-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OuypVwMjAyBNQkH50vSMSVT/0SbedWD9RBFyqEbQQ4CwG+L6UqB1ODRBFpIVwPg7 7h11DLGewy3saMoZy3IZCw== 0001341004-06-001358.txt : 20060510 0001341004-06-001358.hdr.sgml : 20060510 20060510171612 ACCESSION NUMBER: 0001341004-06-001358 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20060331 FILED AS OF DATE: 20060510 DATE AS OF CHANGE: 20060510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANTHRACITE CAPITAL INC CENTRAL INDEX KEY: 0001050112 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 133978906 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13937 FILM NUMBER: 06827350 BUSINESS ADDRESS: STREET 1: 40 EAST 52ND STREET CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127545560 MAIL ADDRESS: STREET 1: 40 EAST 52ND STREET CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: ANTHRACITE MORTGAGE CAPITAL INC DATE OF NAME CHANGE: 19971121 10-Q 1 nyc1118015.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2006 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from: ________ to ________ Commission File Number 001-13937 ANTHRACITE CAPITAL, INC. ------------------------ (Exact name of registrant as specified in its charter) Maryland 13-3978906 ------------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 40 East 52nd Street, New York, New York 10022 --------------------------------------- ---------------- (Address of principal executive offices) (Zip Code) (Registrant's telephone number including area code): (212) 810-3333 -------------- NOT APPLICABLE -------------- (Former name, former address, and for new fiscal year; if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes X No__ (2) Yes X No__ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one) Large accelerated filer__ Accelerated filer X Non-accelerated filer__ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). (1) Yes _ No X As of May 10, 2006, 57,053,435 shares of common stock ($.001 par value per share) were outstanding.
ANTHRACITE CAPITAL, INC. FORM 10-Q INDEX PART I - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements.................................................................4 Consolidated Statements of Financial Condition (Unaudited) At March 31, 2006 and December 31, 2005..............................................4 Consolidated Statements of Operations (Unaudited) For the Three Months Ended March 31, 2006 and 2005...................................5 Consolidated Statement of Changes in Stockholders' Equity (Unaudited) For the Three Months Ended March 31, 2006............................................6 Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2006 and 2005...................................7 Notes to Consolidated Financial Statements (Unaudited)...............................9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...............................................................25 Item 3. Quantitative and Qualitative Disclosures about Market Risk..........................53 Item 4. Controls and Procedures.............................................................58 Part II - OTHER INFORMATION Item 1. Legal Proceedings...................................................................59 Item 1A. Risk Factors........................................................................59 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.........................59 Item 3. Defaults Upon Senior Securities.....................................................59 Item 4. Submission of Matters to a Vote of Security Holders.................................59 Item 5. Other Information...................................................................59 Item 6. Exhibits............................................................................59 SIGNATURES ....................................................................................61
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as "trend," "opportunity," "pipeline," "believe," "comfortable," "expect," "anticipate," "current," "intention," "estimate," "position," "assume," "potential," "outlook," "continue," "remain," "maintain," "sustain," "seek," "achieve" and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may" or similar expressions. Anthracite Capital, Inc. (the "Company") cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and the Company assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance. In addition to factors previously disclosed in the Company's Securities and Exchange Commission (the "SEC") reports and those identified elsewhere in this report, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: (1) the introduction, withdrawal, success and timing of business initiatives and strategies; (2) changes in political, economic or industry conditions, the interest rate environment or financial, capital and real estate markets, which could result in changes in the value of the Company's assets; (3) the relative and absolute investment performance and operations of the Company's manager, BlackRock Financial Management, Inc. (the "Manager"); (4) the impact of increased competition; (5) the impact of capital improvement projects; (6) the impact of future acquisitions and divestitures; (7) the unfavorable resolution of legal proceedings; (8) the extent and timing of any share repurchases; (9) the impact, extent and timing of technological changes and the adequacy of intellectual property protection; (10) the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to the Company, the Manager or The PNC Financial Services Group, Inc. ("PNC Bank"); (11) terrorist activities, which may adversely affect the general economy, real estate, financial and capital markets, specific industries, and the Company and the Manager; (12) the ability of the Manager to attract and retain highly talented professionals. (13) fluctuations in foreign currency exchange rates; and (14) the impact of changes to tax legislation and, generally, the tax position of the Company. Forward-looking statements speak only as of the date they are made. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
Part I - FINANCIAL INFORMATION Item 1. Financial Statements Anthracite Capital, Inc. and Subsidiaries Consolidated Statements of Financial Condition (in thousands, except per share data) (unaudited) - ---------------------------------------------------------------------------------------------------------------------------------- March 31, 2006 December 31, 2005 -------------- ----------------- ASSETS Cash and cash equivalents $27,590 $40,556 Restricted cash equivalents 1,069 1,246 Securities available-for-sale, at fair value: Subordinated commercial mortgage-backed securities ("CMBS") $829,678 $826,955 Investment grade CMBS 1,364,681 1,157,164 Residential mortgage-backed securities ("RMBS") 187,551 92,817 ----------- -------------- Total securities available-for-sale 2,381,910 2,076,936 Commercial mortgage loan pools, at amortized cost 1,287,277 1,292,407 Securities held-for-trading, at estimated fair value CMBS 21,260 21,264 RMBS 155,259 166,209 ----------- -------------- Total securities held-for-trading 176,519 187,473 Commercial mortgage loans, net 361,723 365,806 Equity investments 155,063 110,650 Real estate, held-for-sale 5,435 - Other assets 117,595 89,185 --------------- -------------- Total Assets $4,514,181 $4,164,259 =============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Borrowings: Collateralized debt obligations ("CDOs") $1,066,574 $1,066,930 Secured by pledge of subordinated CMBS 113,899 83,213 Secured by pledge of other securities available-for-sale 860,154 606,209 Secured by pledge of commercial mortgage loan pools 1,273,796 1,278,908 Secured by pledge of securities held-for-trading 132,760 176,361 Secured by pledge of commercial mortgage loans 201,347 229,556 Junior subordinated notes to subsidiary trust issuing preferred securities 180,477 77,380 ----------- -------------- Total borrowings $3,829,007 $3,518,557 Payable for investments purchased 20,660 - Distributions payable 16,873 16,673 Other liabilities 26,629 31,011 --------------- -------------- Total Liabilities $3,893,169 $3,566,241 --------------- -------------- Commitments and Contingencies Stockholders' Equity: Common Stock, par value $0.001 per share; 400,000 shares authorized; 57,053 shares issued and outstanding in 2006; 56,339 shares issued and outstanding in 2005 57 56 9.375% Series C Preferred stock, liquidation preference $57,500 55,435 55,435 Additional paid-in capital 619,984 612,368 Distributions in excess of earnings (127,219) (130,038) Accumulated other comprehensive income 72,755 60,197 --------------- -------------- Total Stockholders' Equity 621,012 598,018 --------------- -------------- Total Liabilities and Stockholders' Equity $4,514,181 $4,164,259 =============== ============== The accompanying notes are an integral part of these consolidated financial statements.
Anthracite Capital, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited) (in thousands, except per share data) For the Three For the Three Months Ended Months Ended March 31, 2006 March 31, 2005 ------------------------------------ Income: Interest from securities available-for-sale $38,897 $33,341 Interest from commercial mortgage loans 8,015 5,344 Interest from commercial mortgage loan pools 13,227 13,552 Interest from securities held-for-trading 1,925 2,170 Earnings from equity investments 9,342 2,605 Earnings from real estate joint ventures - 59 Interest from cash and cash equivalents 337 237 ------------------------------------ Total income 71,743 57,308 ------------------------------------ Expenses: Interest 44,632 35,143 Interest - securities held-for-trading 1,893 1,361 Management and incentive fee 4,219 2,579 General and administrative expense 1,104 820 ------------------------------------ Total expenses 51,848 39,903 ------------------------------------ Other gains (losses): Sale of securities available-for-sale 34 10 Securities held-for-trading 950 (1,372) Foreign currency gain (loss) 44 (168) Loss on impairment of assets (781) (159) ------------------------------------ Total other gains (losses) 247 (1,689) ------------------------------------ Net income 20,142 15,716 ------------------------------------ Dividends on preferred stock 1,348 1,348 ------------------------------------ Net income available to common stockholders $18,794 $14,368 ==================================== Net income per common share, basic: $0.33 $0.27 ==================================== Net income per common share, diluted: $0.33 $0.27 ==================================== Dividend declared per share of Common Stock $0.28 $0.28 Weighted average number of shares outstanding: Basic 56,672 53,294 Diluted 56,678 53,303
The accompanying notes are an integral part of these consolidated financial statements. Anthracite Capital, Inc. and Subsidiaries Consolidated Statement of Changes in Stockholders' Equity (Unaudited) For the Three Months Ended March 31, 2006 (in thousands)
- ------------------------------------------------------------------------------------------------------------------------------- Series Accumulated Common C Additional Distributions Other Total Stock, Preferred Paid-In In Excess Comprehensive Comprehensive Stockholders' Par Value Stock Capital Of Earnings Income Income Equity ----------------------------------------------------------------------------------------- Balance at January 1, 2006 $56 $55,435 $612,368 $(130,038) $60,197 $598,018 Net income 20,142 $20,142 20,142 Unrealized gain on cash flow hedges 34,543 34,543 34,543 Reclassification of losses from cash flow hedges included in net income 1,503 1,503 1,503 Change in net unrealized loss on securities available-for-sale, net of reclassification adjustment (23,488) (23,488) (23,488) --------------- 12,558 Other comprehensive income --------------- $32,700 Comprehensive income =============== Dividends declared-common stock (15,975) (15,975) Dividends declared - preferred stock (1,348) (1,348) Issuance of common stock 1 7,616 7,617 ---------------------------------------------------------------------------------------- Balance at March 31, 2006 $57 $55,435 $619,984 $(127,219) $72,755 $621,012 ======================================================================================== Disclosure of reclassification adjustment: Unrealized holding loss $(23,522) Reclassification for realized gains previously recorded as unrealized 34 --------------- $(23,488) =============== The accompanying notes are an integral part of these consolidated financial statements.
Anthracite Capital, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) (in thousands) For the Three For the Three Months Ended Months Ended March 31, 2006 March 31, 2005 -------------- -------------- Cash flows from operating activities: Net income $20,142 $15,716 Adjustments to reconcile net income to net cash provided by operating activities: Decrease in trading securities 11,904 15,254 Net (gain) loss on sale of securities (984) 1,362 Earnings from subsidiary trust (79) - Distributions from subsidiary trust 51 - Earnings from equity investments and real estate joint ventures (9,342) (2,664) Distributions of earnings from equity investments and real estate joint ventures 6,862 355 Amortization of collateralized debt obligation issuance costs 553 524 Amortization of junior subordinated note issuance costs 30 - Premium amortization (net) 136 888 Loss on impairment of assets 781 159 Unrealized net foreign currency gain (390) (787) Decrease in other assets 16,329 12,892 Decrease in other liabilities (3,094) (12,136) ----------------------- ---------------------- 42,899 31,563 Net cash provided by operating activities ----------------------- ---------------------- Cash flows from investing activities: (322,642) (6,075) Purchase of securities available-for-sale 12,538 11,034 Principal payments received on securities available-for-sale 2,115 2,208 Repayments received from commercial mortgage loan pools (48,883) - Funding of commercial mortgage loans 48,385 25,361 Repayments received from commercial mortgage loans (5,435) - Purchase of real estate held-for-sale 177 2,580 Decrease in restricted cash equivalents Return of capital from equity investments and joint ventures 11,857 5,031 Investment in equity investments (48,216) - ----------------------- ---------------------- Net cash (used in) provided by investing activities (350,104) 40,139 ----------------------- ---------------------- Cash flows from financing activities: Net increase (decrease) in borrowings under reverse repurchase agreements 210,619 (51,401) and credit facilities Repayments of borrowings secured by commercial mortgage loan pools (1,908) (5,367) Repayments of collateralized debt obligations (603) (203) Issuance of junior subordinated notes to subsidiary trust 100,000 - Issuance costs of junior subordinated notes (3,075) - Dividends paid on preferred stock (1,348) (1,348) Proceeds from issuance of common stock, net of offering costs 6,329 91 Dividends paid on common stock (15,775) (14,924) ----------------------- ---------------------- Net cash provided (used in) by financing activities 294,239 (73,152) ----------------------- ---------------------- Net decrease in cash and cash equivalents (12,966) (1,450) Cash and cash equivalents, beginning of period 40,556 23,755 ----------------------- ---------------------- Cash and cash equivalents, end of period $27,590 $22,305 ======================= ====================== Supplemental disclosure of cash flow information: Interest paid $31,509 $23,563 ======================= ====================== Investments purchased not settled $20,660 $ 9,072 ======================= ====================== Supplemental disclosure of non-cash investing and financing activities: Investments in subsidiary trusts $ 3,097 $ - ======================= ====================== The accompanying notes are an integral part of these consolidated financial statements.
Anthracite Capital, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (Dollar amounts in thousands, except share and per share data) - -------------------------------------------------------------- Note 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Anthracite Capital, Inc., a Maryland corporation, and its subsidiaries (the "Company") is a real estate finance company that primarily generates income based on the spread between the interest income on its commercial real estate assets and the interest expense from borrowings used to finance those investments. The Company seeks to earn high returns on a risk-adjusted basis to support a consistent quarterly dividend. The Company has elected to be taxed as a real estate investment trust ("REIT") under the United States Internal Revenue Code of 1986, as amended (the "Code") and, therefore, its income is largely exempt from corporate taxation. The Company commenced operations on March 24, 1998. The Company's ongoing investment activities primarily encompass three core investment activities: 1) Commercial Real Estate Securities 2) Commercial Real Estate Loans 3) Commercial Real Estate Equity The accompanying March 31, 2006 unaudited consolidated financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10, Rule 10-01 of Regulation S-X for interim financial statements. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America ("GAAP") for complete financial statements. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows have been made. These consolidated financial statements should be read in conjunction with the annual audited financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2005 filed with the Securities and Exchange Commission (the "SEC"). In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the statements of financial condition and revenues and expenses for the periods covered. Actual results could differ from those estimates and assumptions. Significant estimates in the financial statements include the valuation of certain of the Company's mortgage-backed securities and certain other investments. Recent Accounting Developments Accounting Changes and Corrections In June 2005, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS No. 154"). SFAS No. 154 replaces Accounting Principles Board ("APB") Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented in accordance with the new accounting principle. SFAS No. 154 also requires that a change in the method of depreciating or amortizing a long-lived non-financial asset be accounted for prospectively as a change in estimate, and correction of errors in previously issued financial statements should be termed "restatements." SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The implementation of SFAS No. 154 had no impact on the Company's consolidated financial statements. Stock Based Compensation In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment. This statement is a revision to SFAS No. 123, Accounting for Stock-Based Compensation, and superseded APB Opinion No. 25, Accounting for Stock Issued to Employees. This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, primarily focusing on the accounting for transactions in which an entity obtains employee services in share-based payment transactions. Entities will be required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service (usually the vesting period) in exchange for the award. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models. If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. As amended by Rule 4-01(a) of Regulation S-X promulgated by the SEC, this statement is effective as of the beginning of the first interim or annual reporting period of the Company's first fiscal year beginning on or after December 15, 2005. The Company adopted SFAS No. 123R, as amended, effective January 1, 2006 with no impact to the consolidated financial statements as there are no unvested options as of December 31, 2005 and the Company applied the fair value method to all options issued after January 1, 2003. Reverse Repurchase Agreements The FASB has placed an item on its agenda relating to the treatment of transactions where mortgage-backed securities purchased from a particular counterparty are financed via a repurchase agreement with the same counterparty. Currently, the Company records such assets and the related financing gross on the consolidated statement of financial condition, and the corresponding interest income and interest expense gross on the consolidated statement of operations. Any change in fair value of the security is reported through other comprehensive income under SFAS No. 115, because the security is classified as available-for-sale. However, in a transaction where the mortgage-backed securities are acquired from and financed under a repurchase agreement with the same counterparty, the acquisition may not qualify as a sale from the seller's perspective under the provisions of SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. In such cases, the seller may be required to continue to consolidate the assets sold to the Company, based on their continuing involvement with such investments. Depending on the ultimate outcome of the FASB deliberations, the Company may be precluded from presenting the assets gross on the Company's balance sheet and should instead be treating the Company's net investment in such assets as a derivative. If it is determined that these transactions should be treated as investments in derivatives, the derivative instruments entered into by the Company to hedge the Company's interest rate exposure with respect to the borrowings under the associated repurchase agreements may no longer qualify for hedge accounting, and would then, as with the underlying asset transactions, also be marked to market through the income statement. This potential change in accounting treatment does not affect the economics of the transactions but does affect how the transactions would be reported in the consolidated financial statements. The Company's cash flows, liquidity and ability to pay a dividend would be unchanged, and the Company does not believe its REIT taxable income or REIT status would be affected. The Company's net equity would not be materially affected. At March 31, 2006, the Company has identified available-for-sale securities with a fair value of $120,999 which had been purchased from and financed with the same counterparty since their purchase. If the Company were to change the current accounting treatment for these transactions at March 31, 2006, total assets and total liabilities would each be reduced by approximately $120,999. Impairment of Investments In November 2005, the FASB issued FASB Staff Position ("FSP") FAS 115-1/124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, which provides guidance for determining when impairment charges should be taken on certain debt and equity securities. FSP FAS 115-1/124-1 requires that debt and equity securities subject to the provisions of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and equity securities subject to the provisions of APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock, but which are not accounted for under the equity method (i.e., securities accounted for under the cost method) shall be reviewed for impairment when circumstances warrant. For securities subject to SFAS No. 115, a review for other-than-temporary impairments shall occur in each accounting period where the fair value of the security is less than its cost. For securities subject to APB Opinion No. 18, a review for other-than-temporary impairments shall occur in each accounting period where a) circumstances indicate that impairment may exist and b) the fair value of the security is less than its carrying value. The provisions of the FSP were required to be applied to reporting periods beginning after December 15, 2005. The adoption of FSP FAS 115-1/124-1 on January 1, 2006 had no material impact on the Company's condensed consolidated financial statements. Recent Accounting Developments In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, which amends SFAS No. 133 and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The Statement provides, among other things, that: (1) companies that have embedded derivatives which would otherwise be required to be bifurcated from their host contracts and accounted for at fair value in accordance with SFAS No. 133 may make an irrevocable election, on an instrument-by-instrument basis, to measure the hybrid financial instrument at fair value in its entirety, with changes in fair value recognized in earnings and (2) clarifies that concentrations of credit risk in the form of subordination are not considered embedded derivatives. SFAS No. 155 is effective for all financial instruments acquired, issued or subject to remeasurement after the beginning of an entity's first fiscal year that begins after September 15, 2006. Upon adoption, differences between the total carrying amount of the individual components of an existing bifurcated hybrid financial instrument and the fair value of the combined hybrid financial instrument should be recognized as a cumulative effect adjustment to beginning retained earnings. Prior periods should not be restated. The Company is currently evaluating the potential impact of SFAS No. 155 and intends to adopt the Statement on January 1, 2007. Reclassifications Certain items previously reported have been reclassified to conform to the current presentation. Note 2 NET INCOME PER SHARE Net income per share is computed in accordance with SFAS No. 128, Earnings Per Share. Basic income per share is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted income per share is calculated using the weighted average number of common shares outstanding during the period plus the additional dilutive effect, if any, of common stock equivalents. The dilutive effect of outstanding stock options is calculated using the treasury stock method.
For the Three For the Three Months Ended Months Ended March 31, 2006 March 31, 2005 ------------------ ------------------- Numerator: Net income available to common stockholders $18,794 $14,368 ------------------ ------------------- Numerator for basic and diluted earnings per share $18,794 $14,368 ================== =================== Denominator: Denominator for basic earnings per share--weighted average common shares Outstanding 56,671,961 53,294,024 Dilutive effect of stock options 5,718 9,195 ------------------ ------------------- Denominator for diluted earnings per share--weighted average common shares 56,677,679 53,303,219 outstanding and common stock equivalents outstanding ================== =================== Basic net income per weighted average common share: $0.33 $0.27 ------------------ ------------------- Diluted net income per weighted average common share and common share equivalents: $0.33 $0.27 ------------------ -------------------
Total anti-dilutive stock options excluded from the calculation of net income per share were 1,384,151 and 1,385,151 for the three months ended March 31, 2006 and 2005, respectively. Note 3 SECURITIES AVAILABLE-FOR-SALE The Company's securities available-for-sale are carried at estimated fair value. The amortized cost and estimated fair value of securities available-for-sale as of March 31, 2006 are summarized as follows:
Gross Gross Estimated Amortized Unrealized Gain Unrealized Fair Security Description Cost Loss Value - ------------------------------------------------------------ ---------------- ---------------- --------------- ----------------- CMBS: CMBS interest only securities ("IOs") $98,721 $750 $(4,055) $95,416 Investment grade CMBS 647,427 39,274 (13,064) 673,637 Non-investment grade rated subordinated securities 581,452 54,925 (7,552) 628,825 Non-rated subordinated securities 41,343 3,295 (174) 44,464 Credit tenant leases 24,857 522 (677) 24,702 Investment grade REIT debt 249,297 6,130 (4,196) 251,231 Multifamily agency securities 372,092 - (11,426) 360,666 CDO investments 117,259 1,731 (3,572) 115,417 ---------------- ---------------- --------------- ----------------- Total CMBS 2,132,448 106,627 (44,716) 2,194,359 ---------------- ---------------- --------------- ----------------- Single-family RMBS: Agency adjustable rate securities 73,950 16 (1,476) 72,490 Residential CMOs 102,829 59 (2,291) 100,597 Hybrid adjustable rate mortgages ("ARMs") 14,945 - (481) 14,464 ---------------- ---------------- --------------- ----------------- Total RMBS 191,724 75 (4,248) 187,551 ---------------- ---------------- --------------- ----------------- ---------------- ---------------- --------------- ----------------- Total securities available-for-sale $2,324,172 $106,702 $(48,964) $2,381,910 ================ ================ =============== =================
As of March 31, 2006, the Company's securities available-for-sale included non-dollar denominated assets with an estimated fair value of $60,555. As of March 31, 2006, an aggregate of $2,197,394 in estimated fair value of the Company's securities available-for-sale was pledged to secure its collateralized borrowings. During the three months ended March 31, 2006 and 2005, respectively, the Company realized gains of $34 and $10 on securities available-for-sale. The following table shows the Company's estimated fair value and gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2006.
Less than 12 Months 12 Months or More Total ------------ ---------------- ------------ ----------------- ------------- ----------------- Estimated Gross Estimated Gross Estimated Gross Fair Unrealized Fair Unrealized Fair Unrealized Value Losses Value Losses Value Losses ------------ ---------------- ------------ ----------------- ------------- ----------------- CMBS IOs $52,903 $(2,869) $22,852 $(1,186) $75,755 $(4,055) Investment grade CMBS 151,373 (3,584) 114,660 (9,480) 266,033 (13,064) Non-investment grade rated subordinated securities 180,242 (5,360) 23,998 (2,192) 204,240 (7,552) Non-rated subordinated securities 2,371 (174) - - 2,371 (174) Credit tenant leases - - 15,859 (677) 15,859 (677) Investment grade REIT debt 38,191 (1,145) 48,858 (3,051) 87,049 (4,196) Multifamily agency securities 338,627 (10,975) 22,039 (451) 360,666 (11,426) CDO investments 56,862 (3,572) - - 56,862 (3,572) Agency adjustable rate securities - - 70,436 (1,476) 70,436 (1,476) Residential CMOs 99,984 (2,291) - - 99,984 (2,291) Hybrid ARMs - - 14,464 (481) 14,464 (481) ------------ ---------------- ------------ ----------------- ------------- ----------------- Total temporarily impaired securities $920,553 $(29,970) $333,166 $(18,994) $1,253,719 $(48,964) ============ ================ ============ ================= ============= =================
The temporary impairment of the available-for-sale securities results from the estimated fair value of the securities falling below the amortized cost basis. These unrealized losses are primarily the result of market factors other than credit impairment and the Company believes the carrying value of the securities are fully recoverable over their expected holding period. Management possesses both the intent and the ability to hold the securities until maturity, allowing for the anticipated recovery in estimated fair value of the securities held. As such, management does not believe any of the securities held are other-than-temporarily impaired at March 31, 2006. As of March 31, 2006, the anticipated weighted average yield to maturity based upon the amortized cost of the subordinated CMBS ("reported yield") was 10.6% per annum. The anticipated reported yield of the Company's investment grade securities available-for-sale was 5.9%. The Company's anticipated yields on its subordinated CMBS and other securities available-for-sale are based upon a number of assumptions that are subject to certain business and economic uncertainties and contingencies. Examples of these include, among other things, the rate and timing of principal payments (including prepayments, repurchases, defaults, and liquidations and related expenses), the pass-through or coupon rate, and interest rate fluctuations. The Company considers the CMBS securities where it maintains the right to influence the foreclosure/workout process on the underlying loans its controlling class CMBS ("Controlling Class"). Additional factors that may affect the Company's anticipated yields to maturity on its Controlling Class CMBS include interest payment shortfalls due to delinquencies on the underlying mortgage loans, and the timing and magnitude of credit losses on the mortgage loans underlying the Controlling Class CMBS that are a result of the general condition of the real estate market (including competition for tenants and their related credit quality) and changes in market rental rates. As these uncertainties and contingencies are difficult to predict and are subject to future events which may alter these assumptions, no assurance can be given that the anticipated yields to maturity, discussed above and elsewhere, will be achieved. Note 4 IMPAIRMENTS - CMBS The Company updates its estimated cash flows for securities subject to Emerging Issues Task Force Issue 99-20, Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets ("EITF 99-20") on a quarterly basis. The Company compares the yields resulting from the updated cash flows to the current accrual yields. An impairment charge is required under EITF 99-20 if the updated yield is lower than the current accrual yield and the security has a market value less than its adjusted purchase price. The Company carries all these securities at their market value on its consolidated statement of financial condition. As of March 31, 2006, the Company had two CMBS that required an impairment of $781. As of March 31, 2005, the Company had one CMBS that required an impairment of $159. The decline in the updated yields that caused the impairments is not related to increases in losses but rather changes in the timing of credit losses and prepayments. Based on current economic conditions, the Company believes the impairments will be recovered over the remaining life of the bonds. Note 5 COMMERCIAL MORTGAGE LOAN POOLS During the second quarter of 2004, the Company acquired subordinated CMBS in a trust establishing a Controlling Class interest. The Company negotiated for and obtained a greater degree of influence over the disposition of the commercial mortgage loans than is typically granted to the special servicer. As a result of this expanded influence, the trust was not a qualifying special-purpose entity ("QSPE") and FASB Interpretation No. 46, Consolidation of Variable Interest Entities (revised December 2003) ("FIN 46R") required the Company to consolidate the net assets and results of operations of the trust. Approximately 45% of the par amount of the commercial mortgage loan pool is comprised of investment grade loans and the remaining 55% are unrated. For income recognition purposes, the Company considers the investment grade and unrated commercial mortgage loans in the pool as single assets reflecting the credit assumptions made in establishing loss adjusted yields for Controlling Class securities. The Company has taken into account the credit quality of the underlying loans in formulating its loss assumptions. Credit losses assumed on the entire pool are 1.40% of the principal balance, or 2.53% of the unrated principal balance. Over the life of the commercial mortgage loan pools, the Company reviews and updates its loss assumptions to determine the impact on expected cash flows to be collected. A decrease in estimated cash flows will reduce the amount of interest income recognized in future periods and may result in a loan loss reserve depending upon the severity of the cash flow reductions. An increase in estimated cash flows will first reduce the loan loss reserve and any additional cash will increase the amount of interest income recorded in future periods. Note 6 SECURITIES HELD-FOR-TRADING The Company's securities held-for-trading are carried at estimated fair value. At March 31, 2006, the Company's securities held-for-trading consisted of FNMA Mortgage Pools with an estimated fair value of $155,259 and CMBS with an estimated fair value of $21,260. The FNMA Mortgage Pools, and the underlying mortgages, bear interest at fixed rates for specified periods, generally three to seven years, after which the rates are periodically reset to market. Note 7 EQUITY INVESTMENTS The Company has a $100,000 commitment to acquire shares of BlackRock Diamond Property Fund ("BlackRock Diamond"). At March 31, 2006, 80.6% of the commitment has been called and the Company owned approximately 34.6% of BlackRock Diamond. The Company's investment in BlackRock Diamond at March 31, 2006 was $86,415. The Company recorded $5,542 of income related to its ownership in BlackRock Diamond for the three months ended March 31, 2006, as reported by BlackRock Diamond. Of the $5,542 in income, $370 represented current income and $5,172 represented unrealized capital appreciation. The Company's investment represents a 34.6% interest in a portfolio of fifteen assets with a total market value of approximately $367,000. BlackRock Diamond carries its real estate investments at estimated fair values based upon valuations performed internally and upon appraisal reports prepared annually by independent real estate appraisers. The estimated fair values of real estate may differ significantly from those that could be realized if the real estate were actually offered for sale in the market place. The Company entered into a $50,000 commitment on July 20, 2001 to acquire shares in Carbon Capital, Inc. ("Carbon I"). On July 12, 2004, the investment period expired. The Company's investment in Carbon I at March 31, 2006 was $6,634. At March 31, 2006, the Company owned approximately 20% of Carbon I. The Company entered into an aggregate commitment of $100,000 to acquire shares in Carbon Capital II, Inc. ("Carbon II"). The Company's investment in Carbon II at March 31, 2006 was $60,364. The Company's remaining commitment at March 31, 2006 was $39,472. At March 31, 2006, the Company owned approximately 26% of Carbon II. On December 22, 2005, the Company entered into an $11,000 commitment to acquire shares of Dynamic India Fund IV. On March 13, 2006, the Company funded a capital call for 16.5% of its commitment. The Company's investment in Dynamic India Fund IV at March 31, 2006 was $1,650. Note 8 REAL ESTATE, HELD-FOR-SALE SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets specifies that long-lives assets to be disposed by sale, which meet certain criteria, should be classified as real estate held-for-sale and measured at the lower of its carrying amount or fair value less costs of sale. In addition, depreciation is not recorded for real estate held-for-sale. During the quarter, the Company purchased a defaulted loan from a Controlling Class CMBS trust. The loan was secured by a first mortgage on a multi-family property in Texas. Subsequent to the loan purchase, the property was acquired by the Company at foreclosure. The Company's plan is to enhance leasing activity and increase occupancy rates. Subsequently, the performance of the asset has improved and the Company has entered into a contract to sell the property for an amount in excess of the Company's basis. The sale is contingent on due diligence and other closing matters. The multi-family property acquired during the quarter meets the requirement of SFAS No. 144 and is carried at its acquisition cost of $5,435 and no depreciation was recorded during the quarter. Note 9 BORROWINGS The Company's borrowings consist of credit facilities, reverse repurchase agreements, CDOs, trust preferred securities, and commercial mortgage loan pools. Reverse Repurchase Agreements and Credit Facilities On February 16, 2006, the Company entered into a $200,000 committed non-dollar credit facility with Morgan Stanley Mortgage Servicing, Inc. which matures in February 2008. Outstanding borrowings under this credit facility bear interest at a LIBOR based variable rate. As of March 31, 2006, there were no borrowings under this facility. On March 17, 2006, the Company entered into a $100,000 committed non-dollar credit facility with Bank of America, N.A. which matures in September 2008. Outstanding borrowings under this credit facility bear interest at a LIBOR based variable rate. As of March 31, 2006, there were no borrowings under this facility. Under the credit facilities and the reverse repurchase agreements, the respective lender retains the right to mark the underlying collateral to estimated fair value. A reduction in the estimated fair value of its pledged assets will require the Company to provide additional collateral or fund margin calls. From time to time, the Company expects that it will be required to provide such additional collateral or fund margin calls. CDOs On May 2, 2006, the Company announced the pricing of its sixth CDO issuance ("CDO HY3") resulting in the issuance of $417,000 of non-recourse debt. The debt will be secured by a portfolio of CMBS and subordinated commercial real estate loans. This debt, rated AAA through BBB-, will be privately placed, and the Company will receive additional CDO debt rated BB and 100% of the preferred shares issued by the CDO. The transaction is expected to close on May 23, 2006. The terms of the offering permit the Company to contribute to the CDO up to $50,000 of additional CMBS during a ramp-up period. These CMBS assets will be contributed at par value. The debt issuance is intended to match fund existing Company assets to be contributed to the CDO at closing, and the assets to be purchased during the ramp-up period, with long-term liabilities. The Company intends to account for this transaction on its balance sheet as a financing. All debt placed will either carry a fixed rate or will be hedged to create a current cost of funds of approximately 6.3% after issuance expenses and will have a weighted average life of 8.1 years. The Company will use the net proceeds of the offering to pay down existing debt on the CDO collateral. Since the CDO collateral was not fully levered, the Company expects excess cash of $93,000 after the pay down of existing debt in addition to the $50,000 ramp facility. Following the closing of CDO HY3, approximately 93% of the Company's subordinated CMBS will be match funded in CDOs. Certain information with respect to the Company's collateralized borrowings at March 31, 2006 is summarized as follows:
Reverse Credit Commercial Collateralized Total Repurchase Mortgage Loan Collateralized Agreements Facilities Pools Debt Obligations Borrowings --------------- -------------- ----------------- -------------------- ----------------- Outstanding borrowings $1,060,329 $254,016 $1,267,611 $1,066,574 $3,648,530 Weighted average borrowing rate 4.89% 5.75% 3.97% 6.01% 4.96% Weighted average remaining maturity 25 days 1.15 years 6.57 years 6.53 years 4.29 years Estimated fair value of assets pledged $1,099,519 $397,002 $1,287,277 $1,236,602 $4,020,400
As of March 31, 2006, the Company's collateralized borrowings had the following remaining maturities:
Reverse Commercial Mortgage Total Repurchase Credit Loan Pools Collateralized Collateralized Agreements Facilities Debt Obligations* Borrowings ---------------- ----------------- --------------------- -------------------- ---------------------- Within 30 days $1,027,784 $- $- $- $1,027,784 31 to 59 days 4,244 12,698 - - 16,942 60 days to less than 1 year 28,301 86,445 - - 114,746 1 year to 3 years - 154,873 - - 154,873 3 years to 5 years - - - - - Over 5 years - - 1,267,611 1,066,574 2,334,185 ---------------- ----------------- --------------------- -------------------- ---------------------- $1,060,329 $254,016 $1,267,611 $1,066,574 $3,648,530 ================ ================= ===================== ==================== ======================
* As of March 31, 2006, collateralized debt obligations are comprised of $418,834 of CDO debt with a weighted average remaining maturity of 6.04 years, $292,585 of CDO debt with a weighted average remaining maturity of 6.42 years, and $367,440 of CDO debt with a weighted average remaining maturity of 7.14 years. Trust Preferred On January 31, 2006, the Company issued $50,000 of trust preferred securities through its wholly owned subsidiary, Anthracite Capital Trust II, a Delaware statutory trust ("Trust II"). The trust preferred securities have a thirty-year term ending April 30, 2036 with interest at a fixed rate of 7.73% for the first ten years and at a floating rate of three-month LIBOR plus 2.7% thereafter. The trust preferred securities can be redeemed at par by the Company beginning in April 2011. Trust II issued $1,550 aggregate liquidation amount of common securities, representing 100% of the voting common stock of Trust II to the Company for a purchase price of $1,550. The Company realized net proceeds from this offering of approximately $48,491. On March 16, 2006, the Company issued $50,000 of trust preferred securities through its wholly owned subsidiary, Anthracite Capital Trust III, a Delaware statutory trust ("Trust III" and collectively with Trust II, the "Trusts"). The trust preferred securities have a thirty-year term ending March 15, 2036 with interest at a fixed rate of 7.77% for the first ten years and at a floating rate of three-month LIBOR plus 2.7% thereafter. The trust preferred securities can be redeemed at par by the Company beginning in March 2011. Trust III issued $1,547 aggregate liquidation amount of common securities, representing 100% of the voting common stock of Trust III to the Company for a purchase price of $1,547. The Company realized net proceeds from this offering of approximately $48,435. The Trusts used the proceeds from the sale of the trust preferred securities and the common securities to purchase the Company's junior subordinated notes. The terms of the junior subordinated notes match the terms of the trust preferred securities. The notes are subordinate and junior in right of payment to all present and future senior indebtedness and certain other of our financial obligations. The Company's interests in the Trusts are accounted for using the equity method and the assets and liabilities of the Trusts are not consolidated into the Company's financial statements. Interest on the junior subordinated notes is included in interest expense on the consolidated statement of operations while the common securities are included as a component of other assets on the Company's consolidated statement of financial condition. Note 10 COMMON STOCK Pursuant to its 2006 Management Agreement (defined below), 30% of the incentive fees earned in 2005 or after may be paid in shares of the Company's Common Stock. On March 20, 2006 the Company issued 117,679 shares of Common Stock related to $1,287 of fourth quarter 2005 incentive fees. See Note 11 of the consolidated financial statements, Transactions with Affiliates, for further discussion of the Company's Management Agreement. For the three months ended March 31, 2006, the Company issued 590,216 shares of Common Stock under its Dividend Reinvestment and Stock Purchase Plan (the "Dividend Reinvestment Plan"). Net proceeds to the Company were approximately $6,270. For the three months ended March 31, 2005, the Company issued 7,706 shares of Common Stock under its Dividend Reinvestment Plan. Net proceeds to the Company were approximately $91. As of February 24, 2006, the Company suspended the Dividend Reinvestment Plan for all future investments dates. During the three months ended March 31, 2006, 7,000 stock options with an exercise price of $8.44 per share were exercised pursuant to the Company's stock option plan (the "1998 Stock Option Plan"). Net proceeds to the Company were $59. On February 24, 2006, the Company declared dividends to its common stockholders of $0.28 per share, payable on May 1, 2006 to stockholders of record on March 31, 2006. For U.S. federal income tax purposes, the dividends are expected to be ordinary income to the Company's stockholders. Note 11 TRANSACTIONS WITH AFFILIATES The Company has a Management Agreement with the Manager, a majority owned indirect subsidiary of The PNC Financial Services Group, Inc. and the employer of certain directors and all of the officers of the Company, under which the Manager manages the Company's day-to-day operations, subject to the direction and oversight of the Company's Board of Directors. Pursuant to the Management Agreement, the Manager formulates investment strategies, arranges for the acquisition of assets, arranges for financing, monitors the performance of the Company's assets and provides certain other advisory and managerial services in connection with the operations of the Company. For performing these services, the Company pays the Manager a base management fee equal to 2.0% of the quarterly average total stockholders' equity for the applicable quarter. To provide an incentive, the Manager is entitled to receive an incentive fee equal to 25% of the amount by which the rolling four-quarter GAAP net income before the incentive fee exceeds the greater of 8.5% or 400 basis points over the ten-year Treasury note multiplied by the adjusted per share issue price of the common stock ($11.36 per common share at March 31, 2006). The Company's unaffiliated directors approved an extension of the Management Agreement to March 31, 2007 at the Board of Directors' February 2006 meeting. Additionally, pursuant to a resolution of the Company's Board of Directors adopted at the February 2006 meeting, up to 30% of the incentive fees earned in 2005 or after may be paid in shares of the Company's Common Stock subject to certain provisions. The Board of Directors also authorized the Company to seek stockholder approval of a compensatory deferred stock plan. Pending stockholder approval, the Company would establish a stock based incentive plan where one half of one percent of common shares outstanding will be paid to the Manager in 2006. The Company incurred $3,050 and $2,579 in base management fees in accordance with the terms of the Management Agreement for the three months ended March 31, 2006 and 2005, respectively. The Company incurred $1,169 in incentive fees for the three months ended March 31, 2006. The Company did not incur incentive fees for the three months ended March 31, 2005. As of March 31, 2006 and 2005, respectively, management and incentive fees of $4,095 and $2,438 are payable to the Manager. In accordance with the provisions of the Management Agreement, the Company recorded reimbursements to the Manager of $100 and $40 for certain expenses incurred on behalf of the Company for the three months ended March 31, 2006 and 2005, respectively, which are included in general and administrative expense on the accompanying consolidated statements of operations. The Company has an administration and investment accounting agreement with the Manager. Under the terms of the administration agreement, the Manager provides financial reporting, audit coordination and accounting oversight services to the Company. Under the terms of the investment accounting agreement, the Manager provides investment accounting services to the Company. For the three months ended March 31, 2006 and 2005, the Company recorded administration and investment accounting fees of $182 and $51, respectively, which are included in general and administrative expense on the accompanying consolidated statements of operations. The special servicer on 20 of the Company's 24 Controlling Class trusts is Midland Loan Services, Inc. ("Midland"), a wholly owned indirect subsidiary of PNC Bank, and therefore an affiliate of the Manager. The Company's fees for Midland's services are at market rates. The Company has a $100,000 commitment to acquire shares of BlackRock Diamond. BlackRock Diamond is a private REIT managed by BlackRock Realty Advisors, Inc., a subsidiary of the Manager. At March 31, 2006, 80.6% of the commitment has been called and the Company owned approximately 34.6% of BlackRock Diamond. The Company does not incur any additional management or incentive fees to the Manager as a result of its investment in BlackRock Diamond. The Company's investment in BlackRock Diamond at March 31, 2006 was $86,116. The Company's unaffiliated directors approved this transaction in September 2005. During 2001, the Company entered into a $50,000 commitment to acquire shares in Carbon Capital, Inc. ("Carbon I"), a private commercial real estate income opportunity fund managed by the Manager. The Carbon I investment period ended on July 12, 2004 and the Company's investment in Carbon I as of March 31, 2006 was $6,634. The Company does not incur any additional management or incentive fees to the Manager as a result of its investment in Carbon I. On March 31, 2006, the Company owned approximately 20% of the outstanding shares in Carbon I. The Company's unaffiliated directors approved this transaction in July 2001. The Company entered into an aggregate commitment of $100,000 to acquire shares in Carbon II, a private commercial real estate income opportunity fund managed by the Manager. At March 31, 2006, the Company's investment in Carbon II was $60,364 and the Company's remaining commitment to Carbon II is $39,472. The Company does not incur any additional management or incentive fees to the Manager as a result of its investment in Carbon II. The Company's unaffiliated directors approved this transaction in September 2004. During 2000, the Company completed the acquisition of CORE Cap, Inc. At the time of the CORE Cap, Inc. acquisition, the Manager agreed to pay GMAC (CORE Cap, Inc.'s external advisor) $12,500 over a ten-year period ("Installment Payment") to purchase the right to manage the CORE Cap, Inc. assets under the existing management contract ("GMAC Contract"). The GMAC Contract had to be terminated in order to allow the Company to complete the merger, as the Company's management agreement with the Manager did not provide for multiple managers. As a result the Manager offered to buy-out the GMAC Contract as the Manager estimated it would receive incremental fees above and beyond the Installment Payment, and thus was willing to pay for, and separately negotiate, the termination of the GMAC Contract. Accordingly, the value of the Installment Payment was not considered in the Company's allocation of its purchase price to the net assets acquired in the acquisition of CORE Cap, Inc. The Company agreed that should the Management Agreement with its Manager be terminated, not renewed or not extended for any reason other than for cause, the Company would pay to the Manager an amount equal to the Installment Payment less the sum of all payments made by the Manager to GMAC. As of March 31, 2006, the Installment Payment would be $5,000 payable over five years. The Company does not accrue for this contingent liability. Note 12 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The Company accounts for its derivative investments under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the consolidated statement of financial condition at estimated fair value. If the derivative is designated as a cash flow hedge, the effective portions of change in the estimated fair value of the derivative are recorded in other comprehensive income ("OCI") and are recognized in the income statement when the hedged item affects earnings. Ineffective portions of changes in the estimated fair value of cash flow hedges are recognized in earnings. If the derivative is designated as a fair value hedge, the changes in the estimated fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. The Company uses interest rate swaps to manage exposure to variable cash flows on portions of its borrowings under reverse repurchase agreements and the floating rate debt of its CDOs and as trading derivatives intended to offset changes in estimated fair value related to securities held as trading assets. On the date in which the derivative contract is entered, the Company designates the derivative as either a cash flow hedge or a trading derivative. Occasionally, counterparties will require the Company or the Company will require counterparties to provide collateral for the interest rate swap agreements in the form of margin deposits. Net deposits are recorded as a component of either other assets or other liabilities. Should the counterparty fail to return deposits paid, the Company would be at risk for the estimated fair value of that asset. At March 31, 2006 and December 31, 2005, respectively, the balance of such net margin deposits held by the Company as collateral under these agreements totaled $1,069 and $1,246. As of March 31, 2006, the Company had interest rate swaps with notional amounts aggregating $1,446,091 designated as cash flow hedges of borrowings under reverse repurchase agreements and the floating rate debt of its CDOs. Cash flow hedges with an estimated fair value of $53,096 are included in other assets on the consolidated statement of financial condition and cash flow hedges with an estimated fair value of $2,914 are included in other liabilities on the consolidated statement of financial condition. For the three months ended March 31, 2006, the net change in the estimated fair value of the interest rate swaps was an increase of $35,158, of which $615 was deemed ineffective and is included as a decrease of interest expense and $34,543 was recorded as an addition to OCI. As of March 31, 2006, the $1,446,091 notional of swaps designated as cash flow hedges had a weighted average remaining term of 7.65 years. During the quarter ended March 31, 2006, the Company terminated one of its interest rate swaps with a notional amount of $36,000 that was designated as a cash flow hedge of borrowings under reverse repurchase agreements. The Company will reclassify the $1,733 gain in value incurred from OCI to interest expense over 7.19 years, which was the remaining term of the swap at the time it was closed out. For the quarter ended March 31, 2006, $20 was reclassified as a decrease to interest expense and $241 will be reclassified as a decrease to interest expense for the next 12 months. As of March 31, 2006 the Company has, in aggregate, $31,962 of losses related to terminated swaps in OCI. For the quarter ended March 31, 2006, $1,503 was reclassified as an increase to interest expense and $5,693 will be reclassified as an increase to interest expense for the next twelve months. As of March 31, 2006, the Company had interest rate swaps with notional amounts aggregating $323,445 designated as trading derivatives. Trading derivatives with an estimated fair value of $4,994 are included in other assets on the consolidated statement of financial condition and trading derivatives with an estimated fair value of $105 are included in other liabilities on the consolidated statement of financial condition. For the three months ended March 31, 2006, the change in estimated fair value for these trading derivatives was an increase of $2,304 and is included as a reduction of loss on securities held-for-trading in the consolidated statements of operations. As of March 31, 2006, the $323,445 notional of swaps designated as trading derivatives had a weighted average remaining term of 6.49 years. At March 31, 2006, the Company had a forward LIBOR cap with a notional amount of $85,000 and an estimated fair value at March 31, 2006 of $370 which is included in other assets, and the change in estimated fair value related to this derivative is included as a component of gain (loss) on securities held-for-trading in the consolidated statements of operations. Foreign Currency The U.S. dollar is considered the functional currency for the Company's international subsidiaries. Foreign currency transaction gains or losses related to the Company's non-dollar denominated assets and liabilities are recognized in the period incurred and are included in other gain (loss) in the consolidated statement of operations. The Company uses foreign currency forward commitments to hedge the Company's net foreign investments. Gains and losses on foreign currency forward commitments are included in other gain (loss) in the consolidated statement of operations. The Company recorded net foreign currency transaction gain (loss) of $44 and $(168) for the three months ended March 31, 2006 and 2005, respectively. At March 31, 2006 and December 31, 2005, the Company also had foreign currency forward commitments with an estimated fair value of $(84,495) and $(55,390) included in other liabilities on the consolidated statement of financial condition. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations All dollar figures expressed herein are expressed in thousands, except share or per share amounts or as otherwise noted. I. General Anthracite Capital, Inc., a Maryland corporation, and subsidiaries (the "Company") is a commercial real estate company that invests in commercial real estate opportunities in the United States and Europe. The company seeks to generate income from the spread between the interest income, gains and net operating income on its commercial real estate assets and the interest expense from borrowings to finance its investments. The Company's primary activity is investing in high yielding commercial real estate debt. The Company combines traditional real estate underwriting and capital markets expertise to maximize the opportunities arising from the continuing integration of these two disciplines. The Company focuses on acquiring pools of performing loans in the form of commercial mortgage-backed securities ("CMBS"), issuing secured debt backed by CMBS and providing strategic capital for the commercial real estate industry in the form of mezzanine loan financing. The Company also recently began investing in diversified portfolios of commercial real estate in the United States. The Company commenced operations on March 24, 1998. The Company's common stock is traded on the New York Stock Exchange under the symbol "AHR". The Company's primary long-term objective is to distribute consistent dividends supported by earnings. The Company establishes its dividend by analyzing the long-term sustainability of earnings given existing market conditions and the current composition of its portfolio. This includes an analysis of the Company's credit loss assumptions, general level of interest rates, projected hedging costs and the estimated return potential of its real estate investments. The Company is managed by BlackRock Financial Management, Inc. (the "Manager"), a subsidiary of BlackRock, Inc., a publicly traded (NYSE:BLK) asset management company with approximately $463 billion of assets under management, including more than $10 billion in real estate equity and debt as of March 31, 2006. The Manager provides an operating platform that incorporates significant asset origination, risk management, operational and property management capabilities. The Company's ongoing investment activities primarily encompass three core investment activities: 1) Commercial Real Estate Securities 2) Commercial Real Estate Loans 3) Commercial Real Estate Equity The commercial real estate securities portfolio provides diversification and high yields that are adjusted for anticipated losses over a period of time (typically, a ten-year weighted average life) and can be financed through the issuance of secured debt that matches the life of the investment. Commercial real estate loans provide attractive risk adjusted returns over shorter periods of time through strategic investments in specific property types or regions. The Company's equity strategy is to invest in a diverse portfolio of commercial real estate with the objective of repositioning the property to maximize its value. The return objective is to provide strong returns over a medium term period of 4 to 7 years through a combination of real estate operating income and capital gains. It is expected that, over the short term, current returns will fluctuate as gains and losses are reported based on a valuation process each quarter. The Company believes that the combination of these activities will result in a strong, sustainable dividend stream for our shareholders. The Company's fixed income investment activity continues to be managed to maintain a positive, though controlled, exposure to both long- and short-term interest rates through its active hedging strategies. See "Item 3 - Quantitative and Qualitative Disclosures About Market Risk" for a discussion of interest rates and their effect on earnings and book value. The following table illustrates the mix of the Company's asset types as of March 31, 2006 and December 31, 2005:
Carrying Value as of March 31, 2006 December 31, 2005 Amount % Amount % ------------------------------------------------- Commercial real estate securities $2,215,620 50.8% $2,005,383 49.7% Commercial mortgage loan pools(1) 1,287,277 29.5 1,292,407 32.0 Commercial real estate loans((2)) 428,720 9.8 425,453 10.6 Commercial real estate equity 88,065 2.0 51,003 1.3 Residential mortgage-backed securities 342,810 7.9 259,026 6.4 ------------------------------------------------- Total $4,362,492 100.0% $4,033,272 100.0% -------------------------------------------------
(1) Represents a Controlling Class CMBS that is consolidated for accounting purposes. See Note 5 of the consolidated financial statements. (2) Includes the Company's investments in the Carbon Capital Funds at March 31, 2006 and December 31, 2005. During the first quarter of 2006, the Company purchased a total of $313,142 of commercial real estate assets. Included in this amount is $40,317 of non-dollar denominated assets as the Company continues to expand its non-U.S. investment activities. Commercial real estate assets purchased were comprised of: $128,032 of CMBS, $105,092 of multifamily agency securities, $48,637 of commercial real estate loans and $31,381 of real estate equity. In addition, the Company purchased $98,225 of investment grade residential mortgage-backed securities. Commercial Real Estate Securities Portfolio Activity The following table details the par, estimated fair value, adjusted purchase price, and loss adjusted yield of the Company's commercial real estate securities included in as well as outside the CDOs as of March 31, 2006:
Adjusted Loss Estimated Dollar Purchase Dollar Adjusted Par Fair Value Price Price Price Yield ------------------------------------------------------------------------------ Investment grade CMBS $182,474 $180,421 98.87 $190,926 104.63 4.42% Investment grade real estate investment trust ("REIT") debt 23,000 21,516 93.55 22,834 99.28 5.49% CMBS rated BB+ to B 198,689 164,771 82.93 169,373 85.25 7.99% CMBS rated B- or lower 188,359 65,683 34.87 61,934 32.88 8.53% CDO Investments 423,349 115,418 27.26 117,259 27.70 17.62% CMBS Interest Only securities ("IOs") 3,461,113 95,415 2.76 98,721 2.85 6.56% Multifamily agency securities 361,931 360,666 99.65 372,092 102.81 4.87% -------------------------------------------------------------------------------- Total commercial real estate securities outside CDOs 4,838,915 1,003,890 20.75 1,033,139 21.35 7.14% -------------------------------------------------------------------------------- Investment grade CMBS 515,555 512,565 99.42 476,849 92.49 7.69% Investment grade REIT debt 223,445 229,715 102.81 226,463 101.35 6.15% CMBS rated BB+ to B 510,302 440,602 86.34 389,022 76.23 10.11% CMBS rated B- or lower 5,439 4,145 76.21 4,292 78.91 12.84% Credit tenant lease 24,187 24,703 102.13 24,857 102.77 5.68% -------------------------------------------------------------------------------- Total commercial real estate securities included in CDOs 1,278,928 1,211,730 94.75 1,121,483 87.69 8.20% -------------------------------------------------------------------------------- Total commercial real estate securities $6,117,843 $2,215,620 36.22 $2,154,622 35.22 7.69% ================================================================================
The following table details the par, estimated fair value, adjusted purchase price and loss adjusted yield of the Company's commercial real estate securities included in as well as outside the CDOs as of December 31, 2005:
Adjusted Loss Estimated Dollar Purchase Dollar Adjusted Par Fair Value Price Price Price Yield ------------------------------------------------------------------------------ Investment grade CMBS $150,128 $151,889 101.17 $161,314 107.45 4.00% Investment grade real estate investment trust ("REIT") debt 23,000 21,828 94.90 22,828 99.25 5.49% CMBS rated BB+ to B 104,784 90,289 86.17 92,931 88.69 7.77% CMBS rated B- or lower 132,242 47,854 36.19 45,070 34.08 9.17% CDO Investments 423,349 124,549 29.42 112,577 26.59 17.29% CMBS Interest Only securities("IOs") 3,505,646 103,363 2.95 103,120 2.94 6.58% Multifamily agency securities 256,398 263,362 102.72 268,319 104.65 4.77% ------------------------------------------------------------------------------ Total commercial real estate 4,595,547 803,134 17.48 806,159 17.54 7.21% securities outside CDOs ------------------------------------------------------------------------------ Investment grade CMBS 375,502 377,291 100.48 354,561 94.42 7.37% Investment grade REIT debt 223,445 233,939 104.70 226,583 101.40 6.15% CMBS rated BB+ to B 656,207 566,181 86.28 513,446 78.24 9.16% Credit tenant lease 24,317 24,837 102.14 24,995 102.79 5.68% ------------------------------------------------------------------------------ Total commercial real estate 1,279,472 1,202,248 93.96 1,119,585 87.50 7.91% securities included in CDOs ------------------------------------------------------------------------------ Total commercial real estate securities $5,875,019 $2,005,383 34.13 $1,925,744 32.78 7.61% ==============================================================================
During the three months ended March 31, 2006, the Company's commercial real estate securities portfolio increased by approximately 10.5% from an estimated fair value of $2,005,383 at December 31, 2005, compared with $2,215,620 at March 31, 2006. The Company's CDO offerings allow the Company to match fund its commercial real estate portfolio by issuing long-term debt to finance long-term assets. The CDO debt is non-recourse to the Company; therefore, the Company's losses are limited to its equity investment in the CDO. The CDO debt is also hedged to protect the Company from an increase in short-term interest rates. At March 31, 2006, over 65% of the estimated fair value of the Company's subordinated CMBS is match funded in the Company's CDOs in this manner. Following the closing of CDO HY3, approximately 93% of the Company's subordinated CMBS will be match funded in CDOs. The Company retained 100% of the equity of CDOs I, II and III (as defined below) and recorded the transactions on its consolidated financial statements as secured financing. The table below summarizes the Company's CDO debt and collateral at March 31, 2006.
Collateral as of March 31, 2006 Debt as of March 31, 2006 ------------------------------------------------------------------------------- Adjusted Purchase Loss Adjusted Yield Adjusted Issue Weighted Average Price Price Cost of Funds * Net Spread ------------------------------------------------------------------------------- ----------- CDO I $442,181 9.19% $406,429 7.05% 2.14% CDO II 326,861 7.96% 292,708** 5.80% 2.16% CDO III 377,881 7.22% 367,437** 5.03% 2.19% - ---------------------------------------------------------------------------------------------------------- Total ** $1,146,923 8.19% $1,066,575 6.01% 2.18%
* Weighted Average Cost of Funds is the current cost of funds plus hedging expenses. ** The Company chose not to sell $10,000 of par of CDO II debt rated BB and $13,069 of par of CDO III debt rated BB. Securitizations On July 26, 2005, the Company closed its fifth CDO ("CDO HY2") and issued non-recourse liabilities with a face amount of $365,010. Senior investment grade notes with a face amount of $240,134 were issued and sold in a private placement. The Company retained the floating rate BBB- note, the below investment grade notes and the preferred shares. The Company recorded CDO HY2 as a secured financing for accounting purposes and consolidated the assets, liabilities, income and expenses of CDO HY2 until the sale of the floating rate BBB- note in December 2005, at which point CDO HY2 qualified as a sale under SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ("SFAS 140"). The Company received cash proceeds of $244,212 as well as all of the retained interests that had an estimated fair value of $105,025 at December 31, 2005. The transaction raised investable proceeds of $56,226. The following table summarizes the impact of this transaction on 2005 results: Net realized gain related to sale of CDO HY2 $16,523 Increase in accumulated other comprehensive income 9,611 -------------- Total stockholders' equity impact $26,134 ============== On November 9, 2004, the Company closed its fourth collateralized debt obligation ("CDO HY1") secured by a portfolio of below investment grade CMBS with an average rating of CCC. The CMBS portfolio was carried at its estimated fair value of $109,933 on the Company's consolidated statement of financial condition based on price quotes received from third parties. The transaction was accounted for as a sale under SFAS No. 140. The Company received cash proceeds of $140,425 as well as all of the CDO HY1 preferred shares that had an estimated fair value of $15,885 at December 31, 2004. The transaction raised investable proceeds of $95,799. The following table summarizes the impact of this transaction on 2004 results: Realized gain at closing of CDO HY1 $14,769 Realized gain from subsequent sale of A- tranche 1,825 Increase in accumulated other comprehensive income 29,782 ------------------ Total stockholders' equity impact $46,376 ================== Real Estate Credit Profile of Below Investment Grade CMBS The Company divides its below investment grade CMBS investment activity into two portfolios; Controlling Class CMBS and other below investment grade CMBS. The Company considers the CMBS securities where it maintains the right to influence the foreclosure/workout process on the underlying loans its controlling class CMBS ("Controlling Class"). The distinction between the two is in the rights the Company obtains with its investment in Controlling Class CMBS. Controlling Class rights allow the Company to influence the workout and/or disposition of defaults that occur in the underlying loans. These securities absorb the first losses realized in the underlying loan pools. The coupon payment on the non-rated security also can be reduced for special servicer fees charged to the trust. The next highest rated security in the structure then generally will be downgraded to non-rated and become the first to absorb losses and expenses from that point on. At March 31, 2006, the Company owns 24 different trusts where it is in the first loss position and is designated as the controlling class representative by owning the lowest rated or non-rated CMBS class. The total par of the loans underlying these securities was $33,598,059. At March 31, 2006, subordinated Controlling Class CMBS with a par of $708,070 were included on the Company's consolidated statement of financial condition. Subordinated Controlling Class CMBS with a par of $711,644 were held as collateral for CDOs HY1 and HY2. The Company's other below investment grade CMBS have more limited rights associated with its ownership to influence the workout and/or disposition of underlying loan defaults. The total par of the Company's other below investment grade CMBS at March 31, 2006, was $194,718; the average credit protection, or subordination level, of this portfolio is 3.92%. The Company's investment in its subordinated Controlling Class CMBS by credit rating category at March 31, 2006 is as follows:
Adjusted Adjusted Estimated Dollar Purchase Dollar Subordination Par Fair Value Price Price Price Level ------------------------------------------------------------------------------------ BB+ $119,110 $105,829 88.85 $101,434 85.16 4.08% BB 130,902 111,688 85.32 95,089 72.64 3.14% BB- 122,786 94,939 77.32 88,471 72.05 3.40% B+ 84,788 60,281 71.10 56,696 66.87 2.60% B 62,125 41,768 67.23 35,658 57.40 2.07% B- 36,771 19,848 53.98 19,359 52.65 1.27% NR 151,588 45,833 30.24 14,574 28.09 n/a ------------------------------------------------------------------------------------ Total $708,070 $480,186 67.82 $439,281 62.04
The Company's investment in its subordinated Controlling Class CMBS by credit rating category at December 31, 2005 is as follows:
Weighted Adjusted Average Estimated Dollar Purchase Dollar Subordination Par Fair Value Price Price Price Level ------------------------------------------------------------------------------------ BB+ $139,541 $131,676 94.36 $120,541 86.38 5.64% BB 92,583 81,469 88.00 76,527 82.66 4.43% BB- 110,514 92,116 83.35 85,829 77.66 4.15% B+ 79,564 56,651 71.20 52,828 66.40 2.60% B 132,247 84,201 63.37 77,784 58.82 2.81% B- 23,775 13,216 55.59 12,303 51.75 1.24% NR 96,626 27,777 28.75 25,727 26.63 n/a ------------------------------------------------------------------------------------ Total $674,850 $487,106 72.18 $451,539 66.91
Future delinquencies and losses may cause par reductions and cause the Company to conclude that a change in loss adjusted yield is required along with a write down of the adjusted purchase price through the income statement according to Emerging Issue Task Force ("EITF") 99-20. During the three months ended March 31, 2006, the loan pools were paid down by $153,842. Pay down proceeds are distributed to the highest rated CMBS class first and reduce the percent of total underlying collateral represented by each rating category. For all of the Company's Controlling Class securities, the Company follows a policy of assigning estimated losses to specific loans as well as adding a general loss assumption that is not loan specific. In performing continuing credit reviews on the 24 Controlling Class trusts, the Company estimates that specific losses totaling $497,635 related to principal of the underlying loans will not be recoverable, of which $186,335 is expected to occur over the next five years. The total loss estimate of $497,638 represents 1.48% of the total current underlying loan pools at March 31, 2006. Additionally, the Company assumes a constant default rate of approximately ten to forty basis points with a 35% loss severity and a one year recovery period. These estimates were developed based on an analysis of individual loan characteristics and prevailing market conditions at the time of origination. All estimated workout expenses including special servicer fees are included in these assumptions. These loss assumptions are then used to compute a loss adjusted yield, which is then used to record income on the Company's consolidated financial statements. If the loss assumptions prove to be consistent with actual loss experience, the Company will maintain that level of income for the life of the security. As actual losses differ from the original loss assumptions, yields are adjusted to reflect the updated assumptions. In addition, a write down of the adjusted purchase price or write up of loss adjusted yields of the security may be required. (See Item 3 - -"Quantitative and Qualitative Disclosures About Market Risk" for more information on the sensitivity of the Company's income and adjusted purchase price to changes in credit experience.) The Company considers delinquency information from the Lehman Brothers Conduit Guide to be the most relevant benchmark to measure credit performance and market conditions applicable to its Controlling Class CMBS holdings. The year of issuance, or vintage year, is important, as older loan pools will tend to have more delinquencies than newly underwritten loans. Comparable delinquency statistics referenced by vintage year as a percentage of par outstanding as of March 31, 2006 are shown in the table below: Underlying Delinquencies Lehman Brothers Vintage Year Collateral Outstanding Conduit Guide --------------------------------------------------------------------- 1998 $5,804,361 1.42% 1.49% 1999 629,114 1.51% 1.73% 2001 869,555 2.99% 1.29% 2002 1,144,715 0.32% 0.53% 2003 2,112,823 0.67% 0.47% 2004 6,699,032 0.56% 0.24% 2005 12,160,658 0.00% 0.16% 2006 4,177,801 0.00% 0.00% --------------------------------------------------------- Total $33,598,059 0.51% 0.48%* * Weighted average based on current principal balance. Delinquencies on the Company's CMBS collateral as a percent of principal are in line with expectations and are consistent with comparable data provided in the Lehman Brothers Conduit Guide. Morgan Stanley also tracks CMBS loan delinquencies for the specific CMBS transactions with more than $200,000 of collateral and that have been seasoned for at least one year. These seasoning criteria generally will adjust for the lower delinquencies that occur in newly originated collateral. At March 31, 2006, the Morgan Stanley index indicated that delinquencies on 350 securitizations were 0.92%, and at December 31, 2005, this same index indicated that delinquencies on 338 securitizations were 1.21%. The following table sets forth certain information relating to the aggregate principal balance and payment status of delinquent mortgage loans underlying the Controlling Class CMBS held by the Company as of March 31, 2006.
-------------------------------------------------------- --------------------------------------- March 31, 2006 -------------------------------------------------------- --------------------------------------- % of Principal Number of Loans Collateral -------------------------------- ----------------------- ------------------- ------------------- Past due 30 days to 60 days $39,532 5 0.12% -------------------------------- ----------------------- ------------------- ------------------- Past due 61 days to 90 days 10,240 4 0.03% -------------------------------- ----------------------- ------------------- ------------------- Past due 91 days or more 60,096 16 0.18% -------------------------------- ----------------------- ------------------- ------------------- Real estate owned ("REO") 59,514 7 0.18% -------------------------------- ----------------------- ------------------- ------------------- Foreclosure 3,617 1 0.01% -------------------------------- ----------------------- ------------------- ------------------- Total delinquent $172,999 33 0.51% -------------------------------- ----------------------- ------------------- ------------------- Total principal balance $33,598,059 -------------------------------- ----------------------- ------------------- -------------------
Of the 33 delinquent loans at March 31, 2006, 7 loans were real estate owned and being marketed for sale, 1 loan was in foreclosure and the remaining 25 loans were in some form of workout negotiations. The Controlling Class CMBS owned by the Company have a delinquency rate of 0.51%, which is consistent with industry averages. During the three months ended March 31, 2006, the underlying collateral experienced early payoffs of $153,842 representing 0.46% of the quarter-end pool balance. These loans were paid off at par with no loss. Aggregate losses related to the underlying collateral of $3,398 were realized during the three months ended March 31, 2006. This brings cumulative realized losses to $93,568, which is 18.8% of total estimated losses. These losses include special servicer and other workout expenses. This experience to date is in line with the Company's loss expectations. Realized losses and special servicer expenses are expected to increase on the underlying loans as the portfolio matures. Special servicer expenses are also expected to increase as portfolios mature. To the extent that realized losses differ from the Company's original loss estimates, it may be necessary to reduce or increase the projected yield on the applicable CMBS investment to better reflect such investment's expected earnings net of expected losses, from the date of purchase. While realized losses on individual assets may be higher or lower than original estimates, the Company currently believes its aggregate loss estimates and yields remain appropriate. The Company manages its credit risk through disciplined underwriting, diversification, active monitoring of loan performance and exercise of its right to control the workout process for delinquent loans as early as possible. The Company maintains diversification of credit exposures through its underwriting process and can shift its focus in future investments by adjusting the mix of loans in subsequent acquisitions. The comparative profiles of the loans underlying the Company's CMBS by property type as of March 31, 2006 and December 31, 2005 are as follows: March 31, 2006 Exposure December 31, 2005 Exposure ------------------------------------------------------------------------- % of % of Property Type Loan Balance Total Loan Balance Total ------------------------------------------------------------------------- Retail $10,577,237 31.5% $9,195,747 31.0% Office 10,359,572 30.8 9,406,148 31.7 Multifamily 7,391,306 22.0 6,874,450 23.2 Industrial 2,510,225 7.5 2,060,953 7.0 Lodging 2,119,098 6.3 1,670,436 5.6 Healthcare 297,530 0.9 299,692 1.0 Other 343,092 1.0 160,923 0.5 ------------------------------------------------------- Total $33,598,059 100% $29,668,349 100% ======================================================= As of March 31, 2006, the estimated fair value of the Company's holdings of subordinated Controlling Class CMBS is $40,904 higher than the adjusted cost for these securities which consists of a gross unrealized gain of $48,153 and a gross unrealized loss of $7,249. The adjusted purchase price of the Company's subordinated Controlling Class CMBS portfolio as of March 31, 2006 represents approximately 62% of its par amount. The estimated fair value of the Company's subordinated Controlling Class CMBS portfolio as of March 31, 2006 represents approximately 68% of its par amount. As the portfolio matures, the Company expects to recoup the $7,249 of unrealized loss, provided that the credit losses experienced are not greater than the credit losses assumed in the projected cash flow analysis. As of March 31, 2006, the Company believes there has been no material deterioration in the credit quality of its portfolio below current expectations. As the portfolio matures and expected losses occur, subordination levels of the lower rated classes of a CMBS investment will be reduced. This may cause the lower rated classes to be downgraded, which would negatively effect their estimated fair value and therefore the Company's net asset value. Reduced estimated fair value would negatively effect the Company's ability to finance any such securities that are not financed through a CDO or similar matched funding vehicle. In some cases, securities held by the Company may be upgraded to reflect seasoning of the underlying collateral and thus would increase the estimated fair value of the securities. During the three months ended March 31, 2006, there were eight credit upgrades on four of the Company's Controlling Class CMBS and no credit downgrades. Additionally, the Company experienced 23 upgrades and no downgrades related to non-Controlling Class commercial real estate securities during the three months ended March 31, 2006. The Company's interest income calculated in accordance with EITF 99-20 for its CMBS is computed based upon a yield, which assumes credit losses will occur. The yield to compute the Company's taxable income does not assume there would be credit losses, as a loss can only be deducted for tax purposes when it has occurred. As a result, for the years 1998 through March 31, 2006, the Company's GAAP income accrued on its CMBS assets was approximately $33,626 lower than the taxable income accrued on the CMBS assets. Effect of Hurricanes on Below Investment Grade CMBS During 2005, four properties which are security for mortgages in four separate Controlling Class CMBS transactions were damaged by Hurricane Katrina. The Company believes that two properties have adequate insurance coverage and the cash flows related to those Controlling Class CMBS transactions should not be adversely affected. As a result, the Company has not adjusted the loss assumed for these properties. However, two properties with aggregate outstanding loan balances of $14,640 have suffered significant damage. Based on the Company's on-site review of the damage incurred and information available to date, the anticipated loss for these properties has been adjusted and reflected in the Company's EITF 99-20 calculations. As more information is received, losses may be adjusted further. In addition, the Company has concluded that no properties in its Controlling Class CMBS transactions were substantially affected by Hurricane Wilma. Commercial Real Estate Loan Activity The Company's commercial real estate loan portfolio generally emphasizes larger transactions located in metropolitan markets, as compared to the typical loan in the CMBS portfolio. The following table summarizes the Company's commercial real estate loan portfolio by property type as of March 31, 2006 and December 31, 2005:
Carrying Value -------------------------------------------- Weighted Average March 31, 2006 December 31, 2005 Yield - ---------------------------- --------------------- ---------------------- -------------------- Property Type Amount % Amount % 2006 2005 - ---------------------------- ----------- --------- ----------- ---------- --------- ---------- Office $94,087 26.0% $94,432 25.8% 8.9% 8.9% Residential 49,481 13.7 57,466 15.7 8.9 8.6 Retail 113,152 31.3 76,502 20.9 7.8 7.3 Hotel 54,541 15.1 79,840 21.8 9.1 8.6 Storage 32,833 9.1 32,913 9.0 9.1 9.1 Communication Tower - - 20,000 5.5 - 9.4 Industrial 15,462 4.2 2,423 0.7 8.8 8.1 Other Mixed Use 2,167 .6 2,230 0.6 8.1 8.1 ----------- --------- ----------- ---------- --------- ---------- Total $361,723 100.0% $365,806 100.0% 8.6% 8.5% ----------- --------- ----------- ---------- --------- ----------
During the quarter ended March 31, 2006, the Company purchased $35,600 U.S. dollar denominated commercial real estate loans with a total principal balance of $40,000 and a British Pound denominated commercial real estate loan with a cost of (pound)7,474 ($13,283) and a principal balance of (pound)7,500. During the quarter ended March 31, 2006, the Company experienced repayments in the aggregate amount of $48,385 related to its U.S. dollar denominated commercial real estate loan portfolio. The Company finances its non-dollar denominated loans by borrowing in the applicable local currency and hedging the un-financed portion. The carrying value and average yields on the Company's commercial real estate loans as of March 31, 2006 were as follows:
Carrying Average Spread Average Spread Average Spread Carrying Value (Local Average to 1-month USD to 3-month GBP to 3-month Value Currency) Yield LIBOR LIBOR EURIBOR ----------------- --------------- ------------- ----------------- -------------------- ------------------- Fixed Rate $177,346 8.88% Floating Rate 48,905 5.85% Floating Rate 69,189 (pound)39,777 4.34% Floating Rate 66,283 (euro)54,588 3.45% ================ $361,723 ================
Critical Accounting Estimates Management's discussion and analysis of financial condition and results of operations are based on the amounts reported in the Company's consolidated financial statements. These financial statements are prepared in accordance with GAAP. In preparing the financial statements, management is required to make various judgments, estimates and assumptions that affect the reported amounts. Changes in these estimates and assumptions could have a material effect on the Company's consolidated financial statements. The following is a summary of the Company's accounting policies that are the most affected by management judgments, estimates and assumptions: Securities Available-for-sale The Company has designated certain investments in mortgage-backed securities, mortgage-related securities and certain other securities as available-for-sale. Securities available-for-sale are carried at estimated fair value with the net unrealized gains or losses reported as a component of accumulated other comprehensive income (loss) in stockholders' equity. Many of these investments are relatively illiquid, and management must estimate their values. In making these estimates, management generally utilizes market prices provided by dealers who make markets in these securities, but may, under certain circumstances, adjust these valuations based on management's judgment. Changes in the valuations do not affect the Company's reported net income or cash flows, but impact stockholders' equity and, accordingly, book value per share. Management must also assess whether unrealized losses on securities reflect a decline in value that is other than temporary, and, accordingly, write the impaired security down to its fair value, through earnings. Significant judgment by management is required in this analysis, which includes, but is not limited to, making assumptions regarding the collectability of the principal and interest, net of related expenses, on the underlying loans. Income on these securities is recognized based upon a number of assumptions that are subject to uncertainties and contingencies. Examples of these assumptions include, among other things, the rate and timing of principal payments (including prepayments, repurchases, defaults and liquidations), the pass-through or coupon rate and interest rate fluctuations. Additional factors that may affect the Company's reported interest income on its mortgage securities include interest payment shortfalls due to delinquencies on the underlying mortgage loans, the timing and magnitude of credit losses on the mortgage loans underlying the securities that are a result of the general condition of the real estate market (including competition for tenants and their related credit quality) and changes in market rental rates. These uncertainties and contingencies are difficult to predict and are subject to future events that may alter the assumptions. The Company recognizes interest income from its purchased beneficial interests in securitized financial interests ("beneficial interests") (other than beneficial interests of high credit quality, sufficiently collateralized to ensure that the possibility of credit loss is remote, or that cannot contractually be prepaid or otherwise settled in such a way that the Company would not recover substantially all of its recorded investment) in accordance with EITF 99-20. Accordingly, on a quarterly basis, when changes in estimated cash flows from the cash flows previously estimated occur due to actual prepayment and credit loss experience, the Company calculates a revised yield based on the current amortized cost of the investment (including any other-than-temporary impairments recognized to date) and the revised cash flows. The revised yield is then applied prospectively to recognize interest income. For other mortgage-backed and related mortgage securities, the Company accounts for interest income under SFAS No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases ("SFAS No. 91"), using the effective yield method which includes the amortization of discount or premium arising at the time of purchase and the stated or coupon interest payments. Impairment - Securities In accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities ("SFAS No. 115"), when the estimated fair value of the security classified as available-for-sale has been below amortized cost for a significant period of time and the Company concludes that it no longer has the ability or intent to hold the security for the period of time over which the Company expects the values to recover to amortized cost, the investment is written down to its fair value. The resulting charge is included in income, and a new cost basis is established. Additionally, under EITF 99-20, when changes in estimated cash flows from the cash flows previously estimated occur due to actual prepayment and credit loss experience, and the present value of the revised cash flows using the current expected yield is less than the present value of the previously estimated remaining cash flows (adjusted for cash receipts during the intervening period), an other-than-temporary impairment is deemed to have occurred. Accordingly, the security is written down to fair value with the resulting change being included in income, and a new cost basis established. In both instances, the original discount or premium is written off when the new cost basis is established. After taking into account the effect of an impairment charge, income is recognized under EITF 99-20 or SFAS No. 91, as applicable, using the market yield for the security used in establishing the write-down. Variable interest entities The consolidated financial statements include the financial statements of the Company and its subsidiaries, which are wholly-owned or controlled by the Company or entities which are variable interest entities ("VIEs") in which the Company is the primary beneficiary under FASB Interpretation No. 46, Consolidation of Variable Interest Entities (revised December 2003) ("FIN 46R"). FIN 46R requires a VIE to be consolidated by its primary beneficiary. The primary beneficiary is the party that absorbs the majority of the VIE's anticipated losses and/or the majority of the expected returns. The Company has evaluated its investments for potential variable interests by evaluating the sufficiency of the entities equity investment at risk to absorb losses. All significant inter-company balances and transactions have been eliminated in consolidation. The Company has analyzed the governing pooling and servicing agreements for each of its Controlling Class CMBS and believes that the terms are industry standard and are consistent with the qualifying special-purpose entity ("QSPE") criteria. However, there is uncertainty with respect to QSPE treatment due to ongoing review by accounting standard setters, potential actions by various parties involved with the QSPE, as well as varying and evolving interpretations of the QSPE criteria under SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ("SFAS No. 140"). Additionally, the standard setters continue to review the FIN 46R provisions related to the computations used to determine the primary beneficiary of a VIE. Future guidance from the standard setters may require the Company to consolidate CMBS trusts in which the Company has invested. Mortgage Loans The Company purchases and originates commercial mortgage loans to be held as long-term investments. The Company also has investments in private opportunity funds that invest in commercial mortgage loans and are managed by the Manager. Management periodically evaluates each loan for possible impairment. Impairment is indicated when it is deemed probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan. If a loan was determined to be impaired, the Company will establish a reserve for probable losses and a corresponding charge to earnings. Given the nature of the Company's loan portfolio and the underlying commercial real estate collateral, significant judgment of management is required in determining impairment and the resulting loan loss allowance, which includes but is not limited to making assumptions regarding the value of the real estate that secures the mortgage loan. To date, the Company has determined that no loan loss allowances have been necessary on the loans in its portfolio or held by the Carbon Capital Funds (as defined under Transactions with Affiliates, below). Derivative Instruments The Company utilizes various hedging instruments (derivatives) to hedge interest rate and foreign currency exposures or to modify the interest rate or foreign currency characteristics of related Company investments. All derivatives are carried at fair value, generally estimated by management based on valuations provided by the counterparty to the derivative contract. For accounting purposes, the Company's management must decide whether to designate these derivatives as either a hedge of an asset or liability, securities available-for-sale, securities held-for-trading, or foreign currency exposure. This designation decision affects the manner in which the changes in the fair value of the derivatives are reported. Securitizations When the Company sells assets in securitizations, it can retain certain tranches which are considered retained interests in the securitization. Gain or loss on the sale of assets depends in part on the previous carrying amount of the financial assets securitized, allocated between the assets sold and the retained interests based on their relative fair value at the date of securitization. To obtain fair values, quoted market prices are used. Gain or loss on securitizations of financial assets is reported as a component of sale of securities available-for-sale on the consolidated statement of operations. Retained interests are carried at estimated fair value on the consolidated statement of financial condition. Adjustments to estimated fair value for retained interests classified as securities available-for-sale are included in accumulated other comprehensive income on the consolidated statement of financial condition. II. Results of Operations Net income available to common stockholders for the three months ended March 31, 2006 was $18,794 or $0.33 per share (basic and diluted). Net income available to common stockholders for the three months ended March 31, 2005 was $14,368 or $0.27 per share (basic and diluted). Net income available to common stockholders increased to $0.33 per share for the three months ended March 31, 2006 as compared to $0.27 per share for the three months ended March 31, 2005. Interest Income: The following tables set forth information regarding the total amount of income from certain of the Company's interest-earning assets.
For the Three Months Ended Variance March 31, 2006 2005 Amount % ------------------- ----------------------------------- ------------ Commercial real estate securities $37,791 $32,631 $5,160 15.8% Commercial mortgage loan pools 13,227 13,552 (325) (2.4) Commercial real estate loans 8,015 5,344 2,671 49.9 Residential mortgage-backed securities ("RMBS") 3,030 2,880 150 5.2 Cash and cash equivalents 337 237 100 42.8 ------------------- ----------------- --- ------------- ------------ Total interest income $62,400 $54,644 $7,756 14.2% =================== ================= === ============= ============
The following table reconciles interest income and total income for the three months ended March 31, 2006 and 2005.
For the Three Months Ended March 31, 2006 2005 ------------------------------------------------ Interest Income $62,400 $54,644 Earnings from BlackRock Diamond Property Fund ("BlackRock Diamond") 5,542 - Earnings from the Carbon Capital Funds 3,801 2,605 Earnings from real estate joint ventures - 59 ------------------------------------------------ Total Income $71,743 $57,308 ================================================
For the three months ended March 31, 2006, interest income increased $7,756, or 14.2%, from the same three month period in 2005. The Company continued to increase its investments in commercial real estate securities and loans, resulting in an increase of $5,160, or 15.8%, and $2,671, or 49.9%, respectively. Income from BlackRock Diamond was $5,542 for the quarter ended March 31, 2006. The Company began investing in BlackRock Diamond in the fourth quarter of 2005, as a result, there was no income related to BlackRock Diamond during the quarter ended March 31, 2005. The $5,542 of income consists of $370 of income and $5,172 of unrealized gains on the underlying portfolio assets. Interest Expense: The following table sets forth information regarding the total amount of interest expense from certain of the Company's borrowings and cash flow hedges.
For the Three Months Ended Variance March 31, 2006 2005 Amount % --------------- --------------- ------------- --------------- Collateralized debt obligations $16,134 $15,747 $387 2.5%% Commercial real estate securities 8,077 2,586 5,491 212.3% Commercial mortgage loan pools* 12,666 12,780 (114) (0.9)% Commercial real estate loans 2,964 1,335 1,629 122.0% RMBS 3,596 2,129 1,467 68.9% Junior subordinated notes - net 2,220 - 2,220 n/a Cash flow hedges 1,483 2,300 (817) (35.5)% Hedge ineffectiveness** (615) (261) (354) (135.6)% --------------- --------------- ------------- --------------- Total Interest Expense $46,525 $36,616 $9,909 27.1% =============== =============== ============= ===============
* Includes $44 and $3 of interest expense for the three months ended March 31, 2006 and 2005 from short-term financings of securities related to the consolidation of commercial mortgage loan pools. **See Note 12 of the consolidated financial statements, Derivative Instruments and Hedging Activities, for a further description of the Company's hedge ineffectiveness. For the three months ended March 31, 2006, interest expense increased $9,909, or 27.1%, from the same three month period in 2005. The financing of additional commercial real estate securities and commercial real estate loans along with higher short-term borrowing rates increased interest expense $5,491 and $1,629, respectively, for the same three month period of 2005. The issuance of $175,000 of trust preferred securities increased interest expense $2,220 for the three months ended March 31, 2006. Hedging expenses not related to the CDOs decreased $816, or 35.5%, from 2005 levels. This decrease is due to the cash flow hedges offsetting higher short-term interest rates. Net Interest Margin and Net Interest Spread from the Portfolio: The Company considers its portfolio to consist of securities available-for-sale, securities held-for-trading, commercial mortgage loans, and cash and cash equivalents because these assets relate to its core strategy of acquiring and originating high yield loans and securities backed by commercial real estate, while at the same time maintaining a portfolio of investment grade securities to enhance the Company's liquidity. Net interest margin from the portfolio is annualized net interest income divided by the average estimated fair value of interest-earning assets. Net interest income is total interest income less interest expense relating to collateralized borrowings. Net interest spread equals the yield on average assets for the period less the average cost of funds for the period. The yield on average assets is interest income divided by average amortized cost of interest earning assets. The average cost of funds is interest expense from the portfolio divided by average outstanding collateralized borrowings. The following chart describes the interest income, interest expense, net interest margin and net interest spread for the Company's portfolio. The following interest income and interest expense amounts exclude income and expense related to hedge ineffectiveness, and the gross-up effect of the consolidation of a VIE that includes commercial mortgage loan pools. The Company believes interest income and expense excluding the effects of these items better reflects the Company's net interest margin and net interest spread from the portfolio. For the Three Months Ended March 31, 2006 2005 ------------------------------------------------ Interest income $49,781 $42,096 Interest expense $34,521 $24,101 Net interest margin 2.2% 3.2% Average yield 7.2% 7.5% Cost of funds 6.1% 5.2% Net interest spread 1.1% 2.3% Other Expenses: Expenses other than interest expense consist primarily of management fees and general and administrative expenses. The table below summarizes those expenses for the three months ended March 31, 2006 and 2005. For the Three Months Ended March 31, Variance 2006 2005 Amount % -------------------------------------------------- Management fee $3,050 $2,579 $471 18.3% Incentive fee 1,169 - 1,169 - General and administrative expense 1,104 820 284 34.6 -------------------------------------------------- Total other expenses $5,323 $3,399 $1,924 56.6% ================================================== Management fees are based on 2% of average quarterly stockholders' equity. The increase of $471, 18.3%, is due to the increase in the Company's stockholders' equity. The Manager earned an incentive fee of $1,169 for the quarter ended March 31, 2006 as the Company achieved the necessary performance goals specified in the Management Agreement. General and administrative expense is comprised of accounting agent fees, custodial agent fees, directors' fees, fees for professional services, insurance premiums, broken deal expenses, and due diligence costs. The increase in general and administrative expense for the quarter ended March 31, 2006 is primarily attributable to the Company's new investment accounting system and cost associated and increased professional fees. Other Gains (Losses): Gains on securities available-for-sale were $34 and $10 for the three months ended March 31, 2006 and 2005, respectively. Gains (losses) on securities held-for-trading were $950 and $(1,372) for the three months ended March 31, 2006 and 2005, respectively. Foreign currency gains (losses) were $44 and $(168) for the three months ended March 31, 2006 and 2005, respectively, which represent the net impact of the Company's foreign currency exposure for the applicable quarters. The losses on impairment of assets of $781 and $159 for the three months ended March 31, 2006 and 2005, respectively, were related to the Company's write down of certain CMBS as required by EITF 99-20. Dividends Declared: On March 24, 2006, the Company declared distributions to its stockholders of $0.28 per share, payable on May 1, 2006 to stockholders of record on March 31, 2006. Changes in Financial Condition Securities Available-for-sale: The Company's securities available-for-sale, which are carried at estimated fair value, included the following at March 31, 2006 and December 31, 2005:
March 31, 2006 December 31, Estimated 2005 Estimated Fair Fair Security Description Value Percentage Value Percentage -------------------------------------------------- ---------------- --------------- ----------------- ---------------- Commercial mortgage-backed securities: CMBS IOs $95,416 4.0% $103,363 5.0% Investment grade CMBS 673,637 28.3 509,835 24.5 Non-investment grade rated subordinated securities 628,825 26.4 675,995 32.5 Non-rated subordinated securities 44,464 1.9 26,411 1.3 Credit tenant leases 24,702 1.0 24,837 1.2 Investment grade REIT debt 251,231 10.6 255,767 12.3 Multifamily agency securities 360,666 15.2 263,362 12.7 CDO investments 115,417 4.8 124,549 6.0 ---------------- --------------- ----------------- ---------------- Total CMBS 2,194,359 92.2 1,984,119 95.5 ---------------- --------------- ----------------- ---------------- Single-family RMBS: Agency adjustable rate securities 72,490 3.0 76,491 3.7 Residential CMOs 100,597 4.2 725 0.1 Hybrid adjustable rate mortgages 14,464 .6 15,601 0.7 ---------------- --------------- ----------------- ---------------- Total RMBS 187,551 7.8 92,817 4.5 ---------------- --------------- ----------------- ---------------- ---------------- --------------- ----------------- ---------------- Total securities available-for-sale $2,381,910 100.0% $2,076,936 100.0% ================ =============== ================= ================
During the quarter ended March 31, 2006, the Company purchased $322,642 of securities available-for-sale. In addition, the Company received principal payments of $12,538 related to securities available-for-sale. Borrowings: As of March 31, 2006 and December 31, 2005, the Company's debt consisted of line-of-credit borrowings, CDO debt, junior subordinated notes, term loans and reverse repurchase agreements, collateralized by a pledge of most of the Company's securities available-for-sale, securities held-for-trading, and its commercial mortgage loans. The Company's financial flexibility is affected by its ability to renew or replace on a continuous basis its maturing short-term borrowings. As of March 31, 2006 and December 31, 2005, the Company has obtained financing in amounts and at interest rates consistent with the Company's short-term financing objectives. Under the credit facilities, and the reverse repurchase agreements, the lender retains the right to mark the underlying collateral to estimated fair value. A reduction in the estimated fair value of its pledged assets would require the Company to provide additional collateral or fund margin calls. From time to time, the Company expects that it will be required to provide such additional collateral or fund margin calls. The following table sets forth information regarding the Company's borrowings:
For the Three Months Ended March 31, 2006 ------------------------------------------------------------- March 31, 2006 Maximum Range of Balance Balance Maturities --------------------- ---------------- ---------------------- CDO debt* $1,066,574 $1,066,930 5.7 to 7.8 years Commercial mortgage loan pools 1,267,611 1,272,931 2.8 to 12.7 years Reverse repurchase agreements 1,060,329 1,060,329 2 to 274 days Credit facilities 254,015 301,923 40 days to 1.7 years Junior subordinated notes 180,477 180,477 29.9 years** --------------------- ---------------- ----------------------
* Disclosed as adjusted issue price. Total par of the Company's CDO debt as of March 31, 2006 was $1,078,860. ** $77,380 of the Company's junior subordinated notes can be redeemed at par beginning in October 2010, $51,550 can be redeemed at par beginning in March 2011 and $51,547 can be redeemed at par beginning in April 2011. Hedging Instruments: From time to time, the Company may reduce its exposure to market interest rates by entering into various financial instruments that adjust portfolio duration. These financial instruments are intended to mitigate the effect of changes in interest rates on the estimated fair value of the Company's assets and the cost of borrowing. Interest rate hedging instruments as of March 31, 2006 and December 31, 2005 consisted of the following:
As of March 31, 2006 ----------------------------------------------------------------------------------- Notional Value Estimated Fair Unamortized Average Remaining Term Value Cost (years) ----------------------------------------------------------------------------------- Cash flow hedges $751,050 $25,254 $- 8.00 CDO cash flow hedges 695,041 24,929 - 7.27 Trading swaps 100,000 4,865 - 5.71 CDO timing swaps 223,445 24 - 6.83 CDO LIBOR cap 85,000 370 1,407 7.15 As of December 31, 2005 ----------------------------------------------------------------------------------- Notional Value Estimated Fair Unamortized Average Remaining Term Value Cost (years) ----------------------------------------------------------------------------------- Cash flow hedges $500,350 $6,234 $- 8.42 CDO cash flow hedges 701,603 10,616 - 7.51 Trading swaps 133,000 4,032 - 6.83 CDO timing swaps 223,445 (37) - 7.08 CDO LIBOR cap 85,000 1,419 1,407 7.40
Capital Resources and Liquidity The Company requires capital to fund its investment activities and operating expenses. The Company has sufficient access to capital resources to fund its existing business plan. The Company's capital sources include cash flow from operations, borrowings under reverse repurchase agreements, credit facilities, CDOs, junior subordinated notes and the issuance of preferred and common equity securities. The distribution requirements under the REIT provisions of the United States Internal Revenue Code of 1986, as amended (the "Code") limit the Company's ability to retain earnings and thereby replenish or increase capital committed to its operations. However, the Company believes that its access to significant capital resources and financing will enable the Company to meet current and anticipated capital requirements. The Company believes that its existing sources of funds will be adequate for purposes of meeting its short- and long-term liquidity needs. The Company's ability to meet its long-term (i.e., beyond one year) liquidity requirements is subject to obtaining additional debt and equity financing. Any decision by the Company's lenders and investors to provide the Company with financing will depend upon a number of factors, such as the Company's compliance with the terms of its existing credit arrangements, the Company's financial performance, industry or market trends, the general availability of and rates applicable to financing transactions, such lenders' and investors' resources and policies concerning the terms under which they make capital commitments and the relative attractiveness of alternative investment or lending opportunities. Reverse Repurchase Agreements and Credit Facilities As of March 31, 2006, $26,716 of the Company's $200,000 committed multicurrency credit facility with Deutsche Bank, AG was available for future borrowings and $6,966 of the Company's $75,000 committed credit facility with Greenwich Capital, Inc. was available. The Company had outstanding borrowings of $12,697 under a committed credit facility with Morgan Stanley Mortgage Capital, Inc. On February 16, 2006, the Company entered into a $200,000 committed non-dollar credit facility with Morgan Stanley Mortgage Servicing, Inc. which matures in February 2008. Outstanding borrowings under this credit facility bear interest at a LIBOR based variable rate. As of March 31, 2006, there were no borrowings under this facility. On March 17, 2006, the Company entered into a $100,000 committed non-dollar credit facility with Bank of America, N.A. which matures in September 2008. Outstanding borrowings under this credit facility bear interest at a LIBOR based variable rate. As of March 31, 2006, there were no borrowings under this facility. The Company is subject to various covenants in its credit facilities, including maintaining a minimum net worth measured on GAAP of $400,000, a recourse debt-to-equity of 3.0 to 1, a minimum cash requirement based upon certain debt-to-equity ratios, a minimum recourse debt service coverage ratio of 1.75 and a minimum liquidity reserve of $10,000. As of March 31, 2006, the Company was in compliance with all covenants in its credit facilities. CDOs Issuance of secured term debt is generally done through a CDO offering. This entails creating a special purpose entity that holds assets used to secure the payments required of the debt issued. Asset cash flows generally are matched with the debt service requirements over their respective lives and an interest rate swap is used to match the fixed or floating rate nature of the coupon payments where necessary. This type of transaction is usually referred to as "match funding" or "term financing" the assets. There is no mark to market requirement in this structure and the debt cannot be called or terminated by the bondholders. Furthermore, the debt issued is non-recourse to the issuer; and therefore permanent reductions in value do not affect the liquidity of the Company. However, since the Company expects to earn a positive spread between the income generated by the assets and the expense of the debt issued, a permanent impairment of any of the assets would negatively affect the spread over time. On May 2, 2006, the Company announced the pricing of its sixth CDO issuance ("CDO HY3") resulting in the issuance of $417,000 of non-recourse debt. The debt will be secured by a portfolio of CMBS and subordinated commercial real estate loans. This debt, rated AAA through BBB-, will be privately placed, and the Company will receive additional CDO debt rated BB and 100% of the preferred shares issued by the CDO. The transaction is expected to close on May 23, 2006. The terms of the offering permit the Company to contribute to the CDO up to $50,000 of additional CMBS during a ramp-up period. These CMBS assets will be contributed at par value. The debt issuance is intended to match fund existing Company assets to be contributed to the CDO at closing, and the assets to be purchased during the ramp-up period, with long-term liabilities. The Company intends to account for this transaction on its balance sheet as a financing. All debt placed will either carry a fixed rate or will be hedged to create a current cost of funds of approximately 6.3% after issuance expenses and will have a weighted average life of 8.1 years. The Company will use the net proceeds of the offering to pay down existing debt on the CDO collateral. Since the CDO collateral was not fully levered, the Company expects excess cash of $93,000 after the pay down of existing debt in addition to the $50,000 ramp facility. Following the closing of CDO HY3, approximately 93% of the Company's subordinated CMBS will be match funded in CDOs. At March 31, 2006, the Company's collateralized borrowings had the following remaining maturities:
Reverse Commercial Repurchase Credit Mortgage Loan Collateralized Total Collateralized Agreements Facilities Pools Debt Obligations* Borrowings ---------------- ----------------- ------------------ ------------------ -------------------------- Within 30 days $1,027,784 $- $- $- $1,027,784 31 to 59 days 4,244 12,698 - - 16,942 60 days to less than 1 year 28,301 86,445 - - 114,746 1 year to 3 years - 154,873 - - 154,873 3 years to 5 years - - - - - Over 5 years - - 1,267,611 1,066,574 2,334,185 ---------------- ----------------- ------------------ ------------------ -------------------------- $1,060,329 $254,016 $1,267,611 $1,066,574 $3,648,530 ================ ================= ================== ================== ==========================
* As of March 31, 2006, collateralized debt obligations are comprised of $418,834 of CDO debt with a weighted average remaining maturity of 6.04 years, $292,585 of CDO debt with a weighted average remaining maturity of 6.42 years, and $367,440 of CDO debt with a weighted average remaining maturity of 7.14 years. Trust Preferred On January 31, 2006, the Company issued $50,000 of trust preferred securities through its wholly owned subsidiary, Anthracite Capital Trust II, a Delaware statutory trust ("Trust II"). The trust preferred securities have a thirty-year term ending April 30, 2036 with interest at a fixed rate of 7.73% for the first ten years and at a floating rate of three-month LIBOR plus 2.7% thereafter. The trust preferred securities can be redeemed at par by the Company beginning in April 2011. Trust II issued $1,550 aggregate liquidation amount of common securities, representing 100% of the voting common stock of Trust II to the Company for a purchase price of $1,550. The Company realized net proceeds from this offering of approximately $48,491. On March 16, 2006, the Company issued $50,000 of trust preferred securities through its wholly owned subsidiary, Anthracite Capital Trust III, a Delaware statutory trust ("Trust III"). The trust preferred securities have a thirty-year term ending March 15, 2036 with interest at a fixed rate of 7.77% for the first ten years and at a floating rate of three-month LIBOR plus 2.7% thereafter. The trust preferred securities can be redeemed at par by the Company beginning in March 2011. Trust III issued $1,547 aggregate liquidation amount of common securities, representing 100% of the voting common stock of Trust III to the Company for a purchase price of $1,547. The Company realized net proceeds from this offering of approximately $48,435. Equity Issuances For the three months ended March 31, 2006, the Company issued 590,216 shares of its Common Stock, par value $0.001 per share (the "Common Stock"), under its Dividend Reinvestment and Stock Purchase Plan (the "Dividend Reinvestment Plan"). Net proceeds to the Company were approximately $6,270. For the three months ended March 31, 2005, the Company issued 7,706 shares of its Common Stock under its Dividend Reinvestment Plan. Net proceeds to the Company were approximately $91. Off Balance Sheet Arrangements The Company's ownership of the subordinated classes of CMBS from a single issuer gives it the right to influence the foreclosure/workout process on the underlying loans ("Controlling Class CMBS"). FIN 46(R)-5 has certain scope exceptions, one of which provides that an enterprise that holds a variable interest in a qualifying special-purpose entity ("QSPE") does not consolidate that entity unless that enterprise has the unilateral ability to cause the entity to liquidate. SFAS No. 140 provides the requirements for an entity to be considered a QSPE. To maintain the QSPE exception, the trust must continue to meet the QSPE criteria both initially and in subsequent periods. A trust's QSPE status can be impacted in future periods by activities by its transferors or other involved parties, including the manner in which certain servicing activities are performed. To the extent its CMBS investments were issued by a trust that meets the requirements to be considered a QSPE, the Company records the investments at the purchase price paid. To the extent the underlying trusts are not QSPEs the Company follows the guidance set forth in FIN 46(R)-5 as the trusts would be considered VIEs. The Company has analyzed the governing pooling and servicing agreements for each of its Controlling Class CMBS and believes that the terms are industry standard and are consistent with the QSPE criteria. However, there is uncertainty with respect to QSPE treatment due to ongoing review by accounting standard setters, potential actions by various parties involved with the QSPE, as discussed above, as well as varying and evolving interpretations of the QSPE criteria under SFAS No. 140. Additionally, the standard setters continue to review the FIN 46(R)-5 provisions related to the computations used to determine the primary beneficiary of a VIE. Future guidance from the standard setters may require the Company to consolidate CMBS trusts in which the Company has invested. At March 31, 2006, the Company owned securities of 24 Controlling Class CMBS trusts with a par of $965,275. The total current par amount of CMBS issued by the 24 trusts was $33,598,059. One of the Company's 24 Controlling Class trusts does not qualify as a QSPE and has been consolidated by the Company. The Company's maximum exposure to loss as a result of its investment in these VIEs totaled $656,509 and $565,231 at March 31, 2006 and December 31, 2005, respectively. In addition, the Company has completed two securizations that qualify as QSPE's under SFAS No. 140. Through CDO HY1 and HY2 the Company issued non-recourse liabilities secured by commercial related assets including portions of 17 Controlling Class CMBS. Should future guidance from the standard setters determine that Controlling Class CMBS are not QSPE's, the Company would be required to consolidate the assets, liabilities, income and expense of CDO HY1 and CDO HY2. The Company's total maximum exposure to loss as a result of its investment in CDOs HY1 and HY2 at March 31, 2006 and December 31, 2005, respectively, is $113,655 and 109,003. At March 31, 2006, the Company also owns non-investment debt and preferred securities in LEAFs CMBS I Ltd ("Leaf"), a QSPE under SFAS No. 140. Leaf issued non-recourse liabilities secured by investment grade commercial real estate securities. At March 31, 2006 and December 31, 2005, the Company's total maximum exposure to loss as a result of its investment in Leaf is $3,603 and $3,573, respectively. Cash Flows Cash provided by operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities including the Company's trading securities. Operating activities provided cash flows of $42,899 and $31,563 during the three months ended March 31, 2006 and 2005, respectively. The Company's investing cash flow consists primarily of the purchase, sale, and repayments on securities activities available for sale, commercial loan pools, commercial mortgage loans and equity investments. The Company's investing activities (used) provided cash flows of $(350,104) and $40,139 during the three months ended March 31, 2006 and 2005, respectively. The variance in investing cash flows is primarily attributable to significant purchases of securities and commercial mortgage loans. Financing cash flows consist primarily of borrowings, CDO and junior subordinated note issuances, common and preferred stock offerings offset by dividends on common and preferred stock and repayments of borrowings. The Company's financing activities provided (used) cash flows $294,239 and $(73,152) during the three months ended March 31, 2006 and 2005, respectively. The increase in financing cash flows in 2006 was primarily attributable to increases in borrowings under reverse repurchase agreements and credit facilities as well as the issuance of junior subordinated notes. The Company's ability to execute its business strategy depends to a significant degree on its ability to obtain additional capital. Factors which could affect the Company's access to the capital markets, or the costs of such capital, include changes in interest rates, general economic conditions and perception in the capital markets of the Company's business, covenants under the Company's current and future credit facilities, results of operations, leverage, financial conditions and business prospects. Consequently, there can be no assurance that the Company will be able to effectively fund future growth. Except as discussed herein, management is not aware of any other trends, events, commitments or uncertainties that may have a significant effect on liquidity. Contingent Liability During 2000, the Company completed the acquisition of CORE Cap, Inc. At the time of the CORE Cap, Inc. acquisition, the Manager agreed to pay GMAC (CORE Cap, Inc.'s external advisor) $12,500 over a ten-year period ("Installment Payment") to purchase the right to manage the Core Cap, Inc. assets under the existing management contract ("GMAC Contract"). The GMAC Contract had to be terminated in order to allow the Company to complete the merger, as the Company's management agreement with the Manager did not provide for multiple managers. As a result the Manager offered to buy-out the GMAC Contract as the Manager estimated it would receive incremental fees above and beyond the Installment Payment, and thus was willing to pay for, and separately negotiate, the termination of the GMAC Contract. Accordingly, the value of the Installment Payment was not considered in the Company's allocation of its purchase price to the net assets acquired in the acquisition of CORE Cap, Inc. The Company agreed that should the Management Agreement with its Manager be terminated, not renewed or not extended for any reason other than for cause, the Company would pay to the Manager an amount equal to the Installment Payment less the sum of all payments made by the Manager to GMAC. As of March 31, 2006, the Installment Payment would be $5,000 payable over five years. The Company does not accrue for this contingent liability. Transactions with Affiliates The Company has a Management Agreement with the Manager, a majority owned indirect subsidiary of The PNC Financial Services Group, Inc. and the employer of certain directors and all of the officers of the Company, under which the Manager manages the Company's day-to-day operations, subject to the direction and oversight of the Company's Board of Directors. Pursuant to the Management Agreement, the Manager formulates investment strategies, arranges for the acquisition of assets, arranges for financing, monitors the performance of the Company's assets and provides certain other advisory and managerial services in connection with the operations of the Company. For performing these services, the Company pays the Manager a base management fee equal to 2.0% of the quarterly average total stockholders' equity for the applicable quarter. To provide an incentive, the Manager is entitled to receive an incentive fee equal to 25% of the amount by which the rolling four-quarter GAAP net income before the incentive fee exceeds the greater of 8.5% or 400 basis points over the ten-year Treasury note multiplied by the adjusted per share issue price of the common stock ($11.36 per common share at March 31, 2006). The Company's unaffiliated directors approved an extension of the Management Agreement to March 31, 2007 at the Board of Directors' February 2006 meeting. Additionally, pursuant to a resolution of the Company's Board of Directors adopted at the February 2006 meeting, up to 30% of the incentive fees earned in 2005 or after may be paid in shares of the Company's Common Stock subject to certain provisions. The Board of Directors also authorized the Company to seek stockholders' approval of a compensatory deferred stock plan. Pending stockholder approval, the Company would establish a stock based incentive plan where one half of one percent of common shares outstanding will be paid to the Manager in 2006. The Company incurred $3,050 and $2,579 in base management fees in accordance with the terms of the Management Agreement for the three months ended March 31, 2006 and 2005, respectively. The Company incurred $1,169 in incentive fees for the three months ended March 31, 2006. The Company did not incur incentive fees for the three months ended March 31, 2005. As of March 31, 2006 and 2005, respectively, management and incentive fees of $4,095 and $2,438 are payable to the Manager. In accordance with the provisions of the Management Agreement, the Company recorded reimbursements to the Manager of $100 and $40 for certain expenses incurred on behalf of the Company for the three months ended March 31, 2006 and 2005, respectively, which are included in general and administrative expense on the accompanying consolidated statements of operations. The Company has an administration and investment accounting agreement with the Manager. Under the terms of the administration agreement, the Manager provides financial reporting, audit coordination and accounting oversight services to the Company. Under the terms of the investment accounting agreement, the Manager provides investment accounting services to the Company. For the three months ended March 31, 2006 and 2005, the Company recorded administration and investment accounting fees of $182 and $51, respectively, which are included in general and administrative expense on the accompanying consolidated statements of operations. The special servicer on 20 of the Company's 24 Controlling Class trusts is Midland Loan Services, Inc. ("Midland"), a wholly owned indirect subsidiary of PNC Bank, and therefore an affiliate of the Manager. The Company's fees for Midland's services are at market rates. The Company has a $100,000 commitment to acquire shares of BlackRock Diamond. BlackRock Diamond is a private REIT managed by BlackRock Realty Advisors, Inc., a subsidiary of the Manager. At March 31, 2006, 80.6% of the commitment has been called and the Company owned approximately 34.6% of BlackRock Diamond. The Company does not incur any additional management or incentive fees to the Manager as a result of its investment in BlackRock Diamond. The Company's investment in BlackRock Diamond at March 31, 2006 was $86,116. The Company's unaffiliated directors approved this transaction in September 2005. During 2001, the Company entered into a $50,000 commitment to acquire shares in Carbon Capital, Inc. ("Carbon I"), a private commercial real estate income opportunity fund managed by the Manager. The Carbon I investment period ended on July 12, 2004 and the Company's investment in Carbon I as of March 31, 2006 was $6,634. The Company does not incur any additional management or incentive fees to the Manager as a result of its investment in Carbon I. On March 31, 2006, the Company owned approximately 20% of the outstanding shares in Carbon I. The Company's unaffiliated directors approved this transaction in July 2001. The Company entered into an aggregate commitment of $100,000 to acquire shares in Carbon Capital II, Inc., a private commercial real estate income opportunity fund managed by the Manager. At March 31, 2006, the Company's investment in Carbon II was $60,364 and the Company's remaining commitment to Carbon II is $39,472. The Company does not incur any additional management or incentive fees to the Manager as a result of its investment in Carbon II. The Company's unaffiliated directors approved this transaction in September 2004. REIT Status: The Company has elected to be taxed as a REIT and therefore must comply with the provisions of the Code with respect thereto. Accordingly, the Company generally will not be subject to U.S. federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and stock ownership tests are met. The Company may, however, be subject to tax at corporate rates or at excise tax rates on net income or capital gains not distributed. During the first quarter, Anthracite and certain subsidiaries have elected to have the subsidiaries treated as taxable REIT subsidiaries. This election permits the subsidiaries to enter into activities that may not have constituted qualifying assets generating qualifying income for the REIT tests. ITEM 3. Quantitative and Qualitative Disclosures about Market Risk Market Risk: Market risk includes the exposure to loss resulting from changes in interest rates, credit curve spreads, foreign currency exchange rates, commodity prices and equity prices. The primary market risks to which the Company is exposed are interest rate risk and credit curve risk. Interest rate risk is highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations and other factors beyond the control of the Company. Credit curve risk is highly sensitive to the dynamics of the markets for commercial mortgage securities and other loans and securities held by the Company. Excessive supply of these assets combined with reduced demand will cause the market to require a higher yield. This demand for higher yield will cause the market to use a higher spread over the U.S. Treasury securities yield curve, or other benchmark interest rates, to value these assets. Changes in the general level of the U.S. Treasury yield curve can have significant effects on the estimated fair value of the Company's portfolio. The majority of the Company's assets are fixed-rate securities valued based on a market credit spread to U.S. Treasuries. As U.S. Treasury securities are priced to a higher yield and/or the spread to U.S. Treasuries used to price the Company's assets is increased, the estimated fair value of the Company's portfolio may decline. Conversely, as U.S. Treasury securities are priced to a lower yield and/or the spread to U.S. Treasuries used to price the Company's assets is decreased, the estimated fair value of the Company's portfolio may increase. Changes in the estimated fair value of the Company's portfolio may affect the Company's net income or cash flow directly through their impact on unrealized gains or losses on securities held-for-trading or indirectly through their impact on the Company's ability to borrow. Changes in the level of the U.S. Treasury yield curve can also affect, among other things, the prepayment assumptions used to value certain of the Company's securities and the Company's ability to realize gains from the sale of such assets. In addition, changes in the general level of the LIBOR money market rates can affect the Company's net interest income. At March 31, 2006, all of the Company's liabilities outside of the CDOs are floating rate based on a market spread to LIBOR. As the level of LIBOR increases or decreases, the Company's interest expense will move in the same direction. The Company may utilize a variety of financial instruments, including interest rate swaps, caps, floors and other interest rate exchange contracts, in order to limit the effects of fluctuations in interest rates on its operations. The use of these types of derivatives to hedge interest-earning assets and/or interest-bearing liabilities carries certain risks, including the risk that losses on a hedge position will reduce the funds available for payments to holders of securities and that such losses may exceed the amount invested in such instruments. A hedge may not perform its intended purpose of offsetting losses or rising interest rates. Moreover, with respect to certain of the instruments used as hedges, the Company is exposed to the risk that the counterparties with which the Company trades may cease making markets and quoting prices in such instruments, which may render the Company unable to enter into an offsetting transaction with respect to an open position. If the Company anticipates that the income from any such hedging transaction will not be qualifying income for REIT income purposes, the Company may conduct part or all of its hedging activities through a to-be-formed corporate subsidiary that is fully subject to federal corporate income taxation. The profitability of the Company may be adversely affected during any period as a result of changing interest rates. The Company monitors and manages interest rate risk based on a method that takes into consideration the interest rate sensitivity of the Company's assets and liabilities, including its preferred stock. The Company's objective is to acquire assets and match fund the purchase so that interest rate risk associated with financing these assets is reduced or eliminated. The primary risks associated with acquiring and financing these assets under 30-day repurchase agreements and committed borrowing facilities are mark-to-market risk and short-term rate risk. Certain secured financing arrangements provide for an advance rate based upon a percentage of the estimated fair value of the asset being financed. Market movements that cause asset values to decline would require a margin call or a cash payment to maintain the relationship between asset value and amount borrowed. A cash flow based CDO is an example of a secured financing vehicle that does not require a mark-to-market to establish or maintain a level of financing. When financed assets are subject to a mark-to-market margin call, the Company carefully monitors the interest rate sensitivity of those assets. The duration of the assets financed which are subject to a mark-to-market margin call was 2.01 years based on net asset value at March 31, 2006. This means that a 100 basis point increase in interest rates would cause a margin call of approximately $12,000. Earnings per share sensitivity to changes in interest rates is analyzed using the assumptions that interest rates, as defined by the LIBOR curve, increase or decrease and that the yield curves of the LIBOR rate shocks will be parallel to each other. Estimated fair value in this scenario is calculated using the assumption that the U.S. Treasury yield curve remains constant even though changes in both long- and short-term interest rates can occur simultaneously. Regarding the table below, all changes in income and value are measured as percentage changes from the respective values calculated in the scenario labeled as "Base Case." The base interest rate scenario assumes interest rates at March 31, 2006. Actual results could differ significantly from these estimates. Projected Percentage Change In Earnings Per Share Given LIBOR Movements Change in LIBOR, Projected Change in +/- Basis Points Earnings per Share ----------------------------------------------------------- -200 $0.04 -100 $0.02 -50 $0.01 Base Case +50 $(0.01) +100 $(0.02) +200 $(0.04) The Company's GAAP book value incorporates the estimated fair value of the Company's interest bearing assets but it does not incorporate the estimated fair value of the Company's interest bearing fixed rate liabilities and preferred stock. The fixed-rate liabilities and preferred stock generally will reduce the actual interest rate risk of the Company from an economic perspective even though changes in the estimated fair value of these liabilities are not reflected in the Company's reported book value. The Company focuses on economic risk in managing its sensitivity to interest rates and maintains an economic duration within a band of 2.0 to 5.0 years. At March 31, 2006, economic duration for the Company's entire portfolio was 2.6 years. This implies that for each 100 basis points of change in interest rates the Company's economic value will change by approximately 2.6%. At March 31, 2006, the Company estimates its economic value, or net asset value of its common stock to be $545,361. A reconciliation of the economic duration of the Company to the duration of the reported book value of the Company's common stock is as follows: Duration - GAAP book value at March 31, 2006 7.3 Less: Duration contribution of CDO I liabilities (1.2) Duration contribution of CDO II liabilities (1.1) Duration contribution of CDO III liabilities (1.1) Duration contribution of Series C Preferred Stock (0.2) Duration contribution of Junior subordinated notes (1.1) Economic duration at March 31, 2006 2.6 The GAAP book value of the Company's common stock is $9.88 per share. As indicated in the table above a 100 basis point change in interest rates will change reported book value by approximately 7.3%, or $45,000. As indicated above, approximately $12,000 of that change would be required to meet margin calls in the event rates rise by 100 basis points. Credit Risk: The Company's portfolios of commercial real estate assets are subject to a high degree of credit risk. Credit risk is the exposure to loss from loan defaults. Default rates are subject to a wide variety of factors, including, but not limited to, property performance, property management, supply/demand factors, construction trends, consumer behavior, regional economics, interest rates, the strength of the global economies, and other factors beyond the control of the Company. All loans are subject to a certain probability of default. Before acquiring a Controlling Class security, the Company will perform an analysis of the quality of all of the loans proposed. As a result of this analysis, loans with unacceptable risk profiles are either removed from the proposed pool or the Company receives a price adjustment. The Company underwrites its Controlling Class CMBS investments assuming the underlying loans will suffer a certain dollar amount of defaults and these defaults will lead to some level of realized losses. Loss adjusted yields are computed based on these assumptions and applied to each class of security supported by the cash flow on the underlying loans. The most significant variables affecting loss adjusted yields include, but are not limited to, the number of defaults, the severity of loss that occurs subsequent to a default and the timing of the actual loss. The different rating levels of CMBS will react differently to changes in these assumptions. The lowest rated securities (B- or lower) are generally more sensitive to changes in timing of actual losses. The higher rated securities (B or higher) are more sensitive to the severity of losses and timing of cashflows. The Company generally assumes that all of the principal of a non-rated security and a significant portion, if not all, of CCC and a portion of B- rated securities will not be recoverable over time. The loss adjusted yields of these classes reflect that assumption; therefore, the timing of when the total loss of principal occurs is the most important assumption in determining value. The interest coupon generated by a security will cease when there is a total loss of its principal regardless of whether that principal is paid. Therefore, timing is of paramount importance because the longer the principal balance remains outstanding, the more interest coupon the holder receives; which results in a larger economic return. Alternatively, if principal is lost faster than originally assumed, there is less opportunity to receive interest coupon; which results in a lower or possibly negative return. If actual principal losses on the underlying loans exceed assumptions, the higher rated securities will be affected more significantly as a loss of principal may not have been assumed. The Company generally assumes that all principal will be recovered by classes rated B or higher. The Company manages credit risk through the underwriting process, establishing loss assumptions and careful monitoring of loan performance. After the securities have been acquired, the Company monitors the performance of the loans, as well as external factors that may affect their value. Factors that indicate a higher loss severity or acceleration of the timing of an expected loss will cause a reduction in the expected yield and therefore reduce the earnings of the Company. Furthermore, the Company may be required to write down a portion of the adjusted purchase price of the affected assets through its consolidated statements of operations. For purposes of illustration, a doubling of the losses in the Company's Controlling Class CMBS, without a significant acceleration of those losses, would reduce GAAP income going forward by approximately $0.19 per share of Common Stock per year and cause a significant write down at the time the loss assumption is changed. The amount of the write down depends on several factors, including which securities are most affected at the time of the write down, but is estimated to be in the range of $0.31 to $0.51 per share based on a doubling of expected losses. A significant acceleration of the timing of these losses would cause the Company's net income to decrease. The Company's exposure to a write down is mitigated by the fact that most of these assets are financed on a non-recourse basis in the Company's CDOs, where a significant portion of the risk of loss is transferred to the CDO bondholders. At March 31, 2006, securities with a total estimated fair value of $1,261,925 are collateralizing the CDO borrowings of $1,082,078; therefore, the Company's preferred equity interest in the three CDOs is $179,847 ($3.15 per share). The CDO borrowings are not marked-to-market in accordance with GAAP even though their economic value will change in response to changes in interest rates and/or credit spreads. Asset and Liability Management: Asset and liability management is concerned with the timing and magnitude of the re-pricing and/or maturing of assets and liabilities. It is the Company's objective to attempt to control risks associated with interest rate movements. In general, management's strategy is to match the term of the Company's liabilities as closely as possible with the expected holding period of the Company's assets. This is less important for those assets in the Company's portfolio considered liquid, as there is a very stable market for the financing of these securities. Other methods for evaluating interest rate risk, such as interest rate sensitivity "gap" (defined as the difference between interest-earning assets and interest-bearing liabilities maturing or re-pricing within a given time period), are used but are considered of lesser significance in the daily management of the Company's portfolio. Management considers this relationship when reviewing the Company's hedging strategies. Because different types of assets and liabilities with the same or similar maturities react differently to changes in overall market rates or conditions, changes in interest rates may affect the Company's net interest income positively or negatively even if the Company were to be perfectly matched in each maturity category. Currency Risk: The Company has foreign currency rate exposures related to certain CMBS and commercial real estate loans. The Company's principal currency exposures are to the Euro and British pound. Changes in currency rates can adversely impact the fair values and earnings of the Company's non-U.S. holdings. The Company mitigates this impact by utilizing local currency-denominated financing on its foreign investments and foreign currency forward commitments to hedge the net exposure. ITEM 4. Controls and Procedures Under the direction of the Company's Chief Executive Officer and Chief Financial Officer, the Company's management evaluated the effectiveness of its disclosure controls and procedures as of March 31, 2006. Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of March 31, 2006. No change in internal control over financial reporting occurred during the quarter ended March 31, 2006 that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting. Part II - OTHER INFORMATION Item 1. Legal Proceedings At March 31, 2006 there were no pending legal proceedings of which the Company was a defendant or of which any of its properties were subject. Item 1A. Risk Factors Certain factors may have a material adverse effect on our business, financial condition and results of operations and you should carefully consider them. For discussion of our potential risks our uncertainties, refer to Part I, "Item 1A., Risk Factors", included in our Annual Report on Form 10-K for the year ended December 31, 2005 as filed with the U.S. Securities Exchange Commission on March 16, 2006. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits Exhibit No. Description 4.1 Junior Subordinated Indenture, dated as of March 16, 2006, between the Registrant and Wilmington Trust Company, as Trustee 4.2 Amended and Restated Trust Agreement, dated as of March 16, 2006, among the Registrant, as depositor, Wilmington Trust Company, as property trustee, Wilmington Trust Company, as Delaware trustee and the three administrative trustees, each of whom is an officer of the Company. 10.1 Multicurrency Revolving Facility Agreement, dated as of March 17, 2006, among AHR Capital BofA Limited, as Borrower, Anthracite Capital, Inc. as Borrower Agent and Bank of America, N.A. as Lender. 24.1 Power of Attorney (included on signature page hereto) 31.1 Certification of Chief Executive Officer 31.2 Certification of Chief Financial Officer 32.1 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ANTHRACITE CAPITAL, INC. Dated: May 10, 2006 By: /s/ Christopher A. Milner ---------------------------------------- Name: Christopher A. Milner Title: Chief Executive Officer (duly authorized representative) Dated: May 10, 2006 By: /s/ James J. Lillis --------------------------------------- Name: James J. Lillis Title: Chief Financial Officer EX-4 2 ant10qx4-1.txt EXHIBIT 4.1 Exhibit 4.1 JUNIOR SUBORDINATED INDENTURE between ANTHRACITE CAPITAL, INC. and WILMINGTON TRUST COMPANY, as Trustee ________________ Dated as of March 16, 2006 ________________ ===============================================================================
TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.................................................1 Section 1.1. Definitions.....................................................................................1 Section 1.2. Compliance Certificate and Opinions............................................................10 Section 1.3. Forms of Documents Delivered to Trustee........................................................10 Section 1.4. Acts of Holders................................................................................11 Section 1.5. Notices, Etc...................................................................................13 Section 1.6. Notice to Holders; Waiver......................................................................13 Section 1.7. Effect of Headings and Table of Contents.......................................................14 Section 1.8. Successors and Assigns.........................................................................14 Section 1.9. Separability Clause............................................................................14 Section 1.10. Benefits of Indenture.........................................................................14 Section 1.11. Governing Law.................................................................................14 Section 1.12. Submission to Jurisdiction....................................................................15 Section 1.13. Non-Business Days.............................................................................15 ARTICLE II SECURITY FORMS........................................................................................15 Section 2.1. Form of Security...............................................................................15 Section 2.2. Restricted Legend..............................................................................19 Section 2.3. Form of Trustee's Certificate of Authentication................................................22 Section 2.4. Temporary Securities...........................................................................22 Section 2.5. Definitive Securities..........................................................................22 ARTICLE III THE SECURITIES.......................................................................................23 Section 3.1. Payment of Principal and Interest..............................................................23 Section 3.2. Denominations..................................................................................25 Section 3.3. Execution, Authentication, Delivery and Dating.................................................25 Section 3.4. Global Securities..............................................................................26 Section 3.5. Registration, Transfer and Exchange Generally..................................................28 Section 3.6. Mutilated, Destroyed, Lost and Stolen Securities...............................................29 Section 3.7. Persons Deemed Owners..........................................................................30 Section 3.8. Cancellation...................................................................................30 Section 3.9. Reserved.......................................................................................31 Section 3.10. Reserved......................................................................................31 Section 3.11. Agreed Tax Treatment..........................................................................31 Section 3.12. CUSIP Numbers.................................................................................31 ARTICLE IV SATISFACTION AND DISCHARGE............................................................................31 Section 4.1. Satisfaction and Discharge of Indenture........................................................31 Section 4.2. Application of Trust Money.....................................................................32 ARTICLE V REMEDIES...............................................................................................33 Section 5.1. Events of Default..............................................................................33 Section 5.2. Acceleration of Maturity; Rescission and Annulment.............................................34 Section 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee................................35 Section 5.4. Trustee May File Proofs of Claim...............................................................35 Section 5.5. Trustee May Enforce Claim Without Possession of Securities.....................................36 Section 5.6. Application of Money Collected.................................................................36 Section 5.7. Limitation on Suits............................................................................36 Section 5.8. Unconditional Right of Holders to Receive Principal, Premium, if any, and Interest; Direct Action by Holders of Preferred Securities...............................................................37 Section 5.9. Restoration of Rights and Remedies.............................................................37 Section 5.10. Rights and Remedies Cumulative................................................................38 Section 5.11. Delay or Omission Not Waiver..................................................................38 Section 5.12. Control by Holders............................................................................38 Section 5.13. Waiver of Past Defaults.......................................................................38 Section 5.14. Undertaking for Costs.........................................................................39 Section 5.15. Waiver of Usury, Stay or Extension Laws.......................................................39 ARTICLE VI THE TRUSTEE...........................................................................................40 Section 6.1. Corporate Trustee Required.....................................................................40 Section 6.2. Certain Duties and Responsibilities............................................................40 Section 6.3. Notice of Defaults.............................................................................42 Section 6.4. Certain Rights of Trustee......................................................................42 Section 6.5. May Hold Securities............................................................................44 Section 6.6. Compensation; Reimbursement; Indemnity.........................................................44 Section 6.7. Resignation and Removal; Appointment of Successor..............................................45 Section 6.8. Acceptance of Appointment by Successor.........................................................46 Section 6.9. Merger, Conversion, Consolidation or Succession to Business....................................46 Section 6.10. Not Responsible for Recitals or Issuance of Securities........................................47 Section 6.11. Appointment of Authenticating Agent...........................................................47 ARTICLE VII HOLDER'S LISTS AND REPORTS BY TRUSTEE AND COMPANY....................................................48 Section 7.1. Company to Furnish Trustee Names and Addresses of Holders......................................48 Section 7.2. Preservation of Information, Communications to Holders.........................................49 Section 7.3. Reports by Company and Trustee.................................................................49 ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE................................................50 Section 8.1. Company May Consolidate, Etc., Only on Certain Terms...........................................50 Section 8.2. Successor Company Substituted..................................................................51 ARTICLE IX SUPPLEMENTAL INDENTURES...............................................................................51 Section 9.1. Supplemental Indentures without Consent of Holders.............................................51 Section 9.2. Supplemental Indentures with Consent of Holders................................................52 Section 9.3. Execution of Supplemental Indentures...........................................................53 Section 9.4. Effect of Supplemental Indentures..............................................................53 Section 9.5. Reference in Securities to Supplemental Indentures.............................................53 ARTICLE X COVENANTS..............................................................................................54 Section 10.1. Payment of Principal, Premium, if any, and Interest...........................................54 Section 10.2. Money for Security Payments to be Held in Trust...............................................54 Section 10.3. Statement as to Compliance....................................................................55 Section 10.4. Calculation Agent.............................................................................55 Section 10.5. Additional Tax Sums...........................................................................56 Section 10.6. Additional Covenants..........................................................................56 Section 10.7. Waiver of Covenants...........................................................................57 Section 10.8. Treatment of Securities.......................................................................58 ARTICLE XI REDEMPTION OF SECURITIES..............................................................................58 Section 11.1. Optional Redemption...........................................................................58 Section 11.2. Special Event Redemption......................................................................58 Section 11.3. Election to Redeem; Notice to Trustee.........................................................58 Section 11.4. Selection of Securities to be Redeemed........................................................59 Section 11.5. Notice of Redemption..........................................................................59 Section 11.6. Deposit of Redemption Price...................................................................60 Section 11.7. Payment of Securities Called for Redemption...................................................60 ARTICLE XII SUBORDINATION OF SECURITIES..........................................................................61 Section 12.1. Securities Subordinate to Senior Debt.........................................................61 Section 12.2. No Payment When Senior Debt in Default; Payment Over of Proceeds Upon Dissolution, Etc........61 Section 12.3. Payment Permitted If No Default...............................................................62 Section 12.4. Subrogation to Rights of Holders of Senior Debt...............................................63 Section 12.5. Provisions Solely to Define Relative Rights...................................................63 Section 12.6. Trustee to Effectuate Subordination...........................................................63 Section 12.7. No Waiver of Subordination Provisions.........................................................64 Section 12.8. Notice to Trustee.............................................................................64 Section 12.9. Reliance on Judicial Order or Certificate of Liquidating Agent................................65 Section 12.10. Trustee Not Fiduciary for Holders of Senior Debt.............................................65 Section 12.11. Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights.................65 Section 12.12. Article Applicable to Paying Agents..........................................................65
SCHEDULES Schedule A - Determination of LIBOR Exhibit A - Form of Officer's Financial Certificate Exhibit B - Form of Officers' Certificate pursuant to Section 10.3 JUNIOR SUBORDINATED INDENTURE, dated as of March 16, 2006, between ANTHRACITE CAPITAL, INC., a Maryland corporation (the "Company"), and Wilmington Trust Company, a Delaware banking corporation, as Trustee (in such capacity, the "Trustee"). RECITALS OF THE COMPANY WHEREAS, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of its unsecured junior subordinated notes (the "Securities") issued to evidence loans made to the Company of the proceeds from the issuance by Anthracite Capital Trust III, a Delaware statutory trust (the "Trust"), of undivided preferred beneficial interests in the assets of the Trust (the "Preferred Securities") and undivided common beneficial interests in the assets of the Trust (the "Common Securities" and, collectively with the Preferred Securities, the "Trust Securities"), and to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered; and WHEREAS, all things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, this Indenture witnesseth: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.1. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article I have the meanings assigned to them in this Article I; (b) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation"; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (d) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Indenture; (e) the words "hereby", "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (f) a reference to the singular includes the plural and vice versa; and (g) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders. "Act" when used with respect to any Holder, has the meaning specified in Section 1.4. "Administrative Trustee" means, with respect to the Trust, each Person identified as an "Administrative Trustee" in the Trust Agreement, solely in its capacity as Administrative Trustee of the Trust under the Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor Administrative Trustee appointed as therein provided. "Additional Interest" means the interest, if any, that shall accrue on any amounts payable on the Securities, the payment of which has not been made on the applicable Interest Payment Date and which shall accrue at the rate per annum specified or determined as specified in such Security, in each case to the extent legally enforceable. "Additional Tax Sums" has the meaning specified in Section 10.5. "Additional Taxes" means taxes, duties or other governmental charges imposed on the Trust as a result of a Tax Event (which, for the sake of clarity, does not include amounts required to be deducted or withheld by the Trust from payments made by the Trust to or for the benefit of the Holder of, or any Person that acquires a beneficial interest in, the Securities). "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect 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. "Applicable Depositary Procedures" means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, in each case to the extent applicable to such transaction and as in effect from time to time. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 6.11 to act on behalf of the Trustee to authenticate the Securities. "AWE" means AWE, Ltd., an exempted company incorporated under the laws of the Cayman Islands, as a purchaser of the Preferred Securities pursuant to the Purchase Agreement. "Board of Directors" means the board of directors of the Company or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification. "Business Day" means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in the City of New York are authorized or required by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Trustee is closed for business. "Calculation Agent" has the meaning specified in Section 10.4. "Common Securities" has the meaning specified in the first recital of this Indenture. "Commission" has the meaning specified in Section 7.3(b). "Company" means the Person named as the "Company" in the first paragraph of this Indenture until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation. "Company Request" and "Company Order" mean, respectively, the written request or order signed in the name of the Company by its Chairman of the Board of Directors, its Vice Chairman of the Board of Directors, its Chief Executive Officer, President or a Vice President, and by its Chief Financial Officer, its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Corporate Trust Office" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of this Indenture is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Capital Markets. "Credit Suisse" means Credit Suisse Securities (USA) LLC, a Delaware limited liability company, as a purchaser of the Preferred Securities pursuant to the Purchase Agreement. "Debt" means, with respect to any Person, whether recourse is to all or a portion of the assets of such Person, whether currently existing or hereafter incurred and whether or not contingent and without duplication, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or other accrued liabilities arising in the ordinary course of business); (v) every capital lease obligation of such Person; (vi) all indebtedness of such Person, whether incurred on or prior to the date of this Indenture or thereafter incurred, for claims in respect of derivative products, including interest rate, foreign exchange rate and commodity forward contracts, options and swaps and similar arrangements; (vii) every obligation of the type referred to in clauses (i) through (vi) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor or otherwise; and (viii) any renewals, extensions, refundings, amendments or modifications of any obligation of the type referred to in clauses (i) through (vii). "Defaulted Interest" has the meaning specified in Section 3.1. "Delaware Trustee" means, with respect to the Trust, the Person identified as the "Delaware Trustee" in the Trust Agreement, solely in its capacity as Delaware Trustee of the Trust under the Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor Delaware Trustee appointed as therein provided. "Depositary" means an organization registered as a clearing agency under the Exchange Act that is designated as Depositary by the Company or any successor thereto. DTC will be the initial Depositary. "Depositary Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Depositary effects book-entry transfers and pledges of securities deposited with the Depositary. "Distributions" means amounts payable in respect of the Trust Securities as provided in the Trust Agreement and referred to therein as "Distributions." "Dollar" or "$" means the currency of the United States of America that, as at the time of payment, is legal tender for the payment of public and private debts. "DTC" means The Depository Trust Company, a New York corporation, or any successor thereto. "EDGAR" has the meaning specified in Section 7.3(d). "Equity Interests" means (a) the partnership interests (general or limited) in a partnership, (b) the membership interests in a limited liability company and (c) the shares or stock interests (both common stock and preferred stock) in a corporation. "Event of Default" has the meaning specified in Section 5.1. "Exchange Act" means the Securities Exchange Act of 1934 or any statute successor thereto, in each case as amended from time to time. "Expiration Date" has the meaning specified in Section 1.4. "Fixed Rate Period" has the meaning set forth in Section 2.1. "GAAP" means United States generally accepted accounting principles, consistently applied, from time to time in effect. "Global Security" means a Security that evidences all or part of the Securities, the ownership and transfers of which shall be made through book entries by a Depositary. "Government Obligation" means (a) any security that is (i) a direct obligation of the United States of America of which the full faith and credit of the United States of America is pledged or (ii) an obligation of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America or the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case (i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (b) any depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any Government Obligation that is specified in clause (a) above and held by such bank for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest on any Government Obligation that is so specified and held, provided, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of principal or interest evidenced by such depositary receipt. "Holder" means a Person in whose name a Security is registered in the Securities Register. "Indenture" means this instrument as originally executed or as it may from time to time be amended or supplemented by one or more amendments or indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Interest Payment Date" means March 30th, June 30th, September 30th and December 30th of each year, commencing on March 30, 2006, during the term of this Indenture. "Investment Company Act" means the Investment Company Act of 1940 or any successor statute thereto, in each case as amended from time to time. "Investment Company Event" means the receipt by the Company of an Opinion of Counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation (including any announced prospective change) or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within ninety (90) days of the date of such opinion will be, considered an "investment company" that is required to be registered under the Investment Company Act, which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Securities. "Kodiak" means Kodiak Warehouse LLC, a Delaware limited liability company, as a purchaser of the Preferred Securities pursuant to the Purchase Agreement. "LIBOR" has the meaning specified in Schedule A. "LIBOR Business Day" has the meaning specified in Schedule A. "LIBOR Determination Date" has the meaning specified in Schedule A. "Liquidation Amount" has the meaning specified in the Trust Agreement. "Maturity," when used with respect to any Security, means the date on which the principal of such Security or any installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Notice of Default" means a written notice of the kind specified in Section 5.1(c). "Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the Chief Executive Officer, the President or a Vice President, and by the Chief Financial Officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for or an employee of the Company or any Affiliate of the Company. "Optional Redemption Price" has the meaning set forth in Section 11.1. "Original Issue Date" means the date of original issuance of each Security. "Outstanding" means, when used in reference to any Securities, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company and/or its Affiliates shall act as its own Paying Agent) for the Holders of such Securities; provided, that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Securities that have been paid or in substitution for or in lieu of which other Securities have been authenticated and delivered pursuant to the provisions of this Indenture, unless proof satisfactory to the Trustee is presented that any such Securities are held by Holders in whose hands such Securities are valid, binding and legal obligations of the Company; provided, that in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be Outstanding unless the Company shall hold all Outstanding Securities, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities that a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor. Notwithstanding anything herein to the contrary, Securities initially issued to the Trust that are owned by the Trust shall be deemed to be Outstanding notwithstanding the ownership by the Company or an Affiliate of any beneficial interest in the Trust. "Paying Agent" means the Trustee or any Person authorized by the Company to pay the principal of or any premium or interest on, or other amounts in respect of, any Securities on behalf of the Company. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, company, limited liability company, trust, unincorporated association, or government, or any agency or political subdivision thereof, or any other entity of whatever nature. "Place of Payment" means, with respect to the Securities, the Corporate Trust Office of the Trustee. "Preferred Securities" has the meaning specified in the first recital of this Indenture. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security. For the purposes of this definition, any security authenticated and delivered under Section 3.6 in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Proceeding" has the meaning specified in Section 12.2. "Property Trustee" means the Person identified as the "Property Trustee" in the Trust Agreement, solely in its capacity as Property Trustee of the Trust under the Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor Property Trustee appointed as therein provided. "Purchase Agreement" means the Purchase Agreement or Purchase Agreements (whether one or more) executed and delivered contemporaneously with this Indenture by the Trust, the Company and the purchaser(s) named therein, as the same may be amended from time to time. "Purchaser" means each of AWE, Credit Suisse and Kodiak, as a purchaser of the Preferred Securities pursuant to the Purchase Agreement. "Redemption Date" means, when used with respect to any Security to be redeemed, the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price" means, when used with respect to any Security to be redeemed, in whole or in part, the Special Redemption Price or the Optional Redemption Price, as applicable, at which such Security or portion thereof is to be redeemed as fixed by or pursuant to this Indenture. "Reference Banks" has the meaning specified in Schedule A. "Regular Record Date" for the interest payable on any Interest Payment Date with respect to the Securities means the date that is fifteen (15) days preceding such Interest Payment Date (whether or not a Business Day). "Responsible Officer" means, when used with respect to the Trustee, the officer in the Corporate Capital Markets division at the Corporate Trust Office of the Trustee having direct responsibility for the administration of this Indenture. "Rights Plan" means a plan of the Company providing for the issuance by the Company to all holders of its Equity Interests of rights entitling the holders thereof to subscribe for or purchase Equity Interests or any class or series of Equity Interests in the Company which rights (i) are deemed to be transferred with such Equity Interests and (ii) are also issued in respect of future issuances of such Equity Interests, in each case until the occurrence of a specified event or events. "Securities" or "Security" means any debt securities or debt security, as the case may be, authenticated and delivered under this Indenture. "Securities Act" means the Securities Act of 1933 or any successor statute thereto, in each case as amended from time to time. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 3.5. "Senior Debt" means the principal of and any premium and interest on (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company, whether or not such claim for post-petition interest is allowed in such proceeding) all Debt of the Company, whether incurred on or prior to the date of this Indenture or thereafter incurred, unless it is provided in the instrument creating or evidencing the same or pursuant to which the same is outstanding, that such obligations are not superior in right of payment to the Securities issued under this Indenture; provided, that Senior Debt shall not be deemed to include any other debt securities (and guarantees, if any, in respect of such debt securities) issued to any trust other than the Trust (or a trustee of any such trust), partnership or other entity affiliated with the Company that is a financing vehicle of the Company (a "financing entity") in connection with the issuance by such financing entity of equity securities or other securities pursuant to an instrument that ranks pari passu with or junior in right of payment to this Indenture. "Special Event" means the occurrence of an Investment Company Event or a Tax Event. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.1. "Special Redemption Price" has the meaning set forth in Section 11.2. "Stated Maturity" means March 30, 2036. "Subsidiary" of a Person means (a) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person and/or by one or more of its Subsidiaries or (b) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person and/or by one or more of its Subsidiaries. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Company. "Tax Event" means the receipt by the Company of an Opinion of Counsel experienced in such matters to the effect that, as a result of (a) any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein or (b) any judicial decision or any official administrative pronouncement (including any private letter ruling, technical advice memorandum or field service advice) or regulatory procedure, including any notice or announcement of intent to adopt any such pronouncement or procedure (an "Administrative Action"), regardless of whether such judicial decision or Administrative Action is issued to or in connection with a proceeding involving the Company or the Trust and whether or not subject to review or appeal, which amendment, change, judicial decision or Administrative Action is enacted, promulgated or announced, in each case, on or after the date of issuance of the Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within ninety (90) days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Securities, (ii) interest payable by the Company on the Securities is not, or within ninety (90) days of the date of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes, or (iii) the Trust is, or will be within ninety (90) days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Trust" has the meaning specified in the first recital of this Indenture. "Trust Agreement" means the Amended and Restated Trust Agreement executed and delivered by the Company, the Property Trustee, Wilmington Trust Company, a Delaware banking corporation, as Delaware Trustee and the Administrative Trustees named therein, contemporaneously with the execution and delivery of this Indenture, for the benefit of the holders of the Trust Securities, as amended or supplemented from time to time. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument, solely in its capacity as such and not in its individual capacity, until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and, thereafter, "Trustee" shall mean or include each Person who is then a Trustee hereunder. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended and as in effect on the date as of this Indenture. "Trust Securities" has the meaning specified in the first recital of this Indenture. SECTION 1.2. Compliance Certificate and Opinions. (a) Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall, if requested by the Trustee, furnish to the Trustee an Officers' Certificate stating that all conditions precedent (including covenants compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent (including covenants compliance with which constitutes a condition precedent), if any, have been complied with. (b) Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than the certificate provided pursuant to Section 10.3) shall include: (i) a statement by each individual signing such certificate or opinion that such individual has read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions of such individual contained in such certificate or opinion are based; (iii) a statement that, in the opinion of such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of such individual, such condition or covenant has been complied with. SECTION 1.3. Forms of Documents Delivered to Trustee. (a) 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. (b) Any certificate or opinion of an officer of the Company 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 after reasonable inquiry should know, that the certificate or opinion or representations with respect to matters upon which his or her 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 Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or after reasonable inquiry should know, that the certificate or opinion or representations with respect to such matters are erroneous. (c) 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. (d) Whenever, subsequent to the receipt by the Trustee of any Board Resolution, Officers' Certificate, Opinion of Counsel or other document or instrument, a clerical, typographical or other inadvertent or unintentional error or omission shall be discovered therein, a new document or instrument may be substituted therefor in corrected form with the same force and effect as if originally received in the corrected form and, irrespective of the date or dates of the actual execution and/or delivery thereof, such substitute document or instrument shall be deemed to have been executed and/or delivered as of the date or dates required with respect to the document or instrument for which it is substituted. Without limiting the generality of the foregoing, any Securities issued under the authority of such defective document or instrument shall nevertheless be the valid obligations of the Company entitled to the benefits of this Indenture equally and ratably with all other Outstanding Securities. SECTION 1.4. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given to or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent thereof duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments (including any appointment of an agent) is or are delivered to the Trustee, and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" 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 for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section 1.4. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him or her the execution thereof. Where such execution is by a Person acting in other than his or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority. The fact and date of the execution by any Person of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient and in accordance with such reasonable rules as the Trustee may determine. (c) The ownership of Securities shall be proved by the Securities Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. (e) Without limiting the foregoing, a Holder entitled to take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. (f) Except as set forth in paragraph (g) of this Section 1.4, the Company may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Securities. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities on such record date, and no other Holders, shall be entitled to take the relevant action, whether or not such Holders remain Holders after such record date; provided, that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date (as defined in Section 1.4(h)) by Holders of the requisite principal amount of Outstanding Securities on such record date. Nothing in this paragraph shall be construed to prevent the Company from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect). Promptly after any record date is set pursuant to this paragraph, the Company, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Trustee in writing and to each Holder of Securities in the manner set forth in Section 1.6. (g) The Trustee may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to join in the giving or making of (i) any Notice of Default, (ii) any declaration of acceleration or rescission or annulment thereof referred to in Section 5.2, (iii) any request to institute proceedings referred to in Section 5.7(b) or (iv) any direction referred to in Section 5.12. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date; provided, that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities on such record date. Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect). Promptly after any record date is set pursuant to this paragraph, the Trustee, at the Company's expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Company in writing and to each Holder of Securities in the manner set forth in Section 1.6. (h) With respect to any record date set pursuant to paragraph (f) or (g) of this Section 1.4, the party hereto that sets such record date may designate any day as the "Expiration Date" and from time to time may change the Expiration Date to any earlier or later day; provided, that no such change shall be effective unless notice of the proposed new Expiration Date is given to the other party hereto in writing, and to each Holder of Securities in the manner set forth in Section 1.6, on or prior to the existing Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section 1.4, the party hereto that set such record date shall be deemed to have initially designated the ninetieth (90th) day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the one hundred eightieth (180th) day after the applicable record date. SECTION 1.5. Notices, Etc. Any request, demand, authorization, direction, notice, consent, waiver, Act of Holders, or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (a) the Trustee by any Holder, any holder of Preferred Securities or the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with and received by the Trustee at its Corporate Trust Office, (b) the Company by the Trustee, any Holder or any holder of Preferred Securities shall be sufficient for every purpose hereunder if in writing and mailed, first class, postage prepaid, to the Company addressed to it at 40 East 52nd Street, New York, NY 10022, or at any other address previously furnished in writing to the Trustee by the Company, (c) AWE by the Trustee, the Company, any Holder or any holder of Preferred Securities shall be sufficient for every purpose hereunder if in writing and mailed, first class, postage prepaid, to AWE at c/o Maples Finance Limited, P.O. Box 1093 GT, Queensgate House, South Church Street, George Town, Grand Cayman, Cayman Islands, Attention: The Directors, or at any other address previously furnished by AWE, (d) Credit Suisse by the Trustee, the Company, any Holder or any holder of Preferred Securities shall be sufficient for every purpose hereunder if in writing and mailed, first class, postage prepaid, to Credit Suisse at Eleven Madison Avenue, New York, New York 10010-3629, Attention: The CDO Group, or at any other address previously furnished by Credit Suisse, or (e) Kodiak by the Trustee, the Company, any Holder or any holder of Preferred Securities shall be sufficient for every purpose hereunder if in writing and mailed, first class, postage prepaid, to Kodiak at c/o Kodiak Capital Management Company LLC, 2107 Wilson Boulevard, Suite 450, Arlington, Virginia 22201, Attention: Robert M. Hurley, or at any other address previously furnished by Kodiak. SECTION 1.6. Notice 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 to the address of such Holder as it appears in the Securities Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. If, by reason of the suspension of or irregularities in regular mail service or for any other reason, it shall be impossible or impracticable to mail notice of any event to Holders when said notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. 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. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the 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 Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 1.7. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction of this Indenture. SECTION 1.8. Successors and Assigns. This Indenture shall be binding upon and shall inure to the benefit of any successor to the Company and the Trustee, including any successor by operation of law. Except in connection with a transaction involving the Company that is permitted under Article VIII and pursuant to which the assignee agrees in writing to perform the Company's obligations hereunder, the Company shall not assign its obligations hereunder. SECTION 1.9. Separability Clause. If any provision in this Indenture or in the Securities 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, and there shall be deemed substituted for the provision at issue a valid, legal and enforceable provision as similar as possible to the provision at issue. SECTION 1.10. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors and assigns, the holders of Senior Debt, the Holders of the Securities and, to the extent expressly provided in Sections 5.2, 5.8, 5.9, 5.11, 5.13, 9.2 and 10.7, the holders of Preferred Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 1.11. Governing Law. This Indenture and the rights and obligations of each of the Holders, the Company and the Trustee shall be construed and enforced in accordance with and governed by the laws of the State of New York without reference to its conflict of laws provisions (other than Section 5-1401 of the General Obligations Law). SECTION 1.12. Submission to Jurisdiction. ANY LEGAL ACTION OR PROCEEDING BY OR AGAINST ANY PARTY HERETO OR WITH RESPECT TO OR ARISING OUT OF THIS INDENTURE MAY BE BROUGHT IN OR REMOVED TO THE COURTS OF THE STATE OF NEW YORK, IN AND FOR THE COUNTY OF NEW YORK, OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK (IN EACH CASE SITTING IN THE BOROUGH OF MANHATTAN). BY EXECUTION AND DELIVERY OF THIS INDENTURE, EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS (AND COURTS OF APPEALS THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS INDENTURE. SECTION 1.13. Non-Business Days. If any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or the Securities) payment of interest, premium, if any, or principal or other amounts in respect of such Security shall not be made on such date, but shall be made on the next succeeding Business Day (and no interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, until such next succeeding Business Day) except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the Interest Payment Date or Redemption Date or at the Stated Maturity. ARTICLE II SECURITY FORMS SECTION 2.1. Form of Security. Any Security issued hereunder shall be in substantially the following form: ANTHRACITE CAPITAL, INC. Junior Subordinated Note due 2036 No. _____________ $51,547,000 Anthracite Capital, Inc., a corporation organized and existing under the laws of Maryland (hereinafter called the "Company," which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Wilmington Trust Company, not in its individual capacity, but solely as Property Trustee for Anthracite Capital Trust III, or registered assigns, the principal sum of Fifty One Million Five Hundred Forty-Seven Thousand Dollars ($51,547,000) on March 30, 2036. The Company further promises to pay interest on said principal sum from March 16, 2006, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly in arrears on March 30th, June 30th, September 30th and December 30th of each year, commencing March 30, 2006, or if any such day is not a Business Day, on the next succeeding Business Day (and no interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date until such next succeeding Business Day), except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on the Interest Payment Date, at a fixed rate equal to 7.77% per annum through the interest payment date in March 2016 ("Fixed Rate Period"), and thereafter at a variable rate equal to LIBOR plus 2.70% per annum, together with Additional Tax Sums, if any, as provided in Section 10.5 of the Indenture, until the principal hereof is paid or duly provided for or made available for payment; provided, further, that any overdue principal, premium, if any, or Additional Tax Sums and any overdue installment of interest shall bear Additional Interest at a rate equal to 7.77% during the Fixed Rate Period and thereafter at a variable rate equal to LIBOR plus 2.70% per annum (to the extent that the payment of such interest shall be legally enforceable), compounded quarterly, from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand. During the Fixed Rate Period, the amount of interest payable shall be computed on the basis of a 360-day year of twelve 30-day months and the amount payable for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. Upon expiration of the Fixed Rate Period, the amount of interest payable for any Interest Payment Period will be computed on the basis of a 360-day year and the actual number of days elapsed in the relevant interest period. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest installment. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than ten (10) days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. Payment of principal of, premium, if any, and interest on this Security shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal, premium, if any, and interest due at the Maturity of this Security shall be made at the Place of Payment upon surrender of such Securities to the Paying Agent, and payments of interest shall be made, subject to such surrender where applicable, by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register. Notwithstanding the foregoing, so long as the Holder of this Security is the Property Trustee, the payment of the principal of (and premium, if any) and interest (including any overdue installment of interest and Additional Tax Sums, if any) on this Security will be made at such place and to such account as may be designated by the Property Trustee. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Debt, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder hereof, by his or her acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Debt, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. [FORM OF REVERSE OF SECURITY] This Security is one of a duly authorized issue of securities of the Company (the "Securities") issued under the Junior Subordinated Indenture, dated as of March 16, 2006 (the "Indenture"), between the Company and Wilmington Trust Company, as Trustee (in such capacity, the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the holders of Senior Debt, the Holders of the Securities and the holders of the Preferred Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. All terms used in this Security that are defined in the Indenture or in the Amended and Restated Trust Agreement, dated as of March 16, 2006 (as modified, amended or supplemented from time to time, the "Trust Agreement"), relating to the Anthracite Capital Trust III (the "Trust") among the Company, as Depositor, the Trustees named therein and the Holders from time to time of the Trust Securities issued pursuant thereto, shall have the meanings assigned to them in the Indenture or the Trust Agreement, as the case may be. The Company may, on any Interest Payment Date, at its option, upon not less than thirty (30) days' nor more than sixty (60) days' written notice to the Holders of the Securities (unless a shorter notice period shall be satisfactory to the Trustee) on or after March 30, 2011 and subject to the terms and conditions of Article XI of the Indenture, redeem this Security in whole at any time or in part from time to time at a Redemption Price equal to one hundred percent (100%) of the principal amount hereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date. In addition, upon the occurrence and during the continuation of a Special Event, the Company may, at its option, upon not less than thirty (30) days' nor more than sixty (60) days' written notice to the Holders of the Securities (unless a shorter notice period shall be satisfactory to the Trustee), redeem this Security, in whole but not in part, subject to the terms and conditions of Article XI of the Indenture at a Redemption Price equal to one hundred seven and one half percent (107.5%) of the principal amount hereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than sixty (60) days prior to the Redemption Date by the Trustee from the Outstanding Securities not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of any Security. The Indenture permits, with certain exceptions as therein provided, the Company and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Company and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium, if any, and interest, including any Additional Interest (to the extent legally enforceable), on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is restricted to transfers to "Qualified Purchasers" (as such term is defined in the Investment Company Act of 1940, as amended), and is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar and duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Securities, of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities are issuable only in registered form without coupons in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Company and, by its acceptance of this Security or a beneficial interest herein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that, for United States federal, state and local tax purposes, it is intended that this Security constitute indebtedness. This Security shall be construed and enforced in accordance with and governed by the laws of the State of New York, without reference to its conflict of laws provisions (other than Section 5-1401 of the General Obligations Law). IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed on this ____ day of __________, 20__. Anthracite Capital, Inc. By:______________________ Name: Title: SECTION 2.2. Restricted Legend. (a) Any Security issued hereunder shall bear a legend in substantially the following form: "[IF THIS SECURITY IS A GLOBAL SECURITY INSERT: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SUCH SECURITIES, AND ANY INTEREST THEREIN, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY OR THE TRUST OR (B) (I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED PURCHASER" (AS DEFINED IN SECTION 2(a)(51) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED), AND (II) (Z) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (Y) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (X) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (W) PURSUANT TO AN EXEMPTION FROM THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND, IN THE CASE OF (Y) OR (W), SUBJECT TO THE RIGHT OF THE COMPANY TO REQUIRE AN OPINION OF COUNSEL AND OTHER INFORMATION REASONABLY SATISFACTORY TO THE COMPANY (PROVIDED THAT IF SUCH OPINION AND INFORMATION STATES THAT THE PROPOSED OFFER, RESALE OR OTHER TRANSFER WILL BE IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS, THE COMPANY MAY NOT OBJECT THERETO). IN ADDITION, THE HOLDER FURTHER AGREES THAT IT WILL NOTIFY ANY PURCHASER OF ANY SECURITIES FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN THE PRECEDING SENTENCE. THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY ATTEMPTED TRANSFER OF SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PRINCIPAL OF OR INTEREST ON SUCH SECURITIES, OR ANY INTEREST THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES. THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE." (b) The above legends shall not be removed from any Security unless there is delivered to the Company satisfactory evidence, which may include an Opinion of Counsel, as may be reasonably required to ensure that any future transfers thereof may be made without restriction under or violation of the provisions of the Securities Act and other applicable law. Upon provision of such satisfactory evidence, the Company shall execute and deliver to the Trustee, and the Trustee shall deliver, upon receipt of a Company Order directing it to do so, a Security that does not bear the legend. SECTION 2.3. Form of Trustee's Certificate of Authentication. The Trustee's certificate of authentication shall be in substantially the following form: This is one of the Securities referred to in the within-mentioned Indenture. Dated: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee By: __________________________________ Authorized Signatory SECTION 2.4. Temporary Securities. (a) Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. (b) If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for that purpose without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall upon receipt of a Company Order authenticate and deliver in exchange therefor one or more definitive Securities of any authorized denominations having the same Original Issue Date and Stated Maturity and having the same terms as such temporary Securities. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. SECTION 2.5. Definitive Securities. The Securities issued on the Original Issue Date shall be in definitive form. The definitive Securities shall be printed, lithographed or engraved, or produced by any combination of these methods, if required by any securities exchange on which the Securities may be listed, on a steel engraved border or steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. ARTICLE III THE SECURITIES SECTION 3.1. Payment of Principal and Interest. (a) The unpaid principal amount of the Securities shall bear interest at a fixed rate equal to 7.77% per annum during the Fixed Rate Period, and at a variable rate equal to LIBOR plus 2.70% per annum until paid or duly provided for, such interest to accrue from the Original Issue Date or from the most recent Interest Payment Date to which interest has been paid or duly provided for, and any overdue principal, premium, if any, or Additional Tax Sums and any overdue installment of interest shall bear Additional Interest at a fixed rate equal to 7.77% per annum during the Fixed Rate Period, and at a variable rate equal to LIBOR plus 2.70% per annum compounded quarterly from the dates such amounts are due until they are paid or funds for the payment thereof are made legally available for payment. (b) Interest and Additional Interest on any Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, except that interest and any Additional Interest payable on the Stated Maturity (or any date of principal repayment upon early maturity) of the principal of a Security or on a Redemption Date shall be paid to the Person to whom principal is paid. The initial payment of interest on any Security that is issued between a Regular Record Date and the related Interest Payment Date shall be payable as provided in such Security. (c) Any interest on any Security that is due and payable, but is not timely paid or duly provided for, on any Interest Payment Date for Securities (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in paragraph (i) or (ii) below: (i) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest (a "Special Record Date"), which shall be fixed in the following manner. At least thirty (30) days prior to the date of the proposed payment, the Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest, which shall be not more than fifteen (15) days and not less than ten (10) days prior to the date of the proposed payment and not less than ten (10) days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first class, postage prepaid, to each Holder of a Security at the address of such Holder as it appears in the Securities Register not less than ten (10) days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered on such Special Record Date; or (ii) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Securities may be listed, traded or quoted and, upon such notice as may be required by such exchange or automated quotation system (or by the Trustee if the Securities are not listed), if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such payment shall be deemed practicable by the Trustee. (d) Payments of interest on the Securities shall include interest accrued to but excluding the respective Interest Payment Dates. During the Fixed Rate Period, the amount of interest payable shall be computed on the basis of a 360-day year of twelve 30-day months and the amount payable for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. Upon expiration of the Fixed Rate Period, the amount of interest payable for any Interest Payment Period will be computed on the basis of a 360-day year and the actual number of days elapsed in the relevant interest period. (e) Payment of principal of, premium, if any, and interest on the Securities shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal, premium, if any, and interest due at the Maturity of such Securities shall be made at the Place of Payment upon surrender of such Securities to the Paying Agent and payments of interest shall be made subject to such surrender where applicable, by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register. Notwithstanding the foregoing, so long as the holder of this Security is the Property Trustee, the payment of the principal of (and premium, if any) and interest (including any overdue installment of interest and Additional Tax Sums, if any) on this Security will be made at such place and to such account as may be designated by the Property Trustee. (f) The parties hereto acknowledge and agree that the holders of the Preferred Securities have certain rights to direct the Company to modify the Interest Payment Dates and corresponding Redemption Date and Stated Maturity of the Securities or a portion of the Securities pursuant to the Purchase Agreement. In the event any such modifications are made to the Securities or a portion of the Securities, appropriate changes to the form of Security set forth in Article II hereof shall be made prior to the issuance and authentication of new or replacement Securities. Any such modification of the Interest Payment Date and corresponding Redemption Date and Stated Maturity with respect to any Securities or tranche of Securities shall not require or be subject to the consent of the Trustee. (g) Subject to the foregoing provisions of this Section 3.1, each Security delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Security. SECTION 3.2. Denominations. The Securities shall be in registered form without coupons and shall be issuable in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof. SECTION 3.3. Execution, Authentication, Delivery and Dating. (a) At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities in an aggregate principal amount (including all then Outstanding Securities) not in excess of Fifty One Million Five Hundred Forty-Seven Thousand Dollars ($51,547,000) executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities. In authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and shall be fully protected in relying upon: (i) a copy of any Board Resolution relating thereto; and (ii) an Opinion of Counsel stating that: (1) such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute, and the Indenture constitutes, valid and legally binding obligations of the Company, each enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (2) the Securities have been duly authorized and executed by the Company and have been delivered to the Trustee for authentication in accordance with this Indenture; (3) the Securities are not required to be registered under the Securities Act; and (4) the Indenture is not required to be qualified under the Trust Indenture Act. (b) The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its Chief Executive Officer, its President or one of its Vice Presidents. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. (c) No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 3.8, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. (d) Each Security shall be dated the date of its authentication. SECTION 3.4. Global Securities. (a) Upon the election of the Holder after the Original Issue Date, which election need not be in writing, the Securities owned by such Holder shall be issued in the form of one or more Global Securities registered in the name of the Depositary or its nominee. Each Global Security issued under this Indenture shall be registered in the name of the Depositary designated by the Company for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture. (b) Notwithstanding any other provision in this Indenture, no Global Security may be exchanged in whole or in part for registered Securities, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security or a nominee thereof unless (i) such Depositary advises the Trustee and the Company in writing that such Depositary is no longer willing or able to properly discharge its responsibilities as Depositary with respect to such Global Security, and no qualified successor is appointed by the Company within ninety (90) days of receipt by the Company of such notice, (ii) such Depositary ceases to be a clearing agency registered under the Exchange Act and no successor is appointed by the Company within ninety (90) days after obtaining knowledge of such event, (iii) the Company executes and delivers to the Trustee a Company Order stating that the Company elects to terminate the book-entry system through the Depositary or (iv) an Event of Default shall have occurred and be continuing. Upon the occurrence of any event specified in clause (i), (ii), (iii) or (iv) above, the Trustee shall notify the Depositary and instruct the Depositary to notify all owners of beneficial interests in such Global Security of the occurrence of such event and of the availability of Securities to such owners of beneficial interests requesting the same. The Trustee may conclusively rely, and be protected in relying, upon the written identification of the owners of beneficial interests furnished by the Depositary, and shall not be liable for any delay resulting from a delay by the Depositary. Upon the issuance of such Securities and the registration in the Securities Register of such Securities in the names of the Holders of the beneficial interests therein, the Trustee shall recognize such holders of beneficial interests as Holders. (c) If any Global Security is to be exchanged for other Securities or canceled in part, or if another Security is to be exchanged in whole or in part for a beneficial interest in any Global Security, then either (i) such Global Security shall be so surrendered for exchange or cancellation as provided in this Article III or (ii) the principal amount thereof shall be reduced or increased by an amount equal to (x) the portion thereof to be so exchanged or canceled, or (y) the principal amount of such other Security to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Securities Registrar, whereupon the Trustee, in accordance with the Applicable Depositary Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Security by the Depositary, accompanied by registration instructions, the Company shall execute and the Trustee shall upon receipt of a Company Order authenticate and deliver any Securities issuable in exchange for such Global Security (or any portion thereof) in accordance with the instructions of the Depositary. The Trustee shall not be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions. (d) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof shall be authenticated and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof. (e) Securities distributed to holders of Book-Entry Preferred Securities (as defined in the applicable Trust Agreement) upon the dissolution of the Trust shall be distributed in the form of one or more Global Securities registered in the name of a Depositary or its nominee, and deposited with the Securities Registrar, as custodian for such Depositary, or with such Depositary, for credit by the Depositary to the respective accounts of the beneficial owners of the Securities represented thereby (or such other accounts as they may direct). Securities distributed to holders of Preferred Securities other than Book-Entry Preferred Securities upon the dissolution of the Trust shall not be issued in the form of a Global Security or any other form intended to facilitate book-entry trading in beneficial interests in such Securities. (f) The Depositary or its nominee, as the registered owner of a Global Security, shall be the Holder of such Global Security for all purposes under this Indenture and the Securities, and owners of beneficial interests in a Global Security shall hold such interests pursuant to the Applicable Depositary Procedures. Accordingly, any such owner's beneficial interest in a Global Security shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Depositary Participants. The Securities Registrar and the Trustee shall be entitled to deal with the Depositary for all purposes of this Indenture relating to a Global Security (including the payment of principal and interest thereon and the giving of instructions or directions by owners of beneficial interests therein and the giving of notices) as the sole Holder of the Security and shall have no obligations to the owners of beneficial interests therein. Neither the Trustee nor the Securities Registrar shall have any liability in respect of any transfers effected by the Depositary. (g) The rights of owners of beneficial interests in a Global Security shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such owners and the Depositary and/or its Depositary Participants. (h) No holder of any beneficial interest in any Global Security held on its behalf by a Depositary shall have any rights under this Indenture with respect to such Global Security, and such Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the owner of such Global Security for all purposes whatsoever. None of the Company, the Trustee nor any agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security or maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominee) as Holder of any Security. SECTION 3.5. Registration, Transfer and Exchange Generally. (a) The Trustee shall cause to be kept at the Corporate Trust Office a register (the "Securities Register") in which the registrar and transfer agent with respect to the Securities (the "Securities Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Securities and of transfers and exchanges of Securities. The Trustee shall at all times also be the Securities Registrar. The provisions of Article VI shall apply to the Trustee in its role as Securities Registrar. (b) Subject to compliance with Section 2.2(b), upon surrender for registration of transfer of any Security at the offices or agencies of the Company designated for that purpose the Company shall execute, and the Trustee shall upon receipt of a Company Order authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations of like tenor and aggregate principal amount. (c) At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations, of like tenor and aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall upon receipt of a Company Order authenticate and deliver, the Securities that the Holder making the exchange is entitled to receive. (d) All Securities issued upon any transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange. (e) Every Security presented or surrendered for transfer or exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar, duly executed by the Holder thereof or such Holder's attorney duly authorized in writing. (f) No service charge shall be made to a Holder for any transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Securities. (g) Neither the Company nor the Trustee shall be required pursuant to the provisions of this Section 3.5 (g): (i) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business fifteen (15) days before the day of selection for redemption of Securities pursuant to Article XI and ending at the close of business on the day of mailing of the notice of redemption or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except, in the case of any such Security to be redeemed in part, any portion thereof not to be redeemed. (h) The Company shall designate an office or offices or agency or agencies where Securities may be surrendered for registration or transfer or exchange. The Company initially designates the Corporate Trust Office as its office and agency for such purposes. The Company shall give prompt written notice to the Trustee and to the Holders of any change in the location of any such office or agency. (i) The Securities may only be transferred to a "Qualified Purchaser" as such term is defined in Section 2(a)(51) of the Investment Company Act. (j) Neither the Trustee nor the Securities Registrar shall be responsible for ascertaining whether any transfer hereunder complies with the registration provisions of or any exemptions from the Securities Act, applicable state securities laws or the applicable laws of any other jurisdiction, ERISA, the United States Internal Revenue Code of 1986, as amended, or the Investment Company Act; provided, that if a certificate is specifically required by the express terms of this Section 3.5 to be delivered to the Trustee or the Securities Registrar by a Holder or transferee of a Security, the Trustee and the Securities Registrar shall be under a duty to receive and examine the same to determine whether or not the certificate substantially conforms on its face to the requirements of this Indenture and shall promptly notify the party delivering the same if such certificate does not comply with such terms. SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities. (a) If any mutilated Security is surrendered to the Trustee together with such security or indemnity as may be required by the Trustee to save the Company and the Trustee harmless, the Company shall execute and the Trustee shall upon receipt of a Company Order authenticate and deliver in exchange therefor a new Security of like tenor and aggregate principal amount and bearing a number not contemporaneously outstanding. (b) If there shall be delivered to the Trustee (i) evidence to its satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by it to save each of the Company and the Trustee harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its receipt of a Company Order the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and aggregate principal amount as such destroyed, lost or stolen Security, and bearing a number not contemporaneously outstanding. (c) If any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. (d) Upon the issuance of any new Security under this Section 3.6, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. (e) Every new Security issued pursuant to this Section 3.6 in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Security 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 Securities duly issued hereunder. (f) The provisions of this Section 3.6 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 Securities. SECTION 3.7. Persons Deemed Owners. The Company, the Trustee and any agent of the Company or the Trustee shall treat the Person in whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any interest on such Security and for all other purposes whatsoever, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. SECTION 3.8. Cancellation. All Securities surrendered for payment, redemption, transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities and Securities surrendered directly to the Trustee for any such purpose shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder that the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section 3.8, except as expressly permitted by this Indenture. All canceled Securities shall be retained or disposed of by the Trustee in accordance with its customary practices and the Trustee shall deliver to the Company a certificate of such disposition. SECTION 3.9. Reserved. SECTION 3.10. Reserved. SECTION 3.11. Agreed Tax Treatment. Each Security issued hereunder shall provide that the Company and, by its acceptance or acquisition of a Security or a beneficial interest therein, the Holder of, and any Person that acquires a direct or indirect beneficial interest in, such Security, intend and agree to treat such Security as indebtedness of the Company for United States Federal, state and local tax purposes and to treat the Preferred Securities (including but not limited to all payments and proceeds with respect to the Preferred Securities) as an undivided beneficial ownership interest in the Securities (and any other Trust property) (and payments and proceeds therefrom, respectively) for United States Federal, state and local tax purposes. The provisions of this Indenture shall be interpreted to further this intention and agreement of the parties. SECTION 3.12. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption and other similar or related materials as a convenience to Holders; provided, that any such notice or other materials may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of redemption or other materials and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. ARTICLE IV SATISFACTION AND DISCHARGE SECTION 4.1. Satisfaction and Discharge of Indenture. This Indenture shall, upon Company Request, cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for and as otherwise provided in this Section 4.1) and the Trustee, on written demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (i) all Securities theretofore authenticated and delivered (other than (A) Securities that have been mutilated, destroyed, lost or stolen and that have been replaced or paid as provided in Section 3.6 and (B) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust as provided in Section 10.2) have been delivered to the Trustee for cancellation; or (ii) all such Securities not theretofore delivered to the Trustee for cancellation (A) have become due and payable, or (B) will become due and payable at their Stated Maturity within one year of the date of deposit, or (C) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of subclause (ii)(A), (B) or (C) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose (x) an amount in the currency or currencies in which the Securities are payable, (y) Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than the due date of any payment, money in an amount or (z) a combination thereof, in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and any premium and interest (including any Additional Interest) to the date of such deposit (in the case of Securities that have become due and payable) or to the Stated Maturity (or any date of principal repayment upon early maturity) or Redemption Date, as the case may be; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.6, the obligations of the Company to any Authenticating Agent under Section 6.11 and, if money shall have been deposited with the Trustee pursuant to subclause (a)(ii) of this Section 4.1, the obligations of the Trustee under Section 4.2 and Section 10.2(e) shall survive. SECTION 4.2. Application of Trust Money. Subject to the provisions of Section 10.2(e), all money deposited with the Trustee pursuant to Section 4.1 shall be held in trust and applied by the Trustee, in accordance with the provisions of the Securities and this Indenture, to the payment in accordance with Section 3.1, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and any premium and interest (including any Additional Interest) for the payment of which such money or obligations have been deposited with or received by the Trustee. Moneys held by the Trustee under this Section 4.2 shall not be subject to the claims of holders of Senior Debt under Article XII. ARTICLE V REMEDIES SECTION 5.1. Events of Default. "Event of Default" means, wherever used herein with respect to the Securities, 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): (a) default in the payment of any interest upon any Security, including any Additional Interest in respect thereof, when it becomes due and payable, and continuance of such default for a period of thirty (30) days; or (b) default in the payment of the principal of or any premium on any Security at its Maturity; or (c) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture or the Purchase Agreement and continuance of such default or breach for a period of thirty (30) days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least twenty five percent (25%) in aggregate principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; (d) the entry by a court having jurisdiction in the premises of a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company 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 for relief or any such other decree or order unstayed and in effect for a period of sixty (60) consecutive days; (e) the institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by the Company to the institution of bankruptcy or insolvency proceedings against it, or the filing by the Company of a petition or answer or consent seeking reorganization or relief under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company 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 and its willingness to be adjudicated a bankrupt or insolvent, or the taking of corporate action by the Company in furtherance of any such action; or (f) the Trust shall have voluntarily or involuntarily liquidated, dissolved, wound-up its business or otherwise terminated its existence, except in connection with (1) the distribution of the Securities to holders of the Preferred Securities in liquidation of their interests in the Trust, (2) the redemption of all of the outstanding Preferred Securities or (3) certain mergers, consolidations or amalgamations, each as and to the extent permitted by the Trust Agreement. SECTION 5.2. Acceleration of Maturity; Rescission and Annulment. (a) If an Event of Default occurs and is continuing, then and in every such case the Trustee or the Holders of not less than twenty five percent (25%) in aggregate principal amount of the Outstanding Securities may declare the principal amount of all the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), provided, that if, upon an Event of Default, the Trustee or the Holders of not less than twenty five percent (25%) in principal amount of the Outstanding Securities fail to declare the principal of all the Outstanding Securities to be immediately due and payable, the holders of at least twenty five percent (25%) in aggregate Liquidation Amount of the Preferred Securities then outstanding shall have the right to make such declaration by a notice in writing to the Property Trustee, the Company and the Trustee; and upon any such declaration the principal amount of and the accrued interest (including any Additional Interest) on all the Securities shall become immediately due and payable. (b) At any time after such a declaration of acceleration with respect to Securities has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article V, the Holders of a majority in aggregate principal amount of the Outstanding Securities, by written notice to the Trustee, or the holders of a majority in aggregate Liquidation Amount of the Preferred Securities, by written notice to the Property Trustee, the Company and the Trustee, may rescind and annul such declaration and its consequences if: (i) the Company has paid or deposited with the Trustee a sum sufficient to pay: (A) all overdue installments of interest on all Securities, (B) any accrued Additional Interest on all Securities, (C) the principal of and any premium on any Securities that have become due otherwise than by such declaration of acceleration and interest (including any Additional Interest) thereon at the rate borne by the Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, the Property Trustee and their agents and counsel; and (ii) all Events of Default with respect to Securities, other than the non-payment of the principal of Securities that has become due solely by such acceleration, have been cured or waived as provided in Section 5.13; provided, that if the Holders of such Securities fail to annul such declaration and waive such default, the holders of not less than a majority in aggregate Liquidation Amount of the Preferred Securities then outstanding shall also have the right to rescind and annul such declaration and its consequences by written notice to the Property Trustee, the Company and the Trustee, subject to the satisfaction of the conditions set forth in paragraph (b) of this Section 5.2. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee. (a) The Company covenants that if: (i) default is made in the payment of any installment of interest (including any Additional Interest) on any Security when such interest becomes due and payable and such default continues for a period of thirty (30) days, or (ii) default is made in the payment of the principal of and any premium on any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest (including any Additional Interest) and, in addition thereto, all amounts owing the Trustee under Section 6.6. (b) If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. (c) If an Event of Default with respect to Securities occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 5.4. Trustee May File Proofs of Claim. In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or similar judicial proceeding relative to the Company (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized hereunder in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to first pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts owing the Trustee, any predecessor Trustee and other Persons under Section 6.6. SECTION 5.5. Trustee May Enforce Claim Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, subject to Article XII and after provision for the payment of all the amounts owing the Trustee, any predecessor Trustee and other Persons under Section 6.6, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 5.6. Application of Money Collected. Any money or property collected or to be applied by the Trustee with respect to the Securities pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money or property on account of principal or any premium or interest (including any Additional Interest), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee, any predecessor Trustee and other Persons under Section 6.6; SECOND: To the payment of all Senior Debt of the Company if and to the extent required by Article XII; THIRD: Subject to Article XII, to the payment of the amounts then due and unpaid upon the Securities for principal and any premium and interest (including any Additional Interest) in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and any premium and interest (including any Additional Interest), respectively; and FOURTH: The balance, if any, to the Person or Persons entitled thereto. SECTION 5.7. Limitation on Suits. Subject to Section 5.8, no Holder of any Securities shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) or for any other remedy hereunder, unless: (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities; (b) the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding for sixty (60) days; and (e) no direction inconsistent with such written request has been given to the Trustee during such sixty (60)-day period by the Holders of a majority in aggregate principal amount of the Outstanding Securities; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing itself of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Securities, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders. SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium, if any, and Interest; Direct Action by Holders of Preferred Securities. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium on such Security at its Maturity and payment of interest (including any Additional Interest) on such Security when due and payable and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. Any registered holder of the Preferred Securities shall have the right, upon the occurrence of an Event of Default described in Section 5.1(a) or Section 5.1(b), to institute a suit directly against the Company for enforcement of payment to such holder of principal of and any premium and interest (including any Additional Interest) on the Securities having a principal amount equal to the aggregate Liquidation Amount of the Preferred Securities held by such holder. SECTION 5.9. Restoration of Rights and Remedies. If the Trustee, any Holder or any holder of Preferred Securities has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee, such Holder or such holder of Preferred Securities, then and in every such case the Company, the Trustee, such Holders and such holder of Preferred Securities shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee, such Holder and such holder of Preferred Securities shall continue as though no such proceeding had been instituted. SECTION 5.10. Rights and Remedies Cumulative. Except as otherwise provided in Section 3.6(f), no right or remedy herein conferred upon or reserved to the Trustee or 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 5.11. Delay or Omission Not Waiver. No delay or omission of the Trustee, any Holder of any Securities or any holder of any Preferred Security 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 V or by law to the Trustee or to the Holders and the right and remedy given to the holders of Preferred Securities by Section 5.8 may be exercised from time to time, and as often as may be deemed expedient, by the Trustee, the Holders or the holders of Preferred Securities, as the case may be. SECTION 5.12. Control by Holders. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities (or, as the case may be, the holders of a majority in aggregate Liquidation Amount of Preferred Securities) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; provided, that: (a) such direction shall not be in conflict with any rule of law or with this Indenture, (b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction, and (c) subject to the provisions of Section 6.2, the Trustee shall have the right to decline to follow such direction if a Responsible Officer or Officers of the Trustee shall, in good faith, reasonably determine that the proceeding so directed would be unjustly prejudicial to the Holders not joining in any such direction or would involve the Trustee in personal liability. SECTION 5.13. Waiver of Past Defaults. (a) The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities or the holders of not less than a majority in aggregate Liquidation Amount of the Preferred Securities may waive any past Event of Default hereunder and its consequences except an Event of Default: (i) in the payment of the principal of or any premium or interest (including any Additional Interest) on any Outstanding Security (unless such Event of Default has been cured and the Company has paid to or deposited with the Trustee a sum sufficient to pay all installments of interest (including any Additional Interest) due and past due and all principal of and any premium on all Securities due otherwise than by acceleration), or (ii) in respect of a covenant or provision hereof that under Article IX cannot be modified or amended without the consent of each Holder of any Outstanding Security. (b) Any such waiver shall be deemed to be on behalf of the Holders of all the Outstanding Securities or, in the case of a waiver by holders of Preferred Securities issued by such Trust, by all holders of Preferred Securities. (c) Upon any such waiver, such Event of 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 Event of Default or impair any right consequent thereon. SECTION 5.14. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by his or her acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, 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 5.14 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than ten percent (10%) in aggregate principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of or any premium on the Security after the Stated Maturity or any interest (including any Additional Interest) on any Security after it is due and payable. SECTION 5.15. Waiver of Usury, Stay or Extension Laws. The Company 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 usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VI THE TRUSTEE SECTION 6.1. Corporate Trustee Required. There shall at all times be a Trustee hereunder with respect to the Securities. The Trustee shall be a corporation or national banking association organized and doing business under the laws of the United States or of any state thereof, authorized to exercise corporate trust powers, having or having a parent that has a combined capital and surplus of at least $50,000,000, subject to supervision or examination by Federal or state authority and having an office within the United States. If such entity publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, then, for the purposes of this Section 6.1, the combined capital and surplus of such entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.1, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VI. SECTION 6.2. Certain Duties and Responsibilities. Except during the continuance of an Event of Default: (i) the 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 Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided, that in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they substantially conform on their face to the requirements of this Indenture. (b) If an Event of Default known to the Trustee has occurred and is continuing, the Trustee shall, prior to the receipt of directions, if any, from the Holders of at least a majority in aggregate principal amount of the Outstanding Securities (or, if applicable, from the holders of at least a majority in aggregate Liquidation Amount of Preferred Securities), exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (c) Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.2. To the extent that, at law or in equity, the Trustee has duties and liabilities relating to the Holders, the Trustee shall not be liable to any Holder or any holder of Preferred Securities for the Trustee's good faith reliance on the provisions of this Indenture. The provisions of this Indenture, to the extent that they restrict the duties and liabilities of the Trustee otherwise existing at law or in equity, are agreed by the Company and the Holders and the holders of Preferred Securities to replace such other duties and liabilities of the Trustee. (d) No provisions of this Indenture shall be construed to relieve the Trustee from liability with respect to matters that are within the authority of the Trustee under this Indenture for its own negligent action, negligent failure to act or willful misconduct, except that: (i) the Trustee shall not be liable for any error or judgment made in good faith by an authorized officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (ii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of at least a majority in aggregate principal amount of the Outstanding Securities (or, as the case may be, the holders of a majority in aggregate Liquidation Amount of Preferred Securities) relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee under this Indenture; and (iii) the Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company and money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. (e) If at any time the Trustee hereunder is not the same Person as the Property Trustee under the Trust Agreement: (i) whenever a reference is made herein to the dissolution, termination or liquidation of the Trust, the Trustee shall be entitled to assume that no such dissolution, termination, or liquidation has occurred so long as the Securities are or continue to be registered in the name of such Property Trustee, and the Trustee shall be charged with notice or knowledge of such dissolution, termination or liquidation only upon written notice thereof given to the Trustee by the Depositor under the Trust Agreement; and (ii) the Trustee shall not be charged with notice or knowledge that any Person is a holder of Preferred Securities or Common Securities issued by the Trust or whether any group of holders of Preferred Securities constitutes any specified percentage of all outstanding Preferred Securities for any purpose under this Indenture, unless and until the Trustee is furnished with a list of holders by such Property Trustee and the aggregate Liquidation Amount of the Preferred Securities then outstanding. The Trustee may conclusively rely and shall be protected in relying on such list. (f) Notwithstanding Section 1.10, the Trustee shall not, and shall not be deemed to, owe any fiduciary duty to the holders of any of the Trust Securities issued by the Trust and shall not be liable to any such holder (other than for the willful misconduct or negligence of the Trustee) if the Trustee in good faith (i) pays over or distributes to a registered Holder of the Securities or to the Company or to any other Person, cash, property or securities to which such holders of such Trust Securities shall be entitled or (ii) takes any action or omits to take any action at the request of the Holder of such Securities. Nothing in this paragraph shall affect the obligation of any other such Person to hold such payment for the benefit of, and to pay such amount over to, such holders of Preferred Securities or Common Securities or their representatives. SECTION 6.3. Notice of Defaults. Within ninety (90) days after the occurrence of any default actually known to the Trustee, the Trustee shall give the Holders notice of such default unless such default shall have been cured or waived; provided, that except in the case of a default in the payment of the principal of or any premium or interest on any Securities, the Trustee shall be fully protected in withholding the notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that withholding the notice is in the interest of holders of Securities; and provided, further, that in the case of any default of the character specified in Section 5.1(c), no such notice to Holders shall be given until at least thirty (30) days after the occurrence thereof. For the purpose of this Section 6.3, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. SECTION 6.4. Certain Rights of Trustee. Subject to the provisions of Section 6.2: (a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting in good faith and in accordance with the terms hereof upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) if (i) in performing its duties under this Indenture the Trustee is required to decide between alternative courses of action, (ii) in construing any of the provisions of this Indenture the Trustee finds ambiguous or inconsistent with any other provisions contained herein or (iii) the Trustee is unsure of the application of any provision of this Indenture, then, except as to any matter as to which the Holders are entitled to decide under the terms of this Indenture, the Trustee shall deliver a notice to the Company requesting the Company's written instruction as to the course of action to be taken and the Trustee shall take such action, or refrain from taking such action, as the Trustee shall be instructed in writing to take, or to refrain from taking, by the Company; provided, that if the Trustee does not receive such instructions from the Company within ten Business Days after it has delivered such notice or such reasonably shorter period of time set forth in such notice the Trustee may, but shall be under no duty to, take such action, or refrain from taking such action, as the Trustee shall deem advisable and in the best interests of the Holders, in which event the Trustee shall have no liability except for its own negligence, bad faith or willful misconduct; (c) any request or direction of the Company shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (d) the Trustee may consult with counsel (which counsel may be counsel to the Trustee, the Company or any of its Affiliates, and may include any of its employees) and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders or any holder of Preferred Securities pursuant to this Indenture, unless such Holders (or such holders of Preferred Securities) shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses (including reasonable attorneys' fees and expenses) and liabilities that might be incurred by it in compliance with such request or direction, including reasonable advances as may be requested by the Trustee; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, indenture, note or other paper or document, but the Trustee in its discretion may make such inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent, attorney, custodian or nominee appointed with due care by it hereunder; (h) whenever in the administration of this Indenture the Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action with respect to enforcing any remedy or right hereunder, the Trustees (i) may request instructions from the Holders (which instructions may only be given by the Holders of the same aggregate principal amount of Outstanding Securities as would be entitled to direct the Trustee under this Indenture in respect of such remedy, right or action), (ii) may refrain from enforcing such remedy or right or taking such action until such instructions are received and (iii) shall be protected in acting in accordance with such instructions; (i) except as otherwise expressly provided by this Indenture, the Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Indenture; (j) without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with any bankruptcy, insolvency or other proceeding referred to in clauses (d) or (e) of the definition of Event of Default, such expenses (including legal fees and expenses of its agents and counsel) and the compensation for such services are intended to constitute expenses of administration under any bankruptcy laws or law relating to creditors rights generally; (k) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers' Certificate addressing such matter, which, upon receipt of such request, shall be promptly delivered by the Company; (l) the Trustee shall not be charged with knowledge of any Event of Default unless either (i) a Responsible Officer of the Trustee shall have actual knowledge or (ii) the Trustee shall have received written notice thereof from the Company or a Holder; and (m) in the event that the Trustee is also acting as Paying Agent, Authenticating Agent, Calculation Agent or Securities Registrar hereunder, the rights and protections afforded to the Trustee pursuant to this Article VI shall also be afforded such Paying Agent, Authenticating Agent, or Securities Registrar. SECTION 6.5. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Securities Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Securities Registrar or such other agent. SECTION 6.6. Compensation; Reimbursement; Indemnity. (a) The Company agrees: (i) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder in such amounts as the Company and the Trustee shall agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (ii) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the 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 its negligence, bad faith or willful misconduct; and (iii) to the fullest extent permitted by applicable law, to indemnify the Trustee (including in its individual capacity) and its Affiliates, and their officers, directors, shareholders, agents, representatives and employees for, and to hold them harmless against, any loss, damage, liability, tax (other than income, franchise or other taxes imposed on amounts paid pursuant to (i) or (ii) hereof), penalty, expense or claim of any kind or nature whatsoever incurred without negligence, bad faith or willful misconduct on its part arising out of or in connection with the acceptance or administration of this trust or the performance of the Trustee's duties hereunder, including the advancement of funds to cover the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. (b) To secure the Company's payment obligations in this Section 6.6, the Company hereby grants and pledges to the Trustee and the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, other than money or property held in trust to pay principal and interest on particular Securities. Such lien shall survive the satisfaction and discharge of this Indenture or the resignation or removal of the Trustee. (c) The obligations of the Company under this Section 6.6 shall survive the satisfaction and discharge of this Indenture and the earlier resignation or removal of the Trustee. (d) In no event shall the Trustee be liable for any indirect, special, punitive or consequential loss or damage of any kind whatsoever, including, but not limited to, lost profits, even if the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action. (e) In no event shall the Trustee be liable for any failure or delay in the performance of its obligations hereunder because of circumstances beyond its control, including, but not limited to, acts of God, flood, war (whether declared or undeclared), terrorism, fire, riot, embargo, government action, including any laws, ordinances, regulations, governmental action or the like which delay, restrict or prohibit the providing of the services contemplated by this Indenture. SECTION 6.7. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article VI shall become effective until the acceptance of appointment by the successor Trustee under Section 6.8. (b) The Trustee may resign at any time by giving written notice thereof to the Company. (c) Unless an Event of Default shall have occurred and be continuing, the Trustee may be removed at any time by the Company by a Board Resolution. If an Event of Default shall have occurred and be continuing, the Trustee may be removed by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. (d) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any reason, at a time when no Event of Default shall have occurred and be continuing, the Company, by a Board Resolution, shall promptly appoint a successor Trustee, and such successor Trustee and the retiring Trustee shall comply with the applicable requirements of Section 6.8. If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any reason, at a time when an Event of Default shall have occurred and be continuing, the Holders, by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities, shall promptly appoint a successor Trustee, and such successor Trustee and the retiring Trustee shall comply with the applicable requirements of Section 6.8. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment within sixty (60) days after the giving of a notice of resignation by the Trustee or the removal of the Trustee in the manner required by Section 6.8, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of such Holder and all others similarly situated, and any resigning Trustee may, at the expense of the Company, petition any court of competent jurisdiction for the appointment of a successor Trustee. (e) The Company shall give notice to all Holders in the manner provided in Section 1.6 of each resignation and each removal of the Trustee and each appointment of a successor Trustee. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 6.8. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee, each successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all rights, powers and trusts referred to in paragraph (a) of this Section 6.8. (c) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article VI. SECTION 6.9. Merger, Conversion, Consolidation or Succession to Business. Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided, that such Person shall be otherwise qualified and eligible under this Article VI. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation or as otherwise provided above in this Section 6.9 to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated, and in case any Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor Trustee or in the name of such successor Trustee, and in all cases the certificate of authentication shall have the full force which it is provided anywhere in the Securities or in this Indenture that the certificate of the Trustee shall have. SECTION 6.10. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of the Securities or the proceeds thereof. SECTION 6.11. Appointment of Authenticating Agent. (a) The Trustee may appoint an Authenticating Agent or Agents with respect to the Securities, which shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 3.6, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, or of any State or Territory thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or state authority. If such Authenticating Agent publishes reports of condition at least annually pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section 6.11 the combined capital and surplus of such Authenticating Agent 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 an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.11, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section 6.11. (b) Any Person into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of an Authenticating Agent shall be the successor Authenticating Agent hereunder, provided such Person shall be otherwise eligible under this Section 6.11, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. (c) An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.11, the Trustee may appoint a successor Authenticating Agent eligible under the provisions of this Section 6.11, which shall be acceptable to the Company, and shall give notice of such appointment to all Holders. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. (d) The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section 6.11 in such amounts as the Company and the Authenticating Agent shall agree from time to time. (e) If an appointment of an Authenticating Agent is made pursuant to this Section 6.11, the Securities may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Securities referred to in the within mentioned Indenture. Dated: WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Trustee By: __________________________________ Authenticating Agent By: __________________________________ Authorized Signatory ARTICLE VII HOLDER'S LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee: (a) semiannually, on or before June 30 and December 31 of each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of a date not more than fifteen (15) days prior to the delivery thereof, and (b) at such other times as the Trustee may request in writing, within thirty (30) days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than fifteen (15) days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the Company and has not otherwise been received by the Trustee in its capacity as Securities Registrar. SECTION 7.2. Preservation of Information, Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.1 and the names and addresses of Holders received by the Trustee in its capacity as Securities Registrar. The Trustee may destroy any list furnished to it as provided in Section 7.1 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided in the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of information as to the names and addresses of the Holders made pursuant to the Trust Indenture Act. SECTION 7.3. Reports by Company and Trustee. (a) The Company shall furnish to the Holders and to prospective purchasers of Securities, upon their request, the information required to be furnished pursuant to Rule 144A(d)(4) under the Securities Act. The delivery requirement set forth in the preceding sentence may be satisfied by compliance with Section 7.3(b) hereof. (b) The Company shall furnish to each of (i) the Holders and to subsequent holders of Securities, (ii) each Purchaser, (iii) any beneficial owner of the Securities reasonably identified to the Company (which identification may be made either by such beneficial owner or by any Purchaser) and (iv) any designee of (i), (ii) or (iii) above, a duly completed and executed certificate in the form attached hereto as Exhibit A, including the financial statements referenced in such Exhibit, which certificate and financial statements shall be so furnished by the Company not later than forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Company and not later than ninety (90) days after the end of each fiscal year of the Company, to the extent such financial statements are not available by such dates via EDGAR (as defined below); if the Company is not a company reporting with the Securities and Exchange Commission (the "Commission"), such Exhibit and the financial statements referenced in said Exhibit shall be delivered. The delivery requirements under this Section 7.3(b) may be satisfied by compliance with Section 8.16(b) of the Trust Agreement. (c) The Trustee shall receive all reports, certificates and information, which it is entitled to receive under each of the Operative Documents (as defined in the Trust Agreement), and deliver to (i) each Purchaser and (ii) a designee of (i) above, as identified in writing to the Trustee, all such reports, certificates or information promptly upon receipt thereof. (d) If the Company intends to file its annual and quarterly information with the Commission in electronic form pursuant to Regulation S-T of the Commission using the Commission's Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system, the Company shall notify the Trustee in the manner prescribed herein of each such annual and quarterly filing. The Trustee is hereby authorized and directed to access the EDGAR system for purposes of retrieving the financial information so filed. Compliance with the foregoing shall constitute delivery by the Company of its financial statements to the Trustee in compliance with the provisions of Section 314(a) of the Trust Indenture Act, if applicable. The Trustee shall have no duty to search for or obtain any electronic or other filings that the Company makes with the Commission, regardless of whether such filings are periodic, supplemental or otherwise. Delivery of reports, information and documents to the Trustee pursuant to this Section 7.3(d) shall be solely for purposes of compliance with this Section 7.3 and, if applicable, with Section 314(a) of the Trust Indenture Act. The Trustee's receipt of such reports, information and documents shall not constitute notice to it of the content thereof or any matter determinable from the content thereof, including the Company's compliance with any of its covenants hereunder, as to which the Trustee is entitled to rely upon Officers' Certificates. ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 8.1. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and no Person shall consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless: (a) if the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the entity formed by such consolidation or into which the Company is merged or the Person that acquires by conveyance or transfer, or that leases, the properties and assets of the Company substantially as an entirety shall be an entity organized and existing under the laws of the United States of America or any State or Territory thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the due and punctual payment of the principal of and any premium and interest (including any Additional Interest) on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed; (b) immediately after giving effect to such transaction, no Event of Default, and no event that, after notice or lapse of time, or both, would constitute an Event of Default, shall have happened and be continuing; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, any such supplemental indenture comply with this Article VIII and that all conditions precedent herein provided for relating to such transaction have been complied with; and the Trustee may rely upon such Officers' Certificate and Opinion of Counsel as conclusive evidence that such transaction complies with this Section 8.1. SECTION 8.2. Successor Company Substituted. (a) Upon any consolidation or merger by the Company with or into any other Person, or any conveyance, transfer or lease by the Company of its properties and assets substantially as an entirety to any Person in accordance with Section 8.1 and the execution and delivery to the Trustee of the supplemental indenture described in Section 8.1(a), the successor entity formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; and in the event of any such conveyance or transfer, following the execution and delivery of such supplemental indenture, the Company shall be discharged from all obligations and covenants under the Indenture and the Securities. (b) Such successor Person may cause to be executed, and may issue either in its own name or in the name of the Company, any or all of the Securities issuable hereunder that theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor Person instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities that previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities that such successor Person thereafter shall cause to be executed and delivered to the Trustee on its behalf. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture. (c) In case of any such consolidation, merger, sale, conveyance or lease, such changes in phraseology and form may be made in the Securities thereafter to be issued as may be appropriate to reflect such occurrence. ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 9.1. Supplemental Indentures without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form reasonably satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (b) to evidence and provide for the acceptance of appointment hereunder by a successor trustee; or (c) to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make or amend any other provisions with respect to matters or questions arising under this Indenture, which shall not be inconsistent with the other provisions of this Indenture, provided, that such action pursuant to this clause (c) shall not adversely affect in any material respect the interests of any Holders or the holders of the Preferred Securities; or (d) to comply with the rules and regulations of any securities exchange or automated quotation system on which any of the Securities may be listed, traded or quoted; or (e) to add to the covenants, restrictions or obligations of the Company or to add to the Events of Default, provided, that such action pursuant to this clause (e) shall not adversely affect in any material respect the interests of any Holders or the holders of the Preferred Securities; or (f) to modify, eliminate or add to any provisions of the Indenture or the Securities to such extent as shall be necessary to ensure that the Securities are treated as indebtedness of the Company for United States Federal income tax purposes, provided, that such action pursuant to this clause (f) shall not adversely affect in any material respect the interests of any Holders or the holders of the Preferred Securities. SECTION 9.2. Supplemental Indentures with Consent of Holders. (a) Subject to Section 9.1, with the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities under this Indenture; provided, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security, (i) change the Stated Maturity of the principal or any premium of any Security or change the date of payment of any installment of interest (including any Additional Interest) on any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof or change the place of payment where, or the coin or currency in which, any Security or interest thereon is payable, or restrict or impair the right to institute suit for the enforcement of any such payment on or after such date, or (ii) reduce the percentage in aggregate principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with any provision of this Indenture or of defaults hereunder and their consequences provided for in this Indenture, or (iii) modify any of the provisions of this Section 9.2, Section 5.13 or Section 10.7, except to increase any percentage in aggregate principal amount of the Outstanding Securities, the consent of whose Holders is required for any reason, or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security; provided, further, that, so long as any Preferred Securities remain outstanding, no amendment under this Section 9.2 shall be effective until the holders of a majority in Liquidation Amount of the Preferred Securities shall have consented to such amendment; provided, further, that if the consent of the Holder of each Outstanding Security is required for any amendment under this Indenture, such amendment shall not be effective until the holder of each Outstanding Preferred Security shall have consented to such amendment. (b) It shall not be necessary for any Act of Holders under this Section 9.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 9.3. Execution of Supplemental Indentures. In executing or accepting the additional trusts created by any supplemental indenture permitted by this Article IX or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in conclusively relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture, and that all conditions precedent herein provided for relating to such action have been complied with. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Trustee's own rights, duties, indemnities or immunities under this Indenture or otherwise. Copies of the final form of each supplemental indenture shall be delivered by the Trustee at the expense of the Company to each Holder, and, if the Trustee is the Property Trustee, to each holder of Preferred Securities, promptly after the execution thereof. SECTION 9.4. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article IX, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities and every holder of Preferred Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 9.5. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and shall if required by the Company, bear a notation in form approved by the Company as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities. ARTICLE X COVENANTS SECTION 10.1. Payment of Principal, Premium, if any, and Interest. The Company covenants and agrees for the benefit of the Holders of the Securities that it will duly and punctually pay the principal of and any premium and interest (including any Additional Interest) on the Securities in accordance with the terms of the Securities and this Indenture. SECTION 10.2. Money for Security Payments to be Held in Trust. (a) If the Company shall at any time act as its own Paying Agent with respect to the Securities, it will, on or before each due date of the principal of and any premium or interest (including any Additional Interest) on the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium or interest (including Additional Interest) so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee in writing of its failure so to act. (b) Whenever the Company shall have one or more Paying Agents, it will, prior to 10:00 a.m., New York City time, on each due date of the principal of or any premium or interest (including any Additional Interest) on any Securities, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided in the Trust Indenture Act and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its failure so to act. (c) The Company will cause each Paying Agent for the Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section 10.2, that such Paying Agent will (i) comply with the provisions of this Indenture and the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the continuance of any default by the Company (or any other obligor upon the Securities) in the making of any payment in respect of the Securities, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Securities. (d) The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. (e) Any money deposited with the Trustee or any Paying Agent, or then held by the Company in trust for the payment of the principal of and any premium or interest (including any Additional Interest) on any Security and remaining unclaimed for two years after such principal and any premium or interest has become due and payable shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be paid on Company Request to the Company, or (if then held by the Company) shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than thirty (30) days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 10.3. Statement as to Compliance. The Company shall deliver to the Trustee, within one hundred and twenty (120) days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate (substantially in the form attached hereto as Exhibit B) covering the preceding fiscal year, stating whether or not to the knowledge of the signers thereof the Company is in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder), and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. SECTION 10.4. Calculation Agent. (a) The Company hereby agrees that for so long as any of the Securities remain Outstanding, there will at all times be an agent appointed to calculate LIBOR in respect of each Interest Payment Date in accordance with the terms of Schedule A (the "Calculation Agent"). The Company has initially appointed the Property Trustee as Calculation Agent for purposes of determining LIBOR for each Interest Payment Date. The Calculation Agent may be removed by the Company at any time. Notwithstanding the foregoing, so long as the Property Trustee holds any of the Securities, the Calculation Agent shall be the Property Trustee. If the Calculation Agent is unable or unwilling to act as such or is removed by the Company, the Company will promptly appoint as a replacement Calculation Agent the London office of a leading bank which is engaged in transactions in Eurodollar deposits in the international Eurodollar market and which does not control or is not controlled by or under common control with the Company or its Affiliates. The Calculation Agent may not resign its duties without a successor having been duly appointed. (b) The Calculation Agent shall be required to agree that, as soon as possible after 11:00 a.m. (London time) on each LIBOR Determination Date (as defined in Schedule A), but in no event later than 11:00 a.m. (London time) on the Business Day immediately following each LIBOR Determination Date, the Calculation Agent will calculate the interest rate (the Interest Payment shall be rounded to the nearest cent, with half a cent being rounded upwards) for the related Interest Payment Date, and will communicate such rate and amount to the Company, the Trustee, each Paying Agent and the Depositary. The Calculation Agent will also specify to the Company the quotations upon which the foregoing rates and amounts are based and, in any event, the Calculation Agent shall notify the Company before 5:00 p.m. (London time) on each LIBOR Determination Date that either: (i) it has determined or is in the process of determining the foregoing rates and amounts or (ii) it has not determined and is not in the process of determining the foregoing rates and amounts, together with its reasons therefor. The Calculation Agent's determination of the foregoing rates and amounts for any Interest Payment Date will (in the absence of manifest error) be final and binding upon all parties. For the sole purpose of calculating the interest rate for the Securities, "Business Day" shall be defined as any day on which dealings in deposits in Dollars are transacted in the London interbank market. SECTION 10.5. Additional Tax Sums. So long as no Event of Default has occurred and is continuing, if (a) the Trust is the Holder of all of the Outstanding Securities and (b) a Tax Event described in clause (i) or (iii) in the definition of Tax Event in Section 1.1 hereof has occurred and is continuing, the Company shall pay to the Trust (and its permitted successors or assigns under the related Trust Agreement) for so long as the Trust (or its permitted successor or assignee) is the registered holder of the Outstanding Securities, such amounts as may be necessary in order that the amount of Distributions (including any Additional Interest Amount (as defined in the Trust Agreement)) then due and payable by the Trust on the Preferred Securities and Common Securities that at any time remain outstanding in accordance with the terms thereof shall not be reduced as a result of any Additional Taxes arising from such Tax Event (additional such amounts payable by the Company to the Trust, the "Additional Tax Sums"). Whenever in this Indenture or the Securities there is a reference in any context to the payment of principal of or interest on the Securities, such mention shall be deemed to include mention of the payments of the Additional Tax Sums provided for in this Section 10.5 to the extent that, in such context, Additional Tax Sums are, were or would be payable in respect thereof pursuant to the provisions of this Section 10.5 and express mention of the payment of Additional Tax Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Tax Sums in those provisions hereof where such express mention is not made. SECTION 10.6. Additional Covenants. (a) The Company covenants and agrees with each Holder of Securities that if an Event of Default shall have occurred and be continuing, it shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Company's Equity Interests, (ii) vote in favor of or permit or otherwise allow any of its Subsidiaries to declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to or otherwise retire, any shares of any such Subsidiary's preferred stock or other Equity Interests entitling the holders thereof to a stated rate of return (for the avoidance of doubt, whether such preferred stock or other Equity Interests are perpetual or otherwise), or (iii) make any payment of principal of or any interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu in all respects with or junior in interest to the Securities (other than (A) repurchases, redemptions or other acquisitions of Equity Interests of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase or similar plan with respect to any Equity Interests or in connection with the issuance of Equity Interests of the Company (or securities convertible into or exercisable for such Equity Interests) as consideration in an acquisition transaction entered into prior to the Event of Default, (B) as a result of an exchange or conversion of any class or series of the Company's Equity Interests (or any Equity Interests of a Subsidiary of the Company) for any class or series of the Company's Equity Interests or of any class or series of the Company's indebtedness for any class or series of the Company's Equity Interests, (C) the purchase of fractional interests in Equity Interests of the Company pursuant to the conversion or exchange provisions of such Equity Interests or the security being converted or exchanged, (D) any declaration of a dividend in connection with any Rights Plan, the issuance of rights, Equity Interests or other property under any Rights Plan or the redemption or repurchase of rights pursuant thereto or (E) any dividend in the form of Equity Interests, warrants, options or other rights where the dividend Equity Interests or the Equity Interests issuable upon exercise of such warrants, options or other rights is the same Equity Interests as that on which the dividend is being paid or ranks pari passu with or junior to such Equity Interests). (b) The Company also covenants with each Holder of Securities (i) to hold, directly or indirectly, one hundred percent (100%) of the Common Securities of the Trust, provided, that any permitted successor of the Company hereunder may succeed to the Company's ownership of such Common Securities, (ii) as holder of such Common Securities, not to voluntarily dissolve, wind-up or liquidate the Trust other than (A) in connection with a distribution of the Securities to the holders of the Preferred Securities in liquidation of the Trust or (B) in connection with certain mergers, consolidations or amalgamations permitted by the Trust Agreement and (iii) to use its reasonable commercial efforts, consistent with the terms and provisions of the Trust Agreement, to cause the Trust to continue to be taxable as a grantor trust and not as a corporation for United States Federal income tax purposes. (c) The Company also agrees to use its reasonable best efforts to meet the requirements to qualify, effective for the fiscal year ending December 2005 and all future fiscal years, as a real estate investment trust under the Internal Revenue Code of 1986, as amended. SECTION 10.7. Waiver of Covenants. The Company may omit in any particular instance to comply with any covenant or condition contained in Section 10.6 if, before or after the time for such compliance, the Holders of at least a majority in aggregate principal amount of the Outstanding Securities shall, by Act of such Holders, and at least a majority of the aggregate Liquidation Amount of the Preferred Securities then outstanding, by consent of such holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company in respect of any such covenant or condition shall remain in full force and effect. SECTION 10.8. Treatment of Securities. The Company will treat the Securities as indebtedness, and the amounts, other than payments of principal, payable in respect of the principal amount of such Securities as interest, for all U.S. federal income tax purposes. All payments in respect of the Securities will be made free and clear of U.S. withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form W-9 or W-8BEN (or any substitute or successor form) establishing its U.S. or non-U.S. status for U.S. federal income tax purposes, or any other applicable form establishing a complete exemption from U.S. withholding tax. ARTICLE XI REDEMPTION OF SECURITIES SECTION 11.1. Optional Redemption. The Company may, at its option, on any Interest Payment Date, on or after March 30, 2011, redeem the Securities in whole at any time or in part from time to time, at a Redemption Price equal to one hundred percent (100%) of the principal amount thereof (or of the redeemed portion thereof, as applicable), together, in the case of any such redemption, with accrued and unpaid interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date (the "Optional Redemption Price"). SECTION 11.2. Special Event Redemption. Prior to March 30, 2011, upon the occurrence and during the continuation of a Special Event, the Company may, at its option, redeem the Securities, in whole but not in part, at a Redemption Price equal to one hundred seven and one half percent (107.5%) of the principal amount thereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date (the "Special Redemption Price"). SECTION 11.3. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities, in whole or in part, shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company, the Company shall, not less than forty-five (45) days and not more than seventy-five (75) days prior to the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee and the Property Trustee under the Trust Agreement in writing of such date and of the principal amount of the Securities to be redeemed and provide the additional information required to be included in the notice or notices contemplated by Section 11.5. In the case of any redemption of Securities, in whole or in part, (a) prior to the expiration of any restriction on such redemption provided in this Indenture or the Securities or (b) pursuant to an election of the Company which is subject to a condition specified in this Indenture or the Securities, the Company shall furnish the Trustee with an Officers' Certificate and an Opinion of Counsel evidencing compliance with such restriction or condition. SECTION 11.4. Selection of Securities to be Redeemed. (a) If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected and redeemed on a pro rata basis not more than sixty (60) days prior to the Redemption Date by the Trustee from the Outstanding Securities not previously called for redemption, provided, that the unredeemed portion of the principal amount of any Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. (b) The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security that has been or is to be redeemed. (c) The provisions of paragraphs (a) and (b) of this Section 11.4 shall not apply with respect to any redemption affecting only a single Security, whether such Security is to be redeemed in whole or in part. In the case of any such redemption in part, the unredeemed portion of the principal amount of the Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. SECTION 11.5. Notice of Redemption. (a) Notice of redemption shall be given not later than the thirtieth (30th) day, and not earlier than the sixtieth (60th) day, prior to the Redemption Date to each Holder of Securities to be redeemed, in whole or in part (unless a shorter notice shall be satisfactory to the Property Trustee under the related Trust Agreement). (b) With respect to Securities to be redeemed, in whole or in part, each notice of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price or, if the Redemption Price cannot be calculated prior to the time the notice is required to be sent, the estimate of the Redemption Price, as calculated by the Company, together with a statement that it is an estimate and that the actual Redemption Price will be calculated on the fifth Business Day prior to the Redemption Date (and if an estimate is provided, a further notice shall be sent of the actual Redemption Price on the date that such Redemption Price is calculated); (iii) if less than all Outstanding Securities are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the amount of and particular Securities to be redeemed; (iv) that on the Redemption Date, the Redemption Price will become due and payable upon each such Security or portion thereof, and that any interest (including any Additional Interest) on such Security or such portion, as the case may be, shall cease to accrue on and after said date; and (v) the place or places where such Securities are to be surrendered for payment of the Redemption Price.. (c) Notice of redemption of Securities to be redeemed, in whole or in part, at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company and shall be irrevocable. The notice if mailed in the manner provided above shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, a failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security. SECTION 11.6. Deposit of Redemption Price. Prior to 10:00 a.m., New York City time, on the Redemption Date specified in the notice of redemption given as provided in Section 11.5, the Company will deposit with the Trustee or with one or more Paying Agents (or if the Company is acting as its own Paying Agent, the Company will segregate and hold in trust as provided in Section 10.2) an amount of money sufficient to pay the Redemption Price of, and any accrued interest (including any Additional Interest) on, all the Securities (or portions thereof) that are to be redeemed on that date. SECTION 11.7. Payment of Securities Called for Redemption. (a) If any notice of redemption has been given as provided in Section 11.5, the Securities or portion of Securities with respect to which such notice has been given shall become due and payable on the date and at the place or places stated in such notice at the applicable Redemption Price, together with accrued interest (including any Additional Interest) to the Redemption Date. On presentation and surrender of such Securities at a Place of Payment specified in such notice, the Securities or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price, together with accrued interest (including any Additional Interest) to the Redemption Date. (b) Upon presentation of any Security redeemed in part only, the Company shall execute and the Trustee upon receipt of a Company Order shall authenticate and deliver to the Holder thereof, at the expense of the Company, a new Security or Securities, of authorized denominations, in aggregate principal amount equal to the unredeemed portion of the Security so presented and having the same Original Issue Date, Stated Maturity and terms. (c) If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal of and any premium on such Security shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. ARTICLE XII SUBORDINATION OF SECURITIES SECTION 12.1. Securities Subordinate to Senior Debt. The Company covenants and agrees, and each Holder of a Security, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article XII, the payment of the principal of and any premium and interest (including any Additional Interest) on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Senior Debt. SECTION 12.2. No Payment When Senior Debt in Default; Payment Over of Proceeds Upon Dissolution, Etc. (a) In the event and during the continuation of any default by the Company in the payment of any principal of or any premium or interest on any Senior Debt (following any grace period, if applicable) when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration of acceleration or otherwise, then, upon written notice of such default to the Company by the holders of such Senior Debt or any trustee therefor, unless and until such default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property, securities, by set-off or otherwise) shall be made or agreed to be made on account of the principal of or any premium or interest (including any Additional Interest) on any of the Securities, or in respect of any redemption, repayment, retirement, purchase or other acquisition of any of the Securities. (b) In the event of a bankruptcy, insolvency or other proceeding described in clause (d) or (e) of the definition of Event of Default (each such event, if any, herein sometimes referred to as a "Proceeding"), all Senior Debt (including any interest thereon accruing after the commencement of any such proceedings) shall first be paid in full before any payment or distribution, whether in cash, securities or other property, shall be made to any Holder of any of the Securities on account thereof. Any payment or distribution, whether in cash, securities or other property (other than securities of the Company or any other entity provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the indebtedness evidenced by the Securities, to the payment of all Senior Debt at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment), which would otherwise (but for these subordination provisions) be payable or deliverable in respect of the Securities shall be paid or delivered directly to the holders of Senior Debt in accordance with the priorities then existing among such holders until all Senior Debt (including any interest thereon accruing after the commencement of any Proceeding) shall have been paid in full. (c) In the event of any Proceeding, after payment in full of all sums owing with respect to Senior Debt, the Holders of the Securities, together with the holders of any obligations of the Company ranking on a parity with the Securities, shall be entitled to be paid from the remaining assets of the Company the amounts at the time due and owing on account of unpaid principal of and any premium and interest (including any Additional Interest) on the Securities and such other obligations before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any Equity Interests or any obligations of the Company ranking junior to the Securities and such other obligations. If, notwithstanding the foregoing, any payment or distribution of any character on any security, whether in cash, securities or other property (other than securities of the Company or any other entity provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the indebtedness evidenced by the Securities, to the payment of all Senior Debt at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment) shall be received by the Trustee or any Holder in contravention of any of the terms hereof and before all Senior Debt shall have been paid in full, such payment or distribution or security shall be received in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of the Senior Debt at the time outstanding in accordance with the priorities then existing among such holders for application to the payment of all Senior Debt remaining unpaid, to the extent necessary to pay all such Senior Debt (including any interest thereon accruing after the commencement of any Proceeding) in full. In the event of the failure of the Trustee or any Holder to endorse or assign any such payment, distribution or security, each holder of Senior Debt is hereby irrevocably authorized to endorse or assign the same. (d) The Trustee and the Holders, at the expense of the Company, shall take such reasonable action (including the delivery of this Indenture to an agent for any holders of Senior Debt or consent to the filing of a financing statement with respect hereto) as may, in the opinion of counsel designated by the holders of a majority in principal amount of the Senior Debt at the time outstanding, be necessary or appropriate to assure the effectiveness of the subordination effected by these provisions. (e) The provisions of this Section 12.2 shall not impair any rights, interests, remedies or powers of any secured creditor of the Company in respect of any security interest the creation of which is not prohibited by the provisions of this Indenture. (f) The securing of any obligations of the Company, otherwise ranking on a parity with the Securities or ranking junior to the Securities, shall not be deemed to prevent such obligations from constituting, respectively, obligations ranking on a parity with the Securities or ranking junior to the Securities. SECTION 12.3. Payment Permitted If No Default. Nothing contained in this Article XII or elsewhere in this Indenture or in any of the Securities shall prevent (a) the Company, at any time, except during the pendency of the conditions described in paragraph (a) of Section 12.2 or of any Proceeding referred to in Section 12.2, from making payments at any time of principal of and any premium or interest (including any Additional Interest) on the Securities or (b) the application by the Trustee of any moneys deposited with it hereunder to the payment of or on account of the principal of and any premium or interest (including any Additional Interest) on the Securities or the retention of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge (in accordance with Section 12.8) that such payment would have been prohibited by the provisions of this Article XII, except as provided in Section 12.8. SECTION 12.4. Subrogation to Rights of Holders of Senior Debt. Subject to the payment in full of all amounts due or to become due on all Senior Debt, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Debt pursuant to the provisions of this Article XII (equally and ratably with the holders of all indebtedness of the Company that by its express terms is subordinated to Senior Debt of the Company to substantially the same extent as the Securities are subordinated to the Senior Debt and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Debt) to the rights of the holders of such Senior Debt to receive payments and distributions of cash, property and securities applicable to the Senior Debt until the principal of and any premium and interest (including any Additional Interest) on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Debt of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article XII, and no payments made pursuant to the provisions of this Article XII to the holders of Senior Debt by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Debt, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Debt. SECTION 12.5. Provisions Solely to Define Relative Rights. The provisions of this Article XII are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Debt on the other hand. Nothing contained in this Article XII or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as between the Company and the Holders of the Securities, the obligations of the Company, which are absolute and unconditional, to pay to the Holders of the Securities the principal of and any premium and interest (including any Additional Interest) on the Securities as and when the same shall become due and payable in accordance with their terms, (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than their rights in relation to the holders of Senior Debt or (c) prevent the Trustee or the Holder of any Security (or to the extent expressly provided herein, the holder of any Preferred Security) from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, including filing and voting claims in any Proceeding, subject to the rights, if any, under this Article XII of the holders of Senior Debt to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. SECTION 12.6. Trustee to Effectuate Subordination. Each Holder of a Security by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article XII and appoints the Trustee his or her attorney-in-fact for any and all such purposes. SECTION 12.7. No Waiver of Subordination Provisions. (a) No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with. (b) Without in any way limiting the generality of paragraph (a) of this Section 12.7, the holders of Senior Debt may, at any time and from to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to such Holders of the Securities and without impairing or releasing the subordination provided in this Article XII or the obligations hereunder of such Holders of the Securities to the holders of Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt or any instrument evidencing the same or any agreement under which Senior Debt is outstanding, (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt, (iii) release any Person liable in any manner for the payment of Senior Debt and (iv) exercise or refrain from exercising any rights against the Company and any other Person. SECTION 12.8. Notice to Trustee. (a) The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company that would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article XII or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Company or a holder of Senior Debt or from any trustee, agent or representative therefor; provided, that if the Trustee shall not have received the notice provided for in this Section 12.8 at least two Business Days prior to the date upon which by the terms hereof any monies may become payable for any purpose (including, the payment of the principal of and any premium on or interest (including any Additional Interest) on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. (b) The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or herself to be a holder of Senior Debt (or a trustee, agent, representative or attorney-in-fact therefor) to establish that such notice has been given by a holder of Senior Debt (or a trustee, agent, representative or attorney-in-fact therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article XII, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XII, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 12.9. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article XII, the Trustee and the Holders of the Securities shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XII. SECTION 12.10. Trustee Not Fiduciary for Holders of Senior Debt. The Trustee, in its capacity as trustee under this Indenture, shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Company or to any other Person cash, property or securities to which any holders of Senior Debt shall be entitled by virtue of this Article XII or otherwise. SECTION 12.11. Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XII with respect to any Senior Debt that may at any time be held by it, to the same extent as any other holder of Senior Debt, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Debt, the Trustee undertakes to perform only such of its obligations as are specifically set forth in this Article XII, and no implied covenants or obligations with respect to the holders of such Senior Debt shall be read into this Indenture against the Trustee. Nothing in this Article XII shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6. SECTION 12.12. Article Applicable to Paying Agents. If at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article XII shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article XII in addition to or in place of the Trustee; provided, that Sections 12.8 and 12.11 shall not apply to the Company or any Affiliate of the Company if the Company or such Affiliate acts as Paying Agent. * * * * 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. * * * * IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. ANTHRACITE CAPITAL, INC. By: /s/ Richard M. Shea --------------------------------- Name: Richard M. Shea Title: President and Chief Operating Officer WILMINGTON TRUST COMPANY, as Trustee By: /s/ W. Thomas Morris --------------------------------- Name: W. Thomas Morris Title: Assistant Vice President EX-4 3 ant10qx4-2.txt EXHIBIT 4.2 Exhibit 4.2 =============================================================================== AMENDED AND RESTATED TRUST AGREEMENT among ANTHRACITE CAPITAL, INC., as Depositor WILMINGTON TRUST COMPANY, as Property Trustee WILMINGTON TRUST COMPANY, as Delaware Trustee and THE ADMINISTRATIVE TRUSTEES NAMED HEREIN as Administrative Trustees ________________ Dated as of March 16, 2006 ________________ ANTHRACITE CAPITAL TRUST III ===============================================================================
CONTENTS Clause Page ARTICLE I. Defined Terms.........................................................................................1 Section 1.1. Definitions.......................................................................1 ARTICLE II. The Trust 11 Section 2.1. Name.............................................................................11 Section 2.2. Office of the Delaware Trustee; Principal Place of Business......................11 Section 2.3. Initial Contribution of Trust Property; Fees, Costs and Expenses.................11 Section 2.4. Purposes of Trust................................................................12 Section 2.5. Authorization to Enter into Certain Transactions.................................12 Section 2.6. Assets of Trust..................................................................15 Section 2.7. Title to Trust Property..........................................................15 ARTICLE III. Payment Account; Paying Agents....................................................................15 Section 3.1. Payment Account..................................................................15 Section 3.2. Appointment of Paying Agents.....................................................16 ARTICLE IV. Distributions; Redemption...........................................................................16 Section 4.1. Distributions....................................................................16 Section 4.2. Redemption.......................................................................18 Section 4.3. Subordination of Common Securities...............................................20 Section 4.4. Payment Procedures...............................................................21 Section 4.5. Withholding Tax..................................................................21 Section 4.6. Tax Returns and Other Reports....................................................22 Section 4.7. Payment of Taxes, Duties, Etc. of the Trust......................................22 Section 4.8. Payments under Indenture or Pursuant to Direct Actions...........................22 Section 4.9. Exchanges........................................................................22 Section 4.10. Calculation Agent................................................................23 Section 4.11. Certain Accounting Matters.......................................................23 ARTICLE V. Securities 25 Section 5.1. Initial Ownership................................................................25 Section 5.2. Authorized Trust Securities......................................................25 Section 5.3. Issuance of the Common Securities; Subscription and Purchase of Notes............25 Section 5.4. The Securities Certificates......................................................25 Section 5.5. Rights of Holders................................................................26 Section 5.6. Book-Entry Preferred Securities..................................................26 Section 5.7. Registration of Transfer and Exchange of Preferred Securities Certificates.....................................................................28 Section 5.8. Mutilated, Destroyed, Lost or Stolen Securities Certificates.....................30 Section 5.9. Persons Deemed Holders...........................................................30 Section 5.10. Cancellation.....................................................................31 Section 5.11. Ownership of Common Securities by Depositor......................................31 Section 5.12. Restricted Legends...............................................................32 Section 5.13. Form of Certificate of Authentication............................................34 ARTICLE VI. Meetings; Voting; Acts of Holders...................................................................35 Section 6.1. Notice of Meetings...............................................................35 Section 6.2. Meetings of Holders of the Preferred Securities..................................35 Section 6.3. Voting Rights....................................................................35 Section 6.4. Proxies, Etc.....................................................................35 Section 6.5. Holder Action by Written Consent.................................................36 Section 6.6. Record Date for Voting and Other Purposes........................................36 Section 6.7. Acts of Holders..................................................................36 Section 6.8. Inspection of Records............................................................37 Section 6.9. Limitations on Voting Rights.....................................................37 Section 6.10. Acceleration of Maturity; Rescission of Annulment; Waivers of Past Defaults.........................................................................38 ARTICLE VII. Representations and Warranties.....................................................................40 Section 7.1. Representations and Warranties of the Property Trustee and the Delaware Trustee.................................................................40 Section 7.2. Representations and Warranties of Depositor......................................42 ARTICLE VIII. The Trustees......................................................................................43 Section 8.1. Number of Trustees...............................................................43 Section 8.2. Property Trustee Required........................................................43 Section 8.3. Delaware Trustee Required........................................................43 Section 8.4. Appointment of Administrative Trustees...........................................44 Section 8.5. Duties and Responsibilities of the Trustees......................................44 Section 8.6. Notices of Defaults and Extensions...............................................46 Section 8.7. Certain Rights of Property Trustee...............................................46 Section 8.8. Delegation of Power..............................................................49 Section 8.9. May Hold Securities..............................................................49 Section 8.10. Compensation; Reimbursement; Indemnity...........................................49 Section 8.11. Resignation and Removal; Appointment of Successor................................50 Section 8.12. Acceptance of Appointment by Successor...........................................51 Section 8.13. Merger, Conversion, Consolidation or Succession to Business......................52 Section 8.14. Not Responsible for Recitals, Issuance of Securities or Representations..................................................................52 Section 8.15. Property Trustee May File Proofs of Claim........................................52 Section 8.16. Reports to and from the Property Trustee.........................................53 ARTICLE IX. Termination, Liquidation and Merger.................................................................54 Section 9.1. Dissolution Upon Expiration Date.................................................54 Section 9.2. Early Termination................................................................54 Section 9.3. Termination......................................................................54 Section 9.4. Liquidation......................................................................55 Section 9.5. Mergers, Consolidations, Amalgamations or Replacements of Trust..................56 ARTICLE X. Information to Purchasers............................................................................58 Section 10.1. Depositor Obligations to Purchasers..............................................58 Section 10.2. Property Trustee's Obligations to Purchasers.....................................58 ARTICLE XI. Miscellaneous Provisions............................................................................58 Section 11.1. Limitation of Rights of Holders..................................................58 Section 11.2. Agreed Tax Treatment of Trust and Trust Securities...............................58 Section 11.3. Amendment........................................................................59 Section 11.4. Separability.....................................................................60 Section 11.5. Governing Law....................................................................60 Section 11.6. Successors.......................................................................61 Section 11.7. Headings.........................................................................61 Section 11.8. Reports, Notices and Demands.....................................................61 Section 11.9. Agreement Not to Petition........................................................62 Section 11.10. Counterparts.....................................................................63 Exhibit A Certificate of Trust of Anthracite Capital Trust III Exhibit B Form of Common Securities Certificate Exhibit C Form of Preferred Securities Certificate Exhibit D Junior Subordinated Indenture Exhibit E Form of Transfer Certificate to be Executed for QIBs Exhibit F Form of Transferee Certificate to be Executed by Transferees Other Than QIBs Exhibit G Form of Officer's Financial Certificate Exhibit H Form of Officers' Certificate pursuant to Section 8.16(a) Schedule A Calculation of LIBOR
THIS AMENDED AND RESTATED TRUST AGREEMENT, dated as of March 16, 2006, among (i) Anthracite Capital, Inc., a Maryland corporation (including any successors or permitted assigns, the "Depositor"), (ii) Wilmington Trust Company, a Delaware banking corporation, as property trustee (in such capacity, the "Property Trustee"), (iii) Wilmington Trust Company, a Delaware banking corporation, as Delaware trustee (in such capacity, the "Delaware Trustee"), (iv) Richard M. Shea, an individual, James J. Lillis, an individual and Robert L. Friedberg, an individual, each of whose address is c/o Anthracite Capital, Inc., 40 East 52nd Street, New York, NY 10022, as administrative trustees (in such capacities, each an "Administrative Trustee" and, collectively, the "Administrative Trustees" and, together with the Property Trustee and the Delaware Trustee, the "Trustees") and (v) the several Holders, as hereinafter defined. WITNESSETH WHEREAS, the Depositor and the Delaware Trustee have heretofore created a Delaware statutory trust pursuant to the Delaware Statutory Trust Act by entering into a Trust Agreement, dated as of March 10, 2006 (the "Original Trust Agreement"), and by executing and filing with the Secretary of State of the State of Delaware the Certificate of Trust, substantially in the form attached as Exhibit A; and WHEREAS, the Depositor and the Trustees desire to amend and restate the Original Trust Agreement in its entirety as set forth herein to provide for, among other things, (i) the issuance of the Common Securities by the Trust to the Depositor, (ii) the issuance and sale of the Preferred Securities by the Trust pursuant to the Purchase Agreement and (iii) the acquisition by the Trust from the Depositor of all of the right, title and interest in and to the Notes; NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each party, for the benefit of the other parties and for the benefit of the Holders, hereby amends and restates the Original Trust Agreement in its entirety and agrees as follows: ARTICLE I......... DEFINED TERMS SECTION 1.1. Definitions. For all purposes of this Trust Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article I have the meanings assigned to them in this Article I; (b) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation"; (c) all accounting terms used but not defined herein have the meanings assigned to them in accordance with United States generally accepted accounting principles; (d) unless the context otherwise requires, any reference to an "Article", a "Section", a "Schedule" or an "Exhibit" refers to an Article, a Section, a Schedule or an Exhibit, as the case may be, of or to this Trust Agreement; (e) the words "hereby", "herein", "hereof" and "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or other subdivision; (f) a reference to the singular includes the plural and vice versa; and (g) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders. "Act" has the meaning specified in Section 6.7. "Additional Interest" has the meaning specified in Section 1.1 of the Indenture. "Additional Interest Amount" means, with respect to Trust Securities of a given Liquidation Amount and/or a given period, the amount of Additional Interest paid by the Depositor on a Like Amount of Notes for such period. "Additional Taxes" has the meaning specified in Section 1.1 of the Indenture. "Additional Tax Sums" has the meaning specified in Section 10.5 of the Indenture. "Administrative Trustee" means each of the Persons identified as an "Administrative Trustee" in the preamble to this Trust Agreement, solely in each such Person's capacity as Administrative Trustee of the Trust and not in such Person's individual capacity, or any successor Administrative Trustee appointed as herein provided. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect 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. "Applicable Depositary Procedures" means, with respect to any transfer or transaction involving a Book-Entry Preferred Security, the rules and procedures of the Depositary for such Book-Entry Preferred Security, in each case to the extent applicable to such transaction and as in effect from time to time. "Bankruptcy Event" means, with respect to any Person: (a) the entry of a decree or order by a court having jurisdiction in the premises (i) judging such Person a bankrupt or insolvent, (ii) approving as properly filed a petition seeking reorganization, arrangement, adjudication or composition of or in respect of such Person under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, (iii) appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of such Person or of any substantial part of its property or (iv) 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 sixty (60) consecutive days; or (b) the institution by such Person of proceedings to be adjudicated a 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 any applicable Bankruptcy Law, or the consent by it to the filing of any such petition or to the appointment of a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of such Person 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 and its willingness to be adjudicated a bankrupt or insolvent, or the taking of corporate action by such Person in furtherance of any such action. "Bankruptcy Laws" means all Federal and state bankruptcy, insolvency, reorganization and other similar laws, including the United States Bankruptcy Code. "Book-Entry Preferred Security" means a Preferred Security, the ownership and transfers of which shall be made through book entries by a Depositary. "Business Day" means a day other than (a) a Saturday or Sunday, (b) a day on which banking institutions in the City of New York are authorized or required by law or executive order to remain closed or (c) a day on which the Corporate Trust Office is closed for business. "Calculation Agent" has the meaning specified in Section 10.4 of the Indenture. "Closing Date" has the meaning specified in the Purchase Agreement. "Code" means the United States Internal Revenue Code of 1986, as amended. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this Trust Agreement such Commission is not existing and performing the duties assigned to it, then the body performing such duties at such time. "Common Securities Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached as Exhibit B. "Common Security" means a common security of the Trust, denominated as such and representing an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $1,000 and having the rights provided therefor in this Trust Agreement. "Common Securities Subscription Agreement" means the agreement of even date herewith by and between the Depositor and the Trust pertaining to the sale and purchase of the Common Securities. "Corporate Trust Office" means the principal office of the Property Trustee at which any particular time its corporate trust business shall be administered, which office at the date of this Trust Agreement is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Capital Markets. "Definitive Preferred Securities Certificates" means Preferred Securities issued in certificated, fully registered form that are not Global Preferred Securities. "Delaware Statutory Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code ss. 3801 et seq., or any successor statute thereto, in each case as amended from time to time. "Delaware Trustee" means the Person identified as the "Delaware Trustee" in the preamble to this Trust Agreement, solely in its capacity as Delaware Trustee of the Trust and not in its individual capacity, or its successor in interest in such capacity, or any successor Delaware Trustee appointed as herein provided. "Depositary" means an organization registered as a clearing agency under the Exchange Act that is designated as Depositary by the Depositor or any successor thereto. DTC will be the initial Depositary. "Depositary Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Depositary effects book-entry transfers and pledges of securities deposited with the Depositary. "Depositor" has the meaning specified in the preamble to this Trust Agreement and any successors and permitted assigns. "Depositor Affiliate" has the meaning specified in Section 4.9. "Distribution Date" has the meaning specified in Section 4.1(a)(i). "Distributions" means amounts payable in respect of the Trust Securities as provided in Section 4.1. "DTC" means The Depository Trust Company, a New York corporation, or any successor thereto. "Early Termination Event" has the meaning specified in Section 9.2. "EDGAR" has the meaning specified in Section 4.11(c). "Event of Default" means any one of the following events (whatever the reason for such event 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): (a) the occurrence of a Note Event of Default; or (b) default by the Trust in the payment of any Distribution when it becomes due and payable, and continuation of such default for a period of thirty (30) days; or (c) default by the Trust in the payment of any Redemption Price of any Trust Security when it becomes due and payable; or (d) default in the performance, or breach, in any material respect of any covenant or warranty of the Trustees in this Trust Agreement (other than those specified in clause (b) or (c) above) and continuation of such default or breach for a period of thirty (30) days after there has been given, by registered or certified mail, to the Trustees and to the Depositor by the Holders of at least twenty five percent (25%) in aggregate Liquidation Amount of the Outstanding Preferred Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (e) the occurrence of a Bankruptcy Event with respect to the Property Trustee if a successor Property Trustee has not been appointed within ninety (90) days thereof. "Exchange Act" means the Securities Exchange Act of 1934, and any successor statute thereto, in each case as amended from time to time. "Expiration Date" has the meaning specified in Section 9.1. "Fiscal Year" shall be the fiscal year of the Trust, which shall be the calendar year, or such other period as is required by the Code. "Fixed Rate Period" has the meaning set forth in Section 4.1(a)(ii). "Global Preferred Security" means a Preferred Securities Certificate evidencing ownership of Book-Entry Preferred Securities. "Holder" means a Person in whose name a Trust Security or Trust Securities are registered in the Securities Register; any such Person shall be deemed to be a beneficial owner within the meaning of the Delaware Statutory Trust Act. "Indemnified Person" has the meaning specified in Section 8.10(c). "Indenture" means the Junior Subordinated Indenture executed and delivered by the Depositor and the Note Trustee contemporaneously with the execution and delivery of this Trust Agreement, for the benefit of the holders of the Notes, a copy of which is attached hereto as Exhibit D, as amended or supplemented from time to time. "Interest Payment Date(s)" has the meaning specified in Section 1.1 of the Indenture. "Investment Company Act" means the Investment Company Act of 1940, or any successor statute thereto, in each case as amended from time to time. "Investment Company Event" has the meaning specified in Section 1.1 of the Indenture. "Junior Subordinated Note Purchase Agreement" means the agreement of even date herewith by and between the Depositor and the Trust pertaining to the issuance and purchase of the Notes. "LIBOR" has the meaning specified in Schedule A. "LIBOR Business Day" has the meaning specified in Schedule A. "LIBOR Determination Date" has the meaning specified in Schedule A. "Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of trust, adverse ownership interest, hypothecation, assignment, security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever. "Like Amount" means (a) with respect to a redemption of any Trust Securities, Trust Securities having a Liquidation Amount equal to the principal amount of Notes to be contemporaneously redeemed or paid at maturity in accordance with the Indenture, the proceeds of which will be used to pay the Redemption Price of such Trust Securities, (b) with respect to a distribution of Notes to Holders of Trust Securities in connection with a dissolution of the Trust, Notes having a principal amount equal to the Liquidation Amount of the Trust Securities of the Holder to whom such Notes are distributed and (c) with respect to any distribution of Additional Interest Amounts to Holders of Trust Securities, Notes having a principal amount equal to the Liquidation Amount of the Trust Securities in respect of which such distribution is made. "Liquidation Amount" means the stated amount of $1,000 per Trust Security. "Liquidation Date" means the date on which assets are to be distributed to Holders in accordance with Section 9.4(a) hereunder following dissolution of the Trust. "Liquidation Distribution" has the meaning specified in Section 9.4(d). "Majority in Liquidation Amount" means Common Securities or Preferred Securities, as the case may be, representing more than fifty percent (50%) of the aggregate Liquidation Amount of all (or a specified group of) then Outstanding Common or Preferred Securities, as the case may be. "Note Event of Default" means any "Event of Default" specified in Section 5.1 of the Indenture. "Note Redemption Date" means, with respect to any Notes to be redeemed under the Indenture, the date fixed for redemption of such Notes under the Indenture. "Note Trustee" means the Person identified as the "Trustee" in the Indenture, solely in its capacity as Trustee pursuant to the Indenture and not in its individual capacity, or its successor in interest in such capacity, or any successor Trustee appointed as provided in the Indenture. "Notes" means the Depositor's Junior Subordinated Notes issued pursuant to the Indenture. "Officers' Certificate" means a certificate signed by the Chief Executive Officer, the President or an Executive Vice President, and by the Chief Financial Officer, Treasurer or an Assistant Treasurer, of the Depositor, and delivered to the Trustees. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Trust Agreement (other than the certificate provided pursuant to Section 8.16(a) which is not an Officers' Certificate) shall include: (a) a statement by each officer signing the Officers' Certificate that such officer has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by such officer in rendering the Officers' Certificate; (c) a statement that such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of such officer, such condition or covenant has been complied with. "Operative Documents" means the Purchase Agreement, the Indenture, the Trust Agreement, the Notes, the Common Securities Subscription Agreement, the Junior Subordinated Note Purchase Agreement, and the Trust Securities. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for, or an employee of, the Depositor or any Affiliate of the Depositor. "Optional Note Redemption Price" means, with respect to any Note to be redeemed on any Redemption Date under the Indenture, an amount equal to one hundred percent (100%) of the outstanding principal amount of such Note, together with accrued interest, including any Additional Interest (to the extent legally enforceable), thereon through but not including the date fixed as such Redemption Date. "Optional Redemption Price" means, with respect to any Trust Security, an amount equal to one hundred percent (100%) of the Liquidation Amount of such Trust Security on the Redemption Date, plus accumulated and unpaid Distributions to the Redemption Date, plus the related amount of the premium, if any, and/or accrued interest, including Additional Interest, if any, thereon paid by the Depositor upon the concurrent redemption or payment at maturity of a Like Amount of Notes. "Original Trust Agreement" has the meaning specified in the recitals to this Trust Agreement. "Outstanding", when used with respect to any Trust Securities, means, as of the date of determination, all Trust Securities theretofore executed and delivered under this Trust Agreement, except: (a) Trust Securities theretofore canceled by the Property Trustee or delivered to the Property Trustee for cancellation; (b) Trust Securities for which payment or redemption money in the necessary amount has been theretofore deposited with the Property Trustee or any Paying Agent in trust for the Holders of such Trust Securities; provided, that if such Trust Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Trust Agreement; and (c) Trust Securities that have been paid or in exchange for or in lieu of which other Trust Securities have been executed and delivered pursuant to the provisions of this Trust Agreement, unless proof satisfactory to the Property Trustee is presented that any such Trust Securities are held by Holders in whose hands such Trust Securities are valid, legal and binding obligations of the Trust; provided, that in determining whether the Holders of the requisite Liquidation Amount of the Outstanding Preferred Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Preferred Securities owned by the Depositor, any Trustee or any Affiliate of the Depositor or of any Trustee shall be disregarded and deemed not to be Outstanding, except that (i) in determining whether any Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Preferred Securities that such Trustee knows to be so owned shall be so disregarded and (ii) the foregoing shall not apply at any time when all of the Outstanding Preferred Securities are owned by the Depositor, one or more of the Trustees and/or any such Affiliate. Preferred Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Administrative Trustees the pledgee's right so to act with respect to such Preferred Securities and that the pledgee is not the Depositor, any Trustee or any Affiliate of the Depositor or of any Trustee. "Owner" means each Person who is the beneficial owner of Book-Entry Preferred Securities as reflected in the records of the Depositary or, if a Depositary Participant is not the beneficial owner, then the beneficial owner as reflected in the records of the Depositary Participant. "Paying Agent" means any Person authorized by the Administrative Trustees to pay Distributions or other amounts in respect of any Trust Securities on behalf of the Trust. "Payment Account" means a segregated non-interest-bearing corporate trust account maintained by the Property Trustee for the benefit of the Holders in which all amounts paid in respect of the Notes will be held and from which the Property Trustee, through the Paying Agent, shall make payments to the Holders in accordance with Sections 3.1, 4.1 and 4.2. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, company, limited liability company, trust, unincorporated association or government, or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Security" means a preferred security of the Trust, denominated as such and representing an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $1,000 and having the rights provided therefor in this Trust Agreement. "Preferred Securities Certificate" means a certificate evidencing ownership of Preferred Securities, substantially in the form attached as Exhibit C. "Property Trustee" means the Person identified as the "Property Trustee" in the preamble to this Trust Agreement, solely in its capacity as Property Trustee of the Trust and not in its individual capacity, or its successor in interest in such capacity, or any successor Property Trustee appointed as herein provided. "Purchase Agreement" means the Purchase Agreement or Purchase Agreements (whether one or more) executed and delivered contemporaneously with this Agreement by the Trust, the Depositor and the purchaser(s) named therein, as the same may be amended from time to time. "Purchaser" means each Person identified as a Purchaser of the Preferred Securities in the Purchase Agreement. "QIB" means a "qualified institutional buyer" as defined in Rule 144A under the Securities Act of 1933, as amended. "QP" means a "qualified purchaser" as defined in Section 2(a)(51) of the Investment Company Act of 1940, as amended. "QIB/QP" means a QIB that is also a QP. "Redemption Date" means, with respect to any Trust Security to be redeemed, the date fixed for such redemption by or pursuant to this Trust Agreement; provided, that each Note Redemption Date and the stated maturity (or any date of principal repayment upon early maturity) of the Notes shall be a Redemption Date for a Like Amount of Trust Securities. "Redemption Price" means the Special Redemption Price or Optional Redemption Price, as applicable. If the Depositor has redeemed the Notes at the Special Note Redemption Price, the Trust shall redeem the Trust Securities at the Special Redemption Price. If the Depositor has redeemed the Notes at the Optional Note Redemption Price, the Trust shall redeem the Trust Securities at the Optional Redemption Price. "Reference Banks" has the meaning specified in Schedule A. "Responsible Officer" means, with respect to the Property Trustee, the officer in the Corporate Capital Markets division at the Corporate Trust Office of the Property Trustee having direct responsibility for the administration of this Trust Agreement. "Securities Act" means the Securities Act of 1933, and any successor statute thereto, in each case as amended from time to time. "Securities Certificate" means any one of the Common Securities Certificates or the Preferred Securities Certificates. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 5.7. "Special Note Redemption Price" means, with respect to any Note to be redeemed on any Redemption Date under the Indenture, an amount equal to one hundred seven and one half percent (107.5%) of the outstanding principal amount of such Note, together with accrued interest, including Additional Interest, thereon through but not including the date fixed as such Redemption Date. "Special Redemption Price" means, with respect to any Trust Security, an amount equal to one hundred seven and one half percent (107.5%) of the Liquidation Amount of such Trust Security on the Redemption Date, plus accumulated and unpaid Distributions to the Redemption Date, plus the related amount of the premium, if any, and/or accrued interest, including Additional Interest, if any, thereon paid by the Depositor upon the concurrent redemption or payment at maturity of a Like Amount of Notes. "Successor Securities" has the meaning specified in Section 9.5(a). "Tax Event" has the meaning specified in Section 1.1 of the Indenture. "Trust" means the Delaware statutory trust known as "Anthracite Capital Trust III," which was created on March 10, 2006 under the Delaware Statutory Trust Act pursuant to the Original Trust Agreement and the filing of the Certificate of Trust, and continued pursuant to this Trust Agreement. "Trust Agreement" means this Amended and Restated Trust Agreement, as the same may be modified, amended or supplemented from time to time in accordance with the applicable provisions hereof, including all Schedules and Exhibits (other than Exhibit D). "Trustees" means the Administrative Trustees, the Property Trustee and the Delaware Trustee, each as defined in this Article I. "Trust Property" means (a) the Notes, (b) any cash on deposit in, or owing to, the Payment Account and (c) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Property Trustee pursuant to this Trust Agreement. "Trust Security" means any one of the Common Securities or the Preferred Securities. ARTICLE II. THE TRUST SECTION 2.1. Name. The statutory trust continued hereby shall be known as "Anthracite Capital Trust III", as such name may be modified from time to time by the Administrative Trustees following written notice to the Holders of Trust Securities and the other Trustees, in which name the Trustees may conduct the business of the Trust, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. SECTION 2.2. Office of the Delaware Trustee; Principal Place of Business. The address of the Delaware Trustee in the State of Delaware is Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Capital Markets, or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Holders, the Depositor, the Property Trustee and the Administrative Trustees. The principal executive office of the Trust is 40 East 52nd Street, New York, NY 10022, Attention: Chief Financial Officer, as such address may be changed from time to time by the Administrative Trustees following written notice to the Holders and the other Trustees. SECTION 2.3. Initial Contribution of Trust Property; Fees, Costs and Expenses. The Delaware Trustee acknowledges receipt from the Depositor in connection with the Original Trust Agreement of the sum of ten dollars ($10), which constituted the initial Trust Property. The Depositor shall pay all fees, costs and expenses of the Trust (except with respect to the Trust Securities) as they arise or shall, upon request of any Trustee, promptly reimburse such Trustee for any such fees, costs and expenses paid by such Trustee. The Depositor shall make no claim upon the Trust Property for the payment of such fees, costs or expenses. SECTION 2.4. Purposes of Trust. (a) The exclusive purposes and functions of the Trust are to (i) issue and sell Trust Securities and use the proceeds from such sale to acquire the Notes, (ii) make distributions as provided herein, (iii) enter into and perform its obligations under agreements, documents, and instructions (including without limitation the Operative Documents to which it is a party) necessary to accomplish (i) and (ii) above, and (iv) engage in only those activities necessary or incidental thereto. The Delaware Trustee, the Property Trustee and the Administrative Trustees are trustees of the Trust, and have all the rights, powers and duties to the extent set forth herein. The Trustees hereby acknowledge that they are trustees of the Trust. (b) So long as this Trust Agreement remains in effect, the Trust (or the Trustees acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, the Trust (or the Trustees acting on behalf of the Trust) shall not (i) acquire any investments or engage in any activities not authorized by this Trust Agreement, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Holders, except as expressly provided herein, (iii) incur any indebtedness for borrowed money or issue any other debt, (iv) take or consent to any action that would result in the placement of a Lien on any of the Trust Property, (v) take or consent to any action that (in the case of the Property Trustee, to the actual knowledge of a Responsible Officer) would reasonably be expected to cause the Trust to become taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes, (vi) take or consent to any action that (in the case of the Property Trustee, to the actual knowledge of a Responsible Officer) would cause the Notes to be treated as other than indebtedness of the Depositor for United States federal income tax purposes or (vii) take or consent to any action that (in the case of the Property Trustee, to the actual knowledge of a Responsible Officer) would cause the Trust to be deemed to be an "investment company" required to be registered under the Investment Company Act. SECTION 2.5. Authorization to Enter into Certain Transactions. (a) The Trustees shall conduct the affairs of the Trust in accordance with and subject to the terms of this Trust Agreement. In accordance with the following provisions (i) and (ii), the Trustees shall have the authority to enter into all transactions and agreements determined by the Trustees to be appropriate in exercising the authority, express or implied, otherwise granted to the Trustees, under this Trust Agreement, and to perform all acts in furtherance thereof, including the following: (i) As among the Trustees, each Administrative Trustee shall severally have the power, authority and authorization to act on behalf of the Trust with respect to the following matters: (A) the issuance and sale of the Trust Securities; (B) to cause the Trust to enter into, and to execute, deliver and perform on behalf of the Trust, such agreements, documents, instruments, certificates and other writings as may be necessary or desirable in connection with the purposes and function of the Trust, including, without limitation, the Operative Documents to which it is a party; (C) assisting in the sale of the Preferred Securities in one or more transactions exempt from registration under the Securities Act, and in compliance with applicable state securities or blue sky laws; (D) assisting in the sending of notices (other than notices of default) and other information regarding the Trust Securities and the Notes to the Holders in accordance with this Trust Agreement; (E) the appointment of a Paying Agent and Securities Registrar in accordance with this Trust Agreement; (F) execution and delivery of the Trust Securities on behalf of the Trust in accordance with this Trust Agreement; (G) execution and delivery of closing certificates, if any, pursuant to the Purchase Agreement and application for a taxpayer identification number for the Trust; (H) preparation and filing of all applicable tax returns and tax information reports that are required to be filed on behalf of the Trust; (I) establishing a record date with respect to all actions to be taken hereunder that require a record date to be established, except as provided in Section 6.10(a); (J) unless otherwise required by the Delaware Statutory Trust Act to execute on behalf of the Trust (either acting alone or together with the other Administrative Trustees) any documents and other writings that such Administrative Trustee has the power to execute pursuant to this Trust Agreement; and (K) the taking of any action incidental to the foregoing as such Administrative Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement. (ii) As among the Trustees, the Property Trustee shall have the power, authority and authorization to act on behalf of the Trust with respect to the following matters: (A) the receipt and holding of legal title of the Notes; (B) the establishment of the Payment Account; (C) the receipt of interest, principal and any other payments made in respect of the Notes and the holding of such amounts in the Payment Account; (D) the distribution through the Paying Agent of amounts distributable to the Holders in respect of the Trust Securities; (E) the exercise of all of the rights, powers and privileges of a holder of the Notes in accordance with the terms of this Trust Agreement; (F) the sending of notices of default and other information regarding the Trust Securities and the Notes to the Holders in accordance with this Trust Agreement; (G) the distribution of the Trust Property in accordance with the terms of this Trust Agreement; (H) to the extent provided in this Trust Agreement, the winding up of the affairs of and liquidation of the Trust, provided that the Administrative Trustees shall have the power, duty and authority to act on behalf of the Trust with respect to the preparation, execution and filing of the certificate of cancellation of the Trust with the Secretary of State of the State of Delaware; (I) the authentication of the Preferred Securities as provided in this Trust Agreement; and (J) the taking of any action incidental to the foregoing as the Property Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement and protect and conserve the Trust Property for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder). (b) In connection with the issue and sale of the Preferred Securities, the Depositor shall have the right and responsibility to assist the Trust with respect to, or effect on behalf of the Trust, the following (and any actions taken by the Depositor in furtherance of the following prior to the date of this Trust Agreement are hereby ratified and confirmed in all respects): (i) the negotiation of the terms of, and the execution and delivery of, the Purchase Agreement providing for the sale of the Preferred Securities in one or more transactions exempt from registration under the Securities Act, and in compliance with applicable state securities or blue sky laws; and (ii) the taking of any other actions necessary or desirable to carry out any of the foregoing activities. (c) Notwithstanding anything herein to the contrary, the Administrative Trustees are authorized and directed to conduct the affairs of the Trust and authorized to operate the Trust so that the Trust will not be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes, so that the Notes will be treated as indebtedness of the Depositor for United States federal income tax purposes and so that the Trust will not be deemed to be an "investment company" required to be registered under the Investment Company Act. In respect thereof, each Administrative Trustee is authorized to take any action, not inconsistent with applicable law, the Certificate of Trust or this Trust Agreement, that such Administrative Trustee determines in his or her discretion to be necessary or desirable for such purposes, as long as such action does not adversely affect in any material respect the interests of the Holders of the Outstanding Preferred Securities. In no event shall the Administrative Trustees be liable to the Trust or the Holders for any failure to comply with this Section 2.5 to the extent that such failure results solely from a change in law or regulation or in the interpretation thereof. (d) Any action taken by a Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with any Trustee acting on behalf of the Trust, no Person shall be required to inquire into the authority of such Trustee to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of any Trustee as set forth in this Trust Agreement. SECTION 2.6. Assets of Trust. The assets of the Trust shall consist of the Trust Property. SECTION 2.7. Title to Trust Property. (a) Legal title to all Trust Property shall be vested at all times in the Property Trustee and shall be held and administered by the Property Trustee in trust for the benefit of the Trust and the Holders in accordance with this Trust Agreement. (b) The Holders shall not have any right or title to the Trust Property other than the undivided beneficial interest in the assets of the Trust conferred by their Trust Securities and they shall have no right to call for any partition or division of property, profits or rights of the Trust except as described below. The Trust Securities shall be personal property giving only the rights specifically set forth therein and in this Trust Agreement. ARTICLE III. PAYMENT ACCOUNT; PAYING AGENTS SECTION 3.1. Payment Account. (a) On or prior to the Closing Date, the Property Trustee shall establish the Payment Account. The Property Trustee and the Paying Agent shall have exclusive control and sole right of withdrawal with respect to the Payment Account for the purpose of making deposits in and withdrawals from the Payment Account in accordance with this Trust Agreement. All monies and other property deposited or held from time to time in the Payment Account shall be held by the Property Trustee in the Payment Account for the exclusive benefit of the Holders and for Distribution as herein provided. (b) The Property Trustee shall deposit in the Payment Account, promptly upon receipt, all payments of principal of or interest on, and any other payments with respect to, the Notes. Amounts held in the Payment Account shall not be invested by the Property Trustee pending distribution thereof. SECTION 3.2. Appointment of Paying Agents. The Property Trustee is appointed as the initial Paying Agent and hereby accepts such appointment. The Paying Agent shall make Distributions to Holders from the Payment Account and shall report the amounts of such Distributions to the Property Trustee and the Administrative Trustees. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account solely for the purpose of making the Distributions referred to above. The Administrative Trustees may revoke such power and remove the Paying Agent in their sole discretion. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon thirty (30) days' written notice to the Administrative Trustees and the Property Trustee. If the Property Trustee shall no longer be the Paying Agent or a successor Paying Agent shall resign or its authority to act be revoked, the Administrative Trustees shall appoint a successor (which shall be a bank or trust company) to act as Paying Agent. Such successor Paying Agent appointed by the Administrative Trustees shall execute and deliver to the Trustees an instrument in which such successor Paying Agent shall agree with the Trustees that as Paying Agent, such successor Paying Agent will hold all sums, if any, held by it for payment to the Holders in trust for the benefit of the Holders entitled thereto until such sums shall be paid to such Holders. The Paying Agent shall return all unclaimed funds to the Property Trustee and upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Property Trustee. The provisions of Article VIII shall apply to the Property Trustee also in its role as Paying Agent, for so long as the Property Trustee shall act as Paying Agent and, to the extent applicable, to any other Paying Agent appointed hereunder. Any reference in this Trust Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. ARTICLE IV. DISTRIBUTIONS; REDEMPTION SECTION 4.1. Distributions. (a) The Trust Securities represent undivided beneficial interests in the Trust Property, and Distributions (including any Additional Interest Amounts) will be made on the Trust Securities at the rate and on the dates that payments of interest (including any Additional Interest) are made on the Notes. Accordingly: (i) Distributions on the Trust Securities shall be cumulative, and shall accumulate whether or not there are funds of the Trust available for the payment of Distributions. Distributions shall accumulate from March 16, 2006, and, except as provided in clause (ii) below, shall be payable quarterly in arrears on March 30th, June 30th, September 30th and December 30th of each year, commencing on March 30, 2006. If any date on which a Distribution is otherwise payable on the Trust Securities is not a Business Day, then the payment of such Distribution shall be made on the next succeeding Business Day (and no interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after each such date until the next succeeding Business Day), except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on such date (each date on which Distributions are payable in accordance with this Section 4.1(a)(i), a "Distribution Date"); (ii) Distributions shall accumulate in respect of the Trust Securities bearing interest at a fixed rate of 7.77% per annum, through the interest payment date in March 2016 ("Fixed Rate Period"), and thereafter at a variable rate of LIBOR plus 2.70% per annum of the Liquidation Amount of the Trust Securities, such rate being the rate of interest payable on the Notes. LIBOR shall be determined by the Calculation Agent in accordance with Schedule A. During the Fixed Rate Period, the amount of Distributions payable shall be computed on the basis of a 360-day year of twelve 30-day months and the amount payable for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. Upon expiration of the Fixed Rate Period, the amount of interest payable for any Distribution period will be computed on the basis of a 360-day year and the actual number of days elapsed in the relevant Distribution period. The amount of Distributions payable for any period shall include any Additional Interest Amounts in respect of such period; and (iii) Distributions on the Trust Securities shall be made by the Paying Agent from the Payment Account and shall be payable on each Distribution Date only to the extent that the Trust has funds then on hand and legally available in the Payment Account for the payment of such Distributions. (b) Distributions on the Trust Securities with respect to a Distribution Date shall be payable to the Holders thereof as they appear on the Securities Register for the Trust Securities at the close of business on the relevant record date, which shall be at the close of business on the fifteenth day (whether or not a Business Day) preceding the relevant Distribution Date, except that Distributions and any Additional Interest Amounts payable on the stated maturity (or any date of principal repayment upon early maturity) of the principal of a Trust Security or on a Redemption Date shall be paid to the Person to whom principal is paid. Distributions payable on any Trust Securities that are not punctually paid on any Distribution Date as a result of the Depositor having failed to make an interest payment under the Notes will cease to be payable to the Person in whose name such Trust Securities are registered on the relevant record date, and such defaulted Distributions and any Additional Interest Amounts will instead be payable to the Person in whose name such Trust Securities are registered on the special record date, or other specified date for determining Holders entitled to such defaulted Distribution and Additional Interest Amount, established in the same manner, and on the same date, as such is established with respect to the Notes under the Indenture. (c) As a condition to the payment of any principal of or interest on the Trust Securities without the imposition of withholding tax, the Administrative Trustees shall require the previous delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or applicable successor form) in the case of a person that is a "United States person" within the meaning of Section 7701(a)(30) of the Code or an Internal Revenue Service Form W-8 (or applicable successor form) in the case of a person that is not a "United States person" within the meaning of Section 7701(a)(30) of the Code) and any other certification acceptable to it to enable the Property Trustee or any Paying Agent to determine in good faith their respective duties and liabilities with respect to any taxes or other charges that they may be required to pay, deduct or withhold in respect of such Trust Securities. SECTION 4.2. Redemption. (a) On each Note Redemption Date and on the stated maturity (or any date of principal repayment upon early maturity) of the Notes and on each other date on (or in respect of) which any principal on the Notes is repaid, the Trust will be required to redeem a Like Amount of Trust Securities at the Redemption Price. (b) Notice of redemption shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not less than thirty (30) nor more than sixty (60) days prior to the Redemption Date to each Holder of Trust Securities to be redeemed, at such Holder's address appearing in the Securities Register. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price or, if the Redemption Price cannot be calculated prior to the time the notice is required to be sent, the estimate of the Redemption Price provided pursuant to the Indenture, as calculated by the Depositor, together with a statement that it is an estimate and that the actual Redemption Price will be calculated by the Calculation Agent on the fifth Business Day prior to the Redemption Date (and if an estimate is provided, a further notice shall be sent of the actual Redemption Price on the date that such Redemption Price is calculated); (iii) if less than all the Outstanding Trust Securities are to be redeemed, the identification (and, in the case of partial redemption, the respective amounts) and Liquidation Amounts of the particular Trust Securities to be redeemed; (iv) that on the Redemption Date, the Redemption Price will become due and payable upon each such Trust Security, or portion thereof, to be redeemed and that Distributions thereon will cease to accumulate on such Trust Security or such portion, as the case may be, on and after said date, except as provided in Section 4.2(d); (v) the place or places where the Trust Securities are to be surrendered for the payment of the Redemption Price; and (vi) such other provisions as the Property Trustee deems relevant. (c) The Trust Securities (or portion thereof) redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption or payment at maturity of Notes. Redemptions of the Trust Securities (or portion thereof) shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Trust has funds then on hand and legally available in the Payment Account for the payment of such Redemption Price. Under the Indenture, the Notes may be redeemed by the Depositor on any Interest Payment Date, at the Depositor's option, on or after March 30, 2011, in whole or in part, from time to time at the Optional Note Redemption Price. The Notes may also be redeemed by the Depositor, at its option pursuant to the terms of the Indenture, in whole but not in part, upon the occurrence and during the continuation of an Investment Company Event or a Tax Event, at the Special Note Redemption Price. (d) If the Property Trustee gives a notice of redemption in respect of any Preferred Securities, then by 10:00 A.M., New York City time, on the Redemption Date, the Depositor shall deposit sufficient funds with the Property Trustee to pay the Redemption Price. If such deposit has been made by such time, then by 12:00 noon, New York City time, on the Redemption Date, the Property Trustee will, with respect to Book-Entry Preferred Securities, irrevocably deposit with the Depositary for such Book-Entry Preferred Securities, to the extent available therefor, funds sufficient to pay the applicable Redemption Price and will give such Depositary irrevocable instructions and authority to pay the Redemption Price to the Holders of the Preferred Securities. With respect to Preferred Securities that are not Book-Entry Preferred Securities, the Property Trustee will irrevocably deposit with the Paying Agent, to the extent legally available therefor, funds sufficient to pay the applicable Redemption Price and will give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the Holders of the Preferred Securities upon surrender of their Preferred Securities Certificates. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Trust Securities (or portion thereof) called for redemption shall be payable to the Holders of such Trust Securities as they appear on the Securities Register on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of Holders holding Trust Securities (or portion thereof) so called for redemption will cease, except the right of such Holders to receive the Redemption Price and any Distribution payable in respect of the Trust Securities on or prior to the Redemption Date, but without interest, and, in the case of a partial redemption, the right of such Holders to receive a new Trust Security or Securities of authorized denominations, in aggregate Liquidation Amount equal to the unredeemed portion of such Trust Security or Securities, and such Securities (or portion thereof) called for redemption will cease to be Outstanding. In the event that any date on which any Redemption Price is payable is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding Business Day (and no interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after each such date until the next succeeding Business Day), except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on such date. In the event that payment of the Redemption Price in respect of any Trust Securities (or portion thereof) called for redemption is improperly withheld or refused and not paid either by the Trust, Distributions on such Trust Securities (or portion thereof) will continue to accumulate, as set forth in Section 4.1, from the Redemption Date originally established by the Trust for such Trust Securities (or portion thereof) to the date such Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the Redemption Price. (e) Subject to Section 4.3(a), if less than all the Outstanding Trust Securities are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust Securities to be redeemed shall be allocated pro rata to the Common Securities and the Preferred Securities based upon the relative aggregate Liquidation Amounts of the Common Securities and the Preferred Securities. Upon such a partial redemption, the Preferred Securities to be redeemed from each Holder of Preferred Securities shall be selected on a pro rata basis based upon the respective Liquidation Amounts of the Preferred Securities then held by each Holder of the Preferred Securities not more than sixty (60) days prior to the Redemption Date by the Property Trustee from the Outstanding Preferred Securities not previously called for redemption; provided, that with respect to Holders that would be required to hold less than one hundred (100) but more than zero (0) Trust Securities as a result of such redemption, the Trust shall redeem Trust Securities of each such Holder so that after such redemption such Holder shall hold either one hundred (100) Trust Securities or such Holder no longer holds any Trust Securities, and shall use such method (including, without limitation, by lot) as the Trust shall deem fair and appropriate; and provided, further, that so long as the Preferred Securities are Book-Entry Preferred Securities, such selection shall be made in accordance with the Applicable Depositary Procedures for the Preferred Securities by such Depositary. The Property Trustee shall promptly notify the Securities Registrar in writing of the Preferred Securities (or portion thereof) selected for redemption and, in the case of any Preferred Securities selected for partial redemption, the Liquidation Amount thereof to be redeemed. For all purposes of this Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Preferred Securities shall relate, in the case of any Preferred Securities redeemed or to be redeemed only in part, to the portion of the aggregate Liquidation Amount of Preferred Securities that has been or is to be redeemed. (f) The Trust in issuing the Trust Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Property Trustee shall indicate the "CUSIP" numbers of the Trust Securities in notices of redemption and related materials as a convenience to Holders; provided, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Trust Securities or as contained in any notice of redemption and related materials. SECTION 4.3. Subordination of Common Securities. (a) Payment of Distributions (including any Additional Interest Amounts) on, the Redemption Price of and the Liquidation Distribution in respect of, the Trust Securities, as applicable, shall be made, pro rata among the Common Securities and the Preferred Securities based on the Liquidation Amount of the respective Trust Securities; provided, that if on any Distribution Date, Redemption Date or Liquidation Date an Event of Default shall have occurred and be continuing, no payment of any Distribution (including any Additional Interest Amounts) on, Redemption Price of or Liquidation Distribution in respect of, any Common Security, and no other payment on account of the redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions (including any Additional Interest Amounts) on all Outstanding Preferred Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price the full amount of such Redemption Price on all Outstanding Preferred Securities then called for redemption, or in the case of payment of the Liquidation Distribution the full amount of such Liquidation Distribution on all Outstanding Preferred Securities, shall have been made or provided for, and all funds immediately and legally available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions (including any Additional Interest Amounts) on, or the Redemption Price of or the Liquidation Distribution in respect of, the Preferred Securities then due and payable. (b) In the case of the occurrence of any Event of Default, the Holders of the Common Securities shall have no right to act with respect to any such Event of Default under this Trust Agreement until all such Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated. Until all such Events of Default under this Trust Agreement with respect to the Preferred Securities have been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the Holders of the Preferred Securities and not on behalf of the Holders of the Common Securities, and only the Holders of all the Preferred Securities will have the right to direct the Property Trustee to act on their behalf. SECTION 4.4. Payment Procedures. Payments of Distributions (including any Additional Interest Amounts), the Redemption Price, Liquidation Amount or any other amounts in respect of the Preferred Securities shall be made by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Securities Register. If any Preferred Securities are held by a Depositary, such Distributions thereon shall be made to the Depositary in immediately and legally available funds. Payments in respect of the Common Securities shall be made in such manner as shall be mutually agreed between the Property Trustee and the Holder of all the Common Securities. SECTION 4.5. Withholding Tax. The Trust and the Administrative Trustees shall comply with all withholding and backup withholding tax requirements under United States federal, state and local law. The Administrative Trustees on behalf of the Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding and backup withholding tax with respect to each Holder and any representations and forms as shall reasonably be requested by the Administrative Trustees on behalf of the Trust to assist it in determining the extent of, and in fulfilling, its withholding and backup withholding tax obligations. The Administrative Trustees shall file required forms with applicable jurisdictions and, unless an exemption from withholding and backup withholding tax is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any jurisdiction with respect to Distributions or allocations to any Holder, the amount withheld shall be deemed to be a Distribution in the amount of the withholding to the Holder. In the event of any claimed overwithholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Administrative Trustees on behalf of the Trust may reduce subsequent Distributions by the amount of such required withholding. SECTION 4.6. Tax Returns and Other Reports. The Administrative Trustees shall prepare (or cause to be prepared) at the principal office of the Trust in the United States, as defined for purposes of Treasury regulations section 301.7701-7, at the Depositor's expense, and file, all United States federal, state and local tax and information returns and reports required to be filed by or in respect of the Trust. The Administrative Trustees shall prepare at the principal office of the Trust in the United States, as defined for purposes of Treasury regulations section 301.7701-7, and furnish (or cause to be prepared and furnished), by January 31 in each taxable year of the Trust to each Holder all Internal Revenue Service forms and returns required to be provided by the Trust. The Administrative Trustees shall provide the Depositor and the Property Trustee with a copy of all such returns and reports promptly after such filing or furnishing. SECTION 4.7. Payment of Taxes, Duties, Etc. of the Trust. Upon receipt under the Notes of Additional Tax Sums and upon the written direction of the Administrative Trustees, the Property Trustee shall promptly pay, solely out of monies on deposit pursuant to this Trust Agreement, any Additional Taxes imposed on the Trust by the United States or any other taxing authority. SECTION 4.8. Payments under Indenture or Pursuant to Direct Actions. Any amount payable hereunder to any Holder of Preferred Securities shall be reduced by the amount of any corresponding payment such Holder (or any Owner with respect thereto) has directly received pursuant to Section 5.8 of the Indenture or Section 6.10(b) of this Trust Agreement. SECTION 4.9. Exchanges. (a) If at any time the Depositor or any of its Affiliates (in either case, a "Depositor Affiliate") is the Owner or Holder of any Preferred Securities, such Depositor Affiliate shall have the right to deliver to the Property Trustee all or such portion of its Preferred Securities as it elects and, subject to compliance with Sections 2.2 and 3.5 of the Indenture, receive, in exchange therefor, a Like Amount of Notes. Such election shall be exercisable effective on any Distribution Date by such Depositor Affiliate delivering to the Property Trustee (i) at least ten (10) Business Days prior to the Distribution Date on which such exchange is to occur, the registration instructions and the documentation, if any, required pursuant to Sections 2.2 and 3.5 of the Indenture to enable the Indenture Trustee to issue the requested Like Amount of Notes, (ii) a written notice of such election specifying the Liquidation Amount of Preferred Securities with respect to which such election is being made and the Distribution Date on which such exchange shall occur, which Distribution Date shall be not less than ten (10) Business Days after the date of receipt by the Property Trustee of such election notice and (iii) shall be conditioned upon such Depositor Affiliate having delivered or caused to be delivered to the Property Trustee or its designee the Preferred Securities that are the subject of such election by 10:00 A.M. New York time, on the Distribution Date on which such exchange is to occur. After the exchange, such Preferred Securities will be canceled and will no longer be deemed to be Outstanding and all rights of the Depositor Affiliate with respect to such Preferred Securities will cease. (b) In the case of an exchange described in Section 4.9(a), the Property Trustee on behalf of the Trust will, on the date of such exchange, exchange Notes having a principal amount equal to a proportional amount of the aggregate Liquidation Amount of the Outstanding Common Securities, based on the ratio of the aggregate Liquidation Amount of the Preferred Securities exchanged pursuant to Section 4.9(a) divided by the aggregate Liquidation Amount of the Preferred Securities Outstanding immediately prior to such exchange, for such proportional amount of Common Securities held by the Depositor (which contemporaneously shall be canceled and no longer be deemed to be Outstanding); provided, that the Depositor delivers or causes to be delivered to the Property Trustee or its designee the required amount of Common Securities to be exchanged by 10:00 A.M. New York time, on the Distribution Date on which such exchange is to occur. SECTION 4.10. Calculation Agent. (a) The Calculation Agent may be removed by the Administrative Trustees at any time. Notwithstanding the foregoing, the Property Trustee shall initially and, for so long as it holds any of the Notes, be the Calculation Agent for purposes of determining LIBOR for each Distribution Date. If the Calculation Agent is unable or unwilling to act as such or is removed by the Administrative Trustees, the Administrative Trustees will promptly appoint as a replacement Calculation Agent the London office of a leading bank which is engaged in transactions in three-month Eurodollar deposits in the international Eurodollar market and which does not control or is not controlled by or under common control with the Administrative Trustee or its Affiliates. The Calculation Agent may not resign its duties without a successor having been duly appointed. (b) The Calculation Agent shall be required to agree that, as soon as possible after 11:00 a.m. (London time) on each LIBOR Determination Date, but in no event later than 11:00 a.m. (London time) on the Business Day immediately following each LIBOR Determination Date, the Calculation Agent will calculate the interest rate (rounded to the nearest cent, with half a cent being rounded upwards) for the related Distribution Date, and will communicate such rate and amount to the Depositor, the Administrative Trustees, the Note Trustee, each Paying Agent and the Depositary. The Calculation Agent will also specify to the Administrative Trustees the quotations upon which the foregoing rates and amounts are based and, in any event, the Calculation Agent shall notify the Administrative Trustees before 5:00 p.m. (London time) on each LIBOR Determination Date that either: (i) it has determined or is in the process of determining the foregoing rates and amounts or (ii) it has not determined and is not in the process of determining the foregoing rates and amounts, together with its reasons therefor. The Calculation Agent's determination of the foregoing rates and amounts for any Distribution Date will (in the absence of manifest error) be final and binding upon all parties. For the sole purpose of calculating the interest rate for the Trust Securities, "Business Day" shall be defined as any day on which dealings in deposits in Dollars are transacted in the London interbank market. SECTION 4.11. Certain Accounting Matters. (a) At all times during the existence of the Trust, the Administrative Trustees shall keep, or cause to be kept at the principal office of the Trust in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, full books of account, records and supporting documents, which shall reflect in reasonable detail each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. (b) The Administrative Trustees shall either (i) if the Depositor is then subject to such reporting requirements, cause each Form 10-K and Form 10-Q prepared by the Depositor and filed with the Commission in accordance with the Exchange Act to be delivered to each Holder, with a copy to the Property Trustee, within thirty (30) days after the filing thereof or (ii) cause to be prepared at the principal office of the Trust in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, and delivered to each of the Holders, with a copy to the Property Trustee, within ninety (90) days after the end of each Fiscal Year, annual financial statements of the Trust, including a balance sheet of the Trust as of the end of such Fiscal Year, and the related statements of income or loss. (c) If the Depositor intends to file its annual and quarterly information with the Commission in electronic form pursuant to Regulation S-T of the Commission using the Commission's Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system, the Administrative Trustees shall notify the Property Trustee in the manner prescribed herein of each such annual and quarterly filing. The Property Trustee is hereby authorized and directed to access the EDGAR system for purposes of retrieving the financial information so filed. Compliance with the foregoing shall constitute delivery by the Administrative Trustees of its financial statements to the Property Trustee in compliance with the provisions of Section 314(a) of the Trust Indenture Act, if applicable. The Property Trustee shall have no duty to search for or obtain any electronic or other filings that the Depositor makes with the Commission, regardless of whether such filings are periodic, supplemental or otherwise. Delivery of reports, information and documents to the Property Trustee pursuant to this Section 4.11(c) shall be solely for purposes of compliance with this Section 4.11 and, if applicable, with Section 314(a) of the Trust Indenture Act. The Property Trustee's receipt of such reports, information and documents shall not constitute notice to it of the content thereof or any matter determinable from the content thereof, including the Depositor's compliance with any of its covenants hereunder, as to which the Property Trustee is entitled to rely upon Officers' Certificates. (d) The Trust shall maintain one or more bank accounts in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Notes held by the Property Trustee shall be made directly to the Payment Account and no other funds of the Trust shall be deposited in the Payment Account. The sole signatories for such accounts (including the Payment Account) shall be designated by the Property Trustee. ARTICLE V. SECURITIES SECTION 5.1. Initial Ownership. Upon the creation of the Trust and the contribution by the Depositor referred to in Section 2.3 and until the issuance of the Trust Securities, and at any time during which no Trust Securities are Outstanding, the Depositor shall be the sole beneficial owner of the Trust. SECTION 5.2. Authorized Trust Securities. The Trust shall be authorized to issue one series of Preferred Securities having an aggregate Liquidation Amount of $50,000,000 and one series of Common Securities having an aggregate Liquidation Amount of $1,547,000. SECTION 5.3. Issuance of the Common Securities; Subscription and Purchase of Notes. On the Closing Date, an Administrative Trustee, on behalf of the Trust, shall execute and deliver to the Depositor Common Securities Certificates, registered in the name of the Depositor, evidencing an aggregate of 1,547 Common Securities having an aggregate Liquidation Amount of One Million Five Hundred Forty-Seven Thousand Dollars ($1,547,000), against receipt by the Trust of the aggregate purchase price of such Common Securities of One Million Five Hundred Forty-Seven Thousand Dollars ($1,547,000). Contemporaneously therewith and with the sale by the Trust to the Holders of an aggregate of 50,000 Preferred Securities having an aggregate Liquidation Amount of Fifty Million Dollars ($50,000,000), an Administrative Trustee, on behalf of the Trust, shall purchase from the Depositor Notes, to be registered in the name of the Property Trustee on behalf of the Trust and having an aggregate principal amount equal to Fifty One Million Five Hundred Forty-Seven Thousand Dollars ($51,547,000), and, in satisfaction of the purchase price for such Notes, the Property Trustee, on behalf of the Trust, shall deliver to the Depositor the sum of Fifty One Million Five Hundred Forty-Seven Thousand Dollars ($51,547,000) (being the aggregate amount paid by the Holders for the Preferred Securities, and the amount paid by the Depositor for the Common Securities). SECTION 5.4. The Securities Certificates. (a) The Preferred Securities Certificates shall be issued in minimum denominations of $100,000 Liquidation Amount and integral multiples of $1,000 in excess thereof, and the Common Securities Certificates shall be issued in minimum denominations of $10,000 Liquidation Amount and integral multiples of $1,000 in excess thereof. The Securities Certificates shall be executed on behalf of the Trust by manual or facsimile signature of at least one Administrative Trustee. Securities Certificates bearing the signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign such Securities Certificates on behalf of the Trust shall be validly issued and entitled to the benefits of this Trust Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Securities Certificates or did not have such authority at the date of delivery of such Securities Certificates. (b) On the Closing Date, upon the written order of an authorized officer of the Depositor, the Administrative Trustees shall cause Securities Certificates to be executed on behalf of the Trust and delivered, without further corporate action by the Depositor, in authorized denominations. (c) The Preferred Securities issued to QIBs/QPs shall be, except as provided in Section 5.6, Book-Entry Preferred Securities issued in the form of one or more Global Preferred Securities registered in the name of the Depositary, or its nominee and deposited with the Depositary or the Property Trustee as custodian for the Depositary for credit by the Depositary to the respective accounts of the Depositary Participants thereof (or such other accounts as they may direct). The Preferred Securities issued to a Person other than a QIB/QP shall be issued in the form of Definitive Preferred Securities Certificates. (d) A Preferred Security shall not be valid until authenticated by the manual signature of an authorized signatory of the Property Trustee. Such signature shall be conclusive evidence that the Preferred Security has been authenticated under this Trust Agreement. Upon written order of the Trust signed by one Administrative Trustee, the Property Trustee shall authenticate and deliver one or more Preferred Security Certificates evidencing the Preferred Securities for original issue. The Property Trustee may appoint an authenticating agent that is a U.S. Person acceptable to the Trust to authenticate the Preferred Securities. A Common Security need not be so authenticated and shall be valid upon execution by one or more Administrative Trustees. The form of this certificate of authentication can be found in Section 5.13. (e) Upon issuance of the Trust Securities as provided in this Trust Agreement, the Trust Securities so issued shall be deemed to be validly issued, fully paid and nonassessable, and each Holder thereof shall be entitled to the benefits provided by this Trust Agreement. SECTION 5.5. Rights of Holders. The Trust Securities shall have no, and the issuance of the Trust Securities is not subject to, preemptive or similar rights and when issued and delivered to Holders against payment of the purchase price therefor will be fully paid and non-assessable by the Trust. Except as provided in Section 5.11(b), the Holders of the Trust Securities, in their capacities as such, shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION 5.6. Book-Entry Preferred Securities. (a) A Global Preferred Security may be exchanged, in whole or in part, for Definitive Preferred Securities Certificates registered in the names of the Owners only if such exchange complies with Section 5.7 and (i) the Depositary advises the Administrative Trustees and the Property Trustee in writing that the Depositary is no longer willing or able properly to discharge its responsibilities with respect to the Global Preferred Security, and no qualified successor is appointed by the Administrative Trustees within ninety (90) days of receipt of such notice, (ii) the Depositary ceases to be a clearing agency registered under the Exchange Act and the Administrative Trustees fail to appoint a qualified successor within ninety (90) days of obtaining knowledge of such event, (iii) the Administrative Trustees at their option advise the Property Trustee in writing that the Trust elects to terminate the book-entry system through the Depositary or (iv) a Note Event of Default has occurred and is continuing. Upon the occurrence of any event specified in clause (i), (ii), (iii) or (iv) above, the Administrative Trustees shall notify the Depositary and instruct the Depositary to notify all Owners of Book-Entry Preferred Securities, the Delaware Trustee and the Property Trustee of the occurrence of such event and of the availability of the Definitive Preferred Securities Certificates to Owners of the Preferred Securities requesting the same. Upon the issuance of Definitive Preferred Securities Certificates, the Trustees shall recognize the Holders of the Definitive Preferred Securities Certificates as Holders. Notwithstanding the foregoing, if an Owner of a beneficial interest in a Global Preferred Security wishes at any time to transfer an interest in such Global Preferred Security to a Person other than a QIB/QP, such transfer shall be effected, subject to the Applicable Depositary Procedures, in accordance with the provisions of this Section 5.6 and Section 5.7, and the transferee shall receive a Definitive Preferred Securities Certificate in connection with such transfer. A holder of a Definitive Preferred Securities Certificate that is a QIB/QP may, upon request and in accordance with the provisions of this Section 5.6 and Section 5.7, exchange such Definitive Preferred Securities Certificate for a beneficial interest in a Global Preferred Security. (b) If any Global Preferred Security is to be exchanged for Definitive Preferred Securities Certificates or canceled in part, or if any Definitive Preferred Securities Certificate is to be exchanged in whole or in part for any Global Preferred Security, then either (i) such Global Preferred Security shall be so surrendered for exchange or cancellation as provided in this Article V or (ii) the aggregate Liquidation Amount represented by such Global Preferred Security shall be reduced, subject to Section 5.4, or increased by an amount equal to the Liquidation Amount represented by that portion of the Global Preferred Security to be so exchanged or canceled, or equal to the Liquidation Amount represented by such Definitive Preferred Securities Certificates to be so exchanged for any Global Preferred Security, as the case may be, by means of an appropriate adjustment made on the records of the Securities Registrar, whereupon the Property Trustee, in accordance with the Applicable Depositary Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender to the Administrative Trustees or the Securities Registrar of any Global Preferred Security or Securities by the Depositary, accompanied by registration instructions, the Administrative Trustees, or any one of them, shall execute the Definitive Preferred Securities Certificates in accordance with the instructions of the Depositary, and the Property Trustee, upon receipt thereof, shall authenticate and deliver such Definitive Preferred Securities Certificates. None of the Securities Registrar or the Trustees shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions. (c) Every Definitive Preferred Securities Certificate executed and delivered upon registration or transfer of, or in exchange for or in lieu of, a Global Preferred Security or any portion thereof shall be executed and delivered in the form of, and shall be, a Global Preferred Security, unless such Definitive Preferred Securities Certificate is registered in the name of a Person other than the Depositary for such Global Preferred Security or a nominee thereof. (d) The Depositary or its nominee, as registered owner of a Global Preferred Security, shall be the Holder of such Global Preferred Security for all purposes under this Trust Agreement and the Global Preferred Security, and Owners with respect to a Global Preferred Security shall hold such interests pursuant to the Applicable Depositary Procedures. The Securities Registrar and the Trustees shall be entitled to deal with the Depositary for all purposes of this Trust Agreement relating to the Global Preferred Securities (including the payment of the Liquidation Amount of and Distributions on the Book-Entry Preferred Securities represented thereby and the giving of instructions or directions by Owners of Book-Entry Preferred Securities represented thereby and the giving of notices) as the sole Holder of the Book-Entry Preferred Securities represented thereby and shall have no obligations to the Owners thereof. None of the Trustees nor the Securities Registrar shall have any liability in respect of any transfers effected by the Depositary. (e) The rights of the Owners of the Book-Entry Preferred Securities shall be exercised only through the Depositary and shall be limited to those established by law, the Applicable Depositary Procedures and agreements between such Owners and the Depositary and/or the Depositary Participants; provided, that solely for the purpose of determining whether the Holders of the requisite amount of Preferred Securities have voted on any matter provided for in this Trust Agreement, to the extent that Preferred Securities are represented by a Global Preferred Security, the Trustees may conclusively rely on, and shall be fully protected in relying on, any written instrument (including a proxy) delivered to the Property Trustee by the Depositary setting forth the Owners' votes or assigning the right to vote on any matter to any other Persons either in whole or in part. To the extent that Preferred Securities are represented by a Global Preferred Security, the initial Depositary will make book-entry transfers among the Depositary Participants and receive and transmit payments on the Preferred Securities that are represented by a Global Preferred Security to such Depositary Participants, and none of the Depositor or the Trustees shall have any responsibility or obligation with respect thereto. (f) To the extent that a notice or other communication to the Holders is required under this Trust Agreement, for so long as Preferred Securities are represented by a Global Preferred Security, the Trustees shall give all such notices and communications to the Depositary, and shall have no obligations to the Owners. SECTION 5.7. Registration of Transfer and Exchange of Preferred Securities Certificates. (a) The Property Trustee shall keep or cause to be kept, at the Corporate Trust Office, a register or registers (the "Securities Register") in which the registrar and transfer agent with respect to the Trust Securities (the "Securities Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Preferred Securities Certificates and Common Securities Certificates and registration of transfers and exchanges of Preferred Securities Certificates as herein provided. The Person acting as the Property Trustee shall at all times also be the Securities Registrar. The provisions of Article VIII shall apply to the Property Trustee in its role as Securities Registrar. (b) Subject to Section 5.7(d), upon surrender for registration of transfer of any Preferred Securities Certificate at the office or agency maintained pursuant to Section 5.7(f), the Administrative Trustees or any one of them shall execute by manual or facsimile signature and deliver to the Property Trustee, and the Property Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Preferred Securities Certificates in authorized denominations of a like aggregate Liquidation Amount as may be required by this Trust Agreement dated the date of execution by such Administrative Trustee or Trustees. At the option of a Holder, Preferred Securities Certificates may be exchanged for other Preferred Securities Certificates in authorized denominations and of a like aggregate Liquidation Amount upon surrender of the Preferred Securities Certificate to be exchanged at the office or agency maintained pursuant to Section 5.7(f). Whenever any Preferred Securities Certificates are so surrendered for exchange, the Administrative Trustees or any one of them shall execute by manual or facsimile signature and deliver to the Property Trustee, and the Property Trustee shall authenticate and deliver, the Preferred Securities Certificates that the Holder making the exchange is entitled to receive. (c) The Securities Registrar shall not be required, (i) to issue, register the transfer of or exchange any Preferred Security during a period beginning at the opening of business fifteen (15) days before the day of selection for redemption of such Preferred Securities pursuant to Article IV and ending at the close of business on the day of mailing of the notice of redemption or (ii) to register the transfer of or exchange any Preferred Security so selected for redemption in whole or in part, except, in the case of any such Preferred Security to be redeemed in part, any portion thereof not to be redeemed. (d) Every Preferred Securities Certificate presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Securities Registrar duly executed by the Holder or such Holder's attorney duly authorized in writing and if such Preferred Securities Certificate is being transferred, accompanied by a certificate of the transferee substantially in the form set forth as Exhibit E or Exhibit F, as the case may be, hereto. (e) No service charge shall be made for any registration of transfer or exchange of Preferred Securities Certificates, but the Property Trustee on behalf of the Trust may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Preferred Securities Certificates. (f) The Administrative Trustees shall designate an office or offices or agency or agencies where Preferred Securities Certificates may be surrendered for registration of transfer or exchange and initially designate the Corporate Trust Office as its office and agency for such purposes. The Administrative Trustees shall give prompt written notice to the Depositor, the Property Trustee and to the Holders of any change in the location of any such office or agency. (g) The Preferred Securities may only be transferred to a "Qualified Purchaser" as such term is defined in Section 2(a)(51) of the Investment Company Act. (h) Neither the Property Trustee nor the Securities Registrar shall be responsible for ascertaining whether any transfer hereunder complies with the registration provisions of or any exemptions from the Securities Act, applicable state securities laws or the applicable laws of any other jurisdiction, ERISA, the Code or the Investment Company Act; provided, that if a certificate is specifically required by the express terms of this Section 5.7 to be delivered to the Property Trustee or the Securities Registrar by a Holder or transferee of a Security, the Property Trustee and the Securities Registrar shall be under a duty to receive and examine the same to determine whether or not the certificate substantially conforms on its face to the requirements of this Trust Agreement and shall promptly notify the party delivering the same if such certificate does not comply with such terms. SECTION 5.8. Mutilated, Destroyed, Lost or Stolen Securities Certificates. (a) If any mutilated Securities Certificate shall be surrendered to the Securities Registrar together with such security or indemnity as may be required by the Securities Registrar to save each of the Trustees harmless, the Administrative Trustees, or any one of them, on behalf of the Trust, shall execute and make available for delivery and, with respect to Preferred Securities, the Property Trustee shall authenticate, in exchange therefor a new Securities Certificate of like class, tenor and denomination. (b) If the Securities Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Securities Certificate and there shall be delivered to the Securities Registrar such security or indemnity as may be required by it to save each of the Trustees harmless, then in the absence of notice that such Securities Certificate shall have been acquired by a protected purchaser, the Administrative Trustees, or any one of them, on behalf of the Trust, shall execute and make available for delivery, and, with respect to Preferred Securities, the Property Trustee upon written order of the Trust executed by one Administrative Trustee shall authenticate, in exchange for or in lieu of any such destroyed, lost or stolen Securities Certificate, a new Securities Certificate of like class, tenor and denomination. (c) In connection with the issuance of any new Securities Certificate under this Section 5.8, the Administrative Trustees or the Securities Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. (d) Any duplicate Securities Certificate issued pursuant to this Section 5.8 shall constitute conclusive evidence of an undivided beneficial interest in the assets of the Trust corresponding to that evidenced by the mutilated, lost, stolen or destroyed Securities Certificate, as if originally issued, whether or not the lost, stolen or destroyed Securities Certificate shall be found at any time. (e) If any such mutilated, destroyed, lost or stolen Securities Certificate has become or is about to become due and payable, the Depositor in its discretion may provide the Property Trustee or Paying Agent, as applicable, with the funds to pay such Trust Security and upon receipt of such funds, the Property Trustee or Paying Agent, as applicable, shall pay such Trust Security instead of issuing a new Securities Certificate. (f) The provisions of this Section 5.8 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement of mutilated, destroyed, lost or stolen Securities Certificates. SECTION 5.9. Persons Deemed Holders. The Trustees and the Securities Registrar shall each treat the Person in whose name any Securities Certificate shall be registered in the Securities Register as the owner of the Trust Securities evidenced by such Securities Certificate for the purpose of receiving Distributions and for all other purposes whatsoever, and none of the Trustees and the Securities Registrar shall be bound by any notice to the contrary. SECTION 5.10. Cancellation. All Preferred Securities Certificates surrendered for registration of transfer or exchange or for payment shall, if surrendered to any Person other than the Property Trustee, be delivered to the Property Trustee, and any such Preferred Securities Certificates and Preferred Securities Certificates surrendered directly to the Property Trustee for any such purpose shall be promptly canceled by it. The Administrative Trustees may at any time deliver to the Property Trustee for cancellation any Preferred Securities Certificates previously delivered hereunder that the Administrative Trustees may have acquired in any manner whatsoever, and all Preferred Securities Certificates so delivered shall be promptly canceled by the Property Trustee. No Preferred Securities Certificates shall be executed and delivered in lieu of or in exchange for any Preferred Securities Certificates canceled as provided in this Section 5.10, except as expressly permitted by this Trust Agreement. All canceled Preferred Securities Certificates shall be retained by the Property Trustee in accordance with its customary practices. SECTION 5.11. Ownership of Common Securities by Depositor. (a) On the Closing Date, the Depositor shall acquire, and thereafter shall retain, beneficial and record ownership of the Common Securities. Neither the Depositor nor any successor Holder of the Common Securities may transfer less than all the Common Securities, and the Depositor or any such successor Holder may transfer the Common Securities only (i) in connection with a consolidation or merger of the Depositor into another Person, or any conveyance, transfer or lease by the Depositor of its properties and assets substantially as an entirety to any Person (in which event such Common Securities will be transferred to such surviving entity, transferee or lessee, as the case may be), pursuant to Section 8.1 of the Indenture or (ii) to the Depositor or an Affiliate of the Depositor, in each such case in compliance with applicable law (including the Securities Act, and applicable state securities and blue sky laws). To the fullest extent permitted by law, any attempted transfer of the Common Securities other than as set forth in the immediately preceding sentence shall be void. The Administrative Trustees shall cause each Common Securities Certificate issued to the Depositor to contain a legend stating substantially "THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.11 OF THE TRUST AGREEMENT." (b) Any Holder of the Common Securities shall be liable for the debts and obligations of the Trust in the manner and to the extent set forth with respect to the Depositor and agrees that it shall be subject to all liabilities to which the Depositor may be subject and, prior to becoming such a Holder, shall deliver to the Administrative Trustees an instrument of assumption satisfactory to such Trustees. SECTION 5.12. Restricted Legends. (a) Each Preferred Security Certificate shall bear a legend in substantially the following form: "[IF THIS SECURITY IS A GLOBAL SECURITY INSERT: THIS PREFERRED SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE TRUST AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS PREFERRED SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE TRUST AGREEMENT, AND NO TRANSFER OF THIS PREFERRED SECURITY (OTHER THAN A TRANSFER OF THIS PREFERRED SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO ANTHRACITE CAPITAL TRUST III OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY PREFERRED SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] THE PREFERRED SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SUCH PREFERRED SECURITIES OR ANY INTEREST THEREIN, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY PREFERRED SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE PREFERRED SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE HOLDER OF THE PREFERRED SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE TRUST AND THE DEPOSITOR THAT SUCH PREFERRED SECURITIES MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE TRUST OR (B) (I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED PURCHASER" (AS DEFINED IN SECTION 2(a)(51) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED), AND (II) (Z) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (Y) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (X) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (W) PURSUANT TO AN EXEMPTION FROM THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND, IN THE CASE OF (Y) OR (W), SUBJECT TO THE RIGHT OF THE TRUST AND THE DEPOSITOR TO REQUIRE AN OPINION OF COUNSEL AND OTHER INFORMATION REASONABLY SATISFACTORY TO EACH OF THEM (PROVIDED THAT IF SUCH OPINION AND INFORMATION STATES THAT THE PROPOSED OFFER, RESALE OR OTHER TRANSFER WILL BE IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS, THE COMPANY MAY NOT OBJECT THERETO). IN ADDITION, THE HOLDER FURTHER AGREES THAT IT WILL NOTIFY ANY PURCHASER OF ANY PREFERRED SECURITIES FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN THE PRECEDING SENTENCE AND THAT SUCH PREFERRED SECURITIES MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED ONLY IN ACCORDANCE WITH SECTION 5.7 OF THE TRUST AGREEMENT AS DEFINED HEREIN. THE PREFERRED SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE LIQUIDATION AMOUNT OF NOT LESS THAN $100,000. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY ATTEMPTED TRANSFER OF PREFERRED SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK HAVING AN AGGREGATE LIQUIDATION AMOUNT OF LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH PREFERRED SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF LIQUIDATION AMOUNT OF OR DISTRIBUTIONS ON SUCH PREFERRED SECURITIES, OR ANY INTEREST THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH PREFERRED SECURITIES. THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS PREFERRED SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR HOLDER OF THE PREFERRED SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE." (b) The above legend shall not be removed from any of the Preferred Securities Certificates unless there is delivered to the Property Trustee and the Depositor satisfactory evidence, which may include an opinion of counsel, as may be reasonably required to ensure that any future transfers thereof may be made without restriction under the provisions of the Securities Act and other applicable law. Upon provision of such satisfactory evidence, one or more of the Administrative Trustees on behalf of the Trust shall execute and deliver to the Property Trustee, and the Property Trustee shall authenticate and deliver, at the written direction of the Administrative Trustees and the Depositor, Preferred Securities Certificates that do not bear the legend. SECTION 5.13. Form of Certificate of Authentication. The Property Trustee's certificate of authentication shall be in substantially the following form: This is one of the Preferred Securities referred to in the within-mentioned Trust Agreement. Dated: Wilmington Trust Company, not in its individual capacity, but solely as Property Trustee By: ________________________________ Authorized signatory ARTICLE VI. MEETINGS; VOTING; ACTS OF HOLDERS SECTION 6.1. Notice of Meetings. Notice of all meetings of the Holders of the Preferred Securities, stating the time, place and purpose of the meeting, shall be given by the Administrative Trustees pursuant to Section 11.8 to each Holder of Preferred Securities, at such Holder's registered address, at least fifteen (15) days and not more than ninety (90) days before the meeting. At any such meeting, any business properly before the meeting may be so considered whether or not stated in the notice of the meeting. Any adjourned meeting may be held as adjourned without further notice. SECTION 6.2. Meetings of Holders of the Preferred Securities. (a) No annual meeting of Holders is required to be held. The Administrative Trustees, however, shall call a meeting of the Holders of the Preferred Securities to vote on any matter upon the written request of the Holders of at least twenty five percent (25%) in aggregate Liquidation Amount of the Outstanding Preferred Securities and the Administrative Trustees or the Property Trustee may, at any time in their discretion, call a meeting of the Holders of the Preferred Securities to vote on any matters as to which such Holders are entitled to vote. (b) The Holders of at least a Majority in Liquidation Amount of the Preferred Securities, present in person or by proxy, shall constitute a quorum at any meeting of the Holders of the Preferred Securities. (c) If a quorum is present at a meeting, an affirmative vote by the Holders present, in person or by proxy, holding Preferred Securities representing at least a Majority in Liquidation Amount of the Preferred Securities held by the Holders present, either in person or by proxy, at such meeting shall constitute the action of the Holders of the Preferred Securities, unless this Trust Agreement requires a lesser or greater number of affirmative votes. SECTION 6.3. Voting Rights. Holders shall be entitled to one vote for each $10,000 of Liquidation Amount represented by their Outstanding Trust Securities in respect of any matter as to which such Holders are entitled to vote. SECTION 6.4. Proxies, Etc. At any meeting of Holders, any Holder entitled to vote thereat may vote by proxy, provided, that no proxy shall be voted at any meeting unless it shall have been placed on file with the Administrative Trustees, or with such other officer or agent of the Trust as the Administrative Trustees may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a resolution of the Property Trustee, proxies may be solicited in the name of the Property Trustee or one or more officers of the Property Trustee. Only Holders of record shall be entitled to vote. When Trust Securities are held jointly by several Persons, any one of them may vote at any meeting in person or by proxy in respect of such Trust Securities, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Trust Securities. A proxy purporting to be executed by or on behalf of a Holder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. No proxy shall be valid more than three years after its date of execution. SECTION 6.5. Holder Action by Written Consent. Any action that may be taken by Holders at a meeting may be taken without a meeting and without prior notice if Holders holding at least a Majority in Liquidation Amount of all Preferred Securities entitled to vote in respect of such action (or such lesser or greater proportion thereof as shall be required by any other provision of this Trust Agreement) shall consent to the action in writing; provided, that notice of such action is promptly provided to the Holders of Preferred Securities that did not consent to such action. Any action that may be taken by the Holders of all the Common Securities may be taken without a meeting and without prior notice if such Holders shall consent to the action in writing. SECTION 6.6. Record Date for Voting and Other Purposes. Except as provided in Section 6.10(a), for the purposes of determining the Holders who are entitled to notice of and to vote at any meeting or to act by written consent, or to participate in any distribution on the Trust Securities in respect of which a record date is not otherwise provided for in this Trust Agreement, or for the purpose of any other action, the Administrative Trustees may from time to time fix a date, not more than ninety (90) days prior to the date of any meeting of Holders or the payment of a Distribution or other action, as the case may be, as a record date for the determination of the identity of the Holders of record for such purposes. SECTION 6.7. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Trust Agreement to be given, made or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent thereof duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to an Administrative Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" 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 for any purpose of this Trust Agreement and conclusive in favor of the Trustees, if made in the manner provided in this Section 6.7. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than such signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer's authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that any Trustee receiving the same deems sufficient. (c) The ownership of Trust Securities shall be proved by the Securities Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Trust Security shall bind every future Holder of the same Trust Security and the Holder of every Trust Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustees, the Administrative Trustees or the Trust in reliance thereon, whether or not notation of such action is made upon such Trust Security. (e) Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Trust Security may do so with regard to all or any part of the Liquidation Amount of such Trust Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such Liquidation Amount. (f) If any dispute shall arise among the Holders or the Trustees with respect to the authenticity, validity or binding nature of any request, demand, authorization, direction, notice, consent, waiver or other Act of such Holder or Trustee under this Article VI, then the determination of such matter by the Property Trustee shall be conclusive with respect to such matter. SECTION 6.8. Inspection of Records. Upon reasonable written notice to the Administrative Trustees and the Property Trustee, the records of the Trust shall be open to inspection by any Holder during normal business hours for any purpose reasonably related to such Holder's interest as a Holder. SECTION 6.9. Limitations on Voting Rights. (a) Except as expressly provided in this Trust Agreement and in the Indenture and as otherwise required by law, no Holder of Preferred Securities shall have any right to vote or in any manner otherwise control the administration, operation and management of the Trust or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Securities Certificates, be construed so as to constitute the Holders from time to time as partners or members of an association. (b) So long as any Notes are held by the Property Trustee on behalf of the Trust, the Property Trustee shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Note Trustee, or exercise any trust or power conferred on the Property Trustee with respect to the Notes, (ii) waive any past default that may be waived under Section 5.13 of the Indenture or waive compliance with any covenant or condition under Section 10.7 of the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Notes shall be due and payable or (iv) consent to any amendment, modification or termination of the Indenture or the Notes, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of at least a Majority in Liquidation Amount of the Preferred Securities; provided, that where a consent under the Indenture would require the consent of each holder of Notes (or each Holder of Preferred Securities) affected thereby, no such consent shall be given by the Property Trustee without the prior written consent of each Holder of Preferred Securities. The Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Preferred Securities, except by a subsequent vote of the Holders of the Preferred Securities. In addition to obtaining the foregoing approvals of the Holders of the Preferred Securities, prior to taking any of the foregoing actions, the Property Trustee shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced in such matters to the effect that such action shall not cause the Trust to be taxable as a corporation or classified as other than a grantor trust for U.S. federal income tax purposes, notwithstanding the foregoing, any holder shall have the rights to change the Interest Payment Date described in Section 6(m) of the Purchase Agreement. (c) If any proposed amendment to the Trust Agreement provides for, or the Trustees otherwise propose to effect, (i) any action that would adversely affect in any material respect the powers, preferences or special rights of the Preferred Securities, whether by way of amendment to the Trust Agreement or otherwise or (ii) the dissolution, winding-up or termination of the Trust, other than pursuant to the terms of this Trust Agreement, then the Holders of Outstanding Preferred Securities as a class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of at least a Majority in Liquidation Amount of the Preferred Securities. Notwithstanding any other provision of this Trust Agreement, no amendment to this Trust Agreement may be made if, as a result of such amendment, it would cause the Trust to be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes. SECTION 6.10. Acceleration of Maturity; Rescission of Annulment; Waivers of Past Defaults. (a) For so long as any Preferred Securities remain Outstanding, if, upon a Note Event of Default, the Note Trustee fails or the holders of not less than twenty five percent (25%) in principal amount of the outstanding Notes fail to declare the principal of all of the Notes to be immediately due and payable, the Holders of at least twenty five percent (25%) in Liquidation Amount of the Preferred Securities then Outstanding shall have the right to make such declaration by a notice in writing to the Property Trustee, the Depositor and the Note Trustee. At any time after a declaration of acceleration with respect to the Notes has been made and before a judgment or decree for payment of the money due has been obtained by the Note Trustee as provided in the Indenture, the Holders of at least a Majority in Liquidation Amount of the Preferred Securities, by written notice to the Property Trustee, the Depositor and the Note Trustee, may rescind and annul such declaration and its consequences if: (i) the Depositor has paid or deposited with the Note Trustee a sum sufficient to pay: (A) all overdue installments of interest on all of the Notes; (B) any accrued Additional Interest on all of the Notes; (C) the principal of and premium, if any, on any Notes that have become due otherwise than by such declaration of acceleration and interest and Additional Interest thereon at the rate borne by the Notes; and (D) all sums paid or advanced by the Note Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Note Trustee, the Property Trustee and their agents and counsel; and (ii) all Note Events of Default, other than the non-payment of the principal of the Notes that has become due solely by such acceleration, have been cured or waived as provided in Section 5.13 of the Indenture. Upon receipt by the Property Trustee of written notice requesting such an acceleration, or rescission and annulment thereof, by Holders of any part of the Preferred Securities, a record date shall be established for determining Holders of Outstanding Preferred Securities entitled to join in such notice, which record date shall be at the close of business on the day the Property Trustee receives such notice. The Holders of Outstanding Preferred Securities on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date; provided, that, unless such declaration of acceleration, or rescission and annulment, as the case may be, shall have become effective by virtue of the requisite percentage having joined in such notice prior to the day that is ninety (90) days after such record date, such notice of declaration of acceleration, or rescission and annulment, as the case may be, shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder of Outstanding Preferred Securities, or a proxy of a Holder, from giving, after expiration of such ninety (90)-day period, a new written notice of declaration of acceleration, or rescission and annulment thereof, as the case may be, that is identical to a written notice that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 6.10(a). (b) For so long as any Preferred Securities remain Outstanding, to the fullest extent permitted by law and subject to the terms of this Trust Agreement and the Indenture, upon a Note Event of Default specified in paragraph (a) or (b) of Section 5.1 of the Indenture, any Holder of Preferred Securities shall have the right to institute a proceeding directly against the Depositor, pursuant to Section 5.8 of the Indenture, for enforcement of payment to such Holder of any amounts payable in respect of Notes having an aggregate principal amount equal to the aggregate Liquidation Amount of the Preferred Securities of such Holder. Except as set forth in Section 6.10(a) and this Section 6.10(b), the Holders of Preferred Securities shall have no right to exercise directly any right or remedy available to the holders of, or in respect of, the Notes. (c) Notwithstanding paragraphs (a) and (b) of this Section 6.10, the Holders of at least a Majority in Liquidation Amount of the Preferred Securities may, on behalf of the Holders of all the Outstanding Preferred Securities, waive any Note Event of Default, except any Note Event of Default arising from the failure to pay any principal of or premium, if any, or interest (including any Additional Interest) on the Notes (unless such Note Event of Default has been cured and a sum sufficient to pay all matured installments of interest and all principal and premium, if any, on all Notes due otherwise than by acceleration has been deposited with the Note Trustee) or a Note Event of Default in respect of a covenant or provision that under the Indenture cannot be modified or amended without the consent of the holder of each outstanding Note. Upon any such waiver, such Note Event of Default shall cease to exist and any Note Event of Default arising therefrom shall be deemed to have been cured for every purpose of the Indenture; but no such waiver shall affect any subsequent Note Event of Default or impair any right consequent thereon. (d) Notwithstanding paragraphs (a) and (b) of this Section 6.10, the Holders of at least a Majority in Liquidation Amount of the Preferred Securities may, on behalf of the Holders of all the Outstanding Preferred Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Trust Agreement, but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereon. (e) The Holders of a Majority in Liquidation Amount of the Preferred Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee in respect of this Trust Agreement or the Notes or exercising any trust or power conferred upon the Property Trustee under this Trust Agreement; provided, that, subject to Sections 8.5 and 8.7, the Property Trustee shall have the right to decline to follow any such direction if the Property Trustee being advised by counsel determines that the action so directed may not lawfully be taken, or if the Property Trustee in good faith shall, by an officer or officers of the Property Trustee, determine that the proceedings so directed would be illegal or involve it in personal liability or be unduly prejudicial to the rights of Holders not party to such direction, and provided, further, that nothing in this Trust Agreement shall impair the right of the Property Trustee to take any action deemed proper by the Property Trustee and which is not inconsistent with such direction. ARTICLE VII. REPRESENTATIONS AND WARRANTIES SECTION 7.1. Representations and Warranties of the Property Trustee and the Delaware Trustee. The Property Trustee and the Delaware Trustee, each severally on behalf of and as to itself, hereby represents and warrants for the benefit of the Depositor and the Holders that: (a) the Property Trustee is a Delaware banking corporation, duly organized and validly existing under the laws of the State of Delaware; (b) the Property Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (c) the Delaware Trustee is a Delaware banking corporation, duly organized and validly existing under the laws of the State of Delaware and with its principal place of business in the State of Delaware; (d) the Delaware Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (e) this Trust Agreement has been duly authorized, executed and delivered by the Property Trustee and the Delaware Trustee and constitutes the legal, valid and binding agreement of each of the Property Trustee and the Delaware Trustee enforceable against each of them in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws affecting creditors' rights generally and to general principles of equity; (f) the execution, delivery and performance of this Trust Agreement have been duly authorized by all necessary corporate or other action on the part of the Property Trustee and the Delaware Trustee and do not require any approval of stockholders of the Property Trustee and the Delaware Trustee and such execution, delivery and performance will not (i) violate the respective Charter or By-laws of the Property Trustee or the Delaware Trustee, (ii) violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the imposition of any lien on any properties included in the Trust Property pursuant to the provisions of any indenture, mortgage, credit agreement, license or other agreement or instrument (not including the Operative Documents, as to which no representation is made) to which the Property Trustee or the Delaware Trustee is a party or by which it is bound, or (iii) violate any applicable law, governmental rule or regulation of the United States or the State of Delaware, as the case may be, governing the banking and trust powers of the Property Trustee or the Delaware Trustee or any order, judgment or decree applicable to the Property Trustee or the Delaware Trustee; (g) neither the authorization, execution or delivery by the Property Trustee or the Delaware Trustee of this Trust Agreement nor the consummation of any of the transactions by the Property Trustee or the Delaware Trustee contemplated herein requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to any governmental authority or agency under any existing law of the United States or the State of Delaware governing the banking and trust powers of the Property Trustee or the Delaware Trustee, as the case may be; and (h) to the best of each of the Property Trustee's and the Delaware Trustee's knowledge, there are no proceedings pending or threatened against or affecting the Property Trustee or the Delaware Trustee in any court or before any governmental authority, agency or arbitration board or tribunal that, individually or in the aggregate, would materially and adversely affect the Trust or would question the right, power and authority of the Property Trustee or the Delaware Trustee, as the case may be, to enter into or perform its obligations as one of the Trustees under this Trust Agreement. SECTION 7.2. Representations and Warranties of Depositor. The Depositor hereby represents and warrants for the benefit of the Holders and the Trustees that: (a) the Depositor is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation; (b) the Depositor has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (c) this Trust Agreement has been duly authorized, executed and delivered by the Depositor and constitutes the legal, valid and binding agreement of the Depositor enforceable against the Depositor in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general principles of equity; (d) the Securities Certificates issued at the Closing Date on behalf of the Trust have been duly authorized and will have been duly and validly executed, issued and delivered by the applicable Trustees pursuant to the terms and provisions of, and in accordance with the requirements of, this Trust Agreement and the Holders will be, as of such date, entitled to the benefits of this Trust Agreement; (e) the execution, delivery and performance of this Trust Agreement have been duly authorized by all necessary corporate or other action on the part of the Depositor and do not require any approval of stockholders of the Depositor and such execution, delivery and performance will not (i) violate the articles or certificate of incorporation or by-laws (or other organizational documents) of the Depositor or (ii) violate any applicable law, governmental rule or regulation governing the Depositor or any material portion of its property or any order, judgment or decree applicable to the Depositor or any material portion of its property; (f) neither the authorization, execution or delivery by the Depositor of this Trust Agreement nor the consummation of any of the transactions by the Depositor contemplated herein requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to any governmental authority or agency under any existing law governing the Depositor or any material portion of its property; and (g) there are no proceedings pending or, to the best of the Depositor's knowledge, threatened against or affecting the Depositor or any material portion of its property in any court or before any governmental authority, agency or arbitration board or tribunal that, individually or in the aggregate, would materially and adversely affect the Trust or would question the right, power and authority of the Depositor, as the case may be, to enter into or perform its obligations under this Trust Agreement. ARTICLE VIII. THE TRUSTEES SECTION 8.1. Number of Trustees. The number of Trustees shall be five (5); provided, that the Property Trustee and the Delaware Trustee may be the same Person, in which case the number of Trustees shall be four (4). The number of Trustees may be increased or decreased by Act of the Holder of the Common Securities subject to Sections 8.2, 8.3, and 8.4. The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul, dissolve or terminate the Trust. SECTION 8.2. Property Trustee Required. There shall at all times be a Property Trustee hereunder with respect to the Trust Securities. The Property Trustee shall be a corporation or national banking association organized and doing business under the laws of the United States or of any state thereof, authorized to exercise corporate trust powers, having or having a parent that has a combined capital and surplus of at least fifty million dollars ($50,000,000), subject to supervision or examination by federal or state authority and having an office within the United States. If any such Person publishes reports of condition at least annually pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section 8.2, the combined capital and surplus of such Person 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 Property Trustee shall cease to be eligible in accordance with the provisions of this Section 8.2, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VIII. SECTION 8.3. Delaware Trustee Required. (a) If required by the Delaware Statutory Trust Act, there shall at all times be a Delaware Trustee with respect to the Trust Securities. The Delaware Trustee shall either be (i) a natural person who is at least 21 years of age and a resident of the State of Delaware or (ii) a legal entity that has its principal place of business in the State of Delaware, otherwise meets the requirements of applicable Delaware law and shall act through one or more persons authorized to bind such entity. If at any time the Delaware Trustee shall cease to be eligible in accordance with the provisions of this Section 8.3, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VIII. The Delaware Trustee shall have the same rights, privileges and immunities as the Property Trustee. (b) The Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities, of the Property Trustee or the Administrative Trustees set forth herein. The Delaware Trustee shall be one of the trustees of the Trust for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Delaware Statutory Trust Act and for taking such actions as are required to be taken by a Delaware trustee under the Delaware Statutory Trust Act. The duties (including fiduciary duties), liabilities and obligations of the Delaware Trustee shall be limited to (a) accepting legal process served on the Trust in the State of Delaware and (b) the execution of any certificates required to be filed with the Secretary of State of the State of Delaware that the Delaware Trustee is required to execute under Section 3811 of the Delaware Statutory Trust Act and there shall be no other duties (including fiduciary duties) or obligations, express or implied, at law or in equity, of the Delaware Trustee. SECTION 8.4. Appointment of Administrative Trustees. (a) There shall at all times be one or more Administrative Trustees hereunder with respect to the Trust Securities. Each Administrative Trustee shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more persons authorized to bind that entity. Each of the individuals identified as an "Administrative Trustee" in the preamble of this Trust Agreement hereby accepts his or her appointment as such. (b) Except where a requirement for action by a specific number of Administrative Trustees is expressly set forth in this Trust Agreement, any act required or permitted to be taken by, and any power of the Administrative Trustees may be exercised by, or with the consent of, any one such Administrative Trustee. Whenever a vacancy in the number of Administrative Trustees shall occur, until such vacancy is filled by the appointment of an Administrative Trustee in accordance with Section 8.11, the Administrative Trustees in office, regardless of their number (and notwithstanding any other provision of this Trust Agreement), shall have all the powers granted to the Administrative Trustees and shall discharge all the duties imposed upon the Administrative Trustees by this Trust Agreement. SECTION 8.5. Duties and Responsibilities of the Trustees. (a) The rights, immunities, duties and responsibilities of the Trustees shall be as provided by this Trust Agreement and there shall be no other duties (including fiduciary duties) or obligations, express or implied, at law or in equity, of the Trustees; provided, however, that if an Event of Default known to the Property Trustee has occurred and is continuing, the Property Trustee shall, prior to the receipt of directions, if any, from the Holders of at least a Majority in Liquidation Amount of the Preferred Securities, exercise such of the rights and powers vested in it by this Trust Agreement, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. Notwithstanding the foregoing, no provision of this Trust Agreement shall require any of the Trustees to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its or their rights or powers, if it or they shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not herein expressly so provided, every provision of this Trust Agreement relating to the conduct or affecting the liability of or affording protection to the Trustees shall be subject to the provisions of this Section 8.5. Nothing in this Trust Agreement shall be construed to release any Administrative Trustee from liability for his or her own negligent action, negligent failure to act; or his or her own willful misconduct. To the extent that, at law or in equity, a Trustee has duties and liabilities relating to the Trust or to the Holders, such Trustee shall not be liable to the Trust or to any Holder for such Trustee's good faith reliance on the provisions of this Trust Agreement. The provisions of this Trust Agreement, to the extent that they restrict the duties and liabilities of the Trustees otherwise existing at law or in equity, are agreed by the Depositor and the Holders to replace such other duties and liabilities of the Trustees. (b) All payments made by the Property Trustee or a Paying Agent in respect of the Trust Securities shall be made only from the revenue and proceeds from the Trust Property and only to the extent that there shall be sufficient revenue or proceeds from the Trust Property to enable the Property Trustee or a Paying Agent to make payments in accordance with the terms hereof. Each Holder, by its acceptance of a Trust Security, agrees that it will look solely to the revenue and proceeds from the Trust Property to the extent legally available for distribution to it as herein provided and that the Trustees are not personally liable to it for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 8.5(b) does not limit the liability of the Trustees expressly set forth elsewhere in this Trust Agreement. (c) No provisions of this Trust Agreement shall be construed to relieve the Property Trustee from liability with respect to matters that are within the authority of the Property Trustee under this Trust Agreement for its own negligent action, negligent failure to act or willful misconduct, except that: (i) the Property Trustee shall not be liable for any error or judgment made in good faith by an authorized officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (ii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of at least a Majority in Liquidation Amount of the Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee hereunder or under the Indenture, or exercising any trust or power conferred upon the Property Trustee under this Trust Agreement; (iii) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Notes and the Payment Account shall be to deal with such Property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Trust Agreement; (iv) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree in writing with the Depositor; and money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Payment Account maintained by the Property Trustee pursuant to Section 3.1 and except to the extent otherwise required by law; and (v) the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the Depositor with their respective duties under this Trust Agreement, nor shall the Property Trustee be liable for the default or misconduct of any other Trustee or the Depositor. SECTION 8.6. Notices of Defaults and Extensions. (a) Within ninety (90) days after the occurrence of a default actually known to the Property Trustee, the Property Trustee shall transmit notice of such default to the Holders, the Administrative Trustees and the Depositor, unless such default shall have been cured or waived. For the purpose of this Section 8.6, the term "default" means any event that is, or after notice or lapse of time or both would become, an Event of Default. (b) The Property Trustee shall not be charged with knowledge of any default or Event of Default unless either (i) a Responsible Officer of the Property Trustee shall have actual knowledge or (ii) the Property Trustee shall have received written notice thereof from the Depositor, an Administrative Trustee or a Holder. (c) The Property Trustee shall notify all Holders of the Preferred Securities of any notice of default received with respect to the Notes. SECTION 8.7. Certain Rights of Property Trustee. Subject to the provisions of Section 8.5: (a) the Property Trustee may conclusively rely and shall be protected in acting or refraining from acting in good faith and in accordance with the terms hereof upon any resolution, Opinion of Counsel, certificate, written representation of an Administrative Trustee, a Holder or transferee, certificate of auditors or any other resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) if (i) in performing its duties under this Trust Agreement the Property Trustee is required to decide between alternative courses of action, (ii) in construing any of the provisions of this Trust Agreement the Property Trustee finds a provision ambiguous or inconsistent with any other provisions contained herein or (iii) the Property Trustee is unsure of the application of any provision of this Trust Agreement, then, except as to any matter as to which the Holders of the Preferred Securities are entitled to vote under the terms of this Trust Agreement, the Property Trustee shall deliver a notice to the Depositor requesting the Depositor's written instruction as to the course of action to be taken and the Property Trustee shall take such action, or refrain from taking such action, as the Property Trustee shall be instructed in writing to take, or to refrain from taking, by the Depositor; provided, that if the Property Trustee does not receive such instructions of the Depositor within ten (10) Business Days after it has delivered such notice or such reasonably shorter period of time set forth in such notice, the Property Trustee may, but shall be under no duty to, take such action, or refrain from taking such action, as the Property Trustee shall deem advisable and in the best interests of the Holders, in which event the Property Trustee shall have no liability except for its own negligence, bad faith or willful misconduct; (c) any direction or act of the Depositor contemplated by this Trust Agreement shall be sufficiently evidenced by an Officers' Certificate unless otherwise expressly provided herein; (d) any direction or act of an Administrative Trustee contemplated by this Trust Agreement shall be sufficiently evidenced by a certificate executed by such Administrative Trustee and setting forth such direction or act; (e) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any re-recording, re-filing or re-registration thereof; (f) the Property Trustee may consult with counsel (which counsel may be counsel to the Property Trustee, the Depositor or any of its Affiliates, and may include any of its employees) and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice; the Property Trustee shall have the right at any time to seek instructions concerning the administration of this Trust Agreement from any court of competent jurisdiction; (g) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Holders pursuant to this Trust Agreement, unless such Holders shall have offered to the Property Trustee reasonable security or indemnity against the costs, expenses (including reasonable attorneys' fees and expenses) and liabilities that might be incurred by it in compliance with such request or direction, including reasonable advances as may be requested by the Property Trustee; provided, however, that nothing contained in this Section 8.7(g) shall be construed to relieve the Property Trustee, upon the occurrence of an Event of Default (of which the Property Trustee has knowledge (as provided in Section 8.6(b) hereof)), of its obligation to exercise the rights and powers vested in it by this Trust Agreement; provided, further, that nothing contained in this Section 8.7(g) shall prevent the Property Trustee from exercising its rights under Section 8.11 hereof; (h) the Property 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, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, unless requested in writing to do so by one or more Holders, but the Property Trustee may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Property Trustee shall determine to make such inquiry or investigation, it shall be entitled to examine the books, records and premises of the Depositor, personally or by agent or attorney; (i) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents, attorneys, custodians or nominees and the Property Trustee shall not be responsible for any negligence or misconduct on the part of any such agent, attorney, custodian or nominee appointed with due care by it hereunder; (j) whenever in the administration of this Trust Agreement the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right hereunder, the Property Trustee (i) may request instructions from the Holders (which instructions may only be given by the Holders of the same proportion in Liquidation Amount of the Trust Securities as would be entitled to direct the Property Trustee under this Trust Agreement in respect of such remedy, right or action), (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received and (iii) shall be protected in acting in accordance with such instructions; (k) except as otherwise expressly provided by this Trust Agreement, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Trust Agreement; (l) without prejudice to any other rights available to the Property Trustee under applicable law, when the Property Trustee incurs expenses or renders services in connection with a Bankruptcy Event, such expenses (including legal fees and expenses of its agents and counsel) and the compensation for such services are intended to constitute expenses of administration under any Bankruptcy Law or law relating to creditors rights generally; (m) whenever in the administration of this Trust Agreement the Property Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, request and rely on an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Depositor; and (n) in the event that the Property Trustee is also acting as Paying Agent, Authenticating Agent (as defined in the Indenture), Securities Registrar or Calculation Agent hereunder, the rights and protections afforded the Property Trustee pursuant to this Article VIII shall also be afforded such Paying Agent, Authenticating Agent, Securities Registrar or Calculation Agent. No provision of this Trust Agreement shall be deemed to impose any duty or obligation on any Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which such Person shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. SECTION 8.8. Delegation of Power. Any Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 its, his or her power for the purpose of executing any documents contemplated in Section 2.5. The Trustees shall have power to delegate from time to time to such of their number or to the Depositor the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Trustees or otherwise as the Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of this Trust Agreement. SECTION 8.9. May Hold Securities. Any Trustee or any other agent of any Trustee or the Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and except as provided in the definition of the term "Outstanding" in Article I, may otherwise deal with the Trust with the same rights it would have if it were not a Trustee or such other agent. SECTION 8.10. Compensation; Reimbursement; Indemnity. The Depositor agrees: (a) to pay to the Trustees from time to time such reasonable compensation for all services rendered by them hereunder as may be agreed by the Depositor and the Trustees from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) to reimburse the Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustees in accordance with any provision of this Trust Agreement (including the reasonable compensation and the expenses and disbursements of their agents and counsel), except any such expense, disbursement or advance as may be attributable to their gross negligence, bad faith or willful misconduct; and (c) to the fullest extent permitted by applicable law, to indemnify and hold harmless (i) each Trustee (including in its individual capacity), (ii) any Affiliate of any Trustee, (iii) any officer, director, shareholder, employee, representative or agent of any Trustee or any Affiliate of any Trustee and (iv) any employee or agent of the Trust (referred to herein as an "Indemnified Person") from and against any loss, damage, liability, tax (other than income, franchise or other taxes imposed on amounts paid pursuant to Section 8.10(a) or (b) hereof), penalty, expense or claim of any kind or nature whatsoever incurred without negligence, bad faith or willful misconduct on its part, arising out of or in connection with the acceptance or administration of the Trust hereunder, including the advancement of funds to cover the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Trust shall have no payment, reimbursement or indemnity obligations to the Trustees under this Section 8.10. The provisions of this Section 8.10 shall survive the termination of this Trust Agreement and the earlier removal or resignation of any Trustee. No Trustee may claim any Lien on any Trust Property whether before or after termination of the Trust as a result of any amount due pursuant to this Section 8.10. To the fullest extent permitted by law, in no event shall the Property Trustee and the Delaware Trustee be liable for any indirect, special, punitive or consequential loss or damage of any kind whatsoever, including, but not limited to, lost profits, even if the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action. In no event shall the Property Trustee and the Delaware Trustee be liable for any failure or delay in the performance of its obligations hereunder because of circumstances beyond its control, including, but not limited to, acts of God, flood, war (whether declared or undeclared), terrorism, fire, riot, embargo, government action, including any laws, ordinances, regulations, governmental action or the like which delay, restrict or prohibit the providing of the services contemplated by this Trust Agreement. SECTION 8.11. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of any Trustee and no appointment of a successor Trustee pursuant to this Article VIII shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 8.12. (b) A Trustee may resign at any time by giving written notice thereof to the Depositor and, in the case of the Property Trustee and the Delaware Trustee, to the Holders. (c) Unless an Event of Default shall have occurred and be continuing, the Property Trustee or the Delaware Trustee, or both of them, may be removed (with or without cause) at any time by Act of the Holder of Common Securities. If an Event of Default shall have occurred and be continuing, the Property Trustee or the Delaware Trustee, or both of them, may be removed (with or without cause) at such time by Act of the Holders of at least a Majority in Liquidation Amount of the Preferred Securities, delivered to the removed Trustee (in its individual capacity and on behalf of the Trust). An Administrative Trustee may be removed (with or without cause) only by Act of the Holder of the Common Securities at any time. (d) If any Trustee shall resign, be removed or become incapable of acting as Trustee, or if a vacancy shall occur in the office of any Trustee for any reason, at a time when no Event of Default shall have occurred and be continuing, the Holder of the Common Securities, by Act of the Holder of the Common Securities, shall promptly appoint a successor Trustee or Trustees, and such successor Trustee and the retiring Trustee shall comply with the applicable requirements of Section 8.12. If the Property Trustee or the Delaware Trustee shall resign, be removed or become incapable of continuing to act as the Property Trustee or the Delaware Trustee, as the case may be, at a time when an Event of Default shall have occurred and be continuing, the Holders of the Preferred Securities, by Act of the Holders of a Majority in Liquidation Amount of the Preferred Securities, shall promptly appoint a successor Property Trustee or Delaware Trustee, and such successor Property Trustee or Delaware Trustee and the retiring Property Trustee or Delaware Trustee shall comply with the applicable requirements of Section 8.12. If an Administrative Trustee shall resign, be removed or become incapable of acting as Administrative Trustee, at a time when an Event of Default shall have occurred and be continuing, the Holder of the Common Securities by Act of the Holder of Common Securities shall promptly appoint a successor Administrative Trustee and such successor Administrative Trustee and the retiring Administrative Trustee shall comply with the applicable requirements of Section 8.12. If no successor Trustee shall have been so appointed by the Holder of the Common Securities or Holders of the Preferred Securities, as the case may be, and accepted appointment in the manner required by Section 8.12 within thirty (30) days after the giving of a notice of resignation by a Trustee, the removal of a Trustee, or a Trustee becoming incapable of acting as such Trustee, any Holder who has been a Holder of Preferred Securities for at least six (6) months may, on behalf of himself and all others similarly situated, and any resigning Trustee may, in each case, at the expense of the Depositor, petition any court of competent jurisdiction for the appointment of a successor Trustee. (e) The Depositor shall give notice of each resignation and each removal of the Property Trustee or the Delaware Trustee and each appointment of a successor Property Trustee or Delaware Trustee to all Holders in the manner provided in Section 11.8. Each notice shall include the name of the successor Property Trustee or Delaware Trustee and the address of its Corporate Trust Office if it is the Property Trustee. (f) Notwithstanding the foregoing or any other provision of this Trust Agreement, in the event any Administrative Trustee or a Delaware Trustee who is a natural person dies or becomes, in the opinion of the Holder of Common Securities, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by (i) the unanimous act of the remaining Administrative Trustees if there are at least two of them or (ii) otherwise by the Holder of the Common Securities (with the successor in each case being a Person who satisfies the eligibility requirement for Administrative Trustees or Delaware Trustee, as the case may be, set forth in Sections 8.3 and 8.4). (g) Upon the appointment of a successor Delaware Trustee, such successor Delaware Trustee shall file a Certificate of Amendment to the Certificate of Trust in accordance with Section 3810 of the Delaware Statutory Trust Act. SECTION 8.12. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee, each successor Trustee shall execute and deliver to the Depositor and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Trust or any successor Trustee such retiring Trustee shall, upon payment of its charges, duly assign, transfer and deliver to such successor Trustee all Trust Property, all proceeds thereof and money held by such retiring Trustee hereunder with respect to the Trust Securities and the Trust. (b) Upon request of any such successor Trustee, the Trust (or the retiring Trustee if requested by the Depositor) shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in the preceding paragraph. (c) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article VIII. SECTION 8.13. Merger, Conversion, Consolidation or Succession to Business. Any Person into which the Property Trustee or the Delaware Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of such Trustee, shall be the successor of such Trustee hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided, that such Person shall be otherwise qualified and eligible under this Article VIII. SECTION 8.14. Not Responsible for Recitals, Issuance of Securities or Representations. The recitals contained herein and in the Securities Certificates shall be taken as the statements of the Trust and the Depositor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the title to, or value or condition of, the property of the Trust or any part thereof, nor as to the validity or sufficiency of this Trust Agreement, the Notes or the Trust Securities. The Trustees shall not be accountable for the use or application by the Depositor of the proceeds of the Notes. It is expressly understood and agreed by the parties hereto that insofar as any document, agreement or certificate is executed on behalf of the Trust by any Trustee (i) such document, agreement or certificate is executed and delivered by such Trustee, not in its individual capacity but solely as Trustee under this Trust Agreement in the exercise of the powers and authority conferred and vested in it, (ii) each of the representations, undertakings and agreements made on the part of the Trust is made and intended not as representations, warranties, covenants, undertakings and agreements by any Trustee in its individual capacity but is made and intended for the purpose of binding only the Trust and (iii) under no circumstances shall any Trustee in its individual capacity be personally liable for the payment of any indebtedness or expenses of the Trust or be liable for the breach of or failure to perform any obligation, representation, warranty or covenant made or undertaken by the Trust under this Trust Agreement or any other document, agreement or certificate. SECTION 8.15. Property Trustee May File Proofs of Claim. (a) In case of any Bankruptcy Event (or event that with the passage of time would become a Bankruptcy Event) relative to the Trust or any other obligor upon the Trust Securities or the property of the Trust or of such other obligor or their creditors, the Property Trustee (irrespective of whether any Distributions on the Trust Securities shall then be due and payable and irrespective of whether the Property Trustee shall have made any demand on the Trust for the payment of any past due Distributions) shall be entitled and empowered, to the fullest extent permitted by law, by intervention in such proceeding or otherwise: (i) to file and prove a claim for the whole amount of any Distributions owing and unpaid in respect of the Trust Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Property Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Property Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding; and (ii) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such proceeding is hereby authorized by each Holder to make such payments to the Property Trustee and, in the event the Property Trustee shall consent to the making of such payments directly to the Holders, to pay to the Property Trustee first any amount due it for the reasonable compensation, expenses, disbursements and advances of the Property Trustee, its agents and counsel, and any other amounts due the Property Trustee. (b) Nothing herein contained shall be deemed to authorize the Property Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or compensation affecting the Trust Securities or the rights of any Holder thereof or to authorize the Property Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 8.16. Reports to and from the Property Trustee. (a) The Depositor and the Administrative Trustees shall deliver to the Property Trustee, not later than forty five (45) days after the end of each of the first three fiscal quarters of the Depositor and not later than ninety (90) days after the end of each fiscal year of the Depositor ending after the date of this Trust Agreement, an Officers' Certificate (substantially in the form attached hereto as Exhibit H) covering the preceding fiscal period, stating whether or not to the knowledge of the signers thereof the Depositor, the Administrative Trustees or the Trust are in default in the performance or observance of any of the terms, provisions and conditions of this Trust Agreement (without regard to any period of grace or requirement of notice provided hereunder) and, if the Depositor, the Administrative Trustees or the Trust shall be in default, specifying all such defaults and the nature and status thereof of which they have knowledge. (b) The Depositor shall furnish (i) to the Property Trustee; (ii) each Purchaser; (iii) any Owner of the Preferred Securities reasonably identified to the Depositor and the Trust (which identification may be made either by such Owner or by any Purchaser); and (iv) any designee of (i), (ii) or (iii) above, a duly completed and executed certificate in the form attached hereto as Exhibit G, including the financial statements referenced in such Exhibit, which certificate and financial statements shall be so furnished by the Depositor not later than forty five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Depositor and not later than ninety (90) days after the end of each fiscal year of the Depositor, to the extent such financial statements are not available by such dates via EDGAR; if the Depositor is not a company reporting with the Commission, such Exhibit and the financial statements referenced in said Exhibit shall be delivered. (c) The Property Trustee shall be furnished all reports, certificates and information, which it is entitled to receive under each of the Operative Documents, and deliver to (i) each Purchaser and (ii) a designee of (i) above, as identified in writing to the Property Trustee, copies of all such reports, certificates or information promptly upon receipt thereof. ARTICLE IX. TERMINATION, LIQUIDATION AND MERGER SECTION 9.1. Dissolution Upon Expiration Date. Unless earlier dissolved, the Trust shall automatically dissolve on March 30, 2041 (the "Expiration Date"), and the Trust Property shall be liquidated in accordance with Section 9.4. SECTION 9.2. Early Termination. The first to occur of any of the following events is an "Early Termination Event", upon the occurrence of which the Trust shall be dissolved: (a) the occurrence of a Bankruptcy Event in respect of, or the dissolution or liquidation of, the Depositor, in its capacity as the Holder of the Common Securities, unless the Depositor shall have transferred the Common Securities as provided by Section 5.11, in which case this provision shall refer instead to any such successor Holder of the Common Securities; (b) the written direction to the Property Trustee from the Holder of the Common Securities at any time to dissolve the Trust and, after satisfaction of any liabilities of the Trust as required by applicable law and in accordance with written instructions of the Administrative Trustees, to distribute the Notes to Holders in exchange for the Preferred Securities (which direction is optional and wholly within the discretion of the Holder of the Common Securities); (c) the redemption of all of the Preferred Securities in connection with the payment at maturity or redemption of all the Notes; and (d) the entry of an order for dissolution of the Trust by a court of competent jurisdiction. SECTION 9.3. Termination. (a) The respective obligations and responsibilities of the Trustees and the Trust shall terminate upon the latest to occur of the following: (a) the distribution by the Property Trustee to Holders of all amounts required to be distributed hereunder upon the liquidation of the Trust pursuant to Section 9.4, or upon the redemption of all of the Trust Securities pursuant to Section 4.2; (b) the satisfaction of any expenses owed by the Trust; and (c) the discharge of all administrative duties of the Administrative Trustees, including the performance of any tax reporting obligations with respect to the Trust or the Holders. (b) As soon as practicable thereafter, after satisfaction of liabilities to creditors of the Trust as required by applicable law, including Section 3808 of the Delaware Statutory Trust Act, the Delaware Trustee, when notified in writing of the completion of the winding up of the Trust in accordance with the Delaware Statutory Trust Act, shall terminate the Trust by filing, at the expense of the Depositor, a certificate of cancellation with the Secretary of State of the State of Delaware. SECTION 9.4. Liquidation. (a) If an Early Termination Event specified in Section 9.2(a), (b) or (d) occurs or upon the Expiration Date, the Trust shall be liquidated by the Administrative Trustees as expeditiously as the Administrative Trustees shall determine to be possible by distributing, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, to each Holder a Like Amount of Notes, subject to Section 9.4(d). Notice of liquidation shall be given by the Administrative Trustees not less than thirty (30) nor more than sixty (60) days prior to the Liquidation Date to each Holder of Trust Securities at such Holder's address appearing in the Securities Register. All such notices of liquidation shall: (i) state the Liquidation Date; (ii) state that from and after the Liquidation Date, the Trust Securities will no longer be deemed to be Outstanding and (subject to Section 9.4(d)) any Securities Certificates not surrendered for exchange will be deemed to represent a Like Amount of Notes; and (iii) provide such information with respect to the mechanics by which Holders may exchange Securities Certificates for Notes, or if Section 9.4(d) applies, receive a Liquidation Distribution, as the Administrative Trustees shall deem appropriate. (b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect the liquidation of the Trust and distribution of the Notes to Holders, the Property Trustee, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish a record date for such distribution (which shall not be more than forty five (45) days prior to the Liquidation Date nor prior to the date on which notice of such liquidation is given to the Holders) and establish such procedures as it shall deem appropriate to effect the distribution of Notes in exchange for the Outstanding Securities Certificates. (c) Except where Section 9.2(c) or 9.4(d) applies, after the Liquidation Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii) certificates representing a Like Amount of Notes will be issued to Holders of Securities Certificates, upon surrender of such Certificates to the exchange agent for exchange, (iii) the Depositor shall use its best efforts to have the Notes listed on the New York Stock Exchange or on such other exchange, interdealer quotation system or self-regulatory organization on which the Preferred Securities are then listed, if any, (iv) Securities Certificates not so surrendered for exchange will be deemed to represent a Like Amount of Notes bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid Distributions on such Securities Certificates until such certificates are so surrendered (and until such certificates are so surrendered, no payments of interest or principal will be made to Holders of Securities Certificates with respect to such Notes) and (v) all rights of Holders holding Trust Securities will cease, except the right of such Holders to receive Notes upon surrender of Securities Certificates. (d) Notwithstanding the other provisions of this Section 9.4, if distribution of the Notes in the manner provided herein is determined by the Property Trustee not to be permitted or practical, the Trust Property shall be liquidated, and the Trust shall be wound up by the Administrative Trustees in such manner as the Administrative Trustees determines. In such event, Holders will be entitled to receive out of the assets of the Trust available for distribution to Holders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to the Liquidation Amount per Trust Security plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If, upon any such winding up the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then, subject to the next succeeding sentence, the amounts payable by the Trust on the Trust Securities shall be paid on a pro rata basis (based upon Liquidation Amounts). The Holder of the Common Securities will be entitled to receive Liquidation Distributions upon any such winding up pro rata (based upon Liquidation Amounts) with Holders of all Trust Securities, except that, if an Event of Default has occurred and is continuing, the Preferred Securities shall have a priority over the Common Securities as provided in Section 4.3. SECTION 9.5. Mergers, Consolidations, Amalgamations or Replacements of Trust. The Trust may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to, any Person except pursuant to this Article IX. At the request of the Holders of the Common Securities, without the consent of the Holders of the Preferred Securities, the Trust may merge with or into, consolidate, amalgamate, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of any State; provided, that: (a) such successor entity either (i) expressly assumes all of the obligations of the Trust under this Trust Agreement with respect to the Preferred Securities or (ii) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (such other Securities, the "Successor Securities") so long as the Successor Securities have the same priority as the Preferred Securities with respect to distributions and payments upon liquidation, redemption and otherwise; (b) a trustee of such successor entity possessing substantially the same powers and duties as the Property Trustee is appointed to hold the Notes; (c) if the Preferred Securities or the Notes are rated, such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Preferred Securities or the Notes (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization that then assigns a rating to the Preferred Securities or the Notes; (d) the Preferred Securities are listed, or any Successor Securities will be listed upon notice of issuance, on any national securities exchange or interdealer quotation system on which the Preferred Securities are then listed, if any; (e) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities (including any Successor Securities) in any material respect; (f) such successor entity has a purpose substantially identical to that of the Trust; (g) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Depositor has received an Opinion of Counsel to the effect that (i) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities (including any Successor Securities) in any material respect; (ii) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Trust nor such successor entity will be required to register as an "investment company" under the Investment Company Act and (iii) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Trust (or the successor entity) will continue to be classified as a grantor trust for U.S. federal income tax purposes; and (h) the Depositor or its permitted transferee owns all of the common securities of such successor entity. Notwithstanding the foregoing, the Trust shall not, except with the consent of Holders of all of the Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other Person or permit any other entity to consolidate, amalgamate, merge with or into, or replace, the Trust if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Trust or the successor entity to be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes or cause the Notes to be treated as other than indebtedness of the Depositor for United States federal income tax purposes. ARTICLE X. INFORMATION TO PURCHASERS SECTION 10.1. Depositor Obligations to Purchasers. Notwithstanding any other provision herein, the Depositor shall furnish to (a) each Purchaser, (b) any Owner of the Preferred Securities reasonably identified to the Depositor or the Trust (which identification may be made either by such Owner or by any Purchaser) and (c) any designee of (a) or (b) above, copies of all correspondence, notices, forms, filings, reports and other documents required to be provided by the Depositor, whether acting through an Administrative Trustee or otherwise, to the Property Trustee or Delaware Trustee under this Trust Agreement. SECTION 10.2. Property Trustee's Obligations to Purchasers. Notwithstanding any other provision herein, the Property Trustee shall furnish to (a) each Purchaser and (b) a designee of (a) above as identified in writing to the Property Trustee, copies of all (i) correspondence, notices, forms, filings, reports and other documents received by the Property Trustee or Delaware Trustee from the Depositor, whether acting through an Administrative Trustee or otherwise, under this Trust Agreement, and (ii) all correspondence, notices, forms, filings, reports and other documents required to be provided to the Depositor or a Holder by the Property Trustee or Delaware Trustee under this Trust Agreement. ARTICLE XI. MISCELLANEOUS PROVISIONS SECTION 11.1. Limitation of Rights of Holders. Except as set forth in Section 9.2, the death, bankruptcy, termination, dissolution or incapacity of any Person having an interest, beneficial or otherwise, in Trust Securities shall not operate to terminate this Trust Agreement, nor annul, dissolve or terminate the Trust nor entitle the legal representatives or heirs of such Person or any Holder for such Person, to claim an accounting, take any action or bring any proceeding in any court for a partition or winding up of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. SECTION 11.2. Agreed Tax Treatment of Trust and Trust Securities. The parties hereto and, by its acceptance or acquisition of a Trust Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, such Trust Security intend and agree to treat the Trust as a grantor trust for United States federal, state and local tax purposes, and to treat the Trust Securities (including all payments and proceeds with respect to such Trust Securities) as undivided beneficial ownership interests in the Trust Property (and payments and proceeds therefrom, respectively) for United States federal, state and local tax purposes and to treat the Notes as indebtedness of the Depositor for United States federal, state and local tax purposes. The provisions of this Trust Agreement shall be interpreted to further this intention and agreement of the parties. SECTION 11.3. Amendment. (a) This Trust Agreement may be amended from time to time by the Property Trustee, the Administrative Trustees and the Holder of all the Common Securities, without the consent of any Holder of the Preferred Securities, (i) to cure any ambiguity, correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make or amend any other provisions with respect to matters or questions arising under this Trust Agreement, which shall not be inconsistent with the other provisions of this Trust Agreement, (ii) to modify, eliminate or add to any provisions of this Trust Agreement to such extent as shall be necessary to ensure that the Trust will neither be taxable as a corporation nor be classified as other than a grantor trust for United States federal income tax purposes at all times that any Trust Securities are Outstanding or to ensure that the Notes are treated as indebtedness of the Depositor for United States federal income tax purposes, or to ensure that the Trust will not be required to register as an "investment company" under the Investment Company Act or (iii) to add to the covenants, restrictions or obligations of the Depositor; provided, that in the case of clauses (i), (ii) or (iii), such action shall not adversely affect in any material respect the interests of any Holder. (b) Except as provided in Section 11.3(c), any provision of this Trust Agreement may be amended by the Property Trustee, the Administrative Trustees and the Holder of all of the Common Securities and with (i) the consent of Holders of at least a Majority in Liquidation Amount of the Preferred Securities and (ii) receipt by the Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment will not cause the Trust to be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes or affect the treatment of the Notes as indebtedness of the Depositor for United States federal income tax purposes or affect the Trust's exemption from status (or from any requirement to register) as an "investment company" under the Investment Company Act. Each party hereto acknowledges that (i) each Holder of Preferred Securities has been granted the right described in Section 6(m) of its respective Purchase Agreement and (ii) prior to or upon the election to exercise such right by any such Holder, the Trust Agreement will need to be amended in order to include certain provisions to effectuate such right. If, at the time any Holder of Preferred Securities elects to exercise such right, the Trust Agreement has not been so amended, the Property Trustee, the Administrative Trustees, the Holder of all of the Common Securities and each Holder of Preferred Securities each agrees, without prejudice to Section 11.3(f), to use commercially reasonable efforts to so amend the Trust Agreement upon such election. (c) Notwithstanding any other provision of this Trust Agreement, without the consent of each Holder, this Trust Agreement may not be amended to (i) change the accrual rate, amount, currency or timing of any Distribution on or the redemption price of the Trust Securities or otherwise adversely affect the amount of any Distribution or other payment required to be made in respect of the Trust Securities as of a specified date, except as set forth in the last sentence of Section 11.3(b) above, (ii) restrict or impair the right of a Holder to institute suit for the enforcement of any such payment on or after such date, (iii) reduce the percentage of aggregate Liquidation Amount of Outstanding Preferred Securities, the consent of whose Holders is required for any such amendment, or the consent of whose Holders is required for any waiver of compliance with any provision of this Trust Agreement or of defaults hereunder and their consequences provided for in this Trust Agreement; (iv) impair or adversely affect the rights and interests of the Holders in the Trust Property, or permit the creation of any Lien on any portion of the Trust Property; or (v) modify the definition of "Outstanding," this Section 11.3(c), Sections 4.1, 4.2, 4.3, 6.10(e) or Article IX. (d) Notwithstanding any other provision of this Trust Agreement, no Trustee shall enter into or consent to any amendment to this Trust Agreement that would cause the Trust to be taxable as a corporation or to be classified as other than a grantor trust for United States federal income tax purposes or that would cause the Notes to fail or cease to be treated as indebtedness of the Depositor for United States federal income tax purposes or that would cause the Trust to fail or cease to qualify for the exemption from status (or from any requirement to register) as an "investment company" under the Investment Company Act. (e) If any amendment to this Trust Agreement is made, the Administrative Trustees or the Property Trustee shall promptly provide to the Depositor and the Note Trustee a copy of such amendment. (f) No Trustee shall be required to enter into any amendment to this Trust Agreement that affects its own rights, duties or immunities under this Trust Agreement. The Trustees shall be entitled to receive an Opinion of Counsel and an Officers' Certificate stating that any amendment to this Trust Agreement is in compliance with this Trust Agreement and all conditions precedent herein provided for relating to such action have been met. (g) No amendment or modification to this Trust Agreement that adversely affects in any material respect the rights, duties, liabilities, indemnities or immunities of the Delaware Trustee hereunder shall be permitted without the prior written consent of the Delaware Trustee. SECTION 11.4. Separability. If any provision in this Trust Agreement or in the Securities Certificates 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, and there shall be deemed substituted for the provision at issue a valid, legal and enforceable provision as similar as possible to the provision at issue. SECTION 11.5. Governing Law. THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE HOLDERS, THE TRUST, THE DEPOSITOR AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO ITS CONFLICTS OF LAWS PROVISIONS; PROVIDED, HOWEVER, THAT, TO THE FULLEST EXTENT PERMITTED BY LAW, THERE SHALL NOT BE APPLICABLE TO THE PARTIES HEREUNDER OR THIS TRUST AGREEMENT ANY PROVISION OF THE LAWS (COMMON OR STATUTORY) OF THE STATE OF DELAWARE PERTAINING TO TRUSTS THAT RELATE TO OR REGULATE, IN A MANNER INCONSISTENT WITH THE TERMS HEREOF, (A) THE FILING WITH ANY COURT OR GOVERNMENTAL BODY OR AGENCY OF TRUSTEE ACCOUNTS OR SCHEDULES OF TRUSTEE FEES AND CHARGES, (B) AFFIRMATIVE REQUIREMENTS TO POST BONDS FOR TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (C) THE NECESSITY FOR OBTAINING COURT OR OTHER GOVERNMENTAL APPROVAL CONCERNING THE ACQUISITION, HOLDING OR DISPOSITION OF REAL OR PERSONAL PROPERTY, (D) FEES OR OTHER SUMS PAYABLE TO TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (E) THE ALLOCATION OF RECEIPTS AND EXPENDITURES TO INCOME OR PRINCIPAL, (F) RESTRICTIONS OR LIMITATIONS ON THE PERMISSIBLE NATURE, AMOUNT OR CONCENTRATION OF TRUST INVESTMENTS OR REQUIREMENTS RELATING TO THE TITLING, STORAGE OR OTHER MANNER OF HOLDING OR INVESTING TRUST ASSETS OR (G) THE ESTABLISHMENT OF FIDUCIARY OR OTHER STANDARDS OF RESPONSIBILITY OR LIMITATIONS ON THE ACTS OR POWERS OF TRUSTEES THAT ARE INCONSISTENT WITH THE LIMITATIONS OR AUTHORITIES AND POWERS OF THE TRUSTEES HEREUNDER AS SET FORTH OR REFERENCED IN THIS AGREEMENT. SECTION 3540 OF TITLE 12 OF THE DELAWARE CODE SHALL NOT APPLY TO THE TRUST. The parties hereto hereby consent to (i) the non-exclusive jurisdiction of the courts of the State of Delaware and any Federal court sitting in Wilmington, Delaware, and (ii) service of process by certified mail. The foregoing shall not preclude any party from bringing an action in any other jurisdiction or from serving process in any other legal means. SECTION 11.6. Successors. This Trust Agreement shall be binding upon and shall inure to the benefit of any successor to the Depositor, the Trust and any Trustee, including any successor by operation of law. Except in connection with a transaction involving the Depositor that is permitted under Article VIII of the Indenture and pursuant to which the assignee agrees in writing to perform the Depositor's obligations hereunder, the Depositor shall not assign its obligations hereunder. SECTION 11.7. Headings. The Article and Section headings are for convenience only and shall not affect the construction of this Trust Agreement SECTION 11.8. Reports, Notices and Demands. (a) Any report, notice, demand or other communication that by any provision of this Trust Agreement is required or permitted to be given or served to or upon any Holder or the Depositor may be given or served in writing delivered in person, or by reputable, overnight courier, by telecopy or by deposit thereof, first-class postage prepaid, in the United States mail, addressed, (a) in the case of a Holder of Preferred Securities, to such Holder as such Holder's name and address may appear on the Securities Register; and (b) in the case of the Holder of all the Common Securities or the Depositor, to Anthracite Capital, Inc., 40 East 52nd Street, New York, NY 10022, Attention: Chief Financial Officer, or to such other address as may be specified in a written notice by the Holder of all the Common Securities or the Depositor, as the case may be, to the Property Trustee. Such report, notice, demand or other communication to or upon a Holder or the Depositor shall be deemed to have been given when received in person, within one (1) Business Day following delivery by overnight courier, when telecopied with receipt confirmed, or within three (3) Business Days following delivery by mail, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. (b) Any notice, demand or other communication that by any provision of this Trust Agreement is required or permitted to be given or served to or upon the Property Trustee, the Delaware Trustee, the Administrative Trustees or the Trust shall be given in writing by deposit thereof, first-class postage prepaid, in the U.S. mail, personal delivery or facsimile transmission, addressed to such Person as follows: (i) with respect to the Property Trustee and the Delaware Trustee to Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Capital Markets -- Anthracite Capital Trust III, facsimile no. (302) 636-4140; (ii) with respect to the Administrative Trustees, to them at the address above for notices to the Depositor, marked "Attention: Administrative Trustees of Anthracite Capital Trust III", and (iii) with respect to the Trust, to its principal executive office specified in Section 2.2, with a copy to the Property Trustee. Such notice, demand or other communication to or upon the Trust, the Property Trustee or the Administrative Trustees shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Trust, the Property Trustee or the Administrative Trustees. SECTION 11.9. Agreement Not to Petition. Each of the Trustees and the Depositor agree for the benefit of the Holders that, until at least one year and one day after the Trust has been terminated in accordance with Article IX, they shall not file, or join in the filing of, a petition against the Trust under any Bankruptcy Law or otherwise join in the commencement of any proceeding against the Trust under any Bankruptcy Law. If the Depositor takes action in violation of this Section 11.9, the Property Trustee agrees, for the benefit of Holders, that at the expense of the Depositor, it shall file an answer with the applicable bankruptcy court or otherwise properly contest the filing of such petition by the Depositor against the Trust or the commencement of such action and raise the defense that the Depositor has agreed in writing not to take such action and should be estopped and precluded therefrom and such other defenses, if any, as counsel for the Property Trustee or the Trust may assert. SECTION 11.10. 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. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] ------------------------------------------------ IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Trust Agreement as of the day and year first above written. ANTHRACITE CAPITAL, INC., as Depositor By: /s/ Richard M. Shea -------------------------------- Name: Richard M. Shea Title: President and Chief Operating Officer WILMINGTON TRUST COMPANY, as WILMINGTON TRUST COMPANY, as Property Trustee Delaware Trustee By: /s/ W. Thomas Morris By: /s/ W. Thomas Morris ------------------------------- -------------------------------- Name: W. Thomas Morris Name: W. Thomas Morris Title: Assistant Vice President Title: Assistant Vice President /s/ Richard M. Shea /s/ James J. Lillis -------------------------------- ----------------------------------- Administrative Trustee Administrative Trustee Name: Richard M. Shea Name: James J. Lillis /s/ Robert L. Friedberg ----------------------------------- Administrative Trustee Name: Robert L. Friedberg EX-10 4 ant10qx10-1.txt EXHIBIT 10.1 Exhibit 10.1 ================================================================================ CREDIT AGREEMENT DATED AS OF MARCH 17, 2006 AMONG AHR CAPITAL BOFA LIMITED as a Borrower, and EACH BORROWER FROM TIME TO TIME PARTY HERETO and ANTHRACITE CAPITAL, INC. as Borrower Agent and BANK OF AMERICA, N.A. as Lender =============================================================================== TABLE OF CONTENTS e SECTION 1 DEFINITIONS AND ACCOUNTING MATTERS........................1 1.01 Certain Defined Terms.....................................1 1.02 Accounting Terms and Determinations......................30 1.03 Exchange Rates; Currency Equivalents.....................30 1.04 Additional Alternative Currencies........................30 1.05 Change of Currency.......................................31 1.06 Times of Day.............................................31 SECTION 2 LOANS, NOTE AND PREPAYMENTS..............................31 2.01 Loans....................................................31 2.02 Evidence of Debt.........................................32 2.03 Procedure for Borrowing..................................32 2.04 Limitation on Types of Loans; Illegality.................33 2.05 Repayment of Loans; Interest.............................34 2.06 Prepayments..............................................34 2.07 Extension of Termination Date............................35 2.08 Repayment of Outstanding Loans after Termination Date....36 2.09 Taxes....................................................36 2.10 Additional Borrowers.....................................40 2.11 Appointment of Borrower Agent............................41 SECTION 3 PAYMENTS, COMPUTATIONS, ETC..............................41 3.01 Establishment of Accounts/Payments.......................41 3.02 Computations.............................................42 3.03 Requirements of Law......................................43 3.04 Indemnity................................................44 3.05 Fees.....................................................44 SECTION 4 CONDITIONS PRECEDENT.....................................44 4.01 Initial Loan.............................................44 4.02 Initial and Subsequent Loans.............................47 SECTION 5 REPRESENTATIONS AND WARRANTIES...........................48 5.01 Legal Name of Borrowers..................................48 5.02 Existence................................................48 5.03 Financial Condition......................................48 5.04 Litigation...............................................49 5.05 No Breach................................................49 5.06 Action...................................................49 5.07 Approvals................................................49 5.08 Margin Regulations.......................................50 5.09 Taxes....................................................50 5.10 Investment Company Act...................................50 5.11 Chief Executive Office/Jurisdiction of Organization......50 5.12 Location of Books and Records............................50 5.13 True and Complete Disclosure.............................50 5.14 ERISA....................................................50 5.15 Regulatory Status........................................50 5.16 Solvency.................................................51 5.17 Eligible Assets..........................................51 5.18 Representations as to Jurisdiction of Domicile of Borrowe51 5.19 Subsidiaries.............................................52 5.20 Separateness.............................................52 5.21 Irish Borrower Tax Requirements..........................53 SECTION 6 COVENANTS................................................53 6.01 Financial Statements.....................................53 6.02 Irish Borrower Tax Requirements..........................55 6.03 Litigation...............................................55 6.04 Purpose of Loans.........................................55 6.05 Changes to Accounting and Reporting Practices............56 6.06 Required Filings.........................................56 6.07 Existence, etc...........................................56 6.08 Notices..................................................56 6.09 Prohibition of Fundamental Changes.......................57 6.10 Transactions with Affiliates.............................57 6.11 Limitation on Indebtedness...............................57 6.12 Limitation on Liens......................................58 6.13 Limitation on Distributions..............................58 6.14 Limitation on Investments................................58 6.15 Lines of Business........................................58 6.16 Separateness.............................................58 6.17 Subsidiaries.............................................59 6.18 Independent Directors....................................59 6.19 Management Fees..........................................59 6.20 Underwriting Guidelines..................................59 6.21 Modification of Certain Agreements.......................60 6.22 ERISA....................................................60 SECTION 7 EVENTS OF DEFAULT........................................60 SECTION 8 REMEDIES UPON DEFAULT....................................63 SECTION 9 NO DUTY OF LENDER........................................64 SECTION 10 MISCELLANEOUS............................................64 10.01 Waiver...................................................64 10.02 Notices..................................................64 10.03 Indemnification and Expenses.............................64 10.04 Amendments...............................................66 10.05 Assignments and Participations...........................66 10.06 Successors and Assigns...................................67 10.07 Survival.................................................68 10.08 Captions.................................................68 10.09 Counterparts.............................................68 10.10 Credit Agreement Constitutes Security Agreement; Governing Law............................................68 10.11 Submission To Jurisdiction; Waivers......................68 10.12 WAIVER OF JURY TRIAL.....................................69 10.13 Acknowledgments..........................................69 10.14 Periodic Due Diligence Review............................69 10.15 Eligible Asset Servicer..................................70 10.16 Judgment Currency........................................70 10.17 Treatment of Certain Information.........................71 10.18 Limited Recourse, Etc....................................71 SCHEDULES SCHEDULE 1-A Representations and Warranties-England and Wales SCHEDULE 1-B Representations and Warranties-Federal Republic of Germany SCHEDULE 1-C Representations and Warranties-Scotland SCHEDULE 1-D Mandatory Costs SCHEDULE 1-E New Asset/New Jurisdiction/Alternate Currency Requirements SCHEDULE 1-F Underlying Asset Servicers SCHEDULE 2-A Collateral (England and Wales) Documents SCHEDULE 2-B Collateral (Ireland) Documents SCHEDULE 2.03 Borrower Account Information SCHEDULE 5.01 Borrower Legal Names SCHEDULE 5.11 Location of Chief Executive Office SCHEDULE 6.01(a) Quarterly Servicing Information Report SCHEDULE 6.01(b) Eligible Asset Information Report EXHIBITS EXHIBIT A Form of Promissory Note EXHIBIT B Form of Request for Borrowing EXHIBIT C-1 Form of Parent Pledge Agreement EXHIBIT C-2 Form of Parent Deed of Charge EXHIBIT C-3 Form of Borrower Security Agreement EXHIBIT D Form of Parent Guaranty EXHIBIT E Borrowing Base Certificate EXHIBIT F Form of Compliance Certificate EXHIBIT G Form of Intercompany Subordination Agreement EXHIBIT H-1 Form of US Collection Account Control Agreement EXHIBIT H-2 Form of English Sub-Collection Account Notice and Acknowledgement of Charge EXHIBIT I Form of Custodial and Payment Application Agreement EXHIBIT J Form of Tax Certificate EXHIBIT K Form of Eligible Asset Servicer Notice and Agreement EXHIBIT L Form of Borrower Joinder EXHIBIT M Form of Release CREDIT AGREEMENT CREDIT AGREEMENT (the "Agreement"), dated as of March 17, 2006, between AHR CAPITAL BOFA LIMITED, a com pany organized under the laws of Ireland ("AHR Capital") as a borrower (a "Borrower"), ANTHRACITE CAPI TAL, INC., a company organized under the laws of Maryland as the Borrower Agent (the "Borrower Agent"), the b orrowers from time to time parties hereto (each, a "Borrower", and together with AHR Capital, collectively, t he "Borrowers") and BANK OF AMERICA, N.A., as lender (the "Lender"). RECITALS Each Borrower has requested that the Lender from time to time make revolving loans to it and the Lender is prepared to make such loans upon the terms and conditions hereof. Accordingly, the parties hereto agree as follows: Section 1. Definitions and Accounting Matters. 1.01 Certain Defined Terms. As used herein, the following terms (all terms defined in this Section 1.01 or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa) shall have the following meanings; provided, that all terms not defined in this Agreement shall (unless otherwise provided herein) have the meanings ascribed to such terms in the Parent Guaranty and the other Loan Documents: "1934 Act" shall mean the Securities and Exchange Act of 1934, as amended. "Acceptable Appraisal" shall mean an appraisal (dated within twelve months of the date of the initial funding for the applicable Eligible Asset) acceptable to the Lender in its sole discretion (a) in respect of any Underlying US Asset, prepared by an independent MAI qualified third party appraiser and satisfying either (i) the requirements of the "Uniform Standards of Professional Appraisal Practice" as adopted by the Appraisal Standards Board of the Appraisal Foundation, or (ii) the requirements of Title XI of FIRREA and the regulations promulgated thereunder (as the foregoing is amended, modified, restated, replaced, waived, substituted, supplemented or extended from time to time), as in effect on the date of such appraisal, (b) in respect of any Underlying UK Asset, prepared by a suitable valuer carried out on an market value basis as defined in the then current Royal Institution of Chartered Surveyors Appraisal and Valuation Manual in association with the Incorporated Society of Valuers and Auctioneers and the Institute of Revenues Rating and Valuation, Practice Statement 4 (or its successor), or (c) in respect of any Underlying German Asset, Underlying Scottish Asset or Underlying Other Eligible Jurisdiction Asset, prepared by third party appraiser or valuer, in each case using methodologies and standards consistent with local practices and requirements and satisfactory to the Lender in its sole discretion. "Acceptable Rating" shall mean a long-term debt rating of B- or higher by S&P and/or Fitch or B3 or higher by Moody's, or, in the event of a split rating, the lower of the two ratings. "Additional Account Control Agreement" shall mean an agreement executed by an Additional Borrower and the Lender, substantially in the form of Annex A-1 or Annex A-2 to the Borrower Security Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Additional Borrower" shall have the meaning set forth in clause (a) of Section 2.10. "Additional Borrower Effective Date" shall have the meaning set forth in clause (a) of Section 2.10. "Additional Borrower Notice" shall have the meaning set forth in clause (a) of Section 2.10. "Affiliate" shall mean, in respect of any specified Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person. For the purposes of this definition, "Control" shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise and "controlling" and "controlled" shall have meanings correlative thereto; provided, that any Person which owns directly or indirectly 25% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation or 25% or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) shall be deemed to control such corporation or other Person; provided, further, that with respect to any Borrower, no Person shall be deemed an Affiliate of any Borrower due to such Person's having a Blackrock entity as such Person's manager. "Alternative Currency" shall mean (a) each of Euro and Sterling and (b) each other currency (other than Dollars) that is approved in accordance with Section 1.04. "Alternative Currency Equivalent" shall mean, at any time, with respect to any amount denominated in Dollars, the equivalent amount thereof in the applicable Alternative Currency as determined by the Lender, at such time on the basis of the Spot Rate (determined in respect of the most recent Revaluation Date) for the purchase of such Alternative Currency with Dollars. "Allocated Underlying Debt" shall mean, with respect to any Underlying Asset related to any Eligible Asset, any senior or pari passu Indebtedness secured directly or indirectly by such Underlying Asset, including, without limitation, any preferred equity interest or mezzanine debt that is senior to, or pari passu with, such Eligible Asset in right of payment or lien priority. "Anthracite" shall mean Anthracite Capital, Inc., a Maryland corporation. "Applicable Borrowing Base Percentage" shall have the meaning set forth in the Fee Letter. "Applicable Borrower Documents" shall have the meaning set forth in clause (a) of Section 5.18. "Applicable Margin" shall have the meaning set forth in the Fee Letter. "Applicable Margin Increase Event" shall mean, as of any date of determination, the occurrence and continuance of an Event of Default. "Appraised Value" shall mean, with respect to any Underlying Asset, the value of such Underlying Asset as determined by an Acceptable Appraisal. "Approved Assignee" shall mean any Person satisfying the minimum capital, net worth and/or similar measures of financial wherewithal required to qualify as a permitted transferee of the Eligible Assets pursuant to the terms of the Eligible Asset Documents and applicable securities laws. "Asset Attributable Loan Balance" shall mean, in respect of each Eligible Asset and subject to the Eligible Asset Funding Requirements, the outstanding principal balance of all outstanding Loans attributable to such Eligible Asset. "Availability Period" shall mean the period from and including the Closing Date to the Termination Date. "Bankruptcy Code" shall mean the United States Bankruptcy Code of 1978, as amended from time to time. "Blackrock Management Agreement" shall mean the investment management agreement, dated as of the Closing Date, between Blackrock Financial Management Inc. and AHR Capital, as in effect on the Closing Date and as the same may be modified from time to time in accordance with Section 6.21. "Blackrock Entities" shall mean Blackrock Financial Management Inc. and any of its Subsidiaries or Affiliates (other than Anthracite or any Borrower). "BOA Hold Amount" shall mean an amount not less than thirty-four (34%) percent of the Maximum Credit and the outstanding Loans. "BOA Indebtedness" shall mean the aggregate indebtedness of the Borrowers hereunder and under any other arrangement between any Borrower or an Affiliate of any Borrower on the one hand and the Lender or an Affiliate of the Lender on the other hand. "Borrower" shall have the meaning provided in the introductory paragraph hereof. "Borrower Agent" shall have the meaning provided in the introductory paragraph hereof pursuant to Section 2.11 and its successors and assigns in such capacity. "Borrower Joinder" shall mean the document referred to in Section 2.10 hereof, substantially in the form of Exhibit L and as the same shall be modified and supplemented and in effect from time to time. "Borrowing Base" shall mean the aggregate Collateral Value of all Eligible Assets. "Borrowing Base Deficiency Event" shall mean that the ratio of (a) the aggregate outstanding principal amount of all outstanding Loans, to (b) the Borrowing Base, is equal to, or greater than, 1.05:1.00; provided, that for the purposes hereof, the Borrowing Base shall be converted into its Dollar Equivalent. "Borrowing Base Certificate" shall mean a certificate, substantially in the form of Exhibit E, with appropriate insertions, showing the Borrowing Base as of the date set forth therein, and executed on behalf of the Borrowers by a Responsible Officer of the Borrower Agent. "Borrower Security Agreement" shall mean the Borrower Security Agreement to be executed and delivered by AHR Capital and each other Borrower in favor of the Lender, substantially in the form of Exhibit C-3, as the same may be amended, supplemented or otherwise modified from time to time. "Borrower Security Agreement Addendum" shall mean the addendum to be executed and delivered by an Additional Borrower in favor of the Lender, substantially in the form of Annex B to the Borrower Security Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Business Day" shall mean any day other than (i) a Saturday or Sunday, (ii) a day on which the New York Stock Exchange or the Federal Reserve Bank of New York is authorized or obligated by law or executive order to be closed or (iii) a day which is a legal holiday in Ireland. When used with respect to a Reset Date, a Business Day shall mean a day on which banks in London, England are not closed for interbank or foreign exchange transactions. "Capital Lease Obligations" shall mean, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) Property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP. "Capital Stock" shall mean all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, and all similar ownership interests in a Person (other than a corporation), including, without limitation, non-managing member membership interests and limited partnership interests, and any and all warrants or options to purchase any of the foregoing. "Cash" shall mean cash on deposit in the US Collection Account, the English Sub-Collection Account or in any other account maintained by any Borrower with any depository institution. "Change of Control" shall mean the occurrence of any of the following events: (a) any "person" or "group" (within the meaning of Section 13(d) or 14(d) of the 1934 Act) shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the 1934 Act), directly or indirectly, of a percentage of 20% or more of the total voting power of all classes of Capital Stock of Anthracite entitled to vote generally in the election of directors, (b) any event pursuant to which BlackRock Financial Management, Inc. shall cease to act as the external manager of Anthracite with exclusive responsibility for Anthracite's investment decision-making, or (c) Anthracite shall cease to own and control, directly beneficially and of record on a fully diluted basis, 100% of the Capital Stock of AHR Capital free and clear of all Liens (other than Liens in favor of the Lender pursuant to the Collateral Documents). "Clearstream" shall mean Clearstream Banking, a societe anonyme and member of the Deutsche Borse Group, or any successor to its trading and settlement business. "Closing Date" shall mean the date upon which the conditions precedent set forth in Section 4.01 and Section 4.02 of this Agreement shall have been satisfied. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Collateral" shall mean the term "Collateral" (or the equivalent thereof) as defined in the Collateral Documents. "Collateral Documents" shall mean (a) the Collateral (US) Documents, (b) the Collateral (England and Wales) Documents, (c) the Collateral (Federal Republic of Germany) Documents, (d) the Collateral (Ireland) Documents and (e) the Collateral (Other Eligible Jurisdiction) Documents. "Collateral (England and Wales) Documents" shall mean the collective reference to all security documents listed on Schedule 2-A Collateral (England and Wales) Documents which are subject to, and governed by, the laws of England and Wales, as applicable, hereafter delivered to the Lender granting a Lien on any property of any Person to secure the obligations and liabilities of each Borrower under any Loan Document. "Collateral (Federal Republic of Germany) Documents" shall mean the collective reference to all security documents, each of which shall be satisfactory to the Lender and its counsel in form and substance in its sole discretion, and which are subject to, and governed by, the laws of the Federal Republic of Germany, hereafter delivered to the Lender granting a Lien on any property of any Person to secure the obligations and liabilities of each Borrower under any Loan Document. "Collateral (Ireland) Documents" shall mean the collective reference to the Parent Deed of Charge and the other security documents listed on Schedule 2-B Collateral (Ireland) Documents which are subject to, and governed by, the laws of Ireland, as applicable, hereafter delivered to the Lender granting a Lien on any property of any Person to secure the obligations and liabilities of each Borrower under any Loan Document. "Collateral (Other Eligible Jurisdiction) Documents" shall mean the collective reference to all security documents which are subject to, and governed by, the laws of any Eligible Jurisdiction (other than the United States of America, England and Wales, Ireland, or the Federal Republic of Germany), hereafter delivered to the Lender granting a Lien on any property of any Person to secure the obligations and liabilities of each Borrower under any Loan Document. "Collateral (US) Documents" shall mean the collective reference to the Parent Guaranty, the Parent Pledge Agreement, the Borrower Security Agreement the US Collection Account Control Agreement and all other security documents which are subject to, and governed by, applicable New York law (or other applicable federal or state law) hereafter delivered to the Lender granting a Lien on any property of any Person to secure the obligations and liabilities of each Borrower under any Loan Document. "Collateral Value" shall mean, with respect to any Eligible Asset, an amount equal to the product of the Applicable Borrowing Base Percentage multiplied by the Market Value of such Eligible Asset. "Collateral Value Cash Sweep Event" shall mean, with respect to any Eligible Asset, that the ratio of (a) the Asset Attributable Loan Balance attributable to such Eligible Asset, to (b) the Collateral Value of such Eligible Asset, is equal to, or greater than, 1.05:1.00, but less than 1:10:1.00. "Collateral Value Deficiency Event" shall mean, with respect to any Eligible Asset, that the ratio of (a) the Asset Attributable Loan Balance attributable to such Eligible Asset, to (b) the Collateral Value of such Eligible Asset, is equal to, or greater than, 1.10:1.00. "Compliance Certificate" shall mean a certificate, substantially in the form of Exhibit F, with appropriate insertions, and executed on behalf of each Borrower by a Responsible Officer of such Borrower. "Concentration Limits" shall mean any limitations on asset classes, property types, tenants, geography and other categories related to the Eligible Assets which may be established by the Lender, from time to time, in its reasonable business judgment; provided, that such "Concentration Limits" shall not be applied in respect of assets previously included in the Borrowing Base as Eligible Assets. "Costs" shall have the meaning provided in Section 10.03(a) hereof. "Custodial and Payment Application Agreement" shall mean the Custodial and Payment Application Agreement, by and among the Borrower Agent, the Custodian and the Lender, substantially in the form of Exhibit I to this Agreement, as amended, restated, supplemented or otherwise modified and in effect from time to time. "Custodian" shall mean LaSalle Bank National Association, as custodian under the Custodial and Payment Application Agreement, or any successor Custodian comparably rated and qualified and appointed by the Borrower Agent with the prior written consent of the Lender (which consent shall not be unreasonably withheld or delayed). "Default" shall mean an Event of Default or an event that with notice or lapse of time or both would become an Event of Default. "Defaulted Underlying Asset" shall mean any Underlying Asset (a) that is ninety (90) days or more delinquent or (b) for which there is a non-monetary default (beyond any applicable notice and cure period) under the related asset documents. "Delinquent Underlying Asset" shall mean any Underlying Asset that is thirty (30) or more days, but less than ninety (90) days, delinquent under the related asset documents. "Discretionary Underlying Asset" shall mean any Underlying Asset which is a hospitality property or a single-tenant non-credit retail or office property. "Dollars" and "$" shall mean lawful money of the United States of America. "Dollar Equivalent" shall mean, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in any Alternative Currency, the equivalent amount thereof in Dollars as determined by the Lender, at such time on the basis of the Spot Rate (determined in respect of the most recent Revaluation Date) for the purchase of Dollars with such Alternative Currency. "Dollar Equivalent Overadvance Date" shall mean any date on which a Dollar Equivalent Overadvance Event has occurred. "Dollar Equivalent Overadvance Event" shall mean that, prior to giving effect to any Dollar Equivalent Overadvance Loan, the Dollar Equivalent of the aggregate amount of Loans outstanding under this Agreement exceeds the Maximum Credit solely as a result of a fluctuation in the rate of exchange between an Alternative Currency and Dollars. "Dollar Equivalent Overadvance Loan" shall mean, on any Dollar Equivalent Overadvance Date, any Loan made in Dollars pursuant to Section 2.01 (b). "Dollar Equivalent Overadvance Maximum Credit" shall mean, in respect of any Dollar Equivalent Overadvance Loan, $15,000,000. "Dollar Equivalent Overadvance Maturity Date" shall mean, in respect of any Dollar Equivalent Overadvance Loan, the date which is ninety (90) days from the Funding Date of such Dollar Equivalent Overadvance Loan. "Eligible Asset" shall mean, without duplication, any of the following types of performing assets owned by a Borrower: (a) Eligible CMBS Securities, (b) Eligible B Notes, (c) Eligible Mezzanine Loans, and (d) Eligible Other Investments; provided, that any Eligible Asset shall be deemed ineligible in the event (w) such Borrower does not have valid title to such Eligible Asset or is subject to any adverse claim or Lien, other than Liens permitted pursuant to Section 6.12, (x) the Underlying Asset is (A) a Defaulted Underlying Asset, (B) a Delinquent Underlying Asset, (C) a Prohibited Underlying Asset, or (D) unless permitted to be included as an Eligible Asset by the Lender in its sole discretion, a Discretionary Underlying Asset, (y) there is a breach of any Concentration Limit; or (z) the Lender has deemed such Eligible Asset to be otherwise ineligible in its good faith business judgment; provided, further, that (i) any Eligible Asset (other than any Eligible Assets included in the Borrowing Base on the Closing Date) shall have been included in the Borrowing Base in accordance with the provisions set forth in Section 2.03(d) and (ii) the Borrower owning such asset shall be deemed to have consented to the inclusion of any Eligible Asset in the Borrowing Base by identifying such Eligible Asset in the schedule delivered to the Lender pursuant to clause (i) of Section 2.03(d); provided, further, that any Eligible Asset shall be a "qualifying asset" (as described in the Irish Taxes Act) and shall not be an asset that requires any Borrower to become authorized under the relevant Irish insurance legislation. "Eligible Asset Funding Requirement" shall mean: (a) Except with respect to Eligible Loans secured by three (3) or more Underlying Assets and as otherwise permitted by the Lender in its sole discretion, the Asset Attributable Loan Balance attributable to any one Eligible Asset shall not exceed thirty (30%) percent of the Maximum Credit; and (b) the Asset Attributable Loan Balance attributable to Eligible Mezzanine Loans shall not exceed forty (40%) percent of the Maximum Credit; provided, that Eligible Mezzanine Loans with an LTV greater than eighty-five (85%) percent shall not exceed ten (10%) percent of the Maximum Credit. "Eligible Asset Documents" shall mean any and all documents, records, imaged copies, computer data files, agreements, instruments or information relating to the Eligible Assets to the extent available to a Borrower. "Eligible Asset Information" shall mean the information set forth on Schedule 6.01(b). "Eligible Asset Net Cash Proceeds" shall mean, in respect of any Eligible Asset, the net cash proceeds received from the payment, prepayment or redemption (in whole or in part) in respect of such Eligible Asset. "Eligible Asset Proceeds Prepayment Amount" shall mean, in respect of any Eligible Asset and on any date of determination, an amount equal to the product of the Applicable Borrowing Base Percentage applied to such Eligible Asset, multiplied by, the Eligible Asset Net Cash Proceeds received in respect of such Eligible Asset. "Eligible Asset Servicer" shall mean any sub-servicer engaged by a Borrower in respect of any of the Eligible Assets. "Eligible Asset Servicer Notice and Agreement" shall have the meaning set forth in Section 10.15. "Eligible Asset Servicing Agreement" shall have the meaning set forth in Section 10.15. "Eligible B-Notes" shall mean performing loans which are: (a) (i) junior notes in performing commercial mortgage loans secured by first liens in mortgages on multifamily or commercial real estate property (or a participation therein) located in an Eligible Jurisdiction that are subordinate in right of payment to one or more separate promissory notes secured by a direct or beneficial interest in the same property; or (ii) any senior, junior or pari passu participation interests in junior notes described in the preceding clause (i); (b) denominated in an Eligible Currency; (c) satisfy all the Eligible Jurisdiction Relevant Warranties; and (d) satisfy such other criteria established by the Lender in its good faith business judgment; provided, that no loans with an LTV greater than ninety (90%) percent shall be deemed Eligible B Notes hereunder. "Eligible CMBS Securities" shall mean performing fixed or floating rate mortgage-backed bonds that: (a) represent a beneficial ownership interest in one or more first lien commercial mortgage loans secured by a single or multiple Underlying Assets located in an Eligible Jurisdiction; (b) are denominated in an Eligible Currency; (c) are rated with an Acceptable Rating and have not been placed on credit watch where any downgrade that could reasonably be expected to occur as a result of review would be likely to result in such securities not having an Acceptable Rating; (d) (i) are settled in book-entry form through the facilities of Clearstream and/or Euroclear against payment therefor in immediately available funds or (ii) are in bearer form (whether in global form or otherwise) and are transferable by way of physical delivery; (e) satisfy all the Eligible Jurisdiction Relevant Warranties; and (f) satisfy such other criteria established by the Lender in its good faith business judgment. "Eligible Currency" shall mean Dollars and any Alternative Currency; provided, that such Eligible Currency shall be the currency in which the applicable Eligible Asset is denominated. "Eligible Jurisdiction" shall mean the Federal Republic of Germany, England or any New Jurisdiction approved in writing by the by the Lender, in its sole discretion, from time to time. "Eligible Jurisdiction Relevant Warranties" shall mean the following in respect of Eligible Assets: (a) in respect of England and Wales, the representations and warranties contained in Schedule 1-A England and Wales; (b) in respect of the Federal Republic of Germany, the representations and warranties contained in Schedule 1-B Federal Republic of Germany; (c) in respect of Scotland, the representations and warranties contained in Schedule 1-C Scotland (d) in respect of any New Jurisdiction, such representations and warranties as are from time to time approved by the Lender in its sole discretion in accordance with the applicable New Asset/New Jurisdiction/Alternate Currency Requirements and, upon such approval, (i) such representations and warranties shall be annexed to this Agreement under Schedule 1 with the appropriate reference to the applicable Eligible Jurisdiction and (ii) this Agreement shall thereupon be deemed amended for that purpose. "Eligible Mezzanine Loans" shall mean performing loans which: (a) are primarily secured by all or partial direct or indirect ownership interests in a company, partnership or other entity owning, operating or controlling, directly or indirectly, multifamily or commercial properties which (i) are located in any Eligible Jurisdiction and (ii) constitute Underlying Assets; (b) are denominated in an Eligible Currency; (c) satisfy all the Eligible Jurisdiction Relevant Warranties; and (d) satisfy such other criteria established by the Lender in its good faith business judgment; provided, that no such loans shall be deemed Eligible Mezzanine Loans hereunder if the sum of (i) Eligible Mezzanine Loans and (ii) Allocated Underlying Debt has an LTV greater than ninety (90%) percent. "Eligible Other Investment" shall mean any performing real estate structured finance product (including, without limitation, REIT debt securities), which: (a) does not otherwise conform to the definition of Eligible CMBS Securities, Eligible B Notes or Eligible Mezzanine Loans; (b) is denominated in an Eligible Currency; (c) in respect of which the Underlying Assets are located in an Eligible Jurisdiction; (d) satisfies all the Eligible Jurisdiction Relevant Warranties; and (e) satisfies such other criteria as may be established by the Lender in its sole discretion. "English Sub-Collection Account" shall mean a deposit, custody, money-market or other similar account (whether, in any case, time or demand or interest or non-interest bearing) maintained by AHR Capital with the Custodian, as securities intermediary. "English Sub-Collection Account Notice and Acknowledgement of Charge" shall mean the acknowledgment of notice of charge in respect of the English Sub-Collection Account, substantially in the form of Exhibit H-2, by and among AHR Capital, ABN-AMRO, and the Lender, as the same shall be modified and supplemented and in effect from time to time. "English Sub-Collection Account Remittance Date" shall mean the date which is two (2) Business Days following the date on which payments are received by any Borrower in respect of any Eligible Asset and deposited into the English Sub-Collection Account pursuant to the applicable Collateral (England and Wales) Document. "EMU" shall mean the economic and monetary union in accordance with the Treaty of Rome 1957, as amended by the Single European Act 1986, the Maastricht Treaty of 1992 and the Amsterdam Treaty of 1998. "EMU Legislation" shall mean the legislative measures for the introduction of, changeover to or operation of a single or unified European currency. "Equity Proceeds" shall mean any proceeds received from any sale or issuance of Capital Stock. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" shall mean any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which a Borrower is a member and (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which such Borrower is a member. "Euro", "EUR" and "(euro)" shall mean the lawful currency of the Participating Member States introduced in accordance with the EMU Legislation. "Euroclear" shall mean Euroclear Bank N.A./S.V., or any successor to its trading and settlement business. "Eurocurrency Base Rate" shall have the meaning specified in the definition of Eurocurrency Rate. "Eurocurrency Rate" shall mean for any Interest Period on any Reset Date with respect to a Eurocurrency Rate Loan, a rate per annum determined by the Lender pursuant to the following formula: Eurocurrency Rate Eurocurrency Base Rate ------------------------------------------ = 1.00 - Eurocurrency Reserve Percentage where, "Eurocurrency Base Rate" shall mean, for such Interest Period: (a) the applicable Screen Rate for such Interest Period; or (b) if the applicable Screen Rate shall not be available, the rate per annum determined by the Lender as the rate of interest at which deposits in the relevant currency for delivery on the first day of such Interest Period in Same Day Funds in the approximate amount of the Eurocurrency Rate Loan being made by the Lender and with a term equivalent to such Interest Period would be offered by the Lender's London Branch (or other branch or Affiliate) to major banks in the London or other offshore interbank market for such currency for a one-month period at their request at approximately 4:00 p.m. (London time) two Business Days prior to the first day of such Interest Period. "Eurocurrency Rate Loan" shall mean any Loan that bears interest at the Eurocurrency Rate. Eurocurrency Rate Loans may be denominated in Dollars or in any Alternative Currency. All Loans denominated in an Alternative Currency must be Eurocurrency Rate Loans. "Eurocurrency Reserve Percentage" shall mean, for any day during any Interest Period, the reserve percentage (expressed as a decimal, carried out to five decimal places) in effect on such day, whether or not applicable to the Lender, under regulations issued from time to time by the Board of Governors of the Federal Reserve System of the United States for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). The Eurocurrency Rate for each outstanding Eurocurrency Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurocurrency Reserve Percentage. "Event of Default" shall have the meaning provided in Section 7 hereof. "Examiner" shall have the meaning provided in Section 1 of the Companies (Amendment) Act of 1990, Ireland. "Federal Funds Rate" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Lender from three federal funds brokers of recognized standing selected by it. "Fee Letter" shall mean the confidential letter, dated as of the Closing Date, by and between the Lender and the Borrowers. "FIRREA" shall mean the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended. "Fitch" shall mean Fitch Ratings. "Funding Date" shall mean the date on which a Loan is made hereunder. "GAAP" shall mean generally accepted accounting principles as in effect from time to time in the United States. "Governmental Authority" shall mean any nation or government, any state or other political subdivision, agency or instrumentality thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any court or arbitrator having jurisdiction over any Borrower, any of its Subsidiaries or any of its properties. "Guarantee" shall mean, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise); provided that the term Guarantee shall not include (a) endorsements for collection or deposit in the ordinary course of business, (b) obligations to make servicing advances for delinquent taxes and insurance or other obligations in respect of any properties, to the extent required by the Lender and (c) non-recourse carve-out and environmental indemnities in respect of any Non-Recourse Indebtedness incurred in connection with commercial real estate properties. The amount of any Guarantee of a Person shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person. The terms Guarantee and Guaranteed used as verbs shall have correlative meanings. "Guarantor" shall mean Anthracite. "Hedge Agreement" shall mean any interest rate or currency swap, cap or collar agreement or similar arrangement or foreign exchange contract entered into by any Person providing for protection against fluctuations in interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies. "Indebtedness" shall mean, for any Person without duplication: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within ninety (90) days after the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective Indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; (e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements, sale/buy-back agreements or like arrangements; (g) Indebtedness of others Guaranteed by such Person; (h) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; (i) Indebtedness of general partnerships of which such Person is a general partner; (j) Hedge Agreements and (k) all Off-Balance Sheet Obligations of such Person. "Indemnified Party" shall have the meaning set forth in Section 10.03(a). "Intercompany Subordination Agreement" shall mean an Intercompany Subordination Agreement substantially in the form of Exhibit G and executed on behalf of each Borrower by a Responsible Officer of such Borrower. "Interest Period" shall mean, with respect to any Loan, (a) initially, the period commencing on the Funding Date to but excluding the first Payment Date and (b) thereafter, each period commencing on a Payment Date to but excluding the next Payment Date. Notwithstanding the foregoing, no Interest Period may end after the Termination Date. "Investment" shall mean in respect of any Person, any loan or advance to such Person, any purchase or other acquisition of any Capital Stock of such Person, any capital contribution to such Person or any other investment or interest in such Person. "Irish Accounts" shall mean, collectively, the current account (account number 26932340) and the deposit account (account number 26933888) in the name of AHR Capital with The Governor and Company of the Bank of Ireland "Irish Borrower" shall mean: (a) any Borrower operating in Ireland through a branch, agency or other form of permanent establishment with which the Agreement is connected; or (b) any Borrower that is resident in Ireland for the purposes of the Irish Taxes Act. "Irish Borrower Tax Requirements" shall mean the following: (a) each Irish Borrower is and shall continue to be resident in Ireland for the purposes of the Irish Taxes Act; (b) each Irish Borrower carries on and shall continue to carry on in Ireland the business of holding, managing or both the holding and managing of the Eligible Assets or interests in the Eligible Assets; (c) apart from activities ancillary to the business of managing or holding the Eligible Assets or interests in the Eligible Assets, each Irish Borrower carries on and shall continue to carry on no other activities; (d) the market value of the Eligible Assets or interests in the Eligible Assets held or managed by each Irish Borrower was not less than 10,000,000 Euro on the day on which the Eligible Assets or interest in the Eligible Assets were first held by it; (e) all of the transactions entered into or that will be entered into by each Irish Borrower have been or will be entered into, as the case may be, on an arm's length basis, apart from any transaction or arrangement where Section 110(4) of the Irish Taxes Act applies to any interest or other distribution payable under the transaction or arrangement unless the transaction or arrangement concerned is excluded from that provision by virtue of Section 110(5) of the Irish Taxes Act; (f) each Irish Borrower has notified the Irish Revenue Commissioners in the prescribed form that it is or intends to be a qualifying company for the purposes of Section 110(1) of the Irish Taxes Act and has supplied to the Irish Revenue Commissioners such other particulars relating to it as may be specified in the prescribed form; (g) the proceeds of all monies or funding received by each Irish Borrower have been, or as applicable, shall be used by each Irish Borrower in the course of its business as a qualifying company within the meaning of Section 110 of the Irish Taxes Act; (h) excluding costs of incorporation of any Irish Borrower, any material expenses (being expenses in the aggregate exceeding $50,000 per annum) incurred or to be incurred by each Irish Borrower including interest payable by such Irish Borrower shall be deductible in computing its profits for the purposes of the Irish Taxes Act; (i) any transaction entered into by each Irish Borrower is not or will not be entered into by such Borrower for tax avoidance reasons; and (j) no Irish Borrower is or will become a member of a VAT Group. "Irish Debenture" shall mean the debenture governed by the laws of Ireland to be executed and delivered by AHR Capital in favor of the Lender, as the same may be amended, supplemented or otherwise modified from time to time. "Irish Revenue Commissioners" shall mean the Revenue Commissioners of Ireland (being the tax authority of Ireland). "Irish Taxes Act" shall mean the Taxes Consolidation Act, 1997, as amended of Ireland. "Irish Tax Indemnification Obligations" shall mean the following: (a) Each Irish Borrower shall pay and, within three (3) Business Days of demand by the Lender, indemnify the Lender against any cost, loss or liability that the Lender may incur in relation to all stamp duty, registration or other similar taxes payable in connection with or in respect of this Agreement or any document relating thereto in connection with the holding or management of the Eligible Assets; (b) The amount of all payments made by each Irish Borrower to the Lender pursuant to this Agreement shall be deemed to be exclusive of any Value Added Tax. In the event the Lender is required, under applicable law, to charge Value Added Tax on any supply made by any Lender to any Borrower in connection with the Agreement, such Borrower shall pay to the Lender an amount equal to the amount of the Value Added Tax; and (c) Each Irish Borrower shall pay and within three (3) Business Days of demand by the Lender, indemnify the Lender against all Value Added Tax incurred by the Lender in respect of costs or expenses to be reimbursed by a Borrower to the extent that the Lender is not entitled to credit or repayment of the Value Added Tax. "Lender" shall have the meaning provided in the introductory paragraph hereto. "Lender Generated Eligible Asset" shall have the meaning provided in clause (c) of Section 10.03 hereof. "Lien" shall mean any mortgage, lien, pledge, charge, security interest or similar encumbrance. "Loan" shall mean the advances and extensions of credit made pursuant to clauses (a) and (b) of Section 2.01 hereof. "Loan Documents" shall mean, collectively, this Agreement, the Note, the Parent Guaranty, the Custodial and Payment Application Agreement, the Intercompany Subordination Agreement, the Collateral Documents and the Fee Letter and each other agreement, certificate, document or instrument executed by a Borrower or the Guarantor and delivered to the Lender in connection with any of the foregoing in each case as amended, restated, supplemented or otherwise modified and in effect from time to time. For the avoidance of doubt, the Eligible Asset Documents shall not constitute Loan Documents hereunder. "LTV Ratio" or "Loan-to-Value" shall mean in respect of Eligible Mezzanine Loans and Eligible B Notes, the ratio of (i) the outstanding principal amount of such Eligible Mezzanine Loans or Eligible B Notes at such time, plus, the amount of any Allocated Underlying Debt for such Eligible Mezzanine Loans or Eligible B Notes at such time, to (ii) the Appraised Value of the Underlying Asset(s) as determined by reference to an Acceptable Appraisal with such Appraised Value being subject to adjustment by the Lender in its good faith business judgment. "Mandatory Cost" shall mean, with respect to any period, the percentage rate per annum determined in accordance with Schedule 1-D Mandatory Costs. "Market Value" shall mean, as of any date of determination in respect of an Eligible Asset and calculated in the applicable Eligible Currency, equal to the value of any Eligible Asset as determined by the Lender (including, if applicable, the positive or negative value of any Permitted Hedge Obligations) in its sole discretion using methodology and parameters determined in its sole discretion; provided, that on any date such Eligible Asset is initially included in the Borrowing Base as a New Asset pursuant to Section 2.03(d)(i), "Market Value" shall be determined by the Lender in its good faith business judgment. "Material Adverse Change" shall mean a material adverse change on (a) any of the property, business, operations or financial condition of (i) Anthracite and its consolidated Subsidiaries, taken as a whole, or (ii) any Borrower, (b) the ability of Anthracite or any Borrower to perform its obligations under any of the Loan Documents to which it is a party, (c) the validity or enforceability of any of the Loan Documents or (d) the rights and remedies of the Lender under any of the Loan Documents. "Maximum Credit" shall mean $100,000,000; provided, that on each Dollar Equivalent Overadvance Date, the "Maximum Credit" shall be increased by an amount not to exceed the Dollar Equivalent Overadvance Maximum Credit. "Moody's" shall mean Moody's Investors Service, Inc. "Multiemployer Plan" shall mean a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been or are required to be made by any Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA. "New Asset" shall mean any asset that a Borrower proposes to be included as an Eligible Asset in the Borrowing Base. "New Asset Legal Documents" shall mean, in respect of the applicable New Asset/New Jurisdiction/Alternate Currency Requirements, such documents, certificates and instruments as determined by the Lender in its sole discretion (including, but not limited to, as applicable, any Collateral (Other Eligible Jurisdiction) Document, any additional Collateral (US) Document, opinions of counsel and amendments to the Loan Documents), which documents, certificates and instruments shall be in form and substance satisfactory to the Lender in its sole discretion. "New Asset Materials" shall mean (each only to the extent available to a Borrower) with respect to the proposed inclusion of any New Assets in the Borrowing Base, a credit approval memo, including (x) a summary of the material terms (as determined by the Borrower Agent in its good faith business judgment) of the underlying intercreditor agreements and participation agreements, in each case relating to such New Asset (provided, that the Lender acknowledges and agrees that each such summary shall be used solely for the Lender's ease of reference in the Lender's own independent review of the underlying loan documentation and that, notwithstanding anything to the contrary in any Loan Document, the applicable Borrower makes no representation or warranty whatsoever as to the accuracy or completeness of any summary) and (y) a summary of the potential transaction benefits and all material underwriting risks, all Underwriting Issues and all other characteristics of the proposed transaction that a reasonable lender would consider material, together with the following information: (a) With respect to each Eligible Mezzanine Loan or Eligible B Note: (i) an Acceptable Appraisal; (ii) the Eligible Asset Documents; (iii) current rent roll, if applicable; (iv) financial statements of the related property-owning entity, certified by such entity, for the past two (2) years and separate financial or other reporting statements with respect to each property owned by such entity and relating to such Eligible Mezzanine Loan or Eligible B Note, to the extent prepared by such entity; (v) trailing 12-month unaudited income statement of the related property-owning entity and income statements with respect to each property owned by such entity and relating to such Eligible Mezzanine Loan or Eligible B Note, to the extent prepared by such entity; (vi) pro-forma cash flow, plus historical information; (vii) current operating budget of the related property-owning entity and a separate operating budget with respect to each property owned by such entity and relating to such Eligible Mezzanine Loan or Eligible B Note; (viii) description of the Underlying Asset and the ownership structure of the borrower and the issuer (including, without limitation, the board of directors, if applicable) and financial statements of the borrower and the issuer; (ix) indicative debt service coverage ratios; (x) indicative loan-to-value ratio; (xi) term sheet outlining the transaction generally; (xii) the relationship between the mortgagor and any Borrower, if any; (xiii) confirmation that such Eligible Mezzanine Loan or Eligible B Note has been approved by the applicable Borrower's credit committee, to the extent applicable; (xiv) any exceptions to the representations and warranties set forth in Schedule 1 to this Agreement; (xv) if such Eligible Asset is serviced by a sub-servicer engaged by a Borrower, the identity of such sub-servicer and (xvi) such other information or other deliverables as may be reasonably requested by the Lender in respect of a particular Eligible Mezzanine Loan or Eligible B Note. (b) With respect to each Eligible CMBS Security: ( i) collateral summary books which include, to the extent provided to any Borrower, the following: (A) loan detail and asset description; (B) map and photo; (C) rent roll; (D) operating information; and (E) appraisal, environmental, engineering summary; (ii) underwriting materials and analysis, which includes the executive summary, all loss scenarios and the asset summaries prepared for the twenty (20) largest loans; (iii) loan data disk; (iv) materials furnished to S&P, Moody's or Fitch in connection with the issuance of such Eligible CMBS Security (including any rating letters or private or public placement memoranda), to the extent in such Borrower's possession; (v) Securitization Documents; (vi) remittance report for most recent period in such Borrower's possession; (vii) quarterly remittance reports in such Borrower's possession; (viii) legal opinions delivered with respect to the Eligible CMBS Security in such Borrower's possession; (ix) special servicing or other reports, if any, delivered with respect to the Eligible CMBS Security in such Borrower's possession; (x) accounting reports delivered with respect to the Eligible CMBS Security in such Borrower's possession; (xi) a copy of the executed trade ticket (including evidence of the dollar price paid by such Borrower and purchase spread over treasuries or other relevant benchmark for such Eligible CMBS Security) and any adjustments to the purchase price not reflected in such trade ticket; and (xii) such other information or other deliverables as may be reasonably requested by the Lender in respect of a particular Eligible CMBS Security. "New Asset/New Jurisdiction/Alternate Currency Requirements" shall mean the requirements relating to (a) the inclusion of any New Asset as an Eligible Asset, (b) the inclusion of any New Jurisdiction as an Eligible Jurisdiction, and (c) the approval of any Alternate Currency, and such other matters related or incidental thereto, in each case as set forth in Schedule 1-E. "New Jurisdiction" shall mean any jurisdiction (a) which the Borrower Agent has requested to be included as an Eligible Jurisdiction for the purpose of including New Assets located in such New Jurisdiction in the Borrowing Base pursuant to Section 2.03(d)(i) or (b) without duplication of clause (i) hereof, in which any Underlying Assets are located. "New Jurisdiction Materials" shall mean with respect to the proposed inclusion of any New Jurisdiction as an Eligible Jurisdiction: (a) a summary of the applicable law in such New Jurisdiction relating to the making of loans, the granting and enforcement of a Lien in respect of each Eligible Asset and each Underlying Asset and such other matters as determined by the Lender in its sole discretion (provided, that the Lender acknowledges and agrees that each such summary shall be used solely for the Lender's ease of reference in the Lender's own independent review of the underlying loan documentation); (b) representations and warranties in form and substance satisfactory to the Lender in respect of (i) each Eligible Asset proposed to be included in such New Jurisdiction or (ii) the applicable Underlying Asset located in such New Jurisdiction, and in each case consistent with local practices and requirements; (c) any other materials deemed necessary by the Lender in its sole discretion. "Non-Recourse Indebtedness" shall have the meaning set forth in the Parent Guaranty. "Note" shall mean the promissory note referred to in Section 2.02 hereof for Loans and any promissory note delivered in substitution or exchange therefor, in each case, substantially in the form of Exhibit A and as the same shall be modified and supplemented and in effect from time to time. "Obligations" shall mean the unpaid principal amount of, and interest (including, without limitation, interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to a Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans, and all other obligations and liabilities of the Borrowers to the Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, or out of, or in connection with this Agreement (including any amounts payable pursuant to Sections 3.03, 10.03 and 10.14(c)), the Notes, the Fee Letter, any other Loan Documents, and any other document made, delivered or given in connection therewith or herewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to the Lender that are required to be paid pursuant to the terms of the Loan Documents) or otherwise For the avoidance of doubt, the aggregate amount of the "Obligations" shall not at any time be reduced by operation of Section 10.18. "Off-Balance Sheet Obligations" shall mean, with respect to any Person and its consolidated Subsidiaries determined on a consolidated basis as of any date of determination thereof, without duplication and to the extent not included as a liability on the consolidated balance sheet of such Person and its consolidated Subsidiaries in accordance with GAAP: (a) the monetary obligations under any financing lease or so-called "synthetic", tax retention or off-balance sheet lease transaction which, upon the application of any insolvency laws to such Person or any of its consolidated Subsidiaries, would be characterized as indebtedness; (b) the monetary obligations under any sale and leaseback transaction which does not create a liability on the consolidated balance sheet of such Person and its consolidated Subsidiaries; or (c) any other monetary obligation arising with respect to any other transaction which (i) is characterized as indebtedness for tax purposes but not for accounting purposes in accordance with GAAP or (ii) is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the consolidated balance sheet of such Person and its consolidated Subsidiaries (for purposes of this clause (c), any transaction structured to provide tax deductibility as interest expense of any dividend, coupon or other periodic payment shall be deemed to be the functional equivalent of a borrowing). "Organic Document" shall mean, relative to Anthracite or any Borrower, as applicable, its certificate of incorporation, by-laws, certificate of partnership, partnership agreement, certificate of formation, limited liability agreement and all shareholder agreements, voting trusts and similar arrangements to which Anthracite or such Borrower is a party applicable to any of its authorized shares of Capital Stock. "Parent Deed of Charge" shall mean the Deed of Charge (In Respect Of Shares) governed by the laws of Ireland to be executed and delivered by Anthracite in favor of the Lender, substantially in the form of Exhibit C-2, as the same may be amended, supplemented or otherwise modified from time to time. "Parent Financial Covenants" shall mean the financial covenants contained in the Parent Guaranty; provided, that compliance with the Parent Financial Covenants shall be determined by excluding the assets and liabilities of variable interest entities required to be consolidated under FIN 46R and without giving any effect to any changes in or in the interpretation of FAS 140 after the date hereof. "Parent Guaranty" shall mean the Parent Guaranty to be executed and delivered by Anthracite in favor of the Lender, substantially in the form of Exhibit D, as the same may be amended, supplemented or otherwise modified from time to time. "Parent Pledge Agreement" shall mean the Pledge Agreement to be executed and delivered by Anthracite in favor of the Lender, substantially in the form of Exhibit C-1, as the same may be amended, supplemented or otherwise modified from time to time. "Participating Member State" shall mean each state so described in any EMU Legislation. "Payment Date" shall mean the 15th calendar day of May, August, November and February, commencing with the first such date after the related Funding Date; provided, that if any such date is not a Business Day, the "Payment Date" shall be the immediately succeeding Business Day. "Permitted Hedge Obligations" shall mean, in respect of a Borrower, any Hedge Agreement which is entered into by such Borrower in the ordinary course of business for the purpose of directly mitigating risks associated with Eligible Assets, or changes in the value of Eligible Assets, and not for purposes of speculation or taking a "market view"; provided that: (a) the relevant Hedge Agreement does not contain any provision exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party; (b) the relevant Hedge Agreement is entered into for bona fide protection against potential losses in relation to interest or currency rates and the relevant Hedge Agreement does not at the time that it is entered into, and is not intended to, create the same or a similar economic benefit as an agreement to borrow money or raise financing or an agreement which otherwise has the same commercial effect as a borrowing (other than in a de minimis amount in aggregate); (c) the relevant Hedge Agreement is entered into on terms (including interest rates) that are an accepted market standard for a company of comparable standing to such Borrower; (d) each Borrower and the applicable counterparty has entered into an intercreditor agreement in respect of the relevant Hedge Agreement, and the applicable counterparty has agreed to waive (i) any right of cross default (other than in respect of the relevant Eligible Asset itself) or (ii) in respect of any other transaction which is not a Permitted Hedge Obligation, any right of set-off or netting arrangements whether arising by contract or other applicable law; provided, that any Hedge Agreement constituting an unsecured forward contract for the purchase of any Eligible Currency with a maturity of ninety (90) days or less, shall not be required to satisfy this paragraph (d); (e) in the event that the applicable counterparty is not the Lender (or an Affiliate of the Lender), such Hedge Agreement shall be fully subordinated in form and substance acceptable to the Lender in its sole discretion; provided, that any Hedge Agreement constituting an unsecured forward contract for the purchase of any Eligible Currency with a maturity of ninety (90) days or less, shall not be required to be subordinated hereunder; and (f) the relevant Hedge Agreement has been pledged to the Lender pursuant to a Collateral Document to secure the Obligations in form and substance reasonably satisfactory to the Lender. "Person" shall mean any individual, corporation, company, voluntary association, partnership, joint venture, limited liability company, trust, unincorporated association or government (or any agency, instrumentality or political subdivision thereof). "Plan" shall mean an employee benefit or other plan established or maintained by a Borrower or any ERISA Affiliate and covered by Title IV of ERISA, other than a Multiemployer Plan. "Prescribed Laws" shall mean, collectively, (a) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56) (The "USA PATRIOT Act"), (b) Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism, (c) the International Emergency Economic Power Act, 50 U.S.C. ss.1701 et. seq. and (d) all other Requirements of Law relating to money laundering or terrorism. "Prohibited Underlying Asset" shall mean any Underlying Asset which (a) is a restaurant, convenience store, gas station, condo conversion, or "value added" construction project or (b) is secured by one or more construction loans; provided, that in the case of any Eligible CMBS Securities, (x) any Underlying Asset which is otherwise a Prohibited Underlying Asset hereunder shall not be deemed a Prohibited Underlying Asset and (y) the Appraised Value of all "Prohibited Underlying Assets" related to such Eligible CMBS Securities shall not exceed five percent (5%) of the Appraised Value of all Underlying Assets related to such Eligible CMBS Securities. "Property" shall mean any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. "Qualifying Lender" means a Lender (and for the purposes of this definition, the term "Lender" shall include any participant, assignee, successor or transferee of or to a Lender's rights or obligations under this Agreement) which at the time the payment is made, is beneficially entitled to the payments to be made by an Irish Borrower hereunder and is: (a) the holder of a license granted under Section 9 of the Central Bank Act, 1971 of Ireland which is carrying on a banking business in Ireland and whose lending office with which this Agreement is connected is located in Ireland; or (b) an authorised credit institution under the terms of the Codified Banking Directive (2000/12/EC) which has duly established a branch in Ireland and has made all necessary notifications to its home state competent authorities required thereunder in relation to its intention to carry on a banking business in Ireland and which is carrying on a bona fide banking business in Ireland and whose lending office with which this Agreement is connected is located in Ireland; or (c) either: (i) a person that is resident in a territory with which Ireland has a double taxation treaty that is in effect or a person that is resident in a member state of the European Communities (other than Ireland), in each case where residence is determined under the tax laws of the relevant territory or Member State (together a "Relevant Territory"); or (ii) a U.S. company that it is incorporated in the US and subject to tax in the U.S. on its worldwide income; or (iii) a U.S. L.L.C. provided, that the ultimate recipients of the interest are resident for tax purposes in a Relevant Territory and that the business conducted through the L.L.C. is so structured for market reasons and not for tax avoidance purposes; provided, that in (a) and (b) the Lender does not, and in (c) neither the Lender nor the ultimate recipients of the interest, operate in Ireland through a branch or agency with which the payments from the Irish Borrower are connected; (d) a qualifying company within the meaning of Section 110 Irish Taxes Act; or (e) a person that is a resident of a territory with which Ireland has a double taxation treaty that is in effect, under the terms of that double taxation treaty; provided, that person is entitled under the terms of that double taxation treaty, subject to the completion of any necessary procedural formalities, to receive all payments under the Finance Documents without a withholding or deduction for or on account of Taxes provided that such person has completed in a timely manner any required forms to obtain this relief, submitted those forms to the Irish Revenue Commissioners and provided a copy of those forms to the Irish Borrower; or (f) a company which includes a body corporate, which is resident in Ireland for the purposes of the Irish Taxes Act or which carries on a trade in Ireland through a branch or agency: (i) which advances money under this Agreement in the ordinary course of a trade which includes the lending of money; (ii) in whose hands any interest payable under this Agreement is taken into account in computing the trading income of the company; and (iii) which has complied with all of the provisions of Section 246(5)(a) of the Irish Taxes Act including making the appropriate notifications thereunder to the Irish Revenue Commissioners and the relevant Irish Borrower, and provided, further,that the Lender has not ceased to be a company to which Section 246(5)(a) applies. "Quarterly Servicing Information" shall mean the information set forth on Schedule 6.01(a), as the same may be amended, supplemented or otherwise modified from time to time. "REIT" shall mean a Person qualifying for treatment as a "real estate investment trust" under the Code. "Request for Borrowing" shall have the meaning provided in Section 2.03(a) hereof and substantially in the form of Exhibit B, as the same shall be modified and supplemented and in effect from time to time. "Requirement of Law" shall mean as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law (including, without duplication, Prescribed Laws), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Reset Date" shall mean each Payment Date. "Responsible Officer" shall mean, as to any Person, the chief executive officer, the chief financial officer, the President, the Vice President, any director, the Secretary or the Treasurer or any other duly appointed officer of such Person customarily performing functions similar to those performed by any of the foregoing officers of such Person. "Restricted Payment" shall mean any dividend or other distribution (whether in cash, securities or other property) with respect to any Capital Stock of any Person, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Capital Stock, or on account of any return of capital to such Person's stockholders, partners or members (or the equivalent Person thereof). "Revaluation Date" shall mean (a) with respect to any Loan, (i) each date of a borrowing of a Eurocurrency Rate Loan denominated in an Alternative Currency, or (ii) such additional dates as the Lender shall designate from time to time in its sole discretion and (b) to the extent applicable, with respect to the calculation of the fees payable pursuant to the Fee Letter, each Business Day. "Same Day Funds" shall mean (a) with respect to disbursements and payments in Dollars, immediately available funds, and (b) with respect to disbursements and payments in an Alternative Currency, same day or other funds as may be determined by the Lender to be customary in the place of disbursement or payment for the settlement of international banking transactions in the relevant Alternative Currency. "Screen Rate" shall mean, for any Interest Period: (a) the rate per annum equal to the rate determined by the Lender to be the offered rate that appears on the page of the Telerate screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in the relevant currency (for delivery on the first day of such Interest Period) with a term of one-month, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period; or (b) if the rate referenced in the preceding clause (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by the Lender to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in the relevant currency (for delivery on the first day of such Interest Period) with a term of one-month, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period. "SEC" shall mean the Securities and Exchange Commission. "Securitization Documents" shall mean, with respect to any Eligible CMBS Securities, any pooling and servicing agreements, special servicing agreements or other agreements governing the issuance and administration of such Eligible CMBS Securities and any offering document used in the distribution and sale of such Eligible CMBS Securities (including, without limitation, the preliminary and final private placement memorandum, prospectus and/or offering memorandum). "S&P" shall mean Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "Single Employer Plan" shall mean as to any Person any Plan of such Person which is not a Multiemployer Plan. "Solvent" shall mean (i) the amount of the "present fair saleable value" of the assets of Anthracite and its consolidated Subsidiaries, taken as a whole, will, as of such date, exceed the amount of all "liabilities of Anthracite and its consolidated Subsidiaries, taken as a whole, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (ii) the present fair saleable value of the assets of Anthracite and its consolidated Subsidiaries, taken as a whole, will, as of such date, be greater than the amount that will be required to pay the liabilities of Anthracite and its consolidated Subsidiaries, taken as a whole, on their respective debts as such debts become absolute and matured, (iii) neither Anthracite and its consolidated Subsidiaries, taken as a whole, will have, as of such date, an unreasonably small amount of capital with which to conduct their respective businesses, and (iv) Anthracite and its consolidated Subsidiaries, taken as a whole, will be able to pay their respective debts as they mature. For purposes of this Section, "debt" means "liability on a claim", "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, and (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "Specified Date" shall mean, in respect of any Borrower as to which an Event of Default pursuant to clauses (ii), (iii) and (iv) of Section 7 has occurred and is continuing, the date which is the earlier of (A) the date on which such Borrower obtains actual knowledge of such breach and (B) the date on which the Lender notifies such Borrower in writing of such breach. "Specified Event of Default" shall mean any Event of Default set forth in Sections 7(a), (b), (f), (g), (h), (i) or (o). "Spot Rate" shall mean, in respect of any currency, the rate determined by the Lender to be the rate quoted by the Person acting in such capacity as the spot rate for the purchase by such Person of such currency with another currency through its principal foreign exchange trading office at approximately 11:00 a.m. on the date two Business Days prior to the date as of which the foreign exchange computation is made; provided, that the Lender may obtain such spot rate from another financial institution designated by the Lender if the Person acting in such capacity does not have as of the date of determination a spot buying rate for any such currency. "Sterling" and "(pound)" shall mean the lawful currency of the United Kingdom. "Subsidiary" shall mean, with respect to any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof Voting Power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have Voting Power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person; provided, that any issuer of certificated subordinate classes and residual equity interests in collateralized debt obligations, collateralized loan obligations or collateralized bond obligations (including, without limitation, any synthetic collateralized debt obligations or synthetic collateralized loan obligations) shall not be deemed a "Subsidiary" hereunder. "Table Funded New Asset" shall mean a New Asset which is financed by the Lender simultaneously with the origination or acquisition thereof, which origination or acquisition is financed with proceeds of a Loan, pursuant to the Borrower Agent's request, paid directly to the settlement agent for such New Asset for disbursement in connection with such origination or acquisition. A New Asset shall cease to be a "Table Funded New Asset" after the Custodian has delivered a trust receipt to the Lender certifying its receipt of the New Asset Legal Documents therefor. "Tangible Net Worth" shall have the meaning set forth in the Parent Guaranty. "Tax Certificate" shall mean a certificate in substantially the form of Exhibit J to this Agreement. "Termination Date" shall mean September __, 2008, or such other date on which this Agreement shall be extended or terminate in accordance with Section 2.07 or such other date as otherwise provided in this Agreement. "Termination Date Extension" shall have the meaning provided in Section 2.07. "UK Custody Agreement" shall mean the custody agreement governed by the laws of England and Wales, by and among the applicable Borrower, ABN AMRO (or its designee), the Lender and the Borrower Agent, which shall be in form and substance satisfactory to the Lender. "Underlying Assets" shall mean, in respect of any Eligible Asset, the income-producing commercial real estate, loan note, bond, security or other asset which directly or indirectly secures such Eligible Asset or to which such Eligible Asset is otherwise related. "Underlying Asset Net Cash Proceeds" shall mean, in respect of any Underlying Asset, the net cash proceeds received from the payment, prepayment or redemption (in whole or in part) in respect of such Underlying Asset. "Underlying Asset Proceeds Prepayment Amount" shall mean, in respect of any Eligible Asset and the related Underlying Asset on any date of determination, an amount equal to the product of the Applicable Borrowing Base Percentage applied to such Eligible Asset, multiplied by, the Underlying Asset Net Cash Proceeds. "Underlying Asset Servicer" shall mean (a) any entity listed on Schedule 1-F hereto or (b) any other entity which manages and/or services any of the Underlying Assets. "Underlying Asset Servicer Instruction Letter" shall mean an irrevocable instruction letter in form and substance satisfactory to the Lender by the applicable Borrower to the Underlying Asset Servicer (and acknowledged by such Underlying Asset Servicer), instructing the Underlying Asset Servicer to deposit all payments to be made to such Borrower in respect of any Eligible Assets serviced by such Underlying Asset Servicer into the English Sub-Collection Account. "Underlying German Assets" shall mean any Underlying Asset located in the Federal Republic of Germany. "Underlying Other Eligible Jurisdiction Assets" shall mean any Underlying Asset located in any Eligible Jurisdiction (other than the Federal Republic of Germany, Scotland, England and Wales or the United States of America). "Underlying Scottish Assets" shall mean any Underlying Asset located in Scotland. "Underlying UK Assets" shall mean any Underlying Asset located in England or Wales. "Underlying US Assets" shall mean any Underlying Asset located in the United States of America. "Underwriting Guidelines" shall mean any underwriting guidelines from time to time adopted by any Borrower and as the same may be modified from time to time in accordance with Section 6.20. "Underwriting Issues" shall mean, with respect to any New Asset, all material information that has come to any Borrower's attention which, based on the making of reasonable inquiries and the exercise of reasonable care and diligence under the circumstances, would be considered a materially "negative" factor (either separately or in the aggregate with other information) to a reasonable institutional mortgage buyer in determining whether to originate or acquire such New Asset, including, but not limited to, the extent of such Borrower's knowledge in respect of (x) whether any of the Eligible Assets were rejected for inclusion in, or repurchased from, any securitization transaction, warehouse loan facility or a repurchase transaction due to the breach of a representation and warranty, or (y) the existence of a material defect in the loan documentation or closing deliveries (such as any absence of any material Eligible Asset Document). "Uniform Commercial Code" or "UCC" shall mean the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided, that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest or the renewal or enforcement thereof in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York. "US Collection Account" shall mean a deposit, custody, money-market or other similar account (whether, in any case, time or demand or interest or non-interest bearing) maintained by each Borrower with LaSalle Bank National Association, as depository institution which shall at all times be subject to the first priority security interest of the Lender pursuant to the US Collection Account Control Agreement. "US Collection Account Control Agreement" shall mean the US Collection Account Control Agreement with respect to the US Collection Account substantially in the form of Exhibit H-1, by and among AHR Capital, as grantor, LaSalle Bank National Association, as securities intermediary, and the Lender, as secured party, as the same shall be modified and supplemented and in effect from time to time. "Value Added Tax" shall mean any tax levied pursuant to the VAT Act 1972 (as amended). "VAT Group" shall mean a "VAT group" as defined by Section 8(8) of the VAT Act 1972 (as amended). "Voting Power" shall mean of any Voting Stock the number of votes such Voting Stock are entitled to cast for directors of a Borrower at any meeting of stockholders of such Borrower. "Voting Stock" shall mean all securities issued by a Borrower having the ordinary power to vote in the election of directors of such Borrower, other than securities having such power only upon the occurrence of a default or any other extraordinary contingency. 1.02 Accounting Terms and Determinations. Except as otherwise expressly provided herein or in the Parent Guaranty, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lender hereunder shall be prepared, in accordance with GAAP. 1.03 Exchange Rates; Currency Equivalents. (a) The Lender shall determine the Spot Rates as of each Revaluation Date to be used for calculating Dollar Equivalent amounts of Loans denominated in Alternative Currencies. Such Spot Rates shall become effective as of such Revaluation Date and shall be the Spot Rates employed in converting any amounts between the applicable currencies until the next Revaluation Date to occur. Except for purposes of financial statements delivered by the Borrowers hereunder or calculating financial covenants hereunder (including the Parent Financial Covenants) or except as otherwise provided herein, the applicable amount of any currency (other than Dollars) for purposes of the Loan Documents shall be such Dollar Equivalent amount as so determined by the Lender in its good faith business judgment. (b) Wherever in this Agreement in connection with a borrowing, conversion, continuation or prepayment of a Eurocurrency Rate Loan, an amount, such as a required minimum or multiple amount, is expressed in Dollars, but such borrowing or Eurocurrency Rate Loan is denominated in an Alternative Currency, such amount shall be the relevant Alternative Currency Equivalent of such Dollar amount (rounded to the nearest unit of such Alternative Currency, with 0.5 of a unit being rounded upward), as determined by the Lender in its good faith business judgment. 1.04 Additional Alternative Currencies. (a) Any Borrower may from time to time request that Loans be made in a currency other than those specifically listed in the definition of "Alternative Currency", provided, that (i) payments are made to a Borrower in such other currency in respect of an Eligible Asset included in the Borrowing Base, and (ii) such requested currency is a lawful currency (other than Dollars) that is readily available and freely transferable and convertible into Dollars. Such request shall be subject to the approval of the Lender in its sole discretion. (b) Any such request shall be made to the Lender in compliance with the applicable New Asset/New Jurisdiction/Alternate Currency Requirements. 1.05 Change of Currency. (a) Each obligation of the Borrowers to make a payment denominated in the national currency unit of any member state of the EMU that adopts the Euro as its lawful currency after the date hereof shall be redenominated into Euro at the time of such adoption (in accordance with the EMU Legislation). If, in relation to the currency of any such member state, the basis of accrual of interest expressed in this Agreement in respect of that currency shall be inconsistent with any convention or practice in the London interbank market for the basis of accrual of interest in respect of the Euro, such expressed basis shall be replaced by such convention or practice with effect from the date on which such member state adopts the Euro as its lawful currency; provided, that if any borrowing in the currency of such member state is outstanding immediately prior to such date, such replacement shall take effect, with respect to such borrowing, at the end of the then current Interest Period. (b) Each provision of this Agreement shall be subject to such changes of construction, as specified in clause (a), as the Lender may from time to time specify to be appropriate to reflect the adoption of the Euro by any member state of the EMU and any relevant market conventions or practices relating to the Euro. (c) Each provision of this Agreement shall also be subject to such changes of construction, as specified in clause (a), as the Lender may from time to time specify to be appropriate to reflect a change in currency of any other country and any relevant market conventions or practices relating to the change in currency. 1.06 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to United States Eastern time (daylight or standard, as applicable). Section 2. Loans, Note and Prepayments. 2.01 Loans. (a) Subject to the fulfillment of the conditions precedent set forth in Sections 4.01 and 4.02 hereof, and provided, that no Default shall have occurred and be continuing hereunder, the Lender agrees from time to time to make, on the terms and subject to the conditions of this Agreement, advances to the Borrowers in an Eligible Currency from time to time, on any Business Day during the Availability Period, in an aggregate principal amount at any one time outstanding up to but not exceeding the lesser of (i) the Maximum Credit or (ii) the Borrowing Base as in effect from time to time; provided, further, that (x) the aggregate principal amount of all outstanding Loans at any one time shall not exceed the lesser of (i) the Maximum Credit or (ii) the Borrowing Base, and (y) the Lender shall not be obligated to make any Loans which, after giving effect thereto, would result in violation of any applicable Eligible Asset Funding Requirement. (b) On any Dollar Equivalent Overadvance Date, at the Lender's sole discretion, and, provided that no Default shall have occurred and be continuing hereunder, the Lender may make, on the terms and subject to the conditions of this Agreement, a Dollar Equivalent Overadvance Loan in an aggregate principal amount at any one time outstanding up to but not exceeding the Dollar Equivalent Overadvance Maximum Credit; provided, that (x) any Dollar Equivalent Overadvance Loan shall be deemed funded in full on the applicable Dollar Equivalent Overadvance Date and no additional amounts may be borrowed or reborrowed thereafter, and (y) the amount of such Dollar Equivalent Overadvance Loan shall not exceed the positive difference between (i) the aggregate amount of the Dollar Equivalent of the Loans outstanding under this Agreement and (ii) the Maximum Credit (prior to being increased by the Dollar Equivalent Overadvance Maximum Credit). (c) Subject to the terms and conditions of this Agreement and other than as provided by clause (b) of Section 2.01, during such period each Borrower may (i) borrow, (ii) repay the Loan, in full or in part, without penalty, and (iii) reborrow hereunder; provided, that notwithstanding the foregoing, the Lender shall have no obligation to make Loans to any Borrower in aggregate amounts in excess of the then current Maximum Credit and, in the event the obligation of the Lender to make Loans to any Borrower is terminated as permitted hereunder, the Lender shall have no further obligation to make additional Loans hereunder. (d) Promptly upon repayment in full in cash of the Asset Attributable Loan Balance and upon a Borrower's written request, the Lender shall grant such Borrower release of the Lender's Lien on such Eligible Asset substantially in the form provided as Exhibit M (as the same shall be amended, from time to time, as may be necessary under the laws of the relevant jurisdiction to effect a complete and unconditional release by the Lender of all its right, title and interest in, to and under such Eligible Asset) and, effective on such date, such asset shall thereupon no longer be deemed an Eligible Asset hereunder. All cost and expenses in connection with all necessary release documents shall be paid by such Borrower upon demand. 2.02 Evidence of Debt. The Loans made by the Lender shall be evidenced by one or more accounts or records maintained by the Lender in the ordinary course of business. The accounts or records maintained by the Lender shall create a rebuttable presumption that the amount of the Loans made by the Lender to any of the Borrowers and the interest and payments thereon listed in such accounts and records are correct. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of any of the Borrowers hereunder to pay any amount owing with respect to the Obligations. Upon the request of the Lender to a Borrower, such Borrower shall execute and deliver to the Lender a Note, substantially in the form of Exhibit A hereto (the "Notes"), which shall evidence the Lender's Loans to such Borrower in addition to such accounts or records. The Lender may attach schedules to a Note and endorse thereon the date, type (if applicable), amount, currency and maturity of its Loans and payments with respect thereto. The Lender shall have the right to have its Note subdivided, by exchange for promissory notes of lesser denominations or otherwise. 2.03 Procedure for Borrowing. (a) Subject to clause (d) of this Section 2.03, the Borrower Agent may request a borrowing hereunder (other than a borrowing made pursuant to Section 2.01(b)) on any Business Day during the Availability Period, by delivering to the Lender a written request for borrowing, substantially in the form of Exhibit B attached hereto (a "Request for Borrowing"), which request must be received by the Lender prior to 11:00 a.m., New York City time, three (3) Business Days prior to the requested Funding Date. Such request for borrowing shall (i) identify the name of each Borrower requesting a Loan, (ii) identify the amount requested to be borrowed in respect of each Eligible Asset (and the Applicable Borrowing Base Percentage for such Eligible Asset), (iii) attach a schedule identifying the Eligible Assets that the applicable Borrower proposes to be included in the Borrowing Base in connection with such borrowing, (iv) specify the requested Funding Date, and (v) attach an officer's certificate signed by a Responsible Officer of the applicable Borrower as required by Section 4.02(b) hereof. (b) Upon a Borrower's request for a borrowing pursuant to Section 2.03(a), the Lender shall, upon satisfaction of all applicable conditions precedent set forth in Section 4.01 and 4.02 hereof and, provided, that no Default shall have occurred and be continuing, make a Loan to the applicable Borrower, in the amount so requested. (c) Subject to Section 4.02 hereof, such borrowing will then be made available to the applicable Borrower by the Lender transferring, via wire transfer, to the account of the applicable Borrower identified on Schedule 2.03 hereto, in the aggregate amount of such borrowing in funds immediately available to such Borrower. (d) (i) The Borrower Agent may, from time to time, submit to the Lender a request to include New Assets into the Borrowing Base in accordance with the applicable New Asset/New Jurisdiction/Alternate Currency Requirements. (ii) The Borrower Agent may, from time to time, submit to the Lender a request to include a New Jurisdiction as an Eligible Jurisdiction in accordance with the applicable New Asset/New Jurisdiction/Alternate Currency Requirements. 2.04 Limitation on Types of Loans; Illegality. Anything herein to the contrary notwithstanding, if, on or prior to the determination of any Eurocurrency Rate: (a) the Lender determines, which determination shall be conclusive, that by reason of circumstances affecting the relevant market, quotations of interest rates for the relevant deposits referred to in the definition of "Eurocurrency Rate" in Section 1.01 hereof are not being provided in the relevant amounts or for the relevant maturities for purposes of determining rates of interest for Loans as provided herein (as certified by the Lender); or (b) the Lender determines, which determination shall be conclusive, that the relevant rate of interest referred to in the definition of "Eurocurrency Rate" in Section 1.01 hereof upon the basis of which the rate of interest for Loans is to be determined is not expected adequately to cover the cost to the Lender of making or maintaining Loans (as certified by the Lender); or (c) it becomes unlawful for the Lender to honor its obligation to make or maintain Loans hereunder using a Eurocurrency Rate (as certified by the Lender); then the Lender shall give the Borrower Agent prompt notice thereof and, so long as such condition remains in effect, (i) in the case of clause (c) of this Section only, the Lender shall be under no obligation to make additional Loans and (ii) in the case of clauses (a), (b) and (c) of this Section, the Borrowers shall either prepay all such Loans as may be outstanding (without additional cost or penalty but subject to Section 3.04) and this Agreement shall terminate, or pay interest on such Loans at a rate per annum equal to the Federal Funds Rate, plus, the Applicable Margin. 2.05 Repayment of Loans; Interest. (a) The Borrowers hereby promise to repay in full in cash the then aggregate outstanding principal amount of the Loans on the Termination Date; provided, that any Dollar Equivalent Overadvance Loan shall be repaid in full in cash on the Dollar Equivalent Overadvance Maturity Date. (b) The Borrowers hereby promise to pay to the Lender interest on the unpaid principal amount of each Loan for the period from and including the date of such Loan to but excluding the date such Loan shall be paid in full, at a rate per annum equal to the Eurocurrency Rate plus the Applicable Margin stated in the definition of "Applicable Margin"; provided, that in no event shall such rate per annum exceed the maximum rate permitted by law. Notwithstanding the foregoing, upon the occurrence and during the continuance of an Applicable Margin Increase Event, the Borrowers hereby promise to pay to the Lender interest at a rate per annum equal to the Eurocurrency Rate plus the Applicable Margin stated in the proviso to the definition of "Applicable Margin" on any principal of any Loan and on any other amount payable by a Borrower hereunder or under the Note that shall not be paid in full when due (whether at stated maturity, by acceleration or by mandatory prepayment or otherwise) for the period from and including the due date thereof to but excluding the date the same is paid in full. Accrued interest on each Loan shall be payable on each Payment Date and on the Termination Date, plus (in the case of a Eurocurrency Rate Loan which is lent from a lending office in the United Kingdom or a Participating Member State) the Mandatory Cost; provided, that, the Lender may, in its sole discretion, require accrued interest to be paid simultaneously with any prepayment of principal made by a Borrower on account of any of the Loans outstanding. Interest payable at the rate per annum equal to the Eurocurrency Rate plus the Applicable Margin stated in the proviso to the definition of "Applicable Margin" shall accrue daily and shall be payable upon such accrual. Promptly after the determination of any interest rate provided for herein or any change therein, the Lender shall give notice thereof to the Borrower Agent. 2.06 Prepayments. (a) (i) Upon the occurrence of a Collateral Value Deficiency Event or Borrowing Base Deficiency Event, as notified to the Borrower Agent on any Business Day, the Borrowers shall after receipt of such notice by the Borrower Agent, prepay the Loans in part or in whole (and such prepayment shall be applied to the Asset Attributable Loan Balance of (x) the Eligible Assets in respect of which the Collateral Value Deficiency Event occurred, in the case of a Collateral Value Deficiency Event, or (y) one or more Eligible Assets designated by the Borrower Agent, in the case of a Borrowing Base Deficiency Event) to the Lender (i) in the event such notice was received by the Borrower Agent on or prior to 11 a.m. on any Business Day, within two (2) Business Days, or (ii) in the event such notice was received by the Borrower Agent after 11 a.m. on any Business Day, within three (3) Business Days, such that after giving effect to such prepayment, the aggregate outstanding principal amount of the Loans does not exceed the Collateral Value or the Borrowing Base, as applicable. (ii) Upon the occurrence of a Collateral Value Cash Sweep Event, as notified to the Borrower Agent on any Business Day, the Lender shall be permitted to apply any Cash in the US Collection Account first, to the payment of accrued and unpaid interest on the Loans, and then to prepay the Loans and apply such prepayment to the Asset Attributable Loan Balance of the Eligible Assets in respect of which the Collateral Value Cash Sweep Event occurred, such that after giving effect to such prepayment, the aggregate outstanding principal amount of the Loans does not exceed the Borrowing Base. (b) If at any time the aggregate outstanding principal amount of Loans exceeds the Maximum Credit then in effect, the Borrowers shall at such time prepay the Loans and such prepayment shall be applied to the Asset Attributable Loan Balance of one or more Eligible Assets designated by the Borrower Agent such that, after giving effect to such prepayment, the aggregate outstanding principal amount of the Loans does not exceed the Maximum Credit then in effect. (c) If at any time any Borrower shall receive any Eligible Asset Net Cash Proceeds in respect of any Eligible Asset, such Borrower shall make a prepayment in the Eligible Asset Proceeds Prepayment Amount to be applied to the applicable Asset Attributable Loan Balance. (d) If at any time any Borrower shall receive any Underlying Asset Net Cash Proceeds in respect of any Eligible Asset, such Borrower shall make a prepayment in the Underlying Asset Proceeds Prepayment Amount to be applied to the applicable Asset Attributable Loan Balance. (e) The Borrowers may, at any time and from time to time, prepay the Loans, in whole or in part, without premium or penalty, and such prepayment shall be applied to the Asset Attributable Loan Balance of one or more Eligible Assets designated by the Borrower Agent upon notice to the Lender by the Borrower Agent prior to 12:00 noon, New York City time, at least two (2) Business Days prior thereto, specifying the date and amount of prepayment. If any such notice is given, unless the same may be revoked by the Borrower Agent prior to 11:00 a.m. on the date of prepayment, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to Section 3.04 of this Agreement. Partial prepayments pursuant to this Section shall be a minimum amount, equal to the lesser of (x) $500,000 and (y) the then outstanding principal balance of the Loans. 2.07 Extension of Termination Date. At the written request of the Borrower Agent made in no event earlier than sixty (60) days prior to the then current Termination Date, the Lender may in its sole discretion extend the Termination Date (each, a "Termination Date Extension") for a period of 364 days from the date of effectiveness of such extension by giving written notice of such extension to the Borrower Agent no later than 30 days prior to the then current Termination Date; provided, that (a) the Borrower Agent may request no more than two (2) Termination Date Extensions, (b) at the time the Lender agrees to such extension and on the effective date of such Termination Date Extension, no Event of Default has occurred and is continuing, and (c) on or prior to the effective date of such Termination Date Extension, the Lender shall have received from the Borrowers any applicable fees payable pursuant to the Fee Letter. Any such extension shall be effective on the date that notice of any such extension is given by the Lender. Any failure by the Lender to deliver such notice of extension shall be deemed to be the Lender's determination not to extend the then current Termination Date. 2.08 Repayment of Outstanding Loans after Termination Date. Effective as of the Termination Date, no further borrowings may be made by any Borrower under this Loan Agreement and the Obligations then outstanding (including any amounts payable pursuant to the Fee Letter and Section 3.03) shall be due and payable in full on such Termination Date. 2.09 Taxes. (a) For purposes of applying this Section 2.09, the term "Lender" shall include any assignee, successor or transferee of or to a Lender's rights or obligations under this Agreement, but only to the extent that the resulting obligations of each Borrower are no less favorable to such Borrower than the obligations to which such Borrower would have been subject but for the related assignment, succession or transfer. (b) Any and all payments by each Borrower under or in respect of this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities (including penalties, interest and additions to tax) with respect thereto, whether now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority (collectively, "Taxes"), unless such Taxes represent a Requirement of Law. If any Borrower shall be required under any applicable Requirement of Law to deduct or withhold any Taxes from or in respect of any sum payable under or in respect of this Agreement to the Lender, (i) such Borrower shall make all such deductions and withholdings in respect of Taxes, (ii) such Borrower shall pay the full amount deducted or withheld in respect of Taxes to the relevant taxation authority or other Governmental Authority in accordance with the applicable Requirement of Law, and (iii) the sum payable by such Borrower shall be increased as may be necessary so that after such Borrower has made all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section) such Lender receives an amount equal to the sum it would have received had no such deductions or withholdings been made in respect of Non-Excluded Taxes, provided that in the case of amounts payable by an Irish Borrower to a Lender, that Lender is a Qualifying Lender. For purposes of this Agreement, the term "Non-Excluded Taxes" are Taxes other than, in the case of the Lender, Taxes that are imposed as a result of any present or former connection between the Lender and the relevant taxing jurisdiction, unless such Taxes are imposed solely as a result of such Lender having executed, delivered or performed its obligations or received payments under, or enforced, this Agreement (in which case such Taxes shall be treated as Non-Excluded Taxes). (c) In addition, each Borrower hereby agrees to pay any present or future stamp, recording, documentary, excise, property or value-added taxes, or similar taxes, charges or levies that arise from any payment made under or in respect of this Agreement or from the execution, delivery or registration of, any performance under, or otherwise with respect to, this Agreement (collectively, "Other Taxes"). (d) Each Borrower hereby agrees to indemnify the Lender, and to hold it harmless against, the full amount of Non-Excluded Taxes and Other Taxes, and the full amount of Taxes of any kind imposed by any jurisdiction on amounts payable to Lender under this Section, imposed on or paid by the Lender, and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. The indemnity by each Borrower provided for in this Section 2.09(d) shall apply and be made whether or not the Non-Excluded Taxes or Other Taxes for which indemnification hereunder is sought have been correctly or legally asserted. Amounts payable by each Borrower under the indemnity set forth in this Section 2.09(d) shall be paid within 30 days from the date on which the Lender makes written demand therefor. (e) As soon as practicable after the date of any payment of Taxes or Other Taxes by each Borrower to the relevant Governmental Authority, such Borrower shall deliver to the Lender the original or a certified copy of the receipt issued by such Governmental Authority evidencing payment thereof. (f) For the purposes of this Section 2.09(f), the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Code. Any Lender that either (i) is not incorporated under the laws of the United States, any State thereof, or the District of Columbia or (ii) whose name does not include "Incorporated," "Inc.," "Corporation," "Corp.," "P.C.," "insurance company," or "assurance company" (a "Non-Exempt Lender") shall deliver or cause to be delivered to the Borrowers either of the following properly completed and duly executed documents: (i) in the case of a Non-Exempt Lender that is not a United States person, a complete and executed (x) U.S. Internal Revenue Form W-8BEN with Part II completed in which the Lender claims the benefits of a tax treaty with the United States providing for a zero or reduced rate of withholding (or any successor forms thereto), including all appropriate attachments or (y) a U.S. Internal Revenue Service Form W-8ECI (or any successor forms thereto); or (ii) in the case of an individual, (x) a complete and executed U.S. Internal Revenue Service Form W-8BEN (or any successor forms thereto) and a Tax Certificate or (y) a complete and executed U.S. Internal Revenue Service Form W-9 (or any successor forms thereto); or (iii) in the case of a Non-Exempt Lender that is organized under the laws of the United States, any State thereof, or the District of Columbia, a complete and executed U.S. Internal Revenue Service Form W-9 (or any successor forms thereto), including all appropriate attachments; or (iv) in the case of a Non-Exempt Lender that (x) is not organized under the laws of the United States, any State thereof, or the District of Columbia and (y) is treated as a corporation for U.S. federal income tax purposes, a complete and executed U.S. Internal Revenue Service Form W-8BEN claiming a zero rate of withholding (or any successor forms thereto) and a Tax Certificate; or (v) in the case of a Non-Exempt Lender that (A) is treated as a partnership or other non-corporate entity, and (B) is not organized under the laws of the United States, any State thereof, or the District of Columbia, (x)(i) a complete and executed U.S. Internal Revenue Service Form W-8IMY (or any successor forms thereto) (including all required documents and attachments) and (ii) a Tax Certificate, and (y) without duplication, with respect to each of its beneficial owners and the beneficial owners of such beneficial owners looking through chains of owners to individuals or entities that are treated as corporations for U.S. federal income tax purposes (all such owners, "beneficial owners"), the documents that would be required by clause (i), (ii), (iii), (iv), (vi), (vii) and/or this clause (v) with respect to each such beneficial owner if such beneficial owner were Lender, provided, however, that no such documents shall be required with respect to a beneficial owner to the extent the actual Lender is determined to be in compliance with the requirements for certification on behalf of its beneficial owner as may be provided in applicable U.S. Treasury regulations, or the requirements of this clause (v) are otherwise determined to be unnecessary, all such determinations under this clause (v) to be made in the sole discretion of the Borrowers, provided, however, that Lender shall be provided an opportunity to establish such compliance as reasonable; or (vi) in the case of a Non-Exempt Lender that is disregarded for U.S. federal income tax purposes, the document that would be required by clause (i), (ii), (iii), (iv), (v), (vii) and/or this clause (vi) of this Section 2.09(f) with respect to its beneficial owner if such beneficial owner were the Lender; or (vii) in the case of a Non-Exempt Lender that (A) is not a United States person and (B) is acting in the capacity as an "intermediary" (as defined in U.S. Treasury Regulations), (x)(i) a U.S. Internal Revenue Service Form W-8IMY (or any successor form thereto) (including all required documents and attachments) and (ii) a Tax Certificate, and (y) if the intermediary is a "non-qualified intermediary" (as defined in U.S. Treasury Regulations), from each person upon whose behalf the "non-qualified intermediary" is acting the documents that would be required by clauses (i), (ii), (iii), (iv), (v), (vi), and/or this clause (vii) with respect to each such person if each such person were Lender. If the forms referred to above in this Section 2.09(f) that are provided by the Lender at the time the Lender first becomes a party to this Agreement or, with respect to a grant of participation, the effective date thereof, indicate a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be treated as Taxes other than Non-Excluded Taxes ("Excluded Taxes") and shall not qualify as Non-Excluded Taxes unless and until the Lender provides the appropriate form certifying that a lesser rate applies, whereupon withholding tax at such lesser rate shall be considered Excluded Taxes solely for the periods governed by such form. (g) The Lender hereby confirms that it is a Qualifying Lender. Insofar as a Borrower is an Irish Borrower, each Lender that is a Qualifying Lender to whom any interest is payable by such Irish Borrower, shall as soon as practicable deliver to the Borrower Agent, written confirmation that it is a Qualifying Lender (a "Qualifying Lender Confirmation"). Each Lender that has provided a Qualifying Lender Confirmation shall notify the Borrower Agent as soon as practicable in writing if it ceases to be a Qualifying Lender (a "Qualifying Lender Revocation"). For the avoidance of doubt, a Lender is not required to provide a Qualifying Lender Confirmation if it has already provided a Qualifying Lender Confirmation and it has not since provided a Qualifying Lender Revocation unless the applicable Borrower receives a written request from the Irish Revenue Commissioners for information as to such Lender's entitlement to exemption from withholding tax on Irish source interest. If a Lender ceases to be a Qualifying Lender (other than as a result of a change in any law, or the interpretation or application thereof, occurring after the date on which such Lender became a Lender), all Taxes suffered by such Lender (whether by deduction, withholding or otherwise) shall not be Non-Excluded Taxes. (h) If, however, on the date the Lender transferee becomes a party to this Agreement, the Lender transferor was entitled to indemnification or additional amounts under this Section 2.09, then, to such extent (and only to such extent), the term "Non-Excluded Taxes" shall include (in addition to Taxes that may be imposed in the future or other amounts otherwise includable in Taxes) such Taxes, if any, applicable with respect to the Lender transferee on such date and the Lender assignee shall be entitled to additional indemnification or additional amounts for any other or additional Non-Excluded Taxes. Any additional Taxes in respect of a Lender that result solely and directly from a change in the principal office of such Lender shall be treated as Excluded Taxes unless (A) any such additional Taxes are imposed as a result of a change in the applicable Requirement of Law, or in the interpretation or application thereof, occurring after the date of such change or (B) such change is made pursuant to the terms of Section 2.09(i) or otherwise as a result of a request therefor by the Borrowers. (i) For any period with respect to which the Lender has failed to provide the Borrowers with the appropriate form, certificate or other document described in Section 2.09(f) (other than (i) if such failure is due to a change in any law, or in the interpretation or application thereof, occurring after the date on which a form, certificate or other document originally was required to be provided or (ii) if such form, certificate or other document otherwise is not required under Section 2.09(f)), the Lender shall not be entitled to payment or indemnification under Sections 2.09(b) or (d) with respect to Non-Excluded Taxes by reason of such failure; provided, however, that should the Lender become subject to Non-Excluded Taxes because of its failure to deliver a form, certificate or other document required hereunder, the Borrowers shall take such steps, at the sole expense of the Lender, as the Lender shall reasonably request to assist the Lender in recovering such Non-Excluded Taxes. (j) The Lender hereby agrees that, upon the occurrence of any circumstances entitling the Lender to additional amounts pursuant to this Section, the Lender shall use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions), at the sole expense of the Borrowers, to designate a different applicable lending office if the making of such a change would avoid the need for, or materially reduce the amount of, any such additional amounts that may thereafter accrue and would not be, in the sole judgment of the Lender, legally inadvisable or commercially or otherwise disadvantageous to the Lender in any respect. (k) Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section shall survive the termination of this Agreement. Nothing contained in this Section shall require the Lender to make available any of its tax returns or any other information that it deems to be confidential or proprietary. 2.10 Additional Borrowers. (a) The Borrower Agent may at any time, upon not less than 15 Business Days' notice from the Borrower Agent to the Lender (or such shorter period as may be agreed by the Lender in its sole discretion), propose any entity as an additional borrower (an "Additional Borrower") to borrow Loans hereunder by delivering to the Lender a Borrower Joinder duly executed by the applicable Borrower and the Lender; provided, that the Lender shall have approved such Additional Borrower in its sole discretion (such date of approval and inclusion as an Additional Borrower, the "Additional Borrower Effective Date"). The parties hereto acknowledge and agree that prior to any Additional Borrower becoming entitled to utilize the credit facilities provided for herein the Lender shall have received such amendments to any Loan Documents (as applicable), including, but not limited to, an executed Borrower Security Agreement Addendum, an executed Additional Account Control Agreement, supporting resolutions, incumbency certificates, appropriate perfection opinions in respect of any Borrower Security Agreement Addendum and Additional Account Control Agreement executed by an Additional Borrower and other documents or information, in form, content and scope satisfactory to the Lender in its sole discretion, as may be required by the Lender in its sole discretion, and Notes signed by such Additional Borrower to the extent the Lender so requires. If the Lender agrees that an Additional Borrower shall be entitled to borrow Loans hereunder, then promptly following receipt of all such requested resolutions, incumbency certificates, opinions of counsel and other documents or information, the Lender shall send a notice (an "Additional Borrower Notice") to the Borrower Agent specifying the effective date upon which the Applicant Borrower shall constitute a Additional Borrower for purposes hereof, whereupon the Lender agrees to permit such Additional Borrower to borrow Loans hereunder, on the terms and conditions set forth herein, and each of the parties agrees that such Additional Borrower otherwise shall be a Borrower for all purposes of this Agreement. (b) The Obligations of the Borrower Agent, AHR Capital and each Additional Borrower shall be joint and several in nature. (c) Each Additional Borrower pursuant to this Section 2.10 hereby irrevocably appoints the Borrower Agent as its agent for all purposes relevant to this Agreement and each of the other Loan Documents, including (i) the giving and receipt of notices, (ii) the execution and delivery of all documents, instruments and certificates contemplated herein and all modifications hereto, and (iii) the receipt of the proceeds of any Loans made by the Lender, to any such Additional Borrower hereunder. Any acknowledgment, consent, direction, certification or other action which might otherwise be valid or effective only if given or taken by all Borrowers, or by each Borrower acting singly, shall be valid and effective if given or taken only by the Borrower Agent, whether or not any such other Borrower joins therein. Any notice, demand, consent, acknowledgement, direction, certification or other communication delivered to the Borrower Agent in accordance with the terms of this Agreement shall be deemed to have been delivered to each Additional Borrower. (d) The Borrower Agent may from time to time, upon not less than 15 Business Days' notice from the Borrower Agent to the Lender (or such shorter period as may be agreed by the Lender in its sole discretion), terminate an Additional Borrower's status as such, provided that there are no outstanding Loans payable by such Additional Borrower, or other amounts payable by such Additional Borrower on account of any Loans made to it, as of the effective date of such termination. 2.11 Appointment of Borrower Agent. (a) Each Borrower hereby irrevocably appoints and constitutes the Borrower Agent as its agent to request and receive Loans pursuant to this Agreement from the Lender in the name of or on behalf of such Borrower. The Lender may disburse the Loans to such bank account of the Borrower Agent or a Borrower or otherwise make such Loans to a Borrower as the Borrower Agent may designate or direct, without notice to any other Borrower. Notwithstanding anything to the contrary contained herein, the Borrower Agent may at any time and from time to time require that any Loans to or for the account of any Borrower be disbursed directly to an operating account of such Borrower. (b) The Borrower Agent hereby accepts the appointment by the Borrowers to act as agent of the Borrowers pursuant to this Section 2.11. The Borrower Agent shall ensure that the disbursement of any Loans to each Borrower requested or paid to or for the account of any Borrower hereunder, shall be paid to or for the account of such Borrower. (c) Each Borrower hereby irrevocably appoints and constitutes the Borrower Agent as its agent with respect to the Obligations or otherwise under or in connection with this Agreement and the other Loan Documents. (d) Any notice, election, representation, warranty, agreement or undertaking by or on behalf of any other Borrower or by the Borrower Agent shall be deemed for all purposes to have been made by such Borrower, as the case may be, and shall be binding upon and enforceable against such Borrower to the same extent as if made directly by such Borrower. Section 3. Payments, Computations, etc. 3.01 Establishment of Accounts/Payments. (a) AHR Capital shall establish the US Collection Account entitled "AHR Capital BofA Limited Collection Account" for the benefit of the Lender. On each Payment Date, all funds in the US Collection Account shall be applied to payments of principal, interest and other amounts to be paid under this Agreement and the other Loan Documents in accordance with the Custodial and Payment Application Agreement. (b) (i) AHR Capital shall establish the English Sub-Collection Account entitled "AHR Capital BofA Limited Sub-Collection Account" for the benefit of the Lender. (ii) Each Borrower and the Borrower Agent shall deposit or cause to be deposited into the English Sub-Collection Account all payments and prepayments (including all payments of principal, interest, Eligible Asset Net Cash Proceeds and Underlying Asset Net Cash Proceeds) on or in respect of each Eligible Asset within one (1) Business Day after receipt thereof. (iii) Each Borrower and the Borrower Agent shall instruct each Underlying Asset Servicer to deposit all payments to be made to any Borrower in respect of any Eligible Assets serviced by such Underlying Asset Servicer into the English Sub-Collection Account pursuant to an Underlying Asset Servicer Instruction Letter. (iv) On each English Sub-Collection Account Remittance Date, all funds in the English Sub-Collection Account shall be deposited into the US Collection Account in accordance with the applicable Collateral (England and Wales) Document. (c) Except to the extent otherwise provided in clauses (a) or (b) of this Section 3.01, all other payments to be made by each Borrower under this Agreement and the other Loan Documents, shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to the Lender at the following account maintained by the Lender: Account Name: Corp Funds Transfer Account, Account No. 1292000883, for the account of Lender, Bank of America, N.A., ABA No. 111000012, Ref: (Anthracite, type of payment), not later than 1:00 p.m., New York City time, on the Payment Date or such other date on which such payment shall become due (and each such payment made after such time on such due date shall be deemed to have been made on the next succeeding Business Day). The Borrowers acknowledge that each has no right of withdrawal from the foregoing account. (d) Except to the extent otherwise expressly provided herein, if the Payment Date or other due date of any payment under this Agreement or the Note would otherwise fall on a day that is not a Business Day, such date shall be extended to the next succeeding Business Day, and interest shall be payable for any principal so extended for the period of such extension. (e) For the avoidance of doubt the Lender agrees that AHR Capital may maintain the Irish Account (subject to the lien created by the applicable Collateral (Ireland) Document) for the purposes of discharging the operational expenses of the Borrower including audit, lawyers and filing fees, which may be transferred to and from the Irish Account; provided, that the amount on deposit in the Irish Account shall not exceed an aggregate amount of (euro)250,000 during any calendar year; provided, further that no payments or prepayments made to any Borrower in respect of any Eligible Assets shall be deposited in the Irish Account. 3.02 Computations. Interest on the Loans shall be computed on the basis of a 360-day year for the actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable. 3.03 Requirements of Law. (a) If the introduction or adoption of or any change (other than any change by way of the imposition of or increase in reserve requirements included in the Eurocurrency Rate Reserve Percentage) in any Requirement of Law (other than with respect to any amendment made to the Lender's certificate of incorporation and by-laws or other organizational or governing documents) or any change in the interpretation or application thereof by any Governmental Authority or compliance by the Lender with any directive (whether or not having the force of law) from any central bank or other Governmental Authority having jurisdiction over the Lender made subsequent to the date hereof: (i) shall subject the Lender to any tax of any kind whatsoever with respect to this Agreement, the Note or any Loan made by it or change the basis of taxation of payments to the Lender in respect thereof (excluding taxes on the Lender's net income or franchise taxes); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of the Lender which is not otherwise included in the determination of the Eurocurrency Rate hereunder, (except (x) any reserve requirement contemplated by Section 3.03(c) or (y) the requirements of (i) the Bank of England and the Financial Services Authority, (ii) the Irish Financial Services Regulatory Authority or (iii) the European Central Bank, as reflected in the Mandatory Cost, other than as set forth below); (iii) the Mandatory Cost, as calculated hereunder, does not represent the cost to the Lender of complying with the requirements of the Bank of England and/or the Financial Services Authority, the requirements of the Irish Financial Services Regulatory Authority or the European Central Bank in relation to its making, funding or maintaining Eurocurrency Rate Loans; or (iv) shall impose on the Lender any other condition; and the result of any of the foregoing is to increase the cost to the Lender, by an amount which the Lender deems to be material, of making, continuing or maintaining any Loan or to reduce any amount due or owing hereunder in respect thereof, then, in any such case, the Borrowers shall promptly pay the Lender such additional amount or amounts as will compensate the Lender for such increased cost or reduced amount receivable. (b) If the Lender shall have determined that the adoption of or any change in any Requirement of Law applicable to the Lender (other than with respect to any amendment made to the Lender's certificate of incorporation and by-laws or other organizational or governing documents) regarding capital adequacy or in the interpretation or application thereof or compliance by the Lender or any corporation controlling the Lender with any directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on the Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which the Lender or such corporation could have achieved but for such adoption, change or compliance by an amount deemed by the Lender to be material, then from time to time, the Borrowers shall promptly upon written request pay to the Lender such additional amount or amounts as will compensate the Lender for such reduction; provided, that such additional amount shall only be payable if the Lender requires other similarly situated borrowers to pay this additional amount. (c) Each Borrower shall pay (and the Borrower Agent shall cause the applicable Borrower to pay) to the Lender, as long as the Lender shall be required to comply with any reserve ratio requirement or analogous requirement of any central banking or financial regulatory authority imposed in respect of the funding of the Eurocurrency Rate Loans, such additional costs (expressed as a percentage per annum and rounded upwards, if necessary, to the nearest five decimal places) equal to the actual costs allocated to such Loan by the Lender (as determined by the Lender in good faith (as defined in Section 1-201 of the UCC), which determination shall be conclusive), which shall be due and payable on each Payment Date, provided, that such Borrowers shall have received at least 10 days' prior notice of such additional costs from the Lender. If the Lender fails to give notice 10 days prior to the relevant Payment Date, such additional costs shall be due and payable 10 days from receipt of such notice. (d) If the Lender becomes entitled to claim any additional amounts pursuant to this Section, it shall promptly notify the Borrower Agent of the event by reason of which it has become so entitled. As a condition to each Borrower's liability under this Section 3.03, the Lender shall promptly deliver to the Borrower Agent a certificate as to the calculation of any additional amounts payable pursuant to this Section submitted by the Lender to the Borrower Agent and including any supporting documentation, which certificate shall be conclusive in the absence of manifest error. The Borrowers shall have the right to terminate this Agreement upon payment of all Obligations (including all additional amounts payable pursuant to this Section 3.03). 3.04 Indemnity. The Borrowers agree to indemnify the Lender and to hold the Lender harmless from any actual loss or expense which the Lender may sustain or incur as a consequence of the making of an optional prepayment of Eurocurrency Rate Loans on a day which is not the last day of an Interest Period with respect thereto. This covenant shall survive the termination of this Agreement and the payment of Loans and all other amounts payable hereunder. 3.05 Fees. The Borrowers, jointly and severally, agree to pay to the Lender the fee as described in the Fee Letter, such payments to be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to the Lender at the account set forth in Section 3.01(c) of this Agreement. Section 4. Conditions Precedent. 4.01 Initial Loan. The obligation of the Lender to make its initial Loan hereunder is subject to the satisfaction, immediately prior to or concurrently with the making of such Loan, of the condition precedent that the Lender shall have received all of the following documents, each of which shall be satisfactory to the Lender and its counsel in form and substance in its sole discretion: (a) Loan Documents. (i) Credit Agreement. This Agreement, duly executed and delivered by AHR Capital; (ii) Note. The Note, duly executed and delivered by AHR Capital; (iii) Parent Pledge Agreement. A Pledge Agreement, duly executed by Anthracite; (iv) Borrower Security Agreement. A Borrower Security Agreement, duly executed by AHR Capital; (v) Parent Guaranty. The Parent Guaranty, duly executed by Anthracite; (vi) Custodial and Payment Application Agreement. The Custodial and Payment Application Agreement, duly executed by the parties thereto; (vii) Collection Account Control Agreements. The US Collection Account Control Agreement and the English Sub-Collection Account Notice and Acknowledgement of Charge, in each case duly executed by the parties thereto; (viii) Intercompany Subordination Agreement. The Intercompany Subordination Agreement, duly executed by the parties thereto; (ix) Collateral (England and Wales) Documents. The Collateral (England and Wales) Documents, in each case duly executed by the parties thereto; (x) Collateral (Ireland) Documents. The Collateral (Ireland) Documents, in each case duly executed by the parties thereto; and (xi) Fee Letter. A Fee Letter, duly executed by the parties thereto. (b) Secretary's Certificates. A certificate of each Borrower and Anthracite, dated the Closing Date, with appropriate insertions and attachments, satisfactory in form and substance to the Lender, executed by the applicable Responsible Officer. (c) Compliance Certificate. A Compliance Certificate, satisfactory in form and substance to the Lender, executed by the applicable Responsible Officer. (d) Corporate Proceedings. A copy of the resolutions, in form and substance satisfactory to the Lender, of the Board of Directors (or other correlative body) of each Borrower and Anthracite authorizing (i) the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, (ii) the borrowings contemplated hereunder and (iii) the granting by it of the Liens created pursuant to the Collateral Documents, in each case, as applicable, certified by the Secretary or an Assistant Secretary of each Borrower and Anthracite as of the Closing Date, which certification shall be in form and substance satisfactory to the Lender and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (e) Incumbency Certificates. A certificate of each Borrower and Anthracite, dated the Closing Date, as to the incumbency and signature of the officers of such Borrower and Anthracite executing any Loan Document, shall be satisfactory in form and substance to the Lender, and shall be executed by an applicable Responsible Officer. (f) Corporate Documents. True and complete copies of the Organic Documents of each Borrower and Anthracite, certified as of the Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of such Borrower and Anthracite. (g) Good Standing Certificates. Certificates (where such certificates are available) dated as of a recent date from the Secretary of State or other appropriate authority, evidencing the good standing of each Borrower and Anthracite (i) in the jurisdiction of its organization and (ii) in each other jurisdiction where its ownership, lease or operation of property or the conduct of its business requires it to qualify as a foreign Person. (h) Fees. The fees to be received on the Closing Date pursuant to the Fee Letter and this Agreement (including the fees, costs and expenses of Lender's counsel). (i) Pledged Stock; Stock Powers; Pledged Interests; Pledged Notes; Pledged Chattel Paper. The certificates representing the shares or other equity interests pledged pursuant to the Parent Pledge Agreement, if any, together with an undated stock power for each such stock certificate executed in blank by a duly authorized officer of the pledgor thereof or such certificate duly endorsed in blank for each such certificate evidencing a limited liability company interest. Each "Issuer" referred to in the Parent Pledge Agreement shall have delivered an acknowledgement and consent to such Parent Agreement, executed by a duly authorized officer of such Issuer, in substantially the form appended to such Pledge Agreement. (j) Actions to Perfect Liens. Evidence in form and substance satisfactory to it that all filings, recordings, registrations and other actions, including, without limitation, the filing of duly executed financing statements on form UCC and the appropriate filings with Companies House in England and the Companies Registration Office in Ireland, necessary or, in the opinion of the Lender, desirable to perfect the Liens created by this Agreement shall have been completed. (k) Lien Searches. The results of a recent search by a Person satisfactory to the Lender of the Uniform Commercial Code, judgment and tax lien filings which may have been filed with respect to personal property of Anthracite, and the results of such search shall be satisfactory to the Lender. (l) Legal Opinion. Legal opinions of US, English and Irish outside counsel to AHR Capital and Anthracite which shall cover such matters incident to the transactions contemplated by this Agreement as the Lender may reasonably require. (m) Filings, Registrations, Recordings; Lien Searches. Any documents (including, without limitation, financing statements) required to be filed, registered or recorded in order to create, in favor of the Lender, a perfected, first priority security interest in the Collateral, subject to no Liens other than those created hereunder, for filing, registration or recording in each office in each jurisdiction in which such filings, registrations and recordations are required to perfect such first priority security interest. (n) Consents, Licenses, Approvals, etc. Copies certified by AHR Capital and Anthracite, as applicable, of all consents, licenses and approvals, if any, required in connection with the execution, delivery and performance by AHR Capital and Anthracite, of, and the validity and enforceability of, the Loan Documents, which consents, licenses and approvals shall be in full force and effect. (o) Eligible Asset Servicer Notice and Agreement. An Eligible Asset Servicer Notice and Agreement in respect of each Eligible Asset Servicer, which shall be in form and substance satisfactory to the Lender. (p) Other Documents. Such other documents as the Lender may reasonably request. 4.02 Initial and Subsequent Loans. The making of each Loan to a Borrower (including the initial Loan) on any Business Day is subject to the satisfaction of the following further conditions precedent, both immediately prior to the making of such Loan and also after giving effect thereto and to the intended use thereof: (a) No Default. No Default or Event of Default shall have occurred and be continuing. (b) Representations and Warranties. Both immediately prior to the making of such Loan and also after giving effect thereto and to the intended use thereof, the Eligible Jurisdiction Relevant Warranties and the representations and warranties made by the Borrowers in Section 5 hereof, and elsewhere in each of the Loan Documents, shall be true and correct in all material respects on and as of the date of the making of such Loan with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). The Lender shall have received an officer's certificate from each of the Borrowers signed by an applicable Responsible Officer thereof certifying as to the truth and accuracy of the above. (c) Borrowing Base. No Collateral Value Deficiency Event, Borrowing Base Deficiency Event or Collateral Value Cash Sweep Event shall have occurred and be continuing. (d) New Assets. In the event any New Asset (other than a Table Funded New Asset) is approved to be included in the Borrowing Base pursuant to Section 2.03(d)(i) hereof and as a condition precedent to the effectiveness of such approval, the Borrower Agent shall have delivered to the Lender duly authorized and executed New Asset Legal Documents. On or before each Funding Date with respect to each Table Funded New Asset, the Borrower Agent shall cause the settlement agent for such Table Funded New Asset to deliver to the Custodian by facsimile the related mortgage note, if any, and a settlement agent trust receipt issued with respect to such Table Funded New Asset. (e) Fees and Expenses. The Lender shall have received all fees and expenses due and payable under this Agreement. (f) Concentration Limits. Each Borrower shall have complied with any Concentration Limits. 4.03 Underlying Asset Servicer Instruction Letter / UK Custody Agreement. Each Borrower shall have delivered (a) in the case the initial Loan made in respect of an Eligible Asset, an Underlying Asset Servicer Instruction Letter in respect of such Eligible Asset and (b) in the case of the initial Loan in respect of an Eligible Asset constituting Eligible CMBS Securities, a UK Custody Agreement, in each case in form and substance satisfactory to the Lender and duly authorized, executed and delivered on or prior to the date of the making of such Loan. Section 5. Representations and Warranties. Each Borrower represents and warrants to the Lender that throughout the term of this Agreement: 5.01 Legal Name of Borrowers. Schedule 5.01 lists the exact legal name of each Borrower, and no Borrower has used any previous names, assumed names or trade names. 5.02 Existence. Each of the Borrowers (a) is duly organized, validly existing and in good standing (in the case of a Borrower that can obtain a certificate of good standing) under the laws of the jurisdiction of its organization; (b) has all requisite corporate or other power, and has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted, except where the lack of such licenses, authorizations, consents and approvals could not reasonably be expected to cause a Material Adverse Change; and (c) is qualified to do business and is in good standing (in the case of a Borrower that can obtain a certificate of good standing) in all other jurisdictions in which the nature of the business conducted by it makes such qualification necessary, except where failure so to qualify could not reasonably be expected (either individually or in the aggregate) to cause a Material Adverse Change. 5.03 Financial Condition. (a) As of the Closing Date or any Additional Borrower Effective Date, as applicable, prior to giving effect to the making of any Loans, no Borrower shall own any material property, assets, Indebtedness, investments, contractual obligations or liabilities of any kind, except pursuant to the Loan Documents, the applicable Organic Documents or the applicable Eligible Asset Documents. (b) AHR Capital was incorporated on December 5th, 2005, and since such date has engaged in no business other than activities related to its organization, its capitalization, and the financing contemplated hereby. 5.04 Litigation. There are no actions, suits, arbitrations, investigations pending or, to the best of each Borrower's knowledge, threatened against any Borrower or affecting any of their respective Eligible Assets or Property that (i) questions or challenges the validity or enforceability of any of the Loan Documents or any material action to be taken in connection with the transactions contemplated hereby, (ii) which, individually or in the aggregate, if adversely determined, may result in a Material Adverse Change, or (iii) to the extent applicable, requires filing with the SEC in accordance with the 1934 Act or any rules thereunder. 5.05 No Breach. Neither (a) the execution and delivery of the Loan Documents nor (b) the consummation of the transactions therein contemplated in compliance with the terms and provisions thereof conflicts with or results in a breach of the charter or by-laws of any Borrower, or any applicable law (including, without limitation, Prescribed Laws), rule or regulation, or any order, writ, injunction or decree of any Governmental Authority, or any agreement or instrument to which any Borrower is a party or by which any of them or any of their Property is bound or to which any of them is subject, or constitute a default under any such agreement or instrument or result in the creation or imposition of any Lien (except for the Liens created pursuant to this Agreement) upon any Property of any Borrower pursuant to the terms of any such agreement or instrument, in each case to the extent that such default, conflict or breach could reasonably be expected to cause a Material Adverse Change. 5.06 Action. Each of the Borrowers has all necessary corporate or other power, authority and legal right to execute, deliver and perform its obligations under each of the Loan Documents; the execution, delivery and performance by such Borrower of each of the Loan Documents has been duly authorized by all necessary corporate or other action on its part; and each Loan Document has been duly and validly executed and delivered by such Borrower, and constitutes a legal, valid and binding obligation of such Borrower, enforceable against such Borrower, in accordance with its terms, subject, as to enforcement, to (i) the effect of bankruptcy, examination, insolvency or similar laws affecting generally the enforcement of creditors' rights, as such laws would apply in the event of any bankruptcy, examination, receivership, insolvency or similar event applicable to such Borrower, (ii) general equitable principles (whether enforceability of such principles is considered in a proceeding at law or in equity), (iii) the making of required registrations, filings and notifications to perfect any security arrangements created pursuant to any of the Loan Documents and (iv) any other qualifications as to matters of general law (but not of fact) set out in legal opinions delivered pursuant to Section 4.01(m). 5.07 Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority, any securities exchange or any other Person are necessary for the execution, delivery or performance by any Borrower of the Loan Documents or for the legality, validity or enforceability thereof, except for filings and recordings in respect of the Liens created pursuant to this Agreement and except for filings required by applicable law and filings which have been made. 5.08 Margin Regulations. Neither the making of any Loan hereunder, nor the use of the proceeds thereof, violates the provisions of Regulation U or X. 5.09 Taxes. Each Borrower has filed all income and corporation tax returns and all other material tax returns that to the knowledge of such Borrower would be delinquent if they had not been filed on or before the date hereof and has paid all taxes due pursuant to such returns or pursuant to any assessment received by any of them, except for any such taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided. 5.10 Investment Company Act. None of the Borrowers, or any Subsidiary thereof, is an "investment company", or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 5.11 Chief Executive Office/Jurisdiction of Organization. On the Closing Date, each Borrower's registered office is located at the address indicated in Schedule 5.11. On the Closing Date, each Borrower's jurisdiction of organization is as indicated in Schedule 5.11. 5.12 Location of Books and Records. The location where each Borrower keeps its books and records, including all computer tapes and records relating to the Collateral is its registered office. 5.13 True and Complete Disclosure. The information, reports, financial statements, credit approval memos, exhibits and schedules furnished in writing by or on behalf of each of the Borrowers to the Lender in connection with the negotiation, preparation or delivery of this Agreement and the other Loan Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole, do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished after the date hereof by or on behalf of each of the Borrowers, to the Lender in connection with this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby is true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified. There is no fact known to any Responsible Officer of any of the Borrowers, after due inquiry, that could be reasonably expected to cause a Material Adverse Change that has not been disclosed herein, in the other Loan Documents or in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to the Lender for use in connection with the transactions contemplated hereby or thereby. 5.14 ERISA. No Borrower (a) has any Plans or any ERISA Affiliates or (b) makes any contributions to any Plans or any Multiemployer Plans. 5.15 Regulatory Status. No Borrower is a "bank holding company" or a direct or indirect subsidiary of a "bank holding company" as defined in the Bank Holding Company Act of 1956, as amended, and Regulation Y thereunder of the Board of Governors of the Federal Reserve System. 5.16 Solvency. After giving effect to each Loan and including consideration of the Parent Guaranty each of the Borrowers is Solvent. 5.17 Eligible Assets. The Eligible Jurisdiction Relevant Warranties are incorporated as if fully set forth herein. 5.18 Representations as to Jurisdiction of Domicile of Borrowers. Each Borrower represents and warrants to the Lender that: (a) Such Borrower is subject to applicable civil and commercial laws with respect to its obligations under this Agreement and the other Loan Documents to which it is a party (collectively as to such Borrower, the "Applicable Borrower Documents"), and the execution, delivery and performance by such Borrower of the Applicable Borrower Documents constitute and shall constitute private and commercial acts and not public or governmental acts. Neither such Borrower nor any of its property has any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) under the laws of the jurisdiction in which such Borrower is organized and existing in respect of its obligations under the Applicable Borrower Documents. (b) The Applicable Borrower Documents are in proper legal form under the Laws of the jurisdiction in which such Borrower is organized and existing for the enforcement thereof against such Borrower under the Laws of such jurisdiction, and to ensure the legality, validity, enforceability, priority or admissibility in evidence of the Applicable Borrower Documents, subject to (a) the principle that the equitable remedies may be granted or refused at the discretion of a court and the limitation of enforcement by laws relating to insolvency, reorganisation and other laws affecting the rights of creditors generally, (b) the time barring of claims, the possibility that an undertaking to assume liability for an indemnity of a person against non-payment of stamp duty may be void and defenses of set-off or counterclaim and (c) any other qualifications as to matters of general law (but not of fact) set out in legal opinions delivered pursuant to Section 4.01(m). Other than filing Forms C-1 in the Companies Registration Office in Ireland within 21 days of the creation of the Irish Debenture and each of the security documents entered into by the Irish Borrower, the filing of a Form 8-E in the Companies Registration Office in Ireland within 21 days of the creation of the Parent Deed of Charge, the payment of stamp duty to the Irish Revenue Commissioners within 30 days of the execution of each of the Parent Deed of Charge and the Irish Debenture in the amount of (euro)630 for the Irish Debenture, (euro)12.50 (marked collateral) for the Parent Deed of Charge and each of the security documents entered into by the Irish Borrower and (euro)12.50 for each counterpart and the payment of nominal court duty (where such payment is required) on any documents submitted to court as part of any enforcement proceedings, it is not necessary to ensure the legality, validity, enforceability (subject as aforesaid), priority or admissibility in evidence of the Applicable Borrower Documents that the Applicable Borrower Documents be filed, registered or recorded with, or executed or notarized before, any court or other authority in the jurisdiction in which such Borrower is organized and existing or that any registration charge or stamp or similar tax be paid on or in respect of the Applicable Borrower Documents or any other document, except for (i) any such filing, registration, recording, execution or notarization as has been made and (ii) any charge or tax as has been timely paid. (c) Provided that the Lender is a Qualifying Lender, there is no tax, levy, impost, duty, fee, assessment or other governmental charge, or any deduction or withholding, imposed by any Governmental Authority in or of the jurisdiction in which such Borrower is organized and existing either (i) on or by virtue of the execution or delivery of the Applicable Borrower Documents or (ii) on any payment to be made by such Borrower pursuant to the Applicable Borrower Documents, except as has been disclosed to the Lender in writing. (d) The execution, delivery and performance of the Applicable Borrower Documents executed by such Borrower are, under applicable foreign exchange control regulations of the jurisdiction in which such Borrower is organized and existing, not subject to any notification or authorization except (i) such as have been made or obtained or (ii) such as cannot be made or obtained until a later date (provided, that any notification or authorization described in clause (ii) shall be made or obtained as soon as is reasonably practicable). (e) The representations and warranties made in this Section 5.18 shall in addition to, any representations and warranties made pursuant to any Collateral (England and Wales) Document, Collateral (Federal Republic of Germany) Document, Collateral (Ireland) Document and Collateral (Other Eligible Jurisdiction) Document. 5.19 Subsidiaries. No Borrower has any Subsidiaries. 5.20 Separateness. Each Borrower (a) does not own any assets, or engage in any business, other than the assets and transactions specifically contemplated by this Agreement; (b) has not incurred any Indebtedness other than as permitted under this Agreement; (c) has not made any Investments (other than the Eligible Assets and assets that may be acquired in any foreclosure on, or after realization of collateral from, any of the Eligible Assets that is a mezzanine loan); (d) has paid its debts and liabilities (including, as applicable, shared personnel and overhead expenses) only from its own assets; (e) complies with the provisions of its organizational documents; (f) does all things necessary to observe organizational formalities and to preserve its existence; (g) maintains all of its books, records, financial statements and bank accounts separate from those of its Affiliates (provided, that it may permit its assets to be included in a consolidated financial statement of an Affiliate; provided, further, that in respect of such assets, (i) appropriate notation shall be made on such consolidated financial statements to indicate the separateness of it from such Affiliate and to indicate that its assets and credit are not available to satisfy the debts and other obligations of such Affiliate or any other Person and (ii) such assets shall also be listed on its own separate balance sheet); (h) is, and at all times holds itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate), corrects any known misunderstanding regarding its status as a separate entity, conducts business in its own name, does not identify itself or any of its Affiliates as a division or part of the other and maintains and utilizes separate invoices and checks; (i) does not engage in or suffer any dissolution, winding up, liquidation, consolidation or merger in whole or in part; (j) does not commingle its funds or other assets with those of any Affiliate or any other Person; (k) maintains its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any Affiliate or any other Person; (l) does not hold itself out to be responsible for the debts or obligations of any other Person; (m) has not (i) filed or consented to the filing of any bankruptcy, insolvency or reorganization case or proceeding with respect to such Borrower; instituted any proceedings under any applicable insolvency law or otherwise sought any relief under any laws relating to the relief from debts or the protection of debtors generally with respect to such Borrower; (ii) sought or consented to the appointment of a receiver, liquidator, Examiner, assignee, trustee, sequestrator, custodian or any similar official for such Borrower or a substantial portion of its properties; or (iii) made any assignment for the benefit of such Borrower's creditors and (n) does not have any employees or own, rent, lease or be in possession of any buildings or equipment. 5.21 Irish Borrower Tax Requirements. (a) For as long as a Borrower is an Irish Borrower, such Borrower satisfies the Irish Borrower Tax Requirements. (b) For as long as each Additional Borrower is, on or after the Additional Borrower Effective Date, an Irish Borrower, such Additional Borrower satisfies the Irish Borrower Tax Requirements. Section 6. Covenants. Each Borrower and the Borrower Agent, as applicable, covenants and agrees with the Lender that, so long as any Loan is outstanding and until payment in full of all Obligations: 6.01 Financial Statements. The Borrower Agent shall deliver to the Lender: (a) as soon as available and in any event within forty-five (45) days after the end of each of the first three quarterly fiscal periods of each fiscal year of Anthracite, the unaudited consolidated balance sheet of Anthracite and its consolidated Subsidiaries as at the end of such period and the related unaudited consolidated statement of income and retained earnings, consolidated statement of cash flows and consolidated statement of equity for Anthracite and its consolidated Subsidiaries for such period and the portion of the fiscal year through the end of such period, setting forth in each case in comparative form the figures for the previous year, accompanied by a certificate of a Responsible Officer of Anthracite, which certificate shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of Anthracite and its consolidated Subsidiaries in accordance with GAAP, consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments); (b) as soon as available and in any event within ninety (90) days after the end of each fiscal year of Anthracite, the consolidated balance sheet of each Anthracite and its consolidated Subsidiaries as at the end of such fiscal year and the related consolidated statement of income and retained earnings, consolidated statement of cash flows and consolidated statement of equity for Anthracite and its consolidated Subsidiaries for such year, setting forth in each case in comparative form the figures for the previous year, accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall not be qualified as to scope of audit or going concern and shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of Anthracite and its consolidated Subsidiaries as at the end of, and for, such fiscal year in accordance with GAAP; (c) from time to time such other information regarding the Eligible Assets, the Borrowing Base, the Collateral Value, financial condition, operations, or business of each Borrower and its Subsidiaries as the Lender may reasonably request (in each case to the extent available), including, but not limited to, the following: (i) With respect to each Eligible Mezzanine Loan or Eligible B Note: (A) within 30 days after each quarter end, a servicing remittance report (or the equivalent thereof); (B) to the extent required by any underlying loan documents and available to a Borrower, within 30 days after each quarter end, the unaudited monthly financial statements and rent rolls for each underlying mortgagor; and (C) to the extent required by any underlying loan documents and available to a Borrower, within 45 days after the last day of each fiscal quarter of each mortgagor and 90 days after the last day of each fiscal year of each mortgagor, unaudited certified quarterly financial statements and audited annual financial statements, respectively, of such mortgagor; and (D) at each quarter end, a report containing the Quarterly Servicing Information set forth on Schedule 6.01(a) hereto; and (E) within 30 days after each quarter end, to the extent as requested by the Lender, a report containing the Eligible Asset Information set forth on Schedule 6.01(b) hereto. (ii) With respect to each Eligible CMBS Security: (A) within 30 days after each quarter end, a trustee report in form satisfactory to the Lender; (B) within 30 days after each quarter end, a remittance report in form satisfactory to the Lender; (C) within 30 days after each fiscal quarter of each Borrower, a report detailing all dealer valuations received by such Borrower in form satisfactory to the Lender; and (D) within 30 days after each fiscal quarter of each Borrower, a report detailing all internal valuations performed by such Borrower in determining the value of such Eligible CMBS Security. (iii) promptly following the implementation of any Underwriting Guidelines, a true and correct copy of such Underwriting Guidelines. (d) promptly following any Borrower obtaining knowledge of any event which, if such event had occurred and was continuing both immediately prior to the making of any Loan and after giving effect thereto, would cause any of the Eligible Jurisdiction Relevant Warranties to be non-compliant with Section 4.02(b), all information actually known by any Borrower relating to such event. The Borrower Agent shall furnish to the Lender, at the time it furnishes each set of financial statements pursuant to paragraphs (a) and (b) above, (i) a certificate of a Responsible Officer of each Borrower stating that, to the best of such Responsible Officer's knowledge, the applicable Borrower during such fiscal period or year has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate (and, if any Default or Event of Default has occurred and is continuing, describing the same in reasonable detail and describing the action the applicable Borrower has taken or proposes to take with respect thereto) and (ii) a Compliance Certificate showing in detail the calculations supporting such Responsible Officer's certification of Anthracite's compliance with the Parent Financial Covenants. (e) promptly following the appointment of any new Underlying Asset Servicer, an updated Schedule 1-F. 6.02 Irish Borrower Tax Requirements (a) For as long as any Borrower is an Irish Borrower, such Borrower shall fulfill the Irish Borrower Tax Requirements. (b) For as long as each Additional Borrower is, on or after the Additional Borrower Effective Date, an Irish Borrower, such Additional Borrower shall fulfill the Irish Borrower Tax Requirements. 6.03 Litigation. The Borrower Agent shall promptly, and in any event within five (5) Business Days after obtaining actual knowledge of any of the following, give to the Lender notice of all litigations, actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are pending or threatened) or other legal or arbitrable proceedings affecting any Borrower affecting any Eligible Asset or Property of any of them that (i) question or challenge the validity or enforceability of any of the Loan Documents or any action to be taken in connection with the transactions contemplated hereby, (ii) involve a claim for failure pay any amounts due and payable under any Eligible Assets, (iii) individually or in the aggregate, if adversely determined, may result in a Material Adverse Change, or (iv) require filing with the SEC in accordance with the 1934 Act and any rules thereunder. 6.04 Purpose of Loans. The Borrowers shall use the proceeds of the Loans for the acquisition of the Eligible Assets and the payment of (i) any fees and expenses incurred in the ordinary course of business in connection therewith, (ii) any other expenses incurred in the ordinary course of business and such other amounts as permitted hereby, (iii) any fees and expenses due hereunder and (iv) any ordinary expenses incurred in connection with the closing of the transactions contemplated hereby; provided, that the Loans shall not be used for the purchase or acquisition, or as collateral related to the purchase or acquisition, by or at the request of the Borrowers or any Subsidiary or Affiliate of the Borrowers of securities or other assets issued or owned by Banc of America Securities LLC or any of its Affiliates except Bank of America, N.A. and its subsidiaries. 6.05 Changes to Accounting and Reporting Practices. Each of the Borrowers and Anthracite shall at all times keep proper books of records and accounts in which full, true and correct entries shall be made of its transactions in accordance with GAAP and set aside on its books from its earnings for each fiscal year all such proper reserves in accordance with GAAP. 6.06 Required Filings. The Borrower Agent shall promptly provide the Lender with copies of all documents which Anthracite or any Borrower is required to file with the SEC in accordance with the 1934 Act or any rules thereunder. 6.07 Existence, etc. Each of the Borrowers shall: (a) preserve and maintain (i) its legal existence, (ii) all of its material rights, privileges, licenses and franchises, and (iii) maintain its tax residence in Ireland; (b) comply with the requirements of all applicable laws, rules, regulations and orders of Governmental Authorities (including, without limitation, Prescribed Laws and all environmental laws) if failure to comply with such requirements would be reasonably likely (either individually or in the aggregate) to cause a Material Adverse Change; (c) not move its registered office from the address referred to in Section 5.11 or change its jurisdiction of organization or incorporation from the jurisdiction referred to in Section 5.11 unless it shall have provided the Lender 15 Business Days' prior written notice of such change; (d) pay and discharge, prior to the date on which penalties attach thereto, all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any Eligible Asset or Property, which in any manner would create any lien or charge on the Eligible Assets, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained in conformance with GAAP; and (e) permit representatives of the Lender upon reasonable prior written notice, during normal business hours and prior to the occurrence and continuance of an Event of Default, to examine, copy and make extracts from its books and records, to inspect any of its Properties, and to discuss its business and affairs with its officers, all to the extent reasonably requested by the Lender and subject to the terms of any applicable confidentiality agreement. 6.08 Notices. The Borrower Agent shall give notice to the Lender: (a) promptly upon receipt of notice or actual knowledge of the occurrence of any Default or Event of Default. (b) promptly upon receipt of notice or actual knowledge of (i) any default related to any Eligible Assets, (ii) any Lien or security interest (other than security interests created hereby or by the other Loan Documents) on, or claim asserted against, the Lender's or any Borrowers interest in any of the Eligible Assets or (iii) any event or change in circumstances which could reasonably be expected to cause a Material Adverse Change. (c) promptly upon the occurrence of a default for which written notice has been delivered to the Borrower Agent under the applicable Eligible Asset Document relating to an Eligible Asset. Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the Borrower Agent setting forth details of the occurrence referred to therein and stating what action the Borrower Agent or a Borrower has taken or proposes to take with respect thereto. 6.09 Prohibition of Fundamental Changes. Each of the Borrowers shall not enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) or sell all or substantially all of its assets. 6.10 Transactions with Affiliates. Other than capital contributions and distributions permitted under its organizational documents and transactions otherwise contemplated under the Loan Documents but not prohibited thereunder, no Borrower shall enter into any transaction, contract or agreement with any of its Affiliates, except upon terms and conditions that are substantially similar to those that would be available on an arm's length basis with Persons other than any Affiliates (it being understood that, notwithstanding anything contained in this Section 6.10, the delivery of the Parent Guaranty shall not be prohibited hereunder). 6.11 Limitation on Indebtedness. No Borrower shall create, incur, assume or suffer to exist any Indebtedness, other than: (a) Indebtedness outstanding pursuant to this Agreement and the other Loan Documents; (b) Permitted Hedge Obligations; (c) unsecured Indebtedness of any Borrower owing to any Blackrock Entity, Anthracite or any of their respective Subsidiaries that has previously executed and delivered to the Lender the Intercompany Subordination Agreement; and (d) unsecured trade payables, in an aggregate amount not to exceed $1,000,000 at any one time outstanding, incurred in the ordinary course of acquiring, owning, financing and disposing of Eligible Assets; provided, however, that any such trade payables incurred by any Borrower shall be paid within 30 days of the date incurred. 6.12 Limitation on Liens. No Borrower shall create, incur, assume or suffer to exist any Lien on any Eligible Assets, Property or revenues, whether now owned or hereafter acquired by it, other than: (a) Liens created pursuant to pursuant to this Agreement and the other Loan Documents; (b) Liens for taxes, assessments or other governmental charges or levies not yet subject to penalties or which are being contested in good faith and for which adequate reserves have been established by such Borrower in accordance with GAAP; and (c) Liens arising out of judgments or orders which do not constitute an Event of Default under Section 7(e) and for which adequate reserves have been established by such Borrower in accordance with GAAP. 6.13 Limitation on Distributions. No Borrower shall make any Restricted Payments after the occurrence and during the continuance of an Event of Default. 6.14 Limitation on Investments. No Borrower shall own or hold any other substantial property or assets or make any Investment, except in respect of Eligible Assets and assets that may be acquired in any foreclosure on, or other realization of collateral from, any of the Eligible Assets that is a mezzanine loan. 6.15 Lines of Business. No Borrower shall engage in any activity other than (a) acquiring, owning, disposing of and otherwise managing the Eligible Assets, and (b) activities necessary, suitable or appropriate to accomplish the foregoing or incidental thereto, and shall not make any material change in its general lines of business existing as of the Closing Date or the Additional Borrower Effective Date, as applicable. 6.16 Separateness. Each Borrower shall (a) own no material assets, and engage in no business, other than the assets and transactions specifically contemplated by this Agreement; (b) not incur any Indebtedness other than as permitted pursuant to this Agreement; (c) not make any Investments other than the Eligible Assets and assets that may be acquired in any foreclosure on, or other realization of collateral from, any of the Eligible Assets that is a mezzanine loan; (d) pay its debts and liabilities (including, as applicable, shared personnel and overhead expenses) only from its own assets; (e) comply with the provisions of its organizational documents; (f) do all things necessary to observe organizational formalities and to preserve its existence, and shall not amend, modify or otherwise change its organizational documents, or suffer same to be amended, modified or otherwise changed, without the prior written consent of the Lender; (g) maintain all of its books, records, financial statements and bank accounts separate from those of its Affiliates (provided, that it may permit its assets to be included in a consolidated financial statement of an Affiliate; provided, further, that in respect of such assets, (i) appropriate notation shall be made on such consolidated financial statements to indicate the separateness of it from such Affiliate and to indicate that its assets and credit are not available to satisfy the debts and other obligations of such Affiliate or any other Person and (ii) such assets shall also be listed on its own separate balance sheet); (h) be, and at all times shall hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate), shall correct any known misunderstanding regarding its status as a separate entity, shall conduct business in its own name, shall not identify itself or any of its Affiliates as a division or part of the other and shall maintain and utilize a separate invoices and checks; (i) not engage in or suffer any dissolution, winding up, liquidation, consolidation or merger in whole or in part; (j) not commingle its funds or other assets with those of any Affiliate or any other Person; (k) maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any affiliate or any other Person; (l) not and will not hold itself out to be responsible for the debts or obligations of any other Person; (m) not (i) file or consent to the filing of any bankruptcy, insolvency or reorganization case or proceeding with respect to such Borrower; institute any proceedings under any applicable insolvency law or otherwise seek any relief under any laws relating to the relief from debts or the protection of debtors generally with respect to such Borrower; (ii) seek or consent to the appointment of a receiver, liquidator, Examiner, assignee, trustee, sequestrator, custodian or any similar official for such Borrower or a substantial portion of its properties; or (iii) make any assignment for the benefit of such Borrower's creditors and (n) not have any employees or own, rent, lease or be in possession of any buildings or equipment. 6.17 Subsidiaries. No Borrower shall form or acquire any Subsidiaries. 6.18 Independent Directors. Each Borrower shall at all times cause there to be not more than five (5) members of the board of directors of which at least one duly appointed member of such Borrower's board of directors, as applicable (an "Independent Director") shall be an Independent Director which shall not have been at the time of initial appointment or at any time while serving as an Independent Director, and shall not have been at any time during the preceding five years (i) a stockholder, officer, employee, partner, attorney or counsel of such Borrower or any Affiliate of such Borrower, (ii) a Person or other entity controlling or under common control with any such stockholder, partner, customer, supplier or other Person or (iii) a member of the immediate family of any such stockholder, member of the board of managers, officer, employee, partner, customer, supplier or other Person. As used in this Section 6.18, the term "control" means the possession, directly or indirectly, or the power to direct or cause the direction of the management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise. 6.19 Management Fees. No Borrower shall enter into any arrangement for the payment of, or pay, management, advisory or similar fees, except management and advisory fees payable to the applicable Blackrock Entity pursuant to the Blackrock Management Agreement or management fees to its corporate services provider paid in the ordinary course of business; provided, that in any event no such fees may be paid (but may accrue) during the continuance of an Event of Default. 6.20 Underwriting Guidelines. No Borrower shall adopt any Underwriting Guidelines unless such Underwriting Guidelines have been approved by the Lender in its good faith business judgment. 6.21 Modification of Certain Agreements. (a) Without the prior written consent of the Lender, neither Anthracite nor any Borrower shall consent to (a) any material amendment, supplement, waiver or other modification of, or enter into any forbearance from exercising any material rights with respect to the terms or provisions contained in any Organic Document or (b) any increase in any fees payable under the Blackrock Management Agreement in excess of five percent (5%) per annum of the gross value of the assets held by such Borrower from time to time. (b) Without the prior written consent of the Lender, no Borrower shall amend or otherwise modify the Underwriting Guidelines. Notwithstanding the preceding sentence, in the event that any Borrower makes any amendment or modification to the Underwriting Guidelines, such Borrower shall promptly deliver to the Lender a complete copy of the amended or modified Underwriting Guidelines. 6.22 ERISA. No Borrower shall (a) have any Plans or ERISA Affiliates and (b) make any contributions to any Plans or any Multiemployer Plans. Section 7. Events of Default. Each of the following events shall constitute an event of default (an "Event of Default") hereunder: (a) any Borrower shall default in the payment of any principal of, or interest on, any Loan when due (whether at stated maturity, upon acceleration or at mandatory or optional prepayment (including in connection with any Collateral Value Deficiency Event or Borrowing Base Deficiency Event)); or (b) any Borrower shall default in the payment of any other amount payable by it hereunder or under any other Loan Document after notification by the Lender of such default, and such default shall have continued unremedied for ten (10) days; or (c) any representation or warranty made or deemed made herein or in any other Loan Document by a Borrower or by Anthracite in Section 10 of the Parent Guaranty shall prove to have been false or misleading in any material respect as of the time made or furnished (other than the representations set forth in Section 5.13 (to the extent it relates to an Eligible Asset), Section 5.17 or in the Collateral Documents which shall not be considered an Event of Default, but shall be considered solely for the purpose of determining whether such asset is an Eligible Asset unless such Borrower shall have made such representation with knowledge that it was materially incorrect or untrue at the time made); or (d) a Borrower shall fail (i) to comply with the requirements of Section 3.01, Section 6.04, Section 6.07(a)(i), Section 6.08(a), Sections 6.09 through 6.15 and Sections 6.17 through 6.22 hereof; (ii) to comply with the requirements of Section 6.01, Section 6.02, Section 6.03, Section 6.06, Sections 6.07(a)(ii), (d) and (f), Section 6.08 (other than clause (a) thereof), Section 6.16 and Section 10.14, and such default shall continue unremedied for five (5) Business Days following a Specified Date, (iii) to comply with the requirements of Sections 6.05, 6.07(b) and (d), and Section 10.15, and such default shall continue unremedied for a period of ten (10) Business Days following a Specified Date; and (iv) to observe or perform any other covenant or agreement contained in this Agreement or any other Loan Document and such failure to observe or perform shall continue unremedied for a period of thirty (30) days following a Specified Date; provided, that, in respect of clause (iv) only, as long as such Borrower is diligently attempting to cure such breach, such cure period shall be extended by an additional period as may be required to cure such breach but in no event by more than thirty (30) additional days; or (e) (i) a final judgment or judgments for the payment of money in excess of $5,000,000 in the aggregate shall be rendered against any Borrower by one or more courts, administrative tribunals or other bodies having jurisdiction and the same shall not be satisfied, discharged (or provision shall not be made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within thirty (30) days from the date of entry thereof or (ii) a final judgment by any competent court, administrative tribunal, or other body having jurisdiction shall have been rendered against Anthracite in an amount in excess of (A) $10,000,000, if the Tangible Net Worth of Anthracite is less than $400,000,000 or (B) $20,000,000, if the Tangible Net Worth of Anthracite is greater than or equal to $400,000,000; or (f) Any of the following occurs in respect of any Borrower or Anthracite: (1) it is, or is deemed for the purposes of any law to be, unable to pay its debts as they fall due or to be insolvent; (2) it admits its inability to pay its debts as they fall due; (3) it suspends making payments on any of its debts or announces an intention to do so; (4) the value of the assets of any Borrower is less than its liabilities (taking into account contingent and prospective liabilities); (5) by reason of actual or anticipated financial difficulties, it begins negotiations with one or more of its creditors with a view to the readjustment or rescheduling of any of its indebtedness or liabilities; (6) an Examiner or a provisional Examiner is appointed or a moratorium is declared in respect of any of its Indebtedness (and, if such a moratorium occurs, the ending of such moratorium will not remedy any Event of Default caused by such moratorium and, notwithstanding any other term of the Loan Documents, that Event of Default shall continue to be outstanding unless and until it is expressly waived by the Lender); or (7) it is not Solvent; or (g) any of the following occurs in respect of any Borrower or Anthracite: (i) any step is taken (including a petition (other than a petition for winding-up presented by a creditor which is being contested in good faith and with due diligence and is discharged or struck out within thirty days), proposal or convening a meeting) with a view to a composition, assignment or arrangement with any class of creditors or with its creditors generally; (ii) a meeting of it (or its directors) is convened for the purpose of considering any resolution for (or petition for) its winding-up, administration, other insolvency proceeding or dissolution or any such resolution is passed; (iii) any person files in a court of competent jurisdiction or other competent forum a petition for its winding-up, administration, other insolvency proceeding or dissolution; (iv) an order by a court of competent jurisdiction or other competent forum for its winding-up, administration or dissolution is made; (v) any liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator, Examiner or similar officer is appointed in respect of it or any of its assets; (vi) any corporate action, legal proceedings or other procedure or step is taken by any Borrower, or legal proceedings or other procedure or step is taken by any person, in relation to examinership or the appointment of an Examiner; (vii) its directors, shareholders or other officers request the appointment of, or give notice of their intention to appoint, a liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, Examiner, administrative receiver, administrator or similar officer; or (viii) any other analogous step or procedure is taken in any other Eligible Jurisdiction; or (h) any liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, Examiner, administrative receiver, administrator, Examiner or the like is appointed in respect of any Borrower or any material part of their respective Property or any other analogous step or procedure is taken in any other Eligible Jurisdiction; or (i) the directors of any Borrower request the appointment of a liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, Examiner, administrative receiver, administrator, Examiner or the like in respect of such Borrower or any material part of their respective Property or any other analogous step or procedure is taken in any other Eligible Jurisdiction; or (j) any Loan Document shall for whatever reason be terminated or cease to be in full force and effect (other than through payment in full in cash of the Obligations and without reinstatement of such Obligations), or the enforceability thereof shall be contested by a Borrower; or (k) Anthracite or any Borrower shall have (i) defaulted or failed to perform under (A) any BOA Indebtedness or (B) any note, indenture, loan agreement, guaranty, swap agreement or any other contract, agreement or transaction to which it is a party, which default (A) involves the failure to pay matured obligations, in the aggregate, in excess of (x) $10,000,000, if the Tangible Net Worth of Anthracite is less than $400,000,000 or (y) $20,000,000, if the Tangible Net Worth of Anthracite is greater than or equal to $400,000,000 or (B) permits the acceleration of the maturity of the obligations by any other party to, or beneficiary of, such note, indenture, loan agreement, guaranty, swap agreement or other contract agreement or transaction, or (ii) breached any covenant or condition, failed to perform, admitted its inability to perform or stated its intention not to perform its obligations, in each case in respect of any repurchase agreement, reverse repurchase agreement, securities contract or derivative transaction with any party; provided, that any such default, failure to perform or breach shall not constitute an Event of Default hereunder if Anthracite cures such default, failure to perform or breach, as the case may be, within the grace period, if any, provided under the applicable agreement; or (l) any Material Adverse Change shall occur; or (m) any audited annual financial statements of any Borrower or Anthracite (or the notes thereto or other opinions or conclusions stated therein) shall be qualified or limited by reference to the status of such Borrower or Anthracite, as applicable, as a "going concern" or a reference of similar import; or (n) a Change of Control has occurred; (o) Anthracite shall have failed to comply with the Parent Financial Covenants; or (p) Anthracite shall have failed to maintain its status as a REIT. Section 8. Remedies Upon Default. (a) An Event of Default shall be deemed to be continuing unless expressly waived by the Lender in writing or cured. Upon the occurrence and during the continuance of one or more Events of Default hereunder, the Lender's obligation to make additional Loans to the Borrowers shall automatically terminate without further action by any Person. Upon the occurrence and during the continuance of one or more Events of Default other than those referred to in Section 7(f) through (i), the Lender may immediately declare the principal amount of the Loans then outstanding to be immediately due and payable, together with all interest thereon and fees and expenses accruing under this Agreement and the Fee Letter. Upon the occurrence and during the continuance of an Event of Default referred to in Section 7(f) through (i), such amounts shall immediately and automatically become due and payable without any further action by any Person. Upon such declaration or such automatic acceleration, the balance then outstanding on the Loans shall become immediately due and payable, without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Borrowers. (b) Upon the occurrence and during the continuance of one or more Events of Default, the Lender shall have the right to obtain physical possession of the servicing records and all other files of the Borrowers relating to the Collateral and all documents relating to the Collateral which are then or may thereafter come in to the possession of the Borrowers or any third party acting for the Borrowers and the Borrower Agent shall deliver to the Lender such assignments as the Lender shall request in order to enable the Lender to obtain such possession. Section 9. No Duty of Lender. The powers conferred on the Lender hereunder are solely to protect the Lender's interests in the Collateral and shall not impose any duty upon it to exercise any such powers. The Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to any Borrower for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct. Section 10. Miscellaneous. 10.01 Waiver. No failure on the part of the Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any Loan Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. 10.02 Notices. Except as otherwise expressly permitted by this Agreement, all notices, requests and other communications provided for herein (including without limitation any modifications of, or waivers, requests or consents under, this Agreement) shall be given or made in writing (including without limitation by telex or telecopy) delivered to the intended recipient at the address for notices specified below its name on the signature pages hereof or thereof); or, as to any party, at such other address as shall be designated by such party in a written notice to each other party; provided, that a copy of all notices shall simultaneously be delivered to (a) Bank of America, 214 North Tryon Street, Hearst Tower, 22nd Floor, Charlotte, North Carolina 28555, NC1-027-22-04; Attention: Angela E. Dugick, Facsimile Number: (704) 386-1094, Telephone: (704) 388-3372, (b) Bank of America, 100 North Tryon Street, 20th Floor, Charlotte, North Carolina 28555, NC1-007-20-01; Attention: Paul Kurzeja, Facsimile Number: (704) 386-8509, Telephone: (704) 409-0267, and (c) Cadwalader, Wickersham & Taft LLP, 227 West Trade Street, Suite 2400, Charlotte, North Carolina 28202, Attention: Steven N. Cohen, Esq., Telephone: (704) 348-5100, Facsimile Number: (704) 348-5200. Except as otherwise provided in this Agreement and except for notices given under Section 2 (which shall be effective only on receipt), all such communications shall be deemed to have been duly given when transmitted by telex or telecopy or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. 10.03 Indemnification and Expenses. (a) The Borrowers agree to indemnify the Lender and its officers, directors, employees and agents (each an "Indemnified Party") against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, taxes (including stamp, excise, sales or other taxes which may be payable or determined to be payable in connection with any of the transactions contemplated by this Agreement and the other Loan Documents, other than taxes of the Lender that are not Non-Excluded Taxes; provided, further, that in relation to Irish withholding tax on interest only, that Lender is a Qualifying Lender), fees, costs, expenses (including reasonable attorneys' fees and disbursements actually incurred to external counsel) or disbursements of any kind which may be imposed on, incurred by or assessed against such Indemnified Party (collectively, the "Costs") relating to or arising out of this Agreement, the Note, any other Loan Document or any transaction contemplated hereby or thereby, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the Note, any other Loan Document or any transaction contemplated hereby or thereby (including, without limitation, such time as this Agreement shall no longer be in effect and the Loans shall have been repaid in full), that, in each case, results from anything other than any Indemnified Party's gross negligence or willful misconduct or the Lender's ownership of any Eligible Asset following enforcement of its rights under the Loan Documents with respect thereto (unless and to the extent such liability relates to an event, circumstance or condition which occurred prior to the enforcement of such rights). Without limiting the generality of the foregoing, each Borrower undertakes, jointly and severally, to perform the Irish Tax Indemnification Obligations. No payment shall be due pursuant to this indemnity to the extent an amount has been received in relation to the same liability pursuant to Sections 2.09(b), (c) or (d). Without limiting the generality of the foregoing, the Borrowers agree to hold any Indemnified Party harmless from and indemnify such Indemnified Party against all Costs relating to or arising out of any violation or alleged violation of any environmental law, rule or regulation or any other applicable law that, in each case, results from anything other than such Indemnified Party's gross negligence or willful misconduct or the Lender's ownership of any Eligible Asset following enforcement of its rights under the Loan Documents with respect thereto (unless and to the extent such liability relates to an event, circumstance or condition which occurred prior to the enforcement of such rights). Each Indemnified Party agrees that it (i) shall promptly notify the Borrower Agent of any claim, action or suit asserted or commenced against it, and (ii) that the Borrowers, with the written consent of the Lender, may assume the defense thereof with counsel reasonably satisfactory to such Indemnified Party at the Borrowers' sole expense, (iii) that such Indemnified Party shall cooperate with the Borrowers on such defense, and (iv) that such Indemnified Party shall not settle any such claim, action or suit without the consent of the Borrowers; provided, however, that in the event such Indemnified Party is not reasonably satisfied with such defense, such Indemnified Party may assume such defense with counsel satisfactory to such Indemnified Party at the Borrowers' sole expense. Notwithstanding the foregoing, the Borrowers shall not be liable to any Indemnified Party for any claim (i) arising from lawsuits relating to claims of any Indemnified Party against any other Indemnified Party or (ii) arising from disputes among the Indemnified Parties regarding the allocation among any of such Persons of any payment properly made by the Borrowers in accordance with the Loan Documents. (b) The Borrowers also agree to reimburse an Indemnified Party for all such Indemnified Party's costs and expenses (including fees actually incurred and expenses of accountants, attorneys and advisors) incurred in connection with the enforcement or the preservation of such Indemnified Party's rights under this Agreement, the Note, any other Loan Document or any transaction contemplated hereby or thereby, including without limitation the fees and disbursements of its external counsel. The Borrowers hereby acknowledge that, notwithstanding the fact that the Loans are secured by the Collateral, the obligations of the Borrowers under this Agreement are recourse obligations of the Borrowers. (c) The Borrowers agree to pay all of the reasonable out-of pocket costs and expenses (including reasonable fees actually incurred and expenses of accountants, external attorneys and advisors) incurred by the Lender in connection with (i) the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement, the Note, any other Loan Document or any other documents prepared in connection herewith or therewith, and (ii) the consummation and administration of the transactions contemplated hereby and thereby (including, without, limitation all the due diligence, inspection, testing and review costs and expenses reasonably incurred by the Lender with respect to the Collateral, including, but not limited to, those costs and expenses incurred by the Lender pursuant to Sections 10.03(a), 10.14 and 10.15 hereof). In the case of any Eligible Asset that was originated by the Lender or any Affiliate thereof (such asset, a "Lender Generated Eligible Asset"), the Lender shall use commercially reasonable efforts to ensure that any costs or expenses incurred by the Lender in connection with due diligence, inspection, testing or review and for which reimbursement will be sought are incurred after giving effect to any efficiencies resulting from the due diligence, inspection, testing or review of such Lender Generated Eligible Asset in connection with the origination thereof. 10.04 Amendments. Except as otherwise expressly provided in this Agreement, any provision of this Agreement may be modified or supplemented only by an instrument in writing signed by the Borrowers and the Lender and any provision of this Agreement (other than obligations of the Lender) may be waived by the Lender. 10.05 Assignments and Participations. (a) The rights and obligations of the parties under the Loan Documents and under any Notes shall not be assigned by the Lender without the prior written consent of the Borrower Agent and shall not be assigned by any Borrower without the prior written consent of the Lender; provided, that the Lender shall be permitted to assign such rights and obligations without the consent of the Borrower Agent in the case of an assignment by the Lender to (x) any Approved Assignee, which is a direct or indirect subsidiary of Bank of America Corporation or (y) any other Approved Assignee during the continuance of a Specified Event of Default; provided, further, that the parties to each such assignment shall execute and deliver an assignment and acceptance, in form and substance acceptable to the Borrower Agent (an "Assignment and Acceptance"), along with replacement Notes executed and delivered by the Borrowers and such other documents as the Borrower Agent or the Lender shall consider reasonably necessary to effect fully such assignment and/or confirm the status of such assignee as an Approved Assignee. (b) Subject to the satisfaction of the conditions set forth in (a) above, upon such execution and delivery, from and after the effective date specified in such Assignment and Acceptance, (i) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of the Lender hereunder, and (ii) the Lender assignor thereunder shall, to the extent that any rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement. (c) The Lender may sell participations to one or more Persons in or to all or a portion of its rights and obligations under this Agreement with written notification to the Borrower Agent within a reasonable time thereafter; provided, however, that (i) after giving effect to any participations sold, the Lender shall continue to hold an interest in the Maximum Credit and/or the outstanding Loans in an amount not less than the BOA Hold Amount, (ii) the Lender shall act as exclusive agent for all participants in any dealings with the Borrower Agent and the Borrowers in connection with this Agreement and the other Loan Documents, (iii) the Borrower Agent and the Borrowers shall not be obligated to deal directly with any Person other than the Lender in connection with this Agreement and the other Loan Documents and the Lender shall maintain unilateral control over all discretionary determinations to be made thereunder, including, without limitation, determinations as to eligibility and purchase of Eligible Assets, the Market Value thereof, the granting of waivers of noncompliance with the terms of the Loan Documents, the granting of extensions of the Termination Date and/or increases in the Maximum Credit and the exercise of rights and remedies upon the occurrence and during the continuation of an Event of Default, (iv) the Lender shall pay or reimburse the Borrower Agent or the Borrowers, as applicable, or any other Person for any fees, costs, expenses or other amounts that would not have been incurred had no participation been sold hereunder and (v) at any time prior to the occurrence and continuance of a Specified Event of Default, the Lender shall not sell (unless consented to by the Borrower Agent (such consent not to be unreasonably withheld)), any participation to any non-financial institutions engaged in the business of purchasing B notes and/or mezzanine loans (it being understood that for the purposes of this clause (c)(v) of Section 10.05, any insurance company, bank or mutual fund shall be deemed a financial institution hereunder). (d) The Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 10.05, disclose to the assignee or participant or proposed assignee or participant, as the case may be, any information relating to the Borrowers or any Subsidiary, any Eligible Asset, any Underlying Asset or to any aspect of the Loans that has been furnished to the Lender by or on behalf of the Borrowers or any Subsidiary. (e) The Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Loans owing to it and the Note held by it) in favor of any other Person (including the Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System issued by such Federal Reserve Bank). No such assignment shall release the assigning Lender from its obligations hereunder. (f) The Lender may at any time disclose any information concerning Anthracite or any Borrower (and any of their respective affiliates) to any assignee of or participant in, or any prospective assignee of or participant in, any of the rights and obligations under this Agreement; provided, that the Lender and the applicable prospective assignee or participant shall, prior to such disclosure, execute a confidentiality agreement substantially in the form used by the Lender in its ordinary course of business. 10.06 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 10.07 Survival. The obligations of the Borrowers under Sections 3.03, 3.04, 3.05, and 10.03 hereof shall survive the repayment of the Loans and the termination of this Agreement. In addition, each representation and warranty made or deemed to be made by a request for a borrowing, herein or pursuant hereto shall survive the making of such representation and warranty, and the Lender shall not be deemed to have waived, by reason of making any Loan, any Default that may arise because any such representation or warranty shall have proved to be false in any material respect, notwithstanding that the Lender may have had notice or knowledge or reason to believe that such representation or warranty was false at the time such Loan was made. 10.08 Captions. The table of contents and captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. 10.09 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. 10.10 Governing Law. This Agreement shall be governed by New York law without reference to choice of law doctrine (other than Section 5-1401 of the New York General Obligations Law). 10.11 Submission To Jurisdiction; Waivers. Each Borrower hereby irrevocably and unconditionally: (A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; (B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH THE LENDER SHALL HAVE BEEN NOTIFIED; (D) AGREES THAT THE LENDER AND EACH BORROWER SHALL HAVE THE RIGHT (BUT NOT THE OBLIGATION) FROM TIME TO TIME TO MAKE OR CAUSE TO BE MADE TAPE RECORDINGS OF COMMUNICATIONS BETWEEN ITS EMPLOYEES AND THOSE OF ANY OTHER PARTY WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. THE LENDER AND EACH BORROWER HEREBY CONSENT TO THE ADMISSIBILITY OF SUCH TAPE RECORDINGS IN ANY COURT, ARBITRATION, OR OTHER PROCEEDINGS, AND AGREE THAT A DULY AUTHENTICATED TRANSCRIPT OF SUCH A TAPE RECORDING SHALL BE DEEMED TO BE A WRITING CONCLUSIVELY EVIDENCING THE PARTIES' AGREEMENT; AND (E) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION. 10.12 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND THE LENDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 10.13 Acknowledgments. The Borrowers hereby acknowledge that: (a) each has been advised by counsel in the negotiation, execution and delivery of this Agreement, the Note and the other Loan Documents; (b) the Lender has no fiduciary relationship to the Borrowers, and the relationship between the Borrowers and the Lender is solely that of debtor and creditor; and (c) no joint venture exists between the Lender and any Borrower. 10.14 Periodic Due Diligence Review. (a) Eligible Assets. Each Borrower acknowledges that the Lender has the right to perform continuing due diligence reviews with respect to the Eligible Assets and the manner in which they were originated, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or otherwise, and each Borrower agrees that, unless an Event of Default has occurred and is continuing (in which case no notice is required), upon reasonable (but no less than three (3) Business Days) prior notice to the Borrower Agent, the Lender or its authorized representatives shall be permitted during normal business hours to (i) examine, inspect, and make copies and extracts of, any and all Eligible Asset Documents in the possession or under the control of the Borrowers and/or any of their Subsidiaries and (ii) examine and inspect any Underlying Assets. Each Borrower also shall make available to the Lender a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Eligible Asset Documents and the Eligible Assets. Without limiting the generality of the foregoing, the Borrowers acknowledge that the Lender may make Loans to the Borrowers based solely upon the Borrowing Base Certificate and the representations, warranties and covenants contained herein, and that the Lender, at its option, has the right at any time to conduct a partial or complete due diligence review on some or all of the Eligible Assets. (b) Borrower. The Borrowers acknowledge that the Lender has the right to perform periodic due diligence reviews of each Borrower's operations, including, but not limited to, a review of (1) the financial condition of each Borrower, (2) loan origination and servicing guidelines, and (3) other corporate due diligence matters at the reasonable discretion of the Lender. In connection therewith, the Borrowers agree that upon reasonable (but no less than three (3) Business Days) prior notice to the Borrower Agent (provided, that if an Event of Default has occurred and is continuing, no such notice shall be required), the Lender or its authorized representatives shall be permitted during normal business hours to examine, inspect, and make copies and extracts of all documents, records, agreements, instruments or information relating to the Borrowers, which are in possession or under the control of the Borrowers, as the Lender may reasonably request. The Borrowers shall also make available to the Lender a knowledgeable financial or accounting officer for the purpose of answering questions respecting the financial condition of each Borrower and make available to the Lender an officer of each Borrower, for the purpose of answering questions respecting other corporate due diligence matters. (c) Fees and Expenses. The Borrowers further agree that each Borrower shall reimburse the Lender as and when billed for any and all costs and expenses incurred by the Lender (including the fees, disbursements and expenses of external counsel to the Lender) in connection with the Lender's activities pursuant to this Section 10.14. 10.15 Eligible Asset Servicer. Each Borrower shall, and shall cause the applicable Eligible Asset Servicer to, (i) provide a copy of the servicing agreement to the Lender (the "Eligible Asset Servicing Agreement"), and (ii) provide an Eligible Asset Servicer Notice and Agreement to the Eligible Asset Servicer substantially in the form of Exhibit K hereto (a "Eligible Asset Servicer Notice and Agreement"), such Eligible Asset Servicer Notice and Agreement acknowledged and agreed to by Eligible Asset Servicer and delivered to the Lender. Any assignee of an Eligible Asset Servicer shall be approved in writing by the Lender and shall acknowledge and agree to a Eligible Asset Servicer Notice and Agreement prior to such successor's assumption of servicing obligations with respect to the Eligible Assets. 10.16 Judgment Currency. If, for the purposes of obtaining judgment in any c ourt, it is necessary to convert a sum due hereunder or any other Loan Document in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Lender could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given. The obligation of each Borrower in respect of any such sum due from it to the Lender hereunder or under the other Loan Documents shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the "Agreement Currency"), be discharged only to the extent that on the Business Day following receipt by the Lender of any sum adjudged to be so due in the Judgment Currency, the Lender may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to the Lender from any Borrower in the Agreement Currency, such Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Lender or the Person to whom such obligation was owing against such loss. If the amount of the Agreement Currency so purchased is greater than the sum originally due to the Lender in such currency, the Lender agrees to return the amount of any excess to such Borrower (or to any other Person who may be entitled thereto under applicable law). 10.17 Treatment of Certain Information. Notwithstanding anything to the contrary contained herein or in any other Loan Document, all Persons may disclose to any and all Persons, without limitation of any kind, the federal income tax treatment of the Loans or any of the transactions contemplated by this Agreement or any other Loan Document, any fact relevant to understanding the federal tax treatment of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) relating to such federal income tax treatment. 10.18 Limited Recourse, Etc. Each of the parties acknowledges and agrees that: (a) Definitions. For the purpose of this Section 10.18 the following definition shall apply: "Directors" shall mean the directors of AHR Capital who are employees of Citco Corporate Services (Ireland) Limited as shall be appointed from time to time as directors of AHR Capital and shall include the employer of the directors, the shareholders of the employer, it's shareholders and agents (if any). For the avoidance of doubt and for the purposes of this provision only, neither the Guarantor, nor any of its Subsidiaries or Affiliates shall be deemed to be a "Director" of AHR Capital; (b) subject to clause (c) below, the Lender shall not take or initiate any insolvency or bankruptcy proceedings (including, without limitation, examinership) or issue any petition for the winding-up of AHR Capital. If any such winding-up, insolvency or bankruptcy proceedings of AHR Capital shall commence, the Lender may exercise any right and take any action available to any creditor in any such circumstances; (c) the Lender may enforce the Collateral Documents in accordance with the provisions thereof and such enforcement may include, without limitation, the appointment by it of a receiver to all or any part of the Collateral; and (d) the Lender's recourse in respect of the Obligations or any claim against AHR Capital relating to or in connection with the Loan Documents is limited to the Collateral and the sums, proceeds, receivables and all other rights relating, appertaining or attaching thereto or deriving therefrom. In such regard, the Lender may take all or any such action with respect to such assets to seek to maximize its return upon enforcement. For the avoidance of doubt, this provision shall only limit the liability of AHR Capital for the discharge of the Obligations and any claim against AHR Capital in respect of or in connection with the Loan Documents, and shall not limit or restrict in any way the accrual of interest on any unpaid amount, or, other than in respect of AHR Capital, derogate from or otherwise limit the right of recovery, realization or application by the Lender on any unpaid amount or pursuant to any of the Loan Documents; provided, however that nothing contained in this clause (d) shall limit the rights of the Lender to bring or commence any action, claim or proceeding (or take any other action) as it may see fit for the sole purpose of enabling it to claim against the Guarantor for the full amount of any loss it may incur hereunder. (e) For the avoidance of doubt, save as expressly prohibited in this Section 10.18, nothing in this Section 10.18 shall extinguish or be deemed to extinguish the right of the Lender to contact and hold meetings with any other creditor of AHR Capital. (f) Absent fraud, negligence, willful or misleading misconduct, deliberate action or omission designed to mislead, avoid, reduce or mitigate liability, or breach of statutory duty, no personal liability shall attach to the Directors and the Lender shall not take or initiate any proceedings or issue any petition against the Directors in connection with the Loan Documents. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. BORROWER AGENT - -------------- ANTHRACITE CAPITAL, INC. By: /s/ Robert L. Friedberg ------------------------------------ Name: Robert L. Friedberg Title: Vice President and Secretary Address for Notices: - ------------------- Anthracite Capital, Inc. 40 East 52nd Street New York, New York 10022 Attention: Richard Shea Telecopier No.: (212) 810-8758 Telephone No.: (212) 754-5579 BORROWER - -------- SIGNED, SEALED AND DELIVERED by the duly authorised attorney of AHR Capital BofA Limited in the presence of: /s/ Stephanie Talbot - --------------------------------- Signature of witness /s/ Stephanie Talbot - --------------------------------- Name of witness Address of witness 40 East 52nd Street New York, NY 10022 Fax no: (212) 754-8758 Attention: Richard Shea Address for Notices: - ------------------- AHR Capital BofA Limited Customs House Plaza, Block 6 IFSC Dublin 1 Ireland Fax no: +353 1 [ ] Attention: The Directors with copies to c/o Anthracite Capital, Inc. 40 East 52nd Street New York, New York 10022 Attention: Richard Shea Telecopier No.: (212) 810-8758 Telephone No.: (212) 754-5579 and c/o Anthracite Capital, Inc. One PNC Plaza, 19th Floor Mailstop P1-P0PP-19-2 249 Fifth Avenue Pittsburgh, PA 15222 Attention: Janice De Julio Telecopier No.: (412) 762-4546 Telephone No.: (412) 762-4675 LENDER - ------ BANK OF AMERICA, N.A. By: /s/ Angela E. Dugick ---------------------------------- Name: Angela E. Dugick Title: Senior Vice President Address for Notices: - ------------------- 214 North Tryon Street, 22nd Floor Mail code: NC1-027-22-04 Charlotte, North Carolina 28555 Attention: Angela E. Dugick Telecopier No.: (704) 386-1094 Telephone No.: (704) 388-3372 with a copy to: 100 North Tryon Street, 20th Floor Mail code: NC1-007-20-01 Charlotte, North Carolina 28555 Attention: Paul Kurzeja Telecopier No.: (704) 386-8509 Telephone No.: (704) 409-0267 with a copy to: Cadwalader, Wickersham & Taft LLP 227 West Trade Street, Suite 2400 Charlotte, North Carolina 28202 Attention: Steven N. Cohen, Esq. Telecopier No.: (704) 348-5200 Telephone No.: (704) 348-5100 EX-31 5 exhibit31-1.txt EXHIBIT 31.1 Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, Christopher A. Milner, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Anthracite Capital, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 10, 2006 /s/ Christopher A. Milner ---------------------------------- Name: Christopher A. Milner Title: Chief Executive Officer EX-31 6 exhibit31-2.txt EXHIBIT 31.2 Exhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER I, James J. Lillis, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Anthracite Capital, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 10, 2006 /s/ James J. Lillis ----------------------------------- Name: James J. Lillis Title: Chief Financial Officer EX-32 7 exhibit32-1.txt EXHIBIT 32.1 Exhibit 32.1 Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report on Form 10-Q of Anthracite Capital, Inc. (the "Company") for the quarter ending March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Christopher A. Milner, as Chief Executive Officer of the Company, and James J. Lillis, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Christopher A. Milner - -------------------------------- Name: Christopher A. Milner Title: Chief Executive Officer Date: May 10, 2006 /s/ James J. Lillis - -------------------------------- Name: James J. Lillis Title: Chief Financial Officer Date: May 10, 2006 This certification accompanies the Report pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of ss. 18 of the Securities Exchange Act of 1934, as amended. A signed original of this certification required by ss. 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----