UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): November 3, 1997
COMMERCIAL ASSETS, INC.
(Exact name of Company as specified in its charter)
Maryland 1-22262 84-1240911
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) Number) Identification No.)
3410 South Galena Street, Suite 210 80231
Denver, Colorado (Zip Code)
(Address of principal executive offices)
(303) 614-9410
(Company's telephone number, including area code)
3600 South Yosemite Street, Suite 350
Denver, Colorado 80237
(Former name or former address,
if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 3, 1997, Commercial Assets, Inc. (the "Company")
restructured its portfolio of commercial mortgage backed securities ("CMBS
bonds"). Nine CMBS bonds were sold to PaineWebber Incorporated for $28,472,000
in cash. Two CMBS bonds were resecuritized by contributing the CMBS bonds and
related restricted cash to an owner trust in which the Company retained an
equity interest. In a private placement, the trust then sold for $39,952,000 in
cash, debt securities representing senior interests in the trust's assets to
PaineWebber Incorporated as the initial purchaser for resale pursuant to Rule
144A under the Securities Act of 1933. The value of the equity interest retained
by the Company was $2,000,000 and represents the first-loss class of the
portfolio, providing credit support for the senior debt securities. The debt
securities sold from the trust are without recourse to the Company. Also on
November 3, 1997, the Company had one CMBS bond which was redeemed by the bond
issuer. This bond had an outstanding principal balance of $10,000,000 and net
carrying value prior to unrealized holding gains of $9,244,000.
In connection with the above transactions, the Company incurred
approximately $200,000 in related costs and approximately $531,000 of management
fees, resulting in net proceeds of approximately $77,693,000. The portfolio of
CMBS bonds has been classified as available-for-sale and included $5,000,000 of
unrealized holding gains at September 30, 1997. Upon completion of the sales and
resecuritization transactions, a net gain of approximately $6,948,000 and
related management fee expense of approximately $531,000 will be recognized by
the Company in the fourth quarter of 1997.
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 interest 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
restructuring of its CMBS bonds, 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. In connection with the closing of
restructuring, the Company has taken the steps necessary to give itself the
benefits of a temporary exemption under the 1940 Act. In evaluating its
investment opportunities for the proceeds from restructuring its portfolio, the
Company's intent is that any new real estate assets acquired will be Qualifying
Interests. See "FORWARD LOOKING INFORMATION" below.
FORWARD LOOKING INFORMATION
The statements contained in this Form 8-K Current Report that are not
historical facts are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These forward-looking statements are based on current expectations,
estimates and projections about the industry and markets in which the Company
operates, management's beliefs and assumptions made by management. Words such as
"expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates,"
variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions which are
difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such forward-looking
statements. Operating results depend primarily on income from equity interests
in real estate, cash equivalents and CMBS bonds, which, in turn, are
substantially influenced by the risks inherent on owning real estate or debt
secured by real estate including, among other things: (i) the demand for and
<PAGE>
supply of real estate assets, which meet the Company's investment criteria; (ii)
operating expense levels; (iii) interest rate levels; and (iv) the pace and
price at which the Company can acquire or develop real estate assets. Capital
and credit market conditions, which affect the Company's cost of capital, also
influence operating results.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(A) Pro-forma Financial Information
Pro-forma Condensed Balance Sheet of Commercial Assets, Inc. as
of September 30, 1997
Pro-forma Condensed Statement of Income of Commercial Assets,
Inc. for the Nine Months Ended
September 30, 1997
Pro-forma Condensed Consolidated Statement of Income of
Commercial Assets, Inc. for the Year Ended December 31, 1996
(B) Exhibits
Exhibit No. Description
2.9 Trust Agreement, dated as of November 3,
1997, between CAX DTR Securitization Corp.
and Wilmington Trust Company
2.9(a) Note Purchase Agreement, dated as of
November 3, 1997, among Structured
Mortgage Trust 1997-2, CAX DTR
Securitization Corp., and PaineWebber
Incorporated
2.9(b) Trust Indenture and Security Agreement,
dated as of November 3, 1997, between
Structured Mortgage Trust 1997-2 and
LaSalle National Bank, as Indenture
Trustee
2.9(c) Contribution Agreement, dated as of
November 3, 1997, between Commercial
Assets, Inc. and CAX DTR Securitization
Corp.
2.9(d) Securitization Cooperation Agreement,
dated as of November 3, 1997, among CAX
DTR Securitization Corp., Commercial
Assets, Inc., Structured Mortgage Trust
1997-2, and PaineWebber Incorporated
10.9(e) Side Letter Agreement, dated as of
November 3, 1997, between Commercial
Assets, Inc. and PaineWebber Incorporated
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COMMERCIAL ASSETS, INC.
Date: November 14, 1997
By:/s/Diane Schott Armstrong
-------------------------------
Diane Schott Armstrong
Controller
<PAGE>
<TABLE>
<CAPTION>
See Notes to Pro-Forma Condensed Financial Statements.
COMMERCIAL ASSETS, INC.
PRO-FORMA CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997
(Dollar amounts in thousands)
(Unaudited)
As Previously Pro-Forma Pro-Forma
Reported Adjustments (a) Results
-------- --------------- -------
Assets
<S> <C> <C> <C>
Cash and cash equivalents $ 3,335 $ 78,283 $ 81,618
Accrued interest receivable 590 (590) --
Restricted cash 8,174 (8,174) --
CMBS bonds 70,012 (70,012) --
Other assets, net 118 -- 118
---------- ---------- ----------
Total Assets $ 82,229 $ (493) $ 81,736
========== ========== ==========
Liabilities
Accounts payable and accrued liabilities $ 111 $ -- $ 111
Management fees payable 885 -- 885
---------- ---------- ----------
Total Liabilities 996 -- 996
---------- ---------- ----------
Stockholders' Equity
Preferred Stock, par value $.01 per share, 25,000,000 shares authorized;
no shares issued or outstanding -- -- --
Common Stock, par value $.01 per share, 75,000,000 shares authorized;
10,342,009 shares issued and outstanding 104 -- 104
Additional paid-in capital 76,724 -- 76,724
Cumulative dividends declared (25,565) -- (25,565)
Cumulative net income 24,970 4,507 29,477
---------- ---------- ----------
Dividends in excess of net income (595) 4,507 3,912
---------- ---------- ----------
Net unrealized holding gains on CMBS bonds 5,000 (5,000) --
---------- ---------- ----------
Total Stockholders' Equity 81,233 (493) 80,740
---------- ---------- ----------
Total Liabilities and Stockholders' Equity $ 82,229 $ (493) $ 81,736
========== ========== ==========
</TABLE>
See Notes to Pro-Forma Condensed Financial Statements
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL ASSETS, INC.
PRO-FORMA CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(In thousands, except per share data)
(Unaudited)
As Previously Pro-Forma Pro-Forma
Reported Adjustments Results
-------- ----------- -------
Revenues
<S> <C> <C> <C>
CMBS bonds $ 7,660 $ (7,660) (b) $ --
Interest 211 2,936 (c) 3,147
-------- -------- --------
Total Revenues 7,871 (4,724) 3,147
-------- -------- --------
Expenses
Management fees 1,494 (1,494) (d) --
General and administrative 348 (44) (b) 304
-------- -------- --------
Total Expenses 1,842 (1,538) 304
-------- -------- --------
Income from continuing operations 6,029 (3,186) 2,843
Gain on restructuring of CMBS bond portfolio -- 6,492 6,492
-------- -------- --------
Net Income $ 6,029 $ 3,306 $ 9,335
======== ======== ========
Income from continuing operations per share $ .58 $ (.31) .27
Gain on restructuring of CMBS bond portfolio per share -- .63 .63
-------- -------- --------
Net income per share $ .58 $ .32 $ .90
======== ======== ========
Weighted-average shares outstanding 10,328 10,328 10,328
See Notes to Pro-Forma Condensed Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL ASSETS, INC.
PRO-FORMA CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996 (In
thousands, except per share data)
As Previously Pro-Forma Pro-Forma
Reported Adjustments Results
-------- ----------- -------
Revenues (unaudited)
<S> <C> <C> <C>
CMBS bonds $ 9,838 $ (8,036) (b) $ 1,802
Interest 319 3,911 (c) 4,230
---------- -------- --------
Total Revenues 10,157 (4,125) 6,032
---------- -------- --------
Expenses
Management fees 1,425 (1,400) (d) 25
General and administrative 805 (73) (b) 732
Elimination of DERs 966 -- 966
Interest 2 (2) (c) --
---------- -------- --------
Total Expenses 3,198 (1,475) 1,723
---------- -------- --------
Income from continuing operations 6,959 (2,650) 4,309
Gain on restructuring of CMBS bond portfolio -- 6,417 6,417
---------- -------- --------
Net Income $ 6,959 $ 3,767 $ 10,726
========== ======== ========
Income from continuing operations per share $ .68 $ (.26) $ .42
Gain on restructuring of CMBS bond portfolio per share -- .63 .63
---------- -------- --------
Net income per share $ .68 $ .37 $ 1.05
========== ======== ========
Weighted-average shares outstanding 10,247 10,247 10,247
</TABLE>
See Notes to Pro-Forma Condensed Financial Statements
<PAGE>
COMMERCIAL ASSETS, INC.
NOTES TO PRO-FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The pro-forma condensed consolidated balance sheet of the Company as of
September 30, 1997, is presented as if the November 3, 1997, transactions had
occurred on September 30, 1997. The pro-forma condensed consolidated statements
of income are presented as if the transaction had occurred: (i) on January 1,
1997, for the statement of income for the nine months ended September 30, 1997;
and (ii) on January 1, 1996, for the statement of income for the year ended
December 31, 1996. In management's opinion, all adjustments necessary to reflect
the sale, resecuritization and redemption of the Company's CMBS bonds have been
made. The unaudited pro-forma condensed consolidated financial statements should
be read in conjunction with the Company's Annual Report on Form 10-K for the
year ended December 31, 1996, and the Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1997.
The unaudited pro-forma condensed consolidated financial statements are
not necessarily indicative of what the actual financial position or results of
operations would have been assuming the transactions had been completed as of
the dates indicated, nor does it purport to represent the future financial
position or results of operations of the Company.
(a) Adjustments reflect the sale of nine CMBS bonds, the resecuritization of
two CMBS bonds, and the redemption of one CMBS bond by the bond issuer. The
Company realized total proceeds of $77,693,000 plus collection of accrued
interest of $590,000 as a result of these transactions.
During the year ended December 31, 1996, the Company recognized $1,802,000
of income relating to two CMBS bonds, which were redeemed in May 1996.
Since these bonds were not included in the restructuring of the CMBS bond
portfolio, the pro-forma adjustment does not eliminate the income from
these bonds.
(b) Eliminates income from and expenses directly attributable to the CMBS bonds
as a result of the sales, resecuritization, and redemption.
(c) Reflects the assumption that a portion of the proceeds from the
restructuring of the CMBS bonds is used to repay outstanding debt and the
remaining proceeds are invested in short-term investments earning 5% per
annum.
(d) Eliminates base fees and administrative fees on the CMBS bonds as a result
of the restructuring and also eliminates incentive fees due to adjusted
REIT income.
- --------------------------------------------------------------------------------
TRUST AGREEMENT
dated as of November 3, 1997
between
CAX DTR Securitization Corp.,
as Depositor and Holder of the Trust Certificates,
and
Wilmington Trust Company,
as Owner Trustee
-------------------------
STRUCTURED MORTGAGE TRUST 1997-2
- --------------------------------------------------------------------------------
<PAGE>
TRUST AGREEMENT
TRUST AGREEMENT, dated as of November 3, 1997, between CAX DTR
Securitization Corp., a Delaware corporation, as Depositor and initial holder of
the Trust Certificates, and Wilmington Trust Company, a Delaware bank and trust
company, as Owner Trustee.
PRELIMINARY STATEMENT
WHEREAS, the Depositor (as defined herein) desires to form the
trust to be created hereby (the "Trust") for the purpose of (i) accepting from
the Depositor, and holding for the benefit of the Holders (as defined herein) of
the Notes (as defined herein), the Trust Estate (as defined herein); (ii)
issuing one or more classes of Collateralized Notes (the "Notes") pursuant to
the Indenture, which Notes are secured by, among other things, a lien on the
Daiwa FLOWS Certificates (as defined herein), and distributing the Notes or the
proceeds therefrom to the Depositor; (iii) issuing a single Class of Trust
Certificates (the "Trust Certificates"), which evidence the entire equity
interest in the Trust, which in turn represents the overcollateralization of the
Notes; (iv) consummating certain transactions contemplated by, and performing
certain obligations under, the Related Agreements (as defined herein); and (v)
engaging in certain activities incidental to the foregoing;
WHEREAS, Wilmington Trust Company, a Delaware bank and trust
company, is willing to act as owner trustee hereunder (in its individual
capacity, the "Bank", and solely in its capacity as owner trustee hereunder,
with its successors in interest in such capacity and its permitted assigns, the
"Owner Trustee") and to accept the Trust created hereby.
NOW THEREFORE, in consideration of the premises and of the
mutual agreements herein contained and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1
<PAGE>
ARTICLE I
DEFINITIONS
All capitalized terms used herein and not otherwise defined,
unless the context otherwise requires, shall have the meanings set forth below
or, if not defined in this Article I, in the Indenture. In the event that a
capitalized term used herein is defined both in this Trust Agreement and in the
Indenture, the definition appearing herein shall control.
"Administrative Expenses": The Indenture Trustee Fee, the
Owner Trustee Fee and fees of the Rating Agency payable under the Indenture.
"Affiliate": With respect to 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 meaning of "control".
"Agent": Any agent or attorney of the Owner Trustee appointed
by the Owner Trustee to execute one or more of the trusts or powers hereunder
the execution of which is properly delegable to an agent under the Business
Trust Statute and other Delaware laws applicable to trustees.
"Applicant": The meaning assigned to such term in Section
12.4.
"Available Funds": The meaning assigned to such term in the
Indenture.
"Bank": The meaning assigned to that term in the preliminary
statement above.
"Bankruptcy Code": The Bankruptcy Code of 1978, Title 11 of
the United States Code, as amended from time to time.
"Business Day": Any day other than a Saturday, a Sunday or a
day on which banking institutions in New York, New York, Wilmington, Delaware,
or any other city specified in the definition of Business Day in the Indenture,
are authorized or obligated by law or executive order to be closed.
"Business Trust Statute": The meaning assigned to that term in
Section 2.1.
"Certificate Account": The segregated trust account
established in the name of the Owner Trustee pursuant to Section 3.1.
"Certificate Distribution Date": The meaning set forth in the
Indenture.
"Certificate of Trust": The meaning assigned to that term in
Section 2.1.
2
<PAGE>
"Certificate Register" and "Certificate Registrar": The
register of Trust Certificates maintained, and the registrar appointed, pursuant
to Section 12.1.
"Certificateholder" or "Holder": With respect to any Trust
Certificate, the Person in whose name such Trust Certificate is registered on
the Certificate Register. Initially, the Depositor shall be the sole holder of
all the Trust Certificates received with respect to the Trust Estate.
"Class": With respect to the Notes or the Trust Certificates,
all of the Trust Certificates or Notes, as the case may be, having the same
alphabetical and/or numerical class designation.
"Closing Date": November 3, 1997.
"Code": The Internal Revenue Code of 1986, as amended from
time to time.
"Company": Commercial Assets, Inc., a Maryland corporation.
"Contribution Agreement": The contribution agreement, dated as
of November 3, 1997, between the Company and the Depositor, pursuant to which
the Company contributed the Daiwa FLOWS Certificates, together with certain
other assets, to the Depositor.
"Corporate Trust Office": The principal corporate trust office
of the Owner Trustee at which, at any particular time, its corporate trust
business is administered, which office at the date hereof is located at the
address of the Owner Trustee set forth in Section 13.4.
"Daiwa FLOWS Certificates": The $50,974,526 aggregate
principal amount of Daiwa Securities America Inc. Multifamily First Loss
Ownership Securities ("Multifamily FlowsSM) Series 1994 Multifamily FlowsSM
trust receipt pass-through certificates, issued pursuant to the Daiwa Pooling
Agreement, together with all related securities entitlements, contract rights,
general intangibles and accounts, conveyed to the Owner Trustee by the Depositor
pursuant to the Section 2.2(b), as from time to time are held as a part of the
Trust Estate.
"Daiwa Pooling Agreement": The meaning assigned to that term
in the Indenture.
"Depositor": CAX DTR Securitization Corp., a Delaware
corporation, and its successors in interest.
"Direction Letter": The meaning assigned to that term in
Section 4.1.
"Eligible Trustee": A corporation or association organized and
doing business under the laws of any state or the United States of America,
authorized under such laws to exercise corporate trust powers and to accept the
trust conferred under this Trust Agreement, having a combined capital and
surplus of at least $100,000,000 and subject to supervision or examination by
federal or state authority. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this definition 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.
3
<PAGE>
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated thereunder.
"Final Payment Date": The meaning assigned to that term in
Section 8.1 (b).
"Governmental Authority": Any government, or any commission,
authority, board, agency, division, subdivision or any court or tribunal of the
government, of the United States of America or of any state, territory, city,
municipality, county or town thereof or of the District of Columbia, of the
Commonwealth of Puerto Rico, or of any foreign jurisdiction, including the
employees or agents thereof.
"Indenture": That certain Trust Indenture, dated as of
November 3, 1997, by and among the Trust, the Company, and the Indenture
Trustee, pursuant to which the Notes are being issued, as the same may be from
time to time supplemented or amended.
"Indenture Trustee": La Salle National Bank, a national
banking corporation, in its capacity as trustee under the Indenture, or its
successor in interest, or any successor trustee appointed as provided in the
Indenture.
"Initial Purchaser": PaineWebber Incorporated, an initial
purchaser of the Notes.
"Initial Trust Estate": The corpus of the Trust created as of
the date hereof and to be administered hereunder, consisting of $10.
"IRS": The Internal Revenue Service or its successor.
"Liabilities": The meaning set forth in Section 7.2(b).
"Lien": Any lien, encumbrance or security interest on or in
any particular asset.
"1933 Act": The Securities Act of 1933, as amended.
"1934 Act": The Securities Exchange Act of 1934, as amended.
"1940 Act": The Investment Company Act of 1940, as amended.
"Noteholder": Those persons or entities holding the Notes from
time to time as shown on the Note Register maintained under the Indenture.
"Note Purchase Agreement": The purchase agreement, dated
November 3, 1997, among the Initial Purchaser, the Depositor and the Owner
Trustee.
"Notes": The meaning assigned to that term in the preliminary
statement above.
"Officers' Certificate": A certificate signed on behalf of the
applicable entity by two officers, one of whom shall be the Chairman of the
Board, the Vice Chairman of the Board, the President, any Vice President or
Managing Director, an Assistant Vice President or any other authorized officer
4
<PAGE>
(however denominated) and the other of which shall be by the Treasurer, the
Secretary, one of the Assistant Treasurers or Assistant Secretaries, or, in
either case, another officer customarily performing functions similar to those
performed by any of the above designated officers or, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
"Opinion of Counsel": A written opinion of counsel which is
reasonably acceptable to the Owner Trustee.
"Owner Trustee": The meaning assigned to that term in the
preliminary statement above.
"Owner Trustee Fee": An amount equal to $4,000 per annum.
"Payment Account": The segregated trust account established in
the name of the Indenture Trustee pursuant to Section 12.01 of the Indenture.
"Payment Date": December 31, 1997, and thereafter the fourth
Business Day following the 25th day of the month, or, if such 25th day is not a
Business Day, then following the next succeeding Business Day; provided,
however, that with respect to the payment of amounts that are described in
Section 3.1(1), the Payment Date shall be the Closing Date.
"Percentage Interest": With respect to any Trust Certificate,
the percentage interest in the related Class evidenced by such Trust Certificate
as specified on the face thereof.
"Person": Any individual, corporation, partnership, joint
venture, association, limited liability company, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Rating Agency": Duff & Phelps Credit Rating Co.
"Record Date": With respect to any Class of Trust Certificates
for any Payment Date, the last Business Day of the month preceding such Payment
Date.
"Related Agreements": This Trust Agreement, the Trust
Certificates, the Indenture, the Notes, the Contribution Agreement, the
Underlying Agreements and the Note Purchase Agreement, as each of them may, from
time to time, be amended or supplemented.
"Responsible Officer": Any officer of the Owner Trustee
assigned to the Corporate Trust Office with direct responsibility for the
administration of this Trust Agreement and also, with respect to a particular
matter, any officer of the Owner Trustee employed within the Corporate Trust
Office, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject, and, in the
case of any certification required to be signed by a Responsible Officer, such
an officer whose name appears on a list of corporate trust officers furnished to
the Depositor and the Indenture Trustee by the Owner Trustee, as such list may
be amended from time to time.
"Tax Return": The meaning set forth in Section 6.6.
5
<PAGE>
"Transfer": Any direct or indirect transfer or other form of
assignment of any Trust Certificate.
"Trust": The trust established under this Trust Agreement.
"Trust Agreement": This Trust Agreement, as the same may be
amended or supplemented from time to time.
"Trust Certificates": The meaning assigned to such term in the
preliminary statement above.
"Trust Estate": The corpus of the trust created as of the
Closing Date and to be administered hereunder, consisting of: all the estate,
right, title and interest of the Depositor in, to and under (a) the Daiwa FLOWS
Certificates, and (b) the Related Agreements (i) to which the Depositor is a
party; or (ii) of which the Depositor is a third party beneficiary, including
the right to receive all income on the Daiwa FLOWS Certificates from and
including the date in December 1997 on which distributions are made on the Daiwa
FLOWS Certificates pursuant to the Daiwa Pooling Agreement; and (c) all present
and future claims, demands, causes and chooses in action in respect of any or
all of the foregoing and all payments on or under and all proceeds of every kind
and nature whatsoever in respect thereof, including all proceeds of the
conversion, voluntary or involuntary, into cash or other liquid property, all
cash proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, insurance proceeds, condemnation
awards, rights to payment of any and every kind and other forms of obligations
and receivables, instruments and other property which at any time constitute all
or part of or are included in the proceeds of the foregoing.
"Underlying Agreement": With respect to the Daiwa FLOWS
Certificates, the pooling and servicing agreement, trust agreement or other
governing agreement, together with all exhibits thereto, pursuant to which such
Daiwa FLOWS Certificates were issued.
"Uniform Commercial Code": The Uniform Code as in effect in
any applicable jurisdiction.
"Voting Rights": The voting rights of all the Trust
Certificates, which shall be allocated to any particular Trust Certificate in
pro rata proportion to their respective Percentage Interests.
[End of Article I]
6
<PAGE>
ARTICLE II
AUTHORITY TO EXECUTE AND PERFORM VARIOUS DOCUMENTS;
DECLARATION OF BUSINESS TRUST BY THE BANK
SECTION 2.1 Declaration of Business Trust by the Bank. The
Bank is hereby appointed to hold and agrees to hold the Trust Estate as Owner
Trustee of Structured Mortgage Trust 1997-2 in trust upon the terms and
conditions and for the use and benefit of the Certificateholders as herein set
forth.
It is the intention of the parties hereto that the trust
created by this Agreement constitute a business trust under the Business Trust
Statute and that this Agreement constitute the governing instrument of such
business trust. This declaration of business trust is not intended to create a
partnership or a joint-stock association. As soon as practicable after the date
hereof, the Owner Trustee shall file the Certificate of Trust required by
Section 3910(a) of the Business Trust Statute (the "Certificate of Trust"), in
the office of the Secretary of State of the State of Delaware. Effective as of
the date hereof, the Owner Trustee shall have all the rights, powers and duties
set forth herein and in the Business Trust Statute with respect to accomplishing
the purposes of the Trust. For purposes of this Declaration of Business Trust,
"Business Trust Statute" means Chapter 38 of Title 12 of the Delaware Code, 12
Del. C. ss. 3801 et seq., as the same may be amended from time to time.
SECTION 2.2 Transfer of Trust Estate to Owner Trustee.
(a) As of the date hereof, the Depositor has sold, granted,
assigned, transferred and otherwise conveyed to and deposited with the Owner
Trustee and its successors, forever, all right, title and interest of the
Depositor in and to the sum of Ten Dollars ($10.00), constituting the Initial
Trust Estate.
(b) Effective as of the Closing Date, the Depositor hereby
sells, grants, assigns, transfers, and otherwise conveys to, and deposits with,
the Owner Trustee, and its successors, until this Trust Agreement terminates
pursuant to Section 8.1, the entire remaining portion of the Trust Estate in
addition to the Initial Trust Estate, such conveyance to be made in exchange for
the net proceeds from the sale of the Notes on the Closing Date, together with
any Notes not sold on such date. Such assignment includes, without limitation,
all amounts payable to the Depositor in respect of the Daiwa FLOWS Certificates
from and including the date in December 1997 on which distributions are made on
the Daiwa FLOWS Certificates pursuant to the Daiwa Pooling Agreement, and all
rights of the Depositor in and to the Daiwa FLOWS Certificates pursuant to the
related Underlying Agreements. In connection with such transfer, the Depositor
assigned to the Trust all of its rights against the Company with respect to the
Trust Estate created pursuant to the Contribution Agreement.
In connection with such transfer and assignment, the Depositor
does hereby deliver or cause to be delivered to, and deposit or cause to be
deposited with, the Owner Trustee (or, at the direction of the Owner Trustee, to
and with the Indenture Trustee on behalf of the Trust pursuant to the Indenture)
each of the following documents or instruments relating to the Daiwa FLOWS
Certificates:
(i) a duly issued and authenticated physical certificate
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evidencing such Daiwa FLOWS Certificates endorsed in blank, together
with such Opinions of Counsel and other documents as shall be necessary
to cause registration of transfer of such Daiwa FLOWS Certificates to
the Indenture Trustee to be made and to obtain a duly issued and
authenticated physical certificate evidencing such Daiwa FLOWS
Certificates registered in the name of the Indenture Trustee;
(ii) copies of any Uniform Commercial Code Financing
Statements, the filing of which is requested by the Indenture Trustee;
(iii) a copy (which may be on electronic media) of each
related Underlying Agreement; and
(iv) all other items relating to the foregoing as may be
reasonably requested by the Owner Trustee or the Indenture Trustee.
(c) The Owner Trustee hereby acknowledges the receipt by it of
the Initial Trust Estate and, upon delivery by or on behalf of the Depositor of
the documents and instruments referenced in Section 2.1(b), will acknowledge
receipt of the entire remaining portion of the Trust Estate in addition to the
Initial Trust Estate and such other documents and instruments referenced above,
and declares that it holds and will hold the entire Trust Estate and such
documents and instruments and that it holds and will hold all other assets and
documents included in the Trust Estate in trust for the exclusive use and
benefit of all present and future Certificateholders.
Except as expressly provided in Section 8.1, neither the
Depositor nor any Certificateholder may revoke the Trust established hereunder.
Except as provided in Sections 4.2 and 8.1 hereof, the Owner Trustee shall not
assign, sell, dispose of or transfer any interest in, nor may the Depositor or
any Certificateholder withdraw from the Trust, any Daiwa FLOWS Certificates or
other asset constituting the Trust Estate. Except as contemplated by the
Indenture, the Owner Trustee shall not permit the Daiwa FLOWS Certificates or
any other asset constituting the Trust Estate to be subjected to any lien, claim
or encumbrance arising by, through or under the Owner Trustee or any person
claiming by, through or under the Owner Trustee.
SECTION 2.3 Authorization to Engage in Certain Activities. The
Depositor hereby authorizes and directs the Owner Trustee (i) to execute and
deliver, as trustee for and on behalf of the Certificateholders, the Related
Agreements to which the Trust is a party and all other agreements, documents,
instruments and certificates contemplated to be executed and delivered by the
Trust pursuant to the Related Agreements and, pursuant to the terms of the
Indenture, to execute, issue and deliver to the Indenture Trustee the Notes
(each such Related Agreement and the Notes to be in the form approved by the
Depositor); (ii) to execute and deliver the Trust Certificates to the Depositor;
(iii) as and to the extent provided in the Indenture, to pledge the Trust Estate
to the Indenture Trustee on behalf of the Noteholders as security for repayment
of the Notes and, in connection therewith, to deliver (or cause to be delivered)
to the Indenture Trustee each of the documents and instruments contemplated by
the Granting Clause of the Indenture; (iv) to take whatever action shall be
required to be taken by the Owner Trustee by the terms of, and exercise its
rights and perform its duties under, each of the documents, agreements,
instruments and certificates referred to in clauses (i) through (iii) above as
set forth in such documents, agreements, instruments and certificates; and (v)
subject to the terms of this Trust Agreement, to take such other action in
connection with the foregoing as the Certificateholders may from time to time
direct.
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SECTION 2.4 Execution and Delivery of Trust Certificates.
(a) The Owner Trustee shall, on the date hereof, execute and
cause to be authenticated and delivered to and upon the order of the Depositor,
the Trust Certificates evidencing the entire beneficial ownership of the Trust.
The Trust Certificates will consist of a single class designated as the "Class A
Trust Certificates". The rights of the Certificateholders to receive
distributions from the proceeds of the Trust in respect of their Trust
Certificates, and all ownership interests of the Certificateholders in such
distributions, shall be as set forth in this Trust Agreement:
(b) The Trust Certificates will be substantially in the form
attached hereto as Exhibit A; provided that any of the Trust Certificates may be
issued with appropriate insertions, omissions, substitutions and variations, and
may have imprinted or otherwise reproduced thereon such legend or legends, not
inconsistent with the provisions of this Trust Agreement, as may be required to
comply with any law or with rules or regulations pursuant thereto, or with the
rules of any securities market in which the Trust Certificates are admitted to
trading, or to conform to general usage. The Trust Certificates will be issuable
in registered form only, with each certificate representing not less than a 25%
Percentage Interest of the Class.
(c) Each Trust Certificate may be printed or in typewritten or
similar form, and each Trust Certificate shall, upon original issue, be executed
by the Owner Trustee and authenticated by the Certificate Registrar and
delivered to or upon the order of the Depositor. All Trust Certificates shall be
executed by manual or facsimile signature on behalf of the Trust by an
authorized officer of the Owner Trustee, not individually, but solely as Owner
Trustee hereunder. Trust Certificates bearing the signatures of individuals who
were at any time the proper officers of the Owner Trustee shall bind the Owner
Trustee, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the delivery of such Trust Certificates or did not
hold such offices at the date of execution of such Trust Certificates. No Trust
Certificate shall be entitled to any benefit under this Trust Agreement, or be
valid for any purpose, unless there appears on such Trust Certificate a
certificate of authentication in the form set forth on the signature page of the
form of the Trust Certificate attached as Exhibit A, executed by the Certificate
Registrar by manual signature, and such certificate of authentication upon any
Trust Certificate shall be conclusive evidence, and the only evidence, that such
Trust Certificate has been duly authenticated and delivered hereunder. All Trust
Certificates shall be dated the date of their authentication.
SECTION 2.5 Activities of the Trust. It is the intention of
the parties hereto that the Trust shall not engage in any business or activities
other than as specified in Section 2.3. The operations of the Trust will be
conducted in accordance with the following standards (and the Owner Trustee and
the Depositor hereby agree to use their best efforts to cause the operations of
the Trust to be conducted in accordance herewith):
(i) The Trust will observe all procedures required by this
Trust Agreement.
(ii) The business and affairs of the Trust will be managed by
or under the direction of the Owner Trustee. Except as otherwise
expressly provided in this Trust Agreement, the Depositor will have no
authority to act for, or to assume any obligation or responsibility on
behalf of, the Trust.
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(iii) The Trust will keep correct and complete books and
records of accounts and minutes of the meetings and other proceedings
of the Owner Trustee and any Agents, separate from those of the
Depositor or any subsidiary, affiliate or separate account of the
Depositor. Any such resolutions, agreements and other instruments will
be continuously maintained as official records by the Trust.
(iv) Each of the Depositor and the Trust will provide for its
own operating expenses and liabilities from its own funds. General
overhead and administrative expenses of the Trust will not be charged
or otherwise allocated to the Depositor (except indirectly, insofar as
the Depositor owns the Trust Certificates) and such expenses of the
Depositor will not be charged or otherwise allocated to the Trust.
(v) The Trust will conduct its business under names or
tradenames so as not to mislead others as to the identity of the Trust.
Without limiting the generality of the foregoing, all oral and written
communications, including letters, invoices, contracts, statements, and
applications will be made solely in the name of the Trust (or addressed
to the Trust, as applicable) if related to the Trust. The Depositor and
the Trust each will have separate stationery and other business forms.
(vi) There will be no guarantees made by the Trust with
respect to obligations of the Depositor. There will not be any
indebtedness between the Trust and the Depositor.
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(vii) The Trust will act solely in its name and through its or
the Owner Trustee's duly authorized officers or Agents in the conduct
of its business. The Trust will not: (a) operate or purport to operate
as an integrated, single economic unit with respect to the Depositor or
any other affiliated or unaffiliated entity; (b) seek or obtain credit
or incur any obligation to any third party based upon the assets of the
Depositor; or (c) induce any such third party to reasonably rely on the
creditworthiness of the Depositor or any other affiliated or
unaffiliated entity.
[End of Article II]
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ARTICLE I
ESTABLISHMENT OF CERTIFICATE ACCOUNT
SECTION 3.1 Establishment of Certificate Account: Deposits
in Certificate Account.
The Owner Trustee, for the benefit of the Certificateholders,
shall establish and maintain one or more interest bearing trust accounts
(collectively, the "Certificate Account"), entitled "Wilmington Trust Company,
in trust for the registered holders of Structured Mortgage Trust 1997-2 Trust
Certificates" and shall hold in trust for the benefit of the Certificateholders.
The Owner Trustee shall cause the following payments and collections to be
deposited directly into the Certificate Account: (1) all proceeds of the
issuance of the Notes received from the Initial Purchaser; (2) all payments
allocable to the Trust Certificates that are received from time to time pursuant
to Section 12.01 of the Indenture; (3) any payments received on the Daiwa FLOWS
Certificates from time to time pursuant to the respective Underlying Agreements
but subject to Section 4.1(a) and (b); and (4) any other amounts specifically
required to be deposited in the Certificate Account hereunder.
The foregoing requirements for deposit in the Certificate
Account shall be exclusive.
SECTION 3.2 Permitted Withdrawals From the Certificate
Account.
The Owner Trustee may from time to time withdraw funds from
the Certificate Account for the following purposes:
(i) to make payments on the Trust Certificates on the Closing
Date in an amount equal to the proceeds of issuance of the Notes
received from the Initial Purchaser;
(ii) to make payments on the Trust Certificates in the amounts
and in the manner provided for in Section 4.2 hereunder;
(iii) to pay itself any unpaid Owner Trustee Fees, but only to
the extent of amounts in the Certificate Account representing amounts
received in respect of the Daiwa FLOWS Certificates;
(iv) to reimburse or indemnify the Owner Trustee for expenses
and other liabilities incurred by and reimbursable to the Owner
Trustee, pursuant to Section 7.2 hereunder, except as otherwise
provided in such Section; and
(v) to clear and terminate the Certificate Account upon the
termination of this Agreement.
On the Closing Date the Owner Trustee shall withdraw from the
Certificate Account all proceeds of issuance of the Notes and shall use such
funds withdrawn from the Certificate Account only for the purposes described in
this Section 3.2 and in Section 4.2 hereunder.
[End of Article III]
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ARTICLE I
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE
SECTION 4.1 Distribution of Payments.
(a) Simultaneously with the execution of this Trust Agreement,
the Trust shall notify and direct the parties responsible under the respective
Underlying Agreements for making distributions on the Daiwa FLOWS Certificates
(which notice shall be substantially in the form of Exhibit B hereto (the
"Direction Letter")) (i) to remit all future payments on account of the Daiwa
FLOWS Certificates directly to the Indenture Trustee for payment as specified in
the Indenture until such time as the Indenture Trustee notifies the Trust that
the Lien on the Trust Estate under the Indenture shall have been discharged and
released, and (ii) that following the receipt of such notice, such parties shall
remit all future payments on account of the Daiwa FLOWS Certificates, from and
after the date in December 1997 on which distributions are made on the Daiwa
FLOWS Certificates pursuant to the Daiwa Pooling Agreement, to the Owner Trustee
for the benefit of the Certificateholders.
(b) In the event that, following receipt by the Trust of the
Direction Letter and prior to receipt by the Trust of notice from the Indenture
Trustee that the Lien on the Trust Estate under the Indenture has been
discharged and released, any payments on account of the Daiwa FLOWS Certificates
are received directly (rather than through the Indenture Trustee) by the Owner
Trustee, the Depositor or a Certificateholder, the Person so receiving such
payment shall, promptly upon receipt, deliver such payment over to the Indenture
Trustee without deduction, set-off or adjustment of any kind.
(c) Pursuant to the terms of the Indenture, after payment by
the Indenture Trustee of all required payments on the Notes on each Indenture
Payment Date, the remaining Available Funds in the Payment Account will be
remitted by the Indenture Trustee to the Owner Trustee for application as
provided in Section 3.2 (including, without limitation, payment to the
Certificateholders in accordance with Section 4.2 hereunder). The Owner Trustee
may direct the Indenture Trustee to distribute such remaining Available Funds on
any such Payment Date in a manner consistent with Sections 3.2 and 4.2 (as if
such remaining Available Funds were on deposit in the Certificate Account); and,
in connection therewith, such remaining Available Funds shall be deemed to have
been deposited in the Certificate Account and subsequently withdrawn to make
such distributions.
SECTION 4.2 Payments.
(a) On each Payment Date (or, if the payments from the
Indenture Trustee on such Payment Date contemplated by Section 4.1(c) shall have
been received after [1:00] p.m., New York City time, on such Payment Date, as
soon as practicable, but in no event more than one Business Day following
receipt), the Owner Trustee (or its Agent) shall withdraw from the Certificate
Account all funds that were previously deposited therein or deemed deposited
therein in accordance with Section 4.1(c), and the Owner Trustee (or its Agent)
shall pay such funds to the Certificateholders pro rata based upon their
respective Percentage Interests. Payments to the Certificateholders on each
Payment Date will be made to the Certificateholders of record on the related
Record Date. Payments to any Certificateholder on any Payment Date shall be made
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by wire transfer of immediately available funds to the account of such
Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder shall have so notified the Owner Trustee in
writing at least five Business Days prior to the related Record Date and if such
Certificateholder is the registered owner of Trust Certificates representing at
least a 50% Percentage Interest, or otherwise by check mailed by first class
mail to the address of such Certificateholder appearing in the Certificate
Register. Final payment on each Trust Certificate will be made in like manner,
but only upon presentment and surrender of such Trust Certificate at the
Corporate Trust Office or such other location specified in the notice to
Certificateholders of such final payment.
(b) Whenever the Owner Trustee expects that the final
distribution with respect to the Certificates will be made on the next Payment
Date (such Payment Date, the "Final Payment Date"), or upon a termination of the
Trust at the direction of the Certificateholders in accordance with Section 8.1,
the Owner Trustee shall mail to each Certificateholder on such date of
Certificates a notice to the effect that:
(i) the Owner Trustee expects that the final distribution
with respect to the Trust Certificates will be made
on such Payment Date but only upon presentation and
surrender of the Trust Certificates at the office of
the Owner Trustee therein specified, and
(ii) no interest shall accrue on the Trust Certificates from
and after such Payment Date.
Upon presentation and surrender of the Trust Certificates by the
Certificateholders on the Final Payment Date in respect of the Trust
Certificates, the Owner Trustee shall distribute to the Certificateholders the
amounts otherwise distributable on such Payment Date pursuant to Section 4.2(a).
Any funds not distributed on such Payment Date because of the failure of any
Certificateholders to tender their Certificates shall be set aside and held in
trust for the account of the appropriate non-tendering Certificateholders. If
any Trust Certificate, as to which notice has been given pursuant to this
Section 4.2(c) shall not have been surrendered for cancellation within six
months after the time specified in such notice, the Owner Trustee shall mail a
second notice to the remaining Certificateholders, at their last addresses shown
in the Certificate Register, to surrender their Trust Certificates for
cancellation in order to receive, from such funds held, the final payment with
respect thereto. If within one year after the second notice any Trust
Certificate shall not have been surrendered for cancellation, the Owner Trustee
shall directly, or through an Agent, take reasonable steps to contact the
remaining Certificateholders concerning surrender of their Certificates. The
costs and expenses of maintaining such funds and of contacting
Certificateholders shall be paid out of the Trust assets which remain held by
the Owner Trustee. If within two years after the second notice any Trust
Certificates shall not have been surrendered for cancellation, the Owner Trustee
shall segregate all amounts distributable to the Holders thereof and shall
thereafter hold such amounts uninvested for the benefit of such Holders. No
interest shall accrue or be payable to any Certificateholder on any amount held
as a result of such Certificateholder's failure to surrender its Trust
Certificates for final payment thereof in accordance with this Section 4.2(c).
SECTION 4.3 Statements to Certificateholders. On each Payment
Date, the Owner Trustee (or its Agent) shall prepare, and shall forward by mail,
a statement to each Certificateholder and to the Depositor stating:
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(i) the aggregate amounts of interest and principal paid
to the Certificateholders on such Payment Date;
(ii) all amounts received by the Owner Trustee, together
with their application; and
(iii) the amount of the Owner Trustee Fees received by the
Owner Trustee since the preceding Payment Date and
any unpaid Owner Trustee Fees then due and owing to
the Owner Trustee.
In addition, the Owner Trustee promptly (and, in any event,
within five Business Days of receipt) will furnish to Certificateholders and the
Depositor copies of any notices, statements reports or other communications
received by the Owner Trustee on behalf of the Trust as issuer of the Notes or
as owner of the Daiwa FLOWS Certificates, including, without limitation, any
such notices, statements, reports or other communications relating to the Notes,
the Indenture, the Daiwa FLOWS Certificates, the Underlying Agreements or the
other assets of the Trust Estate.
On or before January 31st of each calendar year, beginning
with calendar year 1998, the Owner Trustee (or its agent) shall prepare, or
cause to be prepared, and deliver, or cause to be delivered, by first class mail
to each Person who at any time during the previous calendar year was a
Certificateholder of record a statement containing the information required to
be contained in the regular monthly report to Certificateholders, as set forth
above in this Section 4.3, aggregated for such previous calendar year or the
applicable portion thereof during which such Person was a Certificateholder.
Such obligation of the Owner Trustee shall be deemed to have been satisfied to
the extent that substantially comparable information shall have been provided by
the Owner Trustee to any Person who was a Certificateholder, as described above,
pursuant to any requirements of the Code and regulations thereunder as from time
to time are in force.
SECTION 4.4 Access to Certain Documentation and Information.
The Owner Trustee shall provide to the Certificateholders access to the all
reports, documents and records maintained by the Owner Trustee in respect of its
duties hereunder, such access being afforded without charge but only upon
reasonable written request and during normal business hours at offices
designated by the Owner Trustee.
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SECTION 4.5 Compliance with Withholding Requirements. In the
event that the Owner Trustee is required (whether on liquidation of the Trust or
otherwise) to make payments to the Depositor or the Certificateholders,
notwithstanding any other provisions of this Trust Agreement, the Owner Trustee
(or its Agent) shall comply with all federal withholding requirements with
respect to payments to the Depositor or the Certificateholders that the Owner
Trustee reasonably believes are applicable under or required by the Code. The
consent of the Depositor or the Certificateholders, as the case may be, shall
not be required for any such withholding. The parties hereto understand and
agree that the Owner Trustee shall not be required to gross up any such payments
for the amount of such withholding (or any other amounts).
SECTION 4.6 Holding of Trust Estate. Subject to the terms of
the Indenture, the Owner Trustee shall hold that portion of the Trust Estate
delivered to the Owner Trustee that consists of "instruments" (as such term is
defined in Section 9-105(i) of the Uniform Commercial Code as in effect in
Delaware on the date hereof) in the State of Delaware and, except as otherwise
specifically provided in this Agreement, shall not remove such instruments from
the State of Delaware unless it receives an Opinion of Counsel (obtained and
delivered at the expense of the Person requesting the removal of such
instruments from the State of Delaware) that in the event the transfer of the
Daiwa FLOWS Certificates to the Owner Trustee, on behalf of the Trust, is deemed
not to be a sale, after such removal, the Owner Trustee, on behalf of the Trust,
will possess a first priority perfected security interest in such instruments.
[End of Article IV]
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ARTICLE I
DUTIES OF THE OWNER TRUSTEE
SECTION 5.1 Notice of Certain Events; Action by the Owner
Trustee.
(a) Whenever the Owner Trustee, on behalf of the Trust as issuer of the
Notes or as owner of the Daiwa FLOWS Certificates, is requested or, as to any
particular matter, notified by any Person, of its authority, to take any action
or to give any consent, approval or waiver that it is entitled to take or give
on behalf of the Trust in such capacity, the Owner Trustee shall promptly notify
all the Certificateholders of such request or notice in such detail as is
available to it.
(b) Subject to the Owner Trustee's rights in this Trust
Agreement to be indemnified for its acts and omissions with respect to matters
concerning this Trust Agreement, the Related Agreements, the Trust Estate or the
Daiwa FLOWS Certificates, the Owner Trustee shall take or refrain from taking
such action as Certificateholders entitled to a majority of the Voting Rights
shall so direct; provided, however, that so long as the Trust Estate is subject
to the lien of the Indenture such action of the Certificateholders must be
affirmatively approved by 60% of the Holders of the Outstanding Notes. The Owner
Trustee may, from time to time, request in writing instructions from the
Certificateholders and shall request in writing instructions from the
Certificateholders if the Owner Trustee receives notice that a default has
occurred and is continuing under the Indenture.
(c) Notwithstanding any direction of the Certificateholders to
the contrary or any provision hereof to the contrary, the Owner Trustee shall
not, without the written consent of the Indenture Trustee, execute any direction
of the Certificateholders that might result in the Trust being terminated prior
to the satisfaction and discharge of the Lien of the Indenture on the Trust
Estate or prior to the payment in full of the principal of and accrued interest
on the Notes.
SECTION 5.2 Distribution of Reports. The Owner Trustee shall
promptly (but no later than five Business Days following receipt thereof)
distribute to the Depositor and the Certificateholders such reports, notices,
statements and written materials which it actually receives as Owner Trustee or
otherwise on behalf of the Trust hereunder or under any of the other Related
Agreements.
SECTION 5.3 Action Required Only if Owner Trustee is
Indemnified. The Owner Trustee shall not be required to take any action under
Section 5.1(b) if the Owner Trustee shall reasonably determine that such action
is likely to result in personal liability for which the Owner Trustee has not
been and will not be adequately indemnified or is contrary to the terms hereof
or of any Related Agreement or Underlying Agreement, or is otherwise contrary to
law.
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SECTION 5.4 No Duties Except as Specified in Trust
Agreement or Instructions
(a) The Owner Trustee shall not have any duty or obligation to
manage, control, use, make any payment in respect of, register, record, insure,
inspect, sell, dispose of or otherwise deal with the Daiwa FLOWS Certificates or
any other part of the Trust Estate, or otherwise to take or refrain from taking
any action under or in connection with any Related Agreement to which the Owner
Trustee is a party, except as expressly provided by the terms of this Trust
Agreement or any such other Related Agreement or in written instructions from
the Certificateholders received pursuant to Section 5.1(b); and no implied
duties or obligations shall be read into this Trust Agreement against the Owner
Trustee, other than the obligation of the Owner Trustee to exercise such of the
rights and powers vested in it by this Trust Agreement in good faith and in a
manner which is not grossly negligent and which does not constitute willful
misconduct. The Bank (and any successor trustee or co-trustee) in its individual
capacity nevertheless agrees that it will, at its own cost and expense, promptly
take all action as may be necessary to discharge any Liens on the Trust Estate
arising by, through or under the Owner Trustee (or any successor trustee or
co-trustee appointed in accordance with Article IX) either (i) when acting in
its individual capacity or (ii) when acting improperly in its capacity, as Owner
Trustee.
(b) Without limiting the generality of the foregoing
subsection (a), except as otherwise explicitly provided in this Trust Agreement
or in any other Related Agreement to which it is a party, neither the Owner
Trustee nor the Bank shall have any duty to (i) file or record any Related
Agreement or any other document, or to maintain any such filing or recording or
to refile or rerecord any such document, (ii) pay or discharge any tax or any
Lien owing with respect to or assessed or levied against any part of the Trust
Estate, other than to forward notice of such tax or Lien received by the Owner
Trustee to the Certificateholders and the Indenture Trustee, (iii) confirm,
verify, investigate or inquire into the failure of any party to receive any
reports or financial statements in connection with the Daiwa FLOWS Certificates,
(iv) ascertain or inquire as to the performance or observance of any person or
entity under or of any of the Related Agreements, or (v) manage, control, sell,
dispose of or otherwise deal with the Daiwa FLOWS Certificates or any part
hereof or any other part of the Trust Estate.
[End of Article V]
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ARTICLE I
THE OWNER TRUSTEE
SECTION 6.1 Acceptance of Trust and Duties. The Bank accepts
the trust hereby created and agrees to perform the same, but only upon the terms
of this Trust Agreement in accordance with the standard of care set forth in
Section 5.4(a). The Bank, as Owner Trustee, agrees to receive, manage and
disburse all moneys constituting part of the Trust Estate actually received by
it as Owner Trustee in accordance with the terms of this Trust Agreement.
Neither the Bank nor the Owner Trustee shall be answerable or accountable under
any circumstances, except for (i) its own willful misconduct, bad faith or gross
negligence; (ii) the inaccuracy of any of its representations or warranties
contained in Section 6.2 of this Trust Agreement; (iii) its failure to perform
obligations expressly undertaken by it in this Trust Agreement in accordance
with the standard of care set forth in Section 5.4(a); (iv) taxes based on or
measured by any fees, commissions or compensation received by it for acting as
Owner Trustee in connection with any of the transactions contemplated by this
Trust Agreement or any other Related Agreements; (v) its failure to use due care
to receive, manage and disburse moneys actually received by it in accordance
with the terms hereof; and (vi) any other claims, amounts or taxes otherwise
excluded from the Depositor's indemnity obligations pursuant to Article VII.
SECTION 6.2 Limited Representations or Warranties of the Owner
Trustee. Neither the Bank nor the Owner Trustee makes (i) any representation or
warranty, either express or implied, as to the title to or value of the Daiwa
FLOWS Certificates, or (ii) any representation or warranty as to the validity or
enforceability of any Related Agreement, except as set forth below or as to the
correctness of any statement made by a person or entity other than the Bank or
the Owner Trustee contained in any Related Agreement. The Bank represents,
warrants and covenants to and for the benefit of the Depositor, the Indenture
Trustee for the benefit of the Noteholders and the Certificateholders that:
(a) The Bank is a bank and trust company, duly organized,
validly existing and in good standing under the laws of the state of Delaware;
(b) The execution and delivery by the Bank, and the
performance and compliance by the Bank with the terms of, this Trust Agreement
and any and all documents to be executed or delivered by the Bank in its
individual capacity in connection with this Trust Agreement and to fulfill its
obligations under, and to consummate the transactions contemplated by, this
Trust Agreement and such other documents executed in connection herewith to
which the Bank is a party, will not violate any provisions of the Bank's charter
or bylaws, and no consent, approval, authorization or order of or filing with or
notice to any court or governmental agency or body is required for the
execution, delivery or performance by the Bank of this Trust Agreement;
(c) The Bank, in its individual capacity, has full power and
authority and has taken all action necessary to execute and deliver this Trust
Agreement and any and all documents to be executed or delivered by it in its
individual capacity in connection with this Trust Agreement and to fulfill its
obligations under, and to consummate the transactions contemplated by, this
Trust Agreement and such other documents executed in connection herewith to
which it is a party, and this Trust Agreement and such other documents executed
in connection herewith to which it is a party are the legal, valid and binding
obligations of the Bank, in its individual capacity, enforceable against the
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Bank in accordance with their respective terms, except as such terms may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the rights of creditors generally and by general principles of
equity;
(d) The consummation of the transactions contemplated by this
Trust Agreement do not conflict with, violate or contravene any law, rule,
regulation or judicial, governmental or administrative order applicable to the
Bank or the Owner Trustee or conflict with, result in a breach of or constitute
a default under any of the terms, conditions or provisions of any agreement or
instrument to which the Bank is a party or by which it is bound, or any order or
decree applicable to the Bank, or result in the creation or imposition of any
Lien on any of the Bank's assets or property, which would materially and
adversely affect the ability of the Bank or the Owner Trustee to carry out the
transactions contemplated by this Trust Agreement; and
(e) There is no action, suit or proceeding pending against the
Bank, in its individual capacity or as Owner Trustee, in any court or by or
before any other governmental agency or instrumentality which would materially
and adversely affect the ability of the Bank, in its individual capacity or as
Owner Trustee, to carry out the transactions contemplated by this Trust
Agreement.
SECTION 6.3 Trust Accounts. Moneys received by the Owner
Trustee hereunder shall be segregated in a trust account maintained with a
federal or state chartered depository institution or trust company having
corporate trust powers and acting in its fiduciary capacity.
SECTION 6.4 Reliance: Advice of Counsel. Neither the Bank nor
the Owner Trustee shall incur any liability to any person or entity in acting
upon any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond or other document or paper believed by it to
be genuine and believed by it in good faith to be signed by the proper party or
parties. The Owner Trustee may accept and rely upon 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 an Officers' Certificate of
the relevant party, as to such fact or matter, and such Officers' Certificate
shall constitute full protection to the Owner Trustee for any action reasonably
taken or omitted to be taken by it in good faith in reliance thereon. In the
administration of the Trust hereunder, the Owner Trustee may execute any of the
trusts or powers hereof and perform its powers and duties hereunder directly or
through Agents and may consult with counsel, accountants and other skilled
persons or entities to be selected and employed by it reasonably.
SECTION 6.5 Not Acting in Individual Capacity. All persons or
entities having any claim against the Bank or the Owner Trustee by reason of the
transactions contemplated by the Related Agreements shall look only to the Trust
Estate (or a part thereof, as the case may be) for payment or satisfaction
thereof, except as specifically provided in this Trust Agreement and except to
the extent that the Bank or the Owner Trustee shall otherwise expressly agree in
any Related Agreement to which it is a party.
SECTION 6.6 Books and Records; Tax Election. (a) The Owner
Trustee shall be responsible for the keeping of all appropriate books and
records relating to the receipt and disbursement of all moneys that it may
receive or be entitled to hereunder or under any other Related Agreement. The
Owner Trustee shall file an application with the IRS for a taxpayer
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identification number with respect to the Trust (and, upon receipt of such
number, shall notify the Indenture Trustee thereof) and prepare or cause to be
prepared and sign and/or file a tax return in connection with the transactions
contemplated hereby or by any other Related Agreement (the "Tax Return");
provided, however, that the Owner Trustee shall send or cause to be sent a copy
of the completed Tax Return to the Depositor, the Certificateholders and the
Indenture Trustee not more than 60 nor less than 30 days prior to the due date
of the Tax Return. The Depositor and the Certificateholders shall each, upon
request by the Owner Trustee (or the Agent of the Owner Trustee), furnish the
Owner Trustee (or the Agent of the Owner Trustee) with all such information as
may be reasonably required from the Depositor or the Certificateholders in
connection with the preparation of such Tax Return. The Owner Trustee shall keep
copies of the Tax Returns delivered to or filed by it (or by the Agent of the
Owner Trustee).
(b) The Owner Trustee agrees 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 on behalf of the Trust
shall file (or cause to be filed) tax returns consistent with the
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 6.6 if
(i) the Trust enters into an agreement with LaSalle National Bank with respect
to the preparation of tax returns relating to the Trust and (ii) it executes and
delivers the reports and documents required hereunder; provided, however, that
LaSalle National Bank shall be entitled to delegate its duties under such
agreement to a subcontractor; provided, further, that the LaSalle National Bank
will be primarily liable for the performance of duties thereunder.
[End of Article VI]
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ARTICLE I
COMPENSATION, REIMBURSEMENT AND INDEMNIFICATION
OF THE OWNER TRUSTEE
SECTION 7.1 Compensation of the Owner Trustee. The Owner
Trustee shall be entitled to receive as compensation for its services the Owner
Trustee Fee, such amount to be payable: first, as provided in the Indenture;
second, out of amounts on deposit in the Certificate Account that represent
payments received in respect of the Daiwa FLOWS Certificates; and, third, to the
extent not paid pursuant to either clause "first" or "second" of this Section,
within 60 days of first becoming due, by the Certificateholders, on a joint and
several basis.
SECTION 7.2 Reimbursement and Indemnification of the
Owner Trustee
(a) The Owner Trustee shall be entitled to be reimbursed for
its reasonable expenses (including reasonable attorneys' fees) incurred in the
performance of its duties as Owner Trustee hereunder, and to be compensated
reasonably for any extraordinary services rendered under Section 5.1(b) except
to the extent that such expenses arise out of or result from (i) the Owner
Trustee's own willful misconduct, bad faith or gross negligence; (ii) the
inaccuracy of any of the Bank's or the Owner Trustee's representations or
warranties contained in Section 6.2; (iii) the Owner Trustee's failure to
perform obligations expressly undertaken by it in this Trust Agreement in
accordance with the standard of care set forth in Section 5.4(a); (iv) taxes
based on or measured by any fees, commissions or compensation received by the
Owner Trustee for acting as such in connection with any of the transactions
contemplated by this Trust Agreement or any other Related Agreements; and (v)
the Owner Trustee's failure to use due care to receive, manage and disburse
moneys actually received by it in accordance with the terms hereof.
(b) The Owner Trustee shall be entitled to be indemnified and
held harmless from and against any and all liabilities, obligations, indemnity
obligations, losses (excluding loss of anticipated profits), damages (including
reasonable expenses reasonably incurred), claims, actions, suits or judgments of
any kind and nature whatsoever (collectively, the "Liabilities") which may be
imposed on, incurred by or asserted at any time against the Owner Trustee in any
way relating to or arising out of the Trust Estate, any of the properties
included therein, the administration of the Trust Estate or any action or
inaction of the Owner Trustee hereunder or under the Related Agreements, except
to the extent that such Liabilities arise out of or result from (i) the Owner
Trustee's own willful misconduct, bad faith or negligence; (ii) the inaccuracy
of any of the Owner Trustee's representations or warranties contained in Section
6.2; (iii) the Owner Trustee's failure to perform obligations expressly
undertaken by it in this Trust Agreement in accordance with the standard of care
set forth in Section 5.4(a); (iv) taxes based on or measured by any fees,
commissions or compensation received by the Owner Trustee for acting as such in
connection with any of the transactions contemplated by this Trust Agreement or
any other Related Agreements; and (v) the Owner Trustee's failure to use due
care to receive, manage and disburse moneys actually received by it in
accordance with the terms hereof. The indemnities contained in this Section
7.2(b) shall survive the termination of this Trust Agreement and the removal or
resignation of the Owner Trustee hereunder.
(c) Any reimbursements and indemnities to the Owner Trustee
pursuant to this Section 7.2 shall be payable: first, out of amounts on deposit
in the Certificate Account; and, second, to the extent not paid pursuant to
clause first within 60 days of first being incurred, by the Certificateholders,
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on a joint and several basis.
SECTION 7.3 Not Obligations of the Trust. None of the fees,
expenses and other liabilities referred to in Sections 7.1 and 7.2 shall be
obligations of the Trust or otherwise chargeable to the Trust Estate. The Owner
Trustee hereby agrees not to cause or participate in the filing of a petition in
bankruptcy against the Trust for the non-payment to the Owner Trustee of any
amounts provided by this Trust Agreement until the expiration of one year and
one day after the payment in full of all the Notes issued under the Indenture.
[End of Article VII]
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ARTICLE I
TERMINATION OF TRUST AGREEMENT
SECTION 8.1 Termination. The Trust shall not be terminated
under this Section 8.1 until the Notes have been paid in full and the Lien on
the Trust Estate created by the Indenture has been released; provided, however,
that in no event shall the trust created hereby continue beyond the expiration
of 21 years from the death of the survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St. James's
living on the date hereof.
This Trust Agreement may be terminated by all of the
Certificateholders at any time prior to the issuance of the Notes and the pledge
of the Trust Estate pursuant to the Indenture, and at any time after the
Indenture is discharged in accordance with Article V thereof, and this Trust
Agreement shall terminate in connection with the final distribution on the Daiwa
FLOWS Certificates. With respect to any such event, this Trust Agreement and the
estate and rights thereby granted by the Depositor to the Owner Trustee in the
Trust Estate shall cease, terminate and be void as of the date of the final
distribution by the Owner Trustee of all the assets in the Trust Estate pursuant
to this Section 8.1 and Section 4.2. After payment of all amounts then due and
payable to the Owner Trustee pursuant to Sections 7.1 and 7.2 hereof, all right,
title and interest in the Trust Estate still held by the Owner Trustee at the
time of such termination shall be transferred, assigned and paid over to the
Certificateholders or their respective designees.
The Certificateholders hereby irrevocably appoint the Owner
Trustee as its attorney-in-fact for the purposes of the terminating the Trust.
SECTION 8.2 Further Assurances by the Owner Trustee upon
Termination
Upon termination of this Trust, the Owner Trustee shall take
such action as may be requested by the Certificateholders to transfer the
remaining assets of the Trust to the Certificateholders or the
Certificateholders' respective designees, including the execution of instruments
of transfer or assignment with respect to the Daiwa FLOWS Certificates and any
of the Related Agreements to which the Owner Trustee is a party.
SECTION 8.3 Insolvency of a Certificateholder. The insolvency
or other similar incapacity of a Certificateholder shall not (i) operate to
terminate this Trust Agreement; (ii) entitle any Certificateholder's legal
representatives to claim an accounting or to take any action in any court for a
partition or winding up of the Trust Estate; or (iii) otherwise affect the
rights, obligations and liabilities of the parties hereto.
[End of Article VIII]
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ARTICLE I
SUCCESSOR OWNER TRUSTEES, CO-OWNER TRUSTEES
AND SEPARATE OWNER TRUSTEES
SECTION 9.1 Resignation of the Owner Trustee: Appointment
of Successor
(a) The Owner Trustee may resign at any time (and shall
immediately resign if it ceases to be an Eligible Trustee) by giving at least 60
days written notice to the Certificateholders, the Depositor, the Indenture
Trustee, such resignation to be effective on the acceptance of appointment by a
successor Owner Trustee under Section 9.1(b) hereof. The Depositor shall remove
the Owner Trustee by written notice, a copy of which shall be concurrently
delivered by the Depositor to the Certificateholders and the Indenture Trustee,
if the Owner Trustee ceases to be an Eligible Trustee and fails to resign
immediately such resignation to be effective on the acceptance of appointment by
a successor Owner Trustee under Section 9.1(b) hereof. The Owner Trustee
otherwise may be removed with or without cause at any time by the
Certificateholders with 60 days' prior written notice, a copy of which shall be
concurrently delivered by the Certificateholders to the Depositor and the
Indenture Trustee. Any such removal shall be effective upon the acceptance of
appointment by a successor Owner Trustee under Section 9.1(b) hereof. In case of
the resignation or removal of the Owner Trustee, the Certificateholders may
appoint a successor Owner Trustee by an instrument signed by the
Certificateholders. If a successor Owner Trustee shall not have been appointed
within 60 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, the Depositor, the Indenture Trustee or any Certificateholder may 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 and shall
have accepted its appointment as above provided. 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
execute and deliver to the predecessor Owner Trustee and the Indenture Trustee
an instrument accepting such appointment and shall furnish a photocopy of such
instrument to the Certificateholders, 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
herein; provided, however, that upon the written request of such successor Owner
Trustee 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 moneys or
other property then held by such predecessor Owner Trustee upon the trusts
herein expressed.
(c) Any successor Owner Trustee shall be an Eligible Trustee,
willing, able and legally qualified to perform the duties of the Owner Trustee
hereunder.
(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
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Section 9.1(c) hereof, be the Owner Trustee under this Trust Agreement without
any further act.
SECTION 9.2 Co-Trustees and Separate Trustees. Whenever the
Owner Trustee or the Indenture Trustee shall deem it necessary or prudent in
order to conform to any law of any jurisdiction in which all or any part of the
Trust Estate shall be situated or to make any claim or be a party to any suit
with respect to the Trust Estate, the Trust Certificates, the Notes or any
Related Agreement, or the Owner Trustee or the Indenture Trustee shall be
advised in writing by counsel reasonably satisfactory to each of them that it is
so necessary or prudent, the Owner Trustee and the Certificateholders shall
execute and deliver an agreement supplemental hereto and all other instruments
and agreements, and shall take all other action, necessary or proper to
constitute one or more persons or entities, who need not meet the requirements
of Section 9.1(c) hereof (and the Owner Trustee may appoint one or more of its
officers), either as co-trustees or co-trustees jointly with the Owner Trustee
of all or any part of the Trust Estate, or as separate trustee or separate
trustees of all or any part of the Trust Estate, and to vest in such persons or
entities, in such capacity, such title to the Trust Estate or any part thereof
and such rights or duties as may be necessary or desirable, all for such period
and under such terms and conditions as are reasonably satisfactory to the Owner
Trustee and the Certificateholders. In case any co-trustee or separate trustee
shall die, become incapable of acting, resign or be removed, the title to the
Trust Estate and all rights and duties of such co-trustee or separate trustee
shall, so far as permitted by law, vest in and be exercised by the Owner
Trustee, without the appointment of a successor to such co-trustee or separate
trustee.
SECTION 9.3 Notice. Whenever a successor Owner Trustee is
appointed under Section 9.1 hereof, the Owner Trustee resigns pursuant to such
Section 9.1 or a co-trustee or separate trustee is appointed pursuant to Section
9.2 hereof, the Certificateholders promptly shall give notice of such fact to
the Rating Agencies, if the Indenture has not been discharged.
[End of Article IX]
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ARTICLE I
SUPPLEMENTS AND AMENDMENTS
SECTION 10.1 Supplements and Amendments. Subject to Sections
10.2 and 10.3, this Trust Agreement shall be amended by a written instrument
signed by the Owner Trustee and the Certificateholders (and, if its rights
hereunder are adversely affected, the Depositor), but if in the opinion of the
Owner Trustee any instrument required to be so executed materially and adversely
affects any right, duty or liability of, or immunity or indemnity in favor of
the Bank or the Owner Trustee under this Trust Agreement or any of the other
Related Agreements 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 Bank's charter documents or by-laws or any document
contemplated hereby to which the Owner Trustee is a party, the Owner Trustee may
in its sole discretion decline to execute such instrument, unless it shall have
been provided an indemnity satisfactory to it by the Certificateholders.
In the event that there is more than one Holder of Trust
Certificates (as shown on the Certificate Register), the consent to an amendment
by Certificateholders entitled to a majority of the Voting Rights shall be
sufficient to bind all of such Holders; provided, however, that no such
amendment shall: (i) reduce in any manner the amount of, or delay the timing of,
payments received on any Trust Certificate without the consent of the affected
Holder; or (ii) amend this Section 10.1, without the consent of the Holders of
all Trust Certificates then outstanding.
SECTION 10.2 Limitation on Amendments. Notwithstanding Section
10.1 or Section 10.3 hereof, the Owner Trustee shall not, without the consent of
the Indenture Trustee, amend Section 8.1 of this Trust Agreement, or execute any
amendment that might result in the Trust being terminated prior to the
satisfaction and discharge of the Lien of the Indenture on the Trust Estate or
otherwise have a material adverse effect on the Noteholders prior to the payment
in full of the principal of and interest on the Notes. Furthermore,
notwithstanding Section 10.1 or Section 10.3 hereof, the Owner Trustee shall not
execute any amendment without obtaining written confirmation from the Rating
Agency that such amendment will not result in the qualification, downgrade or
withdrawal of any then-current rating on the Notes.
SECTION 10.3 Additional Amendment Provisions. (a) It shall not
be necessary for the consent of the Certificateholders under this Article X to
approve the particular form of any proposed amendment, but it shall be
sufficient if such consent shall approve the substance thereof. The manner of
obtaining such consents and of evidencing the authorization of the execution
thereof shall be subject to such reasonable regulations as the Owner Trustee may
prescribe.
(b) The Owner Trustee may amend this Trust Agreement at any
time without the consent of the Certificateholders at any time prior to the
liquidation of the Trust in order to modify, eliminate or add to any of its
provisions, to such extent as shall be necessary to prevent or reduce the
imposition on the Trust of any material federal, state or local taxes; provided,
however, that such action, as evidenced by an Opinion of Counsel acceptable to
the Owner Trustee is necessary or advisable to prevent the imposition of any
such taxes on the Trust.
(c) Prior to the execution of any amendment to this Trust
Agreement, the Owner Trustee shall be entitled to receive and rely upon an
Opinion of Counsel, at the expense of the party requesting such amendment (or,
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if such amendment is requested by the Owner Trustee, then at the expense of the
Trust) stating that the execution of such amendment is authorized or permitted
by this Trust Agreement.
[End of Article X]
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ARTICLE I
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE DEPOSITOR
SECTION 11.1 Representations and Warranties of the Depositor
(a) The Depositor represents and warrants as follows for the
benefit of the Owner Trustee, the Indenture Trustee, the Noteholders and the
Certificateholders:
(i) the Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware,
has full power and authority, and has taken all action necessary, to
execute and deliver this Trust Agreement, and any and all other
documents to be executed or delivered by it in connection with this
Trust Agreement, and to fulfill its obligations under, and to
consummate the transactions contemplated by, this Trust Agreement, and
this Trust Agreement and such other documents executed in connection
herewith are the legal, valid and binding obligations of the Depositor,
enforceable against it in accordance with their respective terms,
except as such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the rights
of creditors generally and by general principles of equity;
(ii) the execution and delivery of this Trust Agreement and
each other document to be executed or delivered by it in connection
with this Trust Agreement, and the performance of its obligations
hereunder and thereunder by the Depositor will not violate the
provisions of its certificate of incorporation or bylaws, conflict with
any provision of any law or regulation to which it is subject, or
conflict with, result in a breach of, or constitute a default under any
of the terms, conditions or provisions of, any agreement or instrument
to which the Depositor is a party or by which it or its property is
bound, or any order or decree applicable to the Depositor, or result in
the creation or imposition of any Lien on any of the Depositor's assets
or property, which would materially and adversely affect the ability of
the Depositor to carry out the transactions contemplated by this Trust
Agreement or such other documents executed in connection herewith; no
consent, approval, authorization or order of or filing with or notice
to any court or governmental agency or body is required for the
execution, delivery and performance by the Depositor of this Trust
Agreement or such other documents;
(iii) there is no action, suit or proceeding pending against
the Depositor in any court or by or before any other governmental
agency or instrumentality which would materially and adversely affect
the validity of the Daiwa FLOWS Certificates or the ability of the
Depositor or the Certificateholder to carry out the transactions
contemplated by this Trust Agreement; and
(iv) immediately prior to the conveyance of the Daiwa FLOWS
Certificates to the Owner Trustee, the Depositor had good title to, and
was the sole owner of, the Daiwa FLOWS Certificates, free and clear of
any pledge, lien, encumbrance or security interest and such assignment
validly transfers all right, title and interest in and to the Daiwa
FLOWS Certificates to the Owner Trustee, free and clear of any pledge,
lien, encumbrance or security interest.
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(b) It is understood and agreed that each of the foregoing
representations and warranties of the Depositor shall survive delivery of the
Daiwa FLOWS Certificates to the Owner Trustee. Upon discovery or receipt of
notice by the Depositor or a Responsible Officer of the Owner Trustee of a
breach of any of the foregoing representations and warranties that materially
and adversely affects the interests of the Indenture Trustee for the benefit of
the Noteholders or the Owner Trustee for the benefit of the Certificateholders
in the Daiwa FLOWS Certificates, the party discovering such breach shall give
prompt written notice to the other party hereto and to the Indenture Trustee.
SECTION 11.2 Accrued Interest, Etc. The Depositor agrees that
any income, interest, fees and other payments that it may receive in respect of
the Daiwa FLOWS Certificates applicable to a period from and including the date
in December 1997 on which distributions are made on the Daiwa FLOWS Certificates
pursuant to the Daiwa Pooling Agreement shall inure to the benefit of the Trust,
and the Depositor shall pay such amounts to the Owner Trustee to be remitted in
accordance with Section 4.1 promptly upon receipt.
SECTION 11.3 Additional Covenants of the Depositor. The
Depositor hereby covenants and agrees that:
(a) The business and affairs of the Depositor will be managed
by or under the direction of its board of directors in accordance with
its certificate of incorporation and by-laws. The Depositor will keep
correct and complete books and records of accounts and minutes of the
meetings and other proceedings of its board of directors. Any such
resolutions, agreements and other instruments will be continuously
maintained as official records by the Depositor.
(b) The Depositor will at all times ensure that its
capitalization is adequate in light of its business and purposes. The
Depositor will pay from its own funds and assets (and not the Trust's)
all obligations and indebtedness incurred by it.
(c) The Depositor will not conduct its business in the name of
the Trust or the Company.
(d) The Depositor will not guarantee any obligations of the
Trust (including the Notes or the Trust Certificates). The Depositor
will not operate or purport to operate as an integrated, single
economic unit with respect to the Trust or the Company or seek or
obtain credit or incur any obligation to any third party based on the
assets of the Trust or the Company or induce any such third party to
reasonably rely on the creditworthiness of the Trust or the Company in
connection therewith.
(e) The accounting records of the Depositor will disclose the
effect of the transactions in accordance with statutory accounting
practices and relevant pronouncements.
(f) The Depositor hereby acknowledges, and agrees for the
benefit of Owner Trustee, the Indenture Trustee, the Noteholders and
the Certificateholders to perform, each obligation imposed upon it
under the Indenture.
(g) The Depositor hereby acknowledges, and agrees for the
benefit of Owner Trustee, the Indenture Trustee, the Noteholders and
the Certificateholders that it will treat the Notes as debt instruments
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for purposes of federal and state income tax, franchise tax, and other
tax measured in whole or in part by income.
[End of Article XI]
31
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ARTICLE I
TRANSFER OF INTEREST OF THE DEPOSITOR
SECTION 12.1 Registration of Transfer and Exchange of Trust Certificates
(a) At all times during the term of this Trust Agreement,
there shall be maintained at the office of a registrar appointed by the
Depositor (the "Certificate Registrar") a register (the "Certificate Register")
in which, subject to such reasonable regulations as the Certificate Registrar
may prescribe, the Certificate Registrar shall provide for the registration of
Trust Certificates and the registration of transfers and exchanges of Trust
Certificates as herein provided. The Owner Trustee is hereby initially appointed
(and hereby agrees to act in accordance with the terms hereof) as Certificate
Registrar for the purpose of registering Trust Certificates and transfers and
exchanges of Trust Certificates as herein provided. The Owner Trustee may
appoint, by a written instrument delivered to the Depositor, any other bank or
trust company to act as Certificate Registrar under such conditions as the Owner
Trustee may prescribe, provided that the Owner Trustee shall not be relieved of
any of its duties or responsibilities hereunder as Certificate Registrar by
reason of such appointment. If the Owner Trustee resigns or is removed in
accordance with the terms hereof, the successor trustee shall immediately
succeed to its predecessor's duties as Certificate Registrar. The Depositor and
the Owner Trustee shall have the right to inspect the Certificate Register or to
obtain a copy thereof at all reasonable times, and to rely conclusively upon a
certificate of the Certificate Registrar as to the information set forth in the
Certificate Register.
(b) No sale, transfer, or other disposition of any Trust
Certificate may be made, and the Certificate Registrar shall refuse to register
any such transfer, unless the Depositor (or, if the Depositor no longer exists,
100% of the Certificateholders) shall consent in writing to such sale, transfer,
or other disposition. The Depositor (or any such other Certificateholder) shall
be entitled to request from the parties interested in effecting such sale,
transfer, or other disposition, and to rely upon, a certification of facts
and/or an opinion of counsel which establishes to the satisfaction of the
Depositor (or such other Certificateholder) that such sale, transfer, or other
disposition is permissible under applicable law and the Related Agreements.
(c) Transfer of any Trust Certificate is limited to "qualified
institutional buyers" as defined in Rule 144A promulgated under the 1933 Act
("QIBs") purchasing for their own accounts or for the account of a QIB, whom the
Certificateholder has informed, in each case, that the transfer is being made in
reliance on Rule 144A, in a transaction meeting the requirements of Rule 144A,
and to institutional "accredited investors" as defined in Rule 501(a)(1), (2),
(3), or (7) (or any entity in which all of the equity owners come within such
paragraphs) of Regulation D under the 1933 Act, in each case to a transferee
which constitutes one "beneficial owner" and a qualified purchaser, as defined
in the 1940 Act, and which is not purchasing with a view to distribution in
violation of the 1933 Act. If a Certificateholder desires to transfer all or a
portion of the interest represented by a Trust Certificate, the
Certificateholder, as assignor, will be required to surrender the Trust
Certificate to the Certificate Registrar and to execute and deliver to the
Certificate Registrar an assignment request in the form attached thereto, and
the proposed transferee will be required to execute and deliver to the Owner
Trustee the Transfer Affidavit in the form attached thereto. No transfer shall
be effective or shall be registered in the Certificate Register without the
express prior written consent of the Owner Trustee.
(d) No transfer of any ownership interest in a Trust
Certificate shall be made to any Plan. Each prospective transferee of a Trust
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Certificate shall deliver to the Trust, the Certificate Registrar and the
Indenture Trustee (a) an investment representation letter stating, that the
prospective transferee is not a Plan, or (b) an Opinion of Counsel, at the
expense of the transferring Certificateholder, which establishes to the
satisfaction of the Trust, the Certificate Registrar and the Indenture Trustee
that the purchase or holding of the Trust Certificate will not result in the
Trust Estate being deemed to be "plan assets"' and subject to the fiduciary
responsibility or prohibited transaction provisions of ERISA, the Code, or
Similar Law and will not constitute or result in a prohibited transaction within
the meaning of Section 406 or Section 407 of ERISA or Section 4975 of the Code,
and will not subject the Trust, the Indenture Trustee or the Certificate
Registrar to any obligation or liability (including obligations or liabilities
under ERISA or Section 4975 of the Code), which Opinion of Counsel shall not be
an expense of the Indenture Trustee, the Trust Estate, Certificate Registrar or
the Trust. Any transfer of a Trust Certificate that would violate, or result in
a prohibited transaction under, ERISA or Section 4975 of the Code or any Similar
Law shall be deemed absolutely null and void ab initio.
(e) For so long as the Notes are outstanding and the Lien of
the Indenture has not been satisfied and discharged, no sale, transfer, or other
disposition of any Trust Certificate may be made, and the Certificate Registrar
shall refuse to register any such transfer, unless the Owner Trustee shall have
received written confirmation from the Rating Agency to the effect that such
sale, transfer, or other disposition will not result in the qualification,
downgrade or withdrawal of any then current rating on the Notes.
(f) Each Trust Certificate shall bear a legend describing or
referencing the restrictions on transferability set forth in Sections 12.1(b),
(c) and (d).
(g) Subject to compliance with Sections 12.1(b), (c) and (d),
upon surrender for registration of transfer of any Trust Certificate at the
office of the Certificate Registrar or at the office of its Agent in the City of
New York, the Owner Trustee shall execute, and the Certificate Registrar shall
deliver and authenticate, in the name of the designated transferee or
transferees, one or more new Trust Certificates of the same Class, in authorized
denominations, evidencing in the aggregate a like aggregate Percentage Interest
and dated the date of authentication by the Certificate Registrar.
(h) At the option of any Certificateholder, Trust Certificates
may be exchanged for other Trust Certificates of the same Class, in authorized
denominations, evidencing in the aggregate a like aggregate Percentage Interest
upon surrender of the Trust Certificates to be exchanged at the office of the
Certificate Registrar, or the office of its Agent in the City of New York.
Whenever any Trust Certificates are so surrendered for exchange, the Owner
Trustee shall execute and the Certificate Registrar shall authenticate and
deliver, the Trust Certificates which the Certificateholder is entitled to
receive.
(i) If the Owner Trustee or the Certificate Registrar so
requires, every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by, the Certificateholder thereof or such
person's attorney duly authorized in writing.
(j) No service charge shall be made to the requesting
Certificateholder for any registration of transfer or exchange of Trust
Certificates, but the Certificate Registrar may require payment of a sum
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sufficient to cover any tax or governmental charge that may be imposed in
connection with any registration of transfer or exchange of Trust Certificates.
(k) The Certificate Registrar shall cancel and retain or
destroy, in accordance with the Owner Trustee's retention policy then in effect,
all Trust Certificates surrendered for registration of transfer or exchange.
. SECTION 12.2 Mutilated, Destroyed, Lost or Stolen Trust Certificates
If (i) any mutilated Trust Certificate is surrendered to the
Owner Trustee or the Certificate Registrar, or the Owner Trustee and the
Certificate Registrar receive evidence to their satisfaction of the destruction,
loss or theft of any Trust Certificate, and (ii) there is delivered to the Owner
Trustee and the Certificate Registrar such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of actual
knowledge by a Responsible Officer of the Owner Trustee or the Certificate
Registrar that such Trust Certificate has not been acquired by a bona fide
purchaser, the Owner Trustee shall execute and the Certificate Registrar shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Trust Certificate, a new Trust Certificate of like
Class and tenor. Upon the issuance of any new Trust Certificate under this
Section 12.2, the Owner Trustee 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 expenses (including the fees and expenses of the
Certificate Registrar) connected therewith. Any replacement Trust Certificate
issued pursuant to this Section shall constitute complete and indefeasible
evidence of ownership of the corresponding interest in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Trust
Certificate shall be found at any time, and such original Trust Certificate
shall be deemed cancelled upon the issuance of such replacement Trust
Certificate.
SECTION 12.3 Persons Deemed Owners. Prior to due presentation
of a Trust Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar, the Indenture Trustee and any agent of any of them may
treat the person or entity in whose name any Trust Certificate is registered as
the owner of such Trust Certificate for the purpose of receiving distributions
pursuant to Section 4.2 hereof and for all other purposes whatsoever, and
neither the Owner Trustee, the Certificate Registrar, the Indenture Trustee nor
any agent of any of them shall be affected by notice to the contrary.
SECTION 12.4 Access to Names and Addresses.
(a) If any Certificateholder (an "Applicant") applies in writing to the
Owner Trustee, and such application states that the Applicant desires to
communicate with other Certificateholders with respect to their rights under
this Trust Agreement or the Trust Certificates and is accompanied by a copy of
the communication which such Applicant proposes to transmit, then the Owner
Trustee shall, at the expense of such Applicant, within ten Business Days after
the receipt of such application, furnish or cause to be furnished to such
Applicant a list of the names and addresses of the Certificateholders as set
forth in the Certificate Register.
(b) Every Certificateholder consents to the disclosure to any Applicant
of its identity and status as a Certificateholder and agrees with the Owner
Trustee that the Owner Trustee and the Certificate Registrar shall not be held
accountable in any way by reason of the disclosure of any information as to the
names and addresses of the Certificateholders hereunder, regardless of the
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source from which such information was derived.
SECTION 12.5 Actions of Certificateholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Trust Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders 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 Owner Trustee. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any purpose of
this Trust Agreement and conclusive in favor of the Owner Trustee, if made in
the manner provided in this Section 12.5.
(b) The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner which the
Owner Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other action by a Certificateholder shall bind every transferee of
every Trust Certificate issued upon the registration of transfer of such
Certificateholder's Trust Certificate or in exchange therefor or in lieu
thereof, in respect of anything done, or omitted to be done, by the Owner
Trustee, in reliance thereon, whether or not notation of such action is made
upon such Trust Certificate.
(d) The Owner Trustee may require such additional proof of any matter
referred to in this Section 12.5 as it shall deem necessary.
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SECTION 12.6 Transferee's Agreement. No assignment, conveyance
or other transfer pursuant to this Article XII shall be effective unless the
transferee shall have executed and delivered to the Owner Trustee an instrument
containing the transferee's agreement to be bound by the terms of this Trust
Agreement.
[End of Article XII]
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ARTICLE I
MISCELLANEOUS
SECTION 13.1 No Legal Title to Trust Estate in the
Certificateholder. The Certificateholders shall not have legal title to any part
of the Trust Estate; provided, however, that the Certificateholder has a
beneficial interest in the Trust Estate (and initially shall have all right,
title and interest in and to the Trust Certificates). No transfer by operation
of law or otherwise of any right, title or interest of the Certificateholders in
and to the Trust Estate or hereunder shall operate to terminate this Trust
Agreement or the Trust 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 Estate.
SECTION 13.2 Action by the Owner Trustee is Binding. Any
actions, directions, approvals or consents by the Owner Trustee so long as such
actions, directions, consents or approvals are made pursuant to the terms of
this Trust Agreement shall bind the Certificateholders and shall be effective to
consent to action taken by the parties. No such party shall be required to
inquire as to the authorization, necessity, expediency or regularity of such
consent by the Owner Trustee.
SECTION 13.3 Limitation on Rights of Others. Nothing in this
Trust Agreement, whether express or implied, shall be construed to give to any
person or entity, other than the Bank, the Owner Trustee, the Depositor, the
Certificateholder and the Indenture Trustee on behalf of the Noteholders, and
the Certificateholders, any legal or equitable right, remedy or claim under or
in respect of this Trust Agreement.
SECTION 13.4 Notices. All demands, notices and communications
hereunder shall be in writing, may be given by telecopy transmission, shall be
deemed to have been given upon receipt (except that notices being sent by first
class mail, postage prepaid, shall be deemed to be received five business days
following the mailing thereof) as follows:
If to the Owner Trustee, to:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Telecopy Number: (302) 651-8882
Attention: Corporate Trust Administration
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with a copy to:
Richards Layton & Finger
1 Rodney Square North
Wilmington DE 19890
Telecopy Number: 302-658-6548
Telephone Number: 302-651-7678
Attention: Eric Mazie
If to the Depositor, to:
CAX DTR Securitization Corp.
3410 S. Galena Street
Denver, Colorado 80231
Telecopy Number: (303) 614-[9401]
Telephone Number: (303) 614-[9400]
Attention: Kevin Nystrom
with copies to:
Bartlit Beck Herman Palenchar & Scott
511 Sixteenth Street
Suite 700
Denver, Colorado 80202
Telecopy Number: (303) 592-3140
Telephone Number: (303) 592-3100
Attention: James L. Palenchar, Esq.
If to the Indenture Trustee, as set forth in the Indenture,
If to a Certificateholder, to that person or entity's name and
address as set forth from time to time in the Certificate
Register,
or to such other address as any of them shall specify by written notice to the
other parties.
SECTION 13.5 Severability. To the extent permitted by law, any
provision of this Trust Agreement that may be determined by competent authority
to be 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.
SECTION 13.6 Limitation on the Depositor's and the
Certificateholder's Respective Liability
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Neither the Depositor nor any Certificateholder shall have any
liability for the performance of this Trust Agreement except as expressly set
forth herein.
SECTION 13.7 Separate Counterparts. This Trust 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.
SECTION 13.8 Successors and Assigns. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Bank, the Owner Trustee and its successors and assigns, the
Certificateholders and the Depositor and its or their respective successors and
assigns, all as herein provided. Any request, notice, direction, consent, waiver
or other instrument or action by the Depositor shall bind the successors and
assigns of the Depositor and any request, notice, direction, consent, waiver or
other instrument or action by a Certificateholder shall bind the successors and
assigns of such Certificateholder. It is the intention of the parties hereto
that the Trust constitute a trust formed pursuant to the laws of the State of
Delaware with the purpose of facilitating the transactions contemplated by the
Related Agreements.
SECTION 13.9 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 provision hereof.
SECTION 13.10 Governing Law. THIS TRUST AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF DELAWARE.
SECTION 13.11 Administration of Trust. The principal place
of administration of the Trust shall be in Delaware.
SECTION 13.12 Performance by the Depositor. Any obligation of
the Owner Trustee hereunder or under any Related Agreement or other document
contemplated herein may be performed by the Depositor and any such performance
shall not be construed as a revocation of the trusts created hereby.
SECTION 13.13 Conflict with Indenture and Underlying
Agreement. If this Trust Agreement (or any instructions given by the Depositor
or the Certificateholders pursuant hereto) shall require that any action be
taken with respect to any matter and the Indenture or any Underlying Agreement
(or any instructions duly given in accordance with the terms thereof) shall
require that a different action be taken with respect to such matter, and such
actions shall be mutually exclusive, the provisions of the Indenture or such
Underlying Agreement, in respect thereof, shall control.
SECTION 13.14 No Implied Waiver. No term or provision of this
Trust Agreement may be changed, waived, discharged or terminated orally, but
only by an instrument in writing entered into as provided in Section 10.1
hereof; and any such waiver of the terms hereof shall be effective only in the
specific instance and for the specific purpose given.
SECTION 13.15 Third Party Beneficiary. The Indenture Trustee
for the benefit of the Noteholders is an intended third-party creditor
beneficiary of this Trust Agreement from and including the date hereof to the
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date on which the Lien on the Trust Estate created pursuant to the Indenture is
satisfied, discharged and released pursuant to Article III of the Indenture.
SECTION 13.16 References. The definitions in Article I shall
apply equally to both the singular and plural forms of the terms defined.
"Include", "included", "includes" and "including" shall be deemed to be followed
by "without limitation". "Writing", "written" and comparable terms refer to
printing, typing, lithography or other means of reproducing words in a visible
form. Any agreement or instrument or any law, rule or regulation of any
Governmental Authority defined or referred to in Article I means such agreement
or instrument or such law, rule or regulation as from time to time amended,
modified or supplemented in accordance with the terms thereof, including (in the
case of agreements or instruments) by waiver or consent and (in the case of such
law, rule or regulation) by succession of any comparable successor law, rule or
regulation and includes (in the case of agreements or instruments) references to
all attachments thereto and instruments incorporated therein. References to a
Person are also to its successors and permitted assigns. Any term defined above
by reference to any agreement or instrument or any law, rule or regulation of
any Governmental Authority has such meaning whether or not such agreement,
instrument or law, rule or regulation is in effect. "Trust Agreement", "hereof",
"herein", "hereto", "hereunder" and comparable terms refer to this Trust
Agreement (including all exhibits and schedules hereto) and not to any
particular article, section, clause or other subdivision hereof or attachment
hereto. References to any gender include, unless the context otherwise requires,
references to all genders, and references to the singular include, unless the
context other requires, references to the plural and vice versa. References in
this Trust Agreement to "Article", "Section", "Clause" or another subdivision or
to an attachment are, unless the context otherwise requires, to an article,
clause or subdivision of or attachment to this Trust Agreement.
[Signatures appear on next page]
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EXECUTION COPY IN WITNESS WHEREOF, the parties hereto have
caused this Trust Agreement to be duly executed by their respective officers
hereunto duly authorized, as of the date hereof.
CAX DTR SECURITIZATION CORP.,
Delaware corporation,
as Depositor,
By: /s/Diane Armstrong
-----------------------------
Name: Diane Armstrong
Title: President & Secretary
-i-
<PAGE>
STRUCTURED MORTGAGE TRUST
1997-2, a Delaware business trust,
By: Wilmington Trust Company,
not individually, but solely
in its capacity as Owner Trustee,
By: /s/Emmett R. Harmon
-----------------------------
Name: Emmett R. Harmon
Title: Vice President
ii
STRUCTURED MORTGAGE TRUST 1997-2
COLLATERALIZED NOTES
NOTE PURCHASE AGREEMENT
New York, New York
November 3, 1997
PaineWebber Incorporated
1285 Avenue of the Americas, 19th Floor
New York, New York 10019
Ladies and Gentlemen:
Structured Mortgage Trust 1997-2, (the "Issuer"), a business
trust established under the laws of the State of Delaware, proposes to sell to
PaineWebber Incorporated, as initial purchaser (the "Initial Purchaser"), four
classes (each a "Class") of collateralized notes which (collectively, the
"Notes"), in each case in the aggregate principal amount of $24,224,526 of Class
A Notes, $14,000,000 of Class B Notes, $0 of Class C Notes, and $7,750,000 of
Class D Notes, but subject to Section 9 hereof. The Notes are issued pursuant to
an indenture, to be dated as of November 3, 1997 (the "Indenture"), by and
between the Issuer and LaSalle National Bank, a nationally banking association
as indenture trustee (the "Indenture 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 December 1997
payment) from $50,974,526 aggregate principal amount of Daiwa Securities America
Inc. Multifamily First Loss Ownership Securities ("Multifamily FLOWSsm") Series
1994-Multifamily FLOWSsm-1 certificate (the "Collateral"). The Collateral
indirectly represents the entire beneficial ownership in a trust (the "FNMA
Trust"), the assets of which (the "FNMA Trust Assets") consist of the Class C
and Class D certificates issued by the FNMA Multifamily REMIC Trust 1994-M2,
which have been pledged to the Federal National Mortgage Association ("FNMA") by
Daiwa Securities America Inc. in full satisfaction of a limited recourse
obligation (the "Daiwa Obligation"). The Fannie Mae MBS were delivered to FNMA
in exchange for FNMA Guaranteed ACESsm REMIC Pass-Through Certificates, FNMA
Multifamily REMIC Trust 1993-M2 and FNMA Multifamily REMIC Trust 1994-M2. The
entire ownership interest in the assets of the FNMA Trust, subject to the prior
claim of FNMA in respect of the Daiwa Obligation, is evidenced by a trust
<PAGE>
receipt issued in exchange for the delivery of the FNMA Trust Assets to a
custodian pursuant to that certain Second Amended and Restated Credit Support
and Collateral Pledge Agreement, dated as of February 28, 1994, among FNMA,
Daiwa Finance Corp., Daiwa Securities America Inc., and Bank America National
Trust Company, as custodian.
The Collateral will be transferred from Commercial Assets,
Inc. (the "Company"), to CAX DTR Securitization Corp., a Delaware corporation
organized by the Company as a special purpose entity ("QRS"), pursuant to a
Contribution Agreement dated as of November 3, 1997 (the "Contribution
Agreement"), between QRS, as contributee, and the Company, as contributor. QRS
then will transfer the Collateral to the Issuer in exchange for the owner trust
certificates evidencing the entire beneficial ownership of the Issuer, which was
established pursuant to a trust agreement dated as of November 3, 1997 (the
"Trust Agreement"), between QRS and Wilmington Trust Company, a Delaware bank
and trust corporation, (the "Owner Trustee"), acting on behalf of the Issuer.
In order to facilitate the resale of the Notes by the Initial
Purchaser, the Initial Purchaser may require the Issuer to register the exchange
of the Notes for replacement Notes which collectively evidence the same
aggregate principal balance as the Notes originally sold but with different
principal balances, interest rates and allocations of principal and interest
among the various classes of Notes which will be described more fully in a
private offering memorandum (the "Private Offering Memorandum").
Capitalized terms used but not otherwise defined herein shall
have the respective meanings assigned to them in the Indenture.
1. Purchase and Sale. Subject to the terms and conditions and
in reliance upon the representations and warranties set forth herein, the Issuer
agrees to sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Issuer on the Closing Date (as defined below), the Notes for a
purchase price and on payment terms set forth in Schedule A attached hereto.
2. Delivery and Payment. Delivery of and payment for the Notes
shall be made at the offices of O'Melveny & Myers LLP, 153 East 53rd Street, New
York, New York 10022 at 10:00 a.m., New York City time, on November 3, 1997,
which date and time may be changed by agreement between the Initial Purchaser
and the Issuer (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 against payment by the Initial Purchaser of the purchase price
therefor in immediately available funds wired to such bank as may be designated
by the Issuer, or such other manner of payment as may be agreed upon by the
Issuer and the Initial Purchaser. The Notes to be so delivered shall be
definitive, fully registered Notes, registered in the name of the Initial
Purchaser and in such authorized denominations as the Initial Purchaser may have
requested in writing not less than two full business days in advance of the
Closing Date. The Issuer 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.
2
<PAGE>
3. Conditions to the Obligation of the Initial Purchaser. The
obligation of the Initial Purchaser hereunder to purchase the Notes shall be
subject to the accuracy of the representations and warranties on the part of the
Issuer contained herein as of the date hereof, to the accuracy of the statements
of the Issuer made in any Note pursuant to the provisions hereof, to the
performance by the Issuer in all material respects of its obligations hereunder,
and to the following additional conditions:
(a) this Agreement, the Securitization Cooperation
Agreement, dated as of November 3, 1997, by and among the Issuer, the
Company, QRS and the Initial Purchaser, and the other Related
Agreements and each Class 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, QRS, the Owner Trustee, or
the Issuer, and the Indenture Trustee shall have received a fully
executed copy thereof or, with respect to the Notes, a conformed
specimen of each Class thereof. The Related Agreements and the Notes
shall be in all material respects in the forms theretofore provided to
the Initial Purchaser;
(b) the Issuer shall have delivered to the Initial
Purchaser a certificate of a responsible officer of the Owner Trustee,
dated the Closing Date, to the effect that: (i) the representations and
warranties of the Issuer in each respective Related Agreement to which
it is a party 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, and (ii) the Issuer has complied with all the Related Agreements
and satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date.
(c) each of the Company and QRS 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, to the best of such officer's knowledge after due inquiry
and reasonable investigation (i) the representations and warranties of
the Company and QRS, as applicable, in each respective Related
Agreement to which it is a party 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, and (ii) the Company and QRS have complied with
all the agreements and satisfied all the conditions on its part to be
performed or satisfied under the Related Agreements at or prior to the
Closing Date.
(d) the Initial Purchaser shall have received from
Bartlit, Beck, Herman, Palenchar & Scott, special counsel for the
Company, QRS 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) each of the Company and QRS has been
duly organized and is validly existing and in good
standing under the laws of the State of its
respective organization with the power and authority
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<PAGE>
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
Related Agreements to which it is a party, and to
enter into and perform its obligations under Related
Agreements to which it is a party.
(ii) each Related Agreement to which the
Company or QRS is a party has been duly and validly
authorized, executed and delivered by the Company
and/or QRS, as applicable, and each constitutes the
legal, valid and binding agreement of the Company
and/or QRS, as applicable, enforceable against the
Company and/or QRS, as applicable, 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;
(iii) with respect to each Related Agreement
to which the Issuer is a party and assuming that such
Related Agreement has been duly authorized, executed
and delivered by the Issuer, such Related 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 Related Agreements to which the Company, QRS or
the Issuer is a party or the Notes, the consummation
of the transactions contemplated by either the
Related Agreements or the Notes, nor the grant of the
security interest pursuant to the Indenture will (A)
conflict with or violate, or result in a breach of or
4
<PAGE>
constitute a default under any organizational or
other constituent document of or, to such counsel's
knowledge, any statute currently applicable to, the
Company, QRS, or the Issuer, as applicable, or, to
such counsel's knowledge, any order, rule or
regulation currently applicable to the Company, QRS,
or the Issuer, as the case may be, of any court,
regulatory body, administrative agency or
governmental body having jurisdiction over the
Company, QRS, 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, QRS, or the
Issuer is a party or by which the Company, QRS, 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 Related Agreements 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 Related Agreements, or (3) seeking any
determination or ruling that might materially and
adversely affect the performance by the Company, QRS,
or the Issuer of its respective obligations under, or
the validity or enforceability of, any of the Related
Agreements or any Class of the Notes;
(vii) assuming compliance by the Initial
Purchaser with its agreements set forth in Section 7
hereof and that the Daiwa FLOWS Certificates have
been issued by a bankruptcy remote trust, 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, QRS and the Issuer, as applicable,
with the Related Agreements 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 of 1939, as
amended;
(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
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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 Indenture, and
this Agreement are not transactions requiring
registration of any Class of the Notes under the
Securities Act;
(x) following execution and delivery of all
of the Related Agreements, all of the Company's and
QRS's right, title and interest in and to the
Collateral has been conveyed to the Issuer and the
Issuer has duly and validly pledged, assigned and
delivered the Collateral (whether by book entry or by
physical delivery) to the Indenture Trustee and the
Indenture 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; and
(xi) the Company, QRS and the Issuer are
not, and none of the Company, QRS 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 of 1940 (the "Investment Company Act").
(xii) all of the Collateral shall have been
contributed to QRS by the Company pursuant to the
Contribution Agreement, and shall have been
transferred by QRS to the Issuer, pursuant to the
Trust Agreement;
Such opinion may express its reliance as to factual matters on
representations and warranties made by, and on certificates or other
documents furnished by officers or authorized representatives of
parties to the Indenture and on certificates furnished by public
officials. Such opinion may assume the due authorization, execution and
delivery of the documents referred to therein by the parties thereto
other than the party on behalf of which such opinion is being rendered.
Such opinion may be qualified as an opinion only on the laws of each
state in which the writer of the opinion is admitted to practice law
and on the federal law of the United States; Bartlit Beck Herman
Palenchar & Scott may rely on the opinion of Arent Fox Kintner Plotkin
& Kahn, special Maryland counsel to the Company, as to matters of
Maryland law (provided that such opinion shall be satisfactory to the
Initial Purchaser), may rely on the Opinion of Counsel of Latham &
Watkins (provided that such opinion shall be satisfactory to the
Initial Purchaser) with respect to matters of Illinois law and may rely
on the Opinion of Counsel of Richards Layton & Finger (provided that
such opinion shall be satisfactory to the Initial Purchaser) with
respect to matters of Delaware law necessary to render an opinion with
respect to perfection of a security interest.
(e) the Initial Purchaser shall have received a copy
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<PAGE>
of the opinion of Arent Fox Kintner Plotkin & Kahn, special Maryland
counsel to the Company, dated the Closing Date, to the effect that the
Company does not require shareholder approval for the transactions
contemplated by the Related Agreements and for the sale to the Initial
Purchaser of collateralized mortgage backed securities described in
Schedule B attached hereto, which are expected to be sold by the
Company to the Initial Purchaser on November 3, 1997;
(f) the Initial Purchaser shall have received a copy
of the opinion of Richards Layton & Finger, counsel to the Owner
Trustee, dated the Closing Date, to the effect that:
(i) the Owner Trustee is a Delaware banking and trust
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 principles 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;
(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;
(vi) the Notes have been authorized, executed and
delivered by the Owner Trustee on behalf of the Issuer in
accordance with the Trust Agreement and the Indenture;
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<PAGE>
(vii) 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 under assigned
contract rights 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 Indenture Trustee will have a perfected security
interest in the Issuer's rights in such contract rights 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;
(viii) 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;
(ix) 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;
(x) 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;
(xi) the execution and delivery by the Owner Trustee,
on behalf of the Issuer, of the Related Agreements to which
the Issuer is a party do not require any consent, approval or
authorization of, or any registration or filing with, any
8
<PAGE>
governmental authority of the State of Delaware, except for
the filing of the Certificate of Trust with the Secretary of
State of the State of Delaware; and
(xii) neither the consummation by the Issuer of the
transactions contemplated by the Trust Agreement or the
transactions contemplated by the Related Agreements to which
the Issuer is a party, nor the fulfillment of the terms
thereof by the Issuer, will conflict 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 Federal law
of the United States of America governing the banking and trust powers
of Wilmington Trust Company and the laws of the State of Delaware.
(g) 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 and QRS, enforceable
against the Owner Trustee and QRS 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, and 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 Related
Agreements to which it is a party, the Notes, and the Trust
Certificates;
(iv) the Issuer has duly authorized and executed the
Related Agreements to which it is a party, the Notes, and the
Trust Certificates.
(v) the Issuer has the power under the Trust
Agreement and the Delaware Business Trust Act to pledge the
Collateral to the Indenture Trustee as security for the Notes;
9
<PAGE>
and
(vi) the Trust Certificates have been executed and
delivered by the Owner Trustee on behalf of the Issuer 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.
(h) the Initial Purchaser shall have received a copy
of the opinion of each of (i) Thomas A. Rosiello, Esq., Senior Counsel
of the Indenture Trustee and (ii) Latham & Watkins, counsel to the
Indenture Trustee, dated the Closing Date and addressing the valid
existence of the Indenture Trustee under the laws of the jurisdiction
of its organization, the due authorization, execution and delivery of
the Indenture by the Indenture Trustee, and, subject to standard
limitations regarding laws affecting creditors' rights and general
principles of equity, the enforceability of the Indenture against the
Indenture Trustee. Such opinions may express their reliance as to
factual matters on representations and warranties made by, and on
certificates or other documents furnished by officers or authorized
representatives of parties to the Indenture and on certificates
furnished by public officials, and the opinion of Latham & Watkins may
rely on the opinion of Thomas A. Rosiello, Esq., Senior Counsel of the
Indenture Trustee, as to due authorization and execution. Such opinions
may assume the due authorization, execution and delivery of the
documents referred to therein by the parties thereto other than the
party on behalf of which such opinion is being rendered. Each such
opinion may be qualified as an opinion only on the laws of each state
in which the writer of the opinion is admitted to practice law and the
federal law of the United States.
(i) the Initial Purchaser shall have received a copy
of the opinion of O'Melveny & Myers LLP, special counsel to the Initial
Purchaser, dated the Closing Date and in form and substance reasonably
satisfactory to the Initial Purchaser.
(j) Bartlit Beck Herman Palenchar & Scott shall have
provided such true sale, first priority perfected security interest
and/or non-consolidation opinions to the Initial Purchaser as the
Initial Purchaser shall have requested; provided, however, that Bartlit
Beck Herman Palenchar & Scott may rely on the Opinion of Counsel of
Latham & Watkins (provided that such opinion shall be satisfactory to
the Initial Purchaser) with respect to matters of Illinois law and may
rely on the Opinion of Counsel of Richards Layton & Finger (provided
that such opinion shall be satisfactory to the Initial Purchaser) with
respect to matters of Delaware law necessary to render an opinion with
10
<PAGE>
respect to perfection of a security interest.
(k) all proceedings in connection with the
transactions contemplated by this Agreement and all documents incident
hereto shall be satisfactory in form and substance to the Initial
Purchaser, and the Initial Purchaser shall have received such
information, certificates and documents as the Initial Purchaser may
have reasonably requested; and
(l) the Issuer shall have furnished such further
information, certificates, documents and opinions as the Initial
Purchaser may reasonably request.
If any of the conditions specified in this Section 3 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, if the Issuer is in breach of any covenants or agreements contained
herein, or if any of the opinions and certificates referred to above or
elsewhere in this Agreement shall not be in all material respects satisfactory
in form and substance to the Initial Purchaser and counsel for the Initial
Purchaser, this Agreement and all obligations of the Initial Purchaser hereunder
may be canceled by the Initial Purchaser at, or at any time prior to, the
Closing Date. Notice of such cancellation shall be given to the Issuer in
writing, delivered by hand, by messenger, mail, or by telecopy.
4. Covenants of QRS and the Issuer. In further consideration
of the agreements of the Initial Purchaser contained in this Agreement, QRS, and
the Issuer each covenants and agrees with the Initial Purchaser that:
(a) in connection with the resale of the Notes as
contemplated by Section 7, but subsequent to the Closing Date, QRS and
the Issuer will cause the Private Offering Memorandum to be 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, QRS, and the Issuer deem appropriate in connection with the
exchange of the Notes issued on the Closing Date for Notes of equal
aggregate principal amount of Notes which will have been rated by the
Rating Agency;
(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 Private Offering Memorandum, as then amended or
supplemented, would include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, QRS and/or
the Issuer will promptly notify the Initial Purchaser, and QRS, and the
Issuer shall prepare to furnish to the Initial Purchaser, in accordance
with Sections 4(e), 7(d) and 7(e), an amendment or supplement to the
Private Offering Memorandum that will correct such statement or
omission and shall furnish to the Initial Purchaser, without charge,
copies of the Private Offering Memorandum (including all exhibits and
documents incorporated by reference therein) and the Indenture and all
amendments or supplements to such documents, in each case as soon as
available and in such quantities as the Initial Purchaser may
11
<PAGE>
reasonably request;
(c) each of QRS, and the Issuer will immediately
inform the Initial Purchaser (i) 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 (ii) of the commencement of any lawsuit or proceeding to
which QRS, or the Issuer is a party relating to the offering or sale of
the Notes;
(d) to the extent, if any, that the rating provided
with respect to the Notes by the Rating Agency or any other statistical
rating agency which initially rates the Notes is conditional upon the
furnishing of documents or the taking of any other actions by the
Issuer, the Issuer shall use its best efforts to furnish such
documents, and to cause such documents to be furnished, and take any
such other actions; and
(e) during the period referred to in Section 4(b),
the Issuer will, at the Initial Purchaser's request, furnish through
the Initial Purchaser to any prospective purchaser of Notes from the
Initial Purchaser such information as is required to be delivered to
such prospective purchaser pursuant to Section 7(e).
5. Representations and Warranties of the Issuer and QRS.
(a) The Issuer represents and warrants to the Initial
Purchaser that:
(i) the Issuer has been duly formed and is
validly existing as a business trust in good standing under
the laws of the State of Delaware;
(ii) the Issuer has all requisite power and
authority (corporate and other) and all requisite
authorizations, approvals, order, licenses, certificates and
permits of and from all governmental or regulatory officials
and bodies necessary to own the Trust Estate, to conduct its
business and to execute, deliver and perform its obligations
under this Agreement, the Contribution Agreement and the
Indenture, except such as may be required under state
securities or "blue sky" laws in connection with the initial
purchase and any reoffer or resale by the Initial Purchaser of
the Notes; all such authorizations, approvals, orders,
licenses and certificates are in full force and effect and
contain no unduly burdensome provisions, and there are no
legal or governmental proceedings pending or, to the best
knowledge of the Issuer, threatened, that would result in a
material modification, suspension or revocation thereof;
(iii) the Notes have been duly authorized,
and when issued and delivered pursuant to this Agreement, will
have been duly executed, issued and delivered and will be
entitled to the benefits provided by the Indenture, subject,
as to enforcement, to applicable bankruptcy, reorganization,
12
<PAGE>
insolvency, moratorium and other laws affecting the rights of
creditors generally, and to general principles of equity
(regardless of whether enforcement is sought a proceeding in
equity or at law), and will in all material respects be in the
form contemplated by the Indenture;
(iv) this Agreement, and each of the other
Related Agreements to which the Issuer is a party, has been
duly authorized, executed and delivered by the Issuer; and
each such agreement, assuming the due authorization by each
other party hereto or thereto, constitutes a legal, valid,
binding and enforceable agreement of the Issuer, subject, as
to enforceability, to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally and to general principles of equity regardless of
whether enforcement is sought in a proceeding in equity or at
law;
(v) as of the Closing Date, the Notes and
all Related Agreements will each conform in all material
respects to the respective descriptions thereof contained in
the Related Agreements and on the Closing Date, the Issuer
(pursuant to the Indenture) will assign to the Indenture
Trustee, for the benefit of the Holders, certain
representations and warranties with respect to the Collateral
made by QRS to the Issuer in the Contribution Agreement, and
the representations and warranties will be true and correct in
all material respects;
(vi) assuming compliance by the Initial
Purchaser with its agreements set forth in Section 7 hereof
and that the Daiwa FLOWS Certificates have been issued by a
bankruptcy remote trust, no filing or registration with, or
notice to, or consent, approval, non-disapproval,
authorization or order or other action of, any court or
governmental authority or agency is required for the
consummation by the Issuer of the transactions contemplated by
the Related Agreements or the Indenture, except such as have
been or will have been made or obtained prior to the Closing
Date, except such as may be required under the 1933 Act, the
rules and regulations thereunder, or state securities or "blue
sky" laws, in connection with the purchase and distribution of
the Notes by the Initial Purchaser, and except such
recordation of the assignment of the Security interest in the
Collateral to the Indenture Trustee pursuant to the Indenture
that have not yet been filed;
(vii) the Issuer owns or possesses or has
obtained all material governmental licenses, permits,
consents, orders, approvals and other authorizations necessary
to lease, own or license, as the case may be, and to operate,
the Trust Estate and its other properties and to carry on its
business as presently conducted and has received no notice of
proceedings relating to the revocation of any such license,
permit, consent, order or approval, which singly or in the
aggregate, if the subject of an unfavorable decision, ruling
or finding, would materially and adversely affect the conduct
of the business, results of operations, or the net worth or
13
<PAGE>
condition (financial or otherwise) of the Issuer;
(viii) there are no legal or governmental
proceedings pending to which the Issuer is a party or of which
any property of the Issuer is the subject which, if determined
adversely to the Issuer, would individually or in the
aggregate have a material and adverse effect on the condition
(financial or otherwise), earnings, affairs, business or
business prospects of the Issuer and, to the best of the
Issuer's knowledge, no such proceedings are threatened or
contemplated by any governmental authorities or other persons;
(ix) as of the Closing Date, each of the
representations and warranties made by the Issuer in any
Related Agreement will be true and correct as of the date made
and as the Closing Date;
(x) at the time of execution and delivery of
the Indenture, the Issuer will have good and marketable title
to the Collateral, free and clear of any lien, mortgage,
pledge, charge, encumbrance, adverse claim or other security
interest (collectively "Liens") (but subject to the prior
claim of FNMA in respect of the Daiwa Obligation), and will
not have assigned to any person any of its right, title or
interest in the Collateral, in the Indenture, or the Notes,
and at such time the Issuer will have the power and authority
to transfer the Notes to the Initial Purchaser, and, upon
execution and delivery to the Indenture Trustee of the
Indenture and delivery to the Initial Purchaser of the Notes,
the Issuer will have good and marketable title to the
Collateral and the Initial Purchaser will have good and
marketable title to the Notes, in each case free and clear of
any Liens;
(xi) any taxes, fees and other governmental
charges in connection with the execution and delivery of the
Related Agreements, or the execution, delivery and sale of the
Notes have been or will be paid on or prior to the Closing
Date;
(xii) neither the Issuer nor the Initial
Purchaser is, and the activities of the Issuer pursuant to
this Agreement and the Indenture will not cause the Issuer or
the Initial Purchaser to become, an "investment company" or to
be under the control of an "investment company," as such terms
are defined in the 1940 Act;
(xiii) the Indenture is not required to be
qualified under the Trust Indenture Act of 1939, as amended;
(xiv) the offer or sale of the Notes to the
Initial Purchaser in the manner contemplated hereby is exempt
from registration under the 1933 Act; the Notes meet the
eligibility requirements of Rule 144A(d)(3) under the 1933
Act; and the Issuer has not offered or sold, and will not
14
<PAGE>
offer or sell, any Securities or any Note in any manner that
would render the issuance and sale of the Notes hereunder or
the reoffer and resale of the Notes as contemplated by Section
7 hereof a violation of the 1933 Act or, assuming compliance
by the Initial Purchaser with its agreements and undertakings
set forth in Section 7 hereof, any state securities or "blue
sky" laws or registration requirements pursuant thereto, nor
has it authorized, nor will it authorize, any person to act in
such manner. The Issuer has not offered or sold, and will not
offer or sell, any Notes other than in accordance with the
restrictions on transfer set forth in the Legend thereupon and
in the Indenture;
(xv) neither the Issuer nor any person
acting on its behalf has engaged in any form of general
solicitation or general advertising (as those terms are used
in Rule 502(c) under the 1933 Act) in connection with any
offer or sale of the Notes in the United States.
(xvi) Issuer has 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 Issuer 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.
The Issuer has no knowledge that any such disclosure documents
or trustee reports are not true and correct in all material
respects.
(b) QRS represents and warrants to the Initial
Purchaser that:
(i) QRS has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware;
(ii) QRS has all requisite power and
authority (corporate and other) and all requisite
authorizations, approvals, orders, licenses, certificates and
permits of and from all governmental or regulatory officials
and bodies necessary to own its properties, to conduct its
business and to execute, deliver and perform its obligations
under this Agreement and the other Related Agreements to which
it is a party, except such as may be required under state
securities or "blue sky" laws in connection with the initial
purchase and any reoffer or resale by the Initial Purchaser of
the Notes; all such authorizations, approvals, orders,
licenses and certificates are in full force and effect and
contain no unduly burdensome provisions; and there are no
legal or governmental proceedings pending or, to the best
knowledge of QRS, threatened, that would result in a material
modification, suspension or revocation thereof;
(iii) the Notes have been duly authorized,
and when issued and delivered pursuant to this Agreement, will
have been duly executed, issued and delivered and will be
15
<PAGE>
entitled to the benefits provided by the Indenture, subject,
as to enforcement, to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting the rights of
creditors generally, and to general principles of equity
(regardless of whether enforcement is sought a proceeding in
equity or at law), and will in all material respects be in the
form contemplated by the Indenture;
(iv) this Agreement, and each of the other
Related Agreements to which it is a party, has been duly
authorized, executed and delivered by QRS, and, assuming the
due authorization by each other party hereto or thereto, each
such agreement constitutes a legal, valid, binding and
enforceable agreement of QRS, subject, as to enforceability,
to bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and to
general principles of equity regardless of whether enforcement
is sought in a proceeding in equity or at law;
(v) upon the execution and delivery of the
Contribution Agreement by QRS and the Company, QRS will have
acquired all right, title and interest in and to the
Collateral, and immediately prior to the transfer of the
Collateral to the Issuer as contemplated by the Trust
Agreement, QRS (A) will have good title to and will be the
sole owner of the Collateral, free and clear of any Lien (but
subject to the prior claim of FNMA in respect of the Daiwa
Obligation), (B) will not have assigned to any person other
than the Issuer any of its right, title or interest in the
Collateral and (C) will have the power and authority to
transfer the Collateral to the Issuer;
(vi) as of the Closing Date, the Notes and
all Related Agreements will each conform in all material
respects to the respective descriptions thereof contained in
the Related Agreements and on the Closing Date, QRS (pursuant
to the Trust Agreement) will assign to the Owner Trustee, on
behalf of the Issuer, certain representations and warranties
with respect to the Collateral made by the Company to QRS in
the Contribution Agreement, and the representations and
warranties will be true and correct in all material respects;
(vii) assuming compliance by the Initial
Purchaser with its agreements set forth in Section 7 hereof,
no filing or registration with, or notice to, or consent,
approval, non-disapproval, authorization or order or other
action of, any court or governmental authority or agency is
required for the consummation by QRS of the transactions
contemplated by the Related Agreements except such as have
been or will have been made or obtained prior to the Closing
Date, except such as may be required under the 1933 Act, the
rules and regulations thereunder, or state securities or "blue
sky" laws, in connection with the purchase and distribution of
the Notes by the Initial Purchaser, and except such
recordation of the assignment of the security interest in the
16
<PAGE>
Collateral given to the Indenture Trustee pursuant to the
Indenture that has not yet been filed;
(viii) QRS owns or possesses or has obtained
all material governmental licenses, permits, consents, orders,
approvals and other authorizations necessary to lease, own or
license, as the case may be, and to operate, its properties
and to carry on its business as presently conducted and has
received no notice of proceedings relating to the revocation
of any such license, permit, consent, order or approval, which
singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely
affect the conduct of the business, results of operations, or
the net worth or condition (financial or otherwise) of QRS;
(ix) there are no legal or governmental
proceedings pending to which QRS is a party or of which any
property of QRS is the subject which, if determined adversely
to QRS, would individually or in the aggregate have a material
and adverse effect on the condition (financial or otherwise),
earnings, affairs, business or business prospects of QRS and,
to the best of the QRS' knowledge, no such proceedings are
threatened or contemplated by any governmental authorities or
other persons;
(x) as of the Closing Date, each of the
representations and warranties made by QRS in any Related
Agreement will be true and correct as of the date made and as
the Closing Date;
(xi) at the time of execution and delivery
of the Trust Agreement, QRS transferred good and marketable
title to the Collateral, free and clear of any lien (but
subject to the prior claim of the Federal National Mortgage
Association in respect of the assets underlying the Daiwa
FLOWS Certificates);
(xii) any taxes, fees and other governmental
charges in connection with the execution and delivery of this
Agreement, the Indenture, the Contribution Agreement, or the
Trust Agreement, or the execution, delivery and sale of the
Notes have been or will be paid on or prior to the Closing
Date;
(xiii) the Indenture is not required to be
qualified under the Trust Indenture Act of 1939, as amended;
(xiv) the offer or sale of the Notes to the
Initial Purchaser in the manner contemplated hereby is exempt
from registration under the 1933 Act; the Notes meet the
eligibility requirements of Rule 144A(d)(3) under the 1933
Act; and QRS has not offered or sold, and will not offer or
sell, any securities or any Note in any manner that would
render the issuance and sale of the Notes hereunder or the
reoffer and resale of the Notes as contemplated by Section 7
hereof a violation of the 1933 Act or, assuming compliance by
the Initial Purchaser with its agreements and undertakings set
forth in Section 7 hereof, any state securities or "blue sky"
17
<PAGE>
laws or registration requirements pursuant thereto, nor has it
authorized, nor will it authorize, any person to act in such
manner.
(xv) neither QRS nor any person acting on
its behalf has engaged in any form of general solicitation or
general advertising (as those terms are used in Rule 502(c)
under the 1933 Act) in connection with any offer or sale of
the Notes in the United States;
(xvi) any taxes, fees and other governmental
charges in connection with the execution and delivery of the
Related Agreements or the execution, delivery and sale of the
Notes have been or will be paid at or prior to the Closing
Date; and
(xvii) QRS has 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 QRS 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.
QRS has no knowledge that any such disclosure documents or
trustee reports are not true and correct in all material
respects.
6. Conditions to the Obligation of the Issuer. The obligation
of the Issuer to sell the Notes to the Initial Purchaser will be subject to the
performance by the Initial Purchaser of its obligations hereunder.
7. Resales of Notes by the Initial Purchaser.
(a) The Initial Purchaser understands that the Notes have not
been registered under the 1933 Act, in reliance upon the exemption provided in
Section 4(2) thereof, and have not been registered or qualified under the
securities or "blue sky" laws of any state of other jurisdiction, in reliance
upon applicable state private placement exemptions. The Initial Purchaser also
agrees that it will not make a public offering of the Notes and that it will not
reoffer or resell the Notes in a manner that would require the registration of
the Notes under the 1933 Act or registration or qualification under any of the
securities or "blue sky" laws of any state or other jurisdiction. The Initial
Purchaser acknowledges that no action has been or will be taken by the Issuer,
QRS, or the Company that would permit a public offering of the Notes, or
possession or distribution of the Private Offering Memorandum, when prepared, or
any other offering materials in any jurisdiction where conditions or
requirements apply to such public offering and have not been fulfilled.
Accordingly, the Initial Purchaser agrees that it will observe all applicable
laws and regulations in each jurisdiction in or from which it purchases, offers,
sells or delivers the Notes or has in its possession or distributes the Private
18
<PAGE>
Offering Memorandum, or any other offering materials, when the same is prepared.
(b) The Initial Purchaser acknowledges that the Issuer is
exempt from registration under the 1940 Act and agrees that it shall not reoffer
or resell the Notes in such a manner as to cause the Issuer to become subject to
registration under the 1940 Act.
(c) The Initial Purchaser agrees that it will not reoffer or
resell the Notes in a manner that would (i) cause the assets of the Issuer to be
regarded as plan assets and subject to the fiduciary responsibility provisions
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
the prohibited transaction provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), or any federal, state or local law which is, to a material
extent, similar to the foregoing provisions of ERISA or the Code ("Similar
Law"), (ii) give rise to a fiduciary duty under ERISA, Section 4975 of the Code,
or any Similar Law on the part of the Issuer, or (iii) constitute a prohibited
transaction under ERISA, Section 4975 of the Code, or any Similar Law.
(d) The Issuer authorizes the Initial Purchaser to deliver to
investors purchasing Notes from the Initial Purchaser ("Subsequent Noteholders")
copies of this Agreement, the Private Offering Memorandum, when prepared, any
amendments or supplements hereto or thereto, and any information obtained
pursuant hereto in connection with any reoffer or resale of the Notes by the
Initial Purchaser in accordance herewith; provided, however, that the Initial
Purchaser shall not use or disclose any such information in a manner
inconsistent with this Agreement. The Issuer agrees that any Subsequent
Noteholder may rely on the representations and warranties set forth in this
Agreement to the same extent as if such Subsequent Noteholder were a party
hereto.
(e) The Issuer shall cause the Indenture Trustee to provide to
any holder of the Notes, or to any prospective purchaser of the Notes, upon the
request of such holder, the information substantially equivalent in scope to the
information required at such time to be provided for securities qualifying for
resales under Rule 144A under the 1933 Act. This covenant is intended to be for
the benefit of the Holders from time to time of the Notes.
(f) Without prejudice to any other provision of this Section
7, the Issuer shall not have any responsibility for, and the Initial Purchaser
will obtain, any consent, approval or permission required for the purchase,
offer, sale or delivery by the Issuer of the Notes under the laws and
regulations in force in any jurisdiction to which it is subject or in or from
which it makes any purchase, offer, sale or delivery.
(g) The Initial Purchaser agrees to require that each
Subsequent Noteholder deliver letters or opinions of counsel, as required
pursuant to the Indenture, as a condition to the purchase of the Notes.
(h) The Initial Purchaser agrees during the period referred to
Section 4(b) to inform the Issuer if and when the Initial Purchaser has sold all
of the Notes.
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(i) The Initial Purchaser understands that the Notes are
subject to the various restrictions on transfer described in the Indenture and
in the legend on the Note certificates and agrees to comply with such
restrictions on transfer. The Initial Purchaser has not engaged in and will not
engage in any form of general solicitation or general advertising (as those
terms are used in Rule 502(c) under the 1933 Act) in connection with any offer
or sale of the Notes.
(j) The Initial Purchaser agrees that there are no contracts,
agreements or understandings between the Initial Purchaser and any person
granting such person the right to require the Issuer or the Indenture Trustee to
file a registration statement under the 1933 Act with respect to any of the
Notes.
(k) The provisions of this Section 7 shall survive delivery of
and payment for the Notes.
20
<PAGE>
8. Indemnification and Contribution.
(a) Each of the Issuer and QRS (each an "Indemnifying Party")
jointly and severally agrees to indemnify and hold harmless the Initial
Purchaser and its affiliates, and the respective directors, officers, agents and
employees of the Initial Purchaser and its affiliates and each other entity or
person, if any, controlling the Initial Purchaser or any of its affiliates
within the meaning of either Section 15 of the 1933 Act or Section 20 of the
1934 Act (the Initial Purchaser and each such entity or person being
collectively referred to as an "Indemnified Party"), from and against any
losses, claims, damages or liabilities (or actions in respect thereof) (i)
relating to or arising out of the action or inaction of the Issuer or QRS in
connection with this Agreement or any of the other Related Agreements, or (ii)
caused by any untrue statement or alleged untrue statement of a material fact
contained in the Private Offering Memorandum, when prepared, as the same may be
amended or supplemented (including but not limited to any documents deemed to be
incorporated therein by reference), or caused by any omission or alleged
omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading provided, however, that such untrue statement or alleged
untrue statement or omission or alleged omission is not based on information
furnished in writing to the Indemnifying Party by the Initial Purchaser
specifically for use in the Private Offering Memorandum, when prepared, and any
amendment or supplement thereto. The Indemnifying Parties will jointly and
severally reimburse any Indemnified Party for all reasonable expenses
(including, without limitation, fees and disbursements of counsel) incurred by
such Indemnified Party in connection with investigating, preparing or defending
any such action or claim, whether or not in connection with pending or
threatened litigation to which the Indemnified Party is a party, in each case,
as such expenses are incurred or paid. With respect to clause (i) above, an
Indemnifying Party will not, however, be responsible for any losses, claims,
damages or liabilities (or expenses relating thereto) that (x) directly result
from the non-receipt of a Private Offering Memorandum by an investor or
potential investor if such Private Offering Memorandums were provided in
sufficient quantities by the Issuer or QRS to (and actually received by) the
Initial Purchase in a timely manner, or (y) are finally judicially determined to
have resulted from the bad faith or gross negligence of any Indemnified Party.
Each Indemnifying Party also agrees that no Indemnified Party shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to an
Indemnifying Party for or in connection with this Agreement or the Indenture,
except for any such liability for losses, claims, damages or liabilities with
respect to clause (i) above incurred by such Indemnifying Party that are finally
judicially determined to have resulted from the bad faith or gross negligence of
such Indemnified Party.
(b) In case any proceeding (including any governmental
investigation) shall be instituted involving any Indemnified Party, such
Indemnified Party shall promptly notify each Indemnifying Party in writing and
the Indemnifying Party, upon request of the Indemnified Party, shall retain
counsel reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party and any others the Indemnifying Party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
21
<PAGE>
such proceeding. In any such proceeding, any Indemnified Party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such Indemnified Party unless (i) the Issuer and the
Indemnified Party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both an Indemnifying Party and an Indemnified Party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
Indemnifying Party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm (in addition to any local counsel) for
all such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Indemnified Parties, such firm shall be designated in writing by the Initial
Purchaser. An Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, such Indemnifying
Party agrees to indemnify the Indemnified Party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Party shall have requested an
Indemnifying Party to reimburse the Indemnified Party for fees and expenses of
counsel as contemplated by the third sentence of this paragraph, such
Indemnifying Party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by the Issuer of the aforesaid
request and (ii) such Indemnifying Party shall not have reimbursed the
Indemnified Party in accordance with such request prior to the date of such
settlement. An Indemnifying Party shall not, without the prior written consent
of the Indemnified Party, effect any settlement of any pending or threatened
proceeding 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 claims that are the subject matter of such
proceeding.
(c) If the indemnification provided for in the first paragraph
of Section 8(a) is unavailable to an Indemnified Party in respect of any losses,
claims, damages or liabilities referred to therein, then the Indemnifying Party
in lieu of indemnifying such Indemnified Party thereunder, shall contribute to
the amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by the Indemnifying Party, on the one
hand, and the Indemnified Party on the other hand, from the sales 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 Indemnifying Party and of the Indemnified Party 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 fault of the Indemnifying Party, on the one hand, and the Indemnified
Party, on the other hand (i) in the case of any untrue or alleged untrue
statement of a material fact or any omission or alleged omission to state a
material fact, shall be determined by reference to, among other things, whether
such statement or omission relates to information supplied by an Indemnifying
22
<PAGE>
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and (ii) in the
case of any other action or omission, shall be determined by reference to, among
other things, whether such action or omission was taken or omitted to be taken
by the Indemnifying Party or by the Indemnified Party and the parties' relative
intent, knowledge, access to information and opportunity to prevent such action
or omission.
(d) QRS, the Issuer and the Initial Purchaser agree that it
would not be just and equitable if contribution pursuant to this Section 8 were
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 immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding any of the provisions of this Section 8, in no
event shall the Initial Purchaser's aggregate contribution to the amount paid or
payable exceed the aggregate amount of fees actually received by it under this
Agreement.
(e) The Initial Purchaser will indemnify and hold harmless the
Issuer, QRS and each person, if any, who controls any such party within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, to the same
extent as the foregoing indemnity from the Indemnifying Party to the Indemnified
Party, but only with reference to written information furnished to the Issuer as
herein stated by the Initial Purchaser specifically for use in connection with
the preparation of the documents referred to in the foregoing indemnity. This
indemnity will be in addition to any liability that the Initial Purchaser may
otherwise have.
9. Survival of Certain Representations and Obligations. The
respective representations, warranties, agreements, covenants, indemnities and
other statements of the Issuer, its officers, and the Initial Purchaser set
forth in, or made pursuant to, this Agreement shall remain in full force and
effect, regardless of any investigation, or statement as to the result thereof,
made by or on behalf of the Initial Purchaser, the Issuer or any of the officers
or directors or any controlling person of any of the foregoing, and shall
survive the delivery of and payment for the Notes. The provisions of Sections 8,
9 and 14 shall survive the termination or cancellation of this Agreement.
10. No Bankruptcy Filing. Each of the QRS 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 one year and one day after the payment in
full of all Classes of the Notes issued under the Indenture.
11. Issuance of Substitute Notes. In order to facilitate
resales of Notes by the Initial Purchaser to Holders, the Initial Purchaser may,
at its option, exchange the Notes without charge for one or more classes of
substitute notes to be issued pursuant to the Indenture ("Substitute Notes")
23
<PAGE>
that may have different initial principal balances, interest rates or maturities
than those of the Notes; provided, however, that QRS will cooperate in preparing
or effectuating any amendment to the Indenture or the Private Placement
Memorandum necessary in connection with such reallocation; further provided that
the issuance of Substitute Notes will not decrease the amount of Equity Interest
relative to the aggregate Note Principal Balance or the right of the Equity
Interest relative to the Notes to receive payments of Available Funds pursuant
to the Indenture as of the Closing Date.
12. Right to Sell in Various Jurisdictions. The Issuer shall
have no responsibility with respect to the right of the Initial Purchaser or any
other person to offer or sell the Notes in any jurisdiction. In the event that
QRS furnishes notification to the Initial Purchaser pursuant to Section 4(b)
hereof, the Initial Purchaser shall not make any further distribution of the
Private Offering Memorandum until such time as the Issuer shall have furnished
to the Initial Purchaser copies of an amendment or supplement to the Private
Offering Memorandum in accordance with the provision of Section 7 hereof.
13. Payment of Fees and Expenses. Subject to the terms of the
Side Letter Agreement, QRS shall be responsible for and shall pay all of the
fees, disbursements and expenses of the Company's and QRS' counsel and
accountants.
14. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Initial Purchaser, will be
mailed, delivered or telecopied to
PaineWebber Incorporated
1285 Avenue of the Americas, 19th Floor,
New York, New York 10019
Telecopy: 212-917-7957
Telephone: 212 713-7953
Attention: Steven J. Plust
or, if sent to QRS, will be mailed, delivered or telecopied to it at:
CAX DTR Securitization Corp.
3410 S. Galena Street
Denver, Colorado 80231
Telephone: (303) 614-9422
Facsimile: (303) 614-9401
Attention: Kevin Nystrom
or, if sent to the Issuer, will be mailed, delivered or telecopied to it at:
Structured Mortgage Trust 1997-2
c/o Wilmington Trust Company
Rodney Square
1100 North Market Street
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<PAGE>
Wilmington, Delaware 19808-0001
Facsimile: (302) 651-8882
Attention: Corporate Trust Department
15. 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 their successors and assigns, and no other person
will have any right or obligation hereunder.
16. Applicable Law; Counterparts. THIS AGREEMENT WILL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
This Agreement may be executed in any number of counterparts, each of which
shall for all purposes be deemed to be an original and all of which shall
together constitute but one and the same instrument.
17. Time of the Essence. Time shall be of the essence of this
Agreement.
[Signatures Commence On Following Page]
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<PAGE>
If the foregoing is in accordance with your understanding or
our agreement, please sign and return to us a counterpart hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the Issuer,
QRS and the Initial Purchaser.
Very truly yours,
STRUCTURED MORTGAGE TRUST 1997-2,
a Delaware business trust,
By: Wilmington Trust Company, not
individually, but solely in its
capacity as Owner Trustee,
By: /s/Emmett R. Harmon
--------------------------
Name: Emmett R. Harmon
Title: Vice President
CAX DTR SECURITIZATION CORP.,
a Delaware corporation,
By: /s/Diane Armstrong
----------------------------
Name: Diane Armstrong
Title: President & Secretary
Agreed to and accepted as of
the date set forth above at
New York, New York
PAINEWEBBER INCORPORATED,
a Delaware corporation,
as Purchaser
By: /s/Steven J. Plust
--------------------------
Name: Steven J. Plust
Title: Managing Director
S-1
TRUST INDENTURE AND SECURITY AGREEMENT
Dated as of November 3, 1997
Between
STRUCTURED MORTGAGE TRUST 1997-2,
as Issuer of Collateralized Notes
and
LASALLE NATIONAL BANK,
as Indenture Trustee
<PAGE>
This TRUST INDENTURE AND SECURITY AGREEMENT, dated as of
November 3, 1997 (the "Closing Date"), by and between Structured Mortgage Trust
1997-2 (the "Issuer"), a Delaware business trust acting through Wilmington Trust
Company, a banking corporation organized under the laws of the State of
Delaware, as Owner Trustee (the "Owner Trustee") and LaSalle National Bank, a
national banking association, as Indenture Trustee (the "Indenture Trustee").
PRELIMINARY STATEMENT
WHEREAS, the Company has contributed the Daiwa FLOWS
Certificates to CAX DTR Securitization Corp., a Delaware corporation ("QRS") in
exchange all of the equity in QRS, pursuant to a Contribution Agreement, dated
as of the date hereof, between the Company and QRS;
WHEREAS, QRS has deposited the Daiwa FLOWS Certificates with
the Issuer in exchange for trust certificates evidencing all of the Equity
Interest (the "Trust Certificates"), pursuant to a Trust Agreement between the
Owner Trustee and QRS, dated November 3, 1997;
WHEREAS, the Issuer has duly authorized the creation,
authentication, issuance and delivery of collateralized notes, (each a "Note,"
and, collectively, the "Notes"), issuable in four Classes (each, a "Class"),
with an aggregate principal amount of $45,974,526, as provided in this
Indenture;
WHEREAS, the Issuer has duly authorized the execution and
delivery of this Indenture to provide for the issuance of the Notes;
WHEREAS, in order to provide, among other things, for the
payment of the Issuer's obligations to the Holders from revenues of the
Collateral and proceeds from the sale or other disposition of the assets
constituting the Collateral, each of the parties hereto desires to enter into
this Indenture;
WHEREAS, all covenants and agreements made by the Issuer
herein are for the benefit and security of the Holders and the Indenture
Trustee;
WHEREAS, the Issuer is entering into this Indenture, and the
Indenture Trustee is accepting the trust created hereby for the benefit of, and
to secure the obligations owing to, the Holders, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged.
<PAGE>
GRANTING CLAUSE GRANTING CLAUSE
The Issuer hereby grants to the Indenture Trustee on the
Closing Date, in trust for the benefit of the Holders, all of the Issuer's
right, title, and interest in and to (i) the $50,974,526 outstanding principal
amount of Daiwa Securities America Inc. Multifamily First Loss Ownership
Securities ("Multifamily FLOWSSM"-1) Series 1994-Multifamily FLOWSSM-1 trust
receipt pass-through certificates (the "Daiwa FLOWS Certificates") and all
related securities entitlements, (ii) all rights to receive distributions
thereon from and after the date in December 1997 on which distributions on the
Daiwa FLOWS Certificates are made pursuant to the Daiwa Pooling Agreement and
renewals, extensions, substitutions and replacements of such Daiwa FLOWS
Certificates, (iii) all securities entitlements, contract rights, general
intangibles and accounts related to the Daiwa FLOWS Certificates (the "Other
Assets"), (iv) the Payment Account, whether in the form of cash, instruments,
securities, or other properties, (v) all present and future claims, demands, and
choses in action in respect of the foregoing, including the rights of the Issuer
as registered holder of the Daiwa FLOWS Certificates, and (vi) all proceeds of
the foregoing of every kind and nature whatsoever, including, without
limitation, all proceeds of the conversion thereof, voluntary or involuntary,
into cash or other liquid property, all cash proceeds, 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,
instruments and other property that at any time constitute all or part of or are
included in the proceeds of the foregoing ((i), (ii), (iii), (iv), (v) and (vi)
collectively, the "Trust Estate").
The foregoing Grant is made in trust to secure the payment of
principal and interest on, and any other amounts owing in respect of, the Notes,
and to secure compliance with the provisions of this Indenture, all as provided
in this Indenture.
In furtherance of the foregoing, the Issuer hereby delivers or
causes to be delivered to the Indenture Trustee or the Indenture Trustee's
designee each of the following documents or instruments relating to each Daiwa
FLOWS Certificate (or, in the case of item (ii) below, all Daiwa FLOWS
Certificates):
(i) a duly issued and authenticated physical certificate
evidencing such Daiwa Flows Certificate endorsed to LaSalle National
Bank, as Indenture Trustee under the Indenture, dated as of November 3,
1997, relating to STRUCTURED MORTGAGE TRUST 1997-2 or its nominee,
together with such Opinions of Counsel and other documents as shall be
necessary to cause registration of transfer of such Daiwa FLOWS
Certificate to the Indenture Trustee to be made and to obtain a duly
issued and authenticated physical certificate evidencing such Daiwa
FLOWS Certificate registered in the name of the Indenture Trustee or
its nominee;
(ii) three Uniform Commercial Code Financing Statements
covering the Trust Estate and executed, in one case by the Company as
debtor in favor of QRS as secured party and the Indenture Trustee as
its assignee and, in the second case, by QRS as debtor in favor of the
Issuer and the Indenture Trustee as its assignee and, in the third
case, by the Issuer as debtor in favor of the Indenture Trustee;
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<PAGE>
(iii) a copy of the Daiwa Pooling Agreement;
(iv) a copy of the Credit Support Agreement; and
(v) all other items relating to the foregoing in the
possession of the Issuer.
The Indenture Trustee hereby acknowledges the receipt by it of
each of the Daiwa FLOWS Certificates and the other documents and instruments
referenced above, in good faith and without actual notice of any adverse claim,
and declares that it holds and will hold such Daiwa FLOWS Certificates and such
other documents and instruments, and that it holds and will hold all other
assets and documents included in the Trust Estate, in trust for the exclusive
use and benefit of all present and future Holders.
The Indenture Trustee shall not assign, sell, dispose of or
transfer any interest in the Daiwa FLOWS Certificates or cause any other asset
constituting the Trust Estate or cause such to be subjected to any lien, claim
or encumbrance arising by, through or under the Indenture Trustee or any
Affiliate of the Indenture Trustee.
On or prior to the Closing Date, the Issuer shall cause
registration of transfer to the Indenture Trustee of each Daiwa FLOWS
Certificate to be made on the books and records of the registrar for such Daiwa
FLOWS Certificate and the Issuer shall deliver to the Indenture Trustee a duly
issued and authenticated physical certificate evidencing such Daiwa FLOWS
Certificate registered in the name of the Indenture Trustee. Also promptly
following the Closing Date, the Issuer shall notify and direct the parties
responsible under Daiwa Pooling Agreement and related agreements for making
payments on the Daiwa FLOWS Certificates to make such payments directly to the
Indenture Trustee (by wire transfer to the Payment Account if permitted) from
and after the date in December 1997 on which distributions on the Daiwa FLOWS
Certificates are made pursuant to the Daiwa Pooling Agreement and to continue to
do so until such time as the Issuer notifies such parties to the contrary
following the date on which the Indenture shall have been discharged and
released. The Indenture Trustee shall hold the Daiwa FLOWS Certificates in fully
registered certificated form, in the State of Illinois.
3
<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.
"Act": Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by the Holders, which may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by the requisite percentage of
such Holders in person or by an agent duly appointed in writing. Such action
will become effective when such instrument is delivered to the Indenture
Trustee.
"Affiliate": With respect to any specified Person, any other
Person controlling, 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.
"Available Funds": With respect to any Payment Date, but
subject to Section 12.01(c) and (d), all previously undistributed payments on
the Daiwa FLOWS Certificates or proceeds of liquidation thereof pursuant to
Section 11.06 received by the Indenture Trustee on or before the Certificate
Distribution Date immediately preceding the Payment Date.
"Brentwood Adjusted Available Amount": With respect to any
Payment Date, the amount equal to the greater of (a) zero and (b) the excess of
(i) the Brentwood Unadjusted Available Funds over (ii) the Brentwood Settlement
Amount.
"Brentwood Claim": A claim by FNMA against Daiwa Securities
America Inc. for reimbursement of a guarantee payment made by FNMA with respect
to the FNMA MBS in an amount equal to approximately $450,000 arising from a
default on the Brentwood Loan.
"Brentwood Loan": That certain mortgage loan, with FNMA Loan
Number 1661327543 and secured by a property known as Brentwood Apartments, with
an address at 831 Nursery Road, Irving Texas, which had been part of one of the
pools of mortgage loans backing the Trust Receipt prior to default on such
mortgage loan and foreclosure on the related mortgaged property.
"Brentwood Settlement Amount": The amount of any payment made
by Daiwa Securities America Inc. to FNMA in full or partial satisfaction of the
Brentwood Claim.
"Brentwood Unadjusted Available Funds": With respect to the
Payment Date occurring in the month in which the trustee under the Daiwa Pooling
Agreement notifies the Indenture Trustee, as registered holder of the Daiwa
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<PAGE>
FLOWS Certificates, that FNMA has received payment from Daiwa Securities America
Inc. in settlement of the Brentwood Claim as contemplated in Section 12.01(c),
all previously undistributed payments on the Daiwa FLOWS Certificates received
by the Indenture Trustee on or before the Certificate Distribution Date
immediately preceding such Payment Date, less any Tax Administrator's Fees,
Owner Trustee's Fees or Indenture Trustee's Fees due on such Payment Date.
"Business Day": Any day that is not a Saturday, Sunday,
holiday, or other day on which commercial banking institutions in New York, New
York, Wilmington, Delaware or Chicago, Illinois are authorized or obligated by
law or executive order to be closed.
"Certificate Distribution Date": With respect to any date of
determination, the date on or immediately preceding such date of determination
on which distributions of interest and principal are made with respect to the
Daiwa FLOWS Certificates pursuant to the Daiwa Pooling Agreement.
"Certificate Principal Balance": The Outstanding principal
balance of the Daiwa FLOWS Certificates.
"Certificate of Deposit": A certificate of deposit satisfying
the definition of an Eligible Investment.
"Certificate Remittance Reports": The reports received
periodically by the Indenture Trustee, as the holder of the Daiwa FLOWS
Certificates, containing the information on the Daiwa FLOWS Certificates
required to be delivered to the Indenture Trustee pursuant to the Daiwa Pooling
Agreement or the Credit Support Agreement.
"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 $24,224,526 being issued hereunder.
"Class B Notes": The Class B Notes, in the initial aggregate
principal amount of $14,000,000 being issued hereunder.
"Class C Notes": The Class C Notes, in the initial aggregate
principal amount of $0 being issued hereunder.
"Class D Notes": The Class D Notes, in the initial aggregate
principal amount of $7,750,000 being issued hereunder.
"Closing Date": The meaning set forth in the initial paragraph
of this Indenture.
"Code": The Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
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"Collateral": Individually and collectively, the assets
constituting the Trust Estate from time to time pledged as security for the
Issuer's obligation under the Notes and under this Indenture.
"Collateral Proceeds": All "proceeds" of the Collateral as
such term is used in Section 9-306 of the UCC, and all proceeds of such
"proceeds."
"Company": Commercial Assets, Inc., a corporation organized
under the laws of the State of Maryland.
"Contribution Agreement": The Contribution Agreement, dated as
of November 3, 1997, by and between the Company and QRS, pursuant to which the
Company contributed the Daiwa FLOWS Certificates to QRS.
"Cooperation Agreement": The Securitization Cooperation
Agreement, dated as of November 3, 1997, by and among the Company, QRS, the
Issuer and the Initial Purchaser, with respect to retranching of the Notes.
"Corporate Trust Office": The principal corporate trust office
of the Indenture Trustee,
presently located at
135 South LaSalle Street
Chicago, Illinois 60674-4107
Attention: Asset Backed Securities Trust Services Group--
Structured Mortgage Trust 1997-2
or at such other address as the Indenture Trustee may designate from time to
time by notice to the Holders and the Issuer, or the principal corporate trust
office of any successor Indenture Trustee.
"Credit Support Agreement": The Second Amended and Restated
Credit Support and Collateral Pledge Agreement, dated as of February 28, 1994,
by and among FNMA, Daiwa Finance Corp., as seller, Daiwa Securities America
Inc., as initial owner, and BankAmerica National Trust Company, as custodian, as
further amended and restated as of the date of this Indenture.
"Current Interest Shortfall": With respect to any Class or the
Equity Interest and any Payment Date, any amount by which the interest accrued
during the related Interest Accrual Period at the Weighted Average Note Rate
exceeds the amount of Available Funds paid as interest to such Class or the
Equity Interest on such Payment Date.
"Current Principal Shortfall": With respect to any Class or
the Equity Interest and any Payment Date, any amount by which the lesser of the
amounts referred to in clauses (A) and (B)(i) of the definition of Optimal
Principal exceeds the amount of Available Funds paid as principal to such Class
6
<PAGE>
or the Equity Interest on such Payment Date.
"Daiwa FLOWS Certificate": As defined in the Granting Clause.
"Daiwa Pooling Agreement": The Pooling Agreement, dated as of
March 30, 1994, among Daiwa Securities America Inc., Daiwa Finance Corp. and
LaSalle National Bank, as trustee, pursuant to which the Daiwa FLOWS
Certificates were issued, in effect as of the date of this Indenture.
"Default": Any occurrence that is, or with notice or the lapse
of time or both would become, an Event of Default.
"Definitive Notes": The certificated, definitive, fully
registered Notes registered in the name of a Holder and not in the name of DTC
or its nominee.
"Delivery Date": November 3, 1997.
"Depositor": QRS, as depositor under the Trust Agreement.
"Depository": The Depository Trust Company, the nominee of
which is Cede & Co., or any successor thereto.
"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": The Indenture Trustee, or its successor in
interest.
"DTC Letter of Representations": The meaning specified in
Subsection 3.03(c) hereof.
"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 banker, acceptances issued by any depository institution or
trust company incorporated under the laws of the United States of
America (including the Indenture 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
investment have a credit rating in the highest applicable category from
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<PAGE>
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 has 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 balance of the Daiwa FLOWS Certificates and the Eligible
Investments held as part of the Trust Estate at the time of such
acquisition; 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.
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<PAGE>
"Equity Interest": The interest retained by the Issuer in any
excess of the aggregate principal balance of the Daiwa FLOWS Certificates over
the aggregate Note Principal Balance of all Classes of Notes.
"ERISA": The Employee Retirement Income Security Act of 1974,
as it may be amended from time
to time, and the regulations promulgated thereunder.
"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 (i) the Sale of the Daiwa FLOWS Certificates in accordance with Section
6.18 hereof, or (ii) the final payment on the Daiwa FLOWS Certificates.
"FNMA": The Federal National Mortgage Association or any
successor thereof.
"FNMA MBS": Mortgage-backed securities issued by FNMA pursuant
to (a) a Special Pool Purchase Agreement dated November 1993 and (b) a Special
Pool Purchase Agreement dated December 1993.
"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 Depository Participant (whether in
its own name or on behalf of an indirect participant in accordance with the
rules of the Depository).
"Grant": To pledge, create and grant a security interest in
and right of set-off against the Collateral. 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.
"Holder": With respect to any Note, the Person in whose name
such Note is registered in the Note Register, and with respect to the Equity
Interest, QRS as Depositor under the Trust Agreement.
"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.
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<PAGE>
"Imputed Principal Payments": All payments of principal
actually made on the Equity Interest in accordance with priority SIXTH of
Section 12.01(a) hereof.
"Indenture": This instrument, as supplemented or amended from
time to time by one or more indentures supplements hereto entered into in
accordance with the applicable provisions of this Indenture. 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.
"Indenture Trustee": LaSalle National Bank, a national banking
association, unless a successor Person shall have become the Indenture Trustee
pursuant to the applicable provisions of this Indenture, in which case
"Indenture Trustee" shall thereafter mean such successor Person.
"Indenture Trustee's Fee": A monthly fee equal to one twelfth
of the product of (a) the Indenture Trustee's Fee Rate and (b) the aggregate of
(i) the Note Principal Balances of all Classes of the Notes plus (ii) the
Imputed Principal Balance of the Equity Interest, due to the Indenture Trustee
as compensation for its services during the applicable month.
"Indenture Trustee's Fee Rate" 0.02% per annum.
"Indenture Trustee Officer": With respect to the initial
Indenture Trustee, any officer in its Asset Backed Securities Trust Services
Group with particular responsibility for the transactions contemplated by this
Indenture, and with respect to any successor Indenture 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 Indenture 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.
"Independent": When used with respect to any specified Person,
means another Person who (1) is in fact independent of the Issuer, any other
obligor upon the Notes, any Affiliate of the Issuer or such other obligor, the
Company, or QRS (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, such other obligor, the Company, or QRS, and (3) is not
connected with the Issuer, any such other obligor as an officer, employee,
promoter, underwriter, trustee, partner, director or person performing similar
functions or as a spouse, parent, descendant or sibling (whether by blood or
adoption) of any such person.
"Institutional Accredited Investor": Any institution meeting
the requirements of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act and any entity all of the equity owners of which come within such
paragraphs.
"Interest Accrual Period": With respect to any Payment Date,
the period beginning on the 26th day of the month immediately preceding the
10
<PAGE>
month in which such Payment Date occurs and ending on the 25th day of the month
in which such Payment Date occurs; provided, however, that the first Interest
Accrual Period shall be considered to be a full month.
"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": The meaning set forth in the first paragraph of this
Indenture.
"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 Indenture Trustee.
"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.
"1933 Act": The Securities Act of 1933, as amended.
"1934 Act": The Securities Exchange Act of 1934, as amended.
"1939 Act": The Trust Indenture Act of 1939, as amended.
"1940 Act": The Investment Company Act of 1940, as amended.
"Note": The meaning set forth in the Preliminary Statement.
"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, and
with respect to any Class of Notes, the aggregate outstanding principal balance
of all Notes of that Class as of such date, as reduced by all payments of
principal to such Class on or prior to such date of determination.
"Note Register" and "Note Registrar": The respective meanings
specified in Section 3.05.
"Note Remittance Report": The report provided by the Indenture
Trustee to the Holders and the Issuer pursuant to Section 11.04(a).
"Officer": With respect to any corporation, the chairman of
the board of directors, the president, any vice president, the secretary, any
assistant secretary or the treasurer of such corporation; with respect to any
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<PAGE>
bank or trust company acting as trustee of an express trust or as custodian, any
trust officer or other authorized officer thereof.
"Officer's Certificate": For any Person, a certificate
delivered to the Indenture 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 in 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 reasonably
satisfactory to the Indenture Trustee, provided that any counsel rendering an
opinion concerning tax issues be Independent outside counsel. 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 law by an attorney
or law firm not admitted to practice in Delaware.
"Optimal Interest": (a) With respect to any Class and any
Payment Date, an amount equal to the sum of (i) interest accrued during the
related Interest Accrual Period at the Weighted Average Note Rate on the Note
Principal Balance of such Class as of the first day of such Interest Accrual
Period, assuming that all reductions of Note Principal Balance during such
Interest Accrual Period occur on the first day of such Interest Accrual Period,
and (ii) the Unpaid Interest Shortfall for such Class as of such Payment Date,
and (b) with respect to the Equity Interest, subject to Section 12.01(c), an
amount equal to the sum of (i) an amount equal to one twelfth of the product of
the Percentage Cash Flow Rate and the Imputed Principal Balance as of the first
day of such Interest Accrual Period, assuming that all reductions of Imputed
Principal Balance during such Interest Accrual Period occur on the first day of
such Interest Accrual Period, and (ii) the Unpaid Interest Shortfall for the
Equity Interest as of such Payment Date. For purposes hereof, amounts paid to
any Class of Notes or to the Equity Interest in respect of Optimal Interest are
deemed to be paid first pursuant to clause (i) and second to clause (ii).
"Optimal Payment Amount": With respect to any Class or the
Equity Interest and any Payment Date, the sum of Optimal Interest and Optimal
Principal for such Class or the Equity Interest and such Payment Date. For
purposes hereof, amounts paid to any Class or the Equity Interest in respect of
the Optimal Payment Amount are deemed to be paid first to Optimal Interest and
second to Optimal Principal.
"Optimal Principal": With respect to any Class or the Equity
Interest and any Payment Date, and subject to Section 12.01(d), an amount equal
to the lesser of (A) the Note Principal Balance for such Class or the Imputed
Principal Balance for the Equity Interest and (B) the sum of (i) the product of
(a) the Original Percentage for such Class or the Equity Interest and (b) the
sum of (x) the Security Excess Distribution received on the Certificate
Distribution Date immediately preceding such Payment Date and (y) the sum of (1)
the proceeds of liquidation of Pledged FNMA Securities liquidated on the
immediately preceding Certificate Distribution Date pursuant to a Realized Loss,
if any, allocated to the Pledged FNMA Securities on such Certificate
Distribution Date plus (without duplication) (2) the amount of Pledged FNMA
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<PAGE>
Securities Principal and Trust Receipt Reserve Account Principal remitted to
FNMA (or as to which FNMA has directed liquidation) on the immediately preceding
Certificate Distribution Date in accordance with the Credit Support Agreement
pursuant to a Realized Loss, if any, allocated to the Pledged FNMA Securities or
the Trust Receipt Reserve Fund on such Certificate Distribution Date and (ii)
the Unpaid Principal Shortfall for such Class or the Equity Interest. For
purposes hereof, amounts paid to any Class or the Equity Interest in respect of
Optimal Principal are deemed to be paid first pursuant to clause (i) and second
to clause (ii).
"Original Imputed Principal Balance": $5,000,000.
"Original Percentage": with respect to each Class and the
Equity Interest, the percentage set forth below for such Class or the Equity
Interest:
Class A: 47.523%;
Class B: 27.465%;
Class C: 0.000%;
Class D: 15.204%;
Equity Interest 9.808%;
-------
Total 100.000%.
"Other Assets": As defined in the Granting Clause.
"Outstanding":
(1) With respect to the Notes of any Class, as of any date of
determination, "Outstanding" refers to all Notes of such Class theretofore
authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes for payment or redemption of which moneys in the
necessary amount have been theretofore deposited with the Indenture
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
Indenture Trustee has been made;
(iii) Notes in exchange for or in lieu of which other Notes
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a holder in due course; and
(iv) Notes 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,
13
<PAGE>
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 or the Company or QRS shall be
disregarded and deemed not to be Outstanding, except that, in
determining whether the Indenture Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice,
consent or waiver, only Notes that the Indenture 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 Indenture Trustee the pledgee's right so to
act with respect to such Notes and if the pledgee is not the Issuer any
other obligor upon the Notes or any Affiliate of the Issuer or such
other obligor, the Company, or QRS.
(2) With respect to the Daiwa FLOWS Certificates,
"Outstanding" refers to the outstanding principal amount of the Daiwa FLOWS
Certificates.
"Owner Trustee": The Person appointed and acting as Owner
Trustee pursuant to the Trust Agreement, initially Wilmington Trust Company, a
Delaware bank and trust company.
"Owner Trustee's Fee": A monthly fee equal to one twelfth of
the product of (a) the Owner Trustee's Fee Rate and (b) the aggregate of (i) the
Note Principal Balances of all Classes of the Notes plus (ii) the Imputed
Principal Balance of the Equity Interest, due to the Owner Trustee as
compensation for its services during the applicable month.
"Owner Trustee's Fee Rate" The per annum rate derived by
dividing (i) $4,000 over (ii) the aggregate of the Note Principal Balances of
all Classes of the Notes plus the Imputed Principal Balance of the Equity
Interest.
"PaineWebber": PaineWebber Incorporated, a Delaware
corporation.
"Paying Agent": Any Person authorized by the Issuer to pay the
principal of and interest on any Notes and the Equity Interest on behalf of the
Issuer, which shall initially be the Indenture Trustee unless and until the
Issuer appoints another Person as Paying Agent.
"Payment Account": A segregated trust account established and
maintained by the Indenture Trustee pursuant to Section 11.02 hereof, which
shall be designated "LaSalle National Bank, in trust for the registered holders
of Structured Mortgage Trust 1997-2 Collateralized Notes".
"Payment Date": December 31, 1997 and thereafter the first
Business Day following the Certificate Distribution Date. For accounting
purposes of the Issuer and for Record Date purposes only, the Payment Date for a
month will be deemed to occur on the 28th day of such month.
"Percentage Cash Flow Rate": The annual rate at which cash
flow is payable on the Imputed Principal Balance of the Equity Interest, which
shall be equal to the Weighted Average Note Rate.
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<PAGE>
"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 initial Note
Principal Balance of such Note, without giving effect to reductions thereof, and
the denominator of which is the initial Note Principal Balance of Notes of that
Class, without giving effect to reductions thereof; 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 initial Note Principal Balance of such
Note, without giving effect to reductions thereof, and the denominator of which
is the aggregate initial Note Principal Balance of all of the Notes, without
giving effect to reductions thereof.
"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.
"Plan": The meaning set forth in Section 3.05(p).
"Pledged FNMA Securities": The "pledged securities" as defined
in the Credit Support Agreement.
"Pledged FNMA Securities Principal": The "pledged securities
principal" as defined in the Credit Support Agreement.
"Proceeding": Any suit in equity, action at law or other
judicial or administrative proceeding.
"Purchase Price": With respect to the Daiwa FLOWS
Certificates, the price at which the Company is required to repurchase such from
the Issuer pursuant to the Cooperation Agreement.
"QRS": The meaning set forth in the Preliminary Statement of
this Indenture.
"Qualified Institutional Buyer": Any "qualified institutional
buyer" as defined in clause (a)(1) of Rule 144A.
"Rating Agency": Duff & Phelps Rating Co., any successors
thereto, or any other nationally recognized statistical rating organization
requested by the Issuer to rate any Class of the Notes.
"Realized Loss": An event giving rise to an "approved loss" as
defined in the Credit Support Agreement.
"Record Date": With respect to any Payment Date, the last
Business Day of the month preceding the month in which such Payment Date is
deemed to occur.
"Records": All of the books, ledgers, documents,
communications, writings, schedules, reconciliations, controls, computer data,
printouts, programs, tapes and other electronic data processing storage devices,
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<PAGE>
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
of the 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.
"Related Agreements": This Indenture, the Contribution
Agreement, the Note Purchase Agreement, dated November 3, 1997, among the
Issuer, QRS and PaineWebber, the Side Letter Agreement, dated November 3, 1997,
between the Company and PaineWebber, the Trust Agreement and the Cooperation
Agreement.
"Rule 144A": Rule 144A promulgated under the Securities Act.
"Rule 144A Certificate": The certificate to be furnished by
each purchaser of Notes which is a Qualified Institutional Buyer as defined in
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 Investment
Letter and Affidavit".
"Sale": The meaning contemplated in Section 6.18(a).
"Securities Act": The Securities Act of 1933, as amended.
"Securities Legend": The meaning set forth in Section 3.05(j).
"Security Excess Distribution": An amount equal to
distributions of principal of the Daiwa FLOWS Certificates (or the principal
balance of Pledged FNMA Securities liquidated as contemplated by Section 11.06)
on any Certificate Distribution Date in an amount equal to the Security Excess
as defined in the Credit Support Agreement.
"Similar Law": The meaning set forth in Section 3.05(p).
"Stated Maturity": The Payment Date occurring in January 2006,
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": The meaning set forth in Section 8.03.
"Tax Administrator's Fee": A monthly fee equal to one twelfth
of the product of (a) the Tax Administrator's Fee Rate and (b) the aggregate of
(i) the Note Principal Balances of all Classes of the Notes plus (ii) the
Imputed Principal Balance of the Equity Interest, due to the Tax Administrator
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<PAGE>
as compensation for its services as tax administrator during the applicable
month.
"Tax Administrator's Fee Rate": 0.01% per annum.
"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 November
3, 1997, between QRS, as depositor, and the Owner Trustee pursuant to which the
Issuer was established.
"Trust Certificates": The meaning set forth in the Preliminary
Statement.
"Trust Estate": The meaning specified in the Granting Clause
of this Indenture.
"Trust Receipt": As defined in the Credit Support Agreement.
"Trust Receipt Collection Period": With respect to each
Certificate Distribution Date, the period beginning on the day following the
latest distribution on the Pledged FNMA Securities or the Trust Receipt Reserve
Account in the preceding calendar month and ending on the day of the last
distribution on the Pledged FNMA Securities or the Trust Receipt Reserve Account
in the calendar month in which such Certificate Distribution Date occurs.
"Trust Receipt Reserve Account": The "reserve account" as
defined in the Credit Support Agreement.
"Trust Receipt Reserve Account Interest Rate": With respect to
any Interest Accrual Period, the per annum rate derived by dividing (i) twelve
times the amount of interest and other reinvestment earnings on amounts in the
Trust Receipt Reserve Account that would be paid on the Trust Receipt on the
Certificate Distribution Date occurring immediately after the end of such
Interest Accrual Period in the absence of any Realized Loss by (ii) the
principal balance of the Trust Receipt Reserve Account as of the Certificate
Distribution Date immediately following the commencement of such Interest
Accrual Period.
"Trust Receipt Reserve Account Principal": the "reserve
account principal" as defined in the Credit Support Agreement.
"UCC": The Uniform Commercial Code as in effect from time to
time in the State of Illinois.
"Unpaid Interest Shortfall": With respect to any Class or the
Equity Interest and any Payment Date, the amount, if any, by which the aggregate
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<PAGE>
of the Current Interest Shortfall Amount for such Class or the Equity Interest
on prior Payment Dates (after giving effect to all payments made on such Payment
Date) exceeds the amounts paid to such Class or the Equity Interest in respect
of Unpaid Interest Shortfalls on prior Payment Dates.
"Unpaid Principal Shortfall": With respect to any Class or the
Equity Interest and any Payment Date, the amount, if any, by which the aggregate
of the Current Principal Shortfall Amount for such Class or the Equity Interest
on prior Payment Dates (after giving effect to all payments made on such Payment
Date) exceeds the amounts paid to such Class or the Equity Interest in respect
of Unpaid Principal Shortfalls on prior Payment Dates.
"Weighted Average Note Rate": With respect to each Interest
Accrual Period, (a) the weighted average of (x) the Weighted Average Pledged
FNMA Certificate Rate and (y) the Trust Receipt Reserve Account Interest Rate
(weighted, in the case of clause (x) on the basis of the principal balance of
the Pledged FNMA Securities and weighted, in the case of clause (y), on the
principal balance of the Trust Receipt Reserve Account, in each case, as of the
Certificate Distribution Date immediately following the commencement of such
Interest Accrual Period) minus (b) the sum of the Indenture Trustee's Fee Rate,
the Owner Trustee's Fee Rate and the Tax Administrator Fee Rate.
"Weighted Average Pledged FNMA Certificate Rate": With respect
to any Interest Accrual Period, the sum of (a) the weighted average, as of the
Certificate Distribution Date immediately following the commencement of such
Interest Accrual Period, of the pass-through rates on the Pledged FNMA
Securities (weighted on the basis of the principal balances of the respective
classes of Pledged FNMA Securities as of such Certificate Distribution Date)
plus (b) the rate derived by dividing (x) twelve times the amount of prepayment
premiums allocable (in the absence of Realized Losses) to the Trust Receipt on
the Certificate Distribution Date immediately following the end of such Interest
Accrual Period by (y) the principal amount of Pledged FNMA Securities as of the
Certificate Distribution Date immediately following the commencement of such
Interest Accrual Period.
[End of Article I]
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ARTICLE TWO:
[INTENTIONALLY OMITTED]
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ARTICLE THREE: THE NOTES
Section 3.01 The Depository; Initial Note Principal Balances
and Interest Rates.
(a) The Notes of each Class shall be designated generally as
the "Structured Mortgage Trust 1997-2 Collateralized Notes" followed by the
appropriate Class designation. The Notes of each Class shall be issued in the
form attached hereto as Exhibits A-1 through and including A-4, with 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.
(b) The aggregate principal amount of the Notes that may be
authenticated and delivered hereunder is limited to $45,974,526, 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 A Notes: $24,224,526
Class B Notes: $14,000,000
Class C Notes: $0
Class D Notes: $7,750,000
Each Class of Notes will accrue interest during each Interest
Accrual Period at the Weighted Average Note Rate on the applicable Note
Principal Balance. Interest shall be calculated based upon a 360-day year
consisting of twelve 30-day months.
The Notes of each Class that are authenticated and delivered
by the Indenture Trustee to, or upon the order of, the Issuer on the Delivery
Date shall be dated as of 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 $1,000,000 and in integral multiples of $100,000 in
excess thereof, except that one Note of each 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 Note Principal Balance of such Class on the Delivery Date.
On the Delivery Date, the Issuer, upon direction of PaineWebber, shall execute
and the Indenture Trustee shall authenticate (i) one Global Note of each Class
and/or (ii) one or more Definitive Notes of each Class for which Notes will be
held in certificated form all in an aggregate Note Principal Balance that shall
equal the Note 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.
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Section 3.03 Execution, Authentication and Delivery; The Depositor.
(a) The Notes shall be executed on behalf of the Issuer by an
authorized Issuer Officer. 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.
(b) 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 Indenture Trustee for authentication, and the
Indenture Trustee shall authenticate and deliver such Notes in the manner
provided for in this Indenture 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 therein, as set forth in Exhibits A-1 through A-4,
executed by the Indenture Trustee by the manual signature of one of its
Officers, and such certificate upon any Note shall be conclusive evidence, and
the only evidence, that such Note has been duly authenticated and delivered
hereunder.
(c) Except for the Definitive Notes, and as provided in
Subsection 3.03(b), the Notes shall at all times following the Issuance of
Global Notes 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
Indenture 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 any 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 Indenture Trustee shall deal with the
Depository as representative of the Note Owners for purposes of exercising the
rights of Holders 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 Indenture 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 beneficial interests in 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 beneficial interests in Notes of Note Owners it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository's normal procedures.
(d) If (i)(A) the Issuer advises the Indenture Trustee in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities as Depository and (B) the Indenture Trustee or the Issuer
is unable to locate a qualified successor within 30 days, or (ii) the Issuer, at
its option, advises the Indenture Trustee in writing that it elects to terminate
use of the book-entry system through the Depository, the Indenture Trustee shall
request that the Depository notify all Note Owners of the occurrence of any such
event and of the availability of Definitive Notes to Note Owners requesting the
same. Upon surrender to the Indenture Trustee of the Notes by the Depository,
accompanied by registration instructions from the Depository for registration,
the Indenture Trustee shall issue the Definitive Notes. Neither the Issuer nor
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the Indenture 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.
Section 3.04 Temporary Notes.
Pending the preparation of Definitive Notes of any Class, the
Issuer may execute, and upon Issuer Order the Indenture 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 Indenture 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 Indenture 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 Indenture Trustee is appointed
by the Issuer as Note Registrar, the Issuer will give the Indenture 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
Indenture 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.
(c) Subject to Subsection 3.03(d) 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 execute, the Indenture 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.
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(d) By acceptance of a Definitive Note or an interest in a
Global Note, whether upon original issuance or subsequent transfer, each Holder
of such Definitive Note acknowledges (or in the case of Global Notes will be
deemed to have acknowledged) 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 and therein.
(e) 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 a Definitive Note to a transferee that takes delivery in the form
of a Definitive Note:
(i) To a Qualified Institutional Buyer: The Note Registrar
shall register the transfer of a Definitive Note if the requested
transfer is being made to a transferee who has provided the Note
Registrar with a properly completed and executed Rule 144A Certificate.
(ii) To an Institutional Accredited Investor: The Note
Registrar shall register the transfer of any Definitive Note if (x) the
transferor has advised the Note Registrar in writing that the Note is
being transferred to an Institutional Accredited Investor and that the
transferee did not purchase such Note with a view to its resale; 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, determination 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 a Definitive
Note.
(f) 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 Definitive 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(f) and 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 a
Definitive Note or Notes of such Class and the Note Registrar shall
register such transfer only upon compliance with the provisions of
Subsection 3.05(e)(ii).
(ii) In the case of a beneficial interest in a Global Note of
a Class being transferred to a transferee who takes delivery in the
form of a Definitive 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(e)(i).
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(iii) In the case of a Definitive Note of a Class being
transferred to a transferee who takes delivery in the form of a
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) Except as set forth in clause (i) above, 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.
(g) Subject to Subsection 3.05(i), an exchange of a beneficial
interest in the Global Note of a Class for a Definitive Note or Notes of such
Class, an exchange of a Definitive Note or Notes of a Class for a beneficial
interest in the Global Note of such Class and an exchange of a Definitive Note
or Notes of a Class for another Definitive 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(g) 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 a
Definitive Note or Notes of such Class.
(ii) A holder of a Definitive 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 Note Registrar a Rule 144A Certificate.
(iii) A holder of a Definitive Note of a Class may exchange
such Note for an equal aggregate Note Principal Balance of Definitive
Notes of such Class in different authorized denominations without any
certification.
(h) If a Person is acquiring any Note or interest therein as a
fiduciary or agent for one or more accounts, such Person shall be required to
deliver to the Note Registrar (in the case of a Definitive Note) or the
transferor (in the case of a beneficial interest in the Global Note of any Class
of Notes) a certification to the effect that it has (i) sole investment
discretion with respect to each such account and (ii) full power to make the
foregoing acknowledgements, representations, warranties, certifications and
agreements with respect to each such account as set forth in subsections (e),
(f), and (g) of this Section 3.05.
(i) Upon acceptance for exchange or transfer of:
(i) a Definitive Note of a Class for a beneficial interest in
the Global Note of such Class as provided herein, the Note Registrar
shall cancel such Definitive 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
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balance of such Definitive Note exchanged or transferred therefor.
(ii) a beneficial interest in the Global Note of a Class for a
Definitive 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
exchange or transfer and a decrease in the note balance of such Global
Note equal to the note balance of such Definitive Note issued in
exchange therefor or upon transfer thereof.
(j) The following Legend (the "Securities Legend") shall be
placed on the Global Notes and on any Definitive Note issued in exchange for or
upon transfer of another Definitive Note or of a beneficial interest in a Global
Note:
"THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 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
1933 ACT AND OTHER APPLICABLE LAWS AND ONLY (1) TO A PERSON THAT THE HOLDER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (A "QIB") WITHIN THE
MEANING OF RULE 144A UNDER THE 1933 ACT ("RULE 144A"), PURCHASING FOR ITS OWN
ACCOUNT OR 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, IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A; (2) PURSUANT
TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE 1933 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) (OR ANY ENTITY IN
WHICH ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS) OF REGULATION D
UNDER THE 1933 ACT, IN EACH CASE TO A BUYER WHICH CONSTITUTES ONE "BENEFICIAL
OWNER" AND A QUALIFIED PURCHASER, AS DEFINED IN THE INVESTMENT COMPANY ACT OF
1940 AND WHICH IS NOT PURCHASING WITH A VIEW TO DISTRIBUTION IN VIOLATION OF THE
1933 ACT, SUBJECT TO (A) THE RECEIPT BY THE INDENTURE TRUSTEE OF A LETTER
SUBSTANTIALLY IN THE FORM OF EXHIBIT B-1 TO THE TRUST INDENTURE AND (B) THE
RECEIPT BY THE INDENTURE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE
INDENTURE TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE
WITH THE 1933 ACT AND OTHER APPLICABLE LAWS AND 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. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION
FOR RESALES OF THIS NOTE."
"NO TRANSFER OF ANY OWNERSHIP INTEREST IN THIS NOTE SHALL BE MADE TO (i) ANY
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EMPLOYEE BENEFIT PLAN AS DEFINED IN SECTION 3(3) OF ERISA, WHETHER OR NOT THE
PLAN IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (ii) ANY PLAN DESCRIBED
IN SECTION 4975(e)(1) OF THE CODE, OR (iii) ANY ENTITY WHOSE UNDERLYING ASSETS
INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY. ANY TRANSFER
OF A NOTE THAT WOULD VIOLATE, OR RESULT IN A PROHIBITED TRANSACTION UNDER, ERISA
OR SECTION 4975 OF THE CODE OR ANY SIMILAR LAW SHALL BE DEEMED TO BE ABSOLUTELY
NULL AND VOID AB INITIO."
(k) Subject to the restrictions on transfer and exchange set
forth in this Section 3.05, the holder of any Definitive 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 integral multiples of $100,000
in excess thereof) by surrendering such Note at the Corporate Trust Office,
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 and duly authorized in writing with such signature
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. 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 a Definitive
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 Indenture
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, a Definitive 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 Definitive 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.
(l) All Notes properly issued in accordance with this Section
3.05 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.
(m) 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.
(n) The Issuer shall reserve the right with respect to any
Note that it believes, after consultation with a Holder, may be held in
violation of the Investment Company Act of 1940 to (A) withdraw any such Note
from the Note Register, (B) withhold payments due on any such Note, (C) decline
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to register the transfer of any such Note or (D) require the sale of any such
Note. The Note Registrar shall take any such action directed by the Issuer in
writing.
(o) To permit compliance with Rule 144A under the Securities
Act in connection with resales of the Notes, the Issuer will furnish, or will
cause the Indenture Trustee to furnish (to the extent that the Indenture Trustee
has received such information from the Issuer), upon the request of a holder of
the Notes to such holder or to a prospective purchaser designated by such
holder, the information required to be delivered under Rule 144A(d)(4) under the
Securities Act, if at the time of such request the Issuer is not a reporting
company under Section 13 or Section 15(d) of the Securities Exchange Act of
1934, or exempt from reporting pursuant to Rule 12g3-2(b) under such Act.
(p) No transfer of any ownership interest in a Note shall be
made to (i) any employee benefit plan as defined in section 3(3) of ERISA,
whether or not the plan is subject to the provisions of Title I of ERISA, (ii)
any plan described in Section 4975(e)(1) of the Code, or (iii) any entity whose
underlying assets include plan assets by reason of a plan's investment in the
entity (collectively, a "Plan"). Each prospective transferee of a Definitive
Note shall deliver to the Issuer, the Note Registrar and the Indenture Trustee
(a) an investment representation letter stating, and each prospective transferee
of an interest in a Global Note shall be deemed to have represented, that the
prospective transferee is not a Person referred to in (i), (ii) or (iii) above,
or (b) an Opinion of Counsel which establishes to the satisfaction of the
Issuer, the Note Registrar and the Indenture Trustee that the purchase or
holding of the Note will not result in the Trust Estate being deemed to be "plan
assets"' and subject to the fiduciary responsibility or prohibited transaction
provisions of ERISA, the Code, or any federal, state or local law which is to a
material extent similar to the foregoing provisions of ERISA or the Code
("Similar Law") and will not constitute or result in a prohibited transaction
within the meaning of Section 406 or Section 407 of ERISA or Section 4975 of the
Code, and will not subject the Issuer, the Indenture Trustee or the Note
Registrar to any obligation or liability (including obligations or liabilities
under ERISA or Section 4975 of the Code), which Opinion of Counsel shall not be
an expense of the Indenture Trustee, the Trust Estate, Note Registrar or the
Issuer. Any transfer of a Note that would violate, or result in a prohibited
transaction under, ERISA or Section 4975 of the Code or any Similar Law shall be
deemed absolutely null and void ab initio.
(q) Subject to Section 7.01(b)(ii), neither the Indenture
Trustee nor the Note Registrar shall have any obligation or duty to monitor,
determine or inquire as to compliance with any restriction on transfer imposed
under this Section 3.05 of this Agreement or under any applicable law with
respect to any transfer of any Note, or any interest therein, other than to
require delivery of the certifications or Opinions of Counsel described in this
Section 3.05 with respect to changes in registration of record ownership of
Notes in the Note Register. Subject to Section 7.01(d), the Indenture Trustee
and the Note Registrar shall have no liability for transfers, including
transfers made through the book-entry facilities of the Depository or between or
among Depository Participants or beneficial owners of the Notes, made in
violation of applicable restrictions.
Section 3.06 Mutilated, Destroyed, Lost or Stolen Notes.
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If (a) any mutilated Note is surrendered to the Indenture
Trustee, or the Indenture Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, and (b) there is delivered to the
Indenture Trustee such security or indemnity as may be required by it to save
each of the Issuer and the Indenture 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 Indenture
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 Indenture 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 Indenture 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 Indenture 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 Indenture 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 Daiwa FLOWS 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.
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(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 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 Indenture
Trustee by such Person in writing at least five Business Days prior to the
applicable Record Date.
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 Indenture
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) Except as otherwise provided in the next sentence, all
payments to be made by the Owner Trustee under this Indenture shall be made only
from the payments and other receipts in respect of the Trust Estate and the
proceeds thereof and only to the extent that such amounts are sufficient to
enable the Owner Trustee to make payments of amounts due on the Notes or any
other amounts due hereunder in accordance with the terms hereof. Each Holder, by
its acceptance of a Note, and the Indenture Trustee, agrees that it will look
solely to the Trust Estate for payment of any and all amounts due on the Notes
or any other amounts due to such Person pursuant to this Indenture and that none
of the Owner Trustee, the Indenture Trustee, the Company, QRS, or PaineWebber
shall be liable for such payments.
(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.
(e) (i) Notwithstanding anything to the contrary in any
Related Agreement, the Owner Trustee and, by acceptance of its Notes, each
Holder, hereby agrees that no payment or distribution shall be made on or in
respect of any obligation on the Notes, including any payment or distribution of
cash, property or securities after the commencement of a Proceeding of the type
referred to in Section 6.09 hereof, except from cash, securities, or other
assets received by the Indenture Trustee and which are allocated for payment of
obligations in accordance with Article 12.
(ii) By the acceptance of its Notes, each Holder agrees that
in the event that such Holder shall receive any payment or distribution on or in
respect of any obligations referred to in paragraph (i), which it is not
entitled to receive under this subsection or under Article 12, it will hold any
amount so received in trust for the Owner Trustee, on behalf of the Holders and
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will forthwith turn over such payment to the Indenture Trustee in the form
received to be applied or held as provided in Article 12.
Section 3.08 Persons Deemed Owners.
Prior to due presentment for registration of transfer of any
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or of the
Indenture 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
Indenture Trustee nor any agent of the Issuer or the Indenture 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
Indenture Trustee, be delivered to the Indenture Trustee and shall be promptly
canceled by it. The Issuer may at any time deliver to the Indenture 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 Indenture 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 Indenture Trustee shall be destroyed in accordance with the
Indenture Trustee's customary practices unless the Issuer shall direct by an
Issuer Order that they be returned to it.
Section 0.10 Additional Notes.
Subject to Sections 9.08 and 9.09, the Owner Trustee and the
Indenture Trustee are hereby authorized to enter into a Supplemental Indenture
to provide that the Issuer may pledge additional trust receipt-backed securities
or mortgage-backed securities to the Indenture 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 Indenture
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 the Rating
Agency that such action will not adversely affect its then rating of each Class
of Notes.
Section 0.11 Annual Statement as to Compliance.
The Issuer shall deliver to the Indenture Trustee and each
Noteholder, on or before the last day of October beginning in 1998, a
Certificate signed by the Issuer, dated as of the last day of the preceding June
stating that:
(a) a review of the activities of the Issuer during the
preceding twelve-month period and of performance under this Indenture
has been made by the Issuer; and
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(b) to the best of the Issuer's knowledge, based on such
review, the Issuer has fulfilled all of its obligations under this
Indenture throughout such twelve-month period, or, if there has been a
default in the fulfillment of any such obligation, specifying each such
default known to the Issuer and the nature and status thereof.
Such certificate shall be prepared by the Certificateholders for the Issuer and
delivered to the Owner Trustee with authorization and direction to execute and
deliver the certificate to the Indenture Trustee.
[End of Article III]
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ARTICLE FOUR: AUTHENTICATION AND DELIVERY OF NOTES
Section 4.01 Security for Notes.
(a) The Notes of each Class shall be executed by the Issuer
and delivered to the Indenture Trustee for authentication, and thereupon the
same shall be authenticated and delivered to the Issuer by the Indenture Trustee
upon Issuer Order at such time as the Issuer shall, at its expense,
(i) have delivered the Daiwa FLOWS Certificates to
the Indenture Trustee, duly endorsed by the Company to QRS, by
QRS to the Issuer, and by the Issuer to the Indenture Trustee,
together with all required transfer documents to enable the
Daiwa FLOWS Certificates to be registered in the name of the
Indenture Trustee or its nominee or agent,
(ii) have prepared and filed or shall have caused to
be filed, at the Issuer's expense, and the Company, QRS, and
the Indenture Trustee shall have executed (as applicable)
three UCC Financing Statements covering the Trust Estate and
executed, (x) by the Company as debtor in favor of QRS as
secured party and the Indenture Trustee as its assignee, (y)
by QRS as debtor in favor of the Issuer and the Indenture
Trustee as its assignee, and (z) by the Issuer as debtor in
favor of the Indenture Trustee, promptly following the
issuance of the Notes, and the Issuer shall prepare and file
at each such office, and the Indenture Trustee shall execute,
continuation statements with respect thereto, in each case
within six months prior to each fifth anniversary of the
original filing (the Issuer is hereby also authorized and
obligated to make, at the expense of the Issuer, all required
filings and refilings of which the Issuer becomes aware,
necessary to preserve the liens created by this Indenture to
the extent not done by the Issuer as provided herein),
(iii) have provided copies of all notices to account
debtors located outside of the United States sent pursuant to
Section 9-103(3)(c) of the UCC, and
(iv) have delivered a certificate of an Officer of
the Issuer, dated as of the date of the Issuer Order, to the
effect that, immediately prior to the delivery of the Daiwa
FLOWS Certificates on the Delivery Date:
(1) the Issuer is the owner of the Daiwa
FLOWS Certificates;
(2) the Issuer has acquired its
ownership of the Daiwa FLOWS
Certificates in good faith and
without notice of any adverse claim;
(3) the Issuer has not assigned any
interest or participation in the
Daiwa FLOWS Certificates (or, if any
such interest or participation has
been assigned, it has been
released);
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(4) the Issuer has full right and power
to Grant a first priority security
interest in and assign and pledge
the Trust Estate to the Indenture
Trustee subject to no other claim
(including, without limitation, a
claim pursuant to Section 9-304 of
the UCC);
(5) the information set forth with
respect to the Daiwa FLOWS
Certificates in the Granting Clause
is complete and correct; and
(6) (A) the Issuer is the 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 to
assign its interests in the Other
Assets to the Indenture Trustee, or
if consents of third parties are
required, such consents have been
obtained; and (E) all material
contracts pertaining to the rights
of the holders of the Daiwa FLOWS
Certificates have been transferred
and assigned to the Indenture
Trustee.
(b) In connection with the registration of the Daiwa FLOWS
Certificates in the name of the Indenture Trustee or its nominee or agent, the
Issuer assumes all responsibility for compliance with the requirements of the
Daiwa Pooling Agreement and all applicable securities laws, and for determining
whether such transfer is permitted thereunder, and the Indenture Trustee shall
have no responsibility therefor and shall be indemnified by the Trust Estate and
held harmless from any liability arising therefrom.
Section 4.02 Indenture Trustee Receipt.
On or before the Delivery Date, the Indenture Trustee shall
execute and deliver an instrument to the Issuer confirming its receipt of the
Trust Estate, duly endorsed to the order of the Indenture Trustee.
Section 4.03 Exercise of Rights as Registered Holder of Daiwa FLOWS
Certificates.
(a) If at any time the Indenture Trustee, as the registered
holder of the Daiwa FLOWS Certificates, is asked to exercise a right to vote
inherent in the Daiwa FLOWS Certificates or to take any action or give any
consent, approval or waiver with respect to the Daiwa FLOWS Certificates or the
Daiwa Pooling Agreement, the Indenture Trustee shall promptly notify all of the
Holders of such request in writing, requesting direction from such Holders as to
the course of action the Indenture Trustee should take. The Indenture Trustee
shall furnish copies to the Holders of any request or other notice requiring
action by, and received by the Indenture Trustee as, registered holder of any
Daiwa FLOWS Certificates, and subject to the provisions of Section 7.03(e) shall
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act in accordance with the written directions of Holders 51% or more of the
Outstanding Note Principal Balance. In the absence of such directions, the
Indenture Trustee may, but shall have no obligation to, take such action as it
may determine in its absolute discretion, subject to the Indenture Trustee's
standard of care set forth in Section 7.01(c).
(b) Any Holder may, at its expense, and upon delivery to the
Indenture Trustee of an Opinion of Counsel to the effect that the exercise of
its rights as provided in this paragraph will not have a material adverse effect
on any other Holder, direct the Indenture Trustee, as holder of the Daiwa FLOWS
Certificates, to exercise any or all of the rights afforded to such holder
pursuant to the Daiwa Pooling Agreement or any other agreement relating to the
Daiwa FLOWS Certificates including, without limitation, with respect to the
Daiwa FLOWS Certificates, the Pledged FNMA Securities, the mortgage loans
backing the Pledged FNMA Securities and the collateralized mortgage backed
securities with respect to which the Pledged FNMA Securities have been pledged
pursuant to the Credit Support Agreement.
Section 4.04 Benefit Plan Investor Representations.
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.
[End of Article IV]
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ARTICLE FIVE:
SATISFACTION AND DISCHARGE
Section 5.01 Satisfaction and Discharge.
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 Holders to
receive payments of interest on and principal of the Notes, and (iv) the rights
of Holders as beneficiaries hereof with respect to any property deposited with
the Indenture Trustee hereunder and payable to all or any of them, and the
Indenture 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 Notes for which 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
Indenture Trustee for cancellation; or
(b) all Notes of all Classes not theretofore
delivered to the Indenture Trustee for cancellation:
(i) have become due and payable;
(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 Indenture
Trustee for the giving of notice of
redemption by the Issuer; and the
Issuer, in the case of clause (i),
or (ii) of paragraph (b) above, has
deposited or caused to be deposited
with the Indenture 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
Indenture 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
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(3) the Issuer has delivered to the Indenture 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 Indenture Trustee to the Holders under Section 5.02 and the
provisions of Section 7.07 for the benefit of the Indenture Trustee shall
survive.
Section 5.02 Application of Trust Money
All monies deposited with the Indenture 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 Indenture 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 Indenture 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 Indenture Trustee shall release all Collateral, including
all funds on deposit in the Payment Account, to the Issuer or its designee, and
shall deliver the Daiwa FLOWS 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 and delivered in a form satisfactory to the Indenture Trustee by such
Person to effect the transfer of the Daiwa FLOWS 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.
[End of Article V]
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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):
(i) a failure to pay interest and principal in the
required amounts from Available Funds;
(ii) a failure to pay in full the Outstanding
principal amount of any Note by its Stated Maturity;
(iii) default in the performance, or breach, of any
covenant, agreement, or warranty of the Issuer in this Indenture and
continuance of such default or breach for a period of 60 days after
there shall have been given, by facsimile registered or certified mail,
to the Issuer by the Indenture 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;
(iv) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Issuer or QRS 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 60 consecutive days; or
(v) 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 Holder shall be deemed to have agreed, by its
acceptance of its Notes, 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.
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Section 6.02 Acceleration of Maturity; Rescission and Annulment.
(a) If an Event of Default occurs and is continuing, the
Indenture Trustee may, or at the written direction of Holders of not less than
50% of the Note Principal Balances of all of the Outstanding Notes, shall
declare the Outstanding principal balances of all the Notes to be immediately
due and payable, by a notice in writing to the Issuer, 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
Indenture 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 Indenture Trustee, may rescind and annul
such declaration of acceleration of the Notes and its consequences only if:
(i) (A) the Issuer has paid or deposited with the
Indenture Trustee a sum sufficient to pay:
(1) all overdue installments of interest and
principal on each Class of the Notes, and
(2) all sums paid or advanced by the Indenture
Trustee hereunder and the reasonable
compensation, expenses, disbursements and
advances of the Indenture 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,
otherwise, (i) such written notice must be sent by the Holders of 66.66% of the
aggregate Outstanding Note Principal Balance and (ii) the requirement of clause
(b)(i)(A)(2) shall have been fulfilled.
(ii) 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
Indenture Trustee
The Issuer covenants that if Default is made in the payment of
any interest on any Note, the Issuer will, upon demand of the Indenture Trustee,
pay to the Indenture Trustee, for the benefit of the Holders, 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
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Indenture Trustee, its agents and counsel.
If the Issuer fails to pay such amounts forthwith upon such
demand, the Indenture Trustee, in its own name and as Indenture Trustee of an
express trust, shall institute a Proceeding for the collection of the sums so
due and unpaid, and shall 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 Indenture
Trustee shall proceed to protect and enforce its rights and the rights of the
Holders by such appropriate Proceedings as the Indenture 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 Indenture Trustee by this Indenture or by
law.
Section 6.04 Remedies.
If an Event of Default shall have occurred and be continuing,
the Indenture Trustee (or an agent on its behalf) 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;
(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; provided, however, that the
Indenture Trustee shall give the Issuer written notice of any private sale
called by or on behalf of the Indenture Trustee pursuant to this Section
6.04(b), at least 10 days prior to the date fixed for such private sale;
(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 Indenture 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 Indenture 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 pursuant to Section
6.02(b), the Indenture Trustee may, and upon request from the Holders of a
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66.66% 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 Indenture 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 Indenture 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 Indenture Trustee and the Issuer from the
Holders of a majority in aggregate of the Note Principal Balance of the
Outstanding Notes.
Section 6.06 Indenture 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 Indenture 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
Indenture 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:
(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 Indenture
Trustee (including any claim for reasonable compensation to the
Indenture Trustee and each predecessor Indenture Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all
expenses and liabilities incurred, and all advances made, by the
Indenture Trustee and each predecessor Indenture Trustee, except as a
result of negligence or bad faith) and of the Holders 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
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all amounts received with respect to the claims of the Holders and of
the Indenture Trustee on their behalf; and any trustee, receiver or
liquidator, custodian or other similar official is hereby authorized by
each of the Holders to make payments to the Indenture Trustee, and, in
the event that the Indenture Trustee shall consent to the making of
such payments, to make payments directly to the Holders, to pay to the
Indenture Trustee such amounts as shall be sufficient to cover
reasonable compensation to the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents, attorneys and counsel,
and all other expenses and liabilities incurred, and all advances made,
by the Indenture Trustee and each predecessor Indenture Trustee except
as a result of negligence or bad faith.
Amounts payable to the Indenture Trustee under this Section
are intended to constitute administrative expenses. Nothing herein
contained shall be deemed to authorize the Indenture Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any
Holder 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 Indenture Trustee to vote in
respect of the claim of any Holder 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 Indenture Trustee (and also
any Proceedings involving the interpretation of any provision of this
Indenture to which the Indenture Trustee shall be a party) the
Indenture 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 Indenture 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 Indenture 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 Indenture Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee, its
agents and counsel, be for the ratable benefit of the Holders in respect of
which such judgment has been recovered.
Section 6.08 Application of Money Collected.
Any money collected by the Indenture Trustee pursuant to this
Article shall be deposited in the Payment Account and shall be applied in
accordance with Section 12.01 hereof and, in case of the distribution of such
money on account of the principal of or interest on the Notes, upon presentation
and surrender of the Notes if fully paid.
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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:
(a) such Holder has previously given written
notice to the Indenture Trustee of a
continuing Event of Default;
(b) the Holders of not less than 50% of the
aggregate Note Principal Balance of the
Outstanding Notes shall have made written
request to the Indenture Trustee to
institute Proceedings in respect of such
Event of Default in its own name as
Indenture Trustee hereunder;
(c) such Holder or Holders have offered to the
Indenture Trustee reasonable indemnity
against the costs, expenses and liabilities
to be incurred in compliance with such
request;
(d) the Indenture Trustee for 30 days after its
receipt of such notice, request and offer of
indemnity has failed to institute any such
Proceeding; and
(e) no direction inconsistent with such written
request has been given to the Indenture
Trustee during such 30-day period by the
Holders of at least 50% of the aggregate
Note Principal Balance of the Outstanding
Notes;
it being understood and intended that no one or more Holders 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 Holders
or to obtain or to seek to obtain priority or preference over any other Holders
except to the extent explicitly provided herein or to enforce any right under
this Indenture, and except in the manner herein provided and for the equal and
ratable benefit of all the Holders.
In the event the Indenture Trustee shall receive conflicting
or inconsistent requests and indemnity from two or more groups of Holders, each
representing less than a majority of the then aggregate Outstanding Note
Principal Balance of all such Outstanding Notes, the Indenture Trustee in its
sole discretion may determine what action, if any, shall be taken,
notwithstanding any other provisions of this Indenture.
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Section 6.10 Unconditional Rights of Holders 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 Indenture Trustee or any Holder 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 Indenture Trustee or to such Holder, then and in
every such case the Issuer, the Indenture Trustee and the Holder 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 Indenture Trustee and the Holders 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
Indenture Trustee or to the Holders is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
Section 6.13 Delay or Omission Not Waiver
No delay or omission of the Indenture Trustee or of any Holder
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 Indenture Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Indenture Trustee or by the
Holders, as the case may be.
Section 6.14 Control by Holders.
The Holders of a majority of the Note Principal Balance of all
of the Outstanding Notes shall have the right, to direct the time, method and
place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to the Notes or exercising any trust or power conferred on
the Indenture Trustee; provided that:
(a) such direction shall not be in conflict with any rule
of law or with this Indenture; and
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(b) the Indenture Trustee may take any other action
deemed proper by the Indenture Trustee that is not
inconsistent with such direction; provided, however,
that, subject to the standard of care established by
Section 7.01(c), the Indenture Trustee need not take
any action that it determines might involve it in
liability or be unjustly prejudicial to the Holders
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.
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 Holder, 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 Indenture Trustee for any action
taken, suffered or omitted by it as Indenture 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
Indenture Trustee (or an agent on its behalf), to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 25% of the Note
Principal Balance of the Outstanding Notes or to any suit instituted by any
Holder for the 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, the Indenture Trustee, and the Owner
Trustee 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 or QRS, or aiding or soliciting
any other person to take any such action, 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
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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 Indenture 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 Indenture Trustee (or an agent on its behalf) may from
time to time postpone any Sale by public announcement made at the time and place
of such Sale. The Indenture Trustee hereby expressly waives its right to any
amount fixed by law as compensation for any Sale.
(b) Any sale or other transfer of a Daiwa FLOWS Certificate
shall be made in compliance with all applicable laws and the terms of the Daiwa
Pooling Agreement.
(c) The Indenture 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 Indenture
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
Indenture Trustee's authority, inquire into the satisfaction of any conditions
precedent, or see to the application of any monies.
Section 6.19 Action on Notes.
The Indenture 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
Indenture Trustee or the Holders shall be impaired by the recovery of any
judgment by the Indenture 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 Holders shall have
no recourse to (i) the Indenture Trustee, (ii) the Owner Trustee, (iii)
PaineWebber, (iv) QRS, (v) the Company or (vi) any owner (other than QRS) of the
Trust Certificates, or any of their respective shareholders, directors,
officers, employees, agents or representatives.
[End of Article VI]
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ARTICLE SEVEN: THE INDENTURE TRUSTEE
TRUSTEE
Section 7.01 Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Indenture Trustee
shall be as provided herein. The Indenture Trustee shall not be deemed to have
notice or knowledge of a Default or an Event of Default unless an Indenture
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 an Indenture
Trustee Officer at its Corporate Trust Office and such notice references the
Notes or this Indenture. 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 Indenture Trustee shall be subject to the
provisions of this Section 7.01.
(b) Except during the continuance of an Event of Default
with respect to the Notes,
(i) the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read into
this Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the
Indenture Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates, opinions or reports furnished to the Indenture Trustee
and conforming to the requirements of this Indenture to the extent set
forth herein; provided, however, that the Indenture Trustee shall be
under a duty to examine the same to determine whether or not they
conform on their face to the requirements of this Indenture.
(c) Subject to Section 6.14 hereof, in case an Event of
Default known to the Indenture Trustee with respect to Notes has occurred and is
continuing, the Indenture Trustee shall exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care and skill in
their exercise, as a prudent person would exercise or use under the same
circumstances in the conduct of his or her own affairs.
(d) No provision of this Indenture shall be construed to
relieve the Indenture Trustee from liability for its own negligent action, its
own negligent failure to act, or its own wilful misconduct, except that the
Trustee shall not be liable for any error of judgment made in good faith by an
Officer, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts.
(e) The Indenture Trustee shall not be liable for any action
taken or omitted to be taken by it in good faith and in accordance with the
direction of Holders 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 Indenture Trustee, or
exercising any trust or power conferred on the Indenture Trustee under this
Indenture. No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
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performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it believes that repayment of such funds or adequate
indemnity against such risk or liability is not assured to it.
Section 7.02 Notice of Default.
Upon the occurrence of a Default hereunder known to the
Indenture Trustee Officer with respect to the Notes, the Indenture Trustee shall
give notice of such Default to the Holders promptly, and in no event more than
five Business Days after the Indenture Trustee Officer obtains knowledge
thereof.
Section 7.03 Certain Rights of Indenture Trustee.
Except as otherwise provided in Section 7.01:
(a) the Indenture 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, provided, however, that the
Indenture Trustee shall examine such certificates and opinions to determine
whether or not such certificates and opinions conform on their face to the
requirements of this Indenture to the extent set forth herein;
(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
Indenture Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the Indenture
Trustee (unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon a Certificate executed by an Officer
of the appropriate Person or an Opinion of Counsel.
(d) the Indenture 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 Holders pursuant to this Indenture,
unless such Holders shall have offered to the Indenture Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction;
(e) the Indenture 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 provided to it in accordance with
the provisions of this Indenture, provided, however, that the Indenture Trustee
shall examine such certificates and opinions to determine whether or not such
certificates and opinions conform to the requirements of this Indenture to the
extent set forth herein; provided further that the Indenture Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Indenture Trustee shall determine to make
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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
Indenture Trustee's costs of any such examination shall be borne by the Issuer
or, if requested by one or more Holders, then by the Holder(s) requesting that
such examination be made;
(f) the Indenture 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 Indenture 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;
(g) 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 Indenture Trustee shall be determined solely by the express provisions of
this Indenture, the Indenture 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 Indenture Trustee;
(h) the Indenture Trustee shall have no liability or
responsibility for any actions or omissions to act of the Issuer or any other
Person; and
(i) the Indenture Trustee shall not be liable for any action
it takes or omits to take in good faith which it believes to be authorized or
within its rights or powers.
Section 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 Indenture Trustee assumes no responsibility for their correctness. The
Indenture Trustee makes no representation as to the validity or sufficiency of
this Indenture, of the Trust Estate or of the Notes. The Indenture Trustee shall
not be accountable for the use or application by the Issuer of the Notes or the
proceeds thereof.
Section 7.05 May Hold Notes.
The Indenture Trustee, the Paying Agent, the 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 may otherwise deal with the Issuer with
the same rights it would have if it were not the Indenture Trustee, Paying
Agent, Note Registrar, or such other agent.
Section 7.06 Money Held in Trust.
Money held by the Indenture Trustee in trust hereunder should
be held by the Indenture Trustee in trust hereunder for the purpose for which it
was paid and shall be segregated from any other monies held by the Indenture
Trustee. The Indenture Trustee shall be under no liability for interest on any
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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 Indenture Trustee, in its commercial capacity,
and income or other gain actually received by the Indenture Trustee on Eligible
Investments.
Section 7.07 Compensation, Reimbursement and Indemnification.
(a) The Issuer hereby agrees:
(i) On each Payment Date, the Indenture Trustee shall
be entitled to receive the Indenture Trustee's Fee in accordance with
Section 12.01(a).
(ii) to reimburse the Indenture Trustee upon its
request for all reasonable expenses and disbursements incurred or made
by the Indenture Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to the negligence or bad
faith of the Indenture Trustee; and
(iii) to indemnify the Indenture Trustee in its
capacity as such or in its capacity as Paying Agent, Note Registrar,
Tax Administrator, or any other capacity hereunder, its directors,
officers, employees, agents and "control" persons within the meaning of
the 1933 Act for, and to hold them harmless against, any loss,
liability or expense (including reasonable attorney's fees) incurred
without negligence or bad faith on their part, arising out of, or in
connection with, the acceptance or administration of this trust or any
other obligation hereunder (including, without limitation, action taken
by the Indenture Trustee at the direction of any Holder pursuant to
this Indenture), including the costs and expenses of defending
themselves against any claim in connection with the exercise or
performance of any of their power or duties hereunder.
(b) As security for the payment obligations of the Issuer
pursuant to Section 7.07(a)(i), the Issuer hereby Grants to the Indenture
Trustee a lien ranking at all times senior to the lien of the Notes with respect
to which any claim of the Indenture Trustee under such Section arose and senior
to all other liens, if any, upon all property and funds held or collected as
part of the Trust Estate for such Notes by the Indenture Trustee in its capacity
as such.
Section 7.08 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Indenture Trustee, nor
any appointment of a successor Indenture Trustee pursuant to this Article, shall
become effective until the acceptance of such appointment by the successor
Indenture Trustee under Section 7.09.
(b) Subject to Section 7.08(a), the Indenture Trustee may
resign at any time by giving written notice of its resignation to the Issuer. If
an instrument of acceptance by a successor Indenture Trustee shall not have been
delivered to the Indenture Trustee within 30 days after the giving of such
notice of resignation, the resigning Indenture Trustee may petition any court of
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competent jurisdiction for the appointment of a successor Indenture Trustee.
(c) Subject to Section 7.08(a), the Indenture Trustee may be
removed at any time by Act of the Holders of a majority of the Note Principal
Balance of all of the Outstanding Notes delivered to the Indenture Trustee and
to the Issuer upon payment to the Indenture Trustee all amounts owing to it
under this Agreement. The Indenture Trustee may be removed for cause by the
Issuer provided that a successor Indenture Trustee shall have been appointed and
the Issuer receives confirmation that the appointment of the successor Indenture
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 Indenture 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 Indenture Trustee or of its
property shall be appointed or any public officer shall take charge or control
of the Indenture Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Issuer may, and pursuant
to the written direction of 25% of the aggregate Outstanding Note Principal
Balance of all Outstanding Notes, shall, remove the Indenture Trustee, or,
subject to Section 6.16, any Holder 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 Indenture Trustee and the appointment of a successor Indenture Trustee.
(e) If the Indenture Trustee shall resign, be removed or
become incapable of acting, or if a vacancy shall occur in the office of the
Indenture Trustee for any cause, the Issuer shall promptly appoint a successor
Indenture Trustee. If, within 60 days after such resignation, removal or
incapacity, or occurrence of such vacancy, a successor Indenture 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 Indenture
Trustee, and the successor Indenture Trustee so appointed shall, forthwith upon
its acceptance of such appointment, become the successor Indenture Trustee and
supersede the successor Indenture Trustee appointed by the Issuer.
If, within 120 days after such resignation, removal or
incapacity, or the occurrence of such vacancy, no successor Indenture Trustee
shall have been so appointed by the Issuer or the Holders and shall have
accepted appointment in the manner hereinbefore provided, any Holder 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 Indenture Trustee.
(f) The Issuer shall give notice of each resignation and each
removal of the Indenture Trustee and each appointment of a successor Indenture
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 Indenture
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 Indenture Trustee appointed hereunder shall
execute, acknowledge and deliver to the Issuer and the retiring Indenture
Trustee an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Indenture Trustee shall become effective, and such
successor Indenture Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts, duties and obligations of the
retiring Indenture Trustee; but, on request of the Issuer or the successor
Indenture Trustee, such retiring Indenture Trustee shall, upon payment of its
charges then unpaid, execute and deliver an instrument transferring to such
successor Indenture Trustee all the rights, powers and trusts of the retiring
Indenture Trustee and shall duly assign, transfer and deliver to such successor
Indenture Trustee all property and money held by such retiring Indenture Trustee
hereunder subject to the lien provided for in Section 7.07(b). Upon request of
any such successor Indenture Trustee, the Issuer shall execute any and all
instruments prepared and delivered to it and necessary for more fully and
certainly vesting in and confirming to such successor Indenture Trustee all such
rights, powers and trusts. Any successor Indenture Trustee shall be compensated
at the Indenture Trustee Fee Rate.
Section 7.10 Merger, Conversion, Consolidation or Succession to
Business of Indenture Trustee.
Any corporation into which the Indenture 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 Indenture Trustee
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of the Indenture Trustee, shall be the successor of
the Indenture 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 Indenture Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Indenture Trustee may adopt such authentication and deliver the
Notes so authenticated with the same effect as if such successor Indenture
Trustee had itself authenticated such Notes.
Section 7.11 Corporate Trustee Required; Eligibility.
There shall at all times be a Indenture 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 Indenture 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
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this Article.
Section 7.12 Co-Indenture Trustees and Separate Indenture 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 Indenture Trustee shall have power to
appoint (and remove), and, upon the written request of the Indenture 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 Indenture
Trustee in the execution, delivery and performance of all instruments and
agreements necessary or proper to appoint (or remove) one or more Persons
approved by the Indenture Trustee either to act as co-trustee, jointly with the
Indenture 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 or removal 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 Indenture Trustee alone shall have power to make such
appointment or removal. 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 7.13 Paying Agents.
Whenever the Issuer shall have one or more Paying Agents, the
Indenture 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 Indenture
Trustee will promptly notify the Issuer of its action or failure so to act.
Section 7.14 Treatment of Obligations.
The Issuer shall treat the 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 7.15 Survival of Certain Obligations.
The respective agreements and covenants of the Indenture
Trustee set forth in, or made pursuant to, this Indenture shall remain in full
force and effect, regardless of any investigation, or statement as to the result
thereof, made by or on behalf of the Issuer or any of the officers or directors
or any controlling person of the Issuer, and shall survive the delivery of and
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payment for the Notes.
[End of Article VII]
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ARTICLE EIGHT: HOLDERS' LIST
Section 8.01 Issuer to Furnish Indenture Trustee Names and Addresses of
Holders.
The Issuer will furnish or cause to be furnished to the
Indenture Trustee monthly, not more than five Business Days after each Record
Date, a list, in such form as the Indenture Trustee may reasonably require, of
the names and addresses of each Holder of each Class of Notes as they appear on
the Note Register as of such Record Date, and at such other times as the
Indenture Trustee may request in writing, within 30 days after receipt by the
Issuer of any such request, a list of similar form and content as of a date not
more than 10 days prior to the time such list is furnished; provided, however,
that for so long as the Indenture Trustee is the Note Registrar, no such list
shall be required to be furnished to the Indenture Trustee, and the Indenture
Trustee shall furnish such list to the Issuer upon the Issuer's written request,
within 30 days after receipt by the Indenture Trustee of any such request.
Section 8.02 Preservation of Information; Communications to Holders.
The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders of each Class
of Notes contained in the most recent list furnished to the Indenture Trustee as
provided in Section 8.01 or maintained by the Indenture Trustee as Note
Registrar. The Indenture 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.
The Indenture Trustee will act as 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, (and to any applicable taxation authority established under a state or
municipal law, rule, or regulation) at least annually and otherwise as required
by statute, regulation, or administrative ruling, reporting (i) any original
issue discount accrued on each Class of Notes during the relevant period; (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 Holders to report all other information regarding each Class of Notes
that such Holders are required to report to the Internal Revenue Service (or
such other taxation authority) by statute, regulation, or administrative ruling.
In addition, the Tax Administrator shall report to any Holder in writing any
other tax accounting information reasonably requested by such Holder to enable
it to prepare its federal tax returns. The Tax Administrator will be permitted
to delegate its duties as Tax Administrator to a subcontractor with the prior
written consent of the Issuer, which consent shall not be unreasonably withheld;
provided, however, that the Tax Administrator will be liable for all actions and
omissions of such subcontractor as if the Tax Administrator, and not such
subcontractor, has performed such actions or allowed such omission to occur. The
Tax Administrator shall send a copy to the Issuer of any reports it delivers to
any Holder pursuant to this Section 8.03(b). The Tax Administrator shall be
entitled to rely conclusively on information supplied and reports prepared
pursuant to the Daiwa Pooling Agreement unless such information or reports shall
be manifestly incorrect.
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[End of Article VIII]
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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 city
of Wilmington, Delaware 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 Indenture Trustee
as such office or agency. The Issuer will give prompt written notice to the
Indenture 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 Indenture 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
Indenture Trustee at its Corporate Trust Office as its agent to receive all such
presentations, surrenders, notices and demands.
The Owner Trustee on behalf of the issuer may also from time
to time designate one or more other offices or agencies outside the United
States where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any matter relieve the Issuer of
its obligation to maintain an office or agency in accordance with the
requirements set forth in the preceding paragraph. The Owner Trustee on behalf
of the issuer shall give prompt written notice to the Indenture Trustee and
Holders of any such designation or rescission and of any change in the location
of such office or agency.
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 Indenture
Trustee of its action or failure so to act.
The Issuer will cause each Paying Agent, other than the
Indenture Trustee, to execute and deliver to the Indenture Trustee an instrument
in which such Paying Agent shall agree with the Indenture 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 or the Equity Interest
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 Indenture Trustee notice of any
Default in the making of any required payment of principal; and
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(3) at any time during the continuance of any
such Default, upon the written request of the Indenture Trustee, forthwith pay
to the Indenture 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 Indenture Trustee all
sums held in trust by the Issuer or such Paying Agent, such sums to be held by
the Indenture Trustee 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 Indenture Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Any money deposited with the Indenture 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 Indenture 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 Indenture 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 Indenture 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 of Issuer; Owner Trustee.
(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 bank and
trust company under the laws of Delaware.
(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
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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.
(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 Indenture Trustee and the
Holders of Notes of any Class against the claims of
all persons and parties.
The Issuer hereby designates the Indenture 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 Indenture
Trustee to monitor the compliance of the Issuer with the foregoing covenants and
provided further that the duty of the Indenture Trustee to execute any
instrument required pursuant to this Section 9.04 shall arise only if an
Indenture Trustee Officer 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 the Daiwa FLOWS Certificates.
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Section 9.05 Negative Covenants.
The Issuer will not:
(a) sell, transfer, exchange or otherwise dispose of any part
of the Trust Estate except as expressly permitted by this Indenture;
(b) 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;
(c) amend its Trust Agreement without first receiving written
assurance from the Rating Agency that its then-effective rating
assigned to any Class of Notes will not be withdrawn or downgraded as a
result of such amendment;
(d) 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:
(i) 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 by such Person and delivered to the
Indenture 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;
(ii) immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing;
(iii) the Issuer shall have delivered to the
Indenture 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;
(iv) 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;
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(v) 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 Holders
and the Indenture Trustee;
(vi) the Holders of more than 66.66% of the
Outstanding Note Principal Balance agree to such consolidation or
merger in writing.
(b) The Issuer may sell the Collateral to another person only
on terms that clearly reflect that the Collateral has been pledged to the
Indenture 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-effective rating of any Class of Notes.
(c) The Issuer shall not dissolve or liquidate in whole or in
part, except as provided in Section 9.06.
Section 9.07 Successor Substituted.
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 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 if it intends to incur
indebtedness or issue securities other than the Notes pursuant to Section 3.10,
and the Issuer's right to issue any additional securities or incur debt shall be
subject to Section 9.09.
Section 9.09 Limitation on Borrowing.
The Issuer shall not incur any indebtedness (aside from the
Notes) 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
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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 Contribution Agreement.
Upon discovery by the Issuer of any breach by the Company or
of QRS of any of its representations, warranties and covenants under the
Contribution Agreement or the Trust Agreement, as applicable, the Issuer shall
use its best efforts to cause the Company to correct such breach, or shall
pursue such remedies as are provided for such breach. If the Daiwa FLOWS
Certificates are repurchased by the Company pursuant to the Contribution
Agreement and the Trust Agreement, the Issuer shall cause the Purchase Price
therefor to be paid to the Indenture Trustee for deposit into the Payment
Account, and, upon receipt of any such Purchase Price, the Indenture Trustee
shall treat such funds as a final payment on the repurchased Daiwa FLOWS
Certificates and shall release the Daiwa FLOWS Certificates from the lien of
this Indenture and shall execute any and all instruments prepared and delivered
to it and reasonably requested by the Company to confirm such release to the
Company.
Section 9.11 Survival of Certain Representations and Obligations.
The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Issuer set forth in, or made
pursuant to, this Indenture shall remain in full force and effect, regardless of
any investigation, or statement as to the result thereof, made by or on behalf
of the Indenture Trustee any of the officers or directors or any controlling
person of any of the foregoing, and shall survive the delivery of and payment
for the Notes.
Section 9.12 Payment of Taxes and Other Claims.
The Issuer shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, all taxes, assessments and
governmental charges levied or imposed upon the Issuer or upon the income,
profits, or property of the Issuer, or shown to be due on the tax returns filed
by the owner Trustee on behalf of the Issuer, except any such taxes,
assessments, governmental charges or claims which the Owner Trustee on behalf of
the Issuer is contesting in good faith in appropriate proceedings and with
respect to which reserves are established if required in accordance with United
States generally accepted accounting rules; provided, however, that any failure
to pay or discharge will not cause a forfeiture of, or a lien to encumber, any
property included in the Trust Estate. The Owner Trustee, in its individual
capacity, shall not be liable for any such taxes, assessments, governmental
charges or claims. The Indenture Trustee is authorized to pay out of the Payment
Account, prior to making payments on the Notes, any such taxes, assessments,
governmental charges or claims which, if not paid, would cause a forfeiture of,
or a lien to encumber, and property included in the Trust Estate to the extent
that an Indenture Trustee Officer has actual knowledge thereof, subject to
Section 7.01(d).
Section 9.13 Restrictions on Sale of Trust Certificates.
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The Issuer will not allow any Trust Certificates, all of which
are initially held by the Depositor, to be transferred to any other Person,
unless the holders of at least 60% of the aggregate of the Note Principal
Balance of all Outstanding Notes votes to approve the transfer or approves such
transfer in writing and a letter from the Rating Agency that such transfer will
not adversely affect its then-effective rating of the Notes.
Section 9.14 Holding of Trust Estate.
The Indenture Trustee shall hold that portion of the
Collateral delivered to the Indenture Trustee that consists of "instruments" (as
such term is defined in Section 9-105(i) of the Uniform Commercial Code as in
effect in Illinois on the date hereof) in the State of Illinois and, except as
otherwise specifically provided in this Indenture, shall not remove such
instruments from the State of Illinois unless it receives an Opinion of Counsel
(obtained and delivered at the expense of the Person requesting the removal of
such instruments from the State of Illinois) that after such removal, the
Indenture Trustee, on behalf of the Holders, will possess a first priority
perfected security interest in such portion of the Collateral.
[End of Article IX]
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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. 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
Indenture 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 Indenture 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 Indenture Trustee pursuant to
Section 10.02 and shall prepare the notice of redemption specified in Section
10.03.
Section 10.02 Notice to Indenture Trustee.
In the case of any redemption pursuant to Section 10.01, the
Issuer shall, at least 30 days prior to the Redemption Date (unless a shorter
period shall be satisfactory to the Indenture Trustee), notify the Indenture
Trustee of such Redemption Date and of the expected principal amount of each
Class of Notes to be redeemed on such Redemption Date.
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 Holder at his address in the Note Register.
All notices of redemption shall state:
(a) the Redemption Date;
(b) 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;
(c) that payment of the Redemption Price shall be the final
payment on each Class of Notes; and
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(d) 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 Indenture Trustee in the name and
at the expense of the Issuer. Failure to give notice of redemption, or any
defect therein, to any Holder 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 Indenture 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 Holders 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 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 Indenture 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 Indenture Trustee shall not
release its lien on the Trust Estate.
[End of Article X]
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ARTICLE ELEVEN: ACCOUNTS, ACCOUNTINGS AND RELEASES
. Section 11.01 Collection of Money.
Except as otherwise expressly provided herein, the Indenture
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
Indenture Trustee pursuant to this Indenture, including all payments due on the
Daiwa FLOWS Certificates in accordance with the terms and conditions of the
Daiwa FLOWS Certificates. The Indenture Trustee shall hold all such money and
property received by it in trust for the Holders 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 the Daiwa
FLOWS Certificates, the Indenture 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) 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 Indenture Trustee has not
received timely payment on the Daiwa FLOWS Certificates, the Indenture Trustee
shall immediately notify the Issuer of its failure to receive such payment. The
Issuer shall request that the appropriate Person wire such payments in
immediately available funds to the Indenture Trustee, or take such other action
as the Issuer shall designate in accordance with (a) the procedures of such
appropriate Person then in effect and (b) any agreements made by the Issuer or
such Person with the Issuer regarding such Daiwa FLOWS Certificates. 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 Indenture Trustee shall, prior to the Delivery Date for
the Notes, establish the Payment Account, into which the Indenture Trustee shall
deposit all Collateral Proceeds as received by the Indenture Trustee and
proceeds of liquidation as contemplated by Section 11.06. All monies deposited
from time to time in the Payment Account pursuant to this Indenture shall be
held by the Indenture Trustee as part of the Trust Estate as herein provided.
(a) All payments to be made from time to time by the Indenture
Trustee to the Holders out of funds in the Payment Account pursuant to this
Indenture shall be made by the Indenture Trustee as the Paying Agent of the
Issuer.
(b) Monies in the Payment Account shall remain uninvested.
. Section 11.03 Reports by Indenture Trustee.
The Indenture Trustee shall timely supply to the Issuer any
information in the Indenture 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.
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(a) On each Payment Date, the Indenture Trustee shall mail and
telecopy to the Issuer, PaineWebber, QRS, and to each Holder a "Note Remittance
Report" containing the following information with respect to the Notes, based
upon the Certificate Remittance Reports received by the Indenture Trustee
related to the Available Funds for such Payment Date:
(i) the Available Funds as of the Payment Date;
(ii) the Note Principal Balance of each Class of Notes
and the Imputed Principal Balance of the Equity
Interest after giving effect to the payments to be
made on such Payment Date;
(iii) the Weighted Average Note Rate during such
Interest Accrual Period and the Weighted Average
Note Rate for the next Interest Accrual Period
(assuming the absence of prepayment);
(iv) the Optimal Interest for each Class and the Equity
Interest as of the Payment Date;
(v) the Optimal Principal for each Class and the
Equity Interest as of the Payment Date;
(vi) The Current Interest Shortfall and the Current
Principal Shortfall for each Class and the Equity
Interest as of such Payment Date;
(vii) The Unpaid Interest Shortfall and the Unpaid
Principal Shortfall for each Class and the Equity
Interest as of such Payment Date;
(viii) the interest received on the Pledged FNMA
Securities on the related Certificate Distribution
Date;
(ix) the principal received on the Pledged FNMA
Securities on the related Certificate Distribution
Date;
(x) any interest accrued on amounts in the Trust
Receipt Reserve Account during the related Trust
Receipt Collection Period;
(xi) the Security Excess as of the immediately
preceding Certificate Distribution Date;
(xii) the principal amount of the Pledged FNMA
Securities liquidated by the Indenture Trustee
pursuant to Section 11.06;
(xiii) the sum of (A) the proceeds of liquidation of
Pledged FNMA Securities liquidated on the
immediately preceding Certificate Distribution
Date pursuant to a Realized Loss, if any,
allocated to the Pledged FNMA Securities on the
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related Certificate Distribution Date; and (B) the
amount of Pledged FNMA Securities Principal and
Trust Receipt Reserve Account Principal remitted
to FNMA on the related Certificate Distribution
Date.
(xiv) the Certificate Principal Balance of the Daiwa
FLOWS Certificates as of the Certificate Payment
Date immediately preceding such Payment Date;
(xv) the Indenture Trustee's Fee, the Owner Trustee's
Fee and the Tax Administrator's Fee payable on
such Payment Date.
(b) The Indenture Trustee will transmit by mail to the Issuer,
PaineWebber and all Holders a copy of the Certificate Remittance Report relating
to the Outstanding Daiwa FLOWS Certificates, in each case together with the
related Note Remittance Report. The Indenture Trustee shall also provide copies
of Certificate Remittance Reports that it has received to PaineWebber or to a
Holder upon PaineWebber's or such Holder's written request and payment to the
Indenture Trustee of its costs of duplicating and mailing the same.
(c) 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 Indenture Trustee
shall provide the following information to the Issuer:
(1) the aggregate Note Principal Balances for each
Class of Notes as of such proposed Redemption Date; and
(2) the amount in the Payment Account available
for application to the redemption of all Classes of Notes.
(d) The Indenture Trustee shall send copies of each Note
Remittance Report to the Rating Agency, to the address provided by the Rating
Agency to the Indenture Trustee for such purpose.
Section 11.05 Trust Estate.
(a) The Indenture 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, representation or
warranty the Indenture 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 Indenture Trustee as
provided in this Article Eleven shall be bound to ascertain the Indenture
Trustee's authority, inquire into the satisfaction of any conditions precedent
or see to the application of any monies.
(b) The Indenture 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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Section 11.06 Liquidation of Pledged FNMA Securities.
Within one Business Day of receipt by the Indenture Trustee,
as registered holder of the Daiwa FLOWS Certificates, of Pledged FNMA Securities
released from the lien of the Credit Support Agreement pursuant to a Securities
Excess as defined in the Credit Support Agreement, the Indenture Trustee (or an
agent on its behalf) shall liquidate such released Pledged FNMA Securities and
distribute the proceeds of such liquidation pursuant to Section 12.01. The
Indenture Trustee (or an agent on its behalf) will use its commercially
reasonable best efforts to obtain the highest price for such Pledged FNMA
Securities upon liquidation thereof subject to the requirement that such
securities be liquidated within one Business Day of the Indenture Trustee's
receipt thereof.
[End of Article XI]
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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 monies 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:
FIRST, to the extent of Available Funds, in the following
priority, (A) to the Indenture Trustee, the Indenture Trustee's Fee and all
unpaid expenses and indemnification payments payable to the Indenture Trustee
pursuant to the provisions hereunder for the current Payment Date, (B) to the
Owner Trustee, the Owner Trustee's Fee for the current Payment Date and all
unpaid expenses and indemnification payments payable to the Owner Trustee
pursuant to Section 7.2 of the Trust Agreement with respect to the current
Payment Date, (C) to the Tax Administrator, the Tax Administrator's Fee for the
current Payment Date; (D) to the Indenture Trustee, any Indenture Trustee's Fee
previously earned and not received on prior Payment Dates; (E) to the Owner
Trustee, any Owner Trustee's Fee previously earned and not received on prior
Payment Dates; and (E) to the Tax Administrator, any Tax Administrator's Fee
previously earned and not received on prior Payment Dates.
SECOND, to the Class A Holders, an amount equal to the lesser
of (a) Available Funds after making all payments under clause FIRST of this
Section 12.01(a) and (b) the Optimal Payment Amount allocable to the Class A
Notes.
THIRD, to the Class B Holders, an amount equal to the lesser
of (a) Available Funds after making all payments under clauses FIRST and SECOND
of this Section 12.01(a) and (b) the Optimal Payment Amount allocable to the
Class B Notes.
FOURTH, to the Class C Holders, an amount equal to the lesser
of (a) Available Funds after making all payments under clauses FIRST, SECOND and
THIRD of this Section 12.01(a) and (b) the Optimal Payment Amount allocable to
the Class C Notes.
FIFTH, to the Class D Holders, an amount equal to the lesser
of (a) Available Funds after making all payments under clauses FIRST, SECOND,
THIRD and FOURTH of this Section 12.01(a) and (b) the Optimal Payment Amount
allocable to the Class D Notes.
SIXTH, to the Owner Trustee in respect of the Equity Interest,
an amount equal to the lesser of (a) Available Funds after making all payments
under clauses FIRST, SECOND, THIRD, FOURTH and FIFTH of this Section 12.01(a)
and (b) the Optimal Payment Amount allocable to the Equity Interest.
(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
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hereunder have been paid in full, any cash balance then remaining in the Payment
Account shall be withdrawn from the Payment Account by the Indenture Trustee and
shall be released from the lien of this Indenture and paid by the Indenture
Trustee to the Issuer for distribution to the holders of the Trust Certificates
in accordance with the provisions of Section 4.2 of the Trust Agreement.
(c) (i) Notwithstanding anything to the contrary in this
Indenture, on the Payment Date occurring in the month in which the trustee under
the Daiwa Pooling Agreement notifies the Indenture Trustee, as registered holder
of the Daiwa FLOWS Certificates, that FNMA has received payment from Daiwa
Securities America Inc. in settlement of the Brentwood Claim, the Available
Funds for each Class shall be deemed to be as follows: with respect to the Class
A Notes, the Brentwood Adjusted Available Amount; with respect to the Class B
Notes, the Brentwood Adjusted Available Amount less any amounts distributed to
the Class A Notes; with respect to the Class C Notes, the Brentwood Adjusted
Available Amount less any amounts distributed to the Class A Notes and the Class
B Notes; and with respect to the Class D Notes, the Brentwood Adjusted Available
Amount less any amounts distributed to the Class A Notes, the Class B Notes and
the Class C Notes. The Optimal Payment Amount for such Classes on such Payment
Date shall remain unchanged from the definition of "Optimal Payment Amount"
contained in Article I of this Indenture.
(ii) The Available Funds for the Equity Interest on such
Payment Date shall be deemed to be the lesser of (x) the Brentwood Unadjusted
Available Funds and (y) the Brentwood Settlement Amount. The Optimal Interest
for the Equity Interest for such Payment Date shall be deemed to be the sum of
(1) the Optimal Interest for the Equity Interest in the absence of the event
described in the first sentence of Section 12.01(c)(i) and (2) the lesser of (A)
the Brentwood Unadjusted Available Funds and (B) the Brentwood Settlement
Amount.
(d) In the event that the Notes are repurchased pursuant to
Section 5 of the Cooperation Agreement, (i) the Optimal Principal will equal the
Note Principal Balance of each Class of Notes and the Imputed Principal Balance
of the Equity Interest and (ii) the Available Funds will equal the purchase
price paid pursuant to the Cooperation Agreement.
Section 12.02 Trust Account.
All monies held by or deposited with the Indenture 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 Holders.
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.
[End of Article XII]
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ARTICLE THIRTEEN: AMENDMENTS; SUPPLEMENTAL INDENTURES
Section 13.01 Supplemental Indentures Without Consent of Holders.
Without the consent of the Holders of the Notes of any Class,
the Issuer and the Indenture Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, for any of the following
purposes:
(a) 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 Indenture 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
(b) to add to the conditions, limitations and restrictions on
the authorized amount, terms and purposes of issue, authentication and delivery
of the Notes; or
(c) 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
(d) to add to the covenants of the Issuer or the Indenture
Trustee, for the benefit of the Holders of all Notes, or to surrender any right
or power herein conferred upon the Issuer; or
(e) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee; or
(f) 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 Holders 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
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Indenture 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 a replacement Indenture
Trustee or separate trustee, pursuant to the requirements of Section 7.09 or
7.12 hereof; or
(h) 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.
The Indenture 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 Indenture
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Trustee shall not be obligated to enter into any such supplemental indenture
that affects the Indenture Trustee's own rights, duties, liabilities or
immunities under this Indenture or otherwise except to the extent required by
law.
The Indenture Trustee may in its discretion and upon the
advice of counsel upon which it may conclusively rely, such counsel's fees and
expenses to be an expense of the Trust Estate, 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 Indenture Trustee not to adversely affect
the Holders or the Holders of a given Class if (i) the Indenture 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 Indenture Trustee shall not be liable for any such
determination made in good faith.
Section 13.02 Supplemental Indentures With Consent of Holders.
With the prior written consent of the Holders of not less than
a majority of the aggregate Note Principal Balance or, if the amendment affects
less than all Classes of Notes, of the majority of each Class affected thereby,
the Issuer and the Indenture 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 Note
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
(3) impair or adversely affect the Trust Estate
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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 Indenture Trustee not to sell or
liquidate the Trust Estate pursuant to Sections 6.04 and 6.05; 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 Indenture 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 Indenture Trustee shall not be liable for any such
determination made in good faith.
It shall not be necessary for any consent of Holders 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 Indenture Trustee shall be entitled to
receive, and (subject to the limitations set forth in Section 7.03) 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 Indenture Trustee may, but shall not be obligated to, enter into
any such supplemental indenture that affects the Indenture Trustee's own rights,
duties or immunities under this Indenture or otherwise.
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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 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 Indenture
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 Indenture Trustee in exchange for Outstanding
Notes.
[End of Article XIII]
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ARTICLE FOURTEEN: MISCELLANEOUS
Section 14.01 Compliance Certificates and Opinions.
Upon any application or request by the Issuer to the Indenture
Trustee to take any action under any provision of this Indenture, upon the
request of the Indenture Trustee, the Issuer shall furnish to the Indenture
Trustee a certificate signed by an Officer 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 Indenture Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such Officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which 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 Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders of any Class or Classes may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Holders 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 Indenture 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 Holders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
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for any purpose of this Indenture and conclusive in favor of the Indenture
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 Indenture
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 Indenture 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 Indenture Trustee and Issuer.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided for or permitted by
this Indenture to be made upon, given or furnished to, or filed with:
(1) the Indenture Trustee by any Holder or by the
Issuer shall be sufficient for every purpose hereunder if made, given, furnished
or filed in writing to or with the Indenture Trustee at its Corporate Trust
Office; or
(2) the Issuer by the Indenture Trustee or by any
Holder shall be sufficient for every purpose hereunder if in writing and faxed
and mailed, first-class postage prepaid, to the Issuer addressed to it at:
Structured Mortgage Trust 1997-2
c/o Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890-0001
Fax: (302) 651-8882
Attention: Corporate Trust Administration
with a copy to
Richards Layton & Finger
One Rodney Square
Wilmington, Delaware 19899-0001
Tel: (302) 658-6541
Fax: (302) 658-6548
Attention: Eric Mazie, Esq.
or at any other address previously furnished in writing to the Indenture Trustee
by the Issuer.
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Section 14.05 Notices to Holders; Waiver.
Where this Indenture provides for notice to Holders 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 Holder 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 Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders, 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 Holders shall be filed with the Indenture 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 Holders 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 Indenture 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.
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 Holders, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
Section 14.010 Legal Holidays.
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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; Choice of Forum; Submission to
Jurisdiction.
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.
Any action or proceeding against any of the parties hereto
relating in any way to this Indenture or any Note or the Trust Estate may be
brought and enforced in the courts of the State of new York sitting in the
borough of Manhattan or of the United States District Court for the Southern
District of New York, and the Owner Trustee on behalf of the issuer and the
Indenture Trustee both irrevocably submit to the jurisdiction of each such court
in respect of any such action or proceeding. The Owner Trustee on behalf of the
Issuer and the Indenture Trustee both hereby waive, to the fullest extent
permitted by law, any right to remove any such action or proceeding by reason of
improper venue or inconvenient forum. As long as any of the Notes remain
Outstanding, service of process upon the Owner Trustee on behalf of the Issuer
shall, to the fullest extent permitted by law, be deemed in every respect
effective service on the Issuer in any such legal action or proceeding.
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 Obligation.
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 Indenture Trustee or of any
predecessor or successor of the Issuer or the Indenture 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 Limitation of Liability.
It is expressly understood and agreed by the parties hereto
that (a) this Indenture 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
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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 Indenture Trustee and by any Person claiming by, through
or under the Indenture 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.
[Signatures commence on following page]
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IN WITNESS WHEREOF, the Issuer, the Indenture Trustee and the Tax
Administrator, have caused this Indenture to be duly executed by their
respective officers thereunto duly authorized all as of the date first written
above.
STRUCTURED MORTGAGE TRUST 1997-2,
a Delaware business trust,
By: Wilmington Trust Company, not individually, but
solely in its
capacity as Owner Trustee,
By: /s/Emmett R. Harmon
----------------------------
Name: Emmett R. Harmon
Title: Vice President
S-80
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LASALLE NATIONAL BANK,
a national banking association,
as Indenture Trustee and not
in its individual capacity
By:
-----------------------------
Name:
Title:
S-81
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LASALLE NATIONAL BANK,
a national banking association,
as Tax Administrator
By:
-----------------------------
Name:
Title:
S-82
CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT (this "Agreement"), dated as of
November 3, 1997, by and between Commercial Assets, Inc., a Maryland corporation
(the "Company") and CAX DTR Securitization Corp., a Delaware corporation
("QRS").
WHEREAS, the Company is the record or beneficial owner of
$50,974,526 aggregate initial principal amount of Daiwa Securities America Inc.
Multifamily First Loss Ownership Securities ("Multifamily FLOWS_") Series
1994-Multifamily Flows_-1, pass-through certificates (the "Daiwa FLOWS
Certificates"), together with all related securities entitlements, contract
rights, general intangibles and accounts (the "Other Assets");
WHEREAS, QRS is a wholly-owned subsidiary of the Company;
WHEREAS, the Company desires to contribute its right, title
and interest in and to the Daiwa FLOWS Certificates and the Other Assets to QRS
pursuant to the terms hereof in exchange for all of the authorized and
outstanding capital stock of QRS;
WHEREAS, QRS is concurrently herewith, pursuant to a Trust
Agreement (the "Trust Agreement"), dated as of November 3, 1997, by and between
QRS and Wilmington Trust Company, a Delaware bank and trust corporation, as
owner trustee (the "Owner Trustee"), creating Structured Mortgage Trust 1997-2,
a Delaware business trust (the "Issuer");
WHEREAS, pursuant to the Trust Agreement, QRS will, subsequent
to the effectiveness of this Agreement, contribute all its right, title and
interest in and to the Daiwa FLOWS Certificates and the Other Assets to the
Issuer;
WHEREAS, contemporaneously with the contribution of the Daiwa
FLOWS Certificates and the Other Assets to the Issuer pursuant to the terms of
the Trust Agreement, the Issuer will issue four classes of collateralized notes
(the "Notes") pursuant to a trust indenture, dated as of November 3, 1997 (the
"Indenture"), between La Salle National Bank, a national banking corporation, as
indenture trustee (the "Indenture Trustee") and the Issuer, which Notes will be
secured by the Daiwa FLOWS Certificates and the Other Assets, and all of its
rights therein and with respect thereto;
WHEREAS, contemporaneously with the issuance of the Notes and
the pledge of the Daiwa FLOWS Certificates and the Other Assets, the Issuer will
sell the Notes to PaineWebber Incorporated (the "Initial Purchaser") pursuant to
a Note Purchase Agreement, dated as of November 3, 1997 (the "Note Purchase
Agreement") among, the Issuer, QRS, and the Initial Purchaser for consideration
and upon terms set forth in the Note Purchase Agreement and (as described
therein) in a document ancillary thereto; and
<PAGE>
WHEREAS, capitalized terms used and not defined herein shall
have the respective meanings assigned to them in the Indenture.
NOW THEREFORE, in consideration of the premises and the mutual
covenants, representations and warranties made herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION I. Contribution and Transfer.
(a) The Company hereby contributes, conveys, assigns and
transfers to QRS, without recourse, and QRS hereby accepts, in each case as of
November 3, 1997 (the "Closing Date"), all of the Company's right, title and
interest in and to the Daiwa FLOWS Certificates and the Other Assets, including,
without limitation, all amounts distributable in respect of the Daiwa FLOWS
Certificates and the Other Assets payable from and after the date in December
1997 on which distributions are made on the Daiwa FLOWS Certificates (the "Daiwa
December 1997 Distribution Date") pursuant to the Daiwa Pooling Agreement;
provided, however, that all such amounts distributed on such date shall belong
to QRS.
(b) The Company and QRS intend that the conveyance of the
Daiwa FLOWS Certificates and the Other Assets by the Company to QRS as provided
herein be, and be construed as, an absolute contribution and transfer of the
Daiwa FLOWS Certificates and the Other Assets by the Company to QRS and not as a
pledge of the Daiwa FLOWS Certificates and the Other Assets by the Company to
QRS or any assignee of QRS (including, without limitation, QRS, the Owner
Trustee, individually or on behalf of the Issuer, the Issuer, the Indenture
Trustee, individually or on behalf of any Holder or all Holders, or any Holder),
as security for any debt or other obligation owing from QRS to the Company.
Notwithstanding the foregoing sentence, in the event that the Daiwa FLOWS
Certificates and the Other Assets are for any reason deemed to be property of
the Company, then it is intended that (i) this Agreement shall be deemed to be a
security agreement within the meaning of Articles 8 and 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York (the
"UCC"); (ii) the conveyance provided for in the foregoing sentence shall be
deemed to be a grant by the Company to QRS of a security interest in all of the
Company's right, title and interest, whether now owned or hereafter acquired, in
the Daiwa FLOWS Certificates and the Other Assets (together with any related
securities or entitlements, as defined in the UCC); (iii) the Company shall, to
the extent consistent with this Agreement, take all such actions as may be
necessary to create a first priority security interest in the Daiwa FLOWS
Certificates and the Other Assets and to maintain the perfection and priority of
such security interest throughout the term of this Agreement; (iv) the
possession of the Daiwa FLOWS Certificates and the Other Assets and such other
items of property as constitute instruments, money, negotiable documents, or
chattel paper by QRS shall be deemed to be "possession by the secured party" for
the purpose of perfecting such security interest pursuant to Section 9-305 of
the UCC; and (v) notifications to, and acknowledgements, receipts or
confirmations from any person holding such property shall be deemed to be
notifications to, or acknowledgments, receipts or continuations from, financial
intermediaries, bailees or agents of QRS for the purpose of perfecting such
security interest under applicable law.
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SECTION 2. Distribution Rights. Subsequent to all transactions
contemplated herein, in the Trust Agreement and in the Indenture (collectively,
the "Related Agreements"), QRS shall be entitled to all distributions,
including, without limitation, distributions of principal and interest, on the
Daiwa FLOWS Certificates and the Other Assets received on and after the Daiwa
December 1997 Distribution Date. All available distributions, including
interest, on the Daiwa FLOWS Certificates and the Other Assets due on or before
the Closing Date shall belong to the Company.
SECTION 3. Transfer of Daiwa FLOWS Certificates and the Other
Assets to the Owner Trustee. Following the contribution of the Daiwa FLOWS
Certificates and the Other Assets to QRS by the Company, ownership thereof shall
be vested in QRS and QRS intends to transfer the same to the Issuer.
Accordingly, QRS hereby directs the Company to, and the Company agrees to,
deliver to the Owner Trustee as soon as possible, but in any event prior to the
Closing Date, the Daiwa FLOWS Certificates and the Other Assets, together with
proxies executed in favor of "Structured Mortgage Trust 1997-2" and any
transferor documents and opinions of counsel ("Opinions of Counsel") in form and
substance meeting the requirements set forth in this Agreement, the other
Related Agreements, and the Pooling Agreement. Prior to the effectiveness of the
contribution provided for herein, the Owner Trustee shall hold the Daiwa FLOWS
Certificates and the Other Assets for the benefit of the Company.
SECTION 4. Representations and Warranties of the Company to
QRS. The Company hereby represents and warrants to QRS, as of the date of this
Agreement, as follows:
(a) the Company is duly incorporated, validly existing, and in
good standing under the laws of the State of Maryland and has the full power,
authority and legal right to transfer and convey the Daiwa FLOWS Certificates
and the Other Assets to QRS 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;
(b) the Company acquired record or beneficial ownership of the
Daiwa FLOWS 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 Daiwa FLOWS Certificates on the part of any person;
(c) immediately prior to the transfer of the Daiwa FLOWS
Certificates and the Other Assets to QRS, the Company has no actual or
constructive knowledge or notice of any ownership interest (other than that of
the Company) in, will be the sole owner of, and will have good and marketable
title to, the Daiwa FLOWS Certificates and the Other Assets, subject to no prior
lien, mortgage, security interest, pledge, charge or other encumbrance (other
than any such encumbrance as will be discharged prior to such transfer and
subject to the prior claim of the Federal National Mortgage Association in
respect of the assets indirectly underlying the Daiwa FLOWS Certificates), and
on the Closing Date, the Company shall validly endorse and deliver the Daiwa
FLOWS Certificates and the Other Assets, as described in Section 3 hereof,
together with any other documents or certificates as may be required by this
Agreement, the Related Agreements, or the Pooling Agreement. Following the
contribution of the Daiwa FLOWS Certificates and the Other Assets to QRS, QRS
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<PAGE>
will own the Daiwa FLOWS Certificates and the Other Assets free and clear of any
prior lien, mortgage, security interest, pledge, charge or other encumbrance;
(d) the execution and delivery by the Company of this
Agreement has been duly authorized by all necessary action on the part of the
Company and it is not necessary in connection with the conveyance of the Daiwa
FLOWS Certificates and the Other Assets or the other transactions contemplated
by this Agreement that the Company obtain the consent, approval, or
authorization of any of its shareholders;
(e) 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;
(f) 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;
(g) assuming compliance by the Initial Purchaser with its
agreements set forth in Section 7 of the Note Purchase Agreement and that the
Daiwa FLOWS Certificates have been issued by a bankruptcy remote trust, no
consent, approval, authorization or order of any court or governmental agency or
body or official is required for the execution, delivery and performance of or
compliance by the Company with this Agreement or any other transaction
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;
(h) no certificate or statement of an officer furnished
pursuant hereto in writing to QRS by the Company contains any untrue statement
of a material fact, or omits a material fact necessary to make such certificate
or statement not misleading;
(i) the Company has not dealt with any broker, investment
banker (other than the Initial Purchaser) agent (other than Leslie Fox, a
natural person and a consultant to the Company on certain matters) or any other
person that may be entitled to any commission or compensation in connection with
the sale of the Daiwa FLOWS Certificates and the Other Assets to QRS;
(j) there is no litigation pending or, to the Company's
knowledge, threatened against the Company, which would reasonably be expected to
adversely affect the transfer of the Daiwa FLOWS Certificates and the Other
4
<PAGE>
Assets or the execution, delivery, performance or enforceability of this
Agreement;
(k) no default exists on the part of the Company, and no event
has occurred which, with notice, the passage 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 material and adverse effect on
the Company's performance of this Agreement;
(l) the transfer of the Daiwa FLOWS Certificates and the Other
Assets to QRS 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;
(m) the transfer, assignment and conveyance of the Daiwa FLOWS
Certificates and the Other Assets 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 Closing Date;
(o) all conditions precedent and any restrictions upon the
transfer of the Daiwa FLOWS Certificates and the Other Assets provided for in
the Related Agreements or the Pooling Agreement have been satisfied and the
transfer of the Daiwa FLOWS Certificates and the Other Assets to the Owner
Trustee on behalf of the Issuer will be complete upon the execution of the Trust
Agreement by the parties thereto and their delivery to the Owner Trustee, on
behalf of the Issuer, pursuant to the terms thereof;
(p) subject to its continuing ownership of all of the equity
of QRS, the Company intends to relinquish all direct ownership rights in the
Daiwa FLOWS Certificates and the Other Assets transferred pursuant to this
Agreement; after the Closing Date, the Company will have no right to the Daiwa
FLOWS Certificates and the Other Assets, and, subject to Section 11, the Company
will have no right or obligation to repurchase or substitute any Daiwa FLOWS
Certificate or Other Asset;
(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. Representations and Warranties of QRS. As of the
date of this Agreement, QRS represents and warrants to the Company as follows:
(a) QRS is a corporation which 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
5
<PAGE>
material business;
(b) the execution and delivery by QRS of this Agreement are
within the legal power of QRS and have been duly authorized by all necessary
action on the part of QRS; none of the execution and delivery of this Agreement
by QRS, the consummation by QRS of the transactions contemplated hereby, nor
compliance by QRS with the provisions hereof, will (i) conflict with or result
in a breach of, or constitute a default under, any of the provisions of QRS's
certificate of incorporation or by-laws, or any law, governmental rule or
regulation, or any judgment, decree, or order binding upon QRS or its
properties, or any of the provisions of any indenture, mortgage, deed of trust,
contract or other instrument or agreement 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 or agreement;
(c) this Agreement has been duly executed and delivered by QRS
and constitutes a legal, valid and binding agreement of QRS, 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) assuming compliance by the Initial Purchaser with its
agreements set forth in Section 7 of the Note Purchase Agreement and that the
Daiwa FLOWS Certificates have been issued by a bankruptcy remote trust, no
consent, approval, authorization or order of any court or governmental agency or
body or official is required for the consummation by QRS 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 6. Covenants of the Company and QRS.
(a) The Company and QRS hereby covenant to observe all
appropriate formalities and procedures required by this Agreement and the laws
of their respective states of organization. In addition, each of the Company and
QRS will maintain its existence and identity separate from that of the other
party and each of the Company and QRS will take steps necessary to make it
apparent to third parties that each of the Company and QRS is an entity distinct
from the other party.
(b) Each of QRS and the Company covenants that it shall
cooperate with the tax administrator appointed pursuant to the Trust Indenture
and the Trust Agreement.
(c) neither the Company nor QRS will file a petition for
bankruptcy against or for appointment of a receiver of the other or encourage or
aid any other Person to do so.
(d) each of the Company and QRS will treat the 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.
6
<PAGE>
SECTION 7. Further Assurances. Upon request, and from time to
time, each of the Company and QRS 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 QRS, the
Company, the Initial Purchaser, the Owner Trustee, or the Indenture Trustee to
carry out the terms of this Agreement to effect the transfer of the Daiwa FLOWS
Certificates and the Other Assets to QRS.
SECTION 8. Conditions to Obligations of QRS. The obligation of
QRS hereunder to accept the contribution of the Daiwa FLOWS 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;
(b) receipt by QRS of the following documents (collectively,
the ("Closing Documents") in such forms as are agreed upon and acceptable to
QRS, duly executed by all signatories other than QRS as required pursuant to the
respective terms thereof:
(i) the execution and delivery of all
documents described herein, in the Related Agreements, and in
the Pooling Agreement;
(ii) Opinions of Counsel of Bartlit Beck
Herman Palenchar & Scott ("Bartlit Beck") counsel to the
Company, each of which shall be addressed to QRS and shall be
in form and substance acceptable to QRS, the Owner Trustee, on
behalf of the Issuer, the Indenture Trustee, for the benefit
of the Holders, the Initial Purchaser, and the Rating Agency
(it being understood that such Opinions of Counsel shall
expressly provide that the Owner Trustee, on behalf of the
Issuer, the Indenture Trustee, for the benefit of the Holders,
and the Rating Agency shall be entitled to rely thereupon and
that with respect to matters of Maryland law such counsel may
rely upon the Opinion of Counsel of Arent Fox Kintner Plotkin
& Kahn, special Maryland counsel to the Company, provided that
such Opinion of Counsel shall be in form and substance
acceptable to QRS, the Owner Trustee, on behalf of the Issuer,
the Indenture Trustee, for the benefit of the Holders, the
Initial Purchaser, and the Rating Agency), as to the following
matters:
(A) each of the Company and QRS has
been duly organized and 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 Related
Agreements to which it is a party, and to enter into
and perform its obligations under the Related
Agreements to which it is a party;
7
<PAGE>
(B) each Related Document to which
the Company or QRS is a party has been duly and
validly authorized, executed and delivered by the
Company and/or QRS, as applicable, and each
constitutes the legal, valid and binding agreement of
the Company and/or QRS, as applicable, enforceable
against the Company and/or the QRS, as applicable, 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;
(C) none of the execution and
delivery of the Related Agreements to which the
Company or QRS is a party, or the consummation of the
transactions contemplated by either the Related
Agreements 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 or QRS, as applicable, or, to such counsel's
knowledge, any order, rule or regulation currently
applicable to the Company or QRS, as the case may be,
of any court, regulatory body, administrative agency
or governmental body having jurisdiction over the
Company or QRS, 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 or QRS is a party or
by which the Company or QRS or any of their
respective properties are bound;
(D) 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
Private Offering Memorandum, this Agreement, and the
other Related Agreements, are not transactions
requiring registration of the Company or QRS under
the 1940 Act;
(E) the conveyance and transfer of
the Daiwa FLOWS Certificates and the Other Assets,
the creation and transfer of the equity in the
issuer, or any of the other transactions contemplated
by the Related Agreements, including 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
8
<PAGE>
contemplated by this Agreement, and the Related
Agreements, are not transactions requiring
registration of any class of the Notes, or the equity
of QRS or the Issuer, under the Securities Act of
1933;
(F) the conveyance and transfer of
the Daiwa FLOWS Certificates constitutes a true sale
thereof from the Company to QRS and, if such transfer
were to be adjudged not to be a true sale, QRS would
have a first priority perfected security interest in
the Daiwa FLOWS Certificates, and in a case under the
Bankruptcy Code in which the Company is a debtor, a
bankruptcy court would not cause a substantive
consolidation of the assets and liabilities of the
Issuer or QRS with the Company;
(G) to the best of its knowledge
after due inquiry and examination of the face of the
Trust Certificate, no consent, approval,
authorization or order of any court or governmental
agency or body or official is required for the
execution, delivery and performance of or compliance
by the Company with this Agreement or any other
transaction 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; and
(H) to the best of its knowledge
after due inquiry, there is no litigation pending or
threatened against the Company which would reasonably
be expected to adversely affect the transfer of the
Daiwa FLOWS Certificates and the Other Assets or the
execution, delivery, performance or enforceability of
this Agreement;
(iii) a certificate of the Secretary of the
Company as to its certificate 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 Colorado and of
Maryland;
(c) the execution and delivery by the Company, QRS and the
Issuer of a Securitization Cooperation Agreement, dated the Closing Date, among
the Issuer, QRS, the Company and the Initial Purchaser and mutually satisfactory
to the Initial Purchaser and the Company.
(d) all consents required for the transfer of the Daiwa FLOWS
Certificates and the Other Assets to QRS have been obtained by the Company and
reasonably sufficient evidence thereof has been given to QRS.
SECTION 9. Conditions to Obligations of the Company. The
obligations of the Company hereunder to transfer the Daiwa FLOWS Certificates
and the Other Assets to QRS is subject to:
(a) the accuracy in all material respects of all of the
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<PAGE>
representations and warranties of QRS under this Agreement and compliance in all
material respects by QRS with all of its covenants and obligations under this
Agreement;
(b) the receipt by the Company on the date hereof of an
Opinion of Counsel of Bartlit Beck as counsel to QRS, addressed to the Company,
that this Agreement has been duly authorized by all necessary action of QRS and
has been duly and validly executed and delivered by QRS and constitutes a valid,
legal and binding agreement of QRS, enforceable against QRS 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 (it being understood
that such Opinion of Counsel shall expressly provide that the Owner Trustee, on
behalf of the Issuer, the Indenture Trustee, for the benefit of the Holders, and
the Rating Agency shall be entitled to rely thereupon and that such Opinion of
Counsel shall be acceptable to each of the parties entitled to rely thereupon);
and
(c) satisfaction by QRS of all conditions of all of its
purchase obligations under this Agreement.
SECTION 10. Indemnification. In the event that either party
hereto breaches its representations, warranties, covenants or obligations set
forth herein in any material respect, each party hereto shall indemnify and hold
harmless the other 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 a
non-breaching party of notice of the commencement of any such action, the
non-breaching party will, if a claim in respect thereof is to be made against
the breaching party under this Section, notify the breaching party in writing of
the commencement thereof, but the failure of the non-breaching party to notify
the breaching party will not relieve the breaching party from any liability
hereunder unless such omission materially prejudices the rights of the breaching
party. In case any such action is brought against the non-breaching party, and
the non-breaching party notifies the breaching party of the commencement
thereof, the breaching party will be entitled to participate therein, and to
assume the defense thereof, with counsel reasonably satisfactory to the
breaching party, and after notice from the breaching party to the non-breaching
party of its election to assume the defense thereof, the non-breaching party
will not be liable to the breaching party under this Section for any legal or
other expenses subsequently incurred by the other party 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 herein shall survive delivery
of the Daiwa FLOWS Certificates and the Other Assets to QRS, the subsequent
transfer to the Owner Trustee, on behalf of the Issuer, and the further
assignment to the Indenture Trustee, for the benefit of the Holders, of the
Daiwa FLOWS Certificates and the Other Assets and the issuance and sale of Notes
by the Issuer to the Initial Purchaser and shall inure to the benefit of the
Owner Trustee, on behalf of the Issuer, and the Indenture Trustee, for the
benefit of the Holders, notwithstanding any restrictive or qualified endorsement
or assignment. Upon the discovery by a party hereto, the Owner Trustee, or the
Indenture Trustee of a breach of any of such representations and warranties that
10
<PAGE>
materially and adversely affects the interests of any such person or the
Holders, the party discovering such breach shall give prompt written notice to
the other party hereto, the Owner Trustee, and the Indenture Trustee, whereupon
the breaching party shall promptly take such action as is necessary to cure such
breach. Within 60 days of its discovery of or its receipt of notice of any
breach of the representations and warranties contained herein, the breaching
party shall cause such breach to be cured in all material respects or, in the
event the Company is unable to cure such breach, the breaching party shall
purchase the Daiwa Flows Certificates at a purchase price (the "Purchase Price")
calculated as follows: if the Purchase Price is paid prior to the date on which
the Notes are retranched and resold as contemplated by the Cooperation
Agreement, the Purchase Price shall equal to the sum of (x) $39,951,986.00 plus
(y) all costs and expenses of the Initial Purchaser incidental to or consequent
upon such breach, including without limitation all third party costs and
expenses, hedging costs and lost interest income, and (z) the accrued interest
on the Notes as of such date, in each case payable in immediately available
funds. If such Purchase Price is paid following the date on which the Notes are
retranched and resold as contemplated by the Cooperation Agreement, the Purchase
Price shall equal to the sum of (x) the par value of the Notes plus (y) the
accrued interest on the Notes as of such date, in each case payable in
immediately available funds. The obligations of the breaching party set forth in
this Section 11 with respect to a breach of a representation contained herein
shall constitute the sole remedy respecting such breach available to QRS, the
Company, the Owner Trustee, on behalf of the Issuer, the Issuer, the Indenture
Trustee, on behalf of any Holder or the Holders, or any Holder, provided,
however, that this Section 11 shall in no way weaken, reduce, or pre-empt the
indemnification provisions set forth in Section 10, which shall continue in full
force and effect.
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 telecopy, as follows:
(a) If to the Company:
Commercial Assets, Inc.
3410 S. Galena Street, Suite 210
Denver, Colorado 80231
Fax: 303-614-9401
Attention: Kevin Nystrom
with a copy to:
Bartlit Beck Herman Palenchar & Scott
511 Sixteenth Street, Suite 700
Denver, CO 80202
Tel: 303-592-3100
Fax: 303-592-3140
Attention: James L. Palenchar, Esq.
(b) If to QRS:
11
<PAGE>
CAX DTR Securitization Corp.
3410 S. Galena Street
Denver, Colorado 80231
Fax: 303-614-9401
Attention: Kevin Nystrom
with a copy to:
Bartlit Beck Herman Palenchar & Scott
511 Sixteenth Street, Suite 700
Denver, CO 80202
Tel: 303-592-3100
Fax: 303-592-3140
Attention: James L. Palenchar, Esq.
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, WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS THEREOF.
SECTION 15. Survival. Each of the Company and QRS 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 other party, 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 or
QRS herein or in any such certificate or other instrument shall survive the
delivery of and payment for the Daiwa FLOWS Certificates and the Other Assets.
SECTION 16. Acknowledgement of Third Party Reliance. Each of
the Company and QRS hereby acknowledges that the Initial Purchaser and all
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<PAGE>
subsequent Holders shall rely upon the representations, warranties and covenants
made by it in this Agreement not as assignees but as intended third-party
creditor beneficiaries of this Agreement. The Company hereby consents to the
assignment of this Agreement by QRS to the Owner Trustee, on behalf of the
Issuer, and to the Indenture Trustee, for the benefit of the Holders, from time
to time. This Agreement shall inure to the benefit of and be binding upon the
parties hereto, the Owner Trustee, on behalf of the Issuer, the Indenture
Trustee, for benefit of the Holders and their respective successors and assigns.
SECTION 17. Miscellaneous.
(a) This Agreement may be executed in separate 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.
(b) Any person into which the Company or QRS may be merged or
consolidated or any person resulting from a merger, acquisition or other
business combination involving the Company or QRS, respectively, shall be
considered the successor of the Company or of QRS, respectively, hereunder,
without further act or consent of any other party.
(c) This Agreement supersedes all prior agreements and
understandings relating to the subject matter 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.
[Signatures Appear on the Next Page]
13
<PAGE>
IN WITNESS WHEREOF, QRS and the Company have caused this
Contribution Agreement to be executed by their respective officers thereunto
duly authorized as of the date written above.
CAX DTR SECURITIZATION CORP.,
a Delaware corporation,
By: /s/Diane Armstrong
----------------------------------
Name: Diane Armstrong
Title: President & Secretary
S-1
<PAGE>
COMMERCIAL ASSETS, INC.,
a Maryland corporation,
By: /s/Kevin Nystrom
----------------------------------
Name: Kevin Nystrom
Title: Sr. VP & CFO
S-2
SECURITIZATION COOPERATION AGREEMENT
SECURITIZATION COOPERATION AGREEMENT (this "Agreement"), dated
as of November 3, 1997, by and among Commercial Assets, Inc., a Maryland
corporation (the "Company"), CAX DTR Securitization Corp. ("QRS"), a Delaware
corporation, Structured Mortgage Trust 1997-2 (the "Issuer"), a Delaware
Business Trust, and PaineWebber Incorporated, a Delaware corporation (the
"Initial Purchaser").
WHEREAS, capitalized terms used and not defined herein shall
have the meanings assigned to them in the Trust Indenture (the "Indenture"),
dated as of November 3, 1997, by and between the Issuer and LaSalle National
Bank, a national banking corporation, as Indenture Trustee; and
WHEREAS, the Company is the record or beneficial owner of the
Daiwa FLOWS Certificates and the Other Assets;
WHEREAS, QRS is a wholly-owned subsidiary of the Company;
WHEREAS, the Company desires, on or about November 3, 1997, to
contribute its right, title and interest in and to the Daiwa FLOWS Certificates
and the Other Assets to QRS pursuant to the terms of the Contribution Agreement
in exchange for all of the authorized and outstanding capital stock of QRS;
WHEREAS, QRS desires, on or about November 3, 1997, to deposit
the Daiwa FLOWS Certificates and the Other Assets with the Issuer pursuant to
the terms of the Trust Agreement in exchange for all of the equity of the
Issuer;
WHEREAS, the Issuer intends, contemporaneously with the
deposit of the Daiwa FLOWS Certificates and the Other Assets, to issue four
classes of collateralized notes (the "Notes") pursuant to the Indenture, which
Notes will be secured by the Daiwa FLOWS Certificates and the Other Assets, and
all of its rights therein and with respect thereto and which will be credit
enhanced by, among other things, the overcollateralization represented by the
equity interest of the Issuer;
WHEREAS, the Initial Purchaser desires to purchase the Notes
for resale to "qualified institutional buyers" as defined in Rule 144A under the
Securities Act of 1933, as amended, after the Notes have been assigned rating
levels by Duff & Phelps Credit Rating Co. (the "Rating Agency") as set forth in
Exhibit A hereto (the "Desired Ratings"), which ratings the Initial Purchaser
believes are necessary to resell the Notes.
<PAGE>
WHEREAS, in connection with the resale of the Notes it shall
be necessary to prepare a private offering memorandum (the "Private Offering
Memorandum");
WHEREAS, the Rating Agency shall not complete its rating
analysis of the Notes by November 3, 1997 and the Private Offering Memorandum
will not be completed by such date;
WHEREAS, the Initial Purchaser is nonetheless willing to
purchase the Notes on November 3, 1997 subject to the terms and conditions of
(i) the Note Purchase Agreement, dated as of November 3, 1997, by and among the
Initial Purchaser, QRS and the Issuer (including the condition that this
Agreement be executed and delivered by the parties hereto) and (ii) the Side
Letter Agreement, dated as of November 3, 1997, by and between the Initial
Purchaser and the Company, in reliance on the covenants of the Company, QRS and
the Issuer herein to cooperate in obtaining such ratings, to modify the Related
Agreements (or enter into additional agreements) as are necessary in order to
obtain the Desired Ratings and deliver the Private Offering Memorandum, together
with such opinions and representations as shall be necessary in connection
therewith to ensure compliance with federal and state securities laws.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants, undertakings, representations, and warranties made herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
SECTION I. Representations and Warranties.
(a) Each of the Company, QRS and the Issuer
represents and warrants to the Initial Purchaser that:
(i) Such Person has been duly organized and
is validly existing as a corporation in good standing under
the laws of its State of jurisdiction;
(ii) Such Person has all requisite power and
authority (corporate and other) and all requisite
authorizations, approvals, orders, licenses, certificates and
permits of and from all governmental or regulatory officials
and bodies necessary to own its properties, to conduct its
business and to execute, deliver and perform its obligations
under this Agreement, and the other Related Agreements to
which it is a party, except such as may be required under
state securities or "blue sky" laws in connection with the
initial purchase and any reoffer or resale by the Initial
Purchaser; all such authorizations, approvals, orders,
licenses and certificates are in full force and effect and
(with respect to the Company only) contains no unduly
burdensome provisions; and there are no legal or governmental
proceedings pending or, to the best knowledge of such Person,
threatened, that would result in a material modification,
suspension or revocation thereof;
(iii) this Agreement, and each of the other
Related Agreements to which such Person is a party, has been
2
<PAGE>
duly authorized, executed and delivered by such Person, and,
assuming the due authorization by each other party hereto or
thereto, each such agreement constitutes a legal, valid,
binding and enforceable agreement of such Person, subject, as
to enforceability, to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally and to general principles of equity regardless of
whether enforcement is sought in a proceeding in equity or at
law.
SECTION 2. Covenants.
(a) Cooperation with Respect to Securitization. Upon the
request of the Initial Purchaser, the Company, QRS, and the Owner Trustee on
behalf of the Issuer shall exercise its commercially reasonable efforts,
including without limitation promptly effecting any amendments to the Indenture,
the Trust Agreement, the Contribution Agreement, the Note Purchase Agreement, or
the Side Letter Agreement, or to the organizational documents of any party
hereto, or enter into additional agreements, and to deliver such certificates
and opinions and provide such other assistance, as reasonably requested by the
Initial Purchaser in order to comply with a Rating Agency requirement necessary
in order to obtain the Desired Ratings (each, an "Amendment"); provided,
however, that if any individual Amendment, or the Amendments taken as a whole,
will adversely change the value of the total consideration received by the
Company, QRS and the Issuer from the sale of Notes or the right of the Equity
Interest (as defined in the Indenture) relative to the Notes to receive payments
of Available Funds (as defined in the Indenture) pursuant to the Indenture as of
the Closing Date, then any such Amendment or Amendments shall be effected only
with the written consent of the Company, which consent shall not be unreasonably
withheld.
(b) Re-tranching of Notes. In order to facilitate the resale
of the Notes by the Initial Purchaser, the Initial Purchaser may require the
Issuer to register an exchange of the Notes for replacement Notes with the same
aggregate principal balance and weighted average coupon rate as the Notes
originally sold but with different principal balances, interest rates and/or
allocations of principal and interest among the various Classes of Notes, and
the Issuer shall cooperate in effectuating such exchange; provided, however,
that such exchange shall not adversely change the value of the total
consideration received by the Company, QRS and the Issuer from the sale of Notes
or the right of the Equity Interest (as defined in the Indenture) relative to
the Notes to receive payments of Available Funds (as defined in the Indenture)
pursuant to the Indenture as of the Closing Date.
(c) Covenants with Respect to the Private Offering Memorandum.
The Company, QRS, and the Issuer each covenants and agrees
with the Initial Purchaser that:
(1) the Company, QRS, and the Issuer will prepare the
Private Offering Memorandum and will deliver it to the Initial
Purchaser for delivery to subsequent investors identified by the
Initial Purchaser no later than the ___th day following the assignment
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<PAGE>
of the Desired Ratings by the Rating Agency. The Private Offering
Memorandum will contain the material information regarding the Notes
that investors need in order to evaluate the risks and rewards of an
investment in the Notes and will contain no untrue statement of a
material fact and will not omit to state any material fact required to
be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. In furtherance of the foregoing:
(a) on the date as of which the Private
Offering Memorandum is dated, each of the Company, QRS, and
the Owner Trustee on behalf of the Issuer shall deliver to the
Initial Purchaser a certificate of a responsible officer of
such Person, dated such date and acceptable to the Initial
Purchaser, to the effect that the signer of such certificate
has carefully examined the Private Offering Memorandum, this
Agreement and the other Related Agreements, and that: (i) the
representations and warranties of the applicable Person in
each Related Agreement are true and correct in all material
respects at and as of the date as of which the Private
Offering Memorandum is dated with the same effect as if made
on the date as of which the Private Offering Memorandum is
dated, except as disclosed in such certificate, provided that
such exceptions shall be reasonable acceptable to the Initial
Purchaser, (ii) the Private Offering Memorandum contains no
untrue statement of a material fact and does not omit to state
any material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading,
except that no such representation or warranty shall be
required as to statements contained in or omitted from the
Private Offering Memorandum in reliance upon and in conformity
with information furnished in writing to the Issuer by the
Initial Purchaser specifically for use in the Private Offering
Memorandum and any amendment or supplement thereto, and (iii)
with respect to the Issuer only, subsequent to the date as of
which information is given the Private Offering Memorandum,
except as otherwise stated therein, there has been no material
adverse change in the condition, financial or otherwise,
earnings, affairs, regulatory situation or business prospects
of the Issuer, whether or not arising in the ordinary course
of business of the Issuer;
(b) on the date as of which the Private
Offering Memorandum is dated, the Company shall deliver to the
Initial Purchaser the opinion of Bartlit, Beck, Herman,
Palenchar & Scott, special counsel for the Company, QRS and
the Issuer an opinion (which may rely upon opinions of local
counsel to the same extent as the opinion delivered by it
pursuant to the Note Purchase Agreement) satisfactory in form
and substance to the Initial Purchaser reasonably (i)
confirming that the opinions rendered by such counsel on the
Closing Date and addressed to the Initial Purchaser pursuant
to the Note Purchase Agreement remain valid, or updating such
opinions to reflect applicable changes in law or fact as of
the date as of which the Private Offering Memorandum is dated,
and (ii) confirming that nothing has come to the attention of
such counsel that would lead such counsel to believe that the
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<PAGE>
Private Offering Memorandum, as of its date, contains an
untrue statement of a material fact 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 the sections concerning certain federal
income tax consequences, state tax considerations and ERISA
considerations, and other than financial statements, schedules
and other numerical, financial and statistical data contained
therein).
SECTION 3. [Intentionally Omitted.]
SECTION 4. Conditions to Obligations of the Parties
Hereto.
The obligations of the parties hereto hereunder are subject to
the execution, delivery, and effectiveness of all other Related Agreements and
the sale of the Notes to the Initial Purchaser.
SECTION 5. Breach; Remedies.
(a) The default by the Company, QRS or the Issuer of any of
its covenants hereunder, and the continuance of such default or breach for a
period of seven days after receipt by the Company of a written notice from the
Initial Purchaser specifying such default or breach and requiring it to be
remedied shall be an "event of default" hereunder.
(b) It is understood and agreed that the undertakings set
forth in Section 2 shall survive delivery of the Notes to the Initial Purchaser,
and shall inure to the benefit of all parties hereto and that no adequate remedy
at law will be available to the Initial Purchaser upon such a breach. Upon the
discovery by a party hereto, the Owner Trustee, or the Indenture Trustee of a
breach of any undertaking, the party discovering such breach shall give prompt
written notice to all other parties hereto, the Owner Trustee, and the Indenture
Trustee, whereupon the breaching party shall promptly take such action as is
necessary to cure such breach. Within 15 days of its discovery or its receipt of
notice of any breach of any undertaking, the breaching party shall cause such
breach to be cured or, in the event that such breaching party is unable to cure
such breach, the Company shall purchase, or shall cause QRS or the Issuer to
purchase, the Notes at a purchase price as set forth below. If such breach is of
a representation contained in Section 2(c)(1)(a) hereof, the purchase price
shall be an amount equal to the sum of (x) the par value of the Notes and (y)
the accrued interest on the Notes as of such date, payable in immediately
available funds. If such breach is of another obligation of the Company, QRS or
the Issuer pursuant to Section 2(a) or 2(c) of this Agreement, such purchase
price shall be equal to the sum of (x) $39,951,986.00 plus (y) all costs and
expenses of the Initial Purchaser incidental to or consequent upon such breach,
including without limitation all third party costs and expenses, hedging costs
and lost interest income, and (z) the accrued interest on the Notes as of such
date, in each case payable in immediately available funds.
SECTION 6. Incorporation by Reference.
5
<PAGE>
The obligations contained herein are in addition to, and do
not in any way lessen, weaken, or detract from the further assurances provisions
contained in each Related Agreement, including, without limitation, in Section 7
of the Contribution Agreement, Section 2 of the Side Letter Agreement, Section
8.2 of the Trust Agreement, and Section 9.04 of the Indenture, which are hereby
incorporated by reference. It is further agreed that the provisions of Section 4
of the Note Purchase Agreement are hereby incorporated herein by reference as if
stated herein.
SECTION 7. Notices.
All demands, notices and communications hereunder shall be in
writing and shall be delivered to the addressees set forth in the Related
Agreements, and dispatched in the manner set forth therein.
SECTION 8. 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 9. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICT OF LAWS PROVISIONS THEREOF.
SECTION 10. Survival.
Each party hereto agrees that the representations, warranties,
undertakings and agreements made by it pursuant to Section 2(c)(1)(a) herein and
in any certificate or other instrument delivered pursuant hereto shall be deemed
to have been relied upon by the other parties, notwithstanding any investigation
heretofore or hereafter made by any other party or on any other party's behalf,
and that the representations, warranties and agreements made by any party hereto
in any such certificate or other instrument shall survive the delivery of and
payment for the Notes.
SECTION 11. Acknowledgement of Third Party Reliance. Each of
the parties hereto hereby acknowledges that all subsequent Holders, and their
respective successors and assigns, shall rely upon the representations,
6
<PAGE>
warranties and covenants made by it in this Agreement not as assignees but as
intended third-party creditor beneficiaries of this Agreement.
SECTION 12. Miscellaneous.
(a) This Agreement may be executed in separate 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.
(b) Any person into which any party hereto may be merged or
consolidated or any person resulting from a merger, acquisition, or other
business combination involving any such party or any person succeeding to its
business shall be considered the successor of such party 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. 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.
[Signatures Appear on the Following Page]
7
<PAGE>
IN WITNESS WHEREOF, the parties below have caused this
Securitization Cooperation Agreement to be executed by their respective officers
thereunto duly authorized as of the date written above.
CAX DTR SECURITIZATION CORP.,
a Delaware corporation,
By: /s/Diane Armstrong
-------------------------------
Name: Diane Armstrong
Title: President & Secretary
S-1
<PAGE>
COMMERCIAL ASSETS, INC.,
a Maryland corporation,
By: /s/Kevin Nystrom
--------------------------
Name: Kevin Nystrom
Title: Sr. VP & CFO
S-2
<PAGE>
STRUCTURED MORTGAGE TRUST 1997-2, a
Delaware business trust,
By: Wilmington Trust Company, not
individually, but solely in its
capacity as Owner Trustee,
By: /s/Emmett R. Harmon
----------------------------
Name: Emmett R. Harmon
Title: Vice President
S-3
<PAGE>
PAINEWEBBER INCORPORATED,
a Delaware corporation,
By: /s/Steven J. Plust
----------------------------
Name: Steven J. Plust
Title: Managing Director
S-4
SIDE LETTER AGREEMENT
This SIDE LETTER AGREEMENT (this "Agreement"), dated as of
November 3, 1997, by and between Commercial Assets, Inc., a Maryland corporation
(the "Company") and PaineWebber Incorporated (the "Initial Purchaser").
WHEREAS, Structured Mortgage Trust 1997-2, (the "Issuer"), a
business trust established under the laws of the State of Delaware pursuant to a
Trust Agreement, dated November 3, 1997, by and between Wilmington Trust
Company, a Delaware bank and trust corporation, as Owner Trustee, and CAX DTR
Securitization Corp., a Delaware corporation ("QRS"), as depositor, proposes to
sell to the Initial Purchaser the respective classes of collateralized notes
that are identified in Schedule I hereto (collectively, the "Notes") pursuant to
a Note Purchase Agreement, dated as of November 3, 1997, among the Issuer, QRS,
and the Initial Purchaser (the "Note Purchase Agreement") for consideration and
on terms set forth therein and in a document ancillary thereto (as described
therein). The Notes are to be issued pursuant to an indenture (the "Indenture"),
to be dated as of November 3, 1997, by and between the Issuer and LaSalle
National Bank, a national banking association, as indenture trustee (the
"Indenture Trustee");
WHEREAS, the Notes will be secured by, and interest on and
principal of the Notes will be paid out of the cash flow from and after (but not
including distributions made on) the November 1997 Certificate Distribution Date
from $50,974,526 aggregate principal amount of Daiwa Securities America Inc.
Multifamily First Loss Ownership Securities ("Multifamily FLOWS_") Series
1994-Multifamily FLOWS_-1 pass-through certificates (the "Collateral");
WHEREAS, the Collateral will be transferred from the Company
to QRS pursuant to a Contribution Agreement, dated as of November 3, 1997 (the
"Contribution Agreement"), between QRS, as contributee, and the Company, as
contributor. QRS will then transfer the Collateral to the Issuer pursuant to the
Trust Agreement in exchange for all of the equity of the Issuer;
WHEREAS, the contemplated transactions, as described above,
are in the commercial interest of the Company;
WHEREAS, the parties hereto desire to provide a fuller
indemnity for the Initial Purchaser with regard to its purchase of the Notes
than the Contribution Agreement, the Trust Agreement, or the Note Purchase
Agreement currently provide for;
WHEREAS, each of the Issuer and QRS (each, along with the
Company, an "Indemnifying Party") have, as set forth in Section 8 of the Note
<PAGE>
Purchase Agreement, jointly and severally agreed to indemnify (or in certain
circumstances, make contributions to) and hold harmless the Initial Purchaser,
its affiliates, and the respective directors, officers, agents and employees of
the Initial Purchaser and its affiliates and each other entity or person, if
any, controlling the Initial Purchaser or any of its affiliates (as such term
"control" is used in either Section 15 of the 1933 Act or Section 20 of the 1934
Act) under a number of situations and subject to certain conditions;
WHEREAS, the parties hereto desire to provide for mutual
rights of indemnification on terms substantially similar to those contained in
the Note Purchase Agreement; and
WHEREAS, capitalized terms used but not otherwise defined
herein shall have the respective meanings assigned to them in the Indenture.
NOW, THEREFORE, in consideration of the foregoing, and for
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Indemnification and Contribution.
(a) The Company hereby agrees to indemnify (or in certain
circumstances, make contributions to) and hold harmless the Initial Purchaser,
its affiliates, and the respective directors, officers, agents and employees of
the Initial Purchaser and its affiliates and each other entity or person, if
any, controlling the Initial Purchaser or any of its affiliates (as such term
"control" is used in either Section 15 of the 1933 Act or Section 20 of the 1934
Act), to the same extent as the obligations of each Indemnifying Party under the
indemnity and contribution referenced in the sixth WHEREAS clause of this
Agreement. This indemnity will be in addition to, and shall not lessen or modify
the provisions of, any indemnification or contribution obligation of any other
party to the Initial Purchaser.
(b) The Initial Purchaser hereby agrees to indemnify and hold
harmless the Company and each person, if any, who controls the Company (as such
term "control" is used in Section 15 of the 1933 Act or Section 20 of the 1934
Act), to the same extent as the Initial Purchaser's obligations to the
Indemnifying Parties under the indemnity and contribution referenced in the
sixth WHEREAS clause of this Agreement, but only with respect to written
information furnished to the Company by the Initial Purchaser specifically for
use in connection with the preparation of the Private Offering Memorandum with
respect to the Notes or notes substituted therefor (the "Private Offering
Memorandum"). This indemnity will be in addition to, and shall not lessen or
modify the provisions of, any indemnification or contribution obligation of the
Initial Purchaser by any other party.
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<PAGE>
2. Representations and Covenants of the Company.
(a) The Company hereby covenants that it will render any
assistance requested, appropriate, or necessary to draft, and will carefully
examine the Private Offering Memorandum and all amendments and supplements
thereto which are drafted, and will have complied or will comply with all
agreements and have satisfied or will satisfy all conditions on its part to be
performed or satisfied prior to, upon, or after the Closing Date set forth in
the Related Agreements, that it will represent and warrant that the Private
Offering Memorandum, when finalized, and as then amended or supplemented,
contains no untrue statement of a material fact and does not omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, except that no such representation or warranty shall be required
as to statements contained in or omitted from the Private Offering Memorandum in
reliance upon and in conformity with information furnished in writing to the
Company by the Initial Purchaser specifically for use in the Private Offering
Memorandum and any amendment or supplement thereto.
(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
Private Offering Memorandum, as then amended or supplemented, would include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, the
Company will promptly notify the Initial Purchaser, and the Company, in
conjunction with QRS and the Issuer, shall prepare to furnish to the Initial
Purchaser, in accordance with Section 4 of the Note Purchase Agreement, an
amendment or supplement to the Private Offering Memorandum that will correct
such statement or omission and shall furnish to the Initial Purchaser, without
charge, copies of the Private Offering Memorandum (including all exhibits and
documents incorporated by reference therein) and the Indenture and all
amendments or supplements to such documents, in each case as soon as available
and in such quantities as the Initial Purchaser may reasonably request.
(c) The Company will immediately inform the Initial Purchaser,
the Company, and the Issuer (i) of the receipt by it of any communication from
the Securities and Exchange Commission or any state securities authority
concerning the offering or sale of the Notes, and (ii) of the commencement of
any lawsuit or proceeding to which the Company, QRS, the Issuer, the Initial
Purchaser, the Owner Trustee or the Indenture Trustee is a party relating to the
offering or sale of the Notes.
(d) To the extent, if any, that the rating ultimately assigned
to the Notes by Duff & Phelps Credit Rating Co. or another statistical rating
agency which initially rates the Notes is conditional upon the furnishing of
documents or the taking of any other actions by the Company, the Company shall
use its best efforts to furnish such documents, or cause such documents to be
furnished, and take any such other actions.
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<PAGE>
(e) During the period referred to in clause (b), the Issuer
will, at the Initial Purchaser's request, furnish through the Initial Purchaser
to any prospective purchaser of Notes from the Initial Purchaser such
information as is required to be delivered to such prospective purchaser
pursuant to Section 7(e) of the Note Purchase Agreement.
(f) The Company shall be responsible for and shall pay all of
the fees, disbursements and expenses of the Company and QRS's counsel and
accountants.
3. Survival of Certain Representations and Obligations. The
respective representations, warranties, agreements, covenants, indemnities and
other statements of the Company or the Initial Purchaser, and their respective
officers and agents, set forth in, or made pursuant to, this Agreement shall
remain in full force and effect, regardless of any investigation, or statement
as to the result thereof, made by or on behalf of either the Company or the
Initial Purchaser, or any of their respective officers or directors or any
controlling person of any of the foregoing, and shall survive the delivery of
and payment for the Notes. The provisions of Sections 1, 2 and 3 hereof shall
survive the termination or cancellation of this Agreement.
4. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Initial Purchaser, will be
mailed, delivered or telecopied to
PaineWebber Incorporated
1285 Avenue of the Americas, 19th Floor
New York, New York 10019
Telecopy: (212) 917-7957
Telephone: (212) 713-7953
Attention: Steven J. Plust
with a copy to:
O'Melveny & Myers LLP
153 East 53rd Street
New York, New York 10022
Telephone: (212) 326-2197
Telecopy: (212) 326-2061
Attention: Gary Barnett, Esq.
or, if sent to the Company, will be mailed, delivered or telecopied to it at:
Commercial Assets, Inc.
3410 S. Galena Street, Suite 210
Denver, Colorado 80231
Telephone: (303) 614-9400
Facsimile: (303) 614-9401
Attention: Kevin Nystrom
4
<PAGE>
with a copy to:
Bartlit Beck Herman Palenchar & Scott
511 Sixteenth Street, Suite 700
Denver, Colorado 80202
Telephone: (303) 592-3100
Facsimile: (303) 592-3140
Attention: James L. Palenchar, Esq.
5. Applicable Law; Counterparts; Integration.
(a) THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND REFLECTS THE FULL
UNDERSTANDING OF THE PARTIES HERETO WITH RESPECT TO THE MATTERS REFERENCED
HEREIN.
(b) This Agreement may be executed in any number of
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall together constitute but one and the same instrument.
[Signatures Commence On The Following Page]
5
<PAGE>
IN WITNESS WHEREOF, the Company and the Initial Purchaser have
caused this Side Letter Agreement to be executed by their duly authorized
respective officers as of the date first set forth above.
COMMERCIAL ASSETS, INC.,
a Maryland corporation,
By: /s/Kevin Nystrom
-------------------------
Name: Kevin Nystrom
Title: Sr. VP & CFO
S-1
<PAGE>
PAINEWEBBER INCORPORATED,
a Delaware corporation,
By: /s/Steven J. Plust
-------------------------
Name: Steven J. Plust
Title: Managing Director
S-2
<PAGE>
Schedule I
Notes
Class Par Amount Rate CUSIP
----- ---------- ---- -----
Class A $24,224,526 * N/A
Class B $14,000,000 * N/A
Class C $0 * N/A
Class D $7,750,000 * N/A
* Weighted Average Note Rate
I-1
