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
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.
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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(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.
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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 ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, 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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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
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
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
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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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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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"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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"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
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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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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
12
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
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.
14
"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 & ▇▇▇▇▇▇ 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,
15
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
16
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
17
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]
18
ARTICLE TWO:
[INTENTIONALLY OMITTED]
19
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.
20
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
21
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.
22
(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).
23
(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 ▇▇▇▇ 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
24
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 ▇▇▇▇ 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
25
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
26
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.
27
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.
28
(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
29
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
30
(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]
31
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);
32
(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
33
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]
34
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
35
(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]
36
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.
37
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
38
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
39
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
40
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.
41
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.
42
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
43
(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
44
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]
45
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
46
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
47
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
48
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
49
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.
50
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
52
payment for the Notes.
[End of Article VII]
53
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]
55
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
56
(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
57
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.
58
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;
59
(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
60
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.
61
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
66
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.
67
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
69
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]
70
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
71
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
72
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
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Corporate Trust Administration
with a copy to
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Finger
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, 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/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
S-80
LASALLE NATIONAL BANK,
a national banking association,
as Indenture Trustee and not
in its individual capacity
By:
-----------------------------
Name:
Title:
S-81
LASALLE NATIONAL BANK,
a national banking association,
as Tax Administrator
By:
-----------------------------
Name:
Title:
S-82