from the Escrowed Reserve Funds administered by the Company, or arranged
financing through an outside source. SecurNet's borrowings from the Escrowed
Reserve Funds were evidenced by a note, the principal amount of which was not
to exceed $8 million, collectible upon demand, secured by the Mortgage Loans
and bearing interest at prime, which was 7.25% and 6% at June 30, 1994 and
1993, respectively. At June 30, 1994, the balance of the Mortgage Loans with
accrued interest was $6,320,484 while SecurNet owed $5,220,169 to the Escrowed
Reserve Funds, including accrued interest. On August 11, 1994, SecurNet repaid
in full the note and interest to the Escrowed Reserve Funds.
In July 1994, the Company entered into a Letter of
Understanding with one of its Class A shareholders pursuant to which the
Company, ASFCI and ASAC each agreed to purchase, upon such shareholder's
request made at any time prior to December 1, 1994 all of such shareholder's
shares of Class A stock in the Company, ASFCI and ASAC (or any stock issued in
exchange for such stock) at a price equal to the higher of (i) $1,000,000 or,
(ii) in the event the Company has purchased Class A stock from another
shareholder prior to December 1, 1994 at a purchase price higher than
$1,000,000, such higher price.
31
<PAGE> 32
In September 1993 the Company and a Finance Company sold the
Collateral securing its Series 45 Bonds, paid the Bondholders all principal and
interest due on the redemption date and collected a negotiated prepayment
penalty. A Director of the Company also serves as a Director and President of
the residual holder.
In December 1992, the Company and another Finance Company
(the "Seller") that participated in various Series of Bonds of the Company
entered into an agreement under which the Company acquired and placed into
Treasury Stock all shares of stock of the Company owned by the Seller. They
also agreed to maintain at the current amounts the Bond Administration Fees
charged by the Company to the Seller for the various Series of Bonds in which
the Seller participated. As part of the agreement, an affiliate of the Company
(a subsidiary of ASAC), concurrently purchased all of the assets of two Finance
Companies (affiliates of the Seller) that were participants in the Company's
Series W and Series 38 Bonds. The Collateral relating to Series W was sold in
December 1992; the Bonds were subsequently redeemed in February 1993; and all
benefits from the transaction were paid to the subsidiary of ASAC. Surplus
relating to Series 38 continues to be paid to the subsidiary of ASAC. Another
Director of the Company also served as an Officer of the Seller at the time of
the transaction.
Related party transactions involving the Company and Escrowed
Reserve Funds are discussed in Notes 2 and 8.
NOTE 6 - INCOME TAXES
A reconciliation of income taxes at the statutory rate to
income tax expense at the Company's effective rate is as follows:
32
<PAGE> 33
<TABLE>
<CAPTION>
June 30 June 30 June 30
1994 1993 1992
---------- -------- ----------
<S> <C> <C> <C>
Computed federal tax at
the expected statutory
rate $1,228,000 $118,800 $1,760,000
State income tax,
net of federal tax
benefit 202,000 21,200 291,000
---------- -------- ----------
Provision for income tax $1,430,000 $140,000 $2,051,000
========== ======== ==========
</TABLE>
At June 30, 1994, accounts payable includes income taxes
payable of approximately $4,000. At June 30, 1993, other receivables include
refundable income taxes of approximately $191,000 resulting from the
overpayment of federal and state estimated taxes. For the fiscal years ended
June 30, 1994, 1993 and 1992, there were no timing differences between the
recognition of income for book and tax, nor were there any net operating losses
available to offset future book or taxable income.
NOTE 7 - EARNINGS PER SHARE
Earnings per share calculations are based on the weighted
average number of Class A common shares outstanding since voting and dividend
rights are limited to Class A shareholders. Class B shareholders' rights are
limited to a return of capital upon dissolution together with a share of the
Company's profits, if any, upon dissolution, provided such profits were not
paid to Class A shareholders as dividends prior to such dissolution.
NOTE 8 - ESCROWED RESERVE FUNDS
The Company maintains, and invests on behalf of participating
Finance Companies, Escrowed Reserve Funds held primarily for current and future
Bond administration expenses. Escrowed Reserve Funds of approximately $247,500
are also held and invested for a Finance Company who elected not to participate
in
33
<PAGE> 34
certain redemptions (see Note 2). None of these funds are included in the
Company's assets or liabilities on the accompanying balance sheets as of June
30, 1994 and 1993. Escrowed Reserve Funds held by the Company included the
following at June 30:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Cash and cash equivalents $ 5,523,688 $ 3,743,008
U.S. Government Securities
and Commercial Paper 7,505,437
Secured loan to SecurNet - Note 5 5,220,169 3,930,918
----------- -----------
$10,743,857 $15,179,363
=========== ===========
</TABLE>
Escrowed Reserve Funds are released to participating Finance
Companies pursuant to full redemptions of Bonds. The Company believes that the
Escrowed Reserve Funds at June 30, 1994, as well as ongoing fees charged to
participating Finance Companies, are sufficient to meet future Bond
administration obligations, including the obligation to ASFS under the Mortgage
Securities Issuance and Administration Agreement.
NOTE 9 - SUBSEQUENT EVENTS
Since June 30, 1994, the Company has redeemed in full the
remaining outstanding balances of its Series Q, Series R and Series 58 Bonds.
The Company recorded redemption income of approximately $377,500 related to the
Series Q and R redemptions while all proceeds from the Series 58 redemption
were paid to the holders of the residual interest in the REMIC.
On August 15, 1994, pursuant to a signed note, the Company
borrowed from ASAC $2,245,000 at a stated interest rate of prime, as published
in the Wall Street Journal, on an unsecured basis. On September 1, 1994 ASAC
repaid $700,000 of the loan with interest to the Company leaving an outstanding
principal balance of $1,545,000.
34
<PAGE> 35
Item 9. Disagreements on Accounting and Financial Disclosure.
None.
35
<PAGE> 36
AMERICAN SOUTHWEST FINANCIAL CORPORATION
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Directors and Executive Officers of the Company are as
follows:
<TABLE>
<S> <C> <C>
Jon A. Grove..............50 Director and Chairman of the Board
G. Thomas Eggebrecht......51 Director
Michael H. Feinstein......59 Director, Acting President, Executive
Vice President and Chief Operating Officer
Alan D. Hamberlin.........45 Director
Kirby Korth...............42 Director
Philip J. Polich..........45 Director
J. Larry Sorsby...........39 Director
Richard H. Hackett........50 Executive Vice President, Treasurer,
Chief Financial and Accounting Officer
Jeffrey A. Newman.........32 Senior Vice President
Andrew J. Haggerty........40 Vice President
Mary C. Hislop............41 Vice President and Asst. Treasurer
Paul Martin...............37 Vice President
Joanne Morris.............39 Secretary
</TABLE>
Jon A. Grove has been Chairman of the Board and a Director of
the Company since its organization in September 1982. Mr. Grove also has
served as Chairman of the Board and a Director of ASFCI since its organization
in September 1982 and served as its President until March 1984 and from
February through July 1986. Mr. Grove also has served ASAC as Chairman of the
Board and a Director since its organization in March 1985. Mr. Grove also has
served as a Director of Westam Mortgage Financial Corporation ("Westam") from
its organization in May 1986 until October 1992, as President from its
organization until May 1987 and as Chairman of the Board from May 1987 until
October 1992. Mr. Grove served as Chairman of the Board and a Director of
SecurNet Mortgage Securities Corporation I ("SecurNet I") from June 1990 to
December 1991. ASFCI, Westam and SecurNet I, all of which are engaged in
financing residential mortgage loans, are affiliates of the Company. Mr.
Grove has served as Chairman of the Board, President and a Director of ASR
Investments Corporation, a real estate investment trust, since its
organization in June 1987 and as the President and Chief Executive Officer of
the general partner of the managing general partner
36
<PAGE> 37
of ASMA Mortgage Advisors Limited Partnership, a management company that serves
as the manager for ASR Investments Corporation, since its organization.
G. Thomas Eggebrecht has served as a Director of the Company
since April 1986 and served as President and Chief Executive Officer of the
Company from June 1990 through August 1994. Mr. Eggebrecht concurrently served
in identical positions with ASFCI and ASAC. Mr. Eggebrecht served as Director,
President and Chief Executive Officer of Westam and SecurNet I from June 1990
through August 1994. Mr. Eggebrecht served as Chairman of the Board of Westam
from November 1992 through August 1994 and as Chairman of the Board of SecurNet
from April 1987 to June 1988 and from December 1991 through August 1994. Mr.
Eggebrecht served as Chairman of the Board, Director, President and Chief
Executive Officer of American Southwest Financial Securities Corporation
("ASFSC") from its organization in September 1993 through August 1994. ASFSC
is involved in financing commercial and multi-family mortgage loans and is an
affiliate of the Company. Mr. Eggebrecht served as Chairman of the Board,
Director, President and Chief Executive Officer of SecurNet Mortgage Securities
Corporation II ("SMSCII") from its organization August 9, 1994 through August
1994. SMSCII is engaged in financing residential mortgage loans and is an
affiliate of the Company. Mr. Eggebrecht served as Vice Chairman of North
American Mortgage Company from September 1988 to May 1989, and in various other
capacities with such company from September 1980 to September 1988.
Michael H. Feinstein has been a Director of the Company since
October 1984, has been Executive Vice President and Chief Operating Officer of
the Company since September 1993 and has served as Acting President since
August 1994. Mr. Feinstein concurrently served in identical positions with
ASFCI and ASAC since their organizations. Mr. Feinstein served as Executive
Vice President and Chief Operating Officer of Westam and SecurNet I from
September 1993 through
37
<PAGE> 38
August 1994 and has served as Chairman of the Board, Director, President and
Chief Executive Officer since September 1994. Mr. Feinstein has served in
identical positions with ASFSC and SMSCII since each of their inceptions. Mr.
Feinstein served as Executive Vice President and Chief Operating Officer of
Asset Investors Corporation, a real estate investment trust, since January 1990
and as Treasurer and Chief Financial Officer of such company since its
organization in October 1986, until September 1993. Mr. Feinstein served as a
Senior Vice President of Asset Investors Corporation from August 1987 to
January 1990 and as a Vice President of such company from its organization to
August 1987. Mr. Feinstein, through September 1993, also served as a Vice
President and Treasurer of Financial Asset Management Corporation, a management
company that serves as the manager for Asset Investors Corporation, since its
organization in October 1986. Mr. Feinstein, through September 1993, served
as a Senior Vice President of MDC Holdings, Inc. since January 1987, and as
Treasurer since January 1984.
Alan D. Hamberlin has been a Director of the Company and of
ASFCI since their organizations in September 1982 and of ASAC since April 1986.
Mr. Hamberlin has been President of Courtland Homes, Inc. since July 1983. In
addition, Mr. Hamberlin has served as Director, President and Chief Executive
Officer of Homeplex Mortgage Investments Corporation, a real estate investment
trust, since its organization in May 1988, and Chairman of its Board since
January 1990.
Kirby Korth has been a Director of the Company and of ASFCI
since November 1982 and of ASAC since April 1986. Mr. Korth has served as a
Division Manager for U.D.C. Homes, L.P. since March 1989. From November 1988
to February 1989, Mr. Korth served as a building industry consultant. Mr.
Korth was a Director and President of Golden Heritage Corporation from
September 1987 until October 1988, and a Vice President from October 1982 until
September 1987.
38
<PAGE> 39
Philip J. Polich has been a Director of the Company and of
ASFCI since their organizations and a Director of ASAC since April 1986. Mr.
Polich has been Chairman and Chief Executive Officer of Emerald Texas since May
1987. From February 1990 to May 1990, Mr. Polich served as Vice President of
Verit Industries, and served as its Director and President from May 1990 until
June 1992. Mr. Polich was President and Chief Executive Officer of the
managing general partner of Emerald Homes, L.P. from 1984 until June 1990, and
was its Chairman of the Board until June 1992. In 1993 Mr. Polich was
discharged from a bankruptcy under Chapter 7 of the United State Bankruptcy
Code.
J. Larry Sorsby has been a Director of the Company and of
ASFCI since December 1983 and a Director of ASAC since April 1986. Mr. Sorsby
has served as Senior Vice President/Finance and Treasurer for K. Hovnanian
Enterprises, Inc., a home building company, since March 1991 and served as Vice
President/Finance of such company from September 1988 to February 1991. Mr.
Sorsby was President of the MortgageBanque, Inc. (a wholly-owned subsidiary of
Gemcraft Homes, Inc.) from February 1985 to September 1988.
Richard H. Hackett has been Executive Vice President of the
Company since September 1991, and Treasurer and Chief Financial and Accounting
Officer since February 1987. Mr. Hackett served as Vice President from October
1986 to August 1991 and Controller from October 1986 to February 1987. Mr.
Hackett concurrently served in identical positions with ASFCI and ASAC. Mr.
Hackett has been Executive Vice President of Westam since September 1991 and
Chief Financial and Accounting Officer and a Director of such company since
November 1987. Mr. Hackett also has served as a Director, Treasurer and Chief
Financial and Accounting Officer of SecurNet I since its organization in March
1987, Executive Vice President since September 1991 and Vice President from
March 1987 through August 1991. Mr. Hackett has served as Director, Executive
Vice President,
39
<PAGE> 40
Treasurer and Chief Financial and Accounting Officer of ASFSC since its
inception. Mr. Hackett has served in identical positions with SMSCII since its
inception.
Jeffrey A. Newman has served as a Senior Vice President of
the Company since May 1992 and served as Vice President from May 1987 until
November 1988 and from May 1989 to May 1992. Mr. Newman concurrently served in
identical positions with ASFCI and ASAC. Mr. Newman also has been Senior Vice
President of Westam since May 1992, served as Vice President from November 1987
to November 1988 and from May 1989 to May 1992, and as a Director from May 1989
to June 1990 and since September 1, 1994. Mr. Newman has served SecurNet I as
Senior Vice President since May 1992, and as its Vice President from June 1988
to November 1988, and from June 1990 to May 1992. Mr. Newman has also served
as a Director of SecurNet I since September 1, 1994. Mr. Newman has served as
Senior Vice President of ASFSC and SMSCII since each of their inceptions and
has served as a Director for each of these entities since September 1, 1994.
Mr. Newman served the Company and these affiliated companies in the capacity of
Bond Administrator from July 1985 to November 1988, from February 1989 to
September 1989 and again since January 1993.
Andrew J. Haggerty has been a Vice President of the Company
ASFCI and ASAC since May 1987. Mr. Haggerty has been a Vice President of
Westam since November 1987 and served as a Director from May 1988 to June 1990.
Mr. Haggerty also has been a Vice President of SecurNet I since March 1987 and
served as a Director from March 1987 to September 1990. Mr. Haggerty has
served as a Vice President of ASFSC and SMSCII since each of their inceptions.
Mr. Haggerty served the Company and these affiliated companies in charge of
Bond Origination since October 1984.
40
<PAGE> 41
Mary C. Hislop has served as Vice President and Assistant
Treasurer of the Company since November 1992. Ms. Hislop also has served as
Vice President and Assistant Treasurer of ASFCI, ASAC, Westam and SecurNet I
since November 1992. Ms. Hislop has served as Vice President of ASFSC and
SMSCII since each of their inceptions and has served the Company and these
affiliated companies in various positions in accounting since May 1986.
Paul Martin has served as Vice President of the Company since
June 1991. Mr. Martin also has been a Vice President of ASFCI, ASAC, Westam,
and SecurNet I since June 1991. Mr. Martin has served as a Vice President of
ASFSC and SMSCII since each of their inceptions. Since February 1988 Mr.
Martin has served as a Residual Analyst for the Company and its affiliates
while providing consultation for Bond Origination and Bond Administration.
Joanne Morris has served as Secretary of the Company since
May 1987. Ms. Morris has been with the Company since June 1985 and has
concurrently served in identical positions with ASFCI and ASAC. Ms. Morris has
been Secretary of Westam since May 1987. Ms. Morris has also served as
Secretary of SecurNet I, ASFSC and SMSCII since each of their inceptions.
Messrs. Feinstein, Grove, Hamberlin and Korth serve as
members of the Executive Committee of the Board of Directors; Messrs.
Feinstein, Hamberlin and Korth serve as members of the Audit Committee of the
Board of Directors; and Messrs. Grove, Polich and Sorsby serve as members of
the Compensation Committee of the Board of Directors. There are no nominating
or other committees of the Board of Directors. There are no family
relationships among any of the Directors or Executive Officers.
41
<PAGE> 42
Item 11. Executive Compensation.
All officers of the Company are paid by ASFS for services
rendered to the Company, ASFCI, ASAC and other affiliates. The following table
sets forth compensation paid by ASFS to the named executives for the periods
indicated:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compen-
sation
________________
| Payouts |
--------------------------------------------------|------------ |
| |
(a) (b) (c) (d) (e) | (h) | (i)
Other | |
Name Fiscal Annual | | All Other
and Years Compen- | LTIP | Compen-
Principal Ended sation | Payouts | sation
Position June 30 Salary($) Bonus($) ($) | ($) (2) | ($)
- --------- ------- --------- -------- -------- | ------- | ---------
<S> <C> <C> <C> <C> <C> <C> | <C> | <C> <C>
G. Thomas Eggebrecht, 1994 270,845 252,038 | 30,000 | 27,300 (3)
---- | |
Former President and Chief 1993 134,489 97,038 65,036 (1) | | 60,675
---- | |
Executive Officer 1992 128,638 71,316 75,586 (1) | 1,004,377 | 32,480
---- | |
| |
| |
Michael H. Feinstein, 1994 131,250 (4) 63,887 26,091 (5) | | 17,490 (6)
---- | |
Acting President, Executive 1993 | | 35,500
---- | |
Vice President and Chief 1992 | | 20,000
---- | |
Operating Officer | |
| |
| |
Richard H. Hackett, 1994 114,800 44,538 | | 6,030 (7)
---- | |
Executive Vice President, 1993 104,385 52,315 | | 12,875
---- | |
Treasurer, Chief Financial 1992 87,115 17,341 | | 5,236
---- | |
and Accounting Officer | |
| |
Jeffrey A. Newman, Senior 1994 82,077 115,079 | | 10,544 (7)
---- | |
Vice President 1993 74,039 51,825 | | 12,152
---- | |
1992 61,017 17,463 | | 4,793
---- | |
| |
| |
Paul Martin 1994 63,446 40,059 | | 7,417 (7)
---- | |
Vice President 1993 59,779 43,049 | | 10,934
---- | |
1992 55,223 20,863 | | 5,393
----
</TABLE>
(1) Included in other annual compensation for Mr. Eggebrecht
for fiscal years ended June 30 1993 and 1992, are housing
allowances of $60,000 each year.
42
<PAGE> 43
(2) The amount presented for the fiscal year ended June 30,
1994 is related to an annual achievement bonus plan
included in Mr. Eggebrecht's previous employment agreement,
which was superseded by a new employment agreement
effective July 1, 1993 (see below). The new agreement
provides for a settlement of the achievement bonus for 1992
at $30,000 which was paid in October 1993.
(3) Mr. Eggebrecht's other compensation for the fiscal year
ended June 30, 1994 included Director's fees of $1,000,
401(k) Plan employer contributions (see description of Plan
below) made by ASFS for the same fiscal year in the amount
of $9,240 and reverse split-dollar life insurance premiums
of $17,060.
(4) Mr. Feinstein's compensation is for a partial year,
September 20, 1993 through June 30, 1994.
(5) Included in other annual compensation for Mr. Feinstein is
a housing allowance of $21,467.
(6) Mr. Feinstein's other compensation for the fiscal year
ended June 30, 1994 consists of Director's fees of $8,250
paid as a Director prior to his full-time employment and
401(k) employer contributions made by ASFS of $9,240 (see
below).
(7) These amounts are employer contributions made by ASFS to
the 401(k) Plan (see below) for the fiscal year ended June
30, 1994.
On January 1, 1986, ASFS established an Internal Revenue
Service Section 401(k) Profit Sharing Plan and Trust (the "401(k) Plan").
Employees become eligible to participate in the 401(k) Plan after 500 hours of
service. 401(k) Plan participants make pretax contributions based on their
level of compensation to total compensation paid, subject to IRS maximums.
ASFS contributes matching contributions at a percentage determined from time to
time by the Board of Directors of ASFS and communicated to participants prior
to such match. For the calendar year ended December 31, 1993, ASFS contributed
$91,048 to the 401(k) Plan and for the current calendar year ASFS has
contributed $65,033 through June 30, 1994.
ASFS entered into an employment agreement with its President
effective July 1, 1993, which superseded the previous three year employment
agreement entered into as of January 1, 1991. The new agreement called for
compensation in the form of (1) base salary, (2) an annual discretionary bonus,
determined by the Company's
43
<PAGE> 44
ITEM 11. Executive Compensation(cont'd)
Compensation Committee and approved by the Board of Directors, not to exceed
185% of the base salary, and (3) use of an automobile, life insurance coverage
and country club membership. The agreement provides that Mr. Eggebrecht's
employment shall continue until December 31, 1996 unless sooner terminated upon
Mr. Eggebrecht's death or disability, breach of the agreement or acts involving
a crime, moral turpitude, fraud or dishonesty. In addition, either party at
its option may terminate Mr. Eggebrecht's employment upon notice to the other
party. In August 1994, pursuant to the terms of the employment agreement the
Board of Directors of ASAC terminated Mr. Eggebrecht's employment.
Directors of the Company, ASFCI and ASAC (parent company of
ASFS) receive annual fees paid by ASFS of $25,000 and $500 for each meeting
attended including committee meetings. Directors who are officers of the
Company did not receive this compensation after July 1, 1993.
The members of the Compensation Committee of the Board of
Directors are Jon A. Grove, Philip J. Polich and J. Larry Sorsby. Mr. Grove
served the Company as President from its organization in September 1992 until
April 1984. Mr. Polich served the Company as Vice President and Secretary from
its organization until April 1986. Mr. Sorsby served the Company as Vice
President and Assistant Secretary from December 1983 until May 1985.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth certain information regarding
shares of the Company's voting securities beneficially
owned by each person who is known by the Company to own or exercise voting or
dispositive control over more than 5% of such shares. Shares held by all of
the Company's Shareholders and by all Directors and Officers as a group are
presented below:
44
<PAGE> 45
<TABLE>
<CAPTION>
CLASS OF STOCK
NAME AND AND AMOUNT OF DIRECT PERCENT OF
ADDRESS OF BENEFICIAL OWNERS BENEFICIAL OWNERSHIP CLASS
- ---------------------------- -------------------- ----------
<S> <C> <C> <C>
Baldwin Financial Services 1,000 shares 5.56%
500 Newport Center Drive Class A Common Stock
Suite 700
Newport Beach, CA 92660
CDM Financial Company 1,000 shares 5.56%
950 S. Cherry Class A Common Stock
Suite 1100
Denver, CO 80222
CH Financial 1,000 shares 5.56%
4550 N. Black Canyon Hwy. Class A Common Stock
Phoenix, AZ 85017
Steven B. Chotin 1,000 shares 5.56%
Plaza Tower One, Suite 1200 Class A Common Stock
6400 S. Fiddler's Green Circle
Englewood, CO 80111
Courtland Finance Company 1,000 shares 5.56% (1)
5333 N. 7th Street, Suite 305 Class A Common Stock
Phoenix, AZ 85014
Davidon Finance Co. 1,000 shares 5.56%
1600 S. Maine Street Class A Common Stock
Suite 150
Walnut Creek, CA 94596
G. Thomas Eggebrecht 1,000 shares 5.56%
8725 N. 64th Place Class A Common Stock
Paradise Valley, AZ 85253
Jon A. Grove 1,000 shares 5.56%
335 N. Wilmot, Suite 250 Class A Common Stock
Tucson, AZ 85711
Alan D. Hamberlin 1,000 shares 5.56%
5333 N. 7th Street, Suite 305 Class A Common Stock
Phoenix, AZ 85014
Hovnanian Financial Services I 1,000 shares 5.56% (2)
10 Highway 35 Class A Common Stock
Red Bank, NJ 07701
Kirby Korth 1,000 shares 5.56%
10645 E. Gold Dust Class A Common Stock
Scottsdale, AZ 85258
NGMC Finance Corp. 1,000 shares 5.56%
730 N.W. 107th Avenue Class A Common Stock
Suite 410
Miami, FL 33172
</TABLE>
45
<PAGE> 46
<TABLE>
<CAPTION>
CLASS OF STOCK
NAME AND AND AMOUNT OF DIRECT PERCENT OF
ADDRESS OF BENEFICIAL OWNERS BENEFICIAL OWNERSHIP CLASS
- ---------------------------- -------------------- ----------
<S> <C> <C> <C>
Philip J. Polich 1,000 shares 5.56%
3612 W. Dunlap, Suite M Class A Common Stock
Phoenix, AZ 85051
Presley Financial Corp. 1,000 shares 5.56%
6055 E. Washington Blvd. Class A Common Stock
Suite 733
Commerce, CA 90040
J. Larry Sorsby 1,000 shares 5.56%
10 Highway 35 Class A Common Stock
Red Bank, NJ 07701
Toll Brothers Finance Co. 1,000 shares 5.56%
3103 Philmont Avenue Class A Common Stock
Huntingdon Valley, PA 19006
Vineyard Financial Group 1,000 shares 5.56%
1156 N. Mountain Avenue Class A Common Stock
Upland, CA 91786
Weekley Financial 1,000 shares 5.56%
Co., Ltd. Class A Common Stock
1300 Post Oak Blvd.
Suite 1000
Houston, TX 77056
All Directors and 8,000 shares 44.44% (3)
Officers as a Group Class A Common Stock
(13 people)
</TABLE>
(1) These shares are deemed to be beneficially owned by Mr. Hamberlin.
(2) These shares are deemed to be beneficially owned by Mr. Sorsby. Mr.
Sorsby expressly disclaims such beneficial ownership.
(3) Includes 6,000 shares held directly and 2,000 shares held in the name
of two related Finance Companies as discussed in (1) and (2) above.
Item 13. Certain Relationships and Related Transactions.
The Directors and Executive Officers of the Company also
serve in similar capacities with ASFCI and ASAC. Each of such Directors also
owns beneficially the same percentage of Class A Common Stock of ASFCI and ASAC
and in the same manner as the shares held in the Company. ASAC owns 100% of
the outstanding Capital Stock of
46
<PAGE> 47
ASFS and SecurNet Financial Corporation ("SecurNet"), parent company of
SecurNet I and SMSCII, as well as various other affiliates.
The Company is a party to the Mortgage Securities Issuance
and Administration Agreement with ASFS. The Mortgage Securities Issuance and
Administration Agreement generally provides for the Company to pay ASFS, on a
quarterly basis, the shortfall between the total fees earned for both the
securities issuance services and the securities administration services ASFS
performs, and 110% of the overhead of ASFS, subject to scheduled adjustments.
In the fiscal year ended June 30, 1994, the Company paid or accrued $1,825,000
to ASFS pursuant to the Mortgage Securities Issuance and Administration
Agreement.
During the fiscal years ended June 30, 1994, 1993 and 1992,
certain Finance Companies sold portfolios of single- family mortgage loans at
cost to SecurNet. To effect such purchases, SecurNet borrowed funds from the
Escrowed Reserve Funds pursuant to a signed note, or arranged financing through
an outside source. Reference is made to Note 5 of the Financial Statements
included in Item 8 of this Report for a more detailed description of these
transactions.
During the fiscal years ended June 30, 1994, 1993 and 1992,
the Company advanced funds to ASAC for various corporate purposes. All funds
advanced to ASAC bore interest at the prime rate of interest as published in
the Wall Street Journal. At June 30, 1994, the outstanding amount was
$1,750,000, which has subsequently been paid in full with interest. At June
30, 1993 the outstanding amount was $660,000.
Subsequent to June 30, 1994 the Company borrowed $2,245,000
from ASAC pursuant to a signed note. See Note 9 ofthe Financial Statements
included in Item 8 of this report.
In July 1994, the Company entered into a Letter of
Understanding with one of its Class A shareholders pursuant to which the
Company, ASFCI and ASAC each agreed to purchase, upon such shareholder's
request made at any time prior to
47
<PAGE> 48
December 1, 1994 all of such shareholder's shares of Class A stock in the
Company, ASFCI and ASAC (or any stock issued in exchange for such stock) at a
price equal to the higher of (i) $1,000,000 or, (ii) in the event the Company
has purchased Class A stock from another shareholder prior to December 1, 1994
at a purchase price higher than $1,000,000, such higher price.
Pursuant to various Conditional Subscription Agreements, as
amended, between various shareholders of Class A stock of the Company and
American Southwest Holdings, Inc. ("Holdings"), an Arizona corporation, in the
event that at least 80% of such Class A shareholders execute such amended
Conditional Subscription Agreements, such shareholders will exchange their
shares of Class A stock in each of the Company, ASFCI and ASAC for shares of
stock in Holdings. Upon the exchange of shares, such Class A shareholders will
become the sole shareholders of Holdings and Holdings will own the shares of
Class A stock in the Company, ASFCI and ASAC previously owned by such
shareholders. As of September 23, 1994, 11 Class A shareholders had executed
and delivered the amended Conditional Subscription Agreement.
In September 1993 the Company and a Finance Company sold the
Collateral securing its Series 45 Bonds, paid the Bondholders all principal and
interest due on the redemption date and collected a negotiated prepayment
penalty. A Director of the Company also serves as a Director and President of
the residual holder.
In December 1992, the Company and another Finance Company
(the "Seller") that participated in various Series of Bonds of the Company
entered into an agreement under which the Company acquired and placed into
Treasury Stock all shares of stock of the Company owned by the Seller. They
also agreed to maintain at the current amounts the Bond Administration Fees
charged by the Company to the Seller for the various Series of Bonds in which
the Seller participated. As part of the agreement, an affiliate of the Company
(a subsidiary of ASAC), concurrently
48
<PAGE> 49
purchased all of the assets of two Finance Companies (affiliates of the Seller)
that were participants in the Company's Series W and Series 38 Bonds. The
Collateral relating to Series W was sold in December 1992; the Bonds were
subsequently redeemed in February 1993; and all benefits from the transaction
were paid to the subsidiary of ASAC. Surplus relating to Series 38 continues
to be paid to the subsidiary of ASAC. Another Director of the Company also
served as an Officer of the Seller at the time of the transaction.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) (1) Financial Statements:
American Southwest Financial Corporation
Report of Independent Certified
Public Accountants.................. 16
Balance Sheets as of June 30, 1994
and 1993............................ 17
Statements of Income, For each of
the three years ended June 30, 1994,
1993 and 1992....................... 19
Statements of Shareholders' Equity,
For each of the three years ended
June 30, 1994, 1993 and 1992........ 20
Statements of Cash Flows, For each of
the three years ended June 30, 1994,
1993 and 1992....................... 21
Notes to Financial Statements....... 22
(2) Financial Statement Schedules:
All schedules have been omitted since
required information is not present, or is
not present in amounts sufficient to require
submission of the schedule or because
information required is included in the
financial statements or the notes thereto.
49
<PAGE> 50
(3) Exhibits:
4.1 Indenture dated as of August 1, 1984 between
Registrant and Bank One, Arizona, NA
(formerly known as The Valley National Bank
of Arizona) is incorporated herein by
reference to Exhibit 4(a) of Registration
No. 33-8276 of Registrant.
4.2 First Supplemental Indenture dated as of
March 1, 1985 between Registrant and Bank
One, Arizona, NA is incorporated herein by
reference to Exhibit 4(b) of Registration
No. 33-8276 of Registrant.
4.3 Special Supplemental Indenture dated as of
June 1, 1986 between Registrant and Bank
One, Arizona, NA is incorporated herein by
reference to Exhibit 4(c) of Registration
No. 33-8276 of Registrant.
4.4 Indenture dated as of December 1, 1987
between Registrant and State Street Bank and
Trust Company is incorporated herein by
reference to Exhibit 4(d) of Registration
No. 33-19867 of Registrant.
4.5 Amended and Restated Indenture dated as of
February 1, 1988 between Registrant and
State Street Bank and Trust Company is
incorporated herein by reference to Exhibit
4(f) of Registration No. 33-21837 of
Registrant.
4.6 Second Supplemental Indenture dated as of
January 1, 1989 to Indenture between
Registrant and State Street Bank and Trust
Company, is incorporated herein by reference
to Exhibit 4.12 of Form 10-K for the year
ended June 30, 1989.
4.7 Trusteeship Succession Agreement dated as of
October 8, 1993 between Registrant, Bank
One, Arizona, NA, First Bank National
Association, American Southwest Finance Co.,
Inc. and Westam Mortgage Financial
Corporation.
4.8 Confirmation and First Amendment to
Trusteeship Succession Agreement dated
December 28, 1993 between Registrant, Bank
One, Arizona, NA, First Bank National
Association, American Southwest Finance Co.,
Inc. and Westam Mortgage Financial
Corporation.
10.1 Form of Mortgage Securities Issuance and
Administration Agreement dated as of January
1, 1988 between the Registrant and American
Southwest Financial Services, Inc., is
incorporated herein by reference to Exhibit
10.1 of Form 10-K for the year ended June
30, 1991.
23. Consent of Kenneth Leventhal & Company.
24. Power of Attorney.
27. Financial Data Schedule
50
<PAGE> 51
(b) Reports on Form 8-K.
None.
51
<PAGE> 52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
AMERICAN SOUTHWEST FINANCIAL CORPORATION
By: /S/ Michael H. Feinstein
-------------------------
Michael H. Feinstein
Acting President, Executive Vice President and Chief Operating Officer
Date: September 23, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/S/ Michael H. Feinstein
- -------------------------
Michael H. Feinstein
Acting President, Executive Vice President
and Chief Operating Officer
Date: September 23, 1994
/S/ Richard H. Hackett
- -----------------------
Richard H. Hackett
Executive Vice President, Treasurer and Chief Financial and Accounting Officer
Date: September 23, 1994
A Majority of the Board of Directors:
G. Thomas Eggebrecht Michael H. Feinstein
Jon A. Grove Alan D. Hamberlin
Kirby Korth J. Larry Sorsby
By: /S/ Michael H. Feinstein
-------------------------
Michael H. Feinstein, For Himself and as Attorney-in-Fact
52
<PAGE> 53
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(D) OF THE ACT BY REGISTRANT WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT
In accordance with the Indenture dated August 1, 1984 between Registrant,
as Issuer, and Bank One , Arizona, NA (formerly known as The Valley National
Bank of Arizona), as Trustee, and pursuant to the Amended and Restated
Indenture dated February 1, 1988 between Registrant, as Issuer, and State
Street Bank and Trust Company, as Trustee, the Registrant is required to
transmit by mail to all Holders of Bonds of a Series, as their names and
addresses appear in the Bond Register for such Series of Bonds, within 120 days
after the end of each fiscal year of the Issuer, an audited balance sheet of
the Issuer as of the last day of the preceding fiscal year. Copies of the
Audited Balance Sheet are furnished to the Commission for its information
pursuant to the instructions contained in Form 10-K.
53
<PAGE> 54
EXHIBIT INDEX
EXHIBIT
4.7 Trusteeship Succession Agreement.
4.8 Confirmation and First Amendment to Trusteeship Succession
Agreement.
23. Consent of Kenneth Leventhal & Company.
24. Power of Attorney.
27. Financial Data Schedule
<PAGE> 55
AMERICAN SOUTHWEST FINANCIAL CORPORATION
BALANCE SHEETS
JUNE 30, 1993 AND 1992
<PAGE> 56
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders and Board of Directors
American Southwest Financial Corporation
We have audited the accompanying balance sheets of American Southwest Financial
Corporation as of June 30, 1993 and 1992. These balance sheets are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these balance sheets based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheets are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheets. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the balance sheets referred to above present fairly, in all
material respects, the financial position of American Southwest Financial
Corporation as of June 30, 1993 and 1992, in conformity with generally accepted
accounting principles.
KENNETH LEVENTHAL & COMPANY
Phoenix, Arizona
September 16, 1993
2
<PAGE> 57
AMERICAN SOUTHWEST FINANCIAL CORPORATION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30 June 30
1993 1992
-------------- --------------
<S> <C> <C>
Cash and cash equivalents $ 3,989,969 $ 4,203,830
Receivables pursuant to Funding
Agreements - Notes 2 and 3
Principal - (Net of issue
discount of $22,885,638 and
$35,710,810, respectively) 904,618,248 1,496,475,423
Interest 20,100,416 34,209,395
Mortgage Securities - Notes 2 and 3
Principal - (Net of purchase
discount of $52,776,968 and
$72,745,233, respectively) 1,146,695,390 1,646,536,085
Interest 12,683,480 17,269,577
Other receivables, primarily
interest and prepaid income taxes
- Note 7 431,685 360,731
Advances to Affiliate - Note 6 660,000 1,532,551
-------------- --------------
Total Assets $2,089,179,188 $3,200,587,592
============== ==============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
3
<PAGE> 58
AMERICAN SOUTHWEST FINANCIAL CORPORATION
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30 June 30
1993 1992
-------------- --------------
<S> <C> <C>
Liabilities
Bonds Payable - Notes 2, 3 and 4
Principal - (Net of issue
discount of $75,662,606 and
$108,456,043, respectively) $2,050,490,494 $3,135,760,585
Interest 32,771,892 51,319,659
Other obligations - Notes 3 and 8
Principal 4,497,028
Interest 124,230
Accounts payable - Notes 3 and 7 229,316 2,938,836
Accounts payable - Affiliates - Note 6 400,000 827,387
-------------- --------------
Total Liabilities 2,083,891,702 3,195,467,725
-------------- --------------
Shareholders' Equity
Class A Common Stock, $.10 par
value; 100,000 shares authorized;
25,000 shares issued; 19,000 shares
outstanding at June 30, 1993; 22,000
shares outstanding at June 30, 1992 2,500 2,500
Class B Common Stock, $.10 par
value; 50,000 shares authorized;
36,200 shares issued and outstanding
at June 30, 1993; 37,200 shares issue
and outstanding at June 30, 1992 3,620 3,720
Capital in excess of par value 99,480 99,480
Retained earnings 5,250,606 5,041,196
-------------- --------------
5,356,206 5,146,896
Less: Treasury stock - at cost,
Class A Common Stock, 6,000 shares
at June 30, 1993; 3,000 shares
at June 30, 1992 - Note 5 68,720 27,029
-------------- --------------
Total Shareholders' Equity 5,287,486 5,119,867
-------------- --------------
Total Liabilities and
Shareholders' Equity $2,089,179,188 $3,200,587,592
============== ==============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
4
<PAGE> 59
AMERICAN SOUTHWEST FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1993 AND 1992
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
Organization
American Southwest Financial Corporation (the "Company") was
organized for the purpose of issuing mortgage- collateralized bonds ("Bonds")
in series ("Series") consisting of one or more classes (each a "Class") to
facilitate the financing of long-term residential mortgage loans secured by
single-family residences. The Bonds are collateralized by certificates of the
Government National Mortgage Association, the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation (collectively, all
such certificates are referred to as "Mortgage Certificates") and by
conventional mortgage loans (together with Mortgage Certificates referred to as
"Mortgage Collateral"). The Company does not have and is not expected to have
any significant assets other than cash and the assets pledged to secure
specific Series of Bonds.
On the closing of a Series of Bonds issued by the Company,
the Company applies the net proceeds of the Bonds toward the simultaneous
purchase or the repayment of indebtedness with respect to the Mortgage
Collateral securing such Series of Bonds or to fund loans to various entities
(the participating "Finance Companies") pursuant to funding agreements
("Funding Agreements") (defined further in Note 2). The Company last issued a
Series of Bonds in September 1988.
Each Series of Bonds that has been issued is a nonrecourse
obligation of the Company payable solely from the Mortgage Collateral and other
collateral (together the "Collateral") pledged to secure such Series of Bonds.
Neither the Company, the Finance Companies nor the holders of the residual
interest in the REMICs (defined below), as applicable, have guaranteed, or
otherwise are
5
<PAGE> 60
obligated to pay the Bonds of a Series except from the proceeds of the
Collateral securing such Series of Bonds. The Company has made elections to
treat the arrangement by which the Collateral securing certain Series of Bonds
is held as "real estate mortgage investment conduits" ("REMICs") for federal
income tax purposes. The residual interests in the REMICs (generally, the
right to receive the remaining cash flow available on Collateral after debt
service and payment of administrative expenses on Bonds) are owned by persons
other than the Company.
Discounts on Receivables Pursuant to Funding Agreements, Mortgage Securities
and Bonds
Discounts incurred in connection with the issuance of Bonds
and the related Collateral are amortized using the interest method over the
estimated life of the Bonds.
Fair Value of Financial Instruments
The carrying value of the Company's financial instruments
approximates fair value.
NOTE 2 - MORTGAGE COLLATERAL
As a result of the elections by the Company to treat the
arrangement by which the Collateral securing certain Series of Bonds is held as
REMICs, the related income and expense of each such Series is reported as a
separate entity for federal income tax purposes. For financial statement
purposes, the Mortgage Collateral securing the Bonds of a Series is presented
on the balance sheets as (i) "Receivables Pursuant to Funding Agreements"
(defined below) if the Mortgage Collateral securing such Series is owned by
Finance Companies and pledged by such Finance Companies to the Company pursuant
to Funding Agreements, or (ii)
6
<PAGE> 61
"Mortgage Securities" if the Mortgage Collateral securing such Series is owned
by the Company. The Bonds secured by the Mortgage Collateral are presented as
"Bonds Payable".
The Company and each Finance Company participating in a
Series of Bonds when the Mortgage Collateral is owned by the Finance Companies
and pledged to the Company enter into a Funding Agreement with respect to such
Series (collectively the "Funding Agreements") pursuant to which the Company
lends and such Finance Company borrows all or a portion of the proceeds from
the sale of the Bonds of such Series. Each participating Finance Company
agrees to repay its loan from the Company by causing payments to be made to the
Trustee for the related Series of Bonds on behalf of the Company in such
amounts as are necessary to pay the principal of and interest on the Finance
Company's loan made from the Company as it becomes due, and each Finance
Company pledges to the Company Collateral as security for its loan. The
Company assigns to the Trustee its entire right, title and interest in the
Collateral and all proceeds thereof pledged under the Funding Agreements as
security for such Series of Bonds. At June 30, 1993 and 1992, various funds
held by the Trustee pursuant to such Funding Agreements such as expense reserve
funds and debt service funds together with deposits of funds received from
payments on Mortgage Collateral, were approximately $111,526,000 and
$151,118,000, respectively.
Payments on the Mortgage Collateral and withdrawals from the
debt service funds are the source of funds for payments of principal and
interest on the Bonds. Each Mortgage Certificate and mortgage loan is assigned
an initial funding amount which in the aggregate is at least equal to the
principal amount of the Bonds at the issue date.
<PAGE> 62
Funds generated by principal and interest payments on the
Mortgage Collateral securing a Series of Bonds are held by the Trustee until
the payment dates for the Bonds of such Series. Amounts not required to make
principal and interest payments on the Bonds of a Series are used to pay
current fees and expenses, held in reserve funds for future fees and expenses,
held in special reserve funds securing the Bonds, paid to the Finance Companies
pursuant to the Funding Agreements, if any, or paid to the purchaser of the
residual interest in the REMIC, if any, with respect to such Series.
The interest rates and stated maturities for the Mortgage
Collateral generally are similar to the Bonds Payable
NOTE 3 - BONDS PAYABLE
As of June 30, 1993, the Company had issued 68 Series of
Bonds, of which 55 Series were outstanding with stated maturities ranging from
years 2002 through 2019. The Bonds that bear interest at fixed rates have
rates ranging from 5.00% to 13.50%. Certain Classes of Bonds bear interest at
variable rates, determined monthly or quarterly, equal to a stated percentage
above either (i) the London Interbank Offered Rate (LIBOR) or (ii) the Cost of
Funds Index (COFI), subject, in each case, to a maximum interest rate ceiling
established at the issuance date. Certain Classes of Bonds are entitled to
receive principal payments only and do not bear interest.
Under the applicable indenture supplements (the "Series
Supplements"), the unpaid principal balances of certain Classes of "compound
interest" Bonds are increased by the amount of interest accrued but not paid on
each payment date. The amount of principal to be paid at each payment date is
based on the distributions received from the Collateral since the prior payment
date.
8
<PAGE> 63
Interest rates on mortgage loans underlying the Mortgage Collateral pledged to
secure the Bonds affect the rate of repayment on the Mortgage Collateral and
the timing of the return of principal to the Bondholders. The following table
demonstrates the Bond principal reduction experienced by the Company:
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Remaining
Balance
Percentage
of Original
Original Remaining Principal Issue at
Series Bond Outstanding June 30 June 30
----------------------------------------------
Issued Principal 1991 1992 1993 1993
- ------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Fiscal Years
Ended:
June 30, 1985
and Prior $1,208,517 $ 223,558 $ 143,101 $ 51,965 4.3%
June 30, 1986 1,550,615 674,547 481,670 261,732 16.9%
June 30, 1987 1,488,780 1,022,470 812,556 550,407 37.0%
June 30, 1988 2,751,268 1,926,290 1,510,318 1,052,744 38.3%
June 30, 1989 400,350 345,685 296,571 209,305 52.3%
---------- ---------- ---------- ---------- -----
Total $7,399,530 $4,192,550 $3,244,216 $2,126,153 28.7%
========== ========== ========== ========== =====
</TABLE>
The Series Supplements relating to certain Series of Bonds
issued by the Company provide that the Company has the option to redeem such
Bonds in whole or in part when specific criteria are met. The Company
exercised the right to redeem the outstanding Bonds (or portions of the
outstanding Bonds) of several Series during the fiscal years ended June 30,
1993, 1992 and 1991. At the time of a redemption, with the Company's and
Trustee's consent, the Finance Companies sell their underlying collateral and
pay off their Funding Agreements. The Company utilizes the proceeds from such
sales to redeem the Bonds and remits the remainder to the participating Finance
Companies after charging each a prepayment penalty. Prepayment penalties,
including charges to affiliates, are assessed in accordance with specific
policies established by the Company. Any deviation
9
<PAGE> 64
from these policies necessary to address unique Bond structures, Collateral
or other factors requires approval of the Company's Board of Directors
including a majority of the Directors who have no financial or other interest
in the matter. See Note 6 for affiliated related party transactions. Included
in accounts payable at June 30, 1993 and 1992 are liabilities of $212,983 and
$781,552, respectively, due to Finance Companies that participated in the
Series E partial redemptions. Although redemption opportunities are favorable
in the current interest rate environment, the benefits of redemptions are not
predictable due to a variety of factors including uncertainty of the time at
which the Company may effect redemptions of the outstanding Bonds, prevailing
interest rates, other similar market factors and, in certain circumstances,
limitations under agreements entered into by the Company.
Additionally, during the fiscal years ended June 30, 1993 and
1992, the Company exercised its right (pursuant to the indenture and the
applicable Series Supplements) to effect the optional Class redemptions (known
as "clean-up calls") of the remaining outstanding amounts of certain Classes of
Bonds, utilizing corporate cash and funds owned by Finance Companies ("Escrowed
Reserve Funds" -see Note 8). At June 30, 1992, amounts payable to the Escrowed
Reserve Funds accounts related to the clean-up calls are presented as other
obligations on the balance sheet.
NOTE 4 - BOND MODIFICATIONS
The Company did not modify the redemption rights relating to
any Series of Bonds during the fiscal year ended June 30, 1993. During the
fiscal year ended June 30, 1992, the Company and the Trustee, in agreement with
Bondholders and pursuant to the indenture and as supplemented by the applicable
Series
10
<PAGE> 65
Supplements, modified the redemption rights of the Series H Class 4 Bonds, the
Series I Class 3 Bonds, the Series J Class 3 Bonds and the Series K Class 3
Bonds through amendments of the applicable Series Supplements. Future
modifications are not predictable due to a variety of factors including
uncertainty of the time at which the Company may effect modifications of the
outstanding Bonds, prevailing interest rates and other market factors, and, in
certain circumstances, they may be limited by agreements entered into by the
Company.
NOTE 5 - TREASURY STOCK
The Company acquired from three shareholders a total of 3,000
shares of Class A Common Stock during the fiscal year ended June 30, 1993.
During the fiscal year ended June 30, 1992, the Company acquired from eight
shareholders a total of 8,000 shares of Class A Common Stock and sold a total
of 6,000 Class A shares at cost to Directors. In each case, the shareholder
which sold the shares to the Company, simultaneously sold to two affiliated
companies its shares in such companies. The total purchase price for the
shares of all three companies, in each case, was allocated to the shares based
on the relative book value of the companies on the date of the purchase. The
Company also acquired, and subsequently retired, 1,000 shares of Class B Common
Stock during the fiscal year ended June 30, 1993 and 4,000 shares of Class B
Common Stock during the fiscal year ended June 30, 1992. The Company utilized
the cost method of accounting for the acquisitions of the Class A and Class B
shares.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company receives the use of office space, equipment, and
certain managerial, administrative, financial and other services from an
affiliate, American Southwest Financial Services, Inc. ("ASFS") pursuant to the
terms of
11
<PAGE> 66
an agreement (the "Mortgage Issuance and Administration Agreement") between the
Company and ASFS. The Mortgage Issuance and Administration Agreement generally
provides for the Company to pay ASFS, on a quarterly basis, the shortfall
between the total fees earned for both the securities issuance services and the
securities administration services ASFS performs, and 110% of the overhead of
ASFS, subject to scheduled adjustments. Management fees payable to ASFS at
June 30, 1993 and 1992 are $400,000 and $825,000, respectively, and are
included in accounts payable - affiliates. ASFS also receives administration
fees for each Series of Bonds which are paid from the cash held as Escrowed
Reserve Funds or by the Trustee and are not expenses of the Company. The
holders of Class A Stock of the Company and of American Southwest Finance Co.,
Inc. ("ASFCI"), an affiliate, own 100% of the Class A Stock of American
Southwest Affiliated Companies ("ASAC"), parent company of ASFS and various
other affiliates (together the "Consolidated Group").
During the fiscal years ended June 30, 1993 and 1992, the net
assets of certain Finance Companies were acquired by certain members of the
Consolidated Group. Included in accounts payable - affiliates at June 30, 1992
is a liability of $2,387 due to ASAC for certain cash flows related to the
Series E partial redemptions (Note 3).
Additionally, the Company made advances to ASAC. The
advances were collectible upon demand and the amounts presented on the balance
sheets include interest accrued at prime. Subsequent to June 30, 1993, the
advances were paid in full with interest.
During the fiscal years ended June 30, 1993 and 1992, the
Company purchased at various times, portfolios of single-family mortgage loans
(the
12
<PAGE> 67
"Mortgage Loans") and concurrently sold the Mortgage Loans at cost to an
affiliate, SecurNet Financial Corporation ("SecurNet"). SecurNet is a
subsidiary of ASAC and a member of the Consolidated Group. The Mortgage Loans
had been pledged by Finance Companies to the Company as Collateral securing
Funding Agreements. The Company acquired the Mortgage Loans and canceled the
outstanding principal amount of the receivable remaining under the Funding
Agreements.
To effect the acquisitions of Mortgage Loans from the
Company, SecurNet borrowed cash from the Escrowed Reserve Funds administered by
the Company. SecurNet's borrowings are evidenced by a note, the principal
amount of which was not to exceed $5 million (raised to $8 million subsequent
to June 30, 1993 - see Note 10), collectible upon demand, secured by the
Mortgage Loans and bearing interest at prime, which was 6% and 6.5% at June 30,
1993 and 1992, respectively. All Mortgage Loans have 100% mortgage insurance
by a AAA rated insurer, and the weighted average net interest rate of the
Mortgage Loans at June 30, 1993 was approximately 11.7%. All payments received
on the Mortgage Loans are paid directly to the Escrowed Reserve Funds account.
At June 30, 1993, the balance of the Mortgage Loans with accrued interest was
$4,594,151 while SecurNet owed $3,930,918, including accrued interest. At June
30, 1992, the balance of the Mortgage Loans with accrued interest was
$3,401,845 while the loan to SecurNet was $3,366,093.
Related party transactions involving the Company and Escrowed
Reserve Funds are discussed in Notes 3 and 8.
In December 1992, the Company and a Finance Company (the "Seller")
that participated in various Series of Bonds of the Company entered into an
agreement under which the Company acquired and placed into Treasury Stock all
shares of
13
<PAGE> 68
stock of the Company owned by the Seller. They also agreed to maintain at the
current amounts the Bond Administration Fees charged by the Company to the
Seller for the various Series of Bonds in which the Seller participated. As
part of the agreement, an affiliate of the Company (a subsidiary of ASAC),
concurrently purchased all of the assets of two Finance Companies (affiliates
of the Seller) that were participants in the Company's Series W and Series 38
Bonds. The Collateral relating to Series W was sold in December 1992; the
Bonds were subsequently redeemed in February 1993; and all benefits from the
transaction were paid to the subsidiary of ASAC. Surplus relating to Series 38
continues to be paid to the subsidiary of ASAC. A Director of the Company also
served as an Officer of the Seller at the time of the transaction.
In September 1993 the Company and another Finance Company
sold the Collateral securing its Series 45 Bonds, paid the Bondholders all
principal and interest due on the redemption date and collected a negotiated
prepayment penalty. Another Director of the Company also serves as a Director
and President of the residual holder.
NOTE 7 - INCOME TAXES
During the fiscal year ended June 30, 1993, the Company
adopted the Statement of Financial Accounting Standards, No. 109, Accounting
for Income Taxes.
At June 30, 1993, other receivables include prepaid income
taxes of approximately $191,000 resulting from the overpayment of federal and
state estimated taxes. At June 30, 1992, accounts payable includes income
taxes payable of approximately $1,800,000.
14
<PAGE> 69
NOTE 8 - ESCROWED RESERVE FUNDS
The Company maintains, and invests on behalf of participating
Finance Companies, Escrowed Reserve Funds held primarily for future Bond
administration expenses. These funds are not included in the Company's assets
or liabilities on the accompanying balance sheets as of June 30, 1993 and 1992.
Escrowed Reserve Funds held by the Company are comprised of the following at
June 30:
<TABLE>
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
Cash and cash equivalents $ 142,050 $ 5,575,702
U.S. Government Securities
and Commercial Paper 11,106,395 1,746,612
Secured loan to Company for clean-up
calls - Note 3
Principal 4,497,028
Interest 124,230
Secured loan to SecurNet - Note 6 3,930,918 3,366,093
----------- -----------
$15,179,363 $15,309,665
=========== ===========
</TABLE>
The relatively small decrease in Escrowed Reserve Funds at
June 30, 1993 as compared to June 30, 1992 was primarily due to releases of
such funds to participating Finance Companies pursuant to certain redemptions.
The Company believes that the Escrowed Reserve Funds at June 30, 1993, if
needed, as well as ongoing fees charged to participating Finance Companies, are
sufficient to meet the Finance Companies' future Bond administration
obligations, including their obligation to ASFS under the Mortgage Securities
Issuance and Administration Agreement.
NOTE 9 - LEGAL PROCEEDINGS
The Company was a creditor in a bankruptcy case (the
"Bankruptcy Case") in which a limited purpose financing corporation, WE
Financial Co., an Arizona partnership (the "Debtor"), filed on June 11, 1992, a
voluntary petition for relief under Chapter 11 of the United States Bankruptcy
Code in the United States
15
<PAGE> 70
Bankruptcy Court for the District of Arizona (the "Bankruptcy Court"), In re WE
Financial Co., an Arizona partnership (No. 92-1861- TUC-LO).
The Debtor had borrowed a portion of the proceeds of and
provided a portion of the Collateral for the Company's Bonds designated as
Series B, C, D, E, F, G, H, I, J, K, L, M, N, O, P, Q, R, S, T, U, X, Y, 3, 37,
39, 40, 41, 42, 44, 46, 47, 49, 52, 54 and 59 under Funding Agreements. None
of the other Series of Bonds of the Company were affected by the Debtor's
Bankruptcy Case.
On November 10, 1992, the Company and the Debtor signed a
settlement agreement (the "Settlement Agreement") that addressed all disputes
between the parties arising out of the Bankruptcy Case. The Settlement
Agreement has resulted in the continuous payment in full of all amounts with
respect to its Bonds in accordance with their terms.
Additionally, under the Settlement Agreement, ASW Funding
Financial Corporation V ("ASW"), an affiliate of the Company, purchased from
the Debtor, among other things, the Collateral owned by the Debtor relating to
the Company's Bonds designated as Series C, E, G, H, I, J, K, L, M, P, Q, R, T,
X, 39, 40, 42, 44, 46 and 49 (the "WE Financial Transferred Collateral")
(subject to the liens of the related Funding Agreements and Bond indenture) and
related assets (collectively, the "WE Financial Transferred Assets"). ASW
assumed the Debtor's obligations under the Funding Agreements secured by the WE
Financial Transferred Collateral.
In addition, ASW purchased from Guardian Financial Co.
("Guardian"), an affiliate of the Debtor, among other things, the Collateral
owned by Guardian relating to Bonds of ASFCI, an affiliate of the Company,
designated as Series 1984-1, R-5, R-6 and R-7 (the "Guardian Transferred
Collateral") (subject to the
16
<PAGE> 71
liens of the related Guardian Funding Agreements and Bond indenture) and
related assets (collectively, the "Guardian Transferred Assets"). ASW assumed
Guardian's obligations under the Guardian Funding Agreement loans secured by
the Guardian Transferred Collateral.
The Settlement Agreement also provided for the sale of
certain Collateral owned by the Debtor relating to the Company's Series C and E
Bonds, for the sale of certain Collateral owned by Guardian relating to ASFCI's
Series R-5 and R-6 Bonds, and for the redemption of the pro rata portion of the
Series C, E, R-5 and R-6 Bonds corresponding to the Debtor's Collateral and
Guardian's Collateral, respectively, at full par value plus accrued interest,
in accordance with the terms of the indentures governing such Bonds. A portion
of the net proceeds from such Collateral sales and redemptions were credited
against the purchase prices for the WE Financial Transferred Assets and the
Guardian Transferred Assets.
Under the Settlement Agreement, the Debtor transferred the
Collateral owned by the Debtor relating to the Company's Bonds designated as
Series B, D, F, N, O, S, U, Y, 3, 37, 41, 47, 52, 54 and 59 (subject to the
lien of the related Funding Agreements and Bond indenture) into a passive
non-business grantor trust (the "Grantor Trust"). Finally, the Settlement
Agreement provided for the execution by the parties thereto, and certain
affiliated parties, of mutual releases from liability with respect to
litigation commenced as part of the Bankruptcy Case.
On March 10, 1993, the Company closed the transaction
contemplated by the Debtor's First Amended Plan of Reorganization dated January
11, 1993, as modified (the "Amended Plan"). The Amended Plan implemented the
terms of the
17
<PAGE> 72
Settlement Agreement between the Company and the Debtor and various of their
affiliates. As of the closing, the Amended Plan was deemed to be substantially
consummated and all pending adversarial proceedings were dismissed.
NOTE 10 - SUBSEQUENT EVENTS
Since June 30, 1993, the Company has redeemed in full the
remaining outstanding balances of its Series D, Series N, Series 2 and Series 7
Bonds, and redeemed in part its Series F and Series 42.
On August 20, 1993, pursuant to a signed note, the Company
lent ASAC $100,000 at a stated interest rate of prime plus 3% on an unsecured
basis.
On September 15, 1993, the Board of Directors unanimously
approved an increase in the amount that SecurNet may borrow from Escrowed
Reserve Funds from $5 million to $8 million.
18
<PAGE> 1
EXHIBIT INDEX
EXHIBIT
4.7 Trusteeship Succession Agreement.
4.8 Confirmation and First Amendment to Trusteeship Succession
Agreement.
23. Consent of Kenneth Leventhal & Company.
24. Power of Attorney.
27. Financial Data Schedule
<PAGE> 2
AMERICAN SOUTHWEST FINANCIAL CORPORATION
EXHIBITS
filed with report on
FORM 10-K
for fiscal year ended
June 30, 1994
<PAGE> 3
EXECUTION COPY
TRUSTEESHIP SUCCESSION AGREEMENT
Dated as of October 8, 1993
Bank One, Arizona, NA ("Bank One"), First Bank National
Association ("First Bank") and American Southwest Financial Corporation,
American Southwest Finance Co., Inc. and Westam Mortgage Financial Corporation
(collectively, the "Issuers"), agree as follows:
WHEREAS, Bank One currently serves as trustee for certain of
the bond issues for which the Issuers are obligors as identified on Schedule I
hereto (the "Bond Issues") pursuant to the Bond Indentures and Supplemental
Indentures set forth on Schedule II hereto (the "Indentures").
WHEREAS, Bank One intends to resign as trustee, the Issuers
anticipate appointing First Bank and First Bank anticipates accepting such
appointment, as successor trustee under each of the Indentures (the
"Trusteeship Succession"), and to facilitate transfer of bond collateral,
transition of bond registrar and transfer functions and paying agency
functions, transition of bond trustee activities, transfer of records and
provision of successor notices, the parties desire that certain actions and
procedures be undertaken in accordance with the Indentures and the terms and
conditions herein.
NOW, THEREFORE, in consideration of the premises, and the
mutual agreements hereinafter set forth, Bank One, First Bank and the Issuers
agree as follows:
1. Bond Collateral. Prior to the Trusteeship
Succession, First Bank shall act as the custodial agent of Bank One in
connection with the transfer, custody and safe keeping, trust account crediting
and verification of all Bond Issue collateral ("Collateral"), pursuant to that
certain Collateral Custody and Verification Agreement (the "Collateral
Agreement") between Bank One and First Bank, in effect as of August 31, 1993, a
copy of which is attached hereto as Exhibit A.
2. Bond Registrar Functions. Prior to Trusteeship
Succession, First Bank shall act as Bank One's registrar agent to perform all
bond registration, transfer, exchange, authentication and record keeping
functions of the registrar and transfer agent under each of the Indentures,
pursuant to the Registrar Agency Agreement (the "Registrar Agency Agreement")
between Bank One and First Bank, in effect as of August 31, 1993, a copy of
which is attached hereto as Exhibit B.
3. Bond Paying Agency Functions. Prior to and following
the Trusteeship Succession, First Bank shall act as the Issuers' paying agent
for each Bond Issue as provided in the related Indenture, commencing on October
1, 1993, pursuant to the Paying Agency Agreement (the "Paying Agency
Agreement") dated as of September 29, 1993, among Bank One, First Bank and the
Issuers, a copy of which is attached hereto as Exhibit C.
Exhibit 4.7
<PAGE> 4
4. Trusteeship Resignation, Appointment and Acceptance;
Conditions; Discharge. Effective upon the later of November 30, 1993 or
satisfaction of each of the conditions precedent set forth below, Bank One
shall resign as trustee for each Bond Issue by its execution and delivery to
the Issuers of a Trustee Resignation instrument in the form attached hereto as
Exhibit D-1, the Issuers shall appoint First Bank as successor trustee for each
Bond Issue by execution and delivery to Bank One and to First Bank of Trustee
Appointment instruments in the form attached hereto as Exhibit D-2, and First
Bank shall accept such appointment as Successor Trustee for each Bond Issue by
its execution and delivery to Bank One and to the Issuers of a Trustee
Acceptance instrument in the form attached hereto as Exhibit D-3.
The parties agree that the following conditions precedent
shall be fully performed and satisfied prior to Trusteeship Succession with
respect to all Bond Issues:
(i) All Bond Issue Collateral shall be transferred to the
custody of First Bank and receipt of correct and
complete Collateral, together with necessary
endorsements, assignments or transfer notices, shall
be verified, or discrepancies resolved, as provided
in the Collateral Agreement. Notwithstanding the
foregoing, Trusteeship Succession shall not be
prevented based upon First Bank's receipt of
Collateral consisting of Pledged Loans (as that term
is defined in the Collateral Agreement) evidenced by
document files that contain discrepancies of a de
minimis nature, i.e., which do not adversely affect
the value or security of such Pledged Loans.
(ii) All Bond Issue principal balance records by bond
holder and maturity date shall be reconciled as
correct, or discrepancies resolved, as contemplated
by the Paying Agency Agreement.
(iii) All Uniform Commercial Code ("UCC") financing
statements or assignments thereof, naming First
Bank (in its capacity as Bond Issue successor
trustee), as direct or assigned secured party,
shall have been executed and filed in appropriate
public record offices to perfect such trustee's
security interests in all Bond Issue Collateral,
as determined by legal counsel to the Issuers.
The parties hereto agree to cooperate with
Issuers' legal counsel in the preparation and
filing of such UCC financing statements and/or
assignments.
Upon Trusteeship Succession, Bank One shall be released and
discharged from any further claims and obligations under the Indentures with
respect to its administration of the Bond Issues and the transfer of Bond Issue
collateral, except that it shall remain responsible for any undertakings made
by it in connection with the resolution of collateral discrepancies as provided
in Section 4 of the Collateral Agreement. For a period of fifteen months
following the date of Trusteeship Succession, Bank One shall remain responsible
for the accuracy and completeness of the records and documents to be delivered
to First Bank pursuant to Section 5 hereof, the Certified Collateral List
provided to First Bank pursuant to Section 4 of the Collateral Agreement, the
bond
2
Exhibit 4.7
<PAGE> 5
registration information provided to First Bank pursuant to Section 2 of the
Registrar Agency Agreement and the payment information provided to First Bank
pursuant to Section 4 of the Paying Agency Agreement. Bank One shall remain
responsible for the accuracy of principal and interest payments made by it as
paying agent prior to October 1, 1993, with respect to Bond Issues as required
by the Indentures.
5. Post-Trusteeship Succession Actions. Promptly
following Trusteeship Succession, Bank One shall transfer to First Bank (i) all
accounting records and statements of asset credits, asset debits, and monthly
ending balances for Indenture trust accounts, (ii) records of all Bond Issue
payments of principal and interest, affidavits of lost, stolen or destroyed
bond certificates, and related indemnity agreements and surety bonds, (iii)
original Bond Issue closing documents and certificates and all subsequent
amendments and supplements thereto and agreements executed by Bank One as
trustee for any such Bond Issue effecting the rights or security of bondholders
or the duties of the trustee thereunder, (iv) collateral asset servicing
reports and servicer compliance certificates and financial statements, (v)
Issuer Indenture compliance certificates and reports, and (vi) trustee reports
to bondholders.
Within thirty (30) days following Trusteeship Succession, the
parties shall jointly prepare, and First Bank shall mail, a notice of Trustee
resignation, appointment and acceptance to holders of all Bond Issues, Bond
Issue credit rating agencies, Bond Issuer collateral servicers and collateral
agreement parties.
Following Trusteeship Succession, Bank One shall promptly
remit to First Bank all cash payments received by Bank One with respect to
items of Bond Issue collateral, together with a copy of the advice, notice or
other indication of the nature and source of such payment, specifying the item
of collateral to which such payment relates. Further, for a period of one year
following Trusteeship Succession, Bank One shall forward to First Bank all Bond
Issue certificates presented to Bank One for payment of principal maturing
after Trusteeship Succession.
6. Effective Period, Termination and Amendment, and
Interpretive and Additional Provisions. This Agreement shall become effective
as of the date hereof, and may be amended at any time by mutual agreement by
the parties hereto. This Agreement, except with respect to the activities
described in Sections 3 and 5 and Bank One's continuing responsibilities as
provided in Section 4, shall terminate concurrently with the Trusteeship
Succession. In connection with the administration of this Agreement, the
parties may agree from time to time upon the interpretation of the provisions
of this Agreement as may in their joint opinion be consistent with the general
tenor and purposes of this Agreement any such interpretation to be signed by
all parties and annexed hereto.
7. Governing Law. This Agreement shall be governed by,
and construed in accordance with the laws of the State of Arizona.
8. Notices. Notices and other writings shall be
delivered or mailed, postage prepaid, to Bank One at Bank One, Arizona NA, by
mail: Corporate Trust - Mortgage Backed Bonds Department (A834), P. O. Box
29559, Phoenix, Arizona 85038; by delivery: Corporate Trust - Mortgage Backed
Bonds Department,
3
Exhibit 4.7
<PAGE> 6
25th Floor, 241 North Central Avenue, Phoenix, Arizona 85004 Attention:
Corporate Trust Department, to the Issuers at 2390 East Camelback Road, Suite
225, Phoenix, Arizona 85016, Attention: Bond Administration, or to First Bank
at First Bank National Association, 180 East Fifth Street, St. Paul, Minnesota
55101, Attention: Corporate Trust Department, or to such other address as each
party may hereafter specify in writing, and if so delivered or mailed, shall be
conclusively presumed to have bene duly given hereunder to the respective
party, whether or not such party receives such notice.
9. Binding Effect. This Agreement shall be binding upon
and shall enure to the benefit of the parties hereto and their respective
successors and assigns.
FIRST BANK NATIONAL ASSOCIATION
By /s/ Eve D. Kaplan
------------------
Its Vice President
BANK ONE, ARIZONA, NA
By /s/ Susan J. McCord
--------------------
Its Vice President
AMERICAN SOUTHWEST FINANCIAL CORPORATION
By /s/ Jeffrey A. Newman
----------------------
Its Senior Vice President
AMERICAN SOUTHWEST FINANCE CO., INC.
By /s/ Jeffrey A. Newman
----------------------
Its Senior Vice President
WESTAM MORTGAGE FINANCIAL CORPORATION
By /s/ Jeffrey A. Newman
----------------------
Its Senior Vice President
4
Exhibit 4.7
<PAGE> 7
EXHIBIT A
COLLATERAL CUSTODY AND VERIFICATION AGREEMENT
Dated as of August 31, 1993
Bank One, Arizona NA (the "Trustee") and First Bank National
Association, a national banking association (the "Custodian"), agree as
follows:
WHEREAS, the Trustee currently is trustee for each of the bond
issues identified on Schedule I hereto (the "Bond Issues") pursuant to the Bond
Indentures and Supplemental Indentures set forth on Schedule II hereto (the
"Indentures"), and in connection therewith, the Trustee maintains custody of
(i) separate groups of securities of the types described on Exhibit A hereto
("Securities"), (ii) separate pools of mortgage loans evidenced by the types of
documents described on Exhibit B hereto ("Pledged Loans"), (iii) separate
holdings of cash, letters of credit ("Letters of Credit") surety bonds ("Surety
Bonds"), cash-equivalent investment securities ("Cash Investments"),
reinvestment agreements ("Reinvestment Agreements"), insurance policies
("Insurance Policies") and Funding Agreements, Servicing Agreements and Master
Servicing Agreements (collectively, the "Agreements"), all individually
recorded and credited to Indenture trust accounts (collectively referred to
herein as "Collateral") in accordance with the terms of the Indentures.
WHEREAS, the Trustee intends to resign as trustee, and
Custodian anticipates being appointed and accepting as successor trustee, under
each of the Indentures ("Trusteeship Succession"), and to facilitate transfer
and control of and accounting for the Collateral, the parties desire that
Custodian shall act as the Trustee's custodial agent to receive, hold and
verify all Collateral that is transferred from Trustee to Custodian prior to
Trusteeship Succession, in accordance with the terms and conditions herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements hereinafter set forth, the Custodian and the Trustee agree as
follows:
1. Appointment as Custodian. Subject to the terms and
conditions herein, the Trustee hereby appoints the Custodian, and the Custodian
hereby accepts such appointment, as Trustee's custodial agent to receive and
maintain custody of the collateral delivered to it as provided herein, for the
benefit and protection of the Trustee in order to continue and maintain the
lien perfection of the Collateral as security for the Bond Issues, and to
provide for the orderly transfer and verification of the Collateral in
connection with the Trusteeship Succession.
2. Custodial Account. The Custodian agrees to open a
segregated custody account in the Trustee's name for each Bond Issue with
itself at its office in St. Paul, Minnesota where custody of the Collateral
will be maintained on behalf of the Trustee and to credit to such account by
separate records on its books the respective Collateral securing such Bond
Issue.
3. Delivery of Collateral. Trustee shall deliver
Collateral to the Custodian in multiple deliveries from time to time prior to
Trusteeship Succession, upon at least two business days' advance written notice
to Custodian ("Delivery Notice") which may be made by facsimile transmission
and shall
Exhibit 4.7
<PAGE> 8
EXHIBIT A (cont'd)
identify all Collateral by the Bond Issue and Indenture to and by which it is
pledged, the trust accounts to which it is to be credited, the scheduled
delivery date and specific information regarding each item of Collateral as
follows:
Securities and Cash Investments
Title of Security
CUSIP number and face amount
Whether Security is certificated, or if uncertificated,
FED registered or transfer agent if non-FED registered
Date of Transfer if uncertificated
Delivery information
Pledged Loans
Delivery mode of Loan files
Document files identification information
Cash
Amount
Wire transfer transmitting bank
Reinvestment Agreements, Letters of Credit and Surety Bonds
Document title
Names of providers
Dollar amount
Delivery mode
Agreements and Insurance Policies
Document title
Names of issuer or contract parties
Delivery mode
Each Delivery Notice shall be executed by an officer of the Trustee and copies
attached to this Agreement.
Trustee shall make the transfer and delivery of Collateral on
the scheduled delivery dates utilizing the modes of physical delivery and
book-entry transfer and reregistration procedures and agents as agreed upon by
the Custodian and the Trustee for each item of Collateral in the form as held
by Trustee. Custodian's delivery address, registration and electronic
transfer account information for Securities and Cash Investments and wire
transfer instructions for cash are set out in Exhibit C hereto. Uncertificated
Securities and Cash Investments delivery shall be evidenced by written delivery
confirmation forms or transfer agent generated electronic confirmation notices
sent to or available through on-line access by Custodian. Certificated
Securities and Cash Investments and Pledged Loan notes, mortgages and deeds of
trust will be endorsed for transfer, or accompanied by duly executed assignment
instruments, sufficient
2
Exhibit 4.7
<PAGE> 9
EXHIBIT A (cont'd)
to permit Custodian to reregister record ownership of such Collateral.
Certificated Securities held in the physical possession of the Trustee shall be
delivered to the possession of Custodian employees at Trustee's place of
business in Phoenix, Arizona. Pledged Loan original document files will be
delivered to the Custodian's place of business in St. Paul, Minnesota, grouped
by related Bond Issue and accompanied by a manifest of the documents contained
therein; provided that Pledged Loan documents that have been delivered to and
are held by mortgage loan servicers shall be noted on the related Delivery
Notice, and the Trustee shall direct such servicers to remit such documents, or
related remedies proceeds, to the Custodian upon completion of servicing or
remedies use thereof. Original Letters of Credit, Surety Bonds, Reinvestment
Agreements, Insurance Policies and Agreements will be delivered to the
Custodian's place of business in St. Paul, Minnesota together with
Trustee-executed letters or transfer certificates to the providers thereof
advising and directing that Custodian become the beneficiary thereof. Prior to
delivery and receipt by Custodian in the manner specified in the Delivery
Notice, risk of theft, destruction or loss of Collateral will be that of
Trustee.
Custodian will provide Trustee with an initial receipt (in the
form attached hereto as Exhibit D) for all Securities and Cash Investments,
Pledged Loan document files, Letters of Credit, Reinvestment Agreements,
Insurance Policies and Agreements delivered to Custodian. Such initial
receipts shall be delivered to the Trustee with respect to all Collateral other
than Pledged Loans, within three business days after delivery, and with respect
to Pledged Loans, within ten business days after delivery. Custodian shall not
confirm receipt of complete or correct Collateral as required for each Bond
Issue, and will not release Trustee from appropriate claims for missing or
incomplete Collateral, until completion of the Collateral review and
verification procedures described in Section 4 below. The Trustee shall remit
to Custodian any cash income and distributions received by Trustee with respect
to transferred Collateral that is to be (i) held as Collateral and not required
for Bond Issue payments or any other payments due prior to October 1, 1993, or
(ii) held as Collateral or applied to make Bond Issue payments or other
payments under the Indentures from and after October 1, 1993; identifying such
cash to the related Bond Issue and item of Collateral.
4. Collateral Verification. Custodian shall receive
from the Trustee within ten business days following the date of this Agreement,
a certified list of all Collateral currently required pursuant to the
Indentures to secure each Bond Issue (the "Certified Collateral List"), setting
forth sufficient detail to identify each item of Collateral. Custodian shall
review and compare Collateral actually received from the Trustee for each Bond
Issue with the related Certified Collateral List. With respect to Mortgage
Loans, the Custodian shall determine that each Mortgage Loan document file
contains the documents described on Exhibit B hereto. The Custodian shall note
and advise Trustee and American Southwest Financial Corporation in writing of
any Collateral received but not identified on the Certified Collateral List, of
Collateral identified on the List but not received and of Pledged Loan document
exceptions. Such notice and advice shall be given, in the case of Collateral
other than Pledged Loans, within five business days following the date on which
Custodian has given its initial receipt, and has received the Certified
Collateral List,
3
Exhibit 4.7
<PAGE> 10
EXHIBIT A (cont'd)
for such Collateral, and in the case of Pledged Loans, within ten business days
following that date for such Pledged Loans. Any such Collateral discrepancies
will be resolved and corrected prior to the Trusteeship Succession for all Bond
Issues. Immediately following either its determination that no Collateral
discrepancy exists, or all discrepancies are resolved and corrected, with
respect to a Bond Issue, the Custodian shall provide a confirming receipt to
the Trustee and American Southwest for such Bond Issue's Collateral in the form
attached hereto as Exhibits E-1 or E-2.
5. Duties of Custodian. As Custodian, the Custodian
shall have and perform the following powers and duties with respect to the
Collateral:
(a) Safekeeping. The Custodian will hold the Collateral
on behalf of the Trustee. The Custodian will promptly report to the
Trustee any failure on its part to hold the Collateral as herein
provided and promptly take appropriate action to remedy any such
failure.
(b) Access to Collateral. The Custodian will, subject to
security requirements of the Custodian applicable to its own employees
having access to similar records held by the Custodian and such
regulations as may be reasonably imposed by the Custodian, permit the
Trustee or any of its duly authorized representatives, servicing
agents, attorneys or auditors to inspect the Collateral at such times
as the Trustee may reasonably request during normal business hours.
(c) Release of Documents. The Custodian will release any
Pledged Loan documents for servicing as directed by the Trustee and as
required by the governing Indenture or related servicing agreement.
(d) Administration; Reports. The Custodian will collect
any income and distributions on Securities, Pledged Loans, Cash
Investments, Surety Bonds, Reinvestment Agreements, Insurance Policies
and Agreements transferred and registered to it, and remit to the
Trustee such portion thereof required for Bond Issue payments or other
payments by the Trustee prior to October 1, 1993, and in general, will
attend to all non-discretionary details in connection with maintaining
custody of the Collateral on behalf of the Trustee. The Custodian
shall assist the Trustee generally in the preparation of routine
reports to Bondholders or to regulatory bodies, if any, to the extent
necessitated by the Custodian's custody of the Collateral.
(e) Trust Accounts. Custodian will establish on its
records separate trust accounts of the types described on Exhibit F
hereto, for each Bond Issue as directed in writing by the Trustee, and
(i) each item of Collateral received hereunder from the Trustee will
be credited to the particular trust account specified in the related
Delivery Notice, (ii) cash received by the Custodian with respect to
items of Collateral other than Pledged Loans will be credited to the
trust account to which such Collateral is credited and (iii) cash
received by the Custodian with respect to Pledged Loans will be
credited to the Mortgage Collateral
4
Exhibit 4.7
<PAGE> 11
EXHIBIT A (cont'd)
Proceeds Account for the related Bond Issue as specified by the
remitting loan servicer or master servicer.
6. Instructions; Authority to Act. The Custodian shall
be deemed to have received proper instructions with respect to the Collateral
upon its receipt of written instructions signed by a Responsible Officer of the
Trustee. A certified copy of a resolution of the Board of Directors of the
Trustee may be received and accepted by the Custodian as conclusive evidence of
the authority of any such officer to act and may be considered as in full force
and effect until receipt of written notice to the contrary by the Trustee.
Such instructions may be general or specific in terms.
7. Indemnification by the Custodian. The Custodian
agrees to indemnify the Trustee for any and all liabilities, obligations,
losses, damages, payments, costs or expenses of any kind whatsoever which may
be imposed on, incurred by or asserted against the Trustee as the Trustee as
the result of failure of the Custodian to perform its duties hereunder,
provided, however, that the Custodian shall not be liable for any portion of
any such liabilities, obligations, losses, damages, payments or costs due to
the actions or omissions of the Trustee.
8. Advice of Counsel. The Custodian and the Trustee
further agree that the Custodian shall be entitled to rely and act upon advice
of counsel with respect to its performance hereunder as custodian and shall be
without liability for any action reasonably taken pursuant to such advice,
provided that such action is not in violation of applicable federal or state
law.
9. Effective Period, Termination and Amendment, and
Interpretive and Additional Provisions. This Agreement shall become effective
as of the date hereof, shall continue in full force and effect until terminated
as hereinafter provided, may be amended at any time by mutual agreement of the
parties hereto shall terminate concurrently with the Trusteeship Succession and
otherwise may be terminated by either party by written notice delivered or
mailed to the other party, postage prepaid, termination to take effect no
sooner than thirty (30) days after the date of such delivery or mailing.
Concurrently with, or as soon as practicable after any termination other than
upon Trusteeship Succession, the Custodian shall return the Collateral to the
Trustee at such place as the Trustee may reasonably designate. In connection
with the administration of this Agreement, the Custodian and the Trustee may
agree from time to time upon the interpretation of the provisions of this
Agreement as may in their joint opinion be consistent with the general tenor
and purposes of this Agreement, any such interpretation to be signed by all
parties and annexed hereto.
10. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Minnesota.
11. Notices. Notices and other writings shall be
delivered or mailed, postage prepaid, to the Trustee at Bank One, Arizona NA,
by mail: Corporate Trust - Mortgage Backed Bonds Department (A834), P. O. Box
29559, Phoenix, Arizona 85038; by delivery: Corporate Trust - Mortgage Backed
Bonds Department, 25th Floor, 241 North Central Avenue, Phoenix, Arizona
85004, or to
5
Exhibit 4.7
<PAGE> 12
EXHIBIT A (cont'd)
the Custodian at First Bank National Association, 180 East Fifth Street, St.
Paul, Minnesota 55101, Attention: Corporate Trust Agreement, or to such other
address as the Trustee or the Custodian may hereafter specify in writing, shall
be conclusively presumed to have been duly given hereunder to the respective
party, whether or not such party receives such notice.
12. Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the Trustee and the Custodian and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties have duly executed and
delivered this Agreement as of the date and year first written above.
BANK ONE, ARIZONA NA,
as Trustee under the Indentures
referred to above
By /s/ Susan J. McCord
-----------------------------
Its Vice President
-------------------------
By /s/ Anne Aldridge
-----------------------------
Its Corporate Officer
-------------------------
FIRST BANK NATIONAL
ASSOCIATION, as Custodian
By /s/ Eve D. Kaplan
-----------------------------
Its Vice President
-------------------------
By /s/ Sheryl A. Christopherson
-----------------------------
Its Asst. Vice President
-------------------------
6
Exhibit 4.7
<PAGE> 13
EXHIBIT A (cont'd)
ACKNOWLEDGEMENT
Each of the undersigned does hereby acknowledge and agree to the form and
effect of the foregoing Agreement.
AMERICAN SOUTHWEST FINANCIAL
CORPORATION
By /s/ Jeffrey A. Newman
--------------------------
Its Senior Vice President
---------------------
AMERICAN SOUTHWEST FINANCE CO. INC.
By /s/ Jeffrey A. Newman
-------------------------
Its Senior Vice President
---------------------
WESTAM MORTGAGE FINANCIAL
CORPORATION
By /s/ Jeffrey A. Newman
-------------------------
Its Senior Vice President
---------------------
7
Exhibit 4.7
<PAGE> 14
EXHIBIT A (cont'd)
SCHEDULE I
----------
BOND ISSUES
-----------
<TABLE>
<CAPTION>
ISSUER SERIES
------ ------
<S> <C>
American Southwest Financial Corporation G
H
I
J
K
M
P
Q
R
S
T
U
V
X
Y
Z
37
38
39
40
41
42
43
44
45
46
48
49
50
51
53
54
55
56
59
68
American Southwest Finance Co., Inc. 1984-1
Westam Mortgage Financial Corporation W-3
</TABLE>
Exhibit 4.7
<PAGE> 15
EXHIBIT A (cont'd)
SCHEDULE II
-----------
INDENTURES
----------
<TABLE>
<CAPTION>
BOND SERIES INDENTURE DATE SUPPLEMENTAL INDENTURE DATE
- ----------- -------------- ---------------------------
<S> <C> <C>
G 8/1/84 10/01/84
H 8/1/84 12/01/84
I 8/1/84 03/01/85
J 8/1/84 04/01/85
K 8/1/84 07/01/85
M 8/1/84 09/01/85
P 8/1/84 12/01/85
Q 8/1/84 12/01/85
R 8/1/84 12/31/85
S 8/1/84 12/31/85
T 8/1/84 04/01/86
U 8/1/84 03/01/86
V 8/1/84 04/01/86
X 8/1/84 06/01/86
Y 8/1/84 06/01/86
Z 8/1/84 07/01/86
37 8/1/84 08/01/86
38 8/1/84 07/01/86
39 8/1/84 08/01/86
40 8/1/84 10/01/86
41 8/1/84 10/01/86
42 8/1/84 11/01/86
43 8/1/84 01/01/87
44 8/1/84 02/01/87
45 8/1/84 02/01/87
46 8/1/84 05/01/87
48 8/1/84 06/01/87
49 8/1/84 05/01/87
50 8/1/84 06/01/87
51 8/1/84 07/01/87
53 8/1/84 07/01/87
54 8/1/84 09/01/87
55 8/1/84 10/01/87
56 8/1/84 10/01/87
59 8/1/84 12/01/87
68 8/1/84 09/01/88
1984-1 1/1/84 None
W-3 6/1/88 06/01/88
</TABLE>
Exhibit 4.7
<PAGE> 16
EXHIBIT A (cont'd)
Ex. A
TYPES OF SECURITIES
-------------------
1. GNMA I Certificates.
2. GNMA II Certificates.
3. Freddie Mac Certificates.
4. FNMA Certificates.
The GNMA Certificates (both I and II) are fully-modified
mortgage-backed certificates issued by Government National Mortgage
Association.
The Freddie Mac Certificates are Mortgage Participation
Certificates issued by Federal Home Loan Mortgage Corporation.
The FNMA Certificates are Guaranteed Mortgage Pass-Through
Certificates issued by Federal National Mortgage Association.
The GNMA I and GNMA II Certificates are in certificated form
and the remaining securities are in uncertificated, book-entry form.
Exhibit 4.7
<PAGE> 17
EXHIBIT A (cont'd)
Ex. B
MORTGAGE LOAN DOCUMENT TYPES
----------------------------
1. Promissory Note.
2. Deed of Trust or Mortgage.
3. Assignment of Deed of Trust or Mortgage.
4. Title Policy or commitment therefor.
5. Insurance certificates.
6. Appraisal.
7. PMI or Pool Mortgage Insurance certificate.
8. Loan Closing Statement.
Exhibit 4.7
<PAGE> 18
EXHIBIT A (cont'd)
Ex. C
Federal Reserve Bank Deliveries:
ABA 091000022
First MPLS/TRUST
AGENT ACCT # **
---------------------
** to be completed for each Bond Issue Series with the MCPA number set forth
on the following two pages.
FED Wire Instructions:
ABA 091000022
First Bank National Association
. for further credit to First Trust Acct #180121167365
TSU: Corporate Trust
ATTN: Mary Rodgerson
ref. acct. #
Exhibit 4.7
<PAGE> 19
EXHIBIT A (cont'd)
Ex. D
INITIAL RECEIPT BY CUSTODIAN OF COLLATERAL
First Bank National Association, as custodian for Bank One, Arizona NA in its
capacity as Trustee, hereby acknowledges receipt and delivery of each item of
Collateral identified on the Delivery Notice attached hereto, other than the
exceptions set forth on Schedule I attached hereto.
FIRST BANK NATIONAL
ASSOCIATION, as Custodian
By
-------------------------------
Its
----------------------------
Dated: , 1993
--------------------------
Exhibit 4.7
<PAGE> 20
EXHIBIT A (cont'd)
Ex. E-1
(NAME OF ISSUER)
(TITLE OF BOND ISSUE)
CONFIRMING RECEIPT BY CUSTODIAN OF SECURITIES
AND PLEDGED LOAN COLLATERAL
First Bank National Association, as custodian (the
"Custodian") for Bank One, Arizona NA as Trustee under the Indenture dated as
of _________________________, 19____ as amended to the Delivery Date (the
"Indenture"), and the Series ___ Indenture Supplement thereto dated as of
_________________________, 19____ relating to the __________ Bonds (the
Indenture Supplement"), hereby acknowledges and confirms that:
1. The Custodian has received delivery of, and has in
its possession and custody, each GNMA Certificate, Freddie Mac Certificate and
FNMA Certificate (other than in book-entry form) referred to in Schedules
___________ respectively, to the Indenture Supplement, that has been certified
by the Issuer thereof to be currently outstanding.
2. The Custodian has received delivery of required
documents for each Pledged Loan referred to in Schedule ____ to the Indenture
Supplement that has been certified by American Southwest Financial Corporation
to be currently outstanding.
3. Each such Pledged Loan has been assigned to the
Custodian and the assignment forwarded for recording.
4. Each such GNMA Certificate (other than in book-entry
form), Freddie Mac Certificate and FNMA Certificate has been registered in the
name of the Custodian or each GNMA Certificate (other than in book-entry form),
Freddie Mac Certificate in the possession of the Trustee has attached to it a
Form of Detached Assignment (Form PD 1832) or such other form of assignment
acceptable to GNMA with respect to the assignment of GNMA Certificates, Freddie
Mac with respective to the assignment of Freddie Mac Certificates and FNMA with
respect to the assignment of FNMA Certificates, each of which purports to be
executed by the registered holder of the respective Certificates, and the
Custodian hereby confirms that the following information contained on each such
form of assignment is in conformance with what is shown on the face of the
Certificates:
(i) The pool or group number;
(ii) The Certificate number; and
(iii) The original principal amount of the Certificate.
Exhibit 4.7
<PAGE> 21
EXHIBIT A (cont'd)
Ex. E-1 (cont'd)
5. Each such form of assignment also contains the
following:
(i) The name of the Custodian as the party in whose name
the Certificate is to be re-registered;
(ii) The address of the Custodian;
(iii) The federal tax identification number of the Issuer;
and
(iv) The name and address of the commercial bank or trust
company guaranteeing the signature of the assignor.
6. Each GNMA Certificate in book-entry form has been
confirmed by the Custodian in writing by the financial intermediary acting as
depository (the "Depository"), which has represented to the Custodian that it
is an appropriate depository (as such term is defined in 1 CFR 462.4(b) and 24
CFR 81.44(b)), as having been identified, pursuant to appropriate notice, by
book- entry or otherwise by the Depository as in the name of the Custodian, as
pledgee.
7. Each such book-entry GNMA Certificate has been
confirmed to the Custodian in writing by the Depository as having been
registered in the name of the Depository in an appropriate book-entry account
with a Federal Reserve Bank which maintains such accounts.
8. The Custodian further acknowledges that it has
received custody and holds each such GNMA Certificate, Freddie Mac Certificate,
FNMA Certificate and Pledged Loan in good faith and without notice of any
adverse claim.
FIRST BANK NATIONAL
ASSOCIATION, as Custodian
By
-------------------------------
Its
---------------------------
Dated: , 1993
--------------------------
Exhibit 4.7
<PAGE> 22
EXHIBIT A (cont'd)
Ex. E-2
(NAME OF ISSUER)
(TITLE OF BOND ISSUE)
CONFIRMING RECEIPT BY CUSTODIAN OF CASH,
CASH INVESTMENTS, LETTERS OF CREDIT, SURETY BONDS, REINVESTMENT
AGREEMENT, INSURANCE POLICIES AND AGREEMENTS COLLATERAL
First Bank National Association, as custodian (the
"Custodian") for Bank One Arizona NA as Trustee under the Indenture dated as of
_________________________, 19____ as amended to date (the "Indenture"), and the
Series ___ indenture supplement thereto dated as of _________________________,
19____ relating to the __________ Bonds (the Indenture Supplement"), hereby
acknowledges receipt and delivery of the Cash, Cash Investments, Letters of
Credit, Surety Bonds and/or Reinvestment Agreement, Insurance Policies, and/or
Agreements that are currently pledged to secure the Bonds, as certified by the
Issuer thereof, and certifies that it has acquired custody of such Collateral
in good faith and without notice of any adverse claim.
FIRST BANK NATIONAL
ASSOCIATION, as Custodian
By
-------------------------------
Its
----------------------------
Dated: , 1993
--------------------------
Exhibit 4.7
<PAGE> 23
EXHIBIT A (cont'd)
Ex. F
Types of Trust Accounts
1. Mortgage Collateral Proceeds Account.
2. Supplemental Debt Service Fund.
3. Buy-Down Debt Service Fund.
4. Reserve Fund.
5. Prepayment Provision Reserve Account.
6. Supplemental Custodial Reserve Fund.
7. Prepayment Account.
Exhibit 4.7
<PAGE> 24
EXHIBIT B
REGISTRAR AGENCY AGREEMENT
Dated as of August 31, 1993
Bank One, Arizona NA, ("Trustee"), and First Bank National
Association, a national banking association (the "Agent"), agree as follows:
WHEREAS, the Trustee currently is trustee for each of the bond
issues identified on Schedule I hereto (the "Bond Issues") pursuant to the Bond
Indentures and Supplemental Indentures set forth on Schedule II hereto (the
"Indentures"), and in connection therewith, the Trustee acts as bond registrar
and transfer agent for each Bond Issue.
WHEREAS, the Trustee intends to resign as trustee, and Agent
anticipates being appointed and accepting as successor trustee, under each of
the Indentures (the "Trusteeship Succession"), and to facilitate transition of
bond registrar and transfer agent functions, the parties desire that Agent
shall act as the Trustee's agent to perform such functions prior to the
Trusteeship Succession, in accordance with the procedures set forth in the
Indentures, and terms and conditions herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements hereinafter set forth, the Agent and the Trustee agree as
follows:
1. Appointment as Agent. Subject to the terms and
conditions herein, the Trustee hereby appoints the Agent, and the Agent hereby
accepts such appointment, as the Trustee's registrar agent to perform all bond
registration, transfer, exchange, authentication and recordkeeping functions of
the registrar and transfer agent ("Registrar Functions") for each Bond Issue as
provided in the related Indenture, commencing for each Bond Issue on the date
(a "Commencement Date") specified for such Bond Issue on Schedule III attached
hereto and continuing until Trusteeship Succession or prior termination of this
Agreement.
2. Transfer of Registration Information. At least
(five) business days prior to the related Commencement Date, the Trustee will
provide the Agent with all bond registration, information, for each Bond Issue
in hard copy format compatible with Agent's Bond Master processing system,
together with canceled bond records and unissued bond certificate inventory,
all as necessary or appropriate for Agent to perform Registrar Functions for
the Bond Issues on behalf of the Trustee. The Trustee shall be responsible for
loss, theft or destruction of bond registration records and certificates
inventory prior to receipt thereof by the Agent.
3. Bond Certificate Delivery. From and after the
Commencement Date, Agent shall receive Bond Issue certificates for transfer or
exchange at its offices in St. Paul, Minnesota, delivered to the following
addresses:
MAIL DELIVERY HAND DELIVERY
------------- -------------
First Bank National First Bank National Association
Association Corporate Trust Department
P.O. Box 64111 180 East Fifth Street
St. Paul, Minnesota 55764 St. Paul, Minnesota 55701
Exhibit 4.7
<PAGE> 25
EXHIBIT B (cont'd)
The Trustee shall forward to the Agent for processing all Bond Issue
certificates received by the Trustee for transfer or exchange or other
Registrar Functions.
4. Instructions; Authority to Act. Trustee may direct
any particular aspect of the Agent's Registrar Functions by providing
instructions to Agent. The Agent shall be deemed to have received proper
instructions with respect to the Registrar Functions upon its confirmation of
its receipt of written instructions signed by a Responsible Officer of the
Trustee. All such instructions shall contain receipt provisions which the
Agent shall countersign as such receipt confirmation. A certified copy of a
resolution of the Board of Directors of the Trustee may be received and
accepted by the Agent as conclusive evidence of the authority of any such
officer to act and may be considered as in full force and effect until receipt
of written notice to the contrary by the Trustee. Such instructions may be
general or specific in terms.
5. Indemnification by the Agent. The Agent agrees to
indemnify the Trustee for any and all liabilities, obligations, losses,
damages, payments, costs or expenses of any kind whatsoever which may be
imposed on, incurred by or asserted against the Trustee as the Trustee as the
result of failure of the Agent to perform its duties hereunder, provided,
however, that the Agent shall not be liable for any portion of any such
liabilities, obligations, losses, damages, payments or costs due to the actions
or omissions of the Trustee.
6. Advice of Counsel. The Agent and the Trustee further
agree that the Agent shall be entitled to rely and act upon advice of counsel
with respect to its performance hereunder as custodian and shall be without
liability for any action reasonably taken pursuant to such advice, provided
that such action is not in violation of applicable federal or state law.
7. Effective Period, Termination and Amendment, and
Interpretive and Additional Provisions. This Agreement shall become effective
as of the date hereof, shall continue in full force and effect until terminated
as hereinafter provided, may be amended at any time by mutual agreement of the
parties hereto shall terminate concurrently with the Trusteeship Succession and
otherwise may be terminated by either party by written notice delivered or
mailed to the other party, postage prepaid, termination to take effect no
sooner than thirty (30) days after the date of such delivery or mailing.
Concurrently with, or as soon as practicable after any termination other than
upon Trusteeship Succession, the Agent shall return all bond registration
information to the Trustee at such place as the Trustee may reasonably
designate. In connection with the administration of this Agreement, the Agent
and the Trustee may agree from time to time upon the interpretation of the
provisions of this Agreement as may in their joint opinion be consistent with
the general tenor and purposes of this Agreement, any such interpretation to be
signed by all parties and annexed hereto.
8. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Minnesota.
2
Exhibit 4.7
<PAGE> 26
EXHIBIT B (cont'd)
9. Notices. Notices and other writings shall be
delivered or mailed, postage prepaid, to the Trustee at Bank One, Arizona NA,
by mail: Corporate Trust - Mortgage Backed Bonds Department (A834), P.O. Box
29559, Phoenix, Arizona 85038; by delivery: Corporate Trust - Mortgage Backed
Bonds Department, 25th Floor, 241 North Central Avenue, Phoenix, Arizona 85004
Attention: Corporate Trust Department, or to the Agent at First Bank National
Association, 180 East Fifth Street, St. Paul, Minnesota 55101, Attention:
Corporate Trust Agreement, or to such other address as the Trustee or the Agent
may hereafter specify in writing, shall be conclusively presumed to have bene
duly given hereunder to the respective party, whether or not such party
receives such notice.
10. Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the Trustee and the Agent and their
respective successors and assigns.
FIRST BANK NATIONAL BANK ONE, ARIZONA NA,
ASSOCIATION, as Agent as Trustee under the Indentures
referred to above
By /s/ Eve D. Kaplan By /s/ Susan J. McCord
------------------ --------------------
Its Vice President Its Vice President
-------------- ----------------
By /s/ Cheril A. Christopherson By /s/ Anne Aldridge
----------------------------- ----------------------
Its Asst. Vice President Its Corporate Officer
------------------------- ------------------
3
Exhibit 4.7
<PAGE> 27
EXHIBIT B (cont'd)
SCHEDULE I
----------
BOND ISSUES
-----------
<TABLE>
<CAPTION>
ISSUER SERIES
------ ------
<S> <C>
American Southwest Financial Corporation G
H
I
J
K
M
P
Q
R
S
T
U
V
X
Y
Z
37
38
39
40
41
42
43
44
45
46
48
49
50
51
53
54
55
56
59
68
American Southwest Finance Co., Inc. 1984-1
Westam Mortgage Financial Corporation W-3
</TABLE>
Exhibit 4.7
<PAGE> 28
EXHIBIT B (cont'd)
SCHEDULE II
-----------
INDENTURES
----------
<TABLE>
<CAPTION>
BOND SERIES INDENTURE DATE SUPPLEMENTAL INDENTURE DATE
- ----------- -------------- ---------------------------
<S> <C> <C>
G 8/1/84 10/01/84
H 8/1/84 12/01/84
I 8/1/84 03/01/85
J 8/1/84 04/01/85
K 8/1/84 07/01/85
M 8/1/84 09/01/85
P 8/1/84 12/01/85
Q 8/1/84 12/01/85
R 8/1/84 12/31/85
S 8/1/84 12/31/85
T 8/1/84 04/01/86
U 8/1/84 03/01/86
V 8/1/84 04/01/86
X 8/1/84 06/01/86
Y 8/1/84 06/01/86
Z 8/1/84 07/01/86
37 8/1/84 08/01/86
38 8/1/84 07/01/86
39 8/1/84 08/01/86
40 8/1/84 10/01/86
41 8/1/84 10/01/86
42 8/1/84 11/01/86
43 8/1/84 01/01/87
44 8/1/84 02/01/87
45 8/1/84 02/01/87
46 8/1/84 05/01/87
48 8/1/84 06/01/87
49 8/1/84 05/01/87
50 8/1/84 06/01/87
51 8/1/84 07/01/87
53 8/1/84 07/01/87
54 8/1/84 09/01/87
55 8/1/84 10/01/87
56 8/1/84 10/01/87
59 8/1/84 12/01/87
68 8/1/84 09/01/88
1984-1 1/1/84 None
W-3 6/1/88 06/01/88
</TABLE>
Exhibit 4.7
<PAGE> 29
EXHIBIT C
PAYING AGENCY AGREEMENT
Dated as of September 30, 1993
Bank One, Arizona, NA, ("Trustee"), American Southwest
Financial Corporation, American Southwest Finance Co. and Westam Mortgage
Financial Corporation (collectively, the "Issuers") and First Bank National
Association, (the "Agent"), agree as follows:
WHEREAS, the Trustee currently is trustee for each of the bond
issues identified on Schedule I hereto (the "Bond Issues") pursuant to the
respective Bond Indentures between the Issuers and The Valley National Bank of
Arizona (the "Original Indentures") and Supplemental Indentures set forth on
Schedule II hereto (together with the Original Indenture collectively, the
"Indentures"), and in connection therewith, the Trustee acts as paying agent
for each Bond Issue.
WHEREAS, the Trustee intends to resign as trustee, and the
Issuers anticipate appointing Agent and Agent anticipates accepting as
successor trustee, under each of the Indentures (the "Trusteeship Succession"),
and to facilitate transition of bond paying agent functions, the parties desire
that Agent shall act as the paying agent to perform such functions prior to and
after the Trusteeship Succession, in accordance with the procedures set forth
in the Indentures, and terms and conditions herein.
WHEREAS, the Trustee and the Agent have entered into that
certain Collateral Custody and Verification Agreement dated as of August 31,
1993 (the "Collateral Agreement") to provide for the transfer of Bond Issue
collateral to the Agent and the establishment of separate trust accounts to
which such collateral, and cash received with respect to collateral, is
credited by the Agent.
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements hereinafter set forth, the Agent, the Issuers and the Trustee
agree as follows:
1. Appointment as Agent. Subject to the terms and
conditions herein, the Issuers hereby appoints the Agent, and the Agent hereby
accepts such appointment, as the paying agent under Section 9.02 of each of the
Original Indentures to perform the payment and recordkeeping functions thereof
("Paying Functions") for each Bond Issue as provided in the related Indenture,
commencing for each Bond Issue on October 1, 1993 ("Commencement Date") and
continuing until termination of this Agreement.
2. Transfer of Payment Information. At least ten
business days prior to the Commencement Date, the Trustee will provide the
Agent with all bond ownership and payment information for each Bond Issue in
hard copy format and compatible with Agent's Bond Master processing system, all
as necessary or appropriate for Agent to perform Paying Functions for the Bond
Issues on behalf of the Issuer. As part of the said bond payment information,
the Trustee will provide and certify to the Agent for each Bond Issue (i) the
name and address of each registered bondholder, (ii) the
Exhibit 4.7
<PAGE> 30
EXHIBIT C (cont'd)
principal amount of bonds with the same maturity date owned by such bondholder,
(iii) the IRS Taxpayer Identification Number of such bondholder and (iv)
whether or not an IRS Form W-9 has been received from, making back-up
withholding not required for, such bondholder.
At least ten business days prior to the Commencement Date, the
Issuers will provide and certify to the Agent for each Bond Issue the aggregate
outstanding principal amount of bonds with the same maturity date, as of
September 1, 1993.
3. Payment Information Reconciliation. Within seven
business days following receipt of complete bond payment information, as
described in paragraph 2 above, for each Bond Issue, the Agent will reconcile
(i) the total of Bondholders' principal balances with the same maturity date as
provided by the Trustee (ii) with the aggregate principal balances for such
maturity date provided by the Issuers. Within three business days of
discovering any discrepancy in such principal balance information or in other
bond paying information, the Agent will advise the Trustee and the Issuers.
All such discrepancies shall be resolved and corrected prior to Trusteeship
Succession for all Bond Issues.
4. Trust Account Payments. The Agent shall liquidate
investments and withdraw monies to pay Bond Issue principal and interest as
due, from the appropriate trust accounts established by the Agent under the
Collateral Agreement prior to Trusteeship Succession and by the Agent as
successor trustee under the Indentures following Trusteeship Succession.
5. Payment Reports. The Issuers shall provide payment
and disbursement reports to the Agent in the form and manner as heretofore
provided to the Trustee, setting forth the amounts of bondholder payments,
releases of surplus funds and expense payments and payees.
6. Advice of Counsel. The parties further agree that
the Agent shall be entitled to rely and act upon advice of counsel with respect
to its performance hereunder as paying agent and shall be without liability
for any action reasonably taken pursuant to such advice, provided that such
action is not in violation of applicable federal or state law.
7. Effective Period, Termination and Amendment, and
Interpretive and Additional Provisions. This Agreement shall become effective
as of the date hereof, shall continue in full force and effect until terminated
as hereinafter provided, and may be amended at any time by mutual agreement of
the parties hereto. This Agreement may be terminated by either the Issuers or
the Agent by written notice delivered or mailed to the other parties, postage
prepaid, termination to take effect no sooner than thirty (30) days after the
date of such delivery or mailing. Concurrently with, or as soon as practicable
after any termination, the Agent shall transfer all bond payment information to
such successor paying agent as the Issuers shall designate. In connection with
the administration of this Agreement, the Agent, the Issuers and the Trustee
may agree from time to time upon the interpretation of the provisions of this
Agreement as may in their joint opinion be consistent with the general tenor
and purposes of this Agreement, any such interpretation to be signed by all
parties and
2
Exhibit 4.7
<PAGE> 31
EXHIBIT C (cont'd)
annexed hereto. Following Trusteeship Succession, Bank One, Arizona, NA shall
have no further rights or responsibilities hereunder.
8. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Arizona.
9. Notices. Notices and other writings shall be
delivered or mailed, postage prepaid, to the Trustee at Bank One, Arizona, NA,
by mail: Corporate Trust - Mortgage Backed Bonds Department (A834), P. O. Box
29559, Phoenix, Arizona 85038; by delivery: Corporate Trust - Mortgage Backed
Bonds Department, 25th Floor, 241 North Central Avenue, Phoenix, Arizona 85004
Attention: Corporate Trust Department, to the Issuer at 2390 East Camelback
Road, Suite 225, Phoenix, Arizona 85016, or to the Agent at First Bank
National Association, 180 East Fifth Street, St. Paul, Minnesota 55101,
Attention: Corporate Trust Agreement, to the Issuer or to such other address
as the Trustee or the Agent may hereafter specify in writing, shall be
conclusively presumed to have bene duly given hereunder to the respective
party, whether or not such party receives such notice.
10. Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the Trustee, Issuer and the Agent and their
respective successors and assigns.
BANK ONE, ARIZONA, NA,
as Trustee under the Indentures
referred to above
By /s/ Susan J. McCord
--------------------
Its Vice President
----------------
FIRST BANK NATIONAL ASSOCIATION,
as Agent
By /s/ Eve D. Kaplan
------------------
Its Vice President
--------------
AMERICAN SOUTHWEST FINANCIAL CORPORATION
By /s/ Jeffrey A. Newman
-------------------------
Its Senior Vice President
---------------------
3
Exhibit 4.7
<PAGE> 32
EXHIBIT C (cont'd)
AMERICAN SOUTHWEST FINANCE CO., INC.
By /s/ Jeffrey A. Newman
-----------------------
Its Senior Vice President
---------------------
WESTAM MORTGAGE FINANCIAL CORPORATION
By /s/ Jeffrey A. Newman
-----------------------
Its Senior Vice President
---------------------
4
Exhibit 4.7
<PAGE> 33
EXHIBIT C (cont'd)
SCHEDULE I
----------
BOND ISSUES
-----------
<TABLE>
<CAPTION>
ISSUER SERIES
------ ------
<S> <C>
American Southwest Financial Corporation G
H
I
J
K
M
P
Q
R
S
T
U
V
X
Y
Z
37
38
39
40
41
42
43
44
45
46
48
49
50
51
53
54
55
56
59
68
American Southwest Finance Co., Inc. 1984-1
Westam Mortgage Financial Corporation W-3
</TABLE>
Exhibit 4.7
<PAGE> 34
EXHIBIT C (cont'd)
SCHEDULE II
-----------
INDENTURES
----------
<TABLE>
<CAPTION>
BOND SERIES INDENTURE DATE SUPPLEMENTAL INDENTURE DATE
- ----------- -------------- ---------------------------
<S> <C> <C>
G 8/1/84 10/01/84
H 8/1/84 12/01/84
I 8/1/84 03/01/85
J 8/1/84 04/01/85
K 8/1/84 07/01/85
M 8/1/84 09/01/85
P 8/1/84 12/01/85
Q 8/1/84 12/01/85
R 8/1/84 12/31/85
S 8/1/84 12/31/85
T 8/1/84 04/01/86
U 8/1/84 03/01/86
V 8/1/84 04/01/86
X 8/1/84 06/01/86
Y 8/1/84 06/01/86
Z 8/1/84 07/01/86
37 8/1/84 08/01/86
38 8/1/84 07/01/86
39 8/1/84 08/01/86
40 8/1/84 10/01/86
41 8/1/84 10/01/86
42 8/1/84 11/01/86
43 8/1/84 01/01/87
44 8/1/84 02/01/87
45 8/1/84 02/01/87
46 8/1/84 05/01/87
48 8/1/84 06/01/87
49 8/1/84 05/01/87
50 8/1/84 06/01/87
51 8/1/84 07/01/87
53 8/1/84 07/01/87
54 8/1/84 09/01/87
55 8/1/84 10/01/87
56 8/1/84 10/01/87
59 8/1/84 12/01/87
68 8/1/84 09/01/88
1984-1 1/1/84 None
W-3 6/1/88 06/01/88
</TABLE>
Exhibit 4.7
<PAGE> 35
EXHIBIT D-1
September 2, 1992
Mr. G. Thomas Eggebrecht
American Southwest Financial Corporation
American Southwest Finance Co., Inc.
Westam Mortgage Financial Corporation
2390 East Camelback Road, Suite 225
Phoenix, AZ 85016
Dear Mr. Eggebrecht:
After long and careful consideration, Valley National Bank had made difficult
decision to cease bond trustee activity in the collateralized mortgage
obligation ("CMO") field. We have become increasingly aware that we lack the
economics of scale available to larger CMO trustees and cannot compete
effectively given the fees bid in today's marketplace. We therefore, tender
our resignation as Trustee of the bond issues of American Southwest Financial
Corporation, American Southwest Finance Co., Inc. and Westam Mortgage Financial
Corporation effective January 1, 1993.
We have enjoyed the many years of working with American Southwest Financial
Corporation, American Southwest Finance Co., Inc. and Westam Mortgage Financial
Corporation. The professionalism of the staff has been exemplary and we will
miss them all. Our association has also provided us with the privilege to meet
people and develop working relationships throughout the country which would
otherwise have been missed. We will take every opportunity to make the
transition to your selected successor trustee as smooth and uneventful as
possible.
Very truly yours,
/s/ Susan J. McCord
- -------------------
Susan J. McCord
Vice President
SJM/prs
Exhibit 4.7
<PAGE> 36
EXHIBIT D-2
SUCCESSOR TRUSTEE APPOINTMENT
First Bank National Association
First Trust Center
180 East Fifth Street
St. Paul, MN 55101
Bank One, Arizona, NA
241 North Central Avenue
Phoenix, AZ 85016
Ladies and Gentlemen:
Having received notice of the resignation of Bank One, Arizona, NA as
Trustee for each of the Bond issues identified on Schedule I attached hereto
(the "Bond Issues"), each of the undersigned, with respect to the Bond Issues
for which it is the issuer as indicated on the said Schedule I, does hereby
appoint First Bank National Association as successor Trustee for the Bond
Issues pursuant to the respective Bond Indentures and Supplemental Indentures
set forth on Schedule II hereto, such appointment to become effective upon
acceptance by First Bank National Association and delivery to Bank One,
Arizona, NA of executed instruments evidencing this appointment and such
acceptance.
In Witness Whereof, each of the undersigned has duly executed and
delivered this Appointment on December 28, 1993.
AMERICAN SOUTHWEST FINANCIAL CORPORATION
By /s/ Jeffrey A. Newman
-----------------------
Its Senior Vice President
---------------------
AMERICAN SOUTHWEST FINANCE CO., INC.
By /s/ Jeffrey A. Newman
-----------------------
Its Senior Vice President
---------------------
WESTAM MORTGAGE FINANCIAL CORPORATION
By /s/ Jeffrey A. Newman
-----------------------
Its Senior Vice President
---------------------
Exhibit 4.7
<PAGE> 37
EXHIBIT D-2 (cont'd)
SCHEDULE I
----------
BOND ISSUES
-----------
<TABLE>
<CAPTION>
ISSUER SERIES
------ ------
<S> <C>
American Southwest Financial Corporation G
H
I
J
K
M
P
Q
R
S
T
U
V
X
Y
Z
37
38
39
40
41
42
43
44
45
46
48
49
50
51
53
54
55
56
59
68
American Southwest Finance Co., Inc. 1984-1
Westam Mortgage Financial Corporation W-3
</TABLE>
Exhibit 4.7
<PAGE> 38
EXHIBIT D-2 (cont'd)
SCHEDULE II
-----------
INDENTURES
----------
<TABLE>
<CAPTION>
BOND SERIES INDENTURE DATE SUPPLEMENTAL INDENTURE DATE
- ----------- -------------- ---------------------------
<S> <C> <C>
G 8/1/84 10/01/84
H 8/1/84 12/01/84
I 8/1/84 03/01/85
J 8/1/84 04/01/85
K 8/1/84 07/01/85
M 8/1/84 09/01/85
P 8/1/84 12/01/85
Q 8/1/84 12/01/85
R 8/1/84 12/31/85
S 8/1/84 12/31/85
T 8/1/84 04/01/86
U 8/1/84 03/01/86
V 8/1/84 04/01/86
X 8/1/84 06/01/86
Y 8/1/84 06/01/86
Z 8/1/84 07/01/86
37 8/1/84 08/01/86
38 8/1/84 07/01/86
39 8/1/84 08/01/86
40 8/1/84 10/01/86
41 8/1/84 10/01/86
42 8/1/84 11/01/86
43 8/1/84 01/01/87
44 8/1/84 02/01/87
45 8/1/84 02/01/87
46 8/1/84 05/01/87
48 8/1/84 06/01/87
49 8/1/84 05/01/87
50 8/1/84 06/01/87
51 8/1/84 07/01/87
53 8/1/84 07/01/87
54 8/1/84 09/01/87
55 8/1/84 10/01/87
56 8/1/84 10/01/87
59 8/1/84 12/01/87
68 8/1/84 09/01/88
1984-1 1/1/84 None
W-3 6/1/88 06/01/88
</TABLE>
Exhibit 4.7
<PAGE> 39
EXHIBIT D-3
SUCCESSOR TRUSTEE ACCEPTANCE
American Southwest Financial Corporation
American Southwest Finance Co., Inc.
Westam Mortgage Financial Corporation
2390 Camelback Road
Suite 225
Phoenix, AZ 85016
Bank One, Arizona NA
241 North Central Avenue
Phoenix, AZ 85016
Ladies and Gentlemen:
First Bank National Association, a national banking association, does
hereby accept appointment and agrees to serve as successor Trustee for each of
the Bond issues identified on Schedule I hereto pursuant to the respective Bond
Indentures and Supplemental Indentures set forth on Schedule II hereto, subject
to the provisions of such documents but without responsibility or liability for
the actions or omissions of the prior Trustee thereunder.
In Witness Whereof, First Bank National Association has caused this
Acceptance to be duly executed and delivered on December 28, 1993.
FIRST BANK NATIONAL
ASSOCIATION
By /s/ Eve D. Kaplan
------------------
Its Vice President
---------------
By /s/ Lynn M. Steiner
--------------------
Its Trust Officer
-----------------
Exhibit 4.7
<PAGE> 40
EXHIBIT D-3 (cont'd)
SCHEDULE I
----------
BOND ISSUES
-----------
<TABLE>
<CAPTION>
ISSUER SERIES
------ ------
<S> <C>
American Southwest Financial Corporation G
H
I
J
K
M
P
Q
R
S
T
U
V
X
Y
Z
37
38
39
40
41
42
43
44
45
46
48
49
50
51
53
54
55
56
59
68
American Southwest Finance Co., Inc. 1984-1
Westam Mortgage Financial Corporation W-3
</TABLE>
Exhibit 4.7
<PAGE> 41
EXHIBIT D-3 (cont'd)
SCHEDULE II
-----------
INDENTURES
----------
<TABLE>
<CAPTION>
BOND SERIES INDENTURE DATE SUPPLEMENTAL INDENTURE DATE
- ----------- -------------- ---------------------------
<S> <C> <C>
G 8/1/84 10/01/84
H 8/1/84 12/01/84
I 8/1/84 03/01/85
J 8/1/84 04/01/85
K 8/1/84 07/01/85
M 8/1/84 09/01/85
P 8/1/84 12/01/85
Q 8/1/84 12/01/85
R 8/1/84 12/31/85
S 8/1/84 12/31/85
T 8/1/84 04/01/86
U 8/1/84 03/01/86
V 8/1/84 04/01/86
X 8/1/84 06/01/86
Y 8/1/84 06/01/86
Z 8/1/84 07/01/86
37 8/1/84 08/01/86
38 8/1/84 07/01/86
39 8/1/84 08/01/86
40 8/1/84 10/01/86
41 8/1/84 10/01/86
42 8/1/84 11/01/86
43 8/1/84 01/01/87
44 8/1/84 02/01/87
45 8/1/84 02/01/87
46 8/1/84 05/01/87
48 8/1/84 06/01/87
49 8/1/84 05/01/87
50 8/1/84 06/01/87
51 8/1/84 07/01/87
53 8/1/84 07/01/87
54 8/1/84 09/01/87
55 8/1/84 10/01/87
56 8/1/84 10/01/87
59 8/1/84 12/01/87
68 8/1/84 09/01/88
1984-1 1/1/84 None
W-3 6/1/88 06/01/88
</TABLE>
Exhibit 4.7
<PAGE> 1
CONFIRMATION AND FIRST AMENDMENT
TO
TRUSTEESHIP SUCCESSION AGREEMENT
BANK ONE, ARIZONA, NA ("Bank One"), FIRST BANK NATIONAL
ASSOCIATION ("First Bank") and AMERICAN SOUTHWEST FINANCIAL CORPORATION,
AMERICAN SOUTHWEST FINANCE CO., INC. and WESTAM MORTGAGE FINANCIAL CORPORATION
(collectively, the "Issuers"), hereby amend that certain Trusteeship Succession
Agreement, among the parties hereto (the "Trusteeship Succession Agreement"),
as follows:
1. All terms and provisions of the Trusteeship
Succession Agreement, to the extent not modified by this Confirmation and First
Amendment, are hereby confirmed to be in full force and effect. All
capitalized terms used in this Confirmation and First Amendment shall have the
meaning ascribed thereto in the Trusteeship Succession Agreement.
2. Bank One has previously resigned as trustee for each
Bond Issue by its execution and delivery to the Issuers of a letter, a copy of
which is attached hereto as Exhibit D-1. Effective on December 28, 1993, the
Issuers shall appoint First Bank as successor trustee for each Bond Issue by
execution and delivery to Bank One and to First Bank of a Trustee Appointment
in the form attached to the Trusteeship Succession Agreement as Exhibit D-2,
and First Bank shall accept such appointment as Successor Trustee for each Bond
Issue by its execution and delivery to Bank One and to the Issuers of a Trustee
Acceptance instrument in the form attached to the Trusteeship Succession
Agreement as Exhibit D-3.
3. Certified lists of Bond Issue Collateral received by
First Trust identify certain items of Collateral that have not been transferred
to First Bank because such Collateral has been sold or the related Bond Issue
is not subject to the Trusteeship Succession. In addition, such certified
lists of Collateral contain certain incorrect factors or original face amounts.
Bank One, First Bank and the Issuers agree that such certified list Collateral
discrepancies will be corrected or reconciled following Trusteeship Succession
through the diligent and good faith efforts of each party to be concluded no
later than March 1, 1994.
4. First Bank has received delivery of document files
for all Pledged Loans, other than the Pledged Loans identified on Exhibit A
hereto (the "Undelivered Files"), but final review of such files is not
complete. Undelivered Files shall be delivered to First Bank no later than
January 15, 1994. Pledged Loan document file review will be completed by First
Bank, and document delivery exceptions identified to Bank One and the Issuers,
no later than January 30, 1994 and replacement of missing documents, or
correction of incomplete or defective documents will be undertaken by First
Bank; provided, however, that Bank One shall not hereby be released from any
liability for which it could be liable under the Indentures for any financial
loss resulting from, and the Issuers shall pay all costs related to obtaining
certified copies of documents filed of public record evidencing correction of
such Pledged Loan document exceptions.
5. First Bank by March 1, 1994, shall review the
contents of Bond Issue records, correspondence and statements not constituting
Collateral and request receipt from Bank One of missing information. Bank One
shall deliver to First Bank by April 1,
Exhibit 4.8
<PAGE> 2
1994, any information so requested to the extent such information is in the
possession of Bank One and is not privileged.
6. On or before January 30, 1994, the Issuers and First
Bank shall use their best efforts to execute and deliver supplemental
indentures to the Indentures, consistent with the amendment terms thereof,
providing for modified financial and distribution reports to the Trustee from
the Issuers conforming Indenture provisions to current reporting practices and
formats.
7. On or before January 10, 1994, First Bank will
identify in writing to Bank One certain Uniform Commercial Code financing
statements that were previously filed with respect to certain Collateral and
have lapsed without continuation or without new financing statement filing. On
or before February 1, 1994, Bank One will provide First Bank with filed copies
of financing statements reestablishing perfection of such liens in the related
Collateral, and the Issuers, to the extent not previously addressed in an
opinion delivered to Bank One, shall provide First Bank with an opinion of
counsel that such Collateral liens are perfected, first priority security
interests.
8. On or before January 20 , 1994, Bank One shall
execute and the Issuers shall file of record assignments to First Bank, as
trustee, of those Uniform Commercial Code financing statements currently in
effect that must be so assigned to perfect such trustee's security interests in
the Collateral. On or before January 30, 1994, the Issuers shall execute and
file in the office of Secretary of State of the State of Minnesota, Uniform
Commercial Code financing statements naming First Bank, as trustee, as secured
party for all Collateral for which lien perfection is accomplished by such
financing statement filing. On or before February 15, 1994, the Issuers shall
provide to First Bank an opinion of counsel under the laws of all governing
jurisdictions other than Minnesota, and First Bank shall obtain an opinion from
its counsel under the laws of Minnesota, to the effect that First Bank as
trustee under the Indentures, holds valid, perfected, first priority security
interests in the Collateral under the governing Uniform Commercial Code.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Confirmation and First Amendment to Trusteeship Succession
Agreement as of December 28, 1993.
BANK ONE, ARIZONA, NA,
as Trustee under the Indentures
referred to above
By /s/ Susan J. McCord
--------------------
Its Vice President
------------------
2
Exhibit 4.8
<PAGE> 3
FIRST BANK NATIONAL ASSOCIATION,
as Agent
By /s/ Eve D. Kaplan
------------------
Its Vice President
----------------
AMERICAN SOUTHWEST FINANCIAL CORPORATION
By /s/ Jeffrey A. Newman
-----------------------
Its Senior Vice President
---------------------
AMERICAN SOUTHWEST FINANCE CO., INC.
By /s/ Jeffrey A. Newman
-----------------------
Its Senior Vice President
---------------------
WESTAM MORTGAGE FINANCIAL CORPORATION
By /s/ Jeffrey A. Newman
-----------------------
Its Senior Vice President
---------------------
3
Exhibit 4.8
<PAGE> 4
EXHIBIT A
The following pledged loan files have not been delivered to First Bank as of
12/27/93.
UNDELIVERED FILES
- -----------------
<TABLE>
<S> <C> <C>
SERIES I: 4513273 Callahan
SERIES K: 8117101 Day
8117201 Buchanan
8117303 Mauritson
8117306 Uible
8118206 Berlowitz
SERIES P: 1020512 Buckley
SERIES T: 310309 Sanders
3231685 Rockman
SERIES 42: 1022085 Lozano
SERIES 46: 7600099 Aragon
</TABLE>
Exhibit 4.8
<PAGE> 1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in Registration Statement No.
33-21837 on Form S-3 of our report dated August 26, 1994 on the financial
statements as of June 30, 1994 and 1993, and for each of the three years in the
period ended June 30, 1994 included in the Annual Report on Form 10-K of
American Southwest Financial Corporation.
KENNETH LEVENTHAL & COMPANY
Phoenix, Arizona
September 22, 1994
Exhibit 23.
<PAGE> 1
Power of Attorney
AMERICAN SOUTHWEST FINANCIAL CORPORATION
KNOW ALL MEN BY THESE PRESENTS that the undersigned directors and officers of
American Southwest Financial Corporation, an Arizona corporation, hereby
constitute and appoint Jon A. Grove, Alan Hamberlin and Michael H. Feinstein
and each of them, as the true and lawful agents and attorneys-in-fact of the
undersigned with full power and authority in said agents and attorneys-in-fact,
and each of them, to sign for the undersigned in their respective capacities as
directors or officers of American Southwest Financial Corporation, the Annual
Report on Form 10-K of American Southwest Financial Corporation for the fiscal
year ended June 30, 1994 to be filed with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended. Each of the
undersigned further hereby confirm all acts taken by such agents and
attorneys-in-fact, and each of them, as herein authorized.
<TABLE>
Signature Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Jon A. Grove Chairman of the Board September 23, 1994
- --------------------------- and Director
Jon A. Grove
/s/ G. Thomas Eggebrecht Director September 23, 1994
- ----------------------------
G. Thomas Eggebrecht
/s/ Michael H. Feinstein Director, Acting President, September 23, 1994
- ---------------------------- Executive Vice President and
Michael H. Feinstein Chief Operating Officer
/s/ Alan Hamberlin Director September 23, 1994
- ----------------------------
Alan Hamberlin
/s/ Kirby Korth Director September 23, 1994
- ----------------------------
Kirby Korth
Director
- ----------------------------
Philip J. Polich
/s/ Larry Sorsby Director September 23, 1994
- -----------------------------
Larry Sorsby
</TABLE>
Exhibit 24.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-K, ITEM 8, FOR THE FISCAL YEAR ENDED JUNE 30, 1994 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> JUN-30-1994 JUN-30-1993
<PERIOD-START> JUL-01-1993 JUL-01-1992
<PERIOD-END> JUN-30-1994 JUN-30-1994
<CASH> 1,434 3,990
<SECURITIES> 0 0
<RECEIVABLES> 976,637 2,084,529
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 979,826 2,089,179
<CURRENT-LIABILITIES> 257 629
<BONDS> 972,245 2,083,262
<COMMON> 6 6
0 0
0 0
<OTHER-SE> 7317 5281
<TOTAL-LIABILITY-AND-EQUITY> 979,826 2,089,179
<SALES> 0 0
<TOTAL-REVENUES> 162,782 252,513
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 1920 3229
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 157,251 248,934
<INCOME-PRETAX> 3611 349
<INCOME-TAX> 1430 140
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2181 209
<EPS-PRIMARY> 117.88 9.91
<EPS-DILUTED> 117.88 9.91
</TABLE>
