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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-9360
ASSET INVESTORS CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 84-1038736
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3600 South Yosemite Street, Suite 350 80237
Denver, Colorado (Zip Code)
(Address of Principal Executive Offices)
(303) 793-2703
(Registrant's telephone number, including area code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.)
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 __.
As of May 1, 1997, 24,873,345 shares of Asset Investors Corporation
Common Stock were outstanding.
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<PAGE>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION:
Item 1. Condensed Consolidated Financial Statements:
Balance Sheets as of March 31, 1997 (unaudited)
and December 31, 1996............................................. 1
Statements of Income for the three months ended
March 31, 1997 and 1996 (unaudited)............................... 2
Statements of Cash Flows for the three months ended
March 31, 1997 and 1996 (unaudited)............................... 3
Notes to Financial Statements (unaudited)......................... 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 10
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K................................ 17
(i)
<PAGE>
<TABLE>
<CAPTION>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
March 31, December 31,
1997 1996
---- ----
(Unaudited)
Assets
<S> <C> <C>
Cash and cash equivalents $ 68,477 $ 417
Non-agency MBS Bonds -- 68,079
Investment in Commercial Assets 19,627 19,361
Other assets, net 762 2,487
------------ ------------
Total Assets $ 88,866 $ 90,344
============ ============
Liabilities
Accounts payable and accrued liabilities $ 1,070 $ 454
Management fees payable 2,349 525
Short-term borrowings -- 3,000
------------ ------------
Total Liabilities 3,419 3,979
------------ ------------
Stockholders' Equity
Common Stock, par value $.01 per share, 50,000,000 shares authorized;
24,843,345 and 24,840,140 shares issued and outstanding, respectively 248 248
Additional paid-in capital 228,759 228,753
Cumulative dividends (240,727) (238,367)
Cumulative net income 97,802 90,638
------------ ------------
Dividends in excess of net income (142,925) (147,729)
Unrealized holding (losses) gains on debt securities (635) 5,093
------------ ------------
Total Stockholders' Equity 85,447 86,365
------------ ------------
Total Liabilities and Stockholders' Equity $ 88,866 $ 90,344
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
<TABLE>
<CAPTION>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
---------
1997 1996
---- ----
Revenues
<S> <C> <C>
Non-agency MBS bonds $ 2,000 $ 2,830
Equity in earnings of Commercial Assets 464 437
Interest and other income 52 86
--------- ---------
Total revenues 2,516 3,353
--------- ---------
Expenses
Management fees 277 452
General and administrative expenses 336 498
Interest expense 26 --
--------- ---------
Total expenses 639 950
--------- ---------
Net income before gain on resecuritization of non-agency MBS bonds 1,877 2,403
Gain on resecuritization of non-agency MBS bonds 7,359 --
Management fees on resecuritization of non-agency MBS bonds (2,072) --
--------- ---------
Net income $ 7,164 $ 2,403
========= =========
Net income per share $ .29 $ .10
========= =========
Weighted-average shares outstanding 24,841 24,365
Dividends per share $ .095 $ .090
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<TABLE>
<CAPTION>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
---------
1997 1996
---- ----
Cash Flows From Operating Activities
<S> <C> <C>
Net income $ 7,164 $ 2,403
Adjustments to reconcile net income to net cash flows from operating
activities:
Accretion of discounts on non-agency MBS bonds 469 484
Equity in earnings of Commercial Assets (464) (437)
Decrease in other assets 405 208
Increase in accounts payable and accrued liabilities 2,440 365
Gain on resecuritization of non-agency MBS bonds (7,359) --
--------- ---------
Net Cash Provided By Operating Activities 2,655 3,023
--------- ---------
Cash Flows From Investing Activities
Acquisition of non-agency MBS bonds -- (4,157)
Principal collections on non-agency MBS bonds 510 604
Indemnifications from non-agency MBS bonds 37 165
Dividends from Commercial Assets 469 469
Proceeds from resecuritization of non-agency MBS bonds 69,743 --
--------- ---------
Net Cash Provided By (Used In) Investing Activities 70,759 (2,919)
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Cash Flows From Financing Activities
Dividends paid (2,360) (2,192)
Decrease in short-term borrowings, net (3,000) --
Issuance of Common Stock 6 --
--------- ---------
Net Cash Used In Financing Activities (5,354) (2,192)
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Cash and Cash Equivalents
Increase (decrease) 68,060 (2,088)
Beginning of period 417 5,328
--------- ---------
End of period $ 68,477 $ 3,240
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. The Company
Asset Investors Corporation (the "Company") is a real estate investment
trust ("REIT") that was incorporated under Maryland law in 1986. Its shares of
common stock, par value $.01 per share ("Common Stock"), are listed on the New
York Stock Exchange under the symbol "AIC." The Company invests in real estate
assets and owns approximately 27% of the common stock of Commercial Assets, Inc.
(American Stock Exchange, Inc.: CAX) ("Commercial Assets"). Commercial Assets is
a publicly-traded REIT formed by the Company in August 1993 under Maryland law.
The Company's asset acquisition and other policies are determined by
its Board of Directors. The Company's By-laws, as amended, require that a
specified number of the Board of Directors and each committee thereof be
comprised of persons constituting Independent Directors. Pursuant to the
Company's By-laws, an Independent Director is a person "who is not affiliated,
directly or indirectly, with the person or entity responsible for directing or
performing the day-to-day business affairs of the corporation (the "advisor"),
including a person or entity to which the advisor subcontracts substantially all
of such functions, whether by ownership of, ownership interest in, employment
by, any material business or professional relationship with, or by serving as an
officer of the advisor or an affiliated business entity of the advisor."
Multi-Step Plan to Maximize Stockholder Value - In February 1997, the
Board of Directors adopted a multi-step plan (the "1997 Plan") to restructure
the Company's asset base and redeploy its assets in order to reduce risks
associated with the Company's non-agency MBS bond portfolio and maximize
long-term, risk-adjusted returns to stockholders. In March 1997, under the first
step of the 1997 Plan, the Company contributed its portfolio of non-agency MBS
bonds into a structured transaction in which the Company retained a small equity
interest. The Company plans to reinvest the cash proceeds from the
resecuritization of non-agency MBS bonds in the structured transaction in real
estate, a step which would likely reduce its return on assets from 1996 levels,
shift the Company's strategic emphasis to achieving capital appreciation, and
also reduce the risk borne by the Company in its portfolio.
In addition, under the 1997 Plan, the Company converted to an umbrella
partnership real estate investment trust ("UPREIT"). The Company contributed its
assets to an operating partnership while retaining the general partner's
interest. The Company anticipates that the operating partnership will facilitate
the future acquisition of real estate.
The 1997 Plan also provides for consideration of the Company's
acquisition of Financial Asset Management LLC (the "Manager"), a step which
would result in the Company becoming self-managed and fully integrated. A
special committee of Independent Directors has been established to evaluate this
acquisition. The special committee has engaged a financial advisor to assist
them in their evaluation.
B. Presentation of Financial Statements
The Condensed Consolidated Financial Statements of the Company
presented herein have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. These
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financial statements reflect all adjustments, consisting of only normal
recurring accruals, which, in the opinion of management, are necessary to
present fairly the financial position, results of operations and cash flows of
the Company as of March 31, 1997, and for the period then ended and for all
prior periods presented. These statements are condensed and do not include all
the information required by generally accepted accounting principles ("GAAP") in
a full set of financial statements. These statements should be read in
conjunction with the Company's Consolidated Financial Statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
Certain reclassifications have been made in the 1996 Condensed
Consolidated Financial Statements to conform to the classifications used in the
current year.
C. Summary of Significant Accounting Policies
Principles of Consolidation - The Condensed Consolidated Financial
Statements include the accounts of the Company and its wholly owned corporate
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation. The Company's investment in Commercial Assets is
recorded under the equity method. The Company has recorded its proportionate
share of the unrealized holding losses on the commercial mortgage-backed
securities ("CMBS bonds") of Commercial Assets.
Income Taxes - The Company operates in a manner that permits it to
qualify for the income tax treatment accorded to a REIT, as defined under the
Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, the
Company's taxable income ("REIT income") is not subject to federal income tax at
the corporate level. Accordingly, no provision for taxes has been made in the
Condensed Consolidated Financial Statements.
In order to maintain its status as a REIT, the Company generally is
required, among other things, to distribute annually (as determined under the
Code) to its stockholders at least 95% of its REIT income prior to the
"dividends paid deduction." The Company also is required to meet certain asset,
income and stock ownership tests.
Statements of Cash Flows - For purposes of reporting cash flows, cash
maintained in bank accounts, money market funds and overnight cash investments
are considered to be cash and cash equivalents. The Company made interest
payments of $42,000 during the three months ended March 31, 1997.
Non-cash investing and financing activities for the three months ended
March 31, 1997 and 1996 were as follows (in thousands):
March 31,
---------
1997 1996
---- ----
Unrealized holding gains and losses on debt securities $ 5,728 $ 22
Distributions of Common Stock pursuant to DERs $ -- $ 87
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<PAGE>
D. Non-agency MBS Bonds
As of December 31, 1996, the Company owned debt interests in
residential mortgage loan securitizations collateralized by pools of
non-conforming (non-agency guaranteed) single-family mortgage loans ("non-agency
MBS bonds"). In March 1997, the Company resecuritized its non-agency MBS bonds
by contributing them to an owner trust in which it retained the equity interest.
In a private placement, the trust sold $199,894,000 principal amount of debt
securities representing senior interests in the trust's assets. The debt
securities are without recourse to the Company. The Company's equity interest
represents the first-loss class of the portfolio, providing credit support for
the senior debt securities. The equity interest has minimal economic value, and
accordingly, has no carrying value in the financial statements.
The outstanding principal balance of the 214 non-agency MBS bonds owned
by the Company at December 31, 1996, was $224,579,000, less total unamortized
discounts and allowance for credit losses of $162,500,000 for a net amortized
cost of $62,079,000. The portfolio was classified as available-for-sale and
included $6,000,000 of unrealized holding gains at December 31, 1996. The
Company realized a gain of $7,359,000 from the resecuritization of non-agency
MBS bonds in a structured transaction during the three months ended March 31,
1997.
E. Investment in Commercial Assets
On March 31, 1997 and December 31, 1996, the Company owned 2,761,126
shares (approximately 27%) of the common stock of Commercial Assets. Commercial
Assets is a REIT which manages ownership interests in commercial mortgage loan
securitizations of multi-family real estate. The mortgages which comprise the
collateral for Commercial Assets' CMBS bonds are secured by apartment
communities in 36 states. Approximately 25%, 12% and 8% of the mortgage loans
are collateralized by properties in Texas, Arizona and Georgia, respectively.
Presented below is the summarized financial information of Commercial Assets as
reported by Commercial Assets (in thousands):
<TABLE>
<CAPTION>
Balance Sheets March 31, December 31,
1997 1996
---- ----
(Unaudited)
CMBS bonds, net of $2,374 and $3,389
<S> <C> <C>
of unrealized holding losses $ 67,368 $ 61,460
Cash and other assets 6,076 10,946
--------- ---------
Total Assets 73,444 72,406
Total Liabilities 529 487
--------- ---------
Stockholders' Equity $ 72,915 $ 71,919
========= =========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
Statements of Income 1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
CMBS bonds $ 2,044 $ 2,311
Interest 111 7
-------- --------
Total revenues 2,155 2,318
-------- --------
Management fees 297 378
General and administrative 123 330
Interest -- 3
-------- --------
Total expenses 420 711
-------- --------
Net Income $ 1,735 $ 1,607
======== ========
</TABLE>
According to Commercial Assets, at March 31, 1997 and December 31,
1996, it had $2,374,000 and $3,389,000, respectively, of unrealized holding
losses on its CMBS bonds. The Company's share of these unrealized holding losses
on CMBS bonds of $635,000 and $907,000, respectively, is recorded as a reduction
in the carrying value of its investment in Commercial Assets and as a component
of stockholders' equity.
F. Short-Term Borrowings
On July 19, 1996, the Company renewed its one-year, $1,000,000
unsecured line of credit. Advances under this line bear interest at the prime
rate. At March 31, 1997 and December 31, 1996, there were no borrowings under
this line of credit.
On July 24, 1996, the Company secured a $10,000,000 revolving credit
and term loan agreement with a bank. The loan was collateralized by certain of
the Company's non-agency MBS bonds with a net carrying value of $19,461,000 at
December 31, 1996. At December 31, 1996, $3,000,000 was borrowed under this
credit facility at an average effective interest rate of 8.25%. The loan was
repaid and agreement canceled on March 18, 1997, as a result of the
resecuritization of the non-agency MBS bonds. One of the Company's Independent
Directors is a member of the Board of Directors of the parent holding company of
the bank.
G. Other Matters
The Company's day-to-day operations are performed by its Manager
pursuant to a management agreement (the "Management Agreement") which is
extended annually and currently is in effect through December 31, 1997. The
Management Agreement was approved by a majority of the Independent Directors.
Pursuant to the Management Agreement, the Manager advises the Company on its
business and oversees its day-to-day operations subject to the supervision of
the Company's Board of Directors. The Manager also is obligated to present to
the Company asset acquisition opportunities consistent with the policies and
objectives of the Company and to furnish the Board of Directors of the Company
with information concerning the acquisition, holding and disposition of assets.
The terms appearing in quotes below which are not defined herein are defined in
the Management Agreement.
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<PAGE>
The Manager receives various fees for the advisory and other services
performed in connection with the Management Agreement. The Manager provides all
personnel and certain overhead items (at its expense) necessary to conduct the
regular business of the Company.
Pursuant to the Management Agreement, through March 31, 1997, the
Manager received a "Base Fee," an "Incentive Fee" and an "Administrative Fee,"
all of which were payable quarterly per the terms of the Management Agreement.
The Base Fee was an annual fee equal to 3/8 of 1% of the "average invested
assets" of the Company and its subsidiaries for such year. The Incentive Fee was
equal to 20% of the amount of the Company's net book income, calculated in
accordance with GAAP, which was in excess of the return on the Company's
"average net worth" equal to the "Ten-Year U.S. Treasury Rate" plus one percent.
The Manager performed certain bond administration and other related services for
the Company pursuant to the Management Agreement and received an Administrative
Fee of up to $3,500 per annum per non-agency MBS bond for such services.
In connection with the planned change in portfolio assets pursuant to
the 1997 Plan, the Independent Directors of the Company approved an amendment to
the Management Agreement, effective April 1, 1997, that: (i) increased the Base
Fee from 3/8 of 1% to 1% per annum of "average invested assets;" (ii) provided
for an acquisition fee (the "Acquisition Fee") of 1/2 of 1% of the cost of real
estate investments charged at acquisition; and (iii) changed the Incentive Fee
to be calculated from Funds Available for Distribution and Reinvestment ("FADR")
rather than net book income. FADR is representative of the cash flow generated
by the Company and is equal to the Company's net book income adjusted by: (i)
amortization of the discount on the non-agency MBS bonds; (ii) principal
receipts and indemnifications from the non-agency MBS bonds; and (iii) certain
non-cash expenditures. The Administrative Fee will be substantially eliminated
as a result of the resecuritization of the non-agency MBS bonds. The amendment
to the Management Agreement was intended to align the fee structure with equity
interests in real estate, the new portfolio assets to be held.
During the three months ended March 31, 1997 and 1996, the Company
incurred management fees of $277,000 and $452,000, respectively, including: (i)
Base Fees of $46,000 and $53,000, respectively; (ii) Incentive Fees of $32,000
and $235,000, respectively; and (iii) Administrative Fees of $199,000 and
$164,000, respectively. No acquisition fees were incurred during the three
months ending March 31, 1997 or 1996.
The Company also incurred $1,472,000 of Incentive Fees during the three
months ended March 31, 1997, from the gain on the resecuritization of the
non-agency MBS bonds and an added value fee of $600,000 to compensate the
Manager for agreeing to continue as a loss mitigation advisor on the non-agency
MBS bonds. Because the Manager has agreed to continue on as the loss mitigation
advisor on the non-agency MBS bonds, the Company was able to realize more
proceeds and a higher gain from the structured transaction than if the Manager
did not continue as the loss mitigation advisor. The added value fee paid to the
manager represents a portion of the increased proceeds and higher gain.
The Company's 1997 Plan provides for consideration of the Company's
acquisition of the Manager, a step which would result in the Company becoming
self-managed and fully integrated. A special committee of Independent Directors
has been established to evaluate this transaction. The special committee has
engaged a financial advisor to assist them in their evaluation.
At March 31, 1997, the Company's net operating loss ("NOL") carryover
was approximately $96,000,000 and its capital loss carryover was approximately
$35,000,000. The NOL carryover may be used to offset all or a portion of the
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Company's REIT income, and as a result, to reduce the amount of income that the
Company must distribute to stockholders to maintain its status as a REIT. The
NOL carryover is scheduled to expire between 2007 and 2009 and the capital loss
carryover is scheduled to expire between 1998 and 2000.
H. Subsequent Event
On May 14, 1997, the Company acquired interests in eight manufactured
housing communities and a related manufactured housing community management
business for an aggregate purchase price of approximately $29,400,000. The
consideration was approximately $22,900,000 of cash, the assumption of
approximately $5,000,000 of existing debt, 363,372 shares of Common Stock of the
Company and 91,760 Operating Partnership Units of the Company.
The properties acquired are eight adult communities located in the
Tampa, Florida area consisting of 1,540 home sites with the opportunity to
develop and lease an additional 364 home sites on an earn-out basis. The
management business acquired serves these eight communities plus an additional
four communities with 477 home sites located in the same market area.
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<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The Company is a REIT that was incorporated under Maryland law in 1986.
Its shares of Common Stock are listed on the New York Stock Exchange under the
symbol "AIC." The Company invests in real estate assets and owns 27% of the
common stock of Commercial Assets, a publicly-traded REIT formed by the Company
in August 1993.
The Company operates in a manner that permits it to qualify for the
income tax treatment accorded to a REIT under the Code. Accordingly, the
Company's REIT income, with certain limited exceptions, is not subject to state
or federal income tax at the corporate level. In order to maintain its REIT
status, the Company is required, among other things, to distribute annually (as
determined under the Code) to its stockholders at least 95% of its REIT income
prior to the "dividends paid deduction." The Company must also meet certain
asset, income and stock ownership tests.
The Company's asset acquisition and other policies are determined by
its Board of Directors. The Company's By-laws, as amended, require that a
specified number of the Board of Directors and each committee thereof be
comprised of persons constituting Independent Directors. Pursuant to the
Company's By-laws, an Independent Director is a person "who is not affiliated,
directly or indirectly, with the person or entity responsible for directing or
performing the day-to-day business affairs of the corporation (the "advisor"),
including a person or entity to which the advisor subcontracts substantially all
of such functions, whether by ownership of, ownership interest in, employment
by, any material business or professional relationship with, or by serving as an
officer of the advisor or an affiliated business entity of the advisor."
The Company's day-to-day operations are performed by the Manager,
pursuant to the Management Agreement which is extended annually subject to the
approval of a majority of the Independent Directors. The Manager is subject to
the supervision of the Board of Directors. As part of its duties, the Manager
presents the Company with asset acquisition opportunities consistent with the
policies and objectives of the Company and furnishes the Board of Directors with
information concerning the acquisition, holding and disposition of assets. The
Company has no employees. Certain employees of the Manager have been designated
as officers of the Company.
The Company has previously conducted its operations so as not to become
regulated as an investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"). The 1940 Act exempts entities that, directly or
through majority-owned subsidiaries, are "primarily engaged in the business of
purchasing or otherwise acquiring mortgages and other liens on and interests in
real estate" ("Qualifying Interests"). In order to qualify for this exemption,
the Company, among other things, must maintain at least 55% of its assets in
Qualifying Interests and may also be required to maintain an additional 25% in
Qualifying Interests or other real estate-related securities. As a result of the
resecuritization, the Company holds insufficient Qualifying Interests to claim
this exemption. The Company does not now engage, nor has it engaged or intended
to engage in the business of investing, reinvesting, owning, holding or trading
of securities. Since the closing of resecuritization, the Company has taken the
steps necessary to give itself the benefits of a temporary exemption under the
1940 Act. In carrying out the 1997 Plan, the Company's intends that any new real
estate assets acquired will be Qualifying Interests. See "FORWARD LOOKING
INFORMATION" below.
Multi-Step Plan to Maximize Stockholder Value - In February 1997, the
Board of Directors adopted the 1997 Plan to restructure the Company's asset base
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<PAGE>
and redeploy its assets in order to reduce risk associated with the Company's
non-agency MBS bond portfolio and maximize long-term, risk-adjusted returns to
shareholders. Under the first step of the 1997 Plan, the Company completed the
resecuritization of its portfolio of non-agency MBS bonds in March 1997. The
Company contributed its non-agency MBS bonds to an owner trust in which it
retained an equity interest. The owner trust then sold debt securities
representing senior interests in the trust's assets. The Company's equity
interest in the trust represents the first-loss class of the portfolio,
providing credit support for the senior debt securities. Future earnings from
the retained equity interest are not considered probable because they are
dependent upon the credit losses on the underlying mortgage collateral.
Accordingly, the Company's equity interest in the trust has no carrying value in
the financial statements.
The Company plans to reinvest the cash proceeds from the
resecuritization in real estate, a step which would likely reduce its return on
assets from 1996 levels, shift the Company's strategic emphasis to the
management of income producing real estate with the potential of achieving
capital appreciation, and also reduce the investment risk borne by the Company
in its portfolio.
On May 14, 1997, the Company acquired interests in eight manufactured
housing communities and a related manufactured housing community management
business for an aggregate purchase price of approximately $29,400,000. The
consideration was approximately $22,900,000 of cash, the assumption of
approximately $5,000,000 of existing debt, 363,372 shares of Common Stock of the
Company and 91,760 Operating Partnership Units of the Company.
The properties acquired are eight adult communities located in the
Tampa, Florida area consisting of 1,540 home sites with the opportunity to
develop and lease an additional 364 home sites on an earn-out basis. The
management business acquired serves these eight communities plus an additional
four communities with 477 home sites located in the same market area.
In addition, under the 1997 Plan, the Company converted to an UPREIT.
The Company contributed its assets to an operating partnership while retaining
the general partner's interest. The Company anticipates that the operating
partnership will facilitate the future acquisition of real estate.
The 1997 Plan also provides for consideration of the Company's
acquisition of its Manager, a step which would result in the Company becoming
self-managed and fully integrated. A special committee of Independent Directors
has been established to evaluate this acquisition. The special committee has
engaged a financial advisor to assist them in their evaluation.
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<PAGE>
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
The table below summarizes the Company's results of operations during
the three months ended March 31, 1997 and 1996 (in thousands, except per share
data).
Three Months Ended
March 31,
---------
1997 1996
---- ----
Revenues
<S> <C> <C>
Non-agency MBS bonds $ 2,000 $ 2,830
Equity in earnings of Commercial Assets 464 437
Interest and other income 52 86
--------- ---------
Total revenues 2,516 3,353
--------- ---------
Expenses
Management fees 277 452
General and administrative expenses 336 498
Interest expense 26 --
--------- ---------
Total expenses 639 950
--------- ---------
Book income prior to gain on structured transaction 1,877 2,403
Gain on structured transaction 7,359 --
Management fees on structured transaction (2,072) --
--------- ---------
Book income $ 7,164 $ 2,403
========= =========
Book income per share $ .29 $ .10
========= =========
Estimated REIT income $ 932 $ 3,860
========= =========
Estimated REIT income per share $ .04 $ .16
========= =========
Dividends $ 2,360 $ 2,192
========= =========
Dividends per share $ .095 $ .090
========= =========
Weighted-average shares outstanding 24,841 24,365
</TABLE>
Book Income
Non-agency MBS Bonds - Income computed in accordance with GAAP ("book
income") from the Company's non-agency MBS bonds decreased to $2,000,000 during
the first quarter of 1997 compared with $2,830,000 for the same period in 1996
primarily due to the resecuritization of the bonds. The Company completed the
resecuritization of its non-agency MBS bonds in March 1997.
In connection with the transaction, the Company realized net proceeds
of $69,743,000 before related management fees. A gain of $7,359,000 is included
in results of operations for the three months ended March 31, 1997, along with
$1,472,000 of Incentive Fees during the three months ended March 31, 1997, from
resecuritization of non-agency MBS bonds related to the gain and an added value
fee of $600,000 to compensate the Manager for agreeing to continue as a loss
mitigation advisor on the non-agency MBS bonds. Because the Manager has agreed
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<PAGE>
to continue on as the loss mitigation advisor on the non-agency MBS bonds, the
Company was able to realize more proceeds and a higher gain from the structured
transaction. The added value fee paid to the manager represents a portion of the
increased proceeds and higher gain. The portfolio of non-agency MBS bonds was
classified as available-for-sale and included $6,000,000 of unrealized holding
gains at December 31, 1996.
Commercial Assets - Income from the Company's shares of Commercial
Assets (which, for book income purposes, is based on the Company's pro rata
share of Commercial Assets' book income) for the three months ended March 31,
1997 and 1996 was $464,000 and $437,000, respectively. Commercial Assets
reported to the Company that the increase in income is primarily due to
increased interest income and lower management fees and general administrative
expenses partially offset by lower revenues from the early redemption of two
CMBS bonds in May 1996.
At March 31, 1997 and December 31, 1996, Commercial Assets' CMBS bonds
had outstanding principal balances of $94,921,000 and $89,297,000, respectively,
and weighted-average coupons of 8.05% and 8.15%, respectively. The increase in
the outstanding principal balance and decrease weighted-average coupon of the
CMBS bonds from December 31, 1996 to March 31, 1997, was primarily the result of
the March 1997 contribution of two of the CMBS bonds (Lehman Capital Corporation
Trust Certificate, Series 1994-2 and Series 1994-3) into a newly created trust
(Blaylock Mortgage Capital Corporation Multi-family Trust). Interests in bond
classes within the same CMBS issuance which were owned by another party were
also contributed to the trust. The trust then issued seven classes of CMBS bonds
collateralized by the CMBS bond classes contributed into the trust. The Company
received an interest in five of the new bond classes which corresponded to the
Company's ownership interests in the two bonds contributed to the trust. The
Company also acquired the remaining $5,737,000 principal balance of two of the
new bond classes rated BB and B at a cost of $4,801,000, which resulted in the
100% ownership in the five subordinate new classes. The coupon on the new
classes is 6.425% compared to the coupon of 6.5% on the original two classes.
According to Commercial Assets, at March 31, 1997 and December 31,
1996, it had $2,374,000 and $3,389,000, respectively, of unrealized holding
losses on its CMBS bonds. The Company's share of these unrealized holding
losses, $635,000 and $907,000 as of March 31, 1997 and December 31, 1996,
respectively, was recorded as a reduction in the carrying value of its
investment in Commercial Assets and as a component of stockholders' equity.
Interest and Other Income - Interest and other income decreased during
the three months ended March 31, 1997, compared with the same period in 1996
because of lower average cash balances prior to the resecuritization of the
non-agency MBS bonds.
Management Fees - Included in Management Fees are Incentive Fees
incurred by the Company along with Base Fees and Administrative Fees applicable
to the non-agency MBS bonds prior to the resecuritization. Management Fees
decreased to $277,000 during the three months ended March 31, 1997 compared with
$452,000 for the same period in 1996 primarily due to the resecuritization of
the non-agency MBS bonds in March 1997 which resulted in lower Base Fees and
lower income for purposes of calculating Incentive Fees. In addition, an
increase in the average Ten-Year U.S. Treasury Rate had the effect of raising
the threshold above which Incentive Fees are paid.
In connection with the planned change in portfolio assets pursuant to
the 1997 Plan, the Independent Directors of the Company approved an amendment to
the Management Agreement, effective April 1, 1997, that: (i) increased the Base
Fee from 3/8 of 1% to 1% per annum of "average invested assets;" (ii) provided
- 13 -
<PAGE>
for an acquisition fee (the "Acquisition Fee") of 1/2 of 1% of the cost of real
estate investments charged at acquisition; and (iii) changed the Incentive Fee
to be calculated from Funds Available for Distribution and Reinvestment ("FADR")
rather than net book income. FADR is representative of the cash flow generated
by the Company and is equal to the Company's net book income adjusted by: (i)
amortization of the discount on the non-agency MBS bonds; (ii) principal
receipts and indemnifications from the non-agency MBS bonds; and (iii) certain
non-cash expenditures. The Administrative Fee will be substantially eliminated
as a result of the structured transaction of the non-agency MBS bonds. The
amendment to the Management Agreement was intended to align the fee structure
with equity interests in real estate, the new portfolio assets to be held.
The 1997 Plan provides for consideration of the Company's acquisition
of the Manager, a step which would result in the Company becoming self-managed
and fully integrated. A special committee of the Board of Directors has been
established to evaluate this transaction. If the Company acquires the Manager,
management fees will be discontinued, but the Company will receive other
revenues and be obligated for expenses of the Manager. The impact of the
potential acquisition on the Company's earnings and cashflow is, in part,
dependent upon the consideration paid for the Manager and currently cannot be
estimated. See "FORWARD LOOKING INFORMATION" below.
General and Administrative Expenses - General and administrative
expenses decreased during the three months ended March 31, 1997, compared with
the same period in 1996 due primarily to the elimination of Dividend Equivalent
Rights ("DER") expense in the second quarter of 1996, reductions in accounting
and consulting fees, and lower costs associated with the Company's annual
report.
Interest Expense - Interest expense on the Company's borrowing
facilities during the three months ended March 31, 1997, was on the $3,000,000
of short-term borrowings outstanding at December 31, 1996, which were repaid
during the first quarter of 1997.
REIT Income
The Company's estimated REIT income during the three months ended March
31, 1997, was $932,000 compared to $3,860,000 during the three months ended
March 31, 1996. The decrease in estimated REIT income was primarily due to
higher credit losses on the non-agency MBS bonds and higher management fees.
Reconciliation of REIT Income and Book Income
Substantially all of the difference between REIT income and book income
is due to: (i) the method of recording credit losses, which for REIT income
purposes are not deducted until they occur and which for book income purposes
are estimated and reflected as a reduction of revenues in the form of lower
discount amortization included in income from non-agency MBS bonds; (ii)
differences in the calculation of discount and premium amortization for REIT
income compared to book income attributable to non-agency MBS bonds; (iii) gains
on the sales of assets recorded for book income purposes that resulted in either
capital losses or capital gains for REIT income purposes that are reduced to
zero by the Company's capital loss carryover; and (iv) recognition of income
from Commercial Assets which for REIT income purposes is based upon dividends
received and which for book income purposes is based on the Company's pro rata
share of Commercial Assets' book income.
- 14 -
<PAGE>
NOL and Capital Loss Carryovers
At March 31, 1997, the Company's NOL carryover was approximately
$96,000,000 and its capital loss carryover was approximately $35,000,000. The
NOL carryover may be used to offset all or a portion of the Company's REIT
income, and as a result, to reduce the amount of income that the Company must
distribute to stockholders to maintain its status as a REIT. The NOL carryover
is scheduled to expire between 2007 and 2009 and the capital loss carryover is
scheduled to expire between 1998 and 2000.
Dividend Distributions
On March 6, 1997, the Company declared a first quarter dividend of
$2,360,000 or nine and a half cents per share, compared with $2,192,000, or nine
cents per share, for the same period in 1996. The 1997 first quarter dividend
was paid on March 31, 1997, to stockholders of record on March 17, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company uses its cash flow from operating activities and other
capital resources to provide working capital to support its operations, for the
payment of dividends to its stockholders, for the acquisition of assets and for
the repayment of borrowings.
The table below summarizes the Company's operating cash flows and uses
of those cash flows for the three months ended March 31, 1997 and 1996 (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1997 1996
---- ----
Cash Generated By (Used In) Operations:
Non-agency MBS bonds:
<S> <C> <C>
Interest $ 2,469 $ 3,314
Principal 510 604
Indemnifications 37 165
Dividends from Commercial Assets 469 469
Repayment of short-term borrowings ( 3,000) --
Total expenses, net of interest income and other 187 (291)
--------- ----------
Cash Generated By Operations $ 672 $ 4,261
========= ==========
Issuance of Common Stock $ 6 $ --
========= ==========
Dividends Paid $ (2,360) $ (2,192)
========= ==========
Acquisitions of Non-agency MBS bonds $ -- $ (4,157)
========= ==========
Net proceeds from structured transaction $ 69,743 $ --
========= ==========
</TABLE>
In March 1997, the Company completed the resecuritization of its
non-agency MBS bonds which provided the Company with approximately $67,671,000
of cash after payment of transaction costs and $2,072,000 of related management
- 15 -
<PAGE>
fees. The Company plans to reinvest the cash in real estate. Investments in real
estate will likely reduce the Company's return on assets from 1996 levels,
however, such investments may result in increased opportunities for capital
appreciation and reduce portfolio risk. The Company's goal is to invest in real
estate assets with: (i) future growth potential, (ii) a stable, unlevered return
of approximately 9% to 10%, and (iii) the option to convert the underlying land
to an alternative use at some future point in time. There is no assurance that
the Company will achieve this goal. Until the proceeds from the structured
transaction can be reinvested into real estate, the Company may invest the
proceeds in short-term investments which generate lower returns. See "FORWARD
LOOKING INFORMATION" below.
The Company declared $2,360,000 ($.095 per share) in dividends during
the first three months of 1997. The Board of Directors will continue its policy
of reviewing its dividends on a quarter-to-quarter basis and will adjust
distribution levels as it considers necessary. The Company expects lower
earnings and cashflow for the remainder of 1997 compared to 1996 and the first
quarter of 1997 as the Company invests in low-yielding short-term investments
during this period of portfolio transition. Dividends for the remainder of 1997,
and possibly into the future are also expected to be lower than 1996 and first
quarter 1997 dividends. See "FORWARD LOOKING INFORMATION" below.
On July 19, 1995, the Company obtained a one-year, $1,000,000 unsecured
line of credit. The line of credit was renewed for an additional year on July
19, 1996. Advances under this line bear interest at the prime rate. At March 31,
1997 and December 31, 1996, there were no borrowings under this line of credit.
On May 14, 1997, the Company acquired interests in eight manufactured
housing communities and a related manufactured housing community management
business for an aggregate purchase price of approximately $29,400,000. The
consideration was approximately $22,900,000 of cash, the assumption of
approximately $5,000,000 of existing debt, 363,372 shares of Common Stock of the
Company and 91,760 Operating Partnership Units of the Company.
The properties acquired are eight adult communities located in the
Tampa, Florida area consisting of 1,540 home sites with the opportunity to
develop and lease an additional 364 home sites on an earn-out basis. The
management business acquired serves these eight communities plus an additional
four communities with 477 home sites located in the same market area.
FORWARD LOOKING INFORMATION
Some of the statements in this Form 10-Q, as well as statements made by
the Company in periodic press releases, oral statements made by the Company's
officials to analysts and stockholders in the course of presentations about the
Company and conference calls following quarterly earnings releases, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The statements include projections of the
Company's cash flow and dividends. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by the
forward-looking statements. Such factors include the following: general economic
and business conditions; interest rate changes; risks inherent in owning real
estate or debt secured by real estate; competition; the availability of real
estate assets at prices which meet the Company's investment criteria; the
Company's ability to maintain or reduce expense levels and the Company's ability
to complete the 1997 Plan.
- 16 -
<PAGE>
PART II
OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit No. Description
10.5(a) Trust Agreement dated as of March 26, 1997, among the
Registrant, as depositor, Asset Investors Secured Financing
Corporation and Wilmington Trust Company, as Owner Trustee
10.5(b) Pooled Certificate Transfer Agreement between the Registrant
and Asset Investors Secured Financing Corporation dated as of
March 26, 1997
10.5(c) Indenture, dated as of March 27, 1997, between Structured
Mortgage Trust 1997-1 and State Street Bank and Trust Company
10.5(d) Note Purchase Agreement, dated as of March 26, 1997, among
Structured Mortgage Trust 1997-1, Asset Investors Secured
Financing Corporation and Bear, Stearns & Co. Inc.
10.5(e) Trust Certificate issued to Asset Investors Secured Financing
Corporation evidencing its ownership of the Structured
Mortgage Trust 1997-1
27 Financial Data Schedule.
(b) Reports on Form 8-K:
No Current Reports on Form 8-K were filed by the Registrant
during the period covered by this Quarterly Report on Form
10-Q.
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.
ASSET INVESTORS CORPORATION
(Registrant)
Date: May 14 , 1997 By /s/Kevin J. Nystrom
--------------------
Kevin J. Nystrom
Chief Financial Officer
- 17 -
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000804138
<NAME> ASSET INVESTORS CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 68,477
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 68,477
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 88,866
<CURRENT-LIABILITIES> 3,419
<BONDS> 0
0
0
<COMMON> 248
<OTHER-SE> 85,199
<TOTAL-LIABILITY-AND-EQUITY> 88,866
<SALES> 0
<TOTAL-REVENUES> 2,516
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 613
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26
<INCOME-PRETAX> 1,877
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,877
<DISCONTINUED> 5,287
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,164
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.29
</TABLE>
STRUCTURED MORTGAGE TRUST 1997-1
TRUST AGREEMENT
Among
ASSET INVESTORS CORPORATION
as Depositor,
ASSET INVESTORS SECURED FINANCING CORPORATION
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
dated as of March 26, 1997
<PAGE>
ARTICLE I - DEFINITIONS
1.01 Definitions........................................1
1.02 Indenture Definitions..............................4
ARTICLE II - ORGANIZATION
2.01 Name of the Trust; Statement of
Intent.............................................4
2.02 Office.............................................5
2.03 Declaration of Trust...............................5
2.04 Purpose and Powers.................................5
2.05 Transfer of Additional Trust
Property to the Trust..............................5
2.06 Acknowledgment of Receipt of
Trust Property by Owner Trustee....................6
2.07 Representations, Warranties and
Covenants of the Depositor.........................6
2.08 Representations and Warranties of
WTC ...............................................8
2.09 Execution of the Purchase
Agreement..........................................9
2.10 Liability of Holders of Trust
Certificates.......................................10
ARTICLE III - CONCERNING THE OWNERS
3.01 Ownership Prior to Closing Date....................10
3.02 Issuance of Trust Certificates.....................10
3.03 Transfer of Trust Certificates.....................10
3.04 Mutilated, Destroyed, Lost or
Stolen Trust Certificates..........................13
ARTICLE IV - CONCERNING THE AGENT
4.01 Appointment as Agent...............................14
4.02 Instructions to Owner Trustee......................14
4.03 Direction of Agent.................................15
4.04 Replacement of Agent...............................15
4.05 No Agent...........................................15
ARTICLE V - PAYMENTS AND DISTRIBUTIONS
5.01 Payments...........................................15
5.02 Method of Payment..................................16
5.03 Reports............................................16
i
<PAGE>
ARTICLE VI - DUTIES OF THE OWNER TRUSTEE
6.01 Issuance of the Notes..............................17
6.02 In General.........................................17
6.03 Right of Owner Trustee to Request
Instructions.......................................17
6.04 Activities of the Trust............................18
6.05 No Duties Except As Specified in
Agreement or Instructions..........................18
6.06 No Action Except Under Specified
Documents or Instructions..........................19
6.07 Further Assurances.................................19
6.08 Restrictions.......................................19
6.09 Books and Records..................................19
6.10 Communication with Owners..........................19
ARTICLE VII - CONCERNING THE OWNER TRUSTEE
7.01 Acceptance of Trusts and Duties....................20
7.02 Furnishing of Documents............................22
7.03 [Reserved].........................................22
7.04 No Segregation of Moneys;
No Interest........................................22
7.05 Reliance; Employment of Agents
and Advice of Counsel..............................22
7.06 Not Acting in Individual Capacity..................23
7.07 Special Servicing and
Collateral Fund Agreements.........................23
ARTICLE VIII - INDEMNIFICATION BY OWNERS
8.01 Trust Expenses.....................................24
8.02 Indemnification....................................24
8.03 Compensation.......................................25
8.04 Lien on Trust Property.............................25
ARTICLE IX - TERMINATION OF TRUST AGREEMENT
9.01 Termination of Trust
Agreement..........................................24
ii
<PAGE>
ARTICLE X - SUCCESSOR OWNER TRUSTEES AND ADDITIONAL TRUSTEES
10.01 Resignation of Owner Trustee;
Appointment of Successor...........................26
10.02 Appointment of Additional
Trustees...........................................28
10.03 Amendments to Certificate
of Trust...........................................30
ARTICLE XI - MISCELLANEOUS
11.01 Supplements, Amendments
and Waivers........................................30
11.02 No Legal Title to Trust
Property in Owners.................................30
11.03 Pledge of Collateral by Owner
Trustee is Binding.................................31
11.04 Limitations on Rights of Others...............................31
11.05 Non-Petition..................................................31
11.06 Notices 31
11.07 Authorization for Action Deemed to
be Given...........................................32
11.08 Severability..................................................32
11.09 Separate Counterparts.........................................32
11.10 Successors and Assigns........................................32
11.11 Headings 32
11.12 Governing Law.................................................32
EXHIBITS
EXHIBIT A: Form of Trust Certificate
EXHIBIT B: Form of Letter of Representations
SCHEDULES
SCHEDULE A: Description of the Securities
SCHEDULE B: Description of the Assigned Indemnities
iii
<PAGE>
TRUST AGREEMENT relating to STRUCTURED MORTGAGE TRUST
1997-1, dated as of March 26, 1997, by and among ASSET INVESTORS CORPORATION, a
Maryland corporation, as Depositor, ASSET INVESTORS SECURED FINANCING
CORPORATION, a Delaware corporation and wholly-owned subsidiary of the Depositor
(the "SPE") and WILMINGTON TRUST COMPANY, a banking corporation organized under
the laws of the State of Delaware (in its individual capacity, "WTC").
ARTICLE I
DEFINITIONS
1.01. Definitions. For all purposes of this Agreement, the
following terms shall have the meanings set forth below.
"Act" shall have the meaning set forth in Section 2.01.
"Affiliate" of any Person means any other Person controlling,
controlled by or under common control with such Person.
"Agreement" means this Trust Agreement and any amendments or
modifications hereof.
"Authorized Officer" means, with respect to the Owner Trustee,
any officer or representative of the Owner Trustee who is authorized to act for
the Owner Trustee in matters relating to, and binding upon, the Trust and whose
name appears on a list of such authorized officers and representatives furnished
by the Owner Trustee to the Depositor and the Indenture Trustee, as such list
may be amended or supplemented from time to time.
"Business Day" means any day except a Saturday, Sunday or other
day on which banking institutions in the State of Delaware are authorized by law
or regulation to close.
"Certificate Register" means the register maintained pursuant to
Section 3.03(a) hereof.
"Closing Date" means March 27, 1997, or such other date as
specified by the Depositor.
"Collateral" means that portion of the Trust Property that will
be granted to the Indenture Trustee from time to time pursuant to the terms of
the Indenture and therefore will be subject to the Lien of the Indenture, as
identified by the defined term "Trust Estate" in the Indenture.
<PAGE>
"Company/SPE Transfer Agreement" means the Agreement between
Asset Investors Corporation and the SPE pursuant to which the Securities and
certain other assets are transferred to the SPE.
"Corporate Trust Office" means the office of the Owner Trustee
located at Rodney Square North 1100 N. Market Street, Wilmington, Delaware
19890-0001.
"Debtor Relief Laws" means any applicable bankruptcy,
insolvency, reorganization, moratorium, and other similar laws relating to or
affecting creditors' rights generally any court decisions with respect thereto
and general principles of equity.
"Depositor" means Asset Investors Corporation, a Maryland
corporation, and its successors and assigns.
"Depository Agreement" means the Letter of Representa- tions to
the Depository Trust Company in connection with the Notes.
"Distribution Date" means the Business Day following each
Payment Date as defined in the Indenture.
"Fiscal Year" shall mean from each January l to the following
December 31.
"Grant" and variants thereof has the meaning specified in the
Indenture.
"Indemnified Expenses" shall have the meaning set forth in
Section 8.02.
"Indenture" means the Indenture dated March 27, 1997, between
the Trust and the Indenture Trustee which provides for the issuance of the
Notes, and the Indenture as it may be amended or supplemented from time to time.
"Indenture Trustee" means the trustee under the Indenture, and
any successor Person that shall have become the trustee under the Indenture.
"Initial Purchaser" means Bear, Stearns & Co. Inc. as initial
purchaser of the Notes pursuant to the Purchase Agreement".
"Letter of Representations" means the letter to be furnished by
- 2 -
<PAGE>
each purchaser of Trust Certificates in connection with its purchase of Trust
Certificates substantially in the form of Exhibit C hereto.
"Lien" means any lien, mortgage, security interest, pledge,
charge, equity or claim of others or encumbrance of any kind.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Note Rate" means with respect to any Distribution Date the
weighted average pass-through rate paid on the Notes pursuant to the terms of
the Indenture and the Notes on the immediately preceding Payment Date (as
defined in the Indenture).
"Note Agreements" means the Indenture, the Notes, the Depository
Agreement and the Purchase Agreement.
"Noteholder" means the Person in whose name a Note is registered
in the Note Register pursuant to Section 3.05 of the Indenture.
"Notes" means the Collateralized Notes, Class A, Class B, Class
C and Class D, issued by the Trust acting through the Owner Trustee under the
Indenture.
"Owners" means the Depositor and its successors in interest as
beneficiaries of the Trust pursuant to Article III.
"Ownership Percentage" with respect to any Owner means the
proportion (expressed as a percentage) of the ownership interest in the Trust
held by such Owner.
"Owner Trustee" means Wilmington Trust Company, not in its
individual capacity but solely in its fiduciary capacity as owner trustee under
this Agreement, and any successor owner trustee hereunder.
"Payment Account" has the meaning specified in the Indenture.
"Periodic Reports" means any reports or submissions that the
Trust is required pursuant to the Indenture to make with respect to the Notes.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
- 3 -
<PAGE>
"Purchase Agreement" means the Purchase Agreement relating to
the Notes among the Initial Purchaser, the Depositor and the Trust.
"Secretary of State" means the office of the Secretary of State
of the State of Delaware.
"Securities" means the mortgaged-backed securities which are to
be conveyed to the Trust under this Agreement as part of the Trust Property and
which are set forth in Schedule A hereto.
"SPE" means Asset Investors Secured Financing Corporation, a
Delaware corporation which has been organized and is wholly owned by the
Depositor.
"Trust" means the trust established by this Agreement,
designated as Structured Mortgage Trust 1997-1."
"Trust Certificate" means a certificate evidencing the Ownership
Percentage of an Owner substantially in the form annexed hereto as Exhibit A.
"Trust Property" means all money, instruments and other property
deposited in the Trust pursuant hereto, including all proceeds thereof.
Notwithstanding the foregoing, "Trust Property" shall not include any amounts
paid or payable to WTC pursuant to Article VIII.
"WTC" means Wilmington Trust Company and any successor owner
trustee hereunder, in its individual capacity and not as Owner Trustee.
1.02. Indenture Definitions. Capitalized terms used herein and
not otherwise defined herein shall have the meaning assigned to them in the
Indenture.
ARTICLE II
ORGANIZATION
2.01. Name of Trust; Statement of Intent. The name of the Trust
formed hereby shall be Structured Mortgage Trust 1997-1, in which name the Owner
Trustee may conduct the business and affairs of the Trust, make and execute
contracts and agreements on behalf of the Trust and sue and be sued on behalf of
the Trust. It is the intention of the parties hereto that the Trust constitute a
business trust under the Delaware Business Trust Act (12 Del.C. ' 3801 et
- 4 -
<PAGE>
seq.)(the "Act") and that this Agreement constitute the governing instrument of
the Trust under the Act. The Owner Trustee hereby is authorized to file a
Certificate of Trust under said Act with the Secretary of State.
2.02. Office. The office of the Trust shall be in care of the
Owner Trustee, at the address set forth in Section 11.06 or at such other
address as the Owner Trustee may designate by notice to the Owners.
2.03. Declaration of Trust. WTC is hereby appointed to hold and
agrees to hold the Trust Property as Owner Trustee in trust upon the terms and
conditions and for the use and benefit of the holders of the Trust Certificates
as herein set forth. The Owner Trustee hereby acknowledges that it has received
the sum of $1.00 from the Depositor, such sum initially constitutes the Trust
Property. Upon receipt of the additional Trust Property as provided in Section
2.05 and of proceeds from the sale of the Notes, the Trust shall repay such
amount to the Depositor, shall issue the Trust Certificates as provided in
Section 3.02 and, thereafter the Depositor shall have no direct interest in the
Trust.
2.04. Purpose and Powers. (a) The purposes of the Trust are to
issue and administer the Notes, to acquire and own the Collateral and to pledge
the Collateral to support the Notes pursuant to the Indenture, all for the
benefit of the Owners. The Trust shall not have power to perform any act or
engage in any business or activity whatsoever except for the foregoing and as
provided in clause (b) and any activity that is necessary, convenient or
incidental to the foregoing and within the contemplation of the Indenture.
(b) The Trust may acquire additional mortgaged-backed
securities, pledge them to the Trustee and issue additional classes of notes;
provided that prior to taking any such action, the Owner Trustee and the Trustee
are provided with (i) an opinion of counsel to the effect that the Trust will
not be treated as a taxable mortgage pool for federal income tax purposes, (ii)
a written acknowledgement from Moody's that such action will not adversely
affect its then rating of each Class of Notes, and (iii) a written
acknowledgement from an investment banking firm that such action will not
adversely affect the Class D Notes (if such Class of Notes is outstanding and is
not then rated by Moody's).
2.05. Transfer of Additional Trust Property to the Trust. As of
the Closing Date, the SPE shall transfer to the Trust without recourse all its
right, title and interest in and to (i) the Securities identified on Schedule A
- 5 -
<PAGE>
attached hereto and all distributions payable thereon on and after the Pooled
Certificate Information Date, (ii) its rights under the Company/SPE Transfer
Agreement and (iii) the indemnities described in Schedule B attached hereto.
Legal title to all of the Trust Property shall be vested at all times in the
Trust as a separate legal entity except where applicable law in any jurisdiction
requires title to any part of the Trust Property to be vested in a trustee or
trustees, in which case title shall be deemed to be vested in the Owner Trustee,
a co-trustee and/or a separate trustee, as the case may be. The Trust Property
shall be held for the common, equal and ratable use, benefit and security of all
Persons who shall from time to time be Owners and without preference of any of
the Owners over any of the others by reason of priority in the time of issue,
sale or negotiation of the Trust Certificates held by such Owners.
2.06. Acknowledgement of Receipt of Trust Property by Owner
Trustee. The Owner Trustee agrees to acknowledge on behalf of the Trust, by
executing a certificate to that effect, based on receipt of a certification by
the Indenture Trustee, which may be in the form of a signed copy of the
Indenture, the deposit of the Securities, with the Indenture Trustee referred to
in Section 2.05 on the Closing Date.
2.07. Representations, Warranties and Covenants of the Depositor
and the SPE. (a) The Depositor and the SPE each hereby represents and warrants
to the Owner Trustee that as of the date hereof and as of the Closing Date:
(i) It is, and throughout the term of this Agreement will
remain, a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and has the
corporate power and authority to perform its obligations under this
Agreement;
(ii) The execution, delivery and performance of this Agreement
have been duly authorized by all requisite corporate action on its part;
(iii) This Agreement has been duly executed and delivered and,
assuming due authorization, execution, and delivery by WTC, will
constitute its legal, valid and binding obligation, enforceable in
accordance with its terms, except only as such enforcement may be
limited by applicable Debtor Relief Laws;
(iv) Its execution and delivery of this Agreement and its
performance and compliance with the terms of this Agreement will not (A)
violate its articles of incorporation or by-laws, and, to the best of
its knowledge, after reasonable investigation, (B) violate any law or
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regulation, or any administrative or judicial decree or order to which
it is subject or (C) constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or
result in the breach of, any material contract, agreement or other
instrument to which it is a party or which may be applicable to it or
any of its assets;
(v) To the best of its knowledge, after reasonable
investigation, it is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state,
municipal or other governmental agency, which default might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Depositor or its properties or
might have consequences that would affect its performance hereunder;
(vi) It is not a party to or bound by any agreement or
instrument or subject to any articles of incorporation, by-laws or any
other corporate restriction or any judgment, order, writ, injunction,
decree, law or regulation which now or in the future may materially and
adversely affect its ability to perform its obligations under this
Agreement or which requires the consent of any third Person to the
execution of this Agreement or the performance by it of its obligations
under this Agreement;
(vii) No litigation is pending or, to the best of its knowledge,
threatened against it which might materially and adversely affect its
entering into this Agreement or performing its obligations under this
Agreement; and
(viii) Upon the contribution, assignment or other transfer of
any of the Trust Property to the Trust under this Agreement the Trust
will have received good title thereto free and clear of any Lien, and
the Trust will have the right to pledge and deliver the Collateral to
the Indenture Trustee in accordance with the Indenture and Section 6.01
of this Agreement. Upon the pledge and delivery of the Collateral by the
Trust to the Indenture Trustee in the manner contemplated by this
Agreement and the Indenture, and assuming the validity and binding
effect of the Indenture and relying as aforesaid and assuming no action
by the Trust to grant any other Liens, the Indenture Trustee will have
obtained a valid first security interest in the Collateral, prior to all
other Liens;
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(b) The Depositor and the SPE hereby covenant that, so long as
any of the Notes remain outstanding and any principal or interest thereon
remains unpaid:
(i) They will use their best efforts to cause the Trust to have
good and marketable title to the Trust Property, free of all Liens
(other than the Lien of the Indenture) and to have lawful authority to
assign, transfer and pledge the Collateral to the Indenture Trustee;
(ii) Immediately upon the transfer of the Trust Property to the
Trust pursuant to this Agreement, they will make any appropriate
notations on their respective records to indicate that the Trust
Property has been transferred to the Trust pursuant to this Agreement,
and, to the extent it constitutes Collateral, has been pledged by the
Trust to the Indenture Trustee to secure payment of the Notes;
(iii) If the Depositor or the SPE shall take any action which
would cause the Trust to become an investment company which would be
required to register under the Investment Company Act of 1940, they will
use their best efforts to cause the Trust to be registered under such
Act; and
(iv) Without the prior consent of holders of 60% of the Voting
Rights of each Class of outstanding Notes and the written confirmation
from Moody's that such action will not adversely affect its then ratings
of the Notes of any Class, the Depositor will not dispose of its
ownership interest in the SPE and the SPE will not transfer its Trust
Certificates.
(c) The Depositor and the SPE hereby represent and warrant that,
as of the date hereof and as of the Closing Date, the Trust is not and will not
be required to register as an investment company under the Investment Company
Act of 1940.
2.08. Representations and Warranties of WTC. WTC hereby
represents and warrants to the Depositor, as of the Closing Date, that:
(i) WTC is a banking corporation organized under the laws of the
State of Delaware, validly existing and in good standing under the laws
of the State of Delaware;
(ii) WTC has full power, authority and legal right to execute
and deliver this Agreement and to perform its obligations under this
Agreement, and has taken all necessary action to authorize the
execution, delivery and performance by it of this Agreement;
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(iii) The execution, delivery and performance by WTC, in its
individual capacity and in its capacity as Owner Trustee on behalf of
the Trust, as the case may be, of this Agreement and the Indenture, and
the issuance of the Notes and the Trust Certificates by the Trust acting
through the Owner Trustee are within the corporate power of WTC, have
been duly authorized by all necessary corporate action on the part of
WTC (no action by its shareholders being required) and do not and will
not (i) violate or contravene any judgment, injunction, order or decree
binding on WTC, (ii) violate, contravene or constitute a default under
any provision of the certificate of incorporation or by-laws of WTC or
of any material agreement, contract, mortgage or other instrument
binding on WTC or (iii) result in the creation or imposition of any Lien
attributable to WTC on the Trust Property, other than as contemplated
hereunder;
(iv) No consent, approval, authorization or order of, or filing
with, any court or regulatory, supervisory or governmental agency or
body is required under Delaware law by or with respect to WTC in
connection with the execution, delivery and performance by WTC, in its
individual capacity and in its capacity as Owner Trustee on behalf of
the Trust, as the case may be, of this Agreement or the Indenture or the
issuance of the Notes and the Trust Certificates by the Trust acting
through the Owner Trustee or the consummation by the Owner Trustee of
the transactions contemplated hereby or thereby (except for the filing
of the Certificate of Trust with the Secretary of State); and
(v) This Agreement has been duly executed and delivered by the
Owner Trustee and constitutes the legal, valid and binding obligation of
the Owner Trustee, enforceable against the Owner Trustee in accordance
with its terms, except as the enforcement hereof may be limited by
applicable Debtor Relief Laws.
2.09. Execution of the Purchase Agreement; Proceeds. The Owner
Trustee is hereby authorized to execute the Purchase Agreement on behalf of the
Trust. The Notes shall be issued on the Closing Date in accordance with the
terms of the Indenture and the Purchase Agreement and shall be sold pursuant to
the Purchase Agreement. The net proceeds of the sale of the Notes paid on the
Closing Date shall be distributed by the Owner Trustee to the SPE or in
accordance with its direction on the Closing Date by wire transfer.
2.10. Liability of Holders of Trust Certificates. Each holder of
Trust Certificates agrees to be severally liable with any other holders of Trust
Certificates in proportion to their beneficial interests in the Trust for all
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fees, expenses, taxes, indemnity payments and other liabilities of the Trust
(other than the principal and interest on the Notes, for which holders of the
Trust Certificates shall have no liability) to the extent not satisfied out of
the Trust Property, in accordance with their terms, including those incurred by
WTC in its individual capacity or as Owner Trustee, in the administration of the
Trust hereunder, except that no holder of Trust Certificates shall be liable for
any such liabilities arising prior to the date on which such holder acquired, or
after the date on which such holder transferred in accordance with the terms
hereof, its Trust Certificate, to the extent such fees, expenses, taxes,
indemnity payments and other liabilities of the Indenture Trustee or the Owner
Trustee or WTC, as the case may be, with respect to the Trust, are not paid out
of the Trust Property.
ARTICLE III
CONCERNING THE OWNERS
3.01. Ownership Prior to Closing Date. The Depositor shall be
the sole Owner of the Trust prior to the Closing Date. The Depositor shall pay
organizational expenses of the Trust as they may arise. No Trust Certificate
shall be issued to the Depositor to evidence its interest in the Trust.
3.02. Issuance of Trust Certificates. (a) On the Closing Date,
and in connection with the transfer of the Securities, the Owner Trustee,
concurrently with the issuance of the Notes, shall issue a Trust Certificate or
Trust Certificates in substantially the form attached hereto as Exhibit A,
evidencing ownership of the entire beneficial interest in the Trust, to the SPE.
(b) Each Trust Certificate shall be executed by manual signature
on behalf of the Trust by an Authorized Officer of the Owner Trustee. Trust
Certificates bearing the manual signature of an individual who was, at the time
such signature was affixed, an Authorized Officer shall bind the Trust,
notwithstanding that such individual has ceased to be an Authorized Officer
prior to the delivery of such Trust Certificate or is not an Authorized Officer
at the date of such Trust Certificates. Each Trust Certificate shall be dated
the date of its issuance.
3.03. Transfer of Trust Certificates. (a) The Depositor hereby
appoints the Owner Trustee as registrar and transfer agent with respect to the
Trust Certificates and the Owner Trustee hereby accepts such appointment. The
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Owner Trustee shall keep at its Corporate Trust Office a register (the
"Certificate Register") in which, subject to such reasonable regulations as it
may prescribe, the Owner Trustee shall provide for the registration of the Trust
Certificates and for transfers and exchanges of the Trust Certificates as herein
provided. At the option of the Owners, Trust Certificates may be exchanged for
other Trust Certificates of like percentage of beneficial interest in the Trust
upon surrender to the Owner Trustee of the Trust Certificates to be exchanged.
Whenever any Trust Certificates are so surrendered for exchange, the Owner
Trustee shall execute and deliver the Trust Certificates which the Owner making
the exchange is entitled to receive. Every Trust Certificate presented or
surrendered for transfer or exchange shall be duly endorsed by, or be
accompanied by a written instrument of transfer in form satisfactory to the
Owner Trustee, and duly executed by the Owner or his attorney duly authorized in
writing. No transfer of a Trust Certificate shall be made if such transfer would
violate any terms of this Agreement or the Letter of Representations nor shall
any transfer be effective unless an appropriate entry has been made on the
Certificate Register. A transfer of a Trust Certificate or part thereof shall
not be effective unless the transferee shall have signed and delivered to the
Owner Trustee an instrument containing the transferee's agreement to be bound by
all the terms of this Agreement, together with evidence satisfactory to the
Owner Trustee demonstrating the transferee's compliance with the requirements of
subsection (c) of this Section 3.03. Further, before any Trust Certificates may
be transferred to any Person, the Owner Trustee shall have received (i) the
prior consent of holders of at least 60% of the Voting Rights of each Class of
outstanding Notes and (ii) a written acknowledgement from Moody's that such
action will not adversely affect its then rating of each Class of Notes. The
Owners shall be entitled to all rights provided to them under this Agreement and
shall be subject to the provisions and conditions contained in this Agreement
and in the Trust Certificates.
(b) No offer, sale, transfer or other disposition (including
pledge) of any Trust Certificate shall be made by any Owner thereof unless
registered under the Securities Act of 1933, as amended (the "1933 Act"), or an
exemption from the registration requirements of the 1933 Act and any applicable
state securities or "Blue Sky" laws is available and the holder (except the
Depositor) and prospective transferee of the Trust Certificate each certify to
the Owner Trustee, in writing, as to the facts surrounding the transfer.
(c) Unless waived by the Owner Trustee (which waiver may be
given without the consent of any holder of Trust Certificates), no offer, sale,
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transfer or other disposition (including pledge) of any Trust Certificate shall
be made to any transferee unless (i) the net worth of the transferee is not less
than the greater of (A) the product of $15,000,000 and the percentage ownership
of the Trust by the transferee after the proposed transfer and (B) $5,000,000;
(ii) the transferee understands that the Trust Certificates will be offered in a
transaction not involving any public offering within the meaning of the
Securities Act, and that, if in the future it decides to resell, pledge or
otherwise transfer any Trust Certificates, such Trust Certificates may be
resold, pledged or transferred only (a) to an institutional Accredited Investor
as defined in Rule 5.01(a)(1)-(3) and (7) as promulgated under Regulation D
under the Securities Act or pursuant to another exemption from the registration
requirements of the Securities Act and any applicable state laws or (b) pursuant
to an effective registration statement under the Securities Act; (iii) if the
transferee is a corporation purchasing the Trust Certificates in the State of
California, it has a net worth of at least $14,000,000 according to its most
recent audited financial statement; and (v) the proposed transfer is not to the
Indenture Trustee or its affiliates (as defined under the 1933 Act) or to a
Rating Agency. The Owner Trustee may require appropriate evidence as to
compliance with the foregoing conditions of transfer and the Owner Trustee shall
be fully protected in relying on such evidence in making any transfer. The Owner
Trustee shall not bear any of the costs associated with the transfer of the
Trust Certificates.
(d) If any legislation is enacted or regulation adopted which would
result in the imposition of any tax on the Trust or the holders of the Notes,
and, as a result, the Rating Agency advises that it intends to reduce the rating
on any Class of the Notes below the rating for such Class specified in the
Indenture, the then Owners shall be deemed to have agreed to an amendment, and,
if requested, to sign such other documents as may be necessary, to the agreement
by which they purchased the Trust Certificate, this Agreement and the Indenture,
such amendment or other documents to be in such form as such Rating Agency may
require so as to permit the Bonds to retain said rating.
(e) Each Trust Certificate shall bear a legend setting forth
restrictions on transferability substantially as follows: "THIS CERTIFICATE HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES
THAT THIS CERTIFICATE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)
TO AN INSTITUTIONAL ACCREDITED INVESTOR AS DEFINED IN RULE 5.01(a)(1)-(3) AND
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(7) UNDER REGULATION D UNDER THE SECURITIES ACT OR PURSUANT TO ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE
STATE LAW OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT. THE TRANSFER OF THIS INTEREST WILL NOT BE EFFECTIVE UNLESS THE
TRANSFEREE HAS SIGNED AND DELIVERED TO THE ISSUER A LETTER OF REPRESENTATIONS
SUBSTANTIALLY IN THE FORM SET FORTH AS EXHIBIT C TO THE TRUST AGREEMENT DATED AS
OF MARCH 26, 1997, BY AND AMONG ASSET INVESTORS CORPORATION (THE "DEPOSITOR"),
ASSET INVESTORS SECURED FINANCING CORPORATION AND WILMINGTON TRUST COMPANY, AS
OWNER TRUSTEE. THIS TRUST CERTIFICATE MAY NOT BE TRANSFERRED WITHOUT THE CONSENT
OF HOLDERS OF AT LEAST 60% of the VOTING RIGHTS OF EACH CLASS OF THE TRUSTS'
COLLATERALIZED NOTES ISSUED PURSUANT TO THE INDENTURE DATED AS OF MARCH 27, 1997
BETWEEN THE TRUST AND STATE STREET BANK AND TRUST COMPANY, AS INDENTURE TRUSTEE,
VOTING SEPARATELY, AND RECEIPT OF WRITTEN CONFIRMATION FROM MOODY'S INVESTORS
SERVICE, INC. (OR ITS SUCCESSOR) THAT SUCH TRANSFER WILL NOT CAUSE IT TO
DOWNGRADE OR WITHDRAW ITS THEN RATING OF ANY CLASS OF SUCH NOTES.
(f) There shall be no fee charged with respect to the transfer or
exchange of any Trust Certificate hereunder; provided, however, that the Owner
Trustee may require the payment by the Owner of a sum sufficient to cover any
tax or other governmental charge or other expenses (including the fees and
expenses of the Owner Trustee) that may be imposed in relation to such transfer
or exchange.
(g) The Owner Trustee shall not be required to transfer, and the
Certificate Registrar shall not be required to register, any transfer for a
period of ten (10) days prior to any Distribution Date.
(h) Notwithstanding anything contained herein to the contrary, the Owner
Trustee shall not be responsible for ascertaining whether any transfer complies
with the registration provisions or exemptions from the Securities act of 1933,
as amended, the Securities Act of 1934, as amended, applicable state securities
law or the Investment Company Act; provided, however, that if a certificate is
specifically required to be delivered to the Owner Trustee by a purchaser or
transferee of a Trust Certificate, the Owner Trustee shall be under a duty to
examine the same to determine whether it conforms to the requirements of this
Trust Agreement and shall promptly notify the party delivering the same if such
certificate does not so conform.
3.04. Mutilated, Destroyed, Lost or Stolen Trust Certificates.
If (i) any mutilated Trust Certificate is surrendered to the Owner Trustee, or
the Owner Trustee receives evidence to its satisfaction of the destruction, loss
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or theft of any Trust Certificate, and (ii) there is delivered to the Owner
Trustee such security or indemnity as may be required by it to save it harmless,
then, in the absence of actual knowledge of a responsible officer in the
Corporate Trust Administration Division of the Owner Trustee that such Trust
Certificate has been acquired by a bona fide purchaser, the Owner Trustee shall
execute and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Trust Certificate, a new Trust Certificate of like
tenor bearing the same issue number, with notations, if any, as the Owner
Trustee shall determine upon surrender and cancellation of, and in exchange and
substitution for, such mutilated Trust Certificate or in lieu of and in
substitution for the Trust Certificate so lost, stolen or destroyed, and
aggregate Ownership Percentage. In connection with the issuance of any new Trust
Certificate under this Section 3.04, the Owner Trustee may require the payment
by the Owner of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses (including the
fees and expenses of the Owner Trustee) connected therewith. Any duplicate Trust
Certificate issued pursuant to this Section 3.04 shall constitute complete and
indefeasible evidence of ownership of a beneficial interest in the Trust, to the
extent of the Ownership Percentage represented by the Trust Certificate, as if
originally issued, whether or not the lost, stolen or destroyed Trust
Certificate shall be found at any time.
ARTICLE IV
CONCERNING THE AGENT
4.01. Appointment as Agent. The Depositor shall act as agent for
the Owners (in such capacity, the "Agent") until its resignation or removal
pursuant to Section 4.04. The Agent shall have no responsibility under this
Agreement other than to render the services called for hereunder in good faith.
The Agent shall not be liable to the Owners, the Owner Trustee or any other
Person except by reason of its acts or omissions to act which constitute bad
faith, willful misconduct, gross negligence or reckless disregard of its duties
under this Agreement.
4.02. Instructions to Owner Trustee. The right to
(a) instruct the Owner Trustee pursuant to Section 6.03, (b) to agree to
compensation for the Owner Trustee pursuant to Section 8.03, (c) to appoint a
successor Owner Trustee or to remove the Owner Trustee pursuant to Section
10.01(a), and (d) to consent to amendments and waivers pursuant to Section
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11.01, in each case as reserved to the Owners of Trust Certificates pursuant to
this Agreement, shall be exercised by the Agent on behalf of the Owners of Trust
Certificates. The Agent shall promptly respond to every request for instructions
addressed to it by the Owner Trustee.
4.03. Direction of Agent. In performing its duties hereunder,
the Agent shall act in accordance with any written instruction signed on behalf
of Owners holding, in the aggregate, a majority of the beneficial interest in
the Trust and in so acting, to the extent the Agent acts in good faith in
accordance with any such instruction received from such Owners, the Agent shall
not be liable to any person.
4.04. Replacement of Agent. The Agent may resign its duties at
any time on notice to the Owners and the Owner Trustee. The Agent may be
removed, and in the event of the removal or resignation of the Agent, a
successor Agent will be appointed by Owners holding, in the aggregate, a
majority of the ownership interest in the Trust. No such removal or resignation
shall be effective until a successor Agent has been appointed and accepted such
appointment, unless it is determined by the Owners that there shall be no Agent,
and until a notice of such removal meeting the requirements of this section is
delivered to the Owner Trustee.
4.05. No Agent. If at any time there is no Agent appointed under
this Article, Owners holding a majority of the ownership interests in the Trust
shall give such directions or consents or take such other actions as are
reserved herein to the Agent or to the Owners.
ARTICLE V
PAYMENTS AND DISTRIBUTIONS
5.01. Payments. Any amounts paid to the Owner Trustee by the
Indenture Trustee pursuant to Section 12.01 of the Indenture, free and clear of
the Lien of the Indenture, and any amounts received by the Owner Trustee in
respect of the Trust Property, shall be applied in the following order:
(a) to pay any amounts then due to the Owner Trustee or WTC as
the case may be, under this Agreement; and
(b) to pay any current operating expenses of the Trust.
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Any sums remaining after such application shall be distributed to the Owners, in
proportion to their Ownership Percentages, promptly and no later than two
Business Days after the date on which the Owner Trustee has knowledge of its
receipt of such funds. If for any reason funds are not so distributed, the Agent
shall have the right to direct their investment. All payments to be made under
this Agreement by the Owner Trustee shall be made only from the income and
proceeds of the Trust Property and only to the extent that the Owner Trustee has
received such income or proceeds. WTC shall not be liable to the Owners or the
Indenture Trustee or any other person for any amounts payable pursuant to this
Section 5.01 and, except as specifically provided herein, is not subject to any
liability under this Agreement.
5.02. Method of Payment. All amounts payable to an Owner
pursuant to this Agreement will be paid by the Owner Trustee to the Owner or a
nominee thereof by crediting the amount to be distributed to the Owner to an
account maintained by the Owner with the Owner Trustee in immediately available
funds or by transferring such amount in immediately available funds to a banking
institution with bank wire transfer facilities for the account of the Owner, as
instructed in writing from time to time by the Owner.
5.03. Reports. (a) Each payment to an Owner pursuant to Section
5.01 shall be accompanied by a report setting forth, for the related month and
for each preceding month of the same Fiscal Year, the amounts, if any, received
by the Owner Trustee together with their application.
(b) The Owner Trustee will (i) cause to be prepared such annual
or other reports, (ii) make such elections and file such tax returns relating to
the Trust as may from time to time be required under any applicable state or
Federal statute or rule or regulation thereunder and (iii) cause to be mailed to
any Owner any or all of such tax returns when requested to do so by any such
Owner or the Agent. It is the intention of the parties hereto that, for federal
income tax purposes, the Trust shall be treated as a grantor trust under Part I,
Subpart E of Subchapter J of the Code, and that the Owner Trustee shall file (or
cause to be filed) tax returns consistent with characterization of the Trust as
a grantor trust. The Owner Trustee shall be deemed to be in compliance with its
obligations pursuant to this Section 5.03(b) if (i) the Trust enters into an
agreement with Financial Asset Management LLC with respect to the preparation of
tax returns relating to the Trust and (ii) it executes and delivers the reports
and documents required hereunder.
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ARTICLE VI
DUTIES OF THE OWNER TRUSTEE
6.01. Issuance of the Notes. In connection with the issuance of
the Notes, the Owner Trustee is hereby authorized and directed:
(a) to execute and deliver on behalf of the Trust the Depository
Agreement, the Indenture, the Trust Certificates and the Notes;
(b) to pledge on behalf of the Trust the Collateral to the
Trustee as security for the Notes; and
(c) to take whatever action shall be required to be taken by the
Owner Trustee by the terms of, and subject to the terms of, this Agreement.
6.02. In General. It shall be the duty of the Owner Trustee:
(a) to discharge (or cause to be discharged) all
responsibilities assigned to it pursuant to the terms of this Agreement,
(b) to cause the preparation of any Periodic Reports, and
(c) to administer the Trust in the interest of the Owners, in
accordance with the express purpose and powers of the Trust and the provisions
of this Agreement.
6.03. Right of Owner Trustee to Request Instructions.
(a) The Owner Trustee shall take such action or shall refrain
from taking such action under this Agreement as it shall be directed pursuant to
a specific provision of this Agreement or, absent such a specific provision, as
it shall be directed in a notice delivered by the Agent or the Owners holding in
the aggregate a majority of the ownership interest in the Trust in accordance
with Section 11.06 hereof. In connection with the following non-ministerial
matters, the Owner Trustee shall not act unless it shall be directed in a notice
delivered by the Agent or the Owners holding in the aggregate a majority of the
ownership interest in the Trust in accordance with Section 11.06 hereof:
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(i) the amendment of the Indenture by a supplemental
indenture in circumstances where the consent of the
Noteholders is required;
(ii) the initiation of any claim or lawsuit by the
Trust and the compromise of any claim or lawsuit
brought by or against the Trust;
(iii) the appointment of successor Note Registrars,
successor Paying Agents, successor Indenture Trustees,
and any Indenture accountants pursuant to the
Indenture;
(iv) the decision to remove the Indenture Trustee; and
(v) the decision to elect to redeem the Notes pursuant
to Section 10.01 of the Indenture.
(b) If in performing its duties under this Agreement the Owner
Trustee (i) is unable to decide between alternative courses of action, or (ii)
is unsure of the application of any provision of this Agreement, the Indenture
or the Note Agreements, the Owner Trustee may deliver a notice to the Owners and
the Agent in accordance with Section 11.06 requesting written instructions as to
the course of action desired by them and the Owners shall make any determination
required pursuant to this Section 6.03, as reflected in instructions to the
Owner Trustee delivered in accordance with Section 11.06; provided, however,
that if the Owner Trustee does not receive such instructions within 10 days
after it has delivered such notice, or such shorter period of time set forth in
such notice, it may, but shall be under no duty to, take or refrain from taking
such action not inconsistent with this Agreement as it shall deem advisable and
in the best interests of the Owners and the Owner Trustee shall not be liable
for such action or inaction.
6.04. Activities of Trust. The Trust shall not engage in any
activities other than those required or authorized by the terms of this
Agreement or the Indenture.
6.05. No Duties Except as Specified in Agreement or
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment in respect of, register, record, sell, dispose of or otherwise
deal with the Trust Property, or to otherwise take or refrain from taking any
action under, or in connection with, any document contemplated hereby to which
the Trust or the Owner Trustee is a party, except as expressly provided by the
terms of this Agreement or in written instructions pursuant to Section 6.03; and
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no implied duties or obligations shall be read into this Agreement against the
Owner Trustee. WTC nevertheless agrees that it will, at its own cost and
expense, promptly take all action as may be necessary to discharge any Liens on
any part of the Trust Property which are attributable to actions by or claims
against WTC that are not related to the ownership of the Trust Property or the
administration of the Trust Property or the transactions contemplated by this
Agreement or the Note Agreements.
6.06. No Action Except Under Specified Documents or
Instructions. The Owner Trustee agrees that it will not manage, control, use,
sell, dispose of or otherwise deal with the Trust Property except (i) as
required by the terms of this Agreement, (ii) in accordance with the powers
granted to, or the authority conferred upon, the Owner Trustee pursuant to this
Agreement, or (iii) in accordance with the express terms hereof or in accordance
with written instructions received by the Owner Trustee pursuant to Section
6.03.
6.07. Further Assurances. Upon written request, the Owner
Trustee shall execute and deliver all such other instruments, documents or
certificates and take all such other actions as may be necessary or advisable in
connection with the performance of its duties hereunder and the consummation of
the transactions contemplated hereby.
6.08. Restrictions. The Owner Trustee shall take no action (a)
that is inconsistent with the purposes and powers of the Trust as set forth in
Section 2.04 or (b) if the Owner Trustee has been notified by the Agent or the
Indenture Trustee that such action would cause or threaten to cause any
nationally recognized statistical rating organization that has rated the Notes
to downgrade the ratings of the Notes. Neither the Owners nor the Agent on
behalf of the Owners shall direct the Owner Trustee to take action that would
violate the provisions of this Section 6.08.
6.09. Books and Records. The Owner Trustee shall keep proper
books of record and account of all the transactions under this Agreement,
including the Certificate Register, at its Corporate Trust Office, and such
books and records shall be open to inspection by any Owner at all reasonable
times during the usual business hours of the Owner Trustee.
6.10. Communication with Owners. If an Owner (for purposes of
this Section, an "Applicant") applies in writing to the Owner Trustee, and such
application states that the Applicant desires to communicate with other Owners
and is accompanied by a copy of the form of proxy or other communication which
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such Applicant proposes to transmit, then the Owner Trustee shall, within five
Business Days after the receipt of such application, at its election, either:
(1) afford such Applicant access to the Certificate Register
maintained by the Owner Trustee in accordance with Section 3.03(a)
hereof; or
(2) inform such Applicant as to the approximate number of Owners
whose names and addresses appear in the Certificate Register, and as to
the approximate cost of mailing to such Owners the form of proxy or
other communication, if any, specified in such application.
If the Owner Trustee shall elect not to afford such Applicant
access to the Certificate Register, the Owner Trustee shall, upon the written
request of such Applicant, mail to each Owner whose name and address appears in
the Certificate Register a copy of the form of proxy or other communications
that is specified in such request with reasonable promptness after a tender to
the Owner Trustee of the material to be mailed and of payment, or provision for
the payment, of the reasonable expenses of mailing. Each Owner acknowledges and
agrees that the Owner Trustee shall incur no liability in connection with any
information provided pursuant to this Section 6.10.
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
7.01. Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform the same but only upon the terms
of this Agreement. The Owner Trustee also agrees to disburse all moneys actually
received by it constituting part of the Trust Property upon the terms of this
Agreement. WTC shall not be answerable or accountable under any circumstances,
except (i) for its own willful misconduct or gross negligence, (ii) in the case
of the inaccuracy of any representation or warranty contained in Section 2.08,
(iii) for liabilities arising from the failure by WTC to perform obligations
expressly undertaken by it in the last sentence of Section 6.05, or (iv) for
taxes, fees or other charges on, based on or measured by any fees, commissions
or compensation received by WTC in connection with any of the transactions
contemplated by this Agreement or the Note Agreements. In particular, but not by
way of limitation:
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(a) WTC shall not be liable for any error of judgment made in
good faith by a responsible officer of the Owner Trustee;
(b) No provision of this Agreement shall require WTC to expend
or risk funds or otherwise incur any financial liability in the performance of
any of the Owner Trustee's rights or powers hereunder, if WTC shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured or provided
to it;
(c) Under no circumstance shall WTC be liable for indebtedness
evidenced by any Notes;
(d) [Reserved]
(e) WTC shall not be responsible for or in respect of the
recitals herein, the validity or sufficiency of this Agreement or for the due
execution hereof by the Depositor, the SPE or the Agent or for the form,
character, genuineness, sufficiency, value or validity of any Collateral or for
or in respect of the validity or sufficiency of the Indenture, and WTC shall in
no event assume or incur any liability, duty or obligation to any Noteholder,
the Depositor or to any Owner, other than as expressly provided for herein;
(f) WTC shall not be under any obligation to appear in,
prosecute or defend any action which in its opinion may require it to incur any
out-of-pocket expense or any liability, unless it shall be furnished with such
reasonable security and indemnity against such expense or liability as it may
require, and any out-of-pocket cost of the Owner Trustee as a result of such
actions shall be deductible from and a charge against the Trust Property to the
extent that such Trust Property is not subject to the Lien of the Indenture. The
Owner Trustee may, but shall be under no duty to, undertake such action as it
may deem necessary at any and all times, without any further action by any
Owner, to protect the Trust Property and the rights and interests of the Owners
pursuant to the terms of this Agreement and the Indenture; provided, however,
that WTC may obtain reimbursement for the out-of-pocket expenses and costs of
such actions, undertakings or proceedings from the Trust Property to the extent
that such portion of the Trust Property is not subject to the Lien of the
Indenture;
(g) Notwithstanding anything contained herein to the contrary,
neither WTC nor the Owner Trustee shall be required to take any action in any
jurisdiction other than in the State of Delaware if the taking of such action
will (i) require the consent or approval or authorization or order of or the
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giving of notice to, or the registration with or taking of any action in respect
of, any state or other governmental authority or agency of any jurisdiction
other than the State of Delaware; (ii) result in any fee, tax or other
governmental charge under the laws of any jurisdiction or any political
subdivisions thereof in existence on the date hereof other than the State of
Delaware becoming payable by WTC; or (iii) subject WTC to personal jurisdiction
in any jurisdiction other than the State of Delaware for causes of action
arising from acts unrelated to the consummation of the transactions by WTC or
the Owner Trustee, as the case may be, contemplated hereby.
7.02. Furnishing of Documents. The Owner Trustee will furnish to
the Agent, promptly upon receipt thereof, duplicates or copies of all reports,
notices, requests, demands, certificates, financial statements and any other
instruments furnished to the Owner Trustee hereunder or under the Note
Agreements, unless the Owner Trustee reasonably believes a copy already has been
furnished to the Agent.
7.03. [Reserved]
7.04. No Segregation of Moneys; No Interest. Except as otherwise
provided herein or in the Indenture, moneys received by the Owner Trustee
hereunder need not be segregated in any manner except to the extent required by
law and may be deposited under such general conditions as may be prescribed by
law, and neither the Owner Trustee nor WTC shall be liable for any interest
thereon.
7.05. Reliance; Employment of Agents and Advice of Counsel. (a)
The Owner Trustee shall incur no liability to anyone in acting upon any
signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion or other document or paper believed by it to be genuine and
believed by it to be signed by the proper party or parties. The Owner Trustee
may accept a certified copy of a resolution of the board of directors or other
governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in full force
and effect. As to any fact or matter the manner of ascertainment of which is not
specifically prescribed herein, the Owner Trustee may for all purposes hereof
rely on a certificate signed by the president or any vice president and by the
treasurer or an assistant treasurer or the secretary or an assistant secretary
of the relevant party, as to such fact or matter, and such certificate shall
constitute full protection to the Owner Trustee for any action taken or omitted
to be taken by it in good faith in reliance thereon.
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(b) In its exercise or administration of the trusts and powers
hereunder, including its obligations under Section 6.02(b) and any duties or
obligations under the Indenture, the Owner Trustee may, at the expense of the
Trust Property, employ agents, attorneys, accountants and auditors and enter
into agreements with any of them, and WTC, in its individual capacity and in its
capacity as Owner Trustee, shall not be answerable or accountable for the
default or misconduct of any such agents, attorneys, accountants or auditors or
for any action taken by the Owner Trustee in accordance with advice given as a
result of such employment or consultation, if such agents, attorneys,
accountants or auditors shall have been selected by the Owner Trustee with
reasonable care.
(c) In the administration of the trusts hereunder or in the
performance of its duties and obligations under any of the Note Agreements, the
Owner Trustee may act directly or, at the expense of the Trust Property, through
agents or attorneys and may, at the expense of the Trust Property, consult with
counsel, accountants, auditors and other skilled persons to be selected and
employed by it, and the Owner Trustee shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with the advice or opinion
of any such counsel, accountants or other skilled persons and not contrary to
this Agreement.
7.06. Not Acting in Individual Capacity. Except as provided in
this Article VII, in accepting the trusts hereby created WTC acts solely as
trustee hereunder and not in its individual capacity, and all persons having any
claim against the Owner Trustee by reason of the transactions contemplated by
the Note Agreements shall look only to the Trust Property for payment or
satisfaction thereof; provided, however, that nothing contained herein shall
protect WTC or the Owner Trustee against any liability to which either would
otherwise be subject by reason of or with respect to the matters contained in
clauses (i) to (iv) of Section 7.01.
7.07 Special Servicing and Collateral Fund Agreements. The Owner
Trustee acknowledges for the benefit of each Servicer or Master Servicer under a
Special Servicing Agreement to which AIC is a party and which relates to any of
the Securities that it is not entitled to exercise any contractual rights under
those various Special Servicing Agreements either prior to, or, if applicable,
after any foreclosure upon the Collateral due to a default under the Notes,
without the express prior written consent of such Servicer or Master Servicer.
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ARTICLE VIII
INDEMNIFICATION
8.01. Trust Expenses. The Owners, on a pro rata basis based upon
their respective Ownership Percentages, shall pay (or reimburse WTC for) all
reasonable out-of-pocket expenses, disbursements and advances incurred or made
by the Owner Trustee (including without limitation the amounts set forth in
clauses (a) through (d) of Section 5.01), to the extent not paid out of the
Trust Property, in accordance with any of the provisions of this Agreement and
the Note Agreements, including, without limitation, the reasonable compensation,
expenses and disbursements of such agents, representatives, experts and counsel
as the Owner Trustee may employ in connection with the exercise and performance
of its rights and duties under this Agreement and the Note Agreements.
8.02. Indemnification. (a) On a pro rata basis based upon their
respective Ownership Percentages, the Owners covenant to indemnify WTC for, and
to hold it harmless against, any loss, liability, obligations, damages,
penalties, taxes (excluding any taxes payable by WTC on or measured by any
compensation for services rendered by the Owner Trustee under this Agreement),
actions, claims, suits or out-of-pocket expenses or costs including the
reasonable fees and expenses of counsel) of any kind and nature whatsoever
incurred or arising out of or in connection with the acceptance or
administration of this trust (the "Indemnified Expenses"), to the extent not
paid out of the Trust Property, including the reasonable costs and out-of-pocket
expenses of defending itself against any claim of liability in the premises,
except for expenses resulting from the matters referred to in the proviso clause
to Section 7.06 or for the Owner Trustee's failure to use ordinary care to
dispense funds pursuant to Section 5.01. The indemnities under this Section 8.02
shall survive the termination of this Agreement.
(b) The Owner Trustee shall not be required to take or refrain
from taking any action under this Agreement or the Note Agreements (other than
the giving of notices) unless WTC shall have been indemnified, in manner and
form satisfactory to WTC, against any Indemnified Expenses which may be incurred
or charged in connection therewith. The Owner Trustee shall not be required to
take any action if WTC shall reasonably determine, or shall have been advised by
counsel, that such action is likely to result in personal liability, or is
contrary to the terms hereof or of any document contemplated hereby to which the
Owner Trustee is a party or otherwise contrary to law.
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8.03. Compensation. WTC shall receive as compensation for the
Owner Trustee's services hereunder a fee which shall be set forth in a separate
agreement with the Depositor.
8.04. Lien on Trust Property. WTC shall have a Lien on the Trust
Property for any compensation or indemnity due hereunder, such Lien to be
subject only to prior Liens of the Indenture, including the lien of the
Indenture Trustee.
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
9.01. Termination of Trust Agreement. (a) This Agreement and the
trusts created hereby may be terminated by the Depositor at any time prior to
the issuance of the Notes and the pledge of the Collateral pursuant to Section
6.01(b). This Agreement and the trusts created hereby shall terminate and the
Trust Property shall, subject to the Indenture and Section 5.01 hereof, be
distributed to the Owners in accordance with their respective Ownership
Percentages, and this Agreement shall be of no further force or effect, upon the
sale or other final disposition by the Indenture Trustee of all moneys or other
property or proceeds of the Collateral and other assets otherwise held under and
in accordance with the terms of the Indenture and by the Owner Trustee of all
the Trust Property and the final distribution by the Owner Trustee in accordance
with Section 5.01 hereof. The bankruptcy, death or incapacity of any Owner shall
not operate to terminate this Agreement, nor entitle such Owner's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust Property, nor
otherwise affect the rights, obligations and liabilities of the parties hereto.
(b) On any Payment Date on or after the date on which after
taking into account payments of principal on such Payment Date the aggregate
outstanding Note Principal Balance of the Notes is less than 25% of their
original Note Principal Balance, Owners may direct the Owner Trustee to redeem,
on behalf of the Trust, the Notes in whole but not in part. In addition, the
Owners may direct the Owner Trustee to redeem, on behalf of the Trust, the Notes
in whole, but not in part, at any time upon a determination, based upon an
opinion of counsel, that the Notes of any Class will not be treated for federal
income tax purposes as evidences of indebtedness. Any such redemption will be at
a redemption price equal to the aggregate Note Principal Balance of the
outstanding Notes and the amount of any expenses payable by the Trust. The
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Owners may exercise their right to cause the redemption upon (i) the election of
the Owners holding a majority of the ownership interests in the Trust and (ii)
the payment by or on behalf of each Owner of such Owner's pro rata share of the
purchase price. If the majority in interest of the Owners do not otherwise agree
on the disposition of the Securities, the Securities will be assigned to the
Owners, the Owner holding the largest Ownership Percentage will sell the
Securities at market value, and any proceeds remaining after payment of the
expenses of the Trust will first be applied to repay amounts provided to redeem
the Notes and then will be paid to each Owner pro rata based on their respective
interests in the Trust.
(c) Except as provided in Section 9.01(a), neither the Depositor
nor any Owner shall be entitled to revoke the Trust established hereunder.
(d) Upon the winding up of the Trust and its termination the
Owner Trustee shall cause the Certificate of Trust filed under the Act to be
canceled by filing a Certificate of Cancellation with the Secretary of State.
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL TRUSTEES
10.01. Resignation of Owner Trustee; Appointment of Successor.
(a) The Owner Trustee may resign at any time without cause by giving at least 60
days' prior written notice to the Owners, such resignation to be effective on
the acceptance of appointment by a successor Owner Trustee under Section
10.01(b). Upon receipt of such notice of resignation, the Owners shall use their
best efforts promptly to appoint a successor Owner Trustee in the manner and
meeting the qualifications hereinafter provided by written instrument or
instruments delivered to such resigning Owner Trustee and the successor Owner
Trustee. In addition, the Owners may at any time remove the Owner Trustee for
its commission of a material breach of this Agreement by an instrument in
writing delivered to the Owner Trustee, such removal to be effective upon the
acceptance of appointment by a successor Owner Trustee under Section 10.01(b).
In case of the resignation or removal of the Owner Trustee, the Owners may
appoint a successor Owner Trustee by an instrument signed by the Owners. If a
successor Owner Trustee shall not have been appointed within 30 days after the
giving of written notice of such resignation or the delivery of the written
instrument with respect to such removal, the Owner Trustee or the Owners may
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apply to any court of competent jurisdiction to appoint a successor Owner
Trustee to act until such time, if any, as a successor shall have been appointed
as above provided. Thereupon, such court may appoint a successor Owner Trustee
as it may deem proper. Any successor Owner Trustee so appointed by such court
shall immediately and without further act be superseded by any successor Owner
Trustee appointed as above provided within one year from the date of the
appointment by such court.
(b) Any successor Owner Trustee, however appointed, shall
promptly execute and deliver to the predecessor Owner Trustee an instrument
accepting such appointment, and thereupon such successor Owner Trustee, without
further act, shall become vested with all the estates, properties, rights,
powers, duties and trusts of the predecessor Owner Trustee in the trusts
hereunder with like effect as if originally named the Owner Trustee herein and
shall be bound by all the terms and conditions of this Agreement. Nevertheless,
upon the written request of such successor Owner Trustee, and following the
receipt of any compensation or indemnity due hereunder, such predecessor Owner
Trustee shall execute and deliver an instrument transferring to such successor
Owner Trustee, upon the trusts herein expressed, all the estates, properties,
rights, powers, duties and trusts of such predecessor Owner Trustee, and such
predecessor Owner Trustee shall duly assign, transfer, deliver and pay over to
such successor Owner Trustee all of the Trust Property then held or subsequently
received by such predecessor Owner Trustee together with all necessary
instruments of transfer and assignments or other documents properly executed
necessary to effect such transfer and such of the records or copies thereof
maintained by the predecessor Owner Trustee who shall thereupon be discharged
from all duties and responsibilities under this Agreement. Any resignation or
removal of an Owner Trustee and appointment of a successor Owner Trustee shall
become effective upon acceptance of appointment by the successor Owner Trustee.
(c) Any successor Owner Trustee, however appointed, shall be a
bank or trust company incorporated and doing business within the United States
of America, having its principal place of business in the State of Delaware and
having a combined capital and surplus of at least $50,000,000, if there be such
an institution willing, able and legally qualified to perform the duties of the
Owner Trustee hereunder upon reasonable or customary terms.
(d) Any corporation into which the Owner Trustee may be merged
or converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Owner Trustee shall be
a party, or any corporation to which substantially all the corporate trust
business of the Owner Trustee may be transferred, shall, subject to the terms of
Section 10.01(c), be the Owner Trustee under this Agreement without further act.
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10.02. Appointment of Additional Trustees. (a) At any time or
times, for the purpose of meeting any legal requirements of any jurisdiction in
which any of the Trust Property may at the time be located, or in the event that
the Owner Trustee is unwilling to perform any act in any jurisdiction other than
the State of Delaware, the Owner Trustee shall have the power to appoint one or
more individuals or corporations either to act as co-trustee or co-trustees
jointly with the Owner Trustee or to act as separate trustee or separate
trustees and to vest in such person or persons, in such capacity, such title to
the Trust Property or any part thereof, and such rights, powers, duties, trusts
or obligations as may be necessary for the Trust to carry out the purposes
hereunder, subject to the remaining provisions of this Section 10.02.
(b) Unless otherwise provided in the instrument appointing such
co-trustee or separate trustee, every co-trustee or separate trustee shall, to
the extent permitted by law, be appointed subject to the following terms,
namely:
(i) All rights, powers, trusts, duties and obligations
conferred by this Agreement upon the Owner Trustee in respect of
the custody, control or management of moneys, papers, securities
and other personal property shall be exercised solely by the
Owner Trustee;
(ii) All rights, powers, trusts, duties and obligations
conferred or imposed by this Agreement upon the trustees shall
be conferred or imposed upon and exercised or performed by the
Owner Trustee, or by the Owner Trustee and such co-trustee or
co-trustees, or separate trustee and separate trustees jointly,
except to the extent that, under the law of any jurisdiction in
which any particular act or acts are to be performed, the Owner
Trustee shall be incompetent or unqualified to perform such act
or acts, or in the event that the Owner Trustee is unwilling to
perform any act in any jurisdiction other than the State of
Delaware, in which event such act or acts shall be performed by
such co-trustee or co-trustees or separate trustee or separate
trustees alone;
(iii) Any request in writing by the Owner Trustee to
any co-trustee or separate trustee to take or refrain from
taking any action hereunder shall be sufficient warrant for the
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taking, or the refraining from taking, of such action by such
co-trustee or separate trustee;
(iv) Any co-trustee or separate trustee to the extent
permitted by law may delegate to the Owner Trustee the exercise
of any right, power, trust, duty or obligation, discretionary or
otherwise;
(v) The Owner Trustee at any time, by an instrument in
writing may accept the resignation of or remove any co-trustee
or separate trustee appointed under this Section 10.02. A
successor to any co-trustee or separate trustee so resigned or
removed may be appointed in the manner provided in this Section
10.02;
(vi) Neither the Owner Trustee nor any co-trustee or
separate trustee appointed hereunder shall be personally liable
by reason of any act or omission of any other trustee hereunder
selected by it with reasonable care;
(vii) Any demand, request, direction, appointment,
removal, notice, consent, waiver or other action in writing
executed by the Owners and delivered to the Owner Trustee shall
be deemed to have been delivered to each such co-trustee or
separate trustee; and
(viii) Any moneys, papers, securities or other items of
personal property received by any such co-trustee or separate
trustee hereunder shall forthwith, so far as may be permitted by
law, be turned over to the Owner Trustee to be held pursuant to
the terms hereof.
(c) Upon the acceptance in writing of such appointment by any
such co-trustee or separate trustee, it or he shall be vested with the estate,
right, title and interest in the Trust Property, or portion thereof, and with
such rights, powers, duties, trusts or obligations, jointly or separately with
the Owner Trustee, as set forth herein or otherwise, all as shall be specified
in the instrument of appointment, subject to all the terms hereof. Every such
acceptance shall be filed with the Owner Trustee.
(d) In case any co-trustee or separate trustee shall die, become
incapable of acting, resign or be removed, the estate, right, title and interest
in the Trust Property and all rights, powers, trusts, duties and obligations of
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said co-trustee or separate trustee shall, so far as permitted by law, vest in
and be exercised by the Owner Trustee unless and until a successor co-trustee or
separate trustee shall be appointed pursuant to this Section 10.02.
10.03 Amendments to Certificate of Trust. Upon the change in
identity of any of the Trustees as provided for in this Article X, the Trustees
shall cause an amendment to the Certificate of Trust filed under the Act to be
filed with the Secretary of State of the State of Delaware indicating the change
with respect to such Trustee's identity.
ARTICLE XI
MISCELLANEOUS
11.01. Supplements, Amendments and Waivers. (a) At the written
request of Owners holding, in the aggregate, not less than 66-2/3% of the
ownership interest in the Trust, amendments of, or waivers of compliance with,
any provisions of this Agreement (other than Sections 2.04, 2.10, 3.03, 9.01 and
11.02, which, after the sale and issuance of the Notes, shall also require the
consent of holders of not less than 66-2/3% of the Note Principal Balance of the
Notes then Outstanding) shall be effected by a written instrument signed by the
Owner Trustee and all of such Owners, but if in the opinion of the Owner Trustee
any instrument required to be so executed adversely affects any right, duty or
liability of, or immunity or indemnity in favor of, the Owner Trustee under this
Agreement or any of the documents contemplated hereby to which the Owner Trustee
is a party, or would cause or result in any conflict with or breach of any
terms, conditions or provisions of, or default under, the charter documents or
by-laws of the Owner Trustee or any document contemplated hereby to which the
Owner Trustee is a party, or would violate the fundamental purpose of the Trust,
the Owner Trustee may in its sole discretion decline to execute such instrument.
(b) Prior to the execution of any amendment, supplement or
waiver to this Agreement, the Owner Trustee shall be entitled to obtain (at the
expense of the Trust Property) an opinion of counsel as to whether such proposed
amendment, supplement or waiver is permitted by the terms hereof.
11.02. No Legal Title to Trust Property in Owners. The Owners
shall not have legal title to any part of the Trust Property and shall only be
entitled to receive distributions with respect to their undivided beneficial
interest therein pursuant to Section 5.01. No transfer, by operation of law or
otherwise, of any right, title and interest of the Owners in and to their
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undivided beneficial interests in the Trust Property or hereunder shall operate
to terminate this Agreement or the trusts hereunder or entitle any successor or
transferee to an accounting or to the transfer to it of legal title to any part
of the Trust Property.
11.03. Pledge of Collateral by Owner Trustee is Binding. The
pledge of the Collateral to the Indenture Trustee by the Trust made under the
Indenture and pursuant to the terms of this Agreement shall bind the Owners and
shall be effective to transfer or convey the rights of the Trust and the Owners
in and to such Collateral to the extent set forth in the Indenture. No purchaser
or other grantee shall be required to inquire as to the authorization,
necessity, expediency or regularity of such pledge or as to the application of
any proceeds with respect thereto by the Owner Trustee.
11.04. Limitations on Rights of Others. Nothing in this
Agreement, whether express or implied, shall be construed to give to any person
other than WTC or the Owner Trustee, as the case may be, and the Owners any
legal or equitable right in the Trust Property or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein; provided;
however, that the Trustee and the Noteholders are third party beneficiaries
hereof.
11.05. Non-Petition. Each of the Depositor, the SPE and WTC
agrees that it will not seek to commence a case under the Bankruptcy Code or
similar law against the Trust prior to one year and one day after the Notes have
been paid in full. The provisions of this paragraph shall survive any
termination of this Agreement.
11.06. Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and delivered by
hand or mailed by certified mail, postage prepaid, if to the Owner Trustee,
addressed to 1100 N. Market Street, Rodney Square North, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administration, or to such other address
as the Owner Trustee may have set forth in a written notice to the Owners and to
the Agent; if to the Agent, addressed to it at Asset Investors Corporation, 3600
South Yosemite Street, Denver, Colorado 80237 Attention: President or such other
address as the Agent may have furnished to the Owner Trustee and the Owners; and
if to an Owner, addressed to it at the address set forth for such Owner in the
register maintained by the Owner Trustee. Whenever any notice in writing is
required to be given by the Owner Trustee, such notice shall be deemed given and
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such requirement satisfied if such notice is mailed by certified mail, postage
prepaid, addressed as provided above.
11.07. Authorization for Action Deemed to be Given. Any action
taken by the Owner Trustee pursuant to this Agreement in the presence of the
Depositor, the Agent or their respective counsel, whether with or without
written instructions directing the Owner Trustee to take such action, shall be
conclusively deemed to be authorized and taken under the direction of the
Depositor or the Agent, as the case may be.
11.08. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.09. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
11.10. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, WTC, the
Owner Trustee, each Owner and their respective successors and assigns, all as
herein provided. Any request, notice, direction, consent, waiver or other
instrument or action by an Owner shall bind the successors and assigns of such
Owner.
11.11. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
11.12. Governing Law. This Agreement shall in all respects be
governed by, and construed in accordance with, the laws of the State of
Delaware, including all matters of construction, validity and performance.
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IN WITNESS WHEREOF, the parties hereto have caused this Deposit
Trust Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
WILMINGTON TRUST COMPANY
By: /s/ W. Chris Sponenberg
----------------------------------
Name: W. Chris Sponenberg
Title: Senior Financial Services Officer
ASSET INVESTORS CORPORATION
By: /s/ Kevin Nystrom
----------------------------------
Name: Kevin Nystrom
Title: Senior Vice President and Chief
Financial Officer
ASSET INVESTORS SECURED FINANCING CORPORATION
By: /s/ Kevin Nystrom
----------------------------------
Name: Kevin Nystrom
Title: Vice President, Secretary and
Treasurer
THIS POOLED CERTIFICATE TRANSFER AGREEMENT (this "Agreement"), dated as
of March 26, 1997, by and between Asset Investors Secured Financing Corporation,
a Delaware corporation ("SPE") and Asset Investors Corporation, a Maryland
corporation (the "Company "), recites and provides as follows:
RECITALS
WHEREAS, the Company owns certain mortgage certificates as set forth on
Schedule A hereto (the "Pooled Certificates");
WHEREAS, SPE is a wholly-owned subsidiary of the Company.
WHEREAS, the Company desires to contribute its right, title and
interest in and to the Pooled Certificates and other related assets (as provided
herein) to the SPE pursuant to the terms hereof in exchange for all of the
authorized and outstanding stock of the SPE;
WHEREAS, the SPE and Wilmington Trust Company, as owner trustee, have
entered into a Trust Agreement (the "Trust Agreement") dated as of March 26,
1997 creating Structured Mortgage Trust 1997-1 (the "Issuer");
WHEREAS, pursuant to the Trust Agreement the SPE will, subsequent to
the effectiveness of this Agreement, contribute all its right, title and
interest in and to the Pooled Certificates to the Issuer;
WHEREAS, contemporaneously with the contribution of the Pooled
Certificates to the Issuer pursuant to the terms of the Trust Agreement, the
Issuer will issue its Collateralized Notes, (the "Notes"), pursuant to an
Indenture (the "Indenture"), dated as of March 26, 1997, between State Street
Bank and Trust Company, as indenture trustee (the "Trustee") and the Issuer;
WHEREAS, following the contribution of the Pooled Certificates to the
Issuer, the Issuer intends to pledge such Pooled Certificates, and all of its
rights thereunder to the Trustee to secure payments on the Notes;
WHEREAS, contemporaneously with the issuance of the Notes, the Issuer
will sell the Notes to Bear, Stearns & Co. Inc. (the "Initial Purchaser") under
a Note Purchase Agreement, dated March 26, 1997, among the Company, the Issuer
and the Initial Purchaser (the "Note Purchase Agreement"); and
WHEREAS, capitalized terms used and not defined herein shall have the
meanings assigned to them in the Indenture.
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<PAGE>
AGREEMENT
NOW THEREFORE, in consideration of the premises and the mutual
covenants, representations and warranties herein made and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Contribution and Transfer.
(a) The Company hereby contributes, conveys, assigns and transfers, and
the SPE hereby accepts in each case as of the Delivery Date, all of the
Company's right, title and interest in and to the Pooled Certificates, having an
aggregate outstanding principal balance as of the close of business on March 24,
1997 (except March 17, 1997 with respect to the PHH Pooled Certificates) (the
"Pooled Certificate Information Date") of $221,120,946.00 and any and all
payments that are paid on the Pooled Certificates during March 1997 which the
Company has estimated at $1,613,876.00, (the "Cash Amount"); provided, however,
that if the actual amount distributed on a Pooled Certificate in such month is
less than the expected amount, the SPE shall request the Trustee promptly to
remit the shortfall to the Company upon the Company's provision to the SPE, the
Issuer and the Trustee, of reasonably satisfactory evidence thereof and;
provided, further, that if the amount actually distributed on the Pooled
Certificates in such month exceeds the expected amount, the Company shall
promptly remit such excess to the Trustee for deposit into the Payment Account.
(b) The Company hereby contributes, conveys, assigns and transfers, and
the Issuer hereby accepts, in each case as of the Delivery Date, all of the
Company's right, title and interest in and to the list of certain limited
indemnification, and reimbursement agreements associated with certain of the
Pooled Certificates as set forth on Schedule B attached hereto and made a part
hereof (the "Other Assets").
(c) The contribution and transfer of the Pooled Certificates shall be
effected by endorsement and delivery of the Pooled Certificates and delivery of
the Cash Amount as provided in Section 3 hereof.
SECTION 2. Distribution Rights. Subsequent to all transactions
contemplated herein and in the Trust Agreement and the Indenture the Trustee,
acting on behalf of the Holders of the Notes shall be entitled to all
distributions, including distributions of interest, on the Pooled Certificates
due after the Pooled Certificate Information Date. All available distributions,
including interest, on the Pooled Certificates due on or before the Pooled
Certificate Information Date shall belong to the Company.
SECTION 3. Transfer of the Pooled Certificates and Endorsement of the
Pooled Certificates. Following the contribution of the Pooled Certificates to
the SPE by the Company, ownership thereof shall be vested in the SPE. The SPE
hereby directs the Company to deliver to the Trustee as soon as possible prior
to the Delivery Date the Pooled Certificates together with bond powers executed
in favor of "STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE FOR SMT 1997-1" and
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<PAGE>
any transferor documents and opinions of counsel required by the pooling and
servicing agreements or other documents under which the Pooled Certificates were
issued. Prior to the effectiveness of the contribution provided for, the Trustee
shall hold the Pooled Certificates for the benefit of the Company. The Cash
Amount shall be delivered on the Closing Date to the Trustee.
SECTION 4. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Issuer, as of the date of this Agreement
or as of such other date as is specifically provided herein, as follows:
(a) the Company acquired the Pooled Certificates and the Other Assets
in the ordinary course of its business, in good faith, for value and without
notice of any claim against or claim to any of the Pooled Certificates or the
Other Assets on the part of any person;
(b) the Company does not have any actual or constructive knowledge or
notice of any ownership interest in the Pooled Certificates or the Other Assets
that upon contribution of such to the SPE and transfer in accordance herewith
will be adverse to the interests of the SPE hereunder, or of the Issuer under
the Trust Agreement or the Trustee under the Indenture;
(c) the Company is duly incorporated and validly existing and in good
standing under the laws of Maryland and has the full power, authority and legal
right to transfer and convey the Pooled Certificates and the Other Assets to the
SPE and has the full power, authority (corporate and other) and legal right to
execute and deliver, engage in the transactions contemplated by, and perform and
observe the terms and conditions of, this Agreement;
(d) the execution and delivery by the Company of this Agreement are
within the legal power of and have been duly authorized by all necessary action
on the part of the Company; neither the execution and delivery of this Agreement
by the Company, nor the consummation by the Company of the transactions
contemplated hereby, nor compliance by the Company with the provisions hereof,
will (i) conflict with or result in a breach of, or constitute a default under,
any of the provisions of the articles of incorporation or bylaws of, or any law,
governmental rule or regulation, or any judgment, decree or order binding on,
the Company or its properties, or any of the provisions of any indenture,
mortgage, deed of trust, contract or other instrument to which it is a party or
by which it is bound, or (ii) result in the creation or imposition of any lien,
charge or encumbrance upon any of its properties pursuant to the terms of any
such indenture, mortgage, deed of trust, contract or other instrument;
(e) this Agreement has been duly executed and delivered by the Company
and constitutes a legal, valid and binding agreement of the Company, enforceable
in accordance with its terms subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency or other similar laws
affecting creditors' rights generally from time to time in effect, and to
general principles of equity;
(f) no consent, approval, authorization or order of or registration or
filing with, or notice to, any governmental authority or court is required for
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<PAGE>
the execution, delivery and performance of or compliance by the Company with
this Agreement or the consummation by the Company of any other transaction
contemplated hereby;
(g) no certificate of an officer furnished pursuant hereto in writing
to the SPE or the Issuer or the Trustee by the Company contains any untrue
statement of a material fact, or omits a material fact necessary to make the
certificate not misleading;
(h) the Company has not dealt with any broker, investment banker, or
agent or other person that may be entitled to any commission or compensation in
connection with the sale of the Pooled Certificates or the Other Assets to the
Issuer (other than the Initial Purchaser);
(i) there is no litigation pending or, to the Company's knowledge,
threatened against the Company, which would reasonably be expected to affect
adversely the transfer of the Pooled Certificates or the Other Assets or the
execution, delivery, performance or enforceability of this Agreement;
(j) no default exists on the part of the Company, and no event has
occurred which, with notice, lapse of time or both, would constitute a default
on the part of the Company in the due performance and observance of any term,
covenant or condition of any agreement to which the Company is a party or by
which it is bound, which default would have a materially adverse effect on the
Company's performance of this Agreement;
(k) the transfer of the Pooled Certificates and the Other Assets to the
Issuer will be classified as a contribution of assets to a wholly-owned
subsidiary under generally accepted accounting principles on the books and
records of the Company;
(1) immediately prior to the transfer of the Pooled Certificates to the
SPE, the Company will be the sole owner of, and will have good and marketable
title to, the Pooled Certificates and the Other Assets, subject to no prior
lien, mortgage, security interest, pledge, charge or other encumbrance or any
such encumbrance will be discharged, and on the Closing Date, the Company shall
duly and validly endorse the Pooled Certificates as described in Section 3
hereof and deliver the Pooled Certificates as described in Section 3 hereof,
together with any other documents or certificates as may be required by this
Agreement. Following the contribution of the Pooled Certificates to the SPE, the
SPE will own such Pooled Certificates and the Other Assets free and clear of any
prior lien, mortgage, security interest, pledge, charge or other encumbrance,
subject to their subsequent transfer to the Issuer pursuant to the Trust
Agreement and pledge of the Pooled Certificates to the Trustee pursuant to the
Indenture.
(m) the transfer, assignment and conveyance of the Pooled Certificates
by the Company pursuant to this Agreement is not subject to bulk transfer laws
or any similar statutory provisions in effect in any applicable jurisdiction;
(n) the information set forth in Schedule A hereto is true and correct
in all material respects as of the Pooled Certificate Information Date;
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<PAGE>
(o) all conditions precedent and any restrictions upon the transfer of
the Pooled Certificates and the Other Assets provided for in the Underlying
Agreements have been satisfied and the transfer of the Pooled Certificates and
the Other Assets to the Trustee will be complete upon the execution of the
Indenture by the parties thereto and their delivery to the Trustee pursuant to
the terms thereof (provided that transfer of registered ownership will only be
complete after the Underlying Trustees have issued new Pooled Certificates
registered in the name of the Trustee);
(p) the Company intends to relinquish all ownership rights in the
Pooled Certificates transferred pursuant to this Agreement; after the Closing
Date, the Company will have no right to the Pooled Certificates and the Other
Assets, and subject to Section 11, the Company will have no right or obligation
to repurchase or substitute any Pooled Certificates or any of the Other Assets;
(q) the Company's principal place of business and chief executive
office are located in Denver, Colorado; and
(r) the Company is not a "benefit plan investor" described in or
subject to the Department of Labor Regulations set forth in 29 C.F.R. section
2510.3-101.
SECTION 5. Covenants of the Company. The Company hereby covenants to
the Issuer as follows:
(a) simultaneously with the execution hereof, the Company shall deliver
or cause to be delivered to the Issuer (i) an Opinion of Counsel, addressed to
the Initial Purchaser, as to various corporate matters in form and substance
satisfactory to the Issuer; and (ii) such other Opinions of Counsel as are
required Moody's Investors Service, Inc. (the "Rating Agency") to facilitate the
Rating Agency's issuance of the ratings on the Notes specified in the Note
Purchase Agreement;
(b) the Company hereby constitutes and appoints the SPE and its
respective officers and representatives as the Company's true and lawful
attorney-in-fact to execute and deliver all agreements, documents, instruments,
and papers by and on behalf of the Company as may be necessary to consummate the
transfer of the Pooled Certificates and the Other Assets to the SPE in
accordance with the terms and subject to the conditions hereof and the offer,
sale and delivery of all agreements, documents, instruments and papers required
to be executed and delivered by the Company at the closing of the sale of the
Notes; the foregoing grant of authority shall be deemed to be irrevocable and a
power coupled with an interest as and to the extent contemplated by this
Agreement;
(c) the Company shall reflect and treat its transfer of the Pooled
Certificates to the SPE as a transfer of its entire interest therein under
generally accepted accounting principles; and
(d) the Company will cooperate with the Trustee and perform all acts
necessary to enable the Trustee to cause the Pooled Certificates to be
registered in the name of the Trustee.
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<PAGE>
SECTION 6. Representations, Warranties and Covenants of the SPE. As of
the date of this Agreement, the SPE represents and warrants to the Company as
follows:
(a) the SPE has been duly organized and is validly existing and in good
standing under the laws of the State of Delaware and is duly qualified to do
business and is in good standing under the laws of each jurisdiction that
requires such qualification wherein it conducts any material business;
(b) the execution and delivery by the SPE of this Agreement are within
the legal power of the SPE and have been duly authorized by all necessary action
on the part of the SPE; neither the execution and delivery of this Agreement by
the SPE, nor the consummation by the Issuer of the transactions contemplated
hereby, nor compliance by the SPE with the provisions hereof, will (i) conflict
with or result in a breach of, or constitute a default under, any of the
provisions of the Issuer's trust agreement, or any law, governmental rule or
regulation, or any judgment, decree or order binding on, the SPE or its
properties, or any of the provisions of any indenture, mortgage, deed of trust,
contract or other instrument to which it is a party or by which it is bound, or
(ii) result in the creation or imposition of any lien, charge or encumbrance
upon any of its properties pursuant to the terms of any such indenture,
mortgage, deed of trust, contract or other instrument;
(c) this Agreement has been duly executed and delivered by the SPE and
constitutes a legal, valid and binding agreement of the SPE, enforceable in
accordance with its terms, subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency or other similar laws affecting
creditors' rights generally from time to time in effect, and to general
principles of equity; and
(d) no consent, approval, authorization or order of any court or
governmental agency or body or official is required for the consummation by the
Issuer of the transactions contemplated hereby, except such as have been
obtained, and except such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Notes.
SECTION 7. Further Assurances. Upon request from time to time, the
Company shall execute and deliver all documents, make all truthful oaths,
testify in any proceedings and do all other acts that may be reasonably
necessary or desirable, in the reasonable opinion of the SPE, the Issuer or the
Trustee, to carry out the terms of this Agreement to effect the transfer of the
Pooled Certificates to the Issuer pursuant to the Trust Agreement, and to effect
the pledge of the Pooled Certificates and the Other Assets by the Issuer to the
Trustee pursuant to the Indenture.
SECTION 8. Conditions to Obligations of the SPE. The obligation of the
SPE hereunder to accept the contribution of the Pooled Certificates and the
Other Assets is subject to:
(a) the accuracy in all material respects of all of the representations
and warranties of the Company under this Agreement and compliance in all
material respects by the Company with all of its covenants and obligations under
this Agreement;
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<PAGE>
(b) receipt by the SPE of the following documents (collectively, the
("Closing Documents") in such forms as are agreed upon and acceptable to the
Issuer, duly executed by all signatories other than the Issuer as required
pursuant to the respective terms thereof:
(i) the execution and delivery of all documents described
herein;
(ii) Opinions of Counsel for the Company as to various matters
described in 5(a) hereof and such other Opinions of Counsel as are
necessary in order to obtain the ratings set forth in Section 8(e)
below, each of which shall be acceptable to the Issuer, its counsel,
the Initial Purchaser, its counsel, and the Rating Agency (it being
understood that such opinions shall expressly provide that the Trustee
and the Rating Agency shall be entitled to rely on such Opinions of
Counsel);
(iii) a Secretary's certificate of the Company as to its
articles of incorporation, bylaws and resolutions authorizing the
subject transaction, together with current certificates of good
standing of the Company issued by the Secretary of State of the States
of Maryland and Colorado;
(c) except as otherwise provided herein, the Company shall have
delivered to the Trustee, in escrow, all documents required to be delivered
hereunder and shall have released its interest therein to the Issuer or its
designee;
(d) the simultaneous purchase by the Initial Purchaser of the Notes
pursuant to the terms of the Note Purchase Agreement; and
(e) the receipt of written confirmation from the Rating Agency that it
has assigned the ratings to the Notes that are specified in the Note Purchase
Agreement.
SECTION 9. Conditions to Obligations of the Company. The obligation of
the Company hereunder to transfer the Pooled Certificates is subject to:
(a) the receipt by the Company on the date hereof of an opinion of
Bartlit Beck Herman Palenchar & Scott as counsel to the SPE, addressed to the
Initial Purchaser, that this Agreement has been duly authorized by all necessary
action; and has been duly and validly executed and delivered; and constitutes a
valid, legal and binding agreement of the SPE, enforceable against the SPE in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and, as to enforceability, to general principles of equity regardless
of whether enforcement is sought in a proceeding in equity or at law; and
(b) satisfaction by the Issuer of all conditions of all purchase
obligations under the Note Purchase Agreement.
SECTION 10. Indemnification; Assignment of Claims. In the event the
Company breaches its representations, warranties, covenants or obligations set
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<PAGE>
forth herein in any material respect, the Company shall indemnify and hold
harmless the Issuer from and against any loss, damages, penalties, fines,
forfeiture, legal fees and related costs, judgments, and other costs and
expenses resulting from any claim, demand, defense or assertion based on or
grounded upon, or resulting from, such breach. Promptly after receipt by the
Issuer of notice of the commencement of any such action, the Issuer will, if a
claim in respect thereof is to be made against the Company under this Section,
notify the Company in writing of the commencement thereof, but the omission so
to notify the Company will not relieve the Company from any liability hereunder
unless such omission materially prejudices the rights of the Company. In case
any such action is brought against the Issuer, and the Issuer notifies the
Company of the commencement thereof, the Company will be entitled to participate
therein, and to assume the defense thereof, with counsel reasonably satisfactory
to the Issuer, and after notice from the Company to the Issuer of its election
so to assume the defense thereof, the Company will not be liable to the Issuer
under this Section for any legal or other expenses subsequently incurred by the
Issuer in connection with the defense thereof other than reasonable costs of
investigation.
SECTION 11. Repurchase Obligation. It is understood and agreed that the
representations and warranties set forth in Sections 4(b) and 4(1) herein shall
survive delivery of the Pooled Certificates and the Other Assets to the Issuer
and the further assignment to the Issuer and the Trustee, and shall inure to the
benefit of the Issuer and the Trustee notwithstanding any restrictive or
qualified endorsement or assignment. Upon the discovery by a party hereto, the
Issuer or the Trustee of a breach of any of the foregoing representations and
warranties that materially and adversely affects the interests of the Holders,
the party discovering such breach shall give prompt written notice to the other
party hereto the Issuer, and the Trustee, whereupon the Company shall promptly
take such action as is necessary to cure such breach. Within 90 days of its
discovery or its receipt of notice of any breach of the representations and
warranties contained in Sections 4(b) and 4(1) above, the Company shall cause
such breach to be cured in all material respects or, in the event the Company is
unable to cure such breach, the Company shall purchase the affected Pooled
Certificate or other Asset at the purchase price provided for such purchase in
the Indenture and reimburse the Issuer for any loss incurred by the Issuer as a
result of such breach.
The obligations of the Company set forth in this Section 11 with
respect to a breach of a representation contained in Sections 4(b) and 4(1)
hereof shall constitute the sole remedy respecting such breach available to the
SPE, the Issuer, and pursuant to the Indenture, the Holders or the Trustee on
behalf of the Holders.
SECTION 12. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered to or mailed by registered mail, postage prepaid, or transmitted by
telex or telegraph and confirmed by a similar mailed writing, as follows:
(a) If to the SPE:
Asset Investors Secured Financing Corporation
c/o Asset Investors Corporation
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<PAGE>
3600 South Yosemite Street
Denver, Colorado 80237
Attention: President
(b) If to the Company:
Asset Investors Corporation
3600 South Yosemite Street
Denver, Colorado 80237
Attention: Kevin J. Nystrom
Any party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this Section for the giving of notice.
SECTION 13. Severability of Provisions. Any part, provision,
representation or warranty contained in this Agreement that is prohibited or
that is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining parts,
provisions, representations or warranties hereof. Any part, provision,
representation or warranty contained in this Agreement that is prohibited or
unenforceable or is held to be void or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining parts, provisions,
representations or warranties hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
NOTWITHSTANDING ANY NEW YORK OR OTHER CONFLICT OF LAWS PROVISIONS TO THE
CONTRARY.
SECTION 15. Survival. Each of the Company and the SPE agrees that the
representations, warranties and agreements made by it herein and in any
certificate or other instrument delivered pursuant hereto shall be deemed to
have been relied upon by the Issuer or the Company, respectively,
notwithstanding any investigation heretofore or hereafter made by the other
party or on the other party's behalf, and that the representations, warranties
and agreements made by the Company herein or in any such certificate or other
instrument shall survive the delivery of and payment for the Pooled
Certificates.
SECTION 16. The Company hereby acknowledges that the SPE will
contribute all its rights hereunder (except that the SPE will transfer and
retain the SPE's rights under Sections 10 and 11 hereof) relating to the Pooled
Certificates to the Issuer and the Issuer will subsequently pledge and assign
- 9 -
<PAGE>
all of its rights to the Trustee. The Company agrees that, upon the execution of
the Trust Agreement and of the Indenture, the Trustee and the holders of the
Notes will have such rights and remedies equal to those provided to the SPE
hereunder, and that this Agreement will inure to the benefit of the Trustee and
the holders of the Notes. The Trustee and the holders of the Notes shall
constitute not only assignees of the SPE's and the Issuer's rights in accordance
with this Section but also intended third party beneficiaries of this Agreement
to the extent necessary to enforce such rights and to obtain the benefit of such
remedies.
SECTION 17. Miscellaneous.
(a) This Agreement may be executed in two or more counterparts, each of
which when so executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns.
(b) Any person into which the Company may be merged or consolidated or
any person resulting from a merger or consolidation involving the Company or any
person succeeding to the business of the Company shall be considered the
successor of the Company hereunder, without the further act or consent of either
party.
(c) This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof except for the Note Purchase Agreement as
it is incorporated by reference in Section 2(a) hereof. Neither this Agreement
nor any term hereof may be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against whom enforcement of
the change, waiver, discharge or termination is sought. The headings in this
Agreement are for purposes of reference only and shall not limit or otherwise
affect the meaning hereof.
(d) The SPE shall immediately effect the redelivery of the Pooled
Certificates, and any security interest deemed to be created by this Section 17
shall be released if, on the Delivery Date, each of the conditions set forth in
Section 8 hereof shall not have been satisfied or waived.
(e) It is the express intent of the parties hereto that the conveyance
of the Pooled Certificates by the Company to the SPE as contemplated by this
Agreement be construed as a contribution of the Pooled Certificates and the
Other Assets by the Company to the SPE. Further, it is not the intention of the
parties that such conveyances be deemed a pledge of the Pooled Certificates or
the Other Assets by the Company to the SPE or any assignee of the SPE,
including, but not limited to, the Issuer, the Trustee and the holders of the
Notes, to secure a debt or other obligation of the Company. However, in the
event that, notwithstanding the intent of the parties, the Pooled Certificates
or the Other Assets are held to continue to be property of the Company, then (i)
this Agreement shall also be a security agreement within the meaning of the
Uniform Commercial Code of the State of New York and any other state as is
necessary; (ii) the Company hereby grants to the SPE a security interest in all
of the Company's right, title and interest in and to the Pooled Certificates and
the Other Assets; (iii) the possession by the SPE or its agent of the Pooled
Certificates and such other items of property as constitute instruments, money,
negotiable documents or chattel paper shall be deemed to be "possession by the
- 10 -
<PAGE>
secured party" for purposes of perfecting the security interest pursuant to
Section 9-305 of the Uniform Commercial Code of the Commonwealth of
Massachusetts and the State of Colorado; and (iv) notifications to, and
acknowledgments, receipts or confirmations from, persons holding such property
shall be deemed notifications to, or acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the Issuer
for the purpose of perfecting such security interest under applicable law. Any
assignment of the interest of the Issuer pursuant to any provision hereof shall
also be deemed to be an assignment of any security interest created hereby. The
Company and the SPE shall, to the extent consistent with this Agreement, take
such actions as may be necessary to ensure that, if this Agreement were deemed
to create a security interest in the Pooled Certificates or the Other Assets,
such security interest would be deemed to be a perfected security interest of
first priority under applicable law and will be maintained as such throughout
the term of this Agreement, in the Trust Agreement and the Indenture.
<PAGE>
IN WITNESS WHEREOF, Asset Investors Secured Financing Corporation and
Asset Investors Corporation have caused their names to be signed to this Pooled
Certificate Transfer Agreement by their respective officers thereunto duly
authorized as of the first date above written.
ASSET INVESTORS SECURED FINANCING
CORPORATION
By: /s/ Leslie B. Fox
---------------------------------------
Name: Leslie B. Fox
Title: President
ASSET INVESTORS CORPORATION
By: /s/ Leslie B. Fox
---------------------------------------
Name: Leslie B. Fox
Title: President and Chief Operating Officer
================================================================================
EXECUTION COPY
--------------
STRUCTURED MORTGAGE TRUST 1997-1
Issuer
AND
STATE STREET BANK AND TRUST COMPANY,
Trustee
-----------------------------------
INDENTURE
Dated as of March 27, 1997
-----------------------------------
COLLATERALIZED NOTES
$199,893,850
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
PRELIMINARY STATEMENT..........................................................1
GRANTING CLAUSES...............................................................1
ARTICLE ONE DEFINITIONS........................................................2
Section 1.01 Definitions.......................................................2
ARTICLE TWO NOTE FORM.........................................................15
Section 2.01 Designation; Form of Notes.......................................15
ARTICLE THREE THE NOTES.......................................................15
Section 3.01 The Depository; Initial Class Principal Balances and
Interest Rates...............................................................15
Section 3.02 Denominations....................................................17
Section 3.03 Execution, Authentication and Delivery...........................17
Section 3.04 Temporary Notes..................................................18
Section 3.05 Registrations of Transfer and Exchange, Restrictions on
Transfer.....................................................................18
Section 3.06 Mutilated, Destroyed, Lost or Stolen Notes.......................21
Section 3.07 Payment of Principal and Interest; Rights Preserved..............22
Section 3.08 Persons Deemed Owners............................................23
Section 3.09 Cancellation.....................................................23
Section 3.10 Additional Notes.................................................24
ARTICLE FOUR AUTHENTICATION AND DELIVERY OF NOTES.............................24
Section 4.01 Security for Notes...............................................24
Section 4.02 Trustee Receipt..................................................26
Section 4.03 Exercise of Rights as Registered Holder of Pooled
Certificates.................................................................26
Section 4.04 Benefit Plan Investor Representations............................26
ARTICLE FIVE SATISFACTION AND DISCHARGE.......................................26
Section 5.01 Satisfaction and Discharge of Indenture..........................27
Section 5.02 Supplication of Trust Money......................................28
Section 5.03 Release of Collateral............................................28
ARTICLE SIX REMEDIES..........................................................28
Section 6.01 Events of Default................................................28
Section 6.02 Acceleration of Maturity; Rescission and Annulment...............29
Section 6.03 Collection of Indebtedness and Suits for Enforcement by
Trustee......................................................................30
Section 6.04 Remedies .....................................................31
Section 6.05 Optional Preservation of Trust Estate............................31
Section 6.06 Trustee May File Proofs of Claim.................................32
Section 6.07 Trustee May Enforce Claims Without Possession of Notes...........33
Section 6.08 Application of Money Collected...................................33
Section 6.09 Limitation on Suits..............................................34
(i)
<PAGE>
Section 6.10 Unconditional Rights of Noteholders to Receive Payments..........35
Section 6.11 Restoration of Rights and Remedies...............................35
Section 6.12 Rights and Remedies Cumulative...................................35
Section 6.13 Delay or Omission Not Waiver.....................................35
Section 6.14 Control by Noteholders...........................................35
Section 6.15 Waiver of Past Defaults..........................................36
Section 6.16 Undertaking for Costs............................................36
Section 6.17 Waiver of Stay or Extension Laws; Non-Petition...................36
Section 6.18 Sale of Trust Estate.............................................37
Section 6.19 Action on Notes..................................................37
Section 6.20 Recourse .....................................................38
ARTICLE SEVEN THE TRUSTEE.....................................................38
Section 7.01 Certain Duties and Responsibilities..............................38
Section 7.02 Notice of Default................................................39
Section 7.03 Certain Rights of Trustee........................................39
Section 7.04 Not Responsible for Recitals or Issuance of Notes................41
Section 7.05 May Hold Notes...................................................41
Section 7.06 Money Held in Trust..............................................41
Section 7.07 Compensation and Reimbursement...................................41
Section 7.08 Resignation and Removal; Appointment of Successor................42
Section 7.09 Acceptance of Appointment by Successor...........................43
Section 7.10 Merger, Conversion, Consolidation or Succession to
Business of Trustee..........................................................43
Section 7.11 Corporate Trustee Required, (Trustee) Eligibility................43
Section 7.12 Preferential Collection of Claims Against Issuer.................44
Section 7.13 Co-Trustees and Separate Trustees................................44
Section 7.14 Paying Agents....................................................44
ARTICLE: EIGHT NOTEHOLDERS' LIST..............................................45
Section 8.01 Issuer to Furnish Trustee Names and Addresses of
Noteholders...................................................................45
Section 8.02 Preservation of Information; Communications to
Noteholders..................................................................45
Section 8.03 Reports by Tax Administrator.....................................45
ARTICLE NINE COVENANTS OF ISSUER..............................................46
Section 9.01 Maintenance of Office or Agency..................................46
Section 9.02 Money for Note Payments to Be Held in Trust......................46
Section 9.03 Existence .....................................................47
Section 9.04 Protection of Trust Estate.......................................48
Section 9.05 Negative Covenants...............................................49
Section 9.06 Issuer May Consolidate, Etc., Only on Certain
Terms; Sale of Collateral Subject to Notes...................................49
Section 9.07 Successor Substituted............................................50
Section 9.08 No Other Business................................................50
Section 9.09 Limitation on Borrowing..........................................50
Section 9.10 AIC/SPE Transfer Agreement.......................................51
ARTICLE TEN REDEMPTION OF NOTES...............................................51
Section 10.01 Redemption at the Option of the Issuer; Election to Redeem......51
Section 10.02 Notice to Trustee...............................................52
Section 10.03 Notice of Redemption by the Issuer..............................52
Section 10.04 Deposit of Redemption Price.....................................52
(ii)
<PAGE>
Section 10.05 Notes Payable on Redemption Date................................53
Section 10.06 Retention of Notes by Issuer....................................53
ARTICLE ELEVEN ACCOUNTS, ACCOUNTINGS AND RELEASES.............................53
Section 11.01 Collection of Money.............................................53
Section 11.02 Payment Account.................................................54
Section 11.03 Reports by Trustee..............................................54
Section 11.04 Note Remittance Reports and Related Matters.....................54
Section 11.05 Trust Estate....................................................57
ARTICLE TWELVE APPLICATION OF MONIES..........................................57
Section 12.01 Disbursements of Monies from Payment Account....................57
Section 12.02 Limited Release of Collateral...................................59
Section 12.03 Trust Account...................................................59
ARTICLE THIRTEEN AMENDMENTS; SUPPLEMENTAL INDENTURES..........................59
Section 13.01 Supplemental Indentures Without Consent of Noteholders..........59
Section 13.02 Supplemental lndentures With Consent of Noteholders.............61
Section 13.03 Execution of Supplemental Indentures............................62
Section 13.04 Effect of Supplemental Indenture................................62
Section 13.05 Reference in Notes to Supplemental Indentures...................62
ARTICLE FOURTEEN MISCELLANEOUS................................................63
Section 14.01 Compliance Certificates and Opinions............................63
Section 14.02 Form of Documents Delivered to Trustee..........................63
Section 14.03 Acts of Noteholders.............................................64
Section 14.04 Notices, Etc., to Trustee and Issuer............................64
Section 14.05 Notices to Noteholders; Waiver..................................65
Section 14.06 Effect of Headings and Table of Contents........................65
Section 14.07 Successors and Assigns..........................................65
Section 14.08 Separability....................................................65
Section 14.09 Benefits of Indenture...........................................65
Section 14.10 Legal Holidays..................................................66
Section 14.11 Governing Law...................................................66
Section 14.12 Counterparts....................................................66
Section 14.13 Corporate Obligation............................................66
Section 14.14 Loss Mitigation Advisor.........................................66
Section 14.15 Special Servicing Agreements....................................67
Section 14.16 Equity Interests................................................67
Section 14.17 Limitation of Liability.........................................68
(iii)
<PAGE>
EXHIBIT A-1 FORM OF CLASS A NOTE
EXHIBIT A-2 FORM OF CLASS B NOTE
EXHIBIT A-3 FORM OF CLASS C NOTE
EXHIBIT A-4 FORM OF CLASS D NOTE
EXHIBIT B-1 FORM OF INVESTMENT LETTER
EXHIBIT B-2 FORM OF RULE 144A AND RELATED MATTERS CERTIFICATE
SCHEDULE 1 THE POOLED CERTIFICATES
SCHEDULE 2 LIST OF OTHER ASSETS
SCHEDULE 3 SPECIAL SERVICING AGREEMENTS
(iv)
<PAGE>
This INDENTURE, dated as of March 27, 1997, is hereby executed by and
between Structured Mortgage Trust 1997-1, a Delaware business trust acting
through Wilmington Trust Company, as Owner Trustee and not in its individual
capacity (the "Issuer"), and State Street Bank and Trust Company, a
Massachusetts trust company, as trustee (the "Trustee").
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for the issuance of its Collateralized Notes, (the
"Notes"), issuable in four Classes (each a "Class"), as provided in this
Indenture. The Issuer has duly authorized the creation of the Notes with an
aggregate principal amount of $199,893,850. All covenants and agreements made by
the Issuer herein are for the benefit and security of the Noteholders and the
Trustee. The Issuer is entering into this Indenture, and the Trustee is
accepting the trust created hereby, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged.
GRANTING CLAUSES
(a) To secure the payment of the principal and interest of each Class
of Notes in accordance with their respective terms, all of the sums payable
under this Indenture with respect to the Notes and the performance of the
covenants with respect to the Notes contained in this Indenture, the Issuer
hereby Grants to the Trustee, in trust and as collateral security as provided in
this Indenture, for the benefit of the Holders of the Notes, all of the Issuer's
right, title and interest in and to any and all benefits accruing to the Issuer
from (i) the Pooled Certificates listed in Schedule 1 to this Indenture (the
"Pooled Certificates") that the Issuer is causing to be delivered to the Trustee
herewith, together with all interest and principal payments due and received on
the Pooled Certificates after March 24, 1997 (except March 17, 1997 with respect
to the PHH Pooled Certificates); (ii) the AIC/SPE Transfer Agreement, except
that the Issuer shall both pledge and retain its rights under Section 10 and
Section 11 of the AIC/SPE Transfer Agreement; (iii) the Other Assets; (iv) the
Payment Account, whether in the form of cash, instruments, securities or other
properties, including the deposits made therein pursuant to Section 4.01(c); and
(v) the proceeds of all the foregoing (including, but not by way of limitation,
all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, rights to payment of any and every kind
and other forms of obligations and receivables that at any time constitute all
or part or are included in the proceeds of any of the foregoing) (items (i)
through (v) collectively being referred to herein as the "Trust Estate") to
secure each Class of Notes.
(b) The Trustee acknowledges such Grant, accepts the trusts hereunder
in accordance with the provisions hereof and agrees to perform the duties herein
or therein required in accordance with Article Seven hereof to the end that the
interests of the Noteholders may be adequately and effectively protected.
<PAGE>
ARTICLE ONE
DEFINITIONS
Section 1.01 Definitions.
Except as otherwise specified herein or as the context may otherwise
require, the following terms have the respective meanings set forth below for
all purposes of this Indenture, and the definitions of such terms are equally
applicable both to the singular and plural forms of such terms and to the
masculine or feminine forms of such terms. Whenever reference is made to a
Default or an Event of Default necessitating or involving action by the Trustee,
such reference shall be construed to refer only to a Default or an Event of
Default of which the Trustee has notice or knowledge pursuant to Section 7.01.
"Affiliate" of any specified Person: Any other Person controlling or
controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"AIC": Asset Investors Corporation, a Maryland corporation.
"AIC/SPE Transfer Agreement": The Pooled Certificate Transfer
Agreement, dated March 26, 1997, between AIC and the SPE, under which AIC
contributed the Pooled Certificates to the SPE.
"Aggregate Collateral Report": The report required to be prepared and
distributed by the Trustee with respect to each Payment Date in accordance with
Section 11.04(c).
"Available Funds": With respect to any Payment Date, (a) in respect of
the Pooled Certificates which have a scheduled Certificate Distribution Date on
or prior to the most recently preceding 25th day of a month (or, with respect to
Pooled Certificate distributions due on the 25th day of each month, if such 25th
day is not a Business Day, the next succeeding Business Day), all amounts
actually received by the Trustee by 5:00 p.m. on the Business Day following such
25th day (or such succeeding Business Day) and (b) in respect of the Pooled
Certificates which have a scheduled Certificate Distribution Date subsequent to
the 25th day of a month, all amounts actually received by the Trustee by noon on
the third Business Day following the 25th calendar day of the month if such 25th
calendar day is a Business Day or if such day is not a Business Day, the next
succeeding Business Day, net of investment earnings thereon payable to the
Trustee pursuant to Section 11.02(b); provided that any such amounts shall be
included in Available Funds for a Payment Date only if the Trustee also receives
the related Certificate Remittance Report for the related Certificate
Distribution Date by such applicable time.
"Bear Stearns": Bear, Stearns & Co. Inc., a Delaware corporation.
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<PAGE>
"Business Day": Any day that is not a Saturday, Sunday, holiday, or
other day on which commercial banking institutions in New York, New York or
Boston, Massachusetts are authorized or obligated by law or executive order to
be closed.
"Certificate Distribution Date": With respect to any Pooled
Certificate, a date on which a distribution is made pursuant to the related
Underlying Agreement.
"Certificate Principal Balance": With respect to any Pooled
Certificate, the Outstanding principal balance thereof.
"Certificate of Deposit": A certificate of deposit satisfying the
definition of an Eligible Investment.
"Certificate Remittance Reports": The reports received periodically by
the Trustee, as the holder of each Pooled Certificate, containing information on
each Pooled Certificate and related Underlying Series.
"Class": The reference to any Class of Notes or, collectively, to one
or more Classes of Notes.
"Class A Notes": The Class A Notes, in the initial aggregate principal
amount of $8,844,850 being issued hereunder.
"Class B Notes": The Class B Notes, in the initial aggregate principal
amount of $13,267,250 being issued hereunder.
"Class C Notes": The Class C Notes, in the initial aggregate principal
amount of $28,745,750 being issued hereunder.
"Class D Notes": The Class D Notes, in the initial aggregate principal
amount of $149,036,000 being issued hereunder.
"Class Principal Balance": As of any date of determination, and with
respect to any Class of Notes, the aggregate outstanding principal balance of
all Notes of that Class as of such date.
"Code": The Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"Collateral": The Trust Estate.
"Collateral Proceeds": With respect to any Pooled Certificates and the
Other Assets, all amounts paid to the holder of such Pooled Certificates and the
Other Assets in accordance with the terms of such Pooled Certificates and the
Other Assets.
"Corporate Trust Office": The principal corporate trust office of the
Trustee presently located at Two International Place, Boston, Massachusetts
- 3 -
<PAGE>
02110, Attention: Corporate Trust Department, or at such other address as the
Trustee may designate from time to time by notice to the Noteholders and the
Issuer or the principal corporate trust office of any successor Trustee.
"Current Percentage": The percent that the Note Principal Balance of
each Class of Notes or the Imputed Principal of the Equity Interest represents
of the sum of the Note Principal Balance of all the Notes and the Imputed
Principal Balance of the Equity Interest.
"Default": Any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default or, when used in association with
obligations created by any agreement other than this Indenture, the meaning
specified in such agreement.
"Definitive Notes": The meaning specified in Subsection 3.01(b) hereof.
"Delivery Date": March 27, 1997.
"Depositor": AIC, as depositor under the Trust Agreement.
"Depository": The Depository Trust Company, the nominee of which is
Cede & Co., or any successor thereto.
"Depository Agreement": The meaning specified in Subsection 3.01(a)
hereof.
"Depository Participant": A broker, dealer, bank or other financial
institution or other Person for whom from time to time the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
"DTC Custodian": State Street Bank and Trust Company, or its successors
in interest.
"DTC Certificates": The Pooled Certificates identified as Chase
Mortgage Finance Corporation, Multi-Class Mortgage Pass-Through Certificates,
Series 1994-H, Class B-6 (except for $68.00 thereof) which are held in
book-entry form through the facilities of The Depository Trust Corporation.
"Eligible Investments": Any one or more of the following obligations or
securities:
(i) direct obligations of, and obligations fully guaranteed by, the
United States of America, FHLMC, FNMA or any agency or instrumentality of the
United States of America the obligations of which are backed by the full faith
and credit of the United States of America, provided that such obligations of
FHLMC or FNMA shall be limited to senior debt obligations and mortgage
participation certificates;
(ii) (a) demand and time deposits in, certificates of deposit of, or
bankers" acceptances issued by any depository institution or trust company
incorporated under the laws of the United States of America (including the
Trustee) or any state thereof and subject to supervision and examination by
federal and/or state banking authorities so long as the commercial paper and the
long-term debt obligations of such depository institution or trust company at
the time of such investment or contractual commitment providing for such
- 4 -
<PAGE>
investment have a credit rating in the highest applicable category from the
Rating Agency in the case of commercial paper and in one of the two highest
applicable categories from the Rating Agency in the case of long-term debt
obligations and (b) any other demand or time deposit or certificate of deposit
that is fully insured by the Federal Deposit Insurance Corporation;
(iii) repurchase obligations with respect to (a) any security described
in clause (i) above or (b) any other security issued or guaranteed by an agency
or instrumentality of the United States of America, in either case entered into
with a depository institution or trust company (acting as principal) described
in clause (ii)(a) above (and having the ratings from the Rating Agency required
in clause (ii)(a) above), the repurchaser of which also has the ratings from the
Rating Agency described in clause (ii)(a) above;
(iv) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America or any
state thereof which have a credit rating in the highest short-term or one of the
two highest long-term categories from the Rating Agency at the time of such
investment or contractual commitment providing for such investment; provided,
however, that securities issued by any particular corporation will not be
Eligible Investments to the extent that investment therein will cause the then
outstanding principal amount of securities issued by such corporation and held
as part of the Trust Estate to exceed 10% of the aggregate outstanding principal
balances of all the Pooled Certificates and Eligible Investments held as part of
the Trust Estate; provided, further, that in no event shall an instrument be an
Eligible Investment if such instrument evidences either (i) a right to receive
only interest payments with respect to the obligations underlying such
instrument, or (ii) a right to receive both principal and interest payments
derived from obligations underlying such instrument if the interest and
principal payments with respect to such instrument provide a yield to maturity
at the date of investment of greater than 120% of the yield to maturity at par
of such underlying obligations;
(v) commercial paper having a rating in the highest applicable category
from the Rating Agency at the time of such investment;
(vi) a guaranteed investment contract issued by any insurance company
or other corporation or entity with a short-term debt rating in the highest
category by the Rating Agency and a long-term debt rating in one of the two
highest applicable categories by the Rating Agency; and
(vii) any other demand, money market or time deposit or obligation,
interest-bearing or other security or investment that would not affect the then
current rating of the Notes by the Rating Agency;
provided, however, that Eligible Investments shall include only obligations or
securities that mature on or before the Business Day immediately preceding the
next Payment Date (or, in the case of an investment that is an obligation of the
institution in which the account is maintained, no later than such Payment
Date). In addition, no Eligible Investment that incorporates a penalty for early
withdrawal will be used unless the maturity of such Eligible Investment is on or
before the Business Day immediately preceding the next Payment Date.
- 5 -
<PAGE>
"Equity Interest": The interest retained by the Issuer in the
overcollateralization resulting from any excess of the aggregate Certificate
Principal Balance of all of the Pooled Certificates over the aggregate Note
Principal Balance of all of the Notes.
"Event of Default": The meaning provided in Section 6.01.
"Federal Bankruptcy Code": Title 11 of the United States Code, as
amended.
"FHLMC": The Federal Home Loan Mortgage Corporation or any successor
thereof.
"Final Payment Date": The Payment Date following the first to occur of
the Sale of the Pooled Certificates in accordance with Section 6.18 hereof or
the final payment on each Pooled Certificate included in the Trust Estate.
"FNMA": The Federal National Mortgage Association or any successor
thereof.
"Global Note": Any Note registered in the name of the Depository or its
nominee, beneficial interests in which are reflected on the books of the
Depository or on the books of a Person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
"Grant": To pledge, create and grant a security interest in and right
of set-off against. A Grant of any instrument shall include all rights, powers
and options (but none of the obligations) of the granting party thereunder,
including without limitation the immediate continuing right to claim for,
collect, receive and receipt for principal and interest payments in respect
thereof and all other monies payable thereunder, to give and receive notices and
other communications, to make waivers or other agreements, to exercise all
rights and options, to bring Proceedings in the name of the granting party or
otherwise, and generally to do and receive anything that the granting party is
or may be entitled to do or receive thereunder or with respect thereto.
"Imputed Principal Balance": With respect to the Equity Interest at any
time, an amount equal to the Original Imputed Principal Balance reduced by all
Imputed Principal Payments (whether paid to the Issuer in respect of the Equity
Interest or used to make interest payments on the Notes pursuant to the
subordination provisions contained herein) and Realized Losses theretofore
allocated to the Equity Interest.
"Imputed Principal Payments": All payments made on the Equity Interest
in accordance with Section 12.01 hereof from distributions of principal received
on the Pooled Certificates.
"Indenture": This instrument as supplemented or amended. All references
in this instrument to designated "Articles," "Sections," "Subsections" and other
subdivisions are to the designated Articles, Sections, Subsections and other
subdivisions of this instrument as originally executed. The words "herein,"
"hereof," "hereunder" and other words of similar import refer to this Indenture
as a whole and not to any particular Article, Section, Subsection or other
subdivision.
- 6 -
<PAGE>
"Independent": When used with respect to any specified Person means
another Person who (1) is in fact independent of the Issuer and any other
obligor upon the Notes and of any Affiliate of the Issuer or such other obligor,
(2) does not have any direct financial interest or any material indirect
financial interest in the Issuer or in any such other obligor or in any
Affiliate of the Issuer or such other obligor, and (3) is not connected with the
Issuer or any such other obligor as an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions.
"Individual Note": Any Note registered in the name of a Holder other
than the Depository or its nominee.
"Institutional Accredited Investor": Any Person meeting the
requirements of Rule 501 (a)(1), (2), (3) or (7) of Regulation D under the
Securities Act.
"Investment Letter": The letter to be furnished by each Institutional
Accredited Investor which purchases any Class of Notes, substantially in the
form set forth as Exhibit B-1 hereto.
"Issuer": Structured Mortgage Trust 1997-1, a limited purpose Delaware
business trust established by the Trust Agreement for the purpose of issuing the
Notes.
"Issuer Officer": Any Officer of the Owner Trustee authorized to sign
on behalf of the Issuer.
"Issuer Order" and "Issuer Request": A written order or request signed
in the name of the Issuer by the Owner Trustee and delivered to the Trustee.
"Lost Certificates": The Pooled Certificates identified as Housing
Securities, Inc., Mortgage Pass-Through Certificates, Series 1994-1, Class A-B-3
and PNC Mortgage Securities Corp., Mortgage Pass-Through Certificates Series
1994-1, Class B-6 and a portion of Paine Webber Mortgage Acceptance Corporation
IV, Mortgage Pass-Through Certificates Series 1993-6, Class B-3, with an
aggregate unpaid principal balance of $1,209,781 as of March 24, 1997.
"Loss Mitigation Advisor": AIC, and its permitted successors as
provided herein.
"Loss Mitigation Advisor's Fee": The monthly fee due the Loss
Mitigation Advisor to be paid from interest paid on the Pooled Certificates, at
a rate of 0.30% per annum calculated on the same aggregate Certificate Principal
Balance of the Pooled Certificates on which interest is paid; provided that if
AIC no longer acts as the Loss Mitigation Advisor and if Special Servicing
Agreements terminate as a result thereof, the Loss Mitigation Advisor's Fee
shall be reduced in proportion to the reduction of the Aggregate Certificate
Principal Balance of Pooled Certificates that remain subject to Special
Servicing Agreements.
"Maturity": With respect to a Class of Notes, the date on which the
unpaid principal of such Class of Notes becomes due and payable as herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.
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<PAGE>
"Maturity Date": With respect to the Pooled Certificates, the date on
which the last payment of principal of such Pooled Certificates shall be due and
payable. In determining the Maturity Date of such Pooled Certificates, all
pre-payments received prior to the date of determination shall be taken into
account.
"Net Certificate Rate": With respect to a Pooled Certificate and a
Certificate Distribution Date, the effective per annum rate of interest with
respect to the Certificate Principal Balance of such Pooled Certificate
immediately prior to such Certificate Distribution Date actually paid and
received by the Trustee as reported in the related Certificate Remittance Report
received by the Trustee, (or if not so reported, calculated by dividing the
amount of such interest actually received by the Certificate Principal Balance
of such Pooled Certificate immediately prior to such Certificate Distribution
Date, as reported in the related Certificate Remittance Report), i.e., which
takes account of reductions from such Pooled Certificate's then Pass-Through
Rate for any nonreimbursed interest shortfalls and interest losses allocated to
such Pooled Certificate and any increases in respect of reimbursement of past
interest shortfalls when allocated to such Pooled Certificates in the related
Certificate Remittance Report as interest, in each case with respect to such
Certificate Distribution Date and expressed as a per annum rate.
"Note Interest Rate": The annual rate at which interest accrues on the
Notes of a Class, determined as specified in Section 3.01(c).
"Note Owner": Any person who is the beneficial owner of a Note
registered in the name of the Depository or its nominee.
"Note Principal Balance": As of any date of determination, (i) in the
aggregate the outstanding principal balance of all Classes of Notes, which shall
equal the original principal balance of all of the Notes reduced by all
distributions thereon and losses allocated thereto in reduction of their
principal balance on or prior to such date or (ii) with respect to each Class of
Notes or a Note of a Class the outstanding principal balance of all Notes of
that Class or of such Note, which shall equal the original principal balance of
such Class of Notes or of such Note on or prior to such date reduced by all
distributions thereon and losses allocated thereto in reduction of the principal
balance of such Class or of such Note on or prior to such date.
"Note Register" and "Note Registrar": The respective meanings specified
in Section 3.05.
"Note Remittance Report": The report provided by the Trustee to the
Noteholders and the Issuer pursuant to Section 11.04(a).
"Noteholders" or "Holder": With respect to any Note, the Person in
whose name such Note is registered in the Note Register.
"Notes": Any collateralized notes of any Class authorized by, and
authenticated and delivered under, this Indenture.
"Officer": With respect to any corporation, the Chairman of the Board
of Directors, the President, any Vice President, the Secretary, any Assistant
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<PAGE>
Secretary or the Treasurer of such corporation; with respect to any partnership,
any individual general partner thereof or any corporate Officer of a corporate
general partner thereof; with respect to any bank or trust company acting as
trustee of an express trust or as custodian, any trust officer or authorized
officer thereof.
"Officer's Certificate": For any Person, a certificate delivered to the
Trustee that has been signed on behalf of that Person by an individual who is
identified in that certificate as being an Officer of that Person or any other
individual authorized to execute the certificate.
"Opinion of Counsel": A written opinion of an attorney at law admitted
to practice before the highest court of any state of the United States or the
District of Columbia or a law firm that may, except as otherwise expressly
provided in this Indenture, be counsel for the Issuer and who shall be
satisfactory to the Trustee. Whenever an Opinion of Counsel is required
hereunder, such opinion may rely on opinions of other counsel who are so
admitted. Notwithstanding the foregoing, an Opinion of Counsel may be rendered
as to matters of Delaware corporate or partnership law by an attorney or law
firm not admitted to practice in Delaware.
"Original Imputed Principal Balance": $21,227,103.30.
"Original Percentage": The percent that the Note Principal Balance of
each Class of Notes and the Imputed Principal Balance of the Equity Interest
represents of the sum of the initial Note Principal Balance of all the Notes and
the Imputed Principal Balance of the Equity Interest, specifically:
Class A 4.0000053672%
Class B 5.9999967448%
Class C 13.0000117904%
Class D 67.4002159342%
Equity Interest 9.5997701634%
If as a result of the allocation of Realized Losses to the Equity
Interest, the Imputed Principal Balance of the Equity Interest is reduced to
zero while any Class of Notes is still outstanding (or thereafter the Note
Principal Balance of one or more Classes of Notes has been reduced to zero in
accordance with the terms of Section 12.01(a) while at least one other Class of
Notes remains outstanding), the Original Percentages of each remaining Class of
Notes will be recalculated based on the percentage that the initial Note
Principal Balance of each Class of Notes then Outstanding constitutes of the sum
of such aggregate initial Note Principal Balances.
"Other Assets" The list of contracts and contract rights relating to
the Pooled Certificates being transferred to the Issuer pursuant to the Trust
Agreement and set forth on Schedule 2 attached hereto and made a part hereof.
- 9 -
<PAGE>
"Outstanding":
(1) With respect to the Notes or the Notes of any Class, as of any date
of determination, "Outstanding" refers to all Notes or all Notes of such Class
theretofore authenticated and delivered under this Indenture except:
(i) Notes or Notes of such Class theretofore canceled by
the Note Registrar or delivered to the Note Registrar for cancellation;
(ii) Notes or Notes of such Class for which payment or
redemption money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Issuer) in trust
or set aside and segregated in trust by the Issuer for the Holders of
such Notes; provided, however, that, if such Notes or Notes of such
Class are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made;
(iii) Notes or Notes of such Class in exchange for or in lieu
of which other Notes have been authenticated and delivered pursuant to
this Indenture unless proof satisfactory to the Trustee is presented
that any such Notes are held by a holder in due course; and
(iv) Notes or Notes of such Class alleged to have been
destroyed, lost or stolen for which replacement Notes have been issued
as provided in Section 3.06;
provided, however, that, in determining whether the Holders of the requisite
principal amount of the Outstanding Notes or the Outstanding Notes of any Class
have given any request, demand, authorization, direction, notice, consent or
waiver hereunder, Notes owned by the Issuer or any other obligor upon the Notes
or any Affiliate of the Issuer or of such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes that the Trustee knows to be so
owned shall be so disregarded. Notes so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Notes and that the pledgee is not the Issuer or any other obligor upon the Notes
or any Affiliate of the Issuer or such other obligor.
(2) With respect to the Pooled Certificates as of any date,
"Outstanding" refers to the Pooled Certificates with a remaining principal
balance.
"Owner Trustee": The Person acting as Owner Trustee in the Trust
Agreement , initially Wilmington Trust Company, as owner trustee and not in its
individual capacity.
"Owner Trustee's Fee": The monthly fee owed to the Owner Trustee in the
amount of $333.33 for services rendered as the owner trustee under the Trust
Agreement.
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"Pass-through Rate": With respect to any Pooled Certificate and at any
date of determination, the stated per annum rate of interest accruing on the
Certificate Principal Balance of such Pooled Certificate on such date.
"Paying Agent": Any Person authorized by the Issuer to pay the
principal of any Notes on behalf of the Issuer, which shall initially be the
Trustee unless and until the Issuer appoints another Person as Paying Agent.
"Payment Account": A segregated trust account established and
maintained by the Trustee pursuant to Section 11.02 hereof, which shall be
designated "SMT 1997-1."
"Payment Date": April 1, 1997 and thereafter the fourth Business Day
following the 25th day of each month (or, if such 25th day is not a Business
Day, the next succeeding Business Day (each such fourth Business Day, a "Payment
Date") commencing in April 1997. For accounting and Record Date purposes only,
the Payment Date for a month (other than with respect to the April 1, 1997
Payment Date) will be deemed to occur on the 29th day of the month (the 28th day
in February, except in a leap year) without regard to whether such day is a
Business Day.
"Percentage Cash Flow Payments": The monthly payments derived from
interest on the Pooled Certificates paid to the Equity Interest based upon its
Imputed Principal Balance, and which, subject to certain subordination
obligations, as provided in Sections 3.01 and 12.01, is equal in rate to the
Note Interest Rate paid on the Notes.
"Percentage Cash Flow Rate": Subject to the provisions of Section
12.01(a)(ii), the annual rate at which cash flow is payable on the Imputed
Principal Balance of the Equity Interest which shall be equal to the Note
Interest Rate.
"Percentage Interest": (i) With respect to a Note of a specific Class,
the portion that such Note represents of all Notes of the same Class, expressed
as a percentage, the numerator of which is the denomination represented by such
Note, and the denominator of which is the initial Note Principal Balance of
Notes of that Class; and (ii) with respect to all of the Notes, the portion that
such Note represents of all Notes, expressed as a percentage, the numerator of
which is the denomination represented by such Note, and the denominator of which
is the aggregate initial Note Principal Balance of all of the Notes.
"Person": Any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
"PHH Pooled Certificates": The five Pooled Certificates issued by PHH
Mortgage Services Corporation.
"Pooled Certificate": Each of the mortgage-backed securities pledged to
the Trustee hereunder (including all entitlements to payment thereon and
renewals, extensions, substitutions and replacements thereof) all of which are
listed on Schedule 1 attached hereto.
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"Pooled Certificate Credit Support": With respect to any Underlying
Series, the credit support, if any, provided to the Pooled Certificates included
in such Underlying Series (which may take the form of overcollateralization of
one or more classes of securities of the same Underlying Series that are
subordinated to such Pooled Certificates, or of a reserve fund, insurance policy
or other form of non-structural credit enhancement), including, with respect to
any Pooled Certificate backed by mortgage-backed securities rather than directly
by Mortgage Loans, any credit support provided to such Pooled Certificates in
connection with any series of mortgage-backed securities underlying the related
Underlying Series.
"Proceeding": Any suit in equity, action at law or other judicial or
administrative proceeding.
"PSA": A prepayment assumption made using an assumed rate of prepayment
in each month relative to the then outstanding principal balance of a pool of
mortgage loans. 200% PSA assumes prepayment of the then outstanding principal
balance of such mortgage loans in the first month of the life of the mortgage
loans at an annual rate of 0.4 % and an additional 0.4 % in each month
thereafter until the thirtieth month and in each month thereafter during the
life of the mortgage loans, 200% PSA assumes an annual constant prepayment rate
of 12% in each month.
"Purchase Price": With respect to a Pooled Certificate purchased from
the Trust Estate by AIC pursuant to the AIC/SPE Transfer Agreement, the price at
which AIC is required to repurchase such Pooled Certificate from the Issuer,
which shall be an amount equal to the Certificate Principal Balance of the
Pooled Certificate to be repurchased multiplied by the sum of the Current
Percentages for the Class A Notes, Class B Notes, and Class C Notes and one-half
of the Current Percentage for the Class D Notes, plus accrued and unpaid
interest on the Pooled Certificate through the end of the month of purchase.
"Qualified Institutional Buyer": Any "qualified institutional buyer" as
defined in clause (a)(l) of Rule 144A.
"Rating Agency": Moody's Investors Service, Inc., any successors
thereto, or any other nationally recognized statistical rating organization
requested by the Issuer to rate any Class of the Notes.
"Realized Loss": The amount of any loss incurred on any Mortgage Loan
upon the liquidation thereof, as specified in the related Certificate Remittance
Report which shall generally equal the unpaid principal balance of the Mortgage
Loan at the time of the liquidation thereof, plus accrued and unpaid interest
thereon, plus any amounts reimbursable to the servicer thereof for unreimbursed
advances (other than advances of principal and interest), minus liquidation
proceeds (net of expenses of liquidation) received with respect to the Mortgage
Loan and any other loss allocated to a Pooled Certificate.
"Record Date": With respect to the first Payment Date, March 31, 1997,
and, with respect to each succeeding Payment Date, the last Business Day of the
month preceding the month in which such Payment Date is deemed to occur.
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"Records": All of the books, ledgers, documents, communications,
writings, schedules, reconciliations, controls, computer data, printouts,
programs, tapes and other electronic data processing storage devices, and all
other data relating to or maintained in connection with the Collateral.
"Redemption Date": The date specified for redemption of all Classes of
the Notes pursuant to Section 10.01.
"Redemption Price": An amount equal to 100% of the aggregate Note
Principal Balances of all Notes then Outstanding.
"Redemption Record Date": With respect to any redemption of the Notes,
a date fixed pursuant to Section 10.01.
"Rule 144A Certificate": The certificate to be furnished by each
purchaser of Notes which is a Qualified Institutional Buyer as defined under
Rule 144A promulgated under the Securities Act, substantially in the form set
forth as Exhibit B-2 hereto as the Rule 144A and Related Matters Certificate.
"Rule 144A": Rule 144A promulgated under the Securities Act.
"Sale": The meaning contemplated in Section 6.18.
"Schedule of Pooled Certificates": The list of the Pooled Certificates
securing the Notes attached as Schedule 1 hereto.
"Securities Act": The Securities Act of 1933, as amended.
"Securities Legend": "THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER
ANY STATE SECURITIES OR BLUE SKY LAWS. THE HOLDER HEREOF, BY PURCHASING THIS
NOTE, AGREES THAT THIS NOTE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A
PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A
QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH
CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED
BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (3) IN CERTIFICATED FORM
TO AN "INSTITUTIONAL ACCREDITED INVESTOR" WITHIN THE MEANING THEREOF IN RULE
501(a)(1), (2), (3) or (7) OF REGULATION D UNDER THE SECURITIES ACT PURCHASING
NOT FOR DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, SUBJECT TO (A) THE
RECEIPT BY THE TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE
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INDENTURE AND (B) THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE
TO THE TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE
WITH ALL APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE
SKY LAWS OF ANY STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE
JURISDICTION."
"SPE": Asset Investors Secured Financing Corporation, a Delaware
limited purpose corporation, which will hold all of the trust certificates in
the Issuer and consequently the equity interest therein.
"Special Servicing Agreements": Those Agreements relating to certain
Pooled Certificates among AIC, the related servicers or master servicers and the
related trustee which give AIC certain rights with respect to delinquent
Mortgage Loans, as enumerated on Schedule 3 hereto.
"Stated Maturity": The Payment Date occurring in April 2027, which is
the date specified in the Notes as the fixed date on which the final installment
of the principal of the Notes is due and payable.
"Tax Administrator": As defined in Section 8.03(b).
"Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation or other form of assignment of any ownership interest, record or
beneficial, in any Note.
"Trust Agreement" The Trust Agreement, dated as of March 26, 1997,
among the Depositor, the SPE and the Owner Trustee pursuant to which the Issuer
was established.
"Trust Estate": The meaning specified in the granting clauses hereof.
"Trustee": State Street Bank and Trust Company, a Massachusetts trust
company, unless a successor Person shall have become the Trustee pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Person.
"Trustee's Fee": A monthly fee equal to the product of 1/12th times
0.175% of the sum of the aggregate Note Principal Balances of the Notes plus the
Imputed Principal Balance of the Equity Interest, due to the Trustee as
compensation for its services during the related period.
"Trustee Officer": With respect to the Trustee, any vice-president, any
assistant vice-president, any assistant secretary, any assistant treasurer, or
other trust officer or assistant trust officer in the corporate trust department
of the Trustee and, with respect to a particular corporate trust matter, any
other officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Underlying Agreement": The pooling and servicing agreement, trust
agreement, indenture or similar agreement, including all related supplements,
for an Underlying Series, under which the related Pooled Certificates were
issued.
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"Underlying Certificates": Mortgage pass-through certificates,
collateralized mortgage obligations and other similar securities issued pursuant
to Underlying Agreements but not included in the Pooled Certificates.
"Underlying Series": Any series of securities to which any Pooled
Certificate belongs.
"Vice President": Any vice president, irrespective of whether such
title is modified by any other forms preceding or following.
"Voting Rights": With respect to all provisions of this Indenture
requiring the consent, vote, resolution or similar action of the Noteholders,
the voting rights represented by each Note entitled to vote, which voting rights
shall be the portion of the voting rights of all of the Notes which is allocated
to any such Note or if a Class of Notes is entitled to vote separately as a
Class, the portion of the voting rights of all of the Notes of such Class which
is allocated to any such Note of such Class. Voting Rights shall be allocated to
the Notes in proportion to the respective Percentage Interest of the Holders
thereof.
ARTICLE TWO
NOTE FORM
Section 2.01 Designation; Form of Notes.
The Notes of each Class shall be designated generally as the Issuer's
Collateralized Notes. The Notes of each Class shall be issued in the form
attached hereto as Exhibits A-1 through and including A-4, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted under this Indenture, and may have such letters, numbers, or other
marks of identification and such legends or endorsements placed thereon as may
be deemed necessary or desirable by the Note Registrar.
ARTICLE THREE
THE NOTES
Section 3.01 The Depository; Initial Class Principal Balances and
Interest Rates
(a) The Depository, the Issuer and the Trustee have entered into a
Depository Agreement dated as of March 26, 1997 (the "Depository Agreement").
Except for the Individual Notes and as provided in Subsection 3.01(b), the Notes
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shall at all times remain registered in the name of the Depository or its
nominee and at all times: (i) registration of such Notes may not be transferred
by the Trustee except to a successor to the Depository; (ii) ownership and
transfers of registration of such Notes on the books of the Depository shall be
governed by applicable rules established by the Depository; (iii) the Depository
may collect its usual and customary fees, charges and expenses from its
Depository Participants; (iv) the Trustee shall deal with the Depository as
representative of the Note Owners for purposes of exercising the rights of
Noteholders under this Indenture, and requests and directions for and votes of
such representative shall not be deemed to be inconsistent if they are made with
respect to different Note Owners; and (v) the Trustee may rely and shall be
fully protected in relying upon information furnished by the Depository with
respect to its Depository Participants.
All transfers by Note Owners of Notes which are represented by Global
Notes shall be made in accordance with the procedures established by the
Depository Participant or brokerage firm representing such Note Owners. Each
Depository Participant shall only transfer Notes of Note Owners it represents or
of brokerage firms for which it acts as agent in accordance with the
Depository's normal procedures.
(b) If (i)(A) the Issuer advises the Trustee in writing that the
Depository is no longer willing or able to properly discharge its
responsibilities as Depository and (B) the Trustee or the Issuer is unable to
locate a qualified successor within 30 days or (ii) the Issuer at its option
advises the Trustee in writing that it elects to terminate the book-entry system
through the Depository, the Trustee shall request that the Depository notify all
Note Owners of the occurrence of any such event and of the availability of
definitive, fully registered Notes (the "Definitive Notes") to Note Owners
requesting the same. Upon surrender to the Trustee of the Notes by the
Depository, accompanied by registration instructions from the Depository for
registration, the Trustee shall issue the Definitive Notes. Neither the Issuer
nor the Trustee shall be liable for any delay in delivery of such instructions
and may conclusively rely on, and shall be protected in relying on, such
instructions.
(c) The aggregate principal amount of the Notes that may be
authenticated and delivered hereunder is limited to $199,893,850.00 plus such
Notes as may be authenticated and delivered pursuant to the provisions of
Section 3.10 and except for Notes authenticated and delivered upon registration
of transfer of or in exchange for, or in lieu of, other Notes pursuant to
Sections 3.04, 3.05 or 3.06 hereof. The Notes issued and delivered on the
Delivery Date shall be as follows:
Class of Notes Aggregate Principal Amount
- -------------- --------------------------
Class A Notes $ 8,844,850.00
Class B Notes $ 13,267,250.00
Class C Notes $ 28,745,750.00
Class D Notes $ 149,036,000.00
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Each Class of Notes will accrue interest on the Notes from the 29th day
of each month through the 28th day of the following month. Each class of Notes
will be entitled to receive interest on its Note Principal Balance on each
monthly Payment Date at a variable interest rate equal to the excess of (i) the
weighted average of the Net Certificate Rates of all of the Pooled Certificates
with respect to the immediately preceding Certificate Distribution Dates as to
which such interest payments are included in Available Funds over (ii) the sum
of the Loss Mitigation Advisor's Fee, the Trustee's Fee and the Owner Trustee's
Fee due on such date (in each case, expressed as a percentage); provided that if
such rate of interest on a given Payment Date would be less than 4% per annum,
first the Percentage Cash Flow Payment and then the Imputed Principal Payment in
each case due with respect to the Equity Interest on such Payment Date will be
subordinated to the extent necessary to provide each Class of the Notes with
interest at a rate of 4% per annum on such Payment Date. Interest shall be
calculated based upon a 360-day year consisting of 12 30-day months.
The Notes of each Class that are authenticated and delivered by the
Trustee to or upon the order of the Issuer on the Delivery Date shall be dated
the Delivery Date. All other Notes that are authenticated after the Delivery
Date for any other purpose under this Indenture shall be dated the date of their
authentication or as otherwise provided herein.
Section 3.02 Denominations.
Each Class of Notes will be issued in fully registered form in minimum
denominations of $500,000 in the case of Class A Notes and $1,000,000 in the
case of all other Classes and in each case $1.00 in excess thereof, except that
one Note of each such Class may be issued in a different amount so that the sum
of the denominations of all outstanding Notes of such Class shall equal the
Class Principal Balance of such Class on the Delivery Date. On the Delivery
Date, the Issuer shall execute and the Trustee shall authenticate (i) one Global
Note of each Class and/or (ii) one or more Individual Notes all in an aggregate
Note Principal Balance that shall equal the Class Principal Balance of such
Class on the Delivery Date. The Global Notes shall be delivered by the Issuer to
the Depository or pursuant to the Depository's instructions, shall be delivered
by the Issuer on behalf of the Depository to and deposited with the DTC
Custodian. Individual Notes shall be delivered by the Trustee in accordance with
an Issuer Order; the Issuer shall give that Issuer Order in accordance with the
instructions of Bear Stearns.
Section 3.03 Execution, Authentication and Delivery.
The Notes shall be executed on behalf of the Issuer by an authorized
Issuer Officer. The signature of any of these Officers on the Notes may be
manual, photocopied or facsimile.
Notes bearing the manual or facsimile signatures of individuals who
were at any time the proper Issuer Officers shall bind the Issuer,
notwithstanding the fact that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or did
not hold such offices at the date of issuance of such Notes.
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At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Notes of any Class executed by the Issuer
to the Trustee for authentication; and the Trustee shall authenticate and
deliver such Notes as in this Indenture provided and not otherwise.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
signatories, and such certificate upon any Note shall be conclusive evidence,
and the only evidence, the such Note has been duly authenticated and delivered
hereunder.
Section 3.04 Temporary Notes.
Pending the preparation of Definitive Notes of any Class, the Issuer
may execute, and upon Issuer Order the Trustee shall authenticate and deliver,
temporary Notes that are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Notes in lieu of which they are issued and with such
variations as the Officers executing such Notes may determine, as evidenced by
their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 9.01, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like original principal amount of definitive Notes of the same Class in the
authorized denominations. Until so exchanged the temporary Notes shall in all
respects be entitled to the same benefits under this Indenture as definitive
Notes.
Section 3.05 Registrations of Transfer and Exchange, Restrictions on
Transfer.
(a) The Issuer shall cause to be kept a "Note Register" in which,
subject to such reasonable regulations as it may prescribe, the Issuer shall
provide for the registration of Notes of each Class and the registration of
transfers of Notes of each Class. The Trustee is hereby initially appointed
"Note Registrar" for the purpose of registering Notes and transfers of Notes as
herein provided.
(b) If a Person other than the Trustee is appointed by the Issuer as
Note Registrar, the Issuer will give the Trustee prompt written notice of the
appointment of such Person as Note Registrar and of the location, and any change
in the location, of the Note Register, and the Trustee shall have the right to
inspect the Note Register at all reasonable times and to obtain copies thereof
and shall have the right to rely upon a certificate executed on behalf of the
Note Registrar by an Officer thereof as to the names and addresses of the
Holders of each Class of Notes and the principal amounts and numbers of such
Notes.
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(c) Subject to Subsection 3.01(a) and upon the satisfaction of the
conditions set forth below, upon surrender for registration of transfer of any
Note at any office or agency of the Issuer maintained for such purpose pursuant
to Section 9.01, the Issuer shall sign, the Trustee shall authenticate and the
Note Registrar shall deliver, in the name of the designated transferee or
transferees, a new Note of a like Class and aggregate Note Principal Balance,
but bearing a different number.
(d) By acceptance of an Individual Note, whether upon original issuance
or subsequent transfer, each holder of such a Note acknowledges the restrictions
on the transfer of such Note set forth in the Securities Legend and agrees that
it will transfer such a Note only as provided herein. In addition to the
provisions of Subsection 3.05(i), the following restrictions shall apply with
respect to the transfer and registration of transfer of an Individual Note to a
transferee that takes delivery in the form of an Individual Note:
(i) The Note Registrar shall register the transfer of an
Individual Note if the requested transfer is being made to a transferee
who has provided the Note Registrar with a Rule 144A Certificate.
(ii) The Note Registrar shall register the transfer of any
Individual Note if (x) the transferor has advised the Note Registrar in
writing that the Note is being transferred to an Institutional
Accredited Investor; and (y) prior to the transfer the transferee
furnishes to the Note Registrar an Investment Letter, provided that, if
the Note Registrar determines (including, but not limited to, based upon
an Opinion of Counsel) that the delivery of (x) and (y) above are not
sufficient to confirm that the proposed transfer is being made pursuant
to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and other applicable
laws, the Note Registrar may as a condition of the registration of any
such transfer require the transferor to furnish other certifications,
legal opinions or other information reasonably sufficient to provide
such confirmation prior to registering the transfer of an Individual
Note.
(e) Subject to Subsection 3.05(i), so long as the Global Note of a
Class remains outstanding and is held by or on behalf of the Depository,
transfers of beneficial interests in such Global Note, or transfers by holders
of Individual Notes of such Class to transferees that take delivery in the form
of beneficial interests in such Global Note, may be made only in accordance with
this Subsection 3.05(e) and in accordance with the rules of the Depository:
(i) In the case of a beneficial interest in the Global Note of a
Class being transferred to an Institutional Accredited Investor, such
transferee shall be required to take delivery in the form of an
Individual Note or Notes of such Class and the Note Registrar shall
register such transfer only upon compliance with the provisions of
Subsection 3.05(d)(ii).
(ii) In the case of a beneficial interest in a Global Note of a
Class being transferred to a transferee that takes delivery in the form
of an Individual Note or Notes of such Class, except as set forth in
clause (i) above, the Note Registrar shall register such transfer only
upon compliance with the provisions of Subsection 3.05(d)(i).
(iii) In the case of an Individual Note of a Class being
transferred to a transferee that takes delivery in the form of a
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beneficial interest in the Global Note of such Class, the Note Registrar
shall register such transfer if the transferee has provided the Note
Registrar with a Rule 144A Certificate.
(iv) No restrictions shall apply with respect to the transfer or
registration of transfer of a beneficial interest in the Global Note of
a Class to a transferee that takes delivery in the form of a beneficial
interest in the Global Note of such Class.
(f) Subject to Subsection 3.05(i), an exchange of a beneficial interest
in the Global Note of a Class for an Individual Note or Notes of such Class, an
exchange of an Individual Note or Notes of a Class for a beneficial interest in
the Global Note of such Class and an exchange of an Individual Note or Notes of
a Class for another Individual Note or Notes of such Class (in each case,
whether or not such exchange is made in anticipation of subsequent transfer,
and, in the case of the Global Note of such Class, so long as such Note remains
outstanding and is held by or on behalf of the Depository) may be made only in
accordance with this Subsection 3.05(f) and in accordance with the rules of the
Depository:
(i) A holder of a beneficial interest in a Global Note of a
Class may at any time exchange such beneficial interest for an
Individual Note or Notes of such Class.
(ii) A holder of an Individual Note of a Class may exchange such
Note for a beneficial interest in the Global Note of such Class if such
holder furnishes to the Registrar a Rule 144A Certificate.
(iii) A holder of an Individual Note of a Class may exchange
such Note for an equal aggregate Note Principal Balance of Individual
Notes of such Class in different authorized denominations without any
certification.
(g) (i) Upon acceptance for exchange or transfer of an Individual Note
of a Class for a beneficial interest in the Global Note of such Class as
provided herein, the Note Registrar shall cancel such Individual Note and shall
(or shall request the Depository to) endorse on the schedule affixed to the
applicable Global Note (or on a continuation of such schedule affixed to the
Global Note and made a part thereof) an appropriate notation or otherwise mark
its records to evidence the date of such exchange or transfer and an increase in
the note balance of the Global Note equal to the note balance of such Individual
Note exchanged or transferred therefor.
(ii) Upon acceptance for exchange or transfer of a beneficial
interest in the Global Note of a Class for an Individual Note of such Class as
provided herein, the Note Registrar shall (or shall request the Depository to)
endorse on the schedule affixed to such Global Note (or on a continuation of
such schedule affixed to such Global Note and made a part thereof) an
appropriate notation or otherwise mark its records to evidence the date of such
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exchange or transfer and a decrease in the note balance of such Global Note
equal to the note balance of such Individual Note issued in exchange therefor or
upon transfer thereof.
(h) The Securities Legend shall be placed on any Individual Note issued
in exchange for or upon transfer of another Individual Note or of a beneficial
interest in a Global Note.
(i) Subject to the restrictions on transfer and exchange set forth in
this Section 3.05, the holder of any Individual Note may transfer or exchange
the same in whole or in part (in an initial Note Principal Balance equal to the
minimum authorized denomination or any integral multiple of $1.00 in excess
thereof) by surrendering such Note at the Corporate Trust Office, or at the
office of any transfer agent, together with an executed instrument of assignment
and transfer satisfactory in form and substance to the Note Registrar in the
case of transfer and a written request for exchange in the case of exchange duly
executed by the Holder thereof or his attorney duly authorized in writing with
such signature medallion guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the city
in which the Corporate Trust Office is located, or by another participant in the
Securities Transfer Agents Medallion Program. The holder of a beneficial
interest in a Global Note may, subject to the rules and procedures of the
Depository, cause the Depository (or its nominee) to notify the Note Registrar
in writing of a request for transfer or exchange of such beneficial interest for
an Individual Note or Notes. Following a proper request for transfer or
exchange, the Note Registrar shall, within five Business Days of such request
made at such Corporate Trust Office, seek to cause the Issuer to execute, the
Trustee to authenticate and the Note Registrar to deliver at such Corporate
Trust Office, to the transferee (in the case of transfer) or holder (in the case
of exchange) or send by first class mail at the risk of the transferee (in the
case of transfer) or holder (in the case of exchange) to such address as the
transferee or holder, as applicable, may request, an Individual Note or Notes,
as the case may require, for a like aggregate Note Principal Balance and in such
authorized denomination or denominations as may be requested. The presentation
for transfer or exchange of any Individual Note shall not be valid unless made
at the Corporate Trust Office by the registered holder in person, or by a duly
authorized attorney-in-fact.
(j) All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
(k) No service charge shall be made to a Holder for any registration of
transfer or exchange of any Class of Notes, but the Issuer may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of such
Notes, other than exchanges pursuant to Section 3.04 not involving any transfer.
Section 3.06 Mutilated, Destroyed, Lost or Stolen Notes.
If (a) any mutilated Note is surrendered to the Trustee, or the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
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Note, and (b) there is delivered to the Trustee such security or indemnity as
may be required by it to save each of the Issuer and the Trustee harmless, then,
in the absence of notice to the Issuer or the Note Registrar that such Note has
been acquired by a bona fide purchaser, the Issuer shall execute and upon its
request the Trustee shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Note, a new Note of the same
Class and of the same tenor and original principal amount, bearing a number not
contemporaneously outstanding; provided, however, that if any such mutilated,
destroyed, lost or stolen Note shall have become or shall be about to become due
and payable, or shall have been selected or called for redemption, instead of
issuing a new Note, the Issuer may pay such Note without surrender thereof,
except that any mutilated Note shall be surrendered prior to being paid in full.
Upon the issuance of any new Note under this Section, the Issuer may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other reasonable expenses
(including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes of the same Class duly issued
hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
If, after the delivery of a new Note or payment of a destroyed, lost or
stolen Note pursuant to the first paragraph of this Section, a bona fide
purchaser presents for payment the related original Note, the Issuer and the
Trustee shall be entitled to recover the related new Note (or such payment) from
the Person to whom it was delivered or any Person who may have taken such new
Note from such Person, unless such a transferee is a bona fide purchaser of such
new Note, and the Trustee shall be entitled to recover upon the security or
indemnity provided pursuant to the first paragraph of this Section to the extent
of any loss, damage, cost or expenses incurred by the Issuer or the Trustee in
connection with the situation described in this paragraph.
Section 3.07 Payment of Principal and Interest; Rights Preserved.
(a) Principal and interest on the Notes shall be paid out of
collections of principal and interest on the Pooled Certificates and receipts,
if any, with respect to the Other Assets to the extent and in the manner
provided in Section 12.01 until the entire unpaid Note Principal Balance of each
Class of the Notes is reduced to zero.
(b) Except for the final payment due on each Class of Notes at their
Maturity, which final payment shall be made only upon presentation and surrender
of each such Note at the office or agency of the Issuer maintained for the
purpose of making final Note payments as provided in Section 9.01, payments of
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interest and principal of each Note will be made by the Paying Agent on each
Payment Date out of Available Funds to the Person who was the Holder of such
Class of Notes as of the related Record Date either (1) by check mailed to the
address of such Person, as such name and address appear in the Note Register, or
(2) by wire transfer of immediately available funds to the account of such
Person, in accordance with any wiring instructions provided to the Trustee by
such Person in writing at least five Business Days prior to the applicable
Record Date. The Trustee may charge a reasonable fee to any Holder of Notes with
aggregate denominations evidencing original Note Principal Balances of less than
$5,000,000 for any payment made to such holder by wire transfer.
In the case of any Note upon which the final payment is due on the
Maturity of such Note, the Issuer or, at the Issuer's request, the Trustee, in
the name and at the expense of the Issuer, shall notify the Person entitled
thereto at his address as it appears on the Note Register that such Note is to
be paid in full. Such notice shall be mailed as soon as practicable, and in any
event no later than the Payment Date on which the final payment is to be made on
such Note, and shall specify the place where such Note may be presented and
surrendered for final payment.
(c) Notes shall be payable solely from the proceeds of the Trust
Estate and from any other assets of the Issuer.
(d) Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note of the same Class shall carry the rights to
unpaid interest and principal that was carried by such other Note.
Section 3.08 Persons Deemed Owners2.
Prior to due presentment for registration of transfer of any Note, the
Issuer, the Trustee and any agent of the Issuer or of the Trustee may treat the
Person in whose name any such Note is registered in the Note Register as the
owner of such Note for the purpose of receiving payments of interest and
principal on such Note and for all other purposes whatsoever (whether or not
such Note is overdue), and neither the Issuer, the Trustee nor any agent of the
Issuer or the Trustee shall be affected by notice to the contrary.
Section 3.09 Cancellation.
All Notes surrendered for payment, registration of transfer, exchange
or redemption shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly canceled by it. The Issuer may at
any time deliver to the Trustee for cancellation any Notes previously
authenticated and delivered hereunder that the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly canceled by the
Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes
canceled as provided in this Section, except as expressly permitted by this
Indenture. All canceled Notes held by the Trustee shall be destroyed in
accordance with the Trustee's customary practices unless the Issuer shall direct
by an Issuer Order that they be returned to it.
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Section 3.10 Additional Notes.
The Owner Trustee and the Trustee are hereby authorized to enter into a
Supplemental Indenture to provide that the Issuer may pledge additional
mortgage-backed securities to the Trustee and issue additional Classes of Notes
and to provide for any additional provisions necessitated by such pledge and
issuance provided that prior to any such action the Trustee and the Owner
Trustee are provided with (i) an opinion of counsel to the effect that the
Issuer will not be treated as a taxable mortgage pool for federal income tax
purposes and (ii) a written acknowledgment from Moody's that such action will
not adversely affect its then rating of each Class of Notes.
ARTICLE FOUR
ARTICLE FOUR AUTHENTICATION AND DELIVERY OF NOTES
Section 4.01 Security for Notes.
The Notes of each Class shall be executed by the Issuer and delivered
to the Trustee for authentication, and thereupon the same shall be authenticated
and delivered to the Issuer by the Trustee upon Issuer Order and upon delivery
by the Issuer to the Trustee, and receipt by the Trustee, of the following:
(a) Registration of Collateral. The Issuer shall, at its
expense, have delivered all Pooled Certificates (other than the Lost
Certificates, the DTC Certificates and the other Pooled Certificates,
if any, noted in the Trustee Receipt delivered pursuant to Section
4.02) to the Trustee, duly endorsed by the registered holder to the
Trustee or in blank, and the Trustee shall promptly deliver all Pooled
Certificates (other than the Lost Certificates, the DTC Certificates
and such other Pooled Certificates) to the related Underlying Trustees
together with all required transfer documents to enable the Pooled
Certificates to be registered in the name of the Trustee or its nominee
or agent. The Trustee shall also have received confirmation that the
DTC Certificates have been "transferred" to the Trustee in accordance
with Article Eight of the Uniform Commercial Code as in effect in the
State of New York. In connection with the registration of the Pooled
Certificates in the name of the Trustee or its nominee or agent, the
Issuer assumes all responsibility for compliance with the requirements
of the Underlying Agreements and applicable securities laws, and for
determining whether such transfer is permitted thereunder, and the
Trustee shall have no responsibility therefor and shall be held
harmless from any liability arising therefrom. The Issuer shall cause
to be delivered a lost security affidavit and indemnity agreement to
the Trustee with respect to the Lost Certificates and any other Pooled
Certificates noted in the aforesaid Trustee Receipt and shall promptly
obtain replacement certificates for the Lost Certificates and the
certificates for the other Pooled Certificates noted in the aforesaid
Trustee Receipt and deliver them to the Trustee. Following its receipt
of such certificates, the Trustee shall provide to the Issuer a receipt
with respect thereto comparable to the receipt referred to in Section
4.02.
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(b) Certificate of the Issuer. An Officer's Certificate from
the Issuer, dated as of the date of the Issuer Order, to the effect
that, in the case of each Pooled Certificate and immediately prior to
the delivery thereof on the Delivery Date:
(1) the Issuer is the beneficial owner of such
Pooled Certificate;
(2) the Issuer has acquired its ownership or
security interest in such Pooled Certificate in good faith
without notice of any adverse claim;
(3) the Issuer has not assigned any interest
or participation in such Pooled Certificate (or, if any such
interest or participation has been assigned, it has been
released);
(4) the Issuer has full right to Grant a
security interest in and assign and pledge the Trust Estate
to the Trustee;
(5) the information set forth with respect to
each Pooled Certificate in Schedule 1 hereto is complete and
correct; and
(6) (A) the Issuer is the beneficial owner of the
Other Assets; (B) the Issuer has acquired its ownership of the
rights represented by the Other Assets in good faith without
notice of any adverse claim; (C) the Issuer has not assigned
any interest or participation in the Other Assets; (D) the
Issuer has full right assign its interests in the Other Assets
to the Trustee, or if consents of third parties are required,
such consents have been obtained; and (E) the information set
forth with respect to each of the Other Assets listed in
Schedule 2 hereto is complete and correct
(c) Deposits to Payment Account. The amount of all distributions
received or expected to be received on the Pooled Certificates by the registered
holders thereof during March 1997, which amount is $1,613,876, shall have been
deposited into the Payment Account and shall be disbursed on the first Payment
Date in accordance with joint instructions from the Depositor and Bear Stearns
which are intended to reflect the amounts of principal and interest on the Notes
and Percentage Cash Flow Payments and Imputed Principal Payments in respect of
the Equity Interest which would be due hereunder based on March 1997 payments on
the Pooled Certificates. Such deposit shall be invested in Eligible Investments
at the direction of the Depositor. If such deposit plus any proceeds of the
Eligible Investments exceeds the amounts due to the Holders of the Notes and the
Issuer in respect of the Equity Interest as provided in the instructions, the
instructions shall provide that the excess be paid to the Depositor. If such
deposit plus any proceeds of the Eligible Investments are insufficient to pay
the amounts due to the Holders of the Notes and the Issuer in respect of the
Equity Interest, the Depositor shall provide to the Trustee for deposit into the
Payment Account the amount of any such insufficiency by 12:00 p.m. on the day
prior to the first Payment Date.
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Section 4.02 Trustee Receipt.
On or before the Delivery Date, the Trustee shall execute and deliver
an instrument to the Issuer confirming its receipt of each Pooled Certificate
(other than the Lost Certificates and any other exceptions noted thereon), duly
endorsed in blank or to the order of the Trustee, or, in the case of any DTC
Certificate, confirming its receipt of confirmation of the transfer to it of
such Pooled Certificate in accordance with Section 4.01(a).
Section 4.03 Exercise of Rights as Registered Holder of Pooled
Certificates.
If at any time the Trustee, as the registered holder of the Pooled
Certificates, is asked to exercise a right to vote inherent in any Pooled
Certificate or to take any action or give any consent, approval or waiver with
respect to such Pooled Certificate or the related Underlying Agreement, the
Trustee shall promptly notify all of the Noteholders of such request in writing,
requesting direction from such Noteholders as to the course of action the
Trustee should take. The Trustee shall furnish copies to the Holders of any
request or other notice requiring action by, and received by the Trustee as,
registered holder of any Pooled Certificate, and subject to the provisions of
Section 7.03(e) shall act in accordance with the written directions of Holders
of the Notes of all Classes entitled to 51% or more of the Voting Rights of all
the Noteholders. In the absence of such directions, the Trustee may, but shall
have no obligation to, take such action as it may determine in its absolute
discretion. Voting rights will be allocated among the Notes of all Classes pro
rata based upon their respective Note Principal Balances. Except as so provided,
the Trustee shall have no responsibility to monitor or regulate on behalf of the
Holders the exercise by any Person of its rights under any Underlying Agreement,
including any right to amend or terminate such Underlying Agreement, nor any
responsibility to monitor or regulate the liquidation of mortgage loans or other
collateral pursuant to any such Underlying Agreement.
Section 4.04 Benefit Plan Investor Representations.
(a) The Issuer represents and warrants that it is not a "benefit
plan investor" described in or subject to the Department of Labor regulations
set forth in 29 C.F.R. section 2510.3-101.
(b) The Trustee, based upon the Opinion of Counsel it has received from
Stroock & Stroock & Lavan LLP to such effect, represents and warrants that it is
not a "benefit plan investor" described in or subject to the Department of Labor
regulations set forth in 29 C.F.R. section 2510.3-101.
ARTICLE FIVE
SATISFACTION AND DISCHARGE
Section 5.01 Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) the rights of Noteholders to receive
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payments of interest on and principal of the Notes, (iv) the rights, obligations
and immunities of the Trustee hereunder and (v) the rights of Noteholders as
beneficiaries hereof with respect to any property deposited with the Trustee
hereunder and payable to all or any of them, and the Trustee, on demand of and
at the expense of the Issuer, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture when:
(1) either:
(a) all Notes of all Classes theretofore
authenticated and delivered (other than (i) Notes that have
been destroyed, lost or stolen and that have been replaced or
paid as provided in Section 3.06, and (ii) Notes for whose
payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter
repaid to the Issuer or discharged from such trust, as
provided in Section 9.02) have been delivered to the Trustee
for cancellation; or
(b) all Notes of all Classes not theretofore
delivered to the Trustee for cancellation:
(i) have become due and payable; or
(ii) will become due and payable at their
Stated Maturity within one year; or
(iii) are to be called for redemption
within one year under an arrangement satisfactory to
the Trustee for the giving of notice of redemption by
the Issuer;
and the Issuer, in the case of clause (i), (ii) or (iii) of paragraph (b) above,
has deposited or caused to be deposited with the Trustee, in trust for such
purpose, cash or Eligible Investments in an amount sufficient to pay and
discharge the entire indebtedness on such Notes not theretofore delivered to the
Trustee for cancellation; provided, however, that clause (i) of paragraph (b)
above shall be inapplicable if an election to act in accordance with the
provisions of Section 6.05 shall have been made and not rescinded;
(2) the Issuer has paid or caused to be paid all other
sums payable hereunder by the Issuer; and
(3) the Issuer has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture with respect to the Notes have been
complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Trustee to the Noteholders under Section 5.02 and the
provisions of Section 7.07 for the benefit of the Trustee shall survive.
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Section 5.02 Supplication of Trust Money.
All monies deposited with the Trustee pursuant to Section 5.01 shall be
held in trust and applied by it, in accordance with the provisions of the Notes
and this Indenture, to the payment, either directly or through any Paying Agent,
as the Trustee may determine, to the Person entitled thereto of the principal
and interest for the payment of which such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent otherwise expressly required herein or required by law.
Section 5.03 Release of Collateral.
Upon satisfaction and discharge of this Indenture as described in
Section 5.01, the Trustee shall release all Collateral, including all funds on
deposit in the Payment Account to the Issuer or its designee, and shall deliver
any Pooled Certificates to the Issuer or its designee duly endorsed to such
Person, and shall take all appropriate actions to transfer ownership rights in
the Other Assets, if any, to the Issuer, and shall execute and deliver to such
Person any other documents or instruments reasonably requested by such Person to
effect the transfer of the Pooled Certificates and the Other Assets to such
Person all at the expense of the Issuer and shall be indemnified by the Issuer
in so doing.
ARTICLE SIX
REMEDIES
Section 6.01 Events of Default.
(a) An Event of Default with respect to a Note of any Class means any
one of the following events (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) a failure to pay interest and principal in the
required amounts from Available Funds;
(2) a failure to pay in full the Outstanding principal
amount of any Note by its Stated Maturity; or
(3) default in the performance, or breach, of any covenant or
warranty of the Issuer in this Indenture (other than a Default in the
performance of or breach of any covenant or warranty addressed in
Section 6.01(a)(1) and (2) hereof), and continuance of such Default or
breach for a period of 60 days after there shall have been given, by
registered or certified mail, to the Issuer by the Trustee, a written
notice specifying such Default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" under
the Indenture; or
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(4) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Issuer bankrupt or
insolvent; or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Issuer under the Federal Bankruptcy Code or any other applicable
federal or state law, or appointing a receiver, liquidator, assignee,
or sequestrator (or other similar official) of the Issuer or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 90 consecutive days; or
(5) the institution by the Issuer of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under the Federal Bankruptcy Code or any other similar
applicable federal or state law, or the consent by it to the filing of
any such petition or to the appointment of a receiver, liquidator,
assignee, trustee or sequestrator (or other similar official) of the
Issuer or of any substantial part of its property, or the making by it
of an assignment for the benefit of creditors, or the admission by it
in writing of its inability to pay its debts generally as they become
due, or the taking of corporate action by the Issuer in furtherance of
any such action.
(b) Each Noteholder shall be deemed to have agreed, by its acceptance
of its Note, not to file, or join in filing, any petition in bankruptcy or
commence any similar proceeding in respect of the Issuer and to treat its Notes
as debt instruments for purposes of federal and state income tax, franchise tax
and any other tax measured in whole or in part by income.
Section 6.02 Acceleration of Maturity; Rescission and Annulment.
(a) If an Event of Default occurs and is continuing, the Holders of not
less than 25% of the Note Principal Balances of all of the Outstanding Notes may
declare the Outstanding principal balances of all the Notes to be immediately
due and payable, by a notice in writing to the Issuer and to the Trustee, and
upon any such declaration such principal shall become immediately due and
payable.
(b) At any time after a declaration of acceleration of Maturity has
been made pursuant to paragraph (a) of this Section 6.02 and before a judgment
or decree for payment of the money due has been obtained by the Trustee as
hereinafter provided in this Article, the Holders of a majority of the Note
Principal Balances of all of the Outstanding Notes, by written notice to the
Issuer and the Trustee, may rescind and annul such declaration of acceleration
of the Notes and its consequences if:
(1) (A) the Issuer has paid or deposited with the Trustee
a sum sufficient to pay
(i) all overdue installments of interest
and principal on each Class of the Notes, and
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(ii) all sums paid or advanced by the
Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Trustee,
its agents and counsel; and
(B) all Events of Default, other than the non-payment
of interest and principal of Notes that have become due solely by such
acceleration, have been cured or waived as provided in Section 6.15; or
(2) an election is made to act in accordance with the
provisions of Section 6.05 with respect to the Event of Default that
gave rise to such declaration.
No such rescission shall affect any subsequent Default or impair any
right consequent thereon.
Section 6.03 Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Issuer covenants that if Default is made in the payment of any
interest or principal of any Note, the Issuer will, upon demand of the Trustee,
pay to the Trustee, for the benefit of the Noteholders, the whole amount then
due and payable on the Notes and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If the Issuer fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as Trustee of an express trust, may institute a
Proceeding for the collection of the sums so due and unpaid, and may prosecute
such Proceeding to judgment or final decree, and may enforce the same against
the Issuer or any other obligor on the Notes and collect the monies adjudged or
decreed to be payable in the manner provided by law.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Noteholders by such appropriate Proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Trustee by this Indenture or by law.
Section 6.04 Remedies.
If an Event of Default shall have occurred and be continuing, the
Trustee may, to the extent not inconsistent with the provisions of Section 6.05,
if applicable, do one or more of the following:
(a) institute Proceedings for the collection of all amounts
then payable on the Notes under this Indenture, whether by declaration
or otherwise, enforce any judgment obtained, and collect from the Trust
Estate securing the Notes and from the Issuer monies adjudged due;
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(b) sell all or a portion of the Trust Estate securing the
Notes or rights of interest therein, at one or more public or private
sales called and conducted in any manner permitted by law;
(c) institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture with respect to the
Trust Estate securing the Notes; and
(d) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and
enforce the rights and remedies of the Trustee or the Holders of the
Notes hereunder;
provided, however, that unless a declaration of acceleration has been made in
accordance with Section 6.02, the Trustee may not sell or otherwise liquidate
the Trust Estate.
Section 6.05 Optional Preservation of Trust Estate.
If (i) an Event of Default shall have occurred and be continuing and
(ii) no Notes have been declared due and payable or such declaration and its
consequences are annulled and rescinded, the Trustee may, and upon request from
the Noteholders of a majority in aggregate Note Principal Balance of the
Outstanding Notes, shall, elect, by giving written notice of such election to
the Issuer, to take possession of and retain the Trust Estate securing the Notes
intact, collect or cause the collection of the proceeds thereof and make and
apply all payments and deposits and maintain all accounts in respect of such
Notes in accordance with the provisions of Article Eleven and Article Twelve. If
the Trustee is unable to give or is stayed from giving such notice to the Issuer
for any reason whatsoever, such election shall be effective as of the time of
such determination or request, as the case may be, notwithstanding any failure
to give such notice, and the Trustee shall give such notice upon the removal or
cure of such inability or stay (but shall have no obligation to effect such
removal or cure). Any such election may be rescinded with respect to any portion
of the Trust Estate securing the Notes remaining at the time of such rescission
by written notice to the Trustee and the Issuer from the Noteholders of a
majority in aggregate Note Principal Balance of the Outstanding Notes.
Section 6.06 Trustee May File Proofs of Claim.
In case there shall be pending Proceedings relative to the Issuer or
any other obligor on the Notes under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or its
property, or in case of any other comparable judicial Proceedings relative to
the Issuer or other obligor on the Notes, or the creditors or property of the
Issuer or such other obligor, the Trustee, regardless whether any interest or
the principal of any Notes shall then be due and payable as therein expressed or
by declaration or otherwise and regardless whether the Trustee shall have made
any demand pursuant to the provisions of Section 6.03, shall be entitled and
empowered, by intervention in such Proceedings or otherwise:
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(a) to file and prove a claim or claims for the whole amount
of interest and principal owing and unpaid in respect of each Class of
Notes, and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any
claim for reasonable compensation to the Trustee and each predecessor
Trustee, and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee, except as a
result of negligence or bad faith) and of the Noteholders allowed in
any Proceedings relative to the Issuer or other obligor on the Notes,
or to the creditors or property of the Issuer or such other obligor;
(b) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders of each Class of Notes in any election of
a trustee or a standby trustee in arrangement, reorganization,
liquidation or other bankruptcy or insolvency Proceedings, or of any
Person performing similar functions in comparable Proceedings; and
(c) to collect and receive any monies or other property
payable or deliverable on any such claims, and to distribute all
amounts received with respect to the claims of the Noteholders and of
the Trustee on their behalf; and any trustee, receiver or liquidator,
custodian or other similar official is hereby authorized by each of the
Noteholders to make payments to the Trustee, and, in the event that the
Trustee shall consent to the making of such payments, to make payments
directly to the Noteholders, to pay to the Trustee such amounts as
shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and
counsel, and all other expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee except as a
result of negligence or bad faith.
Amounts payable to the Trustee under this Section are intended to
constitute administrative expenses. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or vote for or accept or adopt
on behalf of any Noteholder of any Class any plan of reorganization,
arrangement, adjustment or composition affecting the Notes of such Class or the
rights of any Holder thereof, or to authorize the Trustee to vote in respect of
the claim of any Noteholder in any such Proceeding except, as aforesaid, to vote
for the election of a trustee in bankruptcy or similar person.
In any Proceedings brought by the Trustee (and also any Proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the Holders
of the Notes, and it shall not be necessary to make any Holders of the Notes
parties to any such Proceedings.
Section 6.07 Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture or the Notes may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any Proceeding relating thereto, and any such
Proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment shall, after provision for the
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payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the
Noteholders in respect of which such judgment has been recovered.
Section 6.08 Application of Money Collected.
If the Notes have been declared due and payable following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, any money collected by the Trustee pursuant to this Article or
otherwise and any moneys that may then be held or thereafter received by the
Trustee as security shall (unless such money is being applied in a accordance
with Section 6.05) be applied in the following order, at the date or dates fixed
by the Trustee and, in case of the distribution of the entire amount due on
account of principal of, and interest on, such Notes, upon presentation and
surrender thereof:
first: To the payment of all amounts due the Trustee,
the Owner Trustee and the Loss Mitigation Advisor, in that
order;
second: To the payment of amounts then due and unpaid
on the Outstanding Notes for interest on the aggregate Note
Principal Balance of each Class of Notes to the date of
payment thereof, at the applicable interest rates, all such
amounts to be paid ratably among the Notes, without preference
or priority of any kind;
third: To the payment of the Note Principal Balance
of each Class of Notes in alphabetical order commencing with
the Class A Notes until the Note Principal Balance of the
respective Class has been reduced to zero; and
fourth: To the payment of the remainder, if any, to
the Issuer in respect of the Equity Interest or, with the
consent of the Issuer, any other Person legally entitled
thereto.
Section 6.09 Limitation on Suits.
No Holder of any Note shall have any right to institute any
Proceedings, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% of the aggregate Note
Principal Balance of the Outstanding Notes shall have made written
request to the Trustee to institute Proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
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(4) the Trustee for 30 days after its receipt of such
notice, request and offer of indemnity has failed to institute any such
Proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 30-day period by the Holders of a
majority of the Note Principal Balance of the Outstanding Notes;
it being understood and intended that no one or more Noteholders shall have any
right in any manner whatsoever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or preference over any
other Noteholders except to the extent explicitly provided herein or to enforce
any right under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all the Noteholders.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Noteholders, each representing
less than a majority of the then aggregate Outstanding Note Principal Balance of
all such Outstanding Notes, the Trustee in its sole discretion may determine
what action, if any, shall be taken, notwithstanding any other provisions of
this Indenture.
Section 6.10 Unconditional Rights of Noteholders to Receive Payments.
Notwithstanding any other provision in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of interest on and principal of such Note as such interest or principal
becomes due and payable in accordance with the terms of such Note and to
institute suit for the enforcement of any such payment, and such right shall not
be impaired without the consent of such Holder.
Section 6.11 Restoration of Rights and Remedies.
If the Trustee or any Noteholder has instituted any Proceeding to
enforce any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Noteholder, then and in every such case the Issuer, the
Trustee and the Noteholder shall, subject to any determination in such
Proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the
Noteholders shall continue as though no such Proceeding had been instituted.
Section 6.12 Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Trustee or
to the Noteholders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
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Section 6.13 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Noteholder to exercise
any right or remedy accruing upon any Event of Default shall impair any such
right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Noteholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Noteholders, as the
case may be.
Section 6.14 Control by Noteholders.
The Holders of a majority of the Note Principal Balance of all of the
Outstanding Notes shall have the right, subject to Section 7.03(e) hereof, to
direct the time, method and place of conducting any Proceeding for any remedy
available to the Trustee with respect to the Notes or exercising any trust or
power conferred on the Trustee; provided that:
(1) such direction shall not be in conflict with any rule of
law or with this Indenture; and
(2) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction; provided,
however, that, subject to Section 7.01, the Trustee need not take any
action that it determines might involve it in liability or be unjustly
prejudicial to the Noteholders not consenting.
Section 6.15 Waiver of Past Defaults.
The Holders of a majority of the Note Principal Balance of all of the
Outstanding Notes may waive any past Default and its consequences, except a
Default in the payment of interest on or principal of Notes unless an election
to act in accordance with the provisions of Section 6.05 shall have been made
and not been rescinded.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 6.16 Undertaking for Costs.
All parties to this Indenture agree, and each Noteholder, by its
acceptance of a Note, shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Noteholder, or group of Noteholders,
holding in the aggregate more than 10% in Note Principal Balance of the
Outstanding Notes or to any suit instituted by any Noteholder for the
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enforcement of the payment of interest on or principal of any Notes on or after
the Stated Maturity expressed in such Note (or, in the case of redemption, on or
after the applicable Redemption Date).
Section 6.17 Waiver of Stay or Extension Laws; Non-Petition.
Each Holder of a Note shall be deemed to have agreed, by its acceptance
thereof, to refrain from filing, or from joining in filing, any petition in
bankruptcy or commencing any similar proceeding in respect of the Issuer for a
period of one year and one day following the payment in full of such Note.
The Issuer covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
Section 6.18 Sale of Trust Estate.
(a) The power to effect any sale of any portion of the Trust Estate
pursuant to Section 6.04 shall not be exhausted by any one or more sales (each a
"Sale") as to any portion of such Trust Estate remaining unsold but shall
continue unimpaired until the entire Trust Estate shall have been sold or all
amounts payable on the Notes and under this Indenture with respect thereto shall
have been paid. The Trustee may from time to time postpone any Sale by public
announcement made at the time and place of such Sale. The Trustee hereby
expressly waives its right to any amount fixed by law as compensation for any
Sale.
(b) The Trustee may bid for and acquire any portion of the Trust Estate
in connection with a public sale thereof, and may pay all or part of the
purchase price by crediting against amounts owing on the Notes or other amounts
secured by this Indenture all or part of the net proceeds of such Sale after
deducting the costs, charges and expenses incurred by the Trustee in connection
with such Sale, notwithstanding the provisions of Section 7.07 hereof. The Notes
need not be produced in order to complete any such Sale, or in order for the net
proceeds of such Sale to be credited against amounts owing on the Notes. The
Trustee may hold, lease, operate, manage or otherwise deal with any property so
acquired in any manner permitted by law.
(c) The Trustee shall execute and deliver an appropriate instrument of
conveyance transferring its interest in any portion of the Trust Estate in
connection with a Sale thereof. In addition, the Trustee is hereby irrevocably
appointed the agent and attorney-in-fact of the Issuer to transfer and convey
its interest in any portion of the Trust Estate in connection with a Sale
thereof and to take all action necessary to effect such Sale. No purchaser or
transferee at such a Sale shall be bound to ascertain the Trustee's authority,
inquire into the satisfaction of any conditions precedent or see to the
application of any monies.
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Section 6.19 Action on Notes.
The Trustee's right to seek and recover judgment on the Notes or under
this Indenture shall not be affected by the seeking or obtaining of or
application for any other relief under or with respect to this Indenture.
Neither the lien of this Indenture nor any rights or remedies of the Trustee or
the Noteholders shall be impaired by the recovery of any judgment by the Trustee
against the Issuer or by the levy of any execution under such judgment upon any
portion of the Trust Estate or upon any of the assets of the Issuer.
Section 6.20 Recourse.
In the event of a Default on the Notes, the Noteholders shall have no
recourse to (i) the Trustee, (ii) the Owner Trustee, (iii) Bear Stearns, (iv)
the Loss Mitigation Advisor, (v) AIC, (vi) the SPE or (vii) any owner of the
trust certificates representing a beneficial ownership interest in the Issuer,
or any of their respective shareholders, directors, officers, employees, agents
or representatives.
ARTICLE SEVEN
ARTICLE SEVEN THE TRUSTEE
Section 7.01 Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided
herein. The Trustee shall not be deemed to have notice or knowledge of a Default
or an Event of Default unless a Trustee Officer has actual knowledge thereof or
unless written notice of any event which is a Default or an Event of Default is
received by the Trustee at its Corporate Trust Office and such notice references
the Notes or the Indenture. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not herein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.01.
(a) Prior to any Default, the Trustee shall not be liable except for
the performance of such duties as are specifically set forth in this Indenture.
In connection therewith, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed herein, in the
absence of bad faith on the part of the Trustee, upon certificates or opinions
conforming to the requirements of this Indenture; provided, however, that the
Trustee shall examine such certificates and opinions to determine whether or not
such papers conform to the requirement of this Indenture.
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(b) Upon any Default, the Trustee shall exercise the rights and powers
vested in it by this Indenture with the degree of care and skill as a prudent
person would exercise or use under the same circumstances in the conduct of his
own affairs.
(c) The Trustee shall not be relieved from liability hereunder for
negligent action, for negligent failure to act, or willful misconduct; provided,
however, that
(1) the Trustee's standard of care shall be established by
Sections 7.01 (a) and 7.01 (b) herein;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by one or more Trustee Officers, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent
facts; and
(3) the Trustee shall not be liable for any action taken or
omitted to be taken by it in good faith and in accordance with
direction of Noteholders of not less than a majority of the Note
Principal Balance of all of the Outstanding Notes relating to the time,
method and place for conducting any Proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the
Trustee under this Indenture.
Section 7.02 Notice of Default.
Upon the occurrence of a Default hereunder known to the Trustee with
respect to the Notes, the Trustee shall give notice of such Default to the
Noteholders within ninety days after the occurrence thereof; provided, however,
that, except in the case of a default in the payment of interest on or principal
of the Notes, the Trustee shall be protected in withholding such notice if and
so long as Trustee officers in good faith determine that the withholding of such
notice is in the interest of the Noteholders.
Section 7.03 Certain Rights of Trustee.
Except as otherwise provided in Section 7.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, note or other paper or
document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) any request or direction of the Issuer mentioned herein shall
be sufficiently evidenced by an Issuer Order;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder,
the Trustee (unless other evidence be herein specifically
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prescribed) may, in the absence of bad faith on its part, rely
upon an Officer's Certificate;
(d) as a condition to the taking, suffering or omitting of any
action by it hereunder, the Trustee may consult with counsel,
and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture or to
honor the request or direction of any of the Noteholders
pursuant to this Indenture, unless such Noteholders shall have
offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, note or other paper or
document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as
it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Issuer,
personally or by agent or attorney upon reasonable advance
written notice, with such examination to be conducted during
the Issuer's normal business hours and in a manner that does
not unreasonably interfere with the Issuer's conduct of its
affairs and the Trustee's costs of any such examination shall
be borne by the Trustee or, if requested by one or more
Noteholders, then by the Noteholder(s) requesting that such
examination be made;
(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or
through agents or attorneys, and the Trustee shall not be
responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder;
(h) prior to the occurrence of an Event of Default hereunder and
after the curing or waiver of such Event of Default (or the
rescission of the exercise of any remedies consequent
thereon), the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture,
the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in
this Indenture and no implied covenants or obligations shall
be read into the Indenture against the Trustee; and
(i) the Trustee shall have no liability or responsibility for any
actions or omissions to act of the Issuer or any other Person.
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Section 7.04 Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes, except the certificate
of authentication, shall be taken as the statements of the Issuer, and the
Trustee assumes no responsibility for their correctness. The Trustee makes no
representation as to the validity or sufficiency of this Indenture, of the Trust
Estate or of the Notes. The Trustee shall not be accountable for the use or
application by the Issuer of Notes or the proceeds thereof.
Section 7.05 May Hold Notes.
The Trustee, any Paying Agent, any Note Registrar or any other agent of
the Issuer, in its individual or any other capacity, may become the owner or
pledgee of Notes and, subject to Sections 7.07 and 7.12, may otherwise deal with
the Issuer with the same rights it would have if it were not Trustee, Paying
Agent, Note Registrar or such other agent.
Section 7.06 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds held by the Trustee in trust hereunder except to the extent
required herein or required by law. The Trustee shall be under no liability for
interest on any money received by it hereunder except as otherwise agreed upon
by the Issuer and except to the extent of income or other gain on investments
that are deposits in or certificates of deposit of the Trustee, in its
commercial capacity, and income or other gain actually received by the Trustee
on Eligible Investments.
Section 7.07 Compensation and Reimbursement.
The Issuer agrees:
(1) On each Payment Date, the Trustee shall be entitled to a
monthly fee equal to the product of 1/12th times 0.175% of the sum of
the aggregate Outstanding Note Principal Balances plus the Imputed
Principal Balance of the Equity Interest, as compensation for its
services during the related period (the "Trustee's Fee").
(2) To indemnify the Trustee and its agents for, and to hold
it harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of this trust, including the
costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its powers or
duties hereunder.
The Trustee hereby agrees not to cause the filing of a petition or
otherwise institute any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding or other Proceeding under any federal or state bankruptcy
or similar law against the Issuer until at least 91 days after the payment in
full of all Notes issued under this Indenture. The provisions of this Section
7.07 shall survive the resignation or removal of the Trustee and the termination
of this Indenture.
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Section 7.08 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 7.09.
(b) The Trustee may resign at any time by giving written notice of its
resignation to the Issuer. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority of Note Principal Balance of all of the Outstanding Notes delivered to
the Trustee and to the Issuer. The Trustee may be removed for cause by the
Issuer provided that the Issuer receives confirmation that the appointment of
the successor Trustee will not result in the lowering of the rating of any Class
of Notes by the Rating Agency.
(d) If at any time the Trustee shall become incapable of acting with
respect to the Notes or shall be adjudged a bankrupt or insolvent or a receiver
or liquidator of the Trustee or of its property shall be appointed or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Issuer may remove the Trustee, or, subject to Section 6.16, any Noteholder who
has been a bona fide Holder of a Note of any Class for at least six months may,
on behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Trustee for any cause,
the Issuer shall promptly appoint a successor Trustee. If, within one year after
such resignation, removal or incapability or the occurrence of such vacancy, a
successor Trustee shall be appointed by Act of the Holders of a majority of Note
Principal Balance of all Notes then Outstanding delivered to the Issuer and the
retiring Trustee, the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the successor Trustee and supersede the
successor Trustee appointed by the Issuer. If no successor Trustee shall have
been so appointed by the Issuer or the Noteholders and shall have accepted
appointment in the manner hereinbefore provided, any Noteholder who has been a
bona fide Holder of a Note of any Class for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Issuer shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of the
Notes as their names and addresses appear in the Note Register. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office. A copy of any such notice shall be sent to the Rating Agency.
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Section 7.09 Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Issuer and the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective, and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers, trusts,
duties and obligations of the retiring Trustee; but, on request of the Issuer or
the successor Trustee, such retiring Trustee shall, upon payment of its charges
then unpaid, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder. Upon request of any such successor
Trustee, the Issuer shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
Section 7.10 Merger, Conversion, Consolidation or Succession to Business
of Trustee.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Notes have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Notes so authenticated with the same effect as if
such successor Trustee had itself authenticated such Notes.
Section 7.11 Corporate Trustee Required, (Trustee) Eligibility
There shall at all times be a Trustee hereunder that shall (a) (i) be a
corporation organized and doing business under the laws of the United States of
America or of any State, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000, or (ii)
be a member of a bank holding system, having a combined capital and surplus of
at least $50,000,000. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of a supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the affect hereinafter specified in this Article.
Section 7.12 Preferential Collection of Claims Against Issuer.
If the Trustee shall be or shall become a creditor, directly or
indirectly, secured or unsecured, of the Issuer within three months prior to a
Default, then, unless and until such Default shall be cured, the Trustee shall
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set apart and hold in a special account for the benefit of the Trustee,
individually, and the Holders of the Notes, all proceeds of the Pooled
Certificates.
Section 7.13 Co-Trustees and Separate Trustees.
At any time or times, for the purpose of meeting the legal requirements
of any jurisdiction in which any item of the Trust Estate may at the time be
located, the Issuer and the Trustee shall have power to appoint, and, upon the
written request of the Trustee or of the Holders of a majority of the Note
Principal Balances of all of the Outstanding Notes, the Issuer shall for such
purpose join with the Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to appoint one or more Persons
approved by the Trustee either to act as co-trustee, jointly with the Trustee,
of all or any part of the Trust Estate, or to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section. If the Issuer does not join in
such appointment within 15 days after the receipt by it of a request to do so,
or in case an Event of Default has occurred and is continuing, the Trustee alone
shall have power to make such appointment. The reasonable fees and expenses of
any such co-trustee or separate trustee shall be paid by the Trust Estate.
Should any written instrument from the Issuer be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right or power, any and all
such instruments shall, on request, be executed, acknowledged and delivered by
the Issuer.
Section 7.14 Paying Agents.
Whenever the Issuer shall have one or more Paying Agents, the Trustee
will, on or before each Payment Date or Redemption Date, deposit with each such
Paying Agent cash, Certificates of Deposit or a letter of credit in an amount
sufficient to pay the principal so becoming due (to the extent funds are then
available for such purposes), such sum to be held in trust for the benefit of
the Persons entitled to such principal, and the Trustee will promptly notify the
Issuer of its action or failure so to act.
ARTICLE EIGHT
NOTEHOLDERS' LIST
Section 8.01 Issuer to Furnish Trustee Names and Addresses of
Noteholders.
The Issuer will furnish or cause to be furnished to the Trustee
monthly, not more than eight days after each Record Date, a list, in such form
as the Trustee may reasonably require, of the names and addresses of each
Noteholder of each Class of Notes as they appear on the Note Register as of such
Record Date, and at such other times as the Trustee may request in writing,
within 30 days after receipt by the Issuer of any such request, a list of
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similar form and content as of a date not more than 10 days prior to the time
such list is furnished; provided, however, that for so long as the Trustee is
the Note Registrar, no such list shall be required to be furnished to the
Trustee, and the Trustee shall furnish such list to the Issuer upon the Issuer's
written request, within 30 days after receipt by the Trustee of any such
request.
Section 8.02 Preservation of Information; Communications to Noteholders.
The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Noteholders of each Class of Notes
contained in the most recent list furnished to the Trustee as provided in
Section 8.01 or maintained by the Trustee as Note Registrar. The Trustee may
destroy any list furnished to it as provided in Section 8.01 upon receipt of a
new list so furnished.
Section 8.03 Reports by Tax Administrator.
Financial Asset Management LLC will act as tax administrator (together
with any permitted successors or assignees, the "Tax Administrator") for the
Notes. The Tax Administrator shall deliver a written report to each record
holder of any Class of Notes and, if applicable, to the Internal Revenue
Service, at least annually and otherwise as required by statute, regulation, or
administrative ruling, reporting (i) original issue discount accrued on each
Class of Notes during the relevant period and (ii) information necessary to
permit each Holder to compute the accrual of any market discount on such Class
of Notes, and (iii) any other information necessary to enable the Noteholders to
report all other information regarding each Class of Notes that such Noteholders
are required to report to the Internal Revenue Service by statute, regulation,
or administrative ruling. In addition, the Tax Administrator shall report to any
Noteholder in writing any other tax accounting information reasonably requested
by such Noteholder to enable it to prepare its federal tax returns. The Trustee
shall cooperate with the Tax Administrator by supplying it with a list of
Noteholders, federal tax identification numbers and their addresses (based on
the Note Register) as requested by the Tax Administrator, and by sending copies
of all Note Remittance Reports and Aggregate Collateral Reports to the Tax
Administrator, in each case to the address most recently furnished by the Tax
Administrator to the Trustee. Financial Asset Management LLC serving as Tax
Administrator will be permitted to delegate its duties as Tax Administrator to a
third party with the prior written consent of the Issuer and the Trustee, which
consent shall not be unreasonably withheld. The Tax Administrator will report
original issue discount on the Notes under Section 1272(a)(6) of the Code by
using a prepayment assumption of 200% PSA, which prepayment assumption assumes
no Realized Losses. The Tax Administrator shall send a copy to the Issuer of any
reports it delivers to a Noteholder pursuant to this Section 8.03(b). The Issuer
agrees to report original issue discount on each Class of Notes on the same
basis as determined by the Tax Administrator. In the event the Tax Administrator
resigns or is removed for any reason, AIC shall procure a successor and shall be
responsible for any compensation paid thereto.
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ARTICLE NINE
COVENANTS OF ISSUER
Section 9.01 Maintenance of Office or Agency.
The Issuer will maintain an office or agency within the United States
of America where any Class of Notes may be presented or surrendered for payment,
where any Class of Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Issuer in respect of any
Class of the Notes and this Indenture may be served. The Issuer hereby initially
designates the Corporate Trust Office of the Trustee as such office or agency.
The Issuer will give prompt written notice to the Trustee of the location, and
of any change in the location, of any such office or agency. If at any time the
Issuer shall fail to maintain any such office or agency or shall fail to furnish
the Trustee with the address thereof, such presentations, surrenders, notices
and demands may be made or served at the Corporate Trust Office, and the Issuer
hereby appoints the Trustee at its Corporate Trust Office as its agent to
receive all such presentations, surrenders, notices and demands.
Section 9.02 Money for Note Payments to Be Held in Trust.
Subject to the provisions of Section 6.05, if applicable, if the Issuer
shall at any time act as its own Paying Agent, it will, on or before each
Payment Date or Redemption Date, segregate and hold in trust for the benefit of
the Persons entitled thereto a sum sufficient to pay the principal and interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided, and will promptly notify the Trustee of its
action or failure so to act.
The Issuer will cause each Paying Agent, other than the Trustee, to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of interest
and/or principal due on each Class of the Notes in trust for the
benefit of the Persons entitled thereto until such sums shall be paid
to such Persons or otherwise disposed of as herein provided and pay
such sums to such Persons as herein provided;
(2) give the Trustee notice of any Default in the making of
any required payment of principal; and
(3) at any time during the continuance of any such Default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Issuer Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Issuer or such Paying Agent, such sums to be held by the Trustee
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upon the same trusts as those upon which such sums were held by the Issuer or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Issuer, in trust for the payment of interest or principal due on any Note
of any Class and remaining unclaimed for two years after such interest or
principal has become due and payable shall be paid to the Issuer on Issuer
Request, or (if then held by the Issuer) shall be discharged from such trust;
and the Holder of such Note shall thereafter, as an unsecured general creditor,
look only to the Issuer for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money (but only to the extent of
the amounts so paid to the Issuer), and all liability of the Issuer as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such release of payment, may at
the expense of the Issuer cause to be published once, in a newspaper published
in the English language, customarily published on each Business Day and of
general circulation in New York, New York and in the city in which the Corporate
Trust Office is located, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Issuer. The Trustee may also adopt and employ, at the
expense of the Issuer, any other reasonable means of notification of such
release of payment (including, but not limited to, mailing notice of such
release to Holders whose Notes have been called but have not been surrendered
for redemption or whose right to or interest in monies due and payable but not
claimed is determinable from the records of any Paying Agent, at the last
address of record of each such Holder).
Section 9.03 Existence.
(a) The Issuer will keep in full effect its existence, rights and
franchises as a business trust under the laws of the State of Delaware.
(b) Subject to Sections 9.03 (c) and (d), the Owner Trustee will keep
in full effect its existence, rights and franchises as a corporation under the
laws of the United States of America or any state thereof.
(c) Any corporation into which the Owner Trustee hereunder may be
merged or with which it may be consolidated or any corporation resulting from
any merger or consolidation to which such Owner Trustee hereunder shall be a
party, shall be the successor Owner Trustee under this Indenture without the
execution or filing of any paper, instrument or further act to be done on the
part of the parties hereto, anything herein, or in any agreement relating to
such merger or consolidation, by which any such Owner Trustee may seek to retain
certain powers, rights and privileges theretofore obtaining for any period of
time following such merger or consolidation, to the contrary notwithstanding.
(d) Any successor to the Owner Trustee appointed pursuant to the Trust
Agreement shall be the successor Owner Trustee under this Indenture without the
execution or filing of any paper, instrument or further act to be done on the
part of the parties hereto.
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(e) Upon any consolidation or merger of or other succession to the
Owner Trustee in accordance with this Section 9.03, the Person formed by or
surviving such consolidation or merger (if other than the Owner Trustee) or the
Person succeeding to the Owner Trustee under the Trust Agreement may exercise
every right and power of the Owner Trustee, on behalf of the Issuer under this
Indenture with the same effect as if such Person had been named as the Owner
Trustee herein.
Section 9.04 Protection of Trust Estate.
The Issuer will, at its expense, from time to time execute and deliver
all such supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
and will take such other action as may be necessary or advisable to:
(i) grant more effectively all or any portion of the
Trust Estate;
(ii) maintain or preserve the lien (and the priority
thereof) of this Indenture or to carry out more effectively
the purposes hereof;
(iii) perfect, publish notice of, or protect the
validity of Grant made by this Indenture; or
(iv) preserve and defend title to the Trust Estate
and the rights therein of the Trustee and the Holders of Notes
of any Class against the claims of all persons and parties.
The Issuer hereby designates the Trustee its agent and attorney-in-fact
to execute any financing statement, continuation statement or other instrument
required pursuant to this Section 9.04, and this power of attorney shall be
irrevocable and coupled with an interest; provided, however, that such
designation shall not be deemed to create a duty in the Trustee to monitor the
compliance of the Issuer with the foregoing covenants and provided further that
the duty of the Trustee to execute any instrument required pursuant to this
Section 9.04 shall arise only if the Trustee has knowledge of any failure of the
Issuer to comply with the provisions of this Section 9.04.
The Issuer shall pay or cause to be paid any taxes levied on the
account of the beneficial ownership by the Issuer or an Affiliate of the Issuer
of any Pooled Certificate.
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Section 9.05 Negative Covenants.
(a) The Issuer will not:
(1) sell, transfer, exchange or otherwise dispose of any part
of the Trust Estate except as expressly permitted by this Indenture;
(2) claim any credit on, or make any deduction from, the
interest or principal payable in respect of any Class of Notes by
reason of the payment of any taxes levied or assessed upon any part of
the Trust Estate;
(3) amend its Trust Agreement without first receiving written
assurance from the Rating Agency that its then rating assigned to any
Class of Notes will not be withdrawn or downgraded as a result of such
amendment;
(4) have any employees or own or lease any real property other
than property described in Section 9.08 hereof.
Section 9.06 Issuer May Consolidate, Etc., Only on Certain Terms; Sale
of Collateral Subject to Notes.
(a) The Issuer shall not consolidate or merge with or into any other
Person or convey or transfer its properties and assets substantially as an
entirety to any Person unless:
(1) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger or that acquires by conveyance
or transfer the properties and assets of the Issuer substantially as
an entirety shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, the due and punctual
payment of all interest and principal due on all Classes of Notes and
the performance of every covenant of this Indenture on the part of the
Issuer to be performed or observed;
(2) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(3) the Issuer shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance or transfer and such supplemental
indenture comply with this Article and that all conditions precedent
in this Article provided for relating to such transaction have been
complied with;
(4) the Rating Agency has confirmed in writing that such
merger, consolidation or transfer will not result in the withdrawal or
downgrading of the rating it has then assigned to any Class of Notes;
and
(5) the interest that the transferee acquires in any
properties or assets that are pledged to secure the Notes shall
expressly be made subject and subordinate to the rights of the
Noteholders and the Trustee.
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(b) The Issuer may sell the Collateral to another person only on terms
that clearly reflect that the Collateral has been pledged to the Trustee to
secure the Notes; provided that the Rating Agency confirms in writing that such
sale will not result in any downgrading or withdrawal of its then rating of any
Class of Notes.
Section 9.07 Successor Substituted2.
Upon any consolidation or merger, or any conveyance or transfer of the
properties and assets of the Issuer substantially as an entirety in accordance
with Section 9.06, the Person formed by or surviving such consolidation or
merger (if other than the Issuer) or the Person to which such conveyance or
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Issuer under this Indenture with the same effect
as if such Person had been named as the Issuer herein. In the event of any such
conveyance or transfer, the Person named as the "Issuer" in the first paragraph
of this instrument or any successor that shall theretofore have become such in
the manner prescribed in this Article may be dissolved, wound-up and liquidated
at any time thereafter, and such Person thereafter shall be released from its
liabilities as obligor and maker on all of the Notes and from its obligations
under this Indenture.
Section 9.08 No Other Business.
The Issuer shall not engage in any business other than acquiring,
pledging, holding, and disposing of mortgages and mortgage related securities,
or interests therein, issuing interests therein, issuing debt obligations
secured thereby, and engaging in all acts necessary or incidental to any of the
foregoing. The Issuer shall notify the Rating Agency when it intends to issue
securities other than the Notes pursuant to this Section 9.08, and the Issuer's
right to issue any additional securities shall be subject to Section 9.09.
Section 9.09 Limitation on Borrowing.
The Issuer shall not incur any indebtedness other than obligations
described in Sections 3.10 or 9.08 hereof or elsewhere herein and expenses
incidental thereto. In particular, the Issuer shall not guarantee or become
obligated for the debts of any Person or hold out its credit as being available
to satisfy the obligations of any Person, shall not pledge its assets for the
benefit of any Person or make any loans or advances to any Person, and shall not
acquire direct obligations or securities of its Affiliates. The Issuer shall
notify the Rating Agency when it intends to incur an indebtedness pursuant to
this Section 9.09. The Issuer shall not issue any new indebtedness secured by
the Collateral, and shall not incur any indebtedness other than the Notes
without (i) receiving written confirmation from the Rating Agency that such
issuance will not result in any withdrawal or downgrading of its rating then
assigned to any Class of Notes and (ii) receiving an Opinion of Counsel that
such issuance will not cause the Issuer to be taxable as a corporation or a
taxable mortgage pool.
Section 9.10 AIC/SPE Transfer Agreement.
Upon discovery by the Issuer of any breach by AIC of any of its
representations, warranties and covenants under the AIC/SPE Transfer Agreement,
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the Issuer shall use its best efforts to cause AIC to correct such breach, or
shall pursue such remedies as are provided for such breach, including, in
certain circumstances, requiring AIC to repurchase from the Issuer the Pooled
Certificate affected by such breach for its Purchase Price. If any Pooled
Certificate is repurchased by AIC pursuant to the AIC/SPE Transfer Agreement,
the Issuer shall cause the Purchase Price therefor to be paid to the Trustee for
deposit into the Payment Account, and, upon receipt of any such Purchase Price,
the Trustee shall treat such funds as a final payment on the repurchased Pooled
Certificate and shall release such Pooled Certificate from the lien of this
Indenture and shall execute any and all instruments reasonably requested by AIC
to confirm such release to AIC.
ARTICLE TEN
ARTICLE TEN REDEMPTION OF NOTES
Section 10.01 Redemption at the Option of the Issuer; Election to Redeem.
The Notes of all Classes shall be redeemable at the option of the
Issuer, in whole but not in part, on any Payment Date on or after the Payment
Date on which, after taking into account payments of principal to be made on
such Payment Date, the aggregate Outstanding Note Principal Balance of all Notes
is less than 25 % of the aggregate original Note Principal Balance of all of the
Notes issued. In addition, the Issuer may redeem all Classes of Notes, in whole
but not in part, at any time upon a determination by the Issuer, based upon an
Opinion of Counsel, that a substantial risk exists that any Class of Notes will
not be treated as evidences of indebtedness for federal income tax purposes. Any
Payment Date on which such Notes are to be redeemed is referred to herein as a
"Redemption Date."
Payments of interest and principal due on the Redemption Date shall
continue to be payable to the Holders of each Class of Notes as of the
applicable Redemption Record Date according to their terms and the provisions of
Section 3.07. The election of the Issuer to redeem all Classes of Notes pursuant
to this Section 10.01 shall be evidenced by an Issuer Order directing the
Trustee to make the payment of the Redemption Price of all of the Notes from
funds in the Payment Account and/or other funds and/or monies deposited with the
Trustee by the Issuer pursuant to Section 10.04.
The Issuer shall set the Redemption Date and the Redemption Record Date
and shall give notice thereof to the Trustee pursuant to Section 10.02 and shall
prepare the notice of redemption specified in Section 10.03.
Section 10.02 Notice to Trustee.
In the case of any redemption pursuant to Section 10.01, the Issuer
shall, at least 15 days prior to the Redemption Date (unless a shorter period
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date and of the expected principal amount of each Class of Notes to be redeemed
on such Redemption Date.
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Section 10.03 Notice of Redemption by the Issuer.
Notice of redemption pursuant to Section 10.01 shall be given by
first-class mail, postage prepaid, mailed not less than ten days prior to the
applicable Redemption Date to each Noteholder at his address in the Note
Register.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price to be paid to each Class of
Notes on the Redemption Date, and the fact that, on the
Redemption Date, payment of the Redemption Price shall redeem
each Class of the Notes in full;
(3) that payment of the Redemption Price shall be
the final payment on each Class of Notes; and
(4) the place where each Class of Notes are to be
surrendered for payment of the Redemption Price, which shall
be the office or agency of the Issuer to be maintained as
provided in Section 9.01.
Notice of redemption of each Class of Notes shall be given by the
Issuer or, at the Issuer's request, by the Trustee in the name and at the
expense of the Issuer. Failure to give notice of redemption, or any defect
therein, to any Noteholder shall not impair or affect the validity of the
redemption of any Notes of any Class.
Section 10.04 Deposit of Redemption Price.
In the case of all redemptions, on or before the Business Day next
preceding the giving of notice of redemption as provided in Section 10.03, the
Issuer shall deposit with the Trustee cash, Certificates of Deposit or a letter
of credit in an amount sufficient to provide for payment of the Redemption Price
of all of the Notes of each Class on such Redemption Date (except to the extent
such payment is to be made from the Payment Account).
Section 10.05 Notes Payable on Redemption Date.
Notice of redemption having been given as provided in Section 10.03,
each Class of Notes shall, on the Redemption Date, become due and payable at the
Redemption Price. On or after the Redemption Date, any Class of Notes shall be
paid by the Issuer at the Redemption Price; provided, however, that payments due
on a Payment Date on or prior to the Redemption Date shall be payable to the
Noteholders of such Notes registered as such on the relevant Record Dates
according to their terms and the provisions of Section 3.07.
Section 10.06 Retention of Notes by Issuer.
In the event that the Issuer effects a redemption of all Classes of the
Notes in accordance with the provisions of this Article Ten, it may elect to
cause any Class of Notes to remain Outstanding and not to terminate all Classes
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of the Notes or release the lien of the Indenture with respect to the Trust
Estate securing such Class of Notes.
Notwithstanding the foregoing, no redemption of any Notes shall be
permitted without retiring them unless the Issuer shall have delivered to the
Trustee an Opinion of Counsel that such redemption without retirement will not
adversely affect the status of all Classes of Notes, for federal income tax
purposes, as debt instruments. If any Class of Notes is redeemed and not
retired, the Trustee shall not release its lien on the Trust Estate.
ARTICLE ELEVEN
ACCOUNTS, ACCOUNTINGS AND RELEASES
Section 11.01 Collection of Money.
Except as otherwise expressly provided herein, the Trustee may demand
payment or delivery of, and shall receive and collect, directly and without
intervention or assistance of any fiscal agent or other intermediary, all money
and other property payable to or receivable by the Trustee pursuant to this
Indenture, including all payments due on the Pooled Certificates securing the
Notes in accordance with the terms and conditions of the Pooled Certificates.
The Trustee shall hold all such money and property received by it in trust for
the Noteholders and shall apply it as provided in this Indenture. Except as
otherwise expressly provided in this Indenture, if any Default occurs in the
making of any payment or performance under any Pooled Certificate securing the
Notes, the Trustee may, and upon the request of the Holders of a majority of
Note Principal Balance of the Outstanding Notes (as evidenced by the Note
Register), subject to Section 7.03(e), shall, take such action as may be
appropriate to enforce such payment or performance, including the institution
and prosecution of appropriate Proceedings. In the event that the Trustee has
not received timely payment on the Pooled Certificates securing the Notes, the
Trustee shall immediately notify the appropriate Person of its failure to
receive such payment. The Trustee shall request that such appropriate Person
wire such payments in immediately available funds to the Trustee, or take such
other action as the Trustee shall designate in accordance with (a) the
procedures of such appropriate Person then in effect and (b) any agreements made
by the Trustee or such Person with the Issuer regarding such Pooled Certificate.
Any such action shall be without prejudice to any right to claim a Default or
Event of Default under this Indenture and to proceed thereafter as provided in
Article Six.
Section 11.02 Payment Account.
The Trustee shall, prior to the Delivery Date for the Notes, establish
the Payment Account, into which the Trustee shall deposit all Collateral
Proceeds as received by the Trustee; provided, however, that all amounts as
provided by Section 4.01(c) shall be deposited in such Payment Account on the
Delivery Date. All monies deposited from time to time in the Payment Account
pursuant to this Indenture shall be held by the Trustee as part of the Trust
Estate as herein provided.
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(a) All payments to be made from time to time by the Trustee to the
Noteholders out of funds in the Payment Account pursuant to this Indenture shall
be made by the Trustee as the Paying Agent of the Issuer.
(b) Monies in the Payment Account shall be invested and reinvested, but
only in one or more Eligible Investments, by the Trustee at its discretion. All
income or other gain from such investments shall be credited to such Payment
Account, and, except with respect to any losses incurred from investment of
funds deposited on the Delivery Date pursuant to Section 4.01(c), any loss
resulting from such investments shall be charged to the Trustee. Except as
otherwise provided in Section 4.01(c), income and gain from such investments
shall be payable monthly to the Trustee as additional compensation for its
services as trustee. Except with respect to investments of funds deposited on
the Closing date pursuant to Section 4.01(c), if any loss is incurred on any
Eligible Investments in which Payment Account funds are invested, the Trustee
shall deposit the amount of such loss into the Payment Account, out of its own
funds, promptly after the loss was incurred, and in any event prior to the next
Payment Date.
Section 11.03 Reports by Trustee.
The Trustee shall timely supply to the Issuer any information in the
Trustee's possession that the Issuer may from time to time reasonably request in
writing with respect to the Collateral and the Payment Account.
Section 11.04 Note Remittance Reports and Related Matters.
(a) Not later than each Payment Date, the Trustee shall prepare a
report (a "Note Remittance Report") that shall state the following information:
(1) (A) the aggregate amount of Available Funds available for
payment on all Classes of Notes and to the Equity Interest on such
Payment Date, (B) the amount of interest to be paid to each Class of
Notes, and the Note Interest Rate being paid on the Notes (based on the
then Note Principal Balance of such Class of Notes), and (C) the amount
of principal being paid to each Class of Notes, on such Payment Date in
the aggregate and per $1,000 initial aggregate Note Principal Balance
of Notes of each Class;
(2) the amount of any Realized Losses being charged against
either the Equity Interest, if applicable (and the remaining Imputed
Principal Balance thereof, if any), and/or the then current Note
Principal Balance for each affected Class or Classes of Notes;
(3) for each Class of Notes, a factor, expressed as a decimal
carried to seven digits, equal to the percentage of the initial Note
Principal Balance for each Class that remains outstanding on such
Payment Date, after giving effect to the payments and Realized Loss
charge-offs to be made on such Payment Date;
(4) the Note Principal Balance of each Class of Notes after
giving effect to the payments and Realized Loss charge-offs to be made
on such Payment Date; and
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(5) the amount of Percentage Cash Flow Payments and Imputed
Principal Payments otherwise due to the Equity Interest (if any) that
are paid to the holders of the Notes to provide for the payment of
interest on the Notes at a rate of 4% per annum and the amount of the
Percentage Cash Flow Payment and the Imputed Principal Payment being
made to the Issuer in respect of the Equity Interest.
(b) On each Payment Date, the Trustee will transmit by mail to the
Issuer, Bear Stearns and each Noteholder a copy of the related Note Remittance
Report.
(c) As soon as reasonably practicable following each Payment Date, and
in any event no later than seven Business Days after each Payment Date, the
Trustee shall mail to the Issuer, Bear Stearns, AIC and to each Noteholder an
"Aggregate Collateral Report" containing the following information, based upon,
and to the extent reported in, the Certificate Remittance Reports received by
the Trustee through the Certificate Remittance Reports related to the Available
Funds for such Payment Date:
(1) For each Outstanding Pooled Certificate: (A) the
Certificate Principal Balance of such Pooled Certificate before and
after the related Certificate Distribution Date; (B) the Pass-Through
Rate and the Net Certificate Rate borne by such Pooled Certificate with
respect to the related Certificate Distribution Date; (C) the amount of
interest distributed on such Pooled Certificate on the related
Certificate Distribution Date, as well as any amount by which the
amount of interest scheduled to be distributed on such Pooled
Certificate on such Certificate Distribution Date exceeded the amount
of interest actually distributed thereon; (D) all Realized Losses
incurred on the Mortgage Loans underlying the Pooled Certificate on the
related Certificate Distribution Date, since the date of issuance of
such Pooled Certificate and since March 24, 1997 (except since March
17, 1997 in the case of the PHH Pooled Certificates); (E) all Realized
Losses allocated to the Pooled Certificate on the related Certificate
Distribution Date, since the date of issuance of such Pooled
Certificate, and since March 24, 1997 (except since March 17, 1997 in
the case of the PHH Pooled Certificates); (F) the amount and aggregate
principal balance of Mortgage Loans underlying such Pooled Certificate
that were (i) more than 30 but fewer than 60 days delinquent, (ii) 60
or more but fewer than 90 days delinquent, (iii) 90 or more days
delinquent, (iv) in foreclosure and (v) real estate owed by the related
Underlying Trust, in each case, as of the end of the reporting period
to which the Certificate Remittance Report delivered with respect to
such Pooled Certificate as of the related Certificate Distribution Date
relates; (G) the amount of principal distributed on such Pooled
Certificate on the related Certificate Distribution Date; (H) the total
amount distributed on such Pooled Certificate on the related
Certificate Distribution Date; (I) the amount of any Pooled Certificate
Credit Support remaining on such Payment Date; and (J) the amount of
any cumulative interest shortfalls on any Pooled Certificates on such
Payment Date.
(2) For all Mortgage Loans underlying all of the Pooled
Certificates, an aggregate statement of delinquency statistics,
reporting all of the information specified in clause (1)(F) above in
the aggregate; and
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(3) The number and aggregate Certificate Principal Balance of
all of the Pooled Certificates as of the respective related Certificate
Distribution Dates.
(d) The Trustee will transmit by mail to the Issuer upon its written
request a copy of the Certificate Remittance Report relating to each of the
Underlying Series containing Outstanding Pooled Certificates, in each case
within three Business Days after the mailing of the related Aggregate Collateral
Report. The Trustee shall also provide copies of Certificate Remittance Reports
that it has received to Bear Stearns or to a Noteholder upon Bear Stearns' or
such Noteholder's written request and payment to the Trustee of its costs of
duplicating and mailing the same.
(e) Not less than five Business Days after receiving an Issuer Order
requesting information regarding an optional redemption of Notes as of a
proposed Redemption Date set forth in such Issuer Order, the Trustee shall
provide the following information to the Issuer:
(i) the aggregate Note Principal Balances for each Class
of Notes as of such proposed Redemption Date; and
(ii) the amount in the Payment Account available for
application to the redemption of all Classes of Notes.
(f) The Trustee shall send copies of each Note Remittance Report and
Aggregate Collateral Report to the Rating Agency, to the address provided by the
Rating Agency to the Trustee for such purpose.
Section 11.05 Trust Estate.
(a) The Trustee may, and when required by the provisions of this
Indenture shall, execute instruments to release property from the lien of this
Indenture, or convey, without recourse, the Trustee's interest in the same, in a
manner and under circumstances that are not inconsistent with the provisions of
this Indenture. No party relying upon an instrument executed by the Trustee as
provided in this Article Eleven shall be bound to ascertain the Trustee's
authority, inquire into the satisfaction of any conditions precedent or see to
the application of any monies.
(b) The Trustee shall, at such time as there are no Notes of any Class
Outstanding, and as otherwise provided for in Section 5.01, release the Trust
Estate from the lien of this Indenture in accordance with Article Five.
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ARTICLE TWELVE
APPLICATION OF MONIES
Section 12.01 Disbursements of Monies from Payment Account.
(a) Unless the Notes have been declared due and payable pursuant to
Section 6.02 and moneys collected by the Trustee are being applied in accordance
with Section 6.08, Available Funds on deposit in the Payment Account on any
Payment Date shall be withdrawn by the Trustee from the Payment Account, in the
amounts required, for application as follows:
(i) first, from amounts representing interest
received on the Pooled Certificates, in the following
priority, (A) to the Trustee, the Trustee's Fee, (B) to the
Loss Mitigation Advisor, the Loss Mitigation Advisor's Fee and
(C) to the Owner Trustee, the Owner Trustee's Fee;
second, from amounts representing interest
received on the Pooled Certificates, subject to clause (ii)
below, to the holders of each Class of Notes interest at the
Note Interest Rate and to the Issuer in respect of the Equity
Interest a Percentage Cash Flow Payment at the Percentage Cash
Flow Rate, pro rata based on the Outstanding Note Principal
Balance of each Class of Notes and the then Imputed Principal
Balance of the Equity Interest, to the extent that Available
Funds are sufficient therefor;
third, to the Trustee and Owner Trustee,
reimbursements of expenses and indemnifications permitted
hereunder to the extent not covered by their fees; and
fourth, subject to clause (ii) and to clause
(iii) from amounts representing principal received on the
Pooled Certificates and any amounts received on the Other
Assets, to the holders of each Class of Notes and the Issuer
as holder of the Equity Interest pro rata based on the
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Original Percentages until the Class Principal Balance of each
Class of Notes and the Imputed Principal Balance of the Equity
Interest have been reduced to zero.
(ii) Notwithstanding the foregoing, if, with respect
to any Payment Date the Notes would receive interest at a rate
lower than 4% per annum, first the Percentage Cash Flow
Payment and then the Imputed Principal Payment will be
subordinated to the extent necessary to provide each Class of
Notes with interest at the rate of 4% per annum on such
Payment Date.
(iii) Notwithstanding the foregoing, (A) Realized
Losses that are allocated to the Pooled Certificates and (B)
any excess of the Certificate Principal Balance over the
Purchase Price of a Pooled Certificate repurchased as a result
of a breach of representation of warranty will be allocated
first to the Equity Interest to reduce the Imputed Principal
Balance thereof until its outstanding Imputed Principal
Balance equals zero and will be allocated thereafter to reduce
the Class Principal Balances of the Classes of Notes in
reverse alphabetical order commencing with the Class D Notes
until the respective Class Principal Balances thereof have
been reduced to zero.
(iv) On the Redemption Date, the Trustee shall
withdraw from the Payment Account an amount equal to the
aggregate Redemption Price of the Notes and, on behalf of the
Issuer, apply that amount to the payment of such Redemption
Price as provided in Article Ten.
(v) All amounts payable to Holders of a Class of
Notes or Realized Losses allocated to a Class of Notes shall
be payable or allocated as the case may be among the Holders
of such Class pro rata based upon their respective Percentage
Interests.
(b) On each Payment Date on which funds are to be paid to the Issuer in
respect of the Equity Interest, such funds, upon payment, shall be released from
the lien of this Indenture. In addition, on the Payment Date on which the
principal of and interest on the Notes and all other payments required hereunder
have been paid in full, any cash balance then remaining in the Payment Account
shall be withdrawn from the Payment Account by the Trustee and shall be released
from the lien of this Indenture and paid by the Trustee to the Issuer for
distribution to the holders of the Trust Certificates in accordance with the
provisions of Section 5.01 of the Trust Agreement.
Section 12.02 Limited Release of Collateral.
To the extent and only to the extent required to make any required
Percentage Cash Flow Payments and Imputed Principal Payments in respect of the
Equity Interest, pursuant to the provisions of Section 12.01 above, the Trustee
shall release its lien on the monies in the Payment Account and make payment to
the Issuer in the amounts to which it is entitled.
Section 12.03 Trust Account.
All monies held by or deposited with the Trustee in any fund or account
pursuant to the provisions of this Indenture, including the Payment Account, and
not invested in Eligible Investments as herein provided, shall be deposited in
one or more trust accounts for the benefit of the Noteholders. To the extent
monies deposited in a trust account exceed the Federal Deposit Insurance
Corporation insured amounts, such account shall be invested in Eligible
Investments pursuant to the written directions of the Issuer.
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ARTICLE THIRTEEN
AMENDMENTS; SUPPLEMENTAL INDENTURES
Section 13.01 Supplemental Indentures Without Consent of Noteholders.
Without the consent of the Holders of the Notes of any Class, the
Issuer and the Trustee, at any time and from time to time, may enter into one or
more indentures supplemental hereto, for any of the following purposes:
(1) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Trustee any property subject or required to
be subjected to the lien of this Indenture, or to subject to the lien
of this Indenture additional property; or
(2) to add to the conditions, limitations and restrictions
on the authorized amount, terms and purposes of issue, authentication
and delivery of the Notes; or
(3) to evidence the succession of another Person to the
Issuer, and the assumption by any such successor of the covenants of
the Issuer contained herein and in the Notes; or
(4) to add to the covenants of the Issuer or the Trustee, for
the benefit of the Holders of all Notes, or to surrender any right or
power herein conferred upon the Issuer; or
(5) to convey, transfer, assign, mortgage or pledge any
property to or with the Trustee; or
(6) to cure any ambiguity, to amend, correct or supplement any
provision herein or in any supplemental indenture that may be
defective, ineffective or inconsistent with any other provision herein
or in any supplemental indenture, or to amend or add any other
provisions with respect to matters or questions relating to this
Indenture or in any supplemental indenture, including, but not limited
to, any provisions necessary to achieve the intended federal income tax
treatment of the Noteholders of each Class and the Issuer; provided,
that such action shall not adversely affect the interests of the
Holders of any Outstanding Notes of any Class; or
(7) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes and to add
to or change any of the provisions of this Indenture as shall be
necessary to facilitate the administration of the trusts hereunder by
more than one Trustee, pursuant to the requirements of Section 7.09 or
7.13 hereof; or
(8) to provide for the issuance of an additional Class or
Classes of Notes provided that the conditions therefor as set forth in
Section 3.10 hereof are satisfied.
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The Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into any such supplemental indenture that affects the
Trustee's own rights, duties, liabilities or immunities under this Indenture or
otherwise except to the extent required by law.
The Trustee may in its discretion determine whether or not the rights
of the Holders of any Class of Notes would be adversely affected by any
supplemental indenture, and any such determination shall be conclusive upon the
Holders of all Notes, whether theretofore or thereafter authenticated and
delivered hereunder. In making such determination, a supplemental indenture
shall be conclusively deemed by the Trustee not to adversely affect the
Noteholders or the Noteholders of a given Class if (i) the Trustee receives a
letter or other writing from the Rating Agency to the effect that execution of
the supplemental indenture will not result in any withdrawal or downgrading of
the then-current rating assigned by it to any Class of Notes or the Notes of a
given Class and (ii) the supplemental indenture effects no change in payments,
Redemption Prices, Payment Dates, Record Dates, or terms of optional redemption.
The Trustee shall not be liable for any such determination made in good faith.
Section 13.02 Supplemental lndentures With Consent of Noteholders.
With the prior written consent of the Holders of not less than a
majority of the Voting Rights of all Classes of Notes or if the amendment
affects less than all Classes of Notes, of the Class or Classes affected
thereby, the Issuer and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture relating to
the Notes or one or more Classes thereof, or of modifying in any manner the
rights of the Holders of the Notes or one or more Classes thereof, under this
Indenture; provided, however, that no such supplemental indenture shall, without
the consent of the Holder of each Outstanding Note, as evidenced by the Note
Register, affected thereby:
(1) change the Stated Maturity of the principal of, or the
timing of any installment of principal on, any Note, reduce the
principal amount thereof or the Redemption Price or time for redemption
with respect thereto, change the provisions of this Indenture relating
to the application of proceeds of the Trust Estate to the payment of
interest on or principal of the Notes, change any place where, or the
coin or currency in which, any Note is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
Maturity thereof (or, in the case of redemption, on or after the
applicable Redemption Date); or
(2) reduce the Percentage Interest of the Class Principal
Balance of the Outstanding Notes of each Class, the consent of the
Holders of which is required for the execution of any such supplemental
indenture, or the consent of the Holders of which is required for any
waiver of compliance with certain provisions of this Indenture or
certain Defaults hereunder and their consequences provided for in this
Indenture; or
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(3) impair or adversely affect the Trust Estate except as
otherwise permitted herein; or
(4) except as expressly provided herein, permit the creation
of any lien ranking prior to or on a parity with the lien of this
Indenture with respect to any part of a Trust Estate or terminate the
lien of this Indenture on any property at any time subject hereto or
deprive the Holder of any Note of the security afforded by the lien of
this Indenture; or
(5) change the definition of Event of Default or the
percentage required to direct the Trustee to sell or liquidate the
Trust Estate pursuant to Section 6.04; or
(6) change any of the conditions precedent for the redemption
of Notes under this Indenture or any supplemental indenture; or
(7) modify any of the provisions of this Section or Section
6.15, except to increase the Percentage Interest required to consent to
amendments or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the
Holders of all of the Outstanding Classes or all of the Holders of
Notes of the affected Class, in each case as evidenced by the Note
Register.
The Trustee may in its discretion determine whether or not any Notes of
a given Class would be affected by any supplemental indenture, and any such
determination shall be conclusive upon the Holders of all Notes of such Class,
whether theretofore or thereafter authenticated and delivered hereunder. The
Trustee shall not be liable for any such determination made in good faith.
It shall not be necessary for any consent of Noteholders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such consent shall approve the substance thereof.
Section 13.03 Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 7.01) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture that affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Section 13.04 Effect of Supplemental Indenture.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes with respect to
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any affected Series; and every Holder of Notes of each Class theretofore or
thereafter authenticated and delivered hereunder and affected by such
supplemental indenture shall be bound thereby.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Article Thirteen, the Issuer shall mail
to the Holders of the Notes as their names appear on the Note Register to which
such supplemental indenture relates, a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the Issuer to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
Section 13.05 Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and if required by the
Issuer shall, bear a notation in form approved by the Issuer as to any matter
provided for in such supplemental indenture. If the Issuer shall so determine,
new Notes so modified as to conform, in the opinion of the Issuer, to any such
supplemental indenture may be prepared and executed by the Issuer and
authenticated and delivered by the Trustee in exchange for Outstanding Notes.
ARTICLE FOURTEEN
MISCELLANEOUS
Section 14.01 Compliance Certificates and Opinions.
Upon any application or request by the Issuer to the Trustee to take
any action under any provision of this Indenture, upon the reasonable request of
the Trustee, the Issuer shall furnish to the Trustee an Officer's Certificate
stating that all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with, except that in the case
of any such application or request as to which the furnishing of such a
certificate is specifically required by any provision of this Indenture relating
to such particular application or request, no additional certificate or opinion
need be furnished.
Section 14.02 Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Issuer may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such Officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
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with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Issuer, stating that the
information with respect to such factual matters is in the possession of the
Issuer, unless such counsel knows that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 14.03 Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders of any Class or Classes may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Noteholders in
person or by agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee, and, where it is hereby expressly
required, to the Issuer. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the acts of
the Noteholders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and conclusive in favor of the
Trustee and the Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner that the Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder (and any
transferee thereof) of every Note issued upon the registration thereof or in
exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Trustee or the Issuer in reliance thereon, whether or
not notation of such action is made upon such Note.
Section 14.04 Notices, Etc., to Trustee and Issuer.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other document provided for or permitted by this
Indenture to be made upon, given or furnished to, or filed with:
(1) the Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office;
or
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(2) the Issuer by the Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed,
first-class postage prepaid, to the Issuer addressed to it at
Wilmington Trust Company, as Owner Trustee, 1100 North Market Street,
Rodney Square North, Wilmington, Delaware 19890, attention: Corporate
Trust Administration, with a copy to Asset Investors Corporation, 3600
South Yosemite Street, Denver, Colorado 80237, attention: President, or
at any other address previously furnished in writing to the Trustee by
the Issuer.
Section 14.05 Notices to Noteholders; Waiver.
Where this Indenture provides for notice to Noteholders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each
Noteholder affected by such event at his address as it appears on the Note
Register not later than the latest date, and not earlier than the earliest date,
prescribed for the giving of such notice. In any case where notice to
Noteholders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Noteholder shall affect the
sufficiency of such notice with respect to other Noteholders, and any notice
that is mailed in the manner herein provided shall conclusively be presumed to
have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In the event that, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it shall be
impractical to mail notice of any event to Noteholders when such notice is
required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice that is satisfactory to the Trustee shall be deemed
to be a sufficient giving of such notice.
Section 14.06 Effect of Headings and Table of Contents.
The Article and Section headings and the Table of Contents herein are
for convenience only and shall not affect the construction hereof.
Section 14.07 Successors and Assigns.
All covenants and agreements in this Indenture by the Issuer shall bind
its successors and assigns, whether so expressed or not.
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Section 14.08 Separability.
In case any provision in this Indenture or in any Class of Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 14.09 Benefits of Indenture.
Nothing in this Indenture or in any Class of Notes, express or implied,
shall give to any Person, other than the parties hereto, and their successors
hereunder and the Noteholders, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
Section 14.10 Legal Holidays2.
In the event that the date of any Payment Date shall not be a Business
Day, then notwithstanding any other provision of the Notes or this Indenture,
payment need not be made on such date but may be made on the next succeeding
Business Day with the same force and effect as if made on the nominal date of
any such Payment Date, and no additional interest shall be payable with respect
thereto.
Section 14.11 Governing Law.
THIS INDENTURE AND EACH NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS THEREOF, APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
THEREIN.
Section 14.12 Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 14.13 Corporate Obligation2.
No recourse may be taken, directly or indirectly, against any
incorporator, depositor, subscriber to the capital stock, stockholder, officer,
director or employee of the Issuer or the Trustee or of any predecessor or
successor of the Issuer or the Trustee with respect to the Issuer's obligations
on the Notes or under this Indenture or any certificate or other writing
delivered in connection herewith or therewith except as otherwise expressly
provided in any such certificate or other writing.
Section 14.14 Loss Mitigation Advisor.
(a) AIC agrees to serve as Loss Mitigation Advisor to the Trustee. AIC
shall have the right to cause its manager, Financial Asset Management LLC, to
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perform on its behalf but it will not thereby be released from its obligations
hereunder. To the extent certain consents to the continuation of the Special
Servicing Agreements despite the transfer of the related Pooled Certificates are
received, the Loss Mitigation Advisor will perform the activities provided for
in the Special Servicing Agreements on behalf of the Trustee with respect to the
Mortgage Loans underlying the applicable Pooled Certificates. To the extent
there is no applicable Special Servicing Agreement or a consent is not received,
the Loss Mitigation Advisor on a monthly basis will nonetheless monitor
delinquency and foreclosure information otherwise available to the Trustee, both
from monthly reports supplied to it as the holder of the related Pooled
Certificates or as reported on publicly available sources. In addition, it will
attempt to contact applicable Servicers in order to determine the status of, and
to make suggestions with respect to procedures relating to, foreclosures. For
such services, the Loss Mitigation Advisor shall be entitled to receive the Loss
Mitigation Advisor's Fee each month, in accordance with Section 12.01(a).
(b) AIC may be removed as Loss Mitigation Advisor at any time upon the
determination by the Trustee that AIC has not performed in accordance with
accepted industry standards as the Loss Mitigation Advisor; provided that prior
to such removal becoming effective, the Trustee seeks and obtains the
affirmative vote of holders of each Class of Notes, voting separately, holding
60% of the Voting Rights of each such Class and the prior written confirmation
of the Rating Agency that such action will not adversely affect its then rating
of any Class of Notes.
(c) In connection with performing its duties as Loss Mitigation
Advisor, AIC may not resign as the Loss Mitigation Advisor or assign its
interest in all or any part of the Loss Mitigation Advisor's Fee without
obtaining the affirmative vote of Holders of each Class of Notes, voting
separately, holding 60% of the Voting Rights of each such Class and the prior
written confirmation of the Rating Agency that such action will not adversely
affect its then rating of any Class of Notes.
Section 14.15 Special Servicing Agreements.
The Trustee acknowledges for the benefit of each servicer or master
servicer under a Special Servicing Agreement to which AIC is a party and which
relates to any of the Pooled Certificates that it is not entitled to exercise
any contractual rights under those various Special Servicing Agreements either
prior to, or, if applicable, after any foreclosure upon the Collateral due to a
default under the Notes, without the express prior written consent of such
servicer or master servicer. In addition, each Holder and each Note Owner by its
acceptance of an Individual Note or of an interest in a Global Note,
acknowledges such limitations on the powers of the Trustee and that it as
Noteholder or Note Owner also has no entitlement to exercise any such
contractual rights.
Section 14.16 Equity Interests.
AIC agrees not to consent to the transfer by the SPE of the trust
certificates in the Issuer, and, except in connection with certain
reorganizations or restructurings of AIC in which the equity interest in the SPE
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would be held by an entity succeeding to the rights under Special Servicing
Agreements applicable to not less than 75% of the then aggregate Certificate
Principal Balances of the Pooled Certificates to which Special Servicing
Agreements relate, AIC agrees not to transfer its equity interest in the SPE to
an entity unaffiliated with AIC, in each case without the affirmative vote of
Holders of each Class of Notes, voting separately, holding at least 60% of the
Voting Rights of such Class and the prior written confirmation of the Rating
Agency that such action will not adversely affect its then ratings of any Class
of the Notes. Any transfer of the equity interest in the SPE by AIC whether or
not a consent of Noteholders is required in accordance with the foregoing will
require the same written confirmation of the Rating Agency.
"Section 14.17 Limitation of Liability
It is expressly understood and agreed by the parties hereto that (a)
this Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as owner trustee of the Issuer under the
Trust Agreement, in the exercise of the powers and authority conferred and
vested in it, (b) each of the representations, undertakings and agreements
herein made on the part of the Issuer is made and intended not as personal
representations, undertakings and agreements by Wilmington Trust Company but is
made and intended for the purpose for binding only the Issuer, (c) nothing
herein contained shall be construed as creating any liability on Wilmington
Trust Company, individually or personally, to perform any covenant either
expressed or implied contained herein, all such liability, if any, being
expressly waived by the Trustee and by any Person claiming by, through or under
the Trustee and (d) under no circumstances shall Wilmington Trust Company be
personally liable for the payment of any indebtedness or expenses of the Issuer
or be liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaken by the Issuer under this Indenture or
the Notes.
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IN WITNESS WHEREOF, the Issuer and the Trustee have caused
this Indenture, dated as of March 27, 1997, to be duly executed by their
respective officers thereunto duly authorized all as of the 27th day of March,
1997.
STRUCTURED MORTGAGE TRUST 1997-1
By: WILMINGTON TRUST COMPANY, as Owner Trustee
and not in its individual capacity
By: /s/ Donald G. MacKelcan
-------------------------------
Name: Donald G. MacKelcan
Title: Assistant Vice President
STATE STREET BANK AND TRUST COMPANY
as Trustee
By: /s/ James Byrnes
-------------------------------
Name: James Byrnes
Title: A.V.P.
AGREED AND ACCEPTED,
with respect to Sections 14.14 and 14.16 and Section 4.01(c)
and Section 8.03
ASSET INVESTORS CORPORATION
By: /s/ Leslie B. Fox
--------------------------------
Name: Leslie B. Fox
Title: President and Chief Operating Officer
AGREED AND ACCEPTED
with respect to Section 8.03
Financial Asset Management LLC
By: /s/ Leslie B. Fox
--------------------------------
Name: Leslie B. Fox
Title: President
STRUCTURED MORTGAGE TRUST 1997-1
Collateralized Notes
NOTE PURCHASE AGREEMENT
March 26, 1997
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Dear Sirs:
1. Introductory. Structured Mortgage Trust 1997-1, a Delaware
business trust (the "Issuer"), proposes, subject to the terms and conditions
stated herein, to sell to Bear, Stearns & Co. Inc., as initial purchaser (the
"Initial Purchaser"), approximately $199,893,850 aggregate principal amount of
Collateralized Notes (the "Notes") in the classes listed on Annex I attached
hereto (each a "Class"). The Notes will be issued pursuant to an Indenture to be
dated as of March 27, 1997 (the "Indenture") by and between the Issuer and State
Street Bank and Trust Company, a Massachusetts banking corporation, as Trustee
(the "Trustee"). The Notes will be secured by and interest and principal of the
Notes will be paid out of the cash flow (commencing with the March 1997
payments) from certain subordinated mortgage-backed securities as set forth on
Exhibit A attached hereto (the "Collateral"). The Collateral will be transferred
from Asset Investors Corporation, a Maryland corporation (the "Company"), to
Asset Investors Secured Financing Corporation, a Delaware corporation organized
by the Company as a special purpose entity (the "SPE"), pursuant to a Pooled
Certificate Transfer Agreement to be dated as of March 26, 1997 (the "AIC/SPE
Transfer Agreement") and from the SPE to the Issuer pursuant to the Trust
Agreement referred to below and subsequently, pursuant to the Indenture, pledged
by the Issuer to the Trustee to hold on behalf of the holders of the Notes, as
described in the Memoranda (as defined below).
The Issuer has been established pursuant to the Trust
Agreement (the "Trust Agreement") dated as of March 26, 1997 among the Company,
<PAGE>
the SPE and Wilmington Trust Company, as owner trustee (the "Owner Trustee").
In connection with the sale of the Notes, the Company and the
Issuer are preparing, in consultation with the Initial Purchaser, upon execution
of this Agreement, a confidential offering memorandum (the "Memorandum"),
describing, among other things, the Notes. Such Memorandum, including any
revisions, amendments or supplements thereto and any accompanying exhibits, are
herein referred to as the "Memoranda."
Capitalized terms used and not otherwise defined herein shall
have the meanings given them in the Indenture.
2. Representations, Warranties and Agreements of the Company
and the SPE. The Company and the SPE represent and warrant jointly and severally
to and agree with the Initial Purchaser that:
(a) The Company and the SPE have been duly organized and are
validly existing and in good standing under the laws of the respective states of
their organization and the Issuer is validly existing as a business trust under
the Laws of the State of Delaware, in each case with the power and authority to
own its respective assets and to conduct its respective business as such assets
and as such business are presently owned or conducted, and each of the Company,
the SPE and the Issuer, as the case may be, has or on or before the Closing Date
will have the power and authority to enter into and perform its obligations
under this Agreement, and those of the AIC/SPE Transfer Agreement, the Trust
Agreement and the Indenture (collectively, the "Transaction Documents") to which
it is a party.
(b) The Company is duly qualified to do business as a foreign
corporation, in good standing, and has obtained all necessary licenses and
approvals in each jurisdiction where the failure to do so would have a potential
adverse effect on the Company's ability to perform its obligations hereunder,
under the Transaction Documents to which it is a party or under the Special
Servicing and Collateral Fund Agreements which relate to the Collateral and to
which it is a party as identified on Exhibit B (the "Special Servicing
Agreements").
(c) The Company, the SPE and the Issuer have the power,
authority and legal right to execute and deliver each of the Transaction
Documents to which it is a party and to carry out its terms; and the execution,
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delivery, and performance of such Transaction Documents and all of the documents
required pursuant thereto have been duly authorized by the Company, the SPE or
the Issuer, as applicable, by all necessary action.
(d) This Agreement has been duly and validly executed and
delivered by the Company, the SPE and the Issuer and, as of the Closing Date,
the Transaction Documents, when delivered by the Company, the SPE and/or the
Issuer, as applicable, will have been duly and validly executed and delivered by
the Company, the SPE and/or the Issuer, as applicable, and in each case
constitute or will constitute legal, valid and binding agreements of the
Company, the SPE and/or the Issuer, as applicable, enforceable against the
Company, the SPE and/or the Issuer, as applicable, in accordance with their
terms, subject, as to the enforcement of remedies, to applicable bankruptcy,
insolvency, reorganization, moratorium, receivership and similar laws affecting
creditors' rights generally and to general principles of equity (regardless of
whether the enforcement of such remedies is considered in a proceeding in equity
or at law) and subject, in the case of this Agreement, to public policy
constraints regarding indemnification.
(e) The Notes have been duly and validly authorized by all
required action of the Issuer and, assuming due execution, authentication and
delivery by the Trustee in accordance with the Indenture, will be validly issued
and outstanding and will be enforceable in accordance with their terms and
entitled to the benefits and security provided by the Indenture subject, as to
the enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium, receivership and similar laws affecting creditors'
rights generally and to general principles of equity (regardless of whether the
enforcement of such remedies is considered in a proceeding in equity or at law).
The Notes will be in all material respects in the form contemplated by the
Indenture. The information with respect to the Collateral set forth on Exhibit A
attached hereto is true and correct.
(f) Neither the execution, sale and delivery of the Notes, nor
the execution, delivery and performance of the Company's, the SPE's and/or the
Issuer's obligations under the Transaction Documents or the Notes nor the
consummation of any transactions contemplated by any of the Transaction
Documents or the Notes, nor the fulfillment of the terms thereof will conflict
with or violate, result in a breach of or constitute a default under any
organizational or other constituent document of or any statute applicable to the
Company, the SPE or the Issuer or any law, order, rule or regulation applicable
to the Company, the SPE or the Issuer of any court, regulatory body,
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administrative agency or governmental body having jurisdiction over the Company,
the SPE or the Issuer or the terms of any indenture, agreement, mortgage, deed
of trust or other agreement or instrument to which the Company, the SPE or the
Issuer is a party or by which any of them or any of their respective properties
are bound.
(g) There are no actions, proceedings or investigations
pending, or, to the knowledge of the Company or the SPE, threatened, before any
court, regulatory body, administrative agency or other tribunal or governmental
instrumentality (i) asserting the invalidity of any of the Transaction Documents
or the Notes, (ii) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by any of the Transaction
Documents, (iii) seeking any determination or ruling that might materially and
adversely affect the performance by the Company, the SPE or the Issuer of its
obligations under, or the validity or enforceability of, any of the Transaction
Documents or the Notes or (iv) that may adversely affect the Federal or state
income, excise, franchise or similar tax attributes of the Notes.
(h) The issuance of the Notes pursuant to the Indenture and
the sale of the Notes to the Initial Purchaser pursuant to this Agreement, the
compliance by the Company, the SPE and/or the Issuer with the other provisions
of the Transaction Documents and the Notes and the consummation of the other
transactions herein or therein contemplated do not and will not, under any
statute, regulation or rule of general applicability or any decision, order,
decree or judgment of any judicial or other governmental body applicable to the
Company or the Issuer, require the consent, approval, authorization, order,
registration or qualification of or with any court or governmental authority
except as have been obtained.
(i) No default exists on the part of the Company, the SPE or
the Issuer and no event has occurred which, with notice, lapse of time or both,
would constitute a default on the part of the Company, the SPE or the Issuer in
the due performance and observance of any term, covenant or condition of any
agreement to which the Company, the SPE or the Issuer is a party or by which any
of them is bound, which default is or would be material to the financial
condition, earnings, prospects, business or properties of the Company, the SPE
or the Issuer or which would have an adverse effect on the transactions
contemplated by the Transaction Documents.
(j) The Indenture is not required to be qualified under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
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(k) Any taxes, fees and other governmental charges in
connection with the execution and delivery of the Transaction Documents and the
execution, delivery and sale of the Notes have been or will be paid at or prior
to the Closing Date.
(l) The Memorandum as of its date will not, and any amendments
thereof or supplements thereto, as of their respective dates will not, and as of
the Closing Date the Memorandum as amended or supplemented, if amended or
supplemented, will not, include any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(m) The Company and the SPE have provided to the Initial
Purchaser all disclosure documents and trustee reports related to the
Collateral, to the extent such disclosure documents and trustee reports are
currently in the possession of the Company or the SPE and, upon request of the
Initial Purchaser, will provide to it copies of any additional disclosure
documents and pooling and servicing agreements or indentures related to the
Collateral. Neither the Company nor the Issuer has any knowledge that any such
disclosure documents or trustee reports are not true and correct in all material
respects.
(n) The Indemnity Agreements described in Exhibit C hereto
constitute the only indemnity or similar agreements procured by the Company
relating to the Collateral which are in effect on the date hereof, except for
two Indemnity Agreements dated August 30, 1995 and July 7, 1995 between the
Company and Morgan Stanley & Co. Incorporated which, by their terms, is not
assignable. With the foregoing exception, the Company has the power and
authority to assign such agreements to the SPE, the SPE has the power and
authority to assign them to the Issuer and the Issuer has the power and
authority to assign them to the Trustee.
(o) Each Special Servicing Agreement is, and, to the extent a
consent has been received by the Company, following the transfer of the
Collateral to the SPE and then to the Issuer and thereafter the pledge thereof
to the Trustee will be, in full force and effect and the Company is entitled to
the benefits thereof and will exercise the rights provided therein on behalf of
the Trustee. Consents have been received from Servicers with respect to
approximately 72.1% of the aggregate Certificate Principal Balances of all of
the Pooled Certificates as of the Pooled Certificate Information Date.
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(p) The Notes meet the eligibility requirements set forth in
Rule 144A(d)(3) under the Securities Act of 1933, as amended (the "Securities
Act").
(q) None of the Company, the SPE nor the Issuer nor anyone
acting on their behalf, has offered, transferred, pledged, sold or otherwise
disposed of any Note of any Class, any interest in any Note of any Class or any
other similar security of any of them to, or solicited any offer to buy or
accept a transfer, pledge or other disposition of any Note of any Class, any
interest in any Note of any Class or any such other similar security from, or
otherwise approached or negotiated with respect to any Note of any Class, or any
other similar security of the Company, the SPE or the Issuer or of any entity
organized by the Company or the SPE, with any person in any manner, or made any
general solicitation by means of general advertising or in any other manner, or
taken any other action, that would constitute a distribution of the Notes under
the Securities Act or that would render the disposition of any Note of any Class
by the Initial Purchaser in accordance herewith a violation of Section 5 of the
Securities Act, or any state securities law, or require registration or
qualification pursuant thereto, require qualification of the Indenture under the
Trust Indenture Act or require registration of the Company or the Issuer under
the Investment Company Act of 1940, as amended, nor will the Company, the SPE or
the Issuer act, nor have any of them authorized or will any of them authorize
any person to act, in such manner with respect to any Note of any Class.
(r) The representations and warranties of the Company, the SPE
and the Issuer made or to be made in the Transaction Documents will be true and
correct as of the Closing Date. Such representations and warranties are made for
the benefit of the Initial Purchaser and each such representation and warranty
is so incorporated herein by this reference.
(s) Immediately prior to the pledge to the Trustee pursuant to
the Indenture, the Issuer will own the Collateral free and clear of any lien,
claim or encumbrance created by the Company, the SPE or the Issuer.
(t) On the Closing Date all of the trust certificates issued
by the Issuer will be held by the SPE and all outstanding securities of the SPE
will be held by AIC.
(u) The SPE's business purpose is limited as described in its
articles of incorporation and the SPE has one independent director.
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3. Purchase, Sale, and Delivery of Notes.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Issuer will sell to the Initial Purchaser, and the Initial Purchaser
agrees to purchase from the Issuer, all of the Notes at a purchase price at
least equal to the sum of (i) the Minimum Purchase Price, plus (ii) accrued
interest for the number of days in March 1997 up to but not including the
Closing Date based upon a year of 12 30-day months, plus (iii) the Issuer
Portion of any Excess Proceeds, and less (iv) the Placement and Structuring Fee.
For these purposes the "Minimum Purchase Price" means the sum
of the minimum purchase prices for each Class of Notes, as set forth on Annex I
hereto. The "Placement and Structuring Fee" means 1.8% of the sum of (i) the
Note Principal Balance of all of the Notes and (ii) the Imputed Principal
Balance of the Equity Interest. "Excess Proceeds" means the positive excess, if
any, of (A) the sum of (Y) the products of (i) the face amounts of the Class A,
Class B and Class C Notes and (ii) the price equivalent of the respective
average yield spread at pricing plus (Z) the face amount of the Class D Notes
multiplied by their actual average percentage price over (B) the sum of (Y) the
products of (i) the face amounts of the Class A, Class B and Class C Notes and
(ii) the price equivalent of the yield spread for each respective Class (+145
bps/10 year for the Class A Notes, +340 bps/10 year for the Class B Notes and
+725 bps/10 year for the Class C Notes, based on the yield of the 6.25% 10-Year
Treasury Note maturing February 15, 2007 as of February 20, 1997 of 6.387%) plus
(Z) 25% of the face amount of the Class D Notes. Yield spread shall be
determined for purposes of the foregoing assuming 175% PSA, 75% loss recovery
and 75% of the SDA curve. The "Issuer Portion of Excess Proceeds" means one
third of any Excess Proceeds in excess of $1.6 million.
Certain expenses required to be paid by the Company pursuant
to Section 6 hereof may be netted from the amounts paid to the Issuer hereunder.
In addition, an amount estimated to be at least sufficient to pay principal and
interest on the Notes and the Imputed Principal Payment and the Percentage Cash
Flow Payment on the Equity Interest on the April 1, 1997 Payment Date shall be
deducted from the amounts paid to the Issuer hereunder and provided to the
Trustee for deposit on the Closing Date in the Payment Account. For purposes of
determining the amount to be so deducted and deposited, it shall be assumed that
there are no losses on the Mortgage Loans and that prepayments are at a rate of
225% PSA. As provided in the Indenture, such amounts shall be invested in
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Eligible Investments. If such funds, including the proceeds of such Eligible
Investments, exceed the amount required for the initial payment Date, the excess
shall be paid to the Issuer on the Payment Date. If there are insufficient
funds, the Issuer shall provide any such excess. AIC and the SPE agree to make
such contributions as may be necessary to enable therefor.
(b) Delivery of and payment for each such Class of Notes being
purchased hereunder (the "Closing") shall be made at the offices of Stroock &
Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038 on March 27, 1997
or such later date as to which the Initial Purchaser and the Company shall agree
(such date and time of delivery and payment for the Notes being herein called
the "Closing Date"). Delivery of the Notes shall be made to the Initial
Purchaser through the book entry facilities of The Depository Trust Company
against payment by the Initial Purchaser of the Purchase Price by the wire
transfer of immediately available funds.
The Notes shall be issued in book entry form and in such
permitted denominations as the Initial Purchaser may request not less than two
Business Days (as defined in the Indenture) in advance of the Closing Date. The
Company agrees to have the Notes available for inspection, checking and
packaging by the Initial Purchaser in New York, New York, not later than 2:00
p.m. on the Business Day prior to the Closing Date.
The parties agree the settlement of the Notes sold pursuant to
this Agreement shall take place on the terms set forth herein and not as set
forth in Rule 15c6-1(a) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
4. Subsequent Sales by the Initial Purchaser. It is understood
that the Initial Purchaser proposes to sell the Notes to institutional investors
which meet the qualifications to be "Qualified Institutional Buyers" as defined
in Rule 144A promulgated under the Securities Act and to institutional
Accredited Investors as defined in Rule 5.01(a)(1)-(3) or (7) of Regulation D
under the Securities Act (such purchasers from the Initial Purchaser being
referred to as the "Subsequent Purchasers" and, together with the Initial
Purchaser, the "Purchasers") as set forth in the Memoranda.
5. Covenants of the Company, the SPE and the Issuer. The
Company, the SPE and the Issuer covenant and agree with the Initial Purchaser
that:
(a) In connection with the execution of this Agreement, the
Company, the SPE and the Issuer will cause the Memorandum to be
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prepared setting forth the initial face amount of each Class of Notes
covered thereby and their terms and such other information as the
Initial Purchaser, the Company, the SPE and the Issuer deem appropriate
in connection with the offering of the Notes.
(b) If at any time prior to the completion of the sale of the
Notes by the Initial Purchaser, any event occurs as a result of which
the Memorandum as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it
shall be necessary to amend or supplement the Memorandum to comply with
applicable law, the Company will notify the Initial Purchaser of the
same and the Company will promptly cause to be prepared and delivered
to the Initial Purchaser pursuant to paragraph (d) of this Section 5 an
amendment or supplement that will correct such statement or omission or
effect such compliance.
(c) Each of the Company, the SPE and the Issuer will
immediately inform the Initial Purchaser (A) of the receipt by any of
them of any communication from the Securities and Exchange Commission
(the "SEC") or any state securities authority concerning the offering
or sale of the Notes and (B) of the commencement of any lawsuit or
proceeding to which the Company, the SPE or the Issuer is a party
relating to the offering or sale of the Notes.
(d) Each of the Company, the SPE and the Issuer authorizes the
Initial Purchaser to deliver to prospective Subsequent Purchasers
copies of the Memorandum, any amendments thereof or supplements or
exhibits thereto, and any information obtained pursuant hereto in
connection with any offer or sale of the Notes by the Initial Purchaser
in accordance herewith. In connection with such delivery of copies of
the Memoranda, each of the Company, the SPE and the Issuer agrees to
furnish the Initial Purchaser, without charge, with as many copies of
the Memoranda and any amendment or supplement thereto as the Initial
Purchaser may reasonably request during the period from the first date
of the offering of the Notes until the completion of the sale thereof.
(e) The Company, the SPE and the Issuer will use their
reasonable best efforts to arrange for the qualification of each Class
of Notes for sale under the laws of such jurisdictions as the Initial
Purchaser may designate, will maintain such qualifications in effect so
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<PAGE>
long as required for the sale of each Class of Notes and will arrange
for the determination of the legality of each Class of Notes for
purchase by institutional investors. The Company, the SPE and the
Issuer will advise promptly the Initial Purchaser of the receipt by the
Company, the SPE or the Issuer of any notification with respect to the
suspension of the qualification of any Class of Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose.
(f) Until such time as the Initial Purchaser shall have sold
all of the Notes purchased by it on the Closing Date, the Company will
make available to prospective Subsequent Purchasers of such Notes the
opportunity to ask questions and receive answers concerning the terms
and conditions of the offering of the Notes, the condition (financial
or otherwise) of the Issuer and any other matters relating to the
matters described in the Memoranda and the transactions contemplated
hereby and in obtaining any additional information and documents that
the Company, the SPE or the Issuer possesses or can acquire without
unreasonable effort or expense with respect to any of the foregoing.
(g) For so long as any Class of Notes is outstanding, (1) the
Company will provide or cause to be provided to any holder of Notes of
any Class and any prospective purchaser thereof designated by such a
holder, upon the request of such holder or prospective purchaser, the
information ("Rule 144A Information") required to be provided to such
holder or prospective purchaser by Rule 144A(d)(4) under the Securities
Act; and (2) the Company shall update or shall cause to be updated such
information from time to time in order to prevent such information from
becoming false and misleading and will take such other actions as are
necessary to ensure that the safe harbor exemption from the
registration requirements of the Securities Act under Rule 144A is and
will be available for resales of the Notes conducted in accordance with
Rule 144A.
(h) For a period from the date of this Agreement until the
retirement of all Classes of Notes, the Company or the Issuer will
deliver or cause to be delivered to the Initial Purchaser the annual
statement of compliance and the annual independent certified public
accountants' report furnished to the Trustee or the Owner Trustee
pursuant to the Transaction Documents, as soon as such statements and
reports are furnished to the Trustee or the Owner Trustee.
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<PAGE>
(i) So long as any Class of Notes is outstanding, the Company
or the Issuer will furnish or cause to be furnished to the Initial
Purchaser (A) as soon as practicable after the end of the fiscal year,
all documents required under the Indenture to be distributed to the
holders of each Class of Notes and (B) from time to time, any
information concerning the Company or the Issuer filed with any
government or regulatory authority which is otherwise publicly
available, as the Initial Purchaser may reasonably request.
(j) To the extent, if any, that the ratings to be provided
with respect to certain Classes of Notes by Moody's Investors Service,
Inc. ("Moody's") are conditional upon the furnishing of documents or
the taking of any other actions, the Company, the SPE and the Issuer
shall cooperate in all reasonable respects in connection with
furnishing such documents and taking any such other actions. At the
time any document is delivered by any of the Company, the SPE or the
Issuer to Moody's, a copy of such document shall be provided to the
Initial Purchaser.
6. Payment of Fees and Expenses.
The Company shall be responsible for and shall pay all of the
third party fees and expenses under the Transaction Documents, whether incurred
on behalf of itself, the SPE, the Issuer or the Initial Purchaser, including,
without limitation: (i) the preparation of the Transaction Documents; (ii) the
preparation, issuance and delivery of the Notes to the Initial Purchaser; (iii)
the fees, disbursements and expenses of the Company's, the SPE's, the Issuer's
and the Initial Purchaser's counsel and accountants; (iv) the qualification of
the Notes under state securities laws in accordance with the provisions of
Section 5(e), including filing fees and the fees and disbursements of counsel
for the Initial Purchaser in connection therewith and in connection with the
preparation of any related blue sky survey; (v) the printing and delivery to the
Initial Purchaser of copies of the Memoranda; (vi) any fees charged by Moody's
for the ratings of certain Classes of the Notes; (vii) the upfront fees of the
Trustee under the Indenture; (viii) the upfront fees of the Owner Trustee under
the Trust Agreement; (ix) the fees and expenses of Peabody & Arnold incurred in
connection with the transfer of the Collateral to the Trustee; (x) any recording
fees to be paid in connection with the transactions contemplated by the
Transaction Documents; and (xi) any upfront fee to a Tax Administrator for the
preparation of tax documents in connection with the Notes (collectively, the
"Transaction Expenses").
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7. Representations, Warranties, and Agreements of the Initial
Purchaser. The Initial Purchaser represents and warrants to, and agrees with,
the Company, as of the date hereof and as of the Closing Date, that:
(a) The Initial Purchaser understands that the Notes have not
been and will not be registered under the Securities Act, in reliance upon an
exemption therefrom, or registered or qualified under the securities or "Blue
Sky" laws of any state.
(b) This Agreement has been duly authorized, executed and
delivered by the Initial Purchaser.
(c) The Initial Purchaser is a Qualified Institutional Buyer.
(d) The Initial Purchaser has advised the Company that the
Initial Purchaser is purchasing the Notes for its own account and presently
intends (but has no obligation) to reoffer and resell all or a portion of the
Notes at any time or from time to time to institutional investors which are
Qualified Institutional Buyers or Accredited Investors. The Initial Purchaser
agrees that it will comply with applicable laws and the transfer restrictions in
the Indenture in offering the Notes and will not make a public offering of any
Class of the Notes, and that the Initial Purchaser will not reoffer or resell
the Notes in a manner which would render the issuance and sale of any Class of
the Notes, whether or not considered together with any other such resale, a
violation of the Securities Act or any state securities or "Blue Sky" laws or
require registration pursuant thereto.
8. Conditions of the Obligations of the Initial Purchaser. The
obligations of the Initial Purchaser to purchase and pay for the Notes will be
subject to the accuracy of the representations and warranties on the part of the
Company and the SPE contained or incorporated herein as of the date hereof and
as of the Closing Date, to the accuracy of the statements of officers of the
Company and the SPE made pursuant to the provisions hereof, to the performance
by the Company and the SPE of their respective obligations hereunder and to the
following additional conditions precedent:
(a) Each of the Company and the SPE shall have delivered to
the Initial Purchaser a certificate, dated the Closing Date, of a senior
executive officer acceptable to the Initial Purchaser, to the effect that such
officer has carefully examined this Agreement and the Memorandum and that, to
the best of such officer's knowledge after due inquiry and reasonable
investigation (i) the representations and warranties of the Company and the SPE,
as applicable, in this Agreement and in the case of the Company in the Trust
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Agreement are true and correct in all material respects at and as of the Closing
Date with the same effect as if made on the Closing Date, (ii) the Company and
the SPE have complied with all the agreements and satisfied all the conditions
on its part to be performed or satisfied at or prior to the Closing Date and
(iii) nothing has come to the attention of such officer that would lead such
officer to believe that the Memorandum contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) On the Closing Date, the Transaction Documents and all
Classes of the Notes shall have been duly authorized, executed and delivered by
the parties thereto (other than the Initial Purchaser), shall be in full force
and effect and no default shall exist thereunder on the part of the Company, the
SPE or the Issuer, and the Trustee shall have received a fully executed copy
thereof or, with respect to the Notes, a conformed specimen of each Class
thereof. The Transaction Documents and the Notes shall be in all material
respects in the forms theretofore provided to the Initial Purchaser.
(c) The Initial Purchaser shall have received from Bartlit,
Beck, Herman, Palenchar & Scott, special counsel for the Company, the SPE and
the Issuer, favorable opinions, dated the Closing Date and reasonably
satisfactory in form and substance to the Initial Purchaser and its counsel,
substantially to the effect that:
(i) The SPE has been duly organized and each of the Company
and the SPE is validly existing and in good standing under the laws of
the State of its organization with the power and authority to own its
assets and to conduct its business as such assets are then owned and
such business is then conducted, and, in each case, as contemplated by
the Transaction Documents to which it is a party, and to enter into and
perform its obligations under the Transaction Documents to which it is
a party.
(ii) Each Transaction Document to which the Company or the SPE
is a party has been duly and validly authorized, executed and delivered
by the Company and/or the SPE, as applicable, and each constitutes the
legal, valid and binding agreement of the Company and/or the SPE, as
applicable, enforceable against the Company and/or the Issuer, as
applicable, in accordance with its terms, subject, as to the
enforcement of remedies, to applicable bankruptcy, insolvency,
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reorganization, moratorium, receivership and similar laws affecting
creditors' rights generally and to general principles of equity
(regardless of whether the enforcement of such remedies is considered
in a proceeding in equity or at law) and subject, in the case of this
Agreement, to public policy constraints regarding indemnification.
(iii) With respect to each Transaction Document to which the
Issuer is a party and assuming that such Transaction Document has been
duly authorized, executed and delivered by the Issuer, such Transaction
Document constitutes the legal, valid and binding agreement of the
Issuer enforceable against the Issuer in accordance with its terms
subject, as to the enforcement of remedies, to applicable bankruptcy,
insolvency, reorganization, moratorium, receivership and similar laws
affecting creditors' rights generally and to general principles of
equity (regardless of whether the enforcement of such remedies is
considered in a proceeding in equity or at law) and subject, in the
case of this Agreement, to public policy constraints regarding
indemnification.
(iv) When the Notes have been duly executed, delivered and
authenticated in accordance with the Indenture and delivered and paid
for pursuant to this Agreement, the Notes will be validly issued,
outstanding and entitled to the benefits of the Indenture, except that
(A) enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (B) enforcement may
be limited by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(v) None of the execution and delivery of the Transaction
Documents to which the Company, the SPE or the Issuer is a party, or
consummation of the transactions contemplated by either the Transaction
Documents or the Notes, or the grant of the security interest pursuant
to the Indenture will (A) conflict with or violate, or result in a
breach of or constitute a default under any organizational or other
constituent document of or, to such counsel's knowledge, any statute
currently applicable to the Company, the SPE or the Issuer, as
applicable, or, to such counsel's knowledge, any order, rule or
regulation currently applicable to the Company or the Issuer, as the
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case may be, of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Company, the SPE or the
Issuer, as the case may be, or (B) to such counsel's knowledge,
conflict with or violate, result in a material breach of or constitute
a material default under the terms of any indenture, agreement,
mortgage, deed of trust or other agreement or instrument to which the
Company, the SPE or the Issuer is a party or by which the Company, the
SPE or the Issuer or any of their respective properties are bound.
(vi) To such counsel's knowledge, there are no actions,
proceedings or investigations pending or threatened, before any court,
regulatory body, administrative agency or other tribunal or
governmental instrumentality (1) asserting the invalidity of any of the
Transaction Documents or any Class of the Notes, (2) seeking to prevent
the issuance of any Class of the Notes or the consummation of any of
the transactions contemplated by any of the Transaction Documents or
(3) seeking any determination or ruling that might materially and
adversely affect the performance by the Company, the SPE or the Issuer
of their respective obligations under, or the validity or
enforceability of, any of the Transaction Documents or any Class of the
Notes.
(vii) The issuance of the Notes pursuant to the Indenture and
the sale of each Class of the Notes to the Initial Purchaser pursuant
to this Agreement, the compliance by the Company, the SPE and the
Issuer, as applicable, with the Transaction Documents and the Notes and
the consummation of the other transactions herein or therein
contemplated do not and will not require the consent, approval,
authorization, order, registration or qualification of or with any
court or governmental authority, except such approvals as have been
obtained, and such as may be required under state securities laws or
"blue sky" laws of any jurisdiction in connection with the purchase and
distribution by the Initial Purchaser of the Notes.
(viii) The Indenture is not required to be qualified under the
Trust Indenture Act.
(ix) The offer and sale of the Notes to the Initial Purchaser
and to persons purchasing directly from the Initial Purchaser in
connection with the Initial Purchaser's initial sale of each such Class
of the Notes, in each case in the manner and under the circumstances
contemplated by the Memorandum, the Indenture and this Agreement are
not transactions requiring registration of any Class of the Notes under
the Securities Act.
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(x) Following execution and delivery of all of the Transaction
Documents, all of the Company's and the SPE's right, title and interest
in and to the Pooled Certificates have been conveyed to the Issuer and
the Issuer has duly and validly pledged, assigned and, with the
exception of three lost Pooled Certificates described in the
Memorandum, delivered the Pooled Certificates (whether by book entry or
by physical delivery) to the Trustee and the Trustee has acquired a
perfected first priority security interest in the Collateral, subject
to no prior lien, mortgage, security interest, pledge, adverse claim,
charge or other encumbrance of which such counsel has notice.
(xi) The Company is not, and neither the SPE nor the Issuer
will become, as a result of the transactions contemplated in the
Indenture and this Agreement, an "investment company" that is
registered or is required to be registered under the Investment Company
Act (or an "affiliated person" of any such "affiliated person") as such
terms are defined in the Investment Company Act.
Such opinion may: (a) express its reliance as to factual
matters on certificates of government officials and the representations and
warranties made by, and on the certificates or other documents furnished by,
officers of the parties to the Transaction Documents; (b) assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Company and the SPE; and (c) be
based upon assumptions and subject to qualifications typically made by Bartlit
Beck Herman Palenchar & Scott with respect to the opinion described in clause
(x) above. Alternatively, the opinion in clause (x) or the portion thereof
governed by Massachusetts law may be rendered by Peabody & Arnold. "To such
counsel's knowledge" shall mean the actual knowledge of the Bartlit Beck Herman
Palenchar & Scott attorneys involved in the representation of the Company, the
SPE and the Issuer in connection with the transactions contemplated hereby,
without independent investigation. Bartlit Beck Herman Palenchar & Scott may
rely on special Maryland counsel as to matters of Maryland law and on counsel to
the Owner Trustee as to matters of Delaware law as they pertain to the Issuer
and on Peabody & Arnold as to matters of Massachusetts law.
Such counsel shall also confirm that nothing has come to the
attention of such counsel that would lead such counsel to believe that the
Memorandum, as of its date, and at the Closing Date, contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (other than financial statements,
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<PAGE>
schedules and other numerical, financial and statistical data contained therein,
and the matters referred to in the second full paragraph of Section 8(g) of this
Agreement as to which such counsel need express no view).
(d) The Initial Purchaser shall have received from Peabody &
Arnold, counsel to the Trustee, a favorable opinion, dated the Closing Date and
reasonably satisfactory in form and substance to the Initial Purchaser and its
counsel, to the effect that:
(i) The Trustee has been duly organized and is validly
existing and in good standing as a banking corporation under the laws
of the Commonwealth of Massachusetts, with full power and authority to
execute and deliver the Transaction Documents to which it is a party
and perform its obligations thereunder.
(ii) The Indenture has been duly and validly authorized, executed
and delivered by the Trustee and constitutes the legal, valid and
binding agreement of the Trustee enforceable against the Trustee in
accordance with its terms, subject, as to the enforcement of remedies,
to applicable bankruptcy, insolvency, reorganization, moratorium,
receivership and similar laws affecting creditors' rights generally and
to general principles of equity (regardless of whether the enforcement
of such remedies is considered in a proceeding in equity or at law).
(iii) No consent, approval or authorization of, or registration,
declaration or filing with, any court or governmental agency or body of
the United States of America or the Commonwealth of Massachusetts is
required for the execution, delivery or performance by the Trustee of
the Indenture.
(iv) Neither the authentication and delivery of each Class of the
Notes by the Trustee nor the execution and delivery by the Trustee of
the Indenture and the performance by the Trustee of the respective
terms thereof conflict with or result in a violation of (A) any law or
regulation of the United States of America or the Commonwealth of
Massachusetts governing the banking or trust powers of the Trustee and
(B) the charter documents or by-laws of the Trustee.
(v) Each Class of the Notes have been duly authenticated and
delivered by the Trustee in accordance with the Indenture.
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(vi) To the best of such counsel's knowledge, there are no actions,
proceedings or investigations pending or threatened against or
affecting the Trustee before or by any court, arbitrator,
administrative agency or other governmental authority which, if
adversely decided, would materially and adversely affect the ability of
the Trustee to carry out the transactions contemplated in the
Transaction Documents.
(e) The Initial Purchaser shall have received from Richards,
Layton & Finger, counsel to the Owner Trustee, a favorable opinion, dated the
Closing Date and reasonably satisfactory in form and substance to the Initial
Purchaser and its counsel, to the effect that:
(i) The Owner Trustee is a Delaware banking corporation duly
incorporated and validly existing under the laws of the State of
Delaware.
(ii) The Owner Trustee has the full power and authority to
accept the office of owner trustee under the Trust Agreement and to
enter into and perform its obligations under the Trust Agreement and
the transactions contemplated thereby.
(iii) The execution and delivery of the Trust Agreement by the
Owner Trustee and the performance by the Owner Trustee of its
obligations under the Trust Agreement have been duly authorized by all
necessary action of the Owner Trustee and the Trust Agreement has been
duly executed and delivered by the Owner Trustee and constitutes a
legal, valid and binding obligation of the Owner Trustee enforceable
against the Owner Trustee in accordance with its terms, except as the
enforceability thereof may be (a) limited by bankruptcy, insolvency,
reorganization, moratorium, liquidation or other similar laws affecting
the rights of creditors generally, and (b) subject to general
principals of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(iv) The execution and delivery by the Owner Trustee of the
Trust Agreement and the consummation by the Owner Trustee of the
transactions contemplated thereby do not require any consent, approval
or authorization of, or any registration or filing with, any applicable
governmental authority of the State of Delaware which has not been
obtained or done.
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<PAGE>
(v) Neither the consummation by the Owner Trustee of the
transactions contemplated in the Trust Agreement, nor the fulfillment
of the terms thereof by the Owner Trustee will conflict with, result in
a breach or violation of, or constitute a default under the articles of
organization, by-laws or other organizational documents of the Owner
Trustee.
Such opinion may contain such assumptions, qualifications and
limitations as are customary in opinions of this type and are reasonably
acceptable to counsel to the Initial Purchaser. In rendering such opinion, such
counsel may state that they express no opinion as to the laws of any
jurisdiction other than the Federal law of the United States of America
governing the banking and trust powers of WTC and the laws of the State of
Delaware.
(f) The Initial Purchaser shall have received an opinion of
Richards, Layton & Finger, special Delaware counsel for the Issuer, dated the
Closing Date, in form and substance satisfactory to the Initial Purchaser and
its counsel, to the effect that:
(i) The Trust Agreement is the legal, valid and binding
agreement of the Owner Trustee, the Company and the SPE, enforceable
against the Owner Trustee, the Company and the SPE in accordance with
its terms subject to (i) applicable bankruptcy, insolvency, moratorium,
receivership, reorganization, fraudulent conveyance and similar laws
relating to and affecting the rights and remedies of creditors
generally, (ii) principles of equity (regardless of whether considered
and applied in a proceeding in equity or at law), and (iii) the effect
of applicable public policy on the enforceability of provisions
relating to indemnification or contribution.
(ii) The Certificate of Trust has been duly filed with the
Secretary of State of the State of Delaware. The Issuer has been duly
formed and is validly existing as a business trust under the Delaware
Business Trust Act.
(iii) The Issuer has the power and authority under the Trust
Agreement and the Delaware Business Trust Act to execute, deliver and
perform its obligations under the Transaction Documents to which it is
a party, the Notes and the Trust Certificates.
(iv) The Issuer has duly authorized and executed the
Transaction Documents to which it is a party, the Notes and the Trust
Certificates.
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<PAGE>
(v) The Issuer has the power under the Trust Agreement and
the Delaware Business Trust Act to pledge the Trust Estate to the
Trustee as security for the Notes.
(vi) The Trust Certificates have been executed, and
delivered by the Owner Trustee on behalf of the Trust upon the order of
the Company in accordance with the Trust Agreement and when delivered
to and paid for pursuant to the Trust Agreement, the Trust Certificates
will be validly issued and outstanding, and the holders of record of
such Certificates will be entitled to the benefits accorded by the
Trust Agreement subject to (i) applicable bankruptcy, insolvency,
moratorium, receivership, reorganization, fraudulent conveyance and
similar laws relating to and affecting the rights and remedies of
creditors generally, (ii) principles of equity (regardless of whether
considered and applied in a proceeding in equity or at law), and (iii)
the effect of applicable public policy on the enforceability of
provisions relating to indemnification or contribution.
(vii) The Notes have been authorized, executed and delivered
by the Owner Trustee on behalf of the Trust upon the order of the
Company in accordance with the Trust Agreement and the Indenture.
(viii) To the extent that Article 9 of the Uniform Commercial
Code as in effect in the State of Delaware (the "Delaware UCC") is
applicable (without regard to conflicts of laws principles), and
assuming that the security interest created by the Indenture in the
Issuer's rights in the Indemnity Agreements and other general
intangibles has been duly created and has attached, upon the filing of
a UCC-1 financing statement with the Secretary of State of the State of
Delaware, the Trustee will have a perfected security interest in the
Trust's rights in such Indemnity Agreements and other general
intangibles and the proceeds thereof; and such security interest will
be prior to any other security interest granted by the Issuer that is
perfected solely by the filing of financing statements under the
Delaware UCC.
(ix) No re-filing or other action is necessary under the
Delaware UCC in the State of Delaware in order to maintain the
perfection of the security interest referenced above except for the
filing of continuation statements at five-year intervals.
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<PAGE>
(x) Under ss. 3805(b) of the Delaware Business Trust Act,
no creditor of any holder of Trust Certificates shall have any right to
obtain possession of, or otherwise exercise legal or equitable remedies
with respect to, the property of the Issuer except in accordance with
the terms of the Trust Agreement subject to (i) applicable bankruptcy,
insolvency, moratorium, receivership, reorganization, fraudulent
conveyance and similar laws relating to and affecting the rights and
remedies of creditors generally, (ii) principles of equity (regardless
of whether considered and applied in a proceeding in equity or at law),
and (iii) the effect of applicable public policy on the enforceability
of provisions relating to indemnification or contribution.
(xi) Under ss. 3805(c) of the Delaware Business Trust Act,
and assuming that good title to the assets referred to therein is
conveyed to the Issuer pursuant to the Trust Agreement as a true
contribution and not as a security arrangement, the Issuer, rather than
any holder of the Trust Certificates, is the owner of such assets
subject to (i) applicable bankruptcy, insolvency, moratorium,
receivership, reorganization, fraudulent conveyance and similar laws
relating to and affecting the rights and remedies of creditors
generally, (ii) principles of equity (regardless of whether considered
and applied in a proceeding in equity or at law), and (iii) the effect
of applicable public policy on the enforceability of provisions
relating to indemnification or contribution.
(xii) The execution and delivery by the Owner Trustee on
behalf of the Issuer, of the Transaction Documents to which the Issuer
is a party do not require any consent, approval or authorization of, or
any registration or filing with, any governmental authority of the
State of Delaware, except for the filing of the Certificate of Trust
with the Secretary of State.
(xiii) Neither the consummation by the Issuer of the
transactions contemplated by the Trust Agreement or, the transactions
contemplated by the Transaction Documents to which the Trust is a party
nor the fulfillment of the terms thereof by the Issuer will conflict
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<PAGE>
with or result in a breach or violation of any law of the State of
Delaware.
Such opinion may contain such assumptions, qualifications and
limitations as are customary in opinions of this type and are reasonably
acceptable to counsel to the Initial Purchaser. In rendering such opinion, such
counsel may state that they express no opinion as to the laws of any
jurisdiction other than the laws of the State of Delaware.
(g) The Initial Purchaser shall have received from Stroock &
Stroock & Lavan LLP, counsel for the Initial Purchaser, a favorable opinion,
dated the Closing Date and satisfactory in form and substance to the Initial
Purchaser and shall include therein an opinion substantially to the effect that:
The statements in the Memorandum under the headings "SUMMARY
- -- ERISA Considerations," "ERISA CONSIDERATIONS" and "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES", to the extent that they constitute statements of matters of law
or legal conclusions with respect thereto, have been prepared or reviewed by
such counsel and provide a fair and accurate summary of such law or conclusions.
(h) The Initial Purchaser shall have received from E&Y,
Kenneth Levanthal certified public accountants, letters, dated as of the date of
the Memorandum and as of the Closing Date, respectively, and satisfactory in
form and substance to the Initial Purchaser and its counsel to the effect that
they have performed certain specified procedures, all of which have been agreed
to by the Initial Purchaser, as a result of which the Initial Purchaser has
determined that certain information set forth in the Memorandum agrees with
calculations performed by such accountants.
(i) The Notes shall have been rated as follows by Moody's:
Class of Notes Moody's Rating
- -------------- --------------
Class A Notes "Baa3"
Class B Notes "Ba2"
Class C Notes "B3"
Class D Notes Unrated
(j) The Initial Purchaser shall have received a certificate of
the Trustee, as to the due authorization, execution and delivery of the
Indenture and each Class of the Notes.
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<PAGE>
(k) Bartlit Beck Herman Palenchar & Scott and/or Peabody &
Arnold shall have provided such true sale, first perfected security interest
and/or non-consolidation opinions to Moody's as it shall have requested. The
Initial Purchaser shall have received any and all opinions of counsel supplied
to Moody's in connection with the rating of certain Classes of the Notes. Any
such opinions shall be addressed to the Initial Purchaser or shall indicate that
the Initial Purchaser may rely on such opinions as though they were addressed to
the Initial Purchaser, and shall be dated the Closing Date.
(l) All proceedings in connection with the transactions
contemplated by this Agreement, and all documents incidental hereto and thereto,
shall be reasonably satisfactory in form and substance to the Initial Purchaser
and its counsel, and the Initial Purchaser and its counsel shall have received
such information, certificates and documents as they may reasonably request.
If any of the conditions specified in this Section 8 shall not
have been fulfilled in all material respects when and as provided by this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Initial Purchaser and its counsel,
this Agreement and all obligations of the Initial Purchaser hereunder may be
canceled at, or at any time prior to, the Closing Date by the Initial Purchaser.
Notice of such cancellation shall be given to the Company in writing, or by
telephone or telegraph confirmed in writing.
9. Indemnification and Contribution.
(a) The Company and the SPE jointly and severally agree to
indemnify and hold harmless the Initial Purchaser against all losses, claims,
damages, or liabilities, joint or several, to which the Initial Purchaser may
become subject, under the Securities Act, the Exchange Act, or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Memorandum, or any Rule 144A
Information provided by the Company, the SPE or the Issuer to any holder or
prospective purchaser of any Class of the Notes pursuant to Section 5(a)(vi), or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact necessary to make
the statements therein not misleading, and will reimburse the Initial Purchaser
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<PAGE>
for any legal or other expenses reasonably incurred by it in connection with
investigating or defending against such loss, claim, damage, liability, or
action; provided, however, that (i) the Company and the SPE shall not be liable
for any indemnification obligation pursuant to this Section 9(a) to the extent
but only to the extent that any such loss, claim, damage, or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Memorandum or any Rule 144A Information
provided by the Company or the Issuer to any holder or prospective purchaser of
any Class of the Notes pursuant to Section 5(g), or any amendment or supplement
thereto in reliance upon and in conformity with written information furnished to
the Company, the SPE or the Issuer by the Initial Purchaser specifically for use
in the preparation thereof, and (ii) such indemnity with respect to the
Memorandum shall not inure to the benefit of the Initial Purchaser (or any
person controlling the Initial Purchaser) from whom the person asserting any
such loss, claim, damage or liability purchased such Class of the Notes which
are the subject thereof if such person did not receive, in the event it is
amended or supplemented, the Memorandum as amended or supplemented at or prior
to the confirmation of the sale of such Class of the Notes to such person, if
such Memorandum as amended or supplemented was timely forwarded to the Initial
Purchaser as required by this Agreement and the untrue statement or omission of
a material fact contained in such Memorandum was corrected in the Memorandum as
amended or supplemented.
(b) The Initial Purchaser will indemnify and hold harmless the
Company, the SPE and the Issuer against any losses, claims, damages, or
liabilities to which any of them may become subject, under the Securities Act,
the Exchange Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in the
Memorandum, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made therein in
reliance upon and in conformity with written information furnished to the
Company, the SPE or the Issuer by the Initial Purchaser specifically for use in
the preparation thereof, and will reimburse the Company, the SPE or the Issuer
for any legal or other expenses reasonably incurred by the Company or the Issuer
in connection with investigating or defending against any such loss, claim,
damage, liability or action; provided, however, that in no case shall the
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<PAGE>
Initial Purchaser be liable or responsible for any amount in excess of the sum
of the Placement and Structuring Fee and the Excess Proceeds in excess of the
Issuer Portion of the Excess Proceeds received by the Initial Purchaser pursuant
to this Agreement. The Company, the SPE and the Issuer and the Initial Purchaser
acknowledge that the only information furnished to the Company, the SPE or the
Issuer by the Initial Purchaser specifically for use in the preparation of the
Memorandum is the information under the heading "PLAN OF DISTRIBUTION" in the
Memorandum.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve the indemnifying party from any liability which the indemnifying
party may have to any indemnified party (unless such failure to notify
materially prejudices the indemnifying party or its ability to defend against
such claim). In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent
that the indemnifying party may elect, by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel satisfactory to
such indemnified party (which may be counsel representing the indemnifying
party); provided, however, that if the defendants in any such action include
both the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of the indemnifying party's election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in connection with the
assertion of legal defenses in accordance with the proviso to the next preceding
sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate firm plus appropriate local
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<PAGE>
counsel, approved by the Initial Purchaser in the case of paragraph (a) of this
Section 9, representing the indemnified parties under such paragraph (a) who are
parties to such action), (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party; and except that, if clause (i)
or (iii) is applicable, such liability shall be only in respect of the counsel
referred to in such clause (i) or (iii). The indemnifying party shall not be
liable for any settlement of any action effected without its prior written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent, the indemnifying party shall indemnify the indemnified party from
and against any indemnifiable losses, claims, damages and liabilities by reason
of such settlement. No indemnifying party who has elected to assume the defense
of such action shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened action in respect of
which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party unless such settlement
includes an unconditional release of such indemnified party from all liability
on any claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section 9 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages, or liabilities referred to in subsection (a) or (b) above, (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company, the SPE and the Issuer on the one hand and the Initial Purchaser
on the other from the offering of the Notes or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, the SPE and the Issuer on the
one hand and the Initial Purchaser on the other in connection with the
statements or omissions that resulted in such losses, claims, damages, or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company, the SPE and the Issuer on the one
hand and the Initial Purchaser on the other shall be deemed to be in the same
proportion as the Gross Proceeds from the offering of the Notes (before
deducting expenses) received by the Company and the Issuer bear to the sum of
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<PAGE>
the Placement and Structuring Fee and the Excess Proceeds in excess of the
Issuer Portion of the Excess Proceeds (before deducting expenses) received by
the Initial Purchaser. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, the SPE and the Issuer on the one hand or
the Initial Purchaser on the other and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such untrue
statement or omission. The Company, the SPE, the Issuer and the Initial
Purchaser agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were to be determined by pro rata allocation or
by any other method of allocation that does not take account of the equitable
considerations referred to in the first sentence of this subsection (d). The
amount paid by an indemnified party as a result of the losses, claims, damages,
or liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending against any
action or claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), the Initial Purchaser shall not be required
to contribute any amount in excess of the Underwriting Fees. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) The obligations of the Company, the SPE and the Issuer
under this Section 9 shall be in addition to any liability which the Company,
the SPE or the Issuer may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls the Initial Purchaser
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act.
10. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Company or the Issuer or their respective officers and of the
Initial Purchaser set forth in or made pursuant to this Agreement or contained
in certificates of officers of the Company, the SPE, the Issuer or the Initial
Purchaser submitted pursuant hereto shall remain operative and in full force and
effect, regardless of any investigation or statement as to the results thereof,
made by or on behalf of the Initial Purchaser or of the Company, the SPE or the
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<PAGE>
Issuer or any of their respective representatives, officers or directors or any
controlling person, and will survive delivery of and payment for the Notes. The
provisions of Sections 6 and 9 hereof shall survive the termination or
cancellation of this Agreement.
11. No Bankruptcy Filing. Each of the Company, the SPE and the
Initial Purchaser agrees not to cause the filing of a petition or otherwise
institute any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other proceeding under any federal or state bankruptcy or similar
law against the Issuer until at least 91 days after the payment in full of all
Classes of the Notes issued under the Indenture. The Company will not institute
against the SPE any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other proceedings under any United States federal or
state bankruptcy or similar law.
12. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchaser by notice given
to the Company, the SPE and the Issuer prior to delivery of and payment for the
Notes if there has occurred any of the following: (i) any suspension or
limitation of trading in securities generally on the New York or American Stock
Exchanges, or any setting of minimum or maximum prices or maximum ranges for
trading of securities shall have been required on the New York or American Stock
Exchanges by the New York or American Stock Exchanges or by order of the SEC or
any other governmental authority having jurisdiction; (ii) any declaration of a
banking moratorium by Federal or New York authorities or of any banking
moratorium in foreign exchange trading by major international banks or persons;
or (iii) any outbreak or escalation of major hostilities in which the United
States is involved or any declaration of war by Congress, or any other
substantial national or international calamity or emergency if, in the judgment
of the Initial Purchaser, the effect of any such change makes it impractical or
inadvisable to proceed with completion of the sale of and payment for the Notes.
13. Notices. All communications hereunder shall be in writing
and effective only on receipt, and if sent to the Initial Purchaser shall be
delivered, mailed or telecopied and confirmed to the Initial Purchaser at Bear,
Stearns & Co. Inc. at 245 Park Avenue, New York, New York 10167, Attention: Sara
M. Bonesteel (facsimile number: (212) 272-2718), with a copy in the case of
communications under Section 10 to Stroock & Stroock & Lavan LLP, 180 Maiden
Lane, New York, New York 10038, Attention: Lois L. Weinroth, Esq. (facsimile
number: (212) 806-6006); if to the Company or the SPE, shall be delivered,
mailed or telecopied and confirmed to Asset Investors Corporation, or Asset
Investors Secured Financing Corporation, 3600 South Yosemite Street, Suite 350,
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<PAGE>
Denver, Colorado 80237 Attention: Kevin Nystrom (facsimile number: (303)
771-3461); and if to the Issuer, shall be delivered, mailed or telecopied and
confirmed to Structured Mortgage Trust 1997-1, c/o Wilmington Trust Company, as
Owner Trustee, 1100 North Market Street, Rodney Square North, Wilmington,
Delaware 19890-0001 Attention: Corporate Trust Administration (facsimile number:
(302) 651-8882), with a copy to the Company at the above address.
14. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 10 and no
other person will have any right or obligations hereunder.
15. Severability of Provisions. Any covenant, provision,
agreement or term of this Agreement that is prohibited or is held to be void or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
16. Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties hereto with respect to the matters
and transactions contemplated hereby and supersedes all prior agreements and
understandings whatsoever relating to such matters and transactions.
17. Amendment. Neither this Agreement nor any term hereof may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.
18. Headings. The headings in this Agreement are for the
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
19. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
20. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which shall
together constitute one instrument.
21. Limited Liability. It is expressly understood and agreed
by the parties hereto that (a) this Agreement is executed and delivered by
Wilmington Trust company, not individually or personally but solely as trustee
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<PAGE>
of Structured Mortgage Trust 1997-1 under the Trust Agreement dated as of March
26, 1997, with Asset Investors Corporation, as Depositor, and Asset Investors
Secured Financing Corporation, in the exercise of the powers and authority
conferred and vested in it, (b) each of the representations, undertakings and
agreements herein made on the part of the Issuer is made and intended not as
personal representations, undertakings and agreements by Wilmington Trust
Company but is made and intended for the purpose of binding only the Issuer, (c)
nothing herein contained shall be construed as creating any liability on
Wilmington Trust Company, individually or personally, to perform any covenant
either expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties hereto and by any Person claiming by, through or
under the parties hereto and (d) under no circumstances shall Wilmington Trust
Company be personally liable for the payment of any indebtedness or expenses of
the Issuer or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Issuer under this
Agreement or any other related document.
- 30 -
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us the enclosed duplicate hereof,
whereupon it will become a binding agreement among the Company, the Issuer and
the Initial Purchaser in accordance with its terms.
Very truly yours,
ASSET INVESTORS CORPORATION
By: /s/ Leslie B. Fox
---------------------------------------
Name: Leslie B. Fox
Title: President and Chief Operating Officer
ASSET INVESTORS SECURED
FINANCING CORPORATION
By: /s/ Leslie B. Fox
---------------------------------------
Name: Leslie B. Fox
Title: President and Chief Operating Officer
STRUCTURED MORTGAGE TRUST 1997-1
By: WILMINGTON TRUST COMPANY
not in its individual
capacity but as Owner
Trustee
By:_________________________
Name: _________________
Title: ________________
The foregoing Note Purchase
Agreement is hereby confirmed
and accepted as of the date
first written above.
BEAR, STEARNS & CO. INC.
By: /s/ Thomas Marano
--------------------------
Name:
Title:
- 31 -
[STATE OF COLORADO SEAL]
STATE OF COLORADO
DEPARTMENT OF STATE
CERTIFICATE
I, VICTORIA BUCKLEY, SECRETARY OF STATE OF THE STATE OF
COLORADO HEREBY CERTIFY THAT
ACCORDING TO THE RECORDS OF THIS OFFICE
ASSET INVESTORS CORPORATION
(MARYLAND CORPORATION)
FILE # 19871709364 WAS FILED IN THIS OFFICE ON February 04, 1987 AND HAS
COMPLIED WITH THE APPLICABLE PROVISIONS OF THE LAWS OF THE STATE OF COLORADO AND
ON THIS DATE IS IN GOOD STANDING AND AUTHORIZED AND COMPETENT TO TRANSACT
BUSINESS OR TO CONDUCT ITS AFFAIRS WITHIN THIS STATE.
Dated: March 14, 1997
/s/Victoria Buckley
-----------------------------
SECRETARY OF STATE
