<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: April 7, 1998
(Date of earliest event reported)
CMC SECURITIES CORPORATION III
(Exact name of Registrant as specified in its charter)
Delaware 33-47913 75-2431913
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
2711 N. Haskell Avenue
Suite 900
Dallas, Texas 75204
(Address of Principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (214) 874-2323
<PAGE> 2
Item 5. Other Events.
Reference is hereby made to the Registrant's Registration Statement on
Form S-3 (File No. 33-47913) filed with the Securities and Exchange Commission
(the "Commission") on May 14, 1992, as amended by Amendment No. 1 thereto filed
with the Commission on August 7, 1992, as further amended by Post Effective
Amendment No. 1 thereto filed with the Commission on September 16, 1993, as
further amended by Post Effective Amendment No. 2 thereto filed with the
Commission on December 13, 1993, and as further amended by Post Effective
Amendment No. 3 thereto filed with the Commission on February 14, 1994
(collectively, the "Registration Statement"), pursuant to which the Registrant
registered $4,000,000,000 aggregate principal amount of its collateralized
mortgage obligations, issuable in various series, for sale in accordance with
the provisions of the Securities Act of 1933, as amended (the "Act").
Reference is also hereby made to the Prospectus dated March 27, 1998 and the
related Prospectus Supplement, dated March 27, 1998 (collectively, the
"Prospectus"), which have been filed with the Commission pursuant to Rule
424(b)(5), with respect to the Registrant's Collateralized Mortgage
Obligations, Series 1998-1 (the "Bonds").
On March 31, 1998, the Registrant caused the issuance and sale of
approximately $593,796,659 aggregate initial principal amount of Bonds. The
Bonds are collateralized by mortgage pass-through certificates (the
"Conventional Certificates") evidencing the beneficial ownership interest in
entire pools of certain conventional, fixed-rate, fully-amortizing, one-to
four-family, first lien mortgage loans (the "Mortgage Loans") originated or
acquired by (i) Cendant Mortgage Corporation ("Cendant"), Bank of America, FSB
("BAFSB"), and (iii) Bank of America National Trust and Savings Association
("BANTSA"). Cendant, BAFSB and BANTSA are referred to herein collectively as
the "Loan Sellers". The Certificates were created pursuant to a Pooling and
Servicing Agreement dated as of March 1, 1998 (the "Pooling and Servicing
Agreement") by and among the Registrant, as Depositor, Cendant and BAFSB, as
Master Servicers, First Chicago National Processing Corporation, as Custodian,
and The First National Bank of Chicago, as Certificate Trustee. A copy of the
Pooling and Servicing Agreement is filed herewith as Exhibit 10.1. The
Securities were issued pursuant to an Indenture dated as of March 1, 1998 (the
"Indenture"), as supplemented by the Series 1998-1 Supplement thereto dated as
of March 31, 1998 (the "Series Supplement"), each by and between the Registrant
and The First National Bank of Chicago, as Indenture Trustee. A copy of the
Indenture is filed herewith as Exhibit 4.1 and a copy of the Series Supplement
is filed herewith as Exhibit 4.2.
The Offered Bonds (as defined in the Prospectus), having an aggregate
principal balance of $589,490,892, have been sold by the Registrant to Bear,
Stearns & Co. Inc. ("Bear, Stearns") pursuant to an Underwriting Agreement
dated as of March 27, 1998 (the "Underwriting Agreement"), as supplemented by a
Terms Agreement dated as of March 27, 1998, each among Bear, Stearns, the
Registrant and Capstead Mortgage Corporation ("CMC"). A copy of the
Underwriting Agreement is filed herewith as Exhibit 1.1.
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Item 7. Financial Statements and Exhibits.
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
1.1 Underwriting Agreement dated as of March 27, 1998
by and among Bear, Stearns, the Registrant and CMC
4.1 Indenture dated as of March 1, 1998 by and between
the Registrant and The First National Bank of
Chicago, as Indenture Trustee
4.2 Series 1998-1 Supplement dated as of March 31, 1998
by and between the Registrant and The First
National Bank of Chicago, as Indenture Trustee
10.1 Pooling and Servicing Agreement dated as of March
1, 1998 by and among the Registrant, as Depositor,
Cendant and BAFSB, as Master Servicers, First
Chicago National Processing Corporation, as
Custodian, and The First National Bank of Chicago,
as Certificate Trustee
</TABLE>
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Signature
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 hereunto duly authorized.
CMC SECURITIES CORPORATION III
April 7, 1998 By: /s/ ANDREW F. JACOBS
----------------------------------
Andrew F. Jacobs,
Senior Vice President - Asset
and Liability Management
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<PAGE> 5
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C>
1.1 Underwriting Agreement dated as of March 27, 1998
by and among Bear, Stearns, the Registrant and CMC
4.1 Indenture dated as of March 1, 1998 by and between
the Registrant and The First National Bank of Chicago,
as Indenture Trustee
4.2 Series 1998-1 Supplement dated as of March 31, 1998
by and between the Registrant and The First National
Bank of Chicago, as Indenture Trustee
10.1 Pooling and Servicing Agreement dated as of March 1, 1998
by and among the Registrant, as Depositor, Cendant and
BAFSB, as Master Servicers, First Chicago National Processing
Corporation, as Custodian, and The First National Bank of
Chicago, as Certificate Trustee
</TABLE>
<PAGE> 1
EXHIBIT 1.1
CMC SECURITIES CORPORATION III
COLLATERALIZED MORTGAGE OBLIGATIONS
(Issuable in Series)
UNDERWRITING AGREEMENT
March 27, 1998
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies and Gentlemen:
CMC Securities Corporation III (the "Company"), a Delaware corporation
and wholly-owned subsidiary of Capstead Mortgage Corporation, a Maryland
corporation ("Capstead"), proposes to issue its Collateralized Mortgage
Obligations of the series (each, a "Series") and classes designated at the time
of sale (the "Bonds"). The Bonds shall be issued under an indenture, dated as
of March 1, 1998 (the "Original Indenture"), between the Company and The First
National Bank of Chicago, as trustee (the "Indenture Trustee"), as supplemented
from time to time by one or more supplemental indentures, each providing for
the issuance of a Series of Bonds (the "Series Supplements") between the
Company and the Indenture Trustee. Such Original Indenture, as supplemented
from time to time hereafter, and as supplemented by the Series Supplements,
with any changes therein made with your consent, and, with your consent any
other indenture is herein referred to as the "Indenture." Capstead joins this
agreement for the purposes set forth herein.
Underwritten Offerings of Bonds may be made through you or through an
underwriting syndicate managed by you. The Company proposes to sell one or
more Series of the Bonds or certain Classes of Bonds of one or more Series to
you and to each of the other several underwriters, if any, participating in an
underwriting syndicate managed by you. It is understood, however, that the
Company may elect to retain, through the execution of one or more underwriting
agreements in addition to this Agreement, one or more additional underwriters
other than you to underwrite, or manage the underwriting syndicate with respect
to, any offering of one or more Series of its Bonds.
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Whenever the Company determines to make such an offering of Bonds
through you, it will enter into an agreement (the "Terms Agreement") providing
for the sale of such Bonds to, and the purchase and offering thereof by, you
and such other underwriters, if any, selected by you as have authorized you to
enter into such Terms Agreement on their behalf (the underwriters designated in
any such Terms Agreement being referred to herein as "Underwriters," which term
shall include you whether acting alone in the sale of any Series of Bonds or as
a member of the underwriting syndicate). The Terms Agreement relating to each
offering of Bonds shall specify the principal amount of Bonds to be issued and
their terms not otherwise specified in the Indenture, a brief description of
the Conventional Certificates (as defined below) to be pledged as security
therefor, the names of the Underwriters participating in such offering (subject
to substitution as provided in Section 11 hereof) and the principal amount of
the Bonds which each severally agrees to purchase, the names of such other
Underwriters, if any, acting as co-managers with you in connection with such
offering, the price at which the Bonds are to be purchased by the Underwriters
from the Company, the initial public offering price (or the manner in which
such prices shall be determined), the time and place of delivery of and payment
for the Bonds, and such other information as may be agreed upon. The Terms
Agreement, which shall be substantially in the form of Exhibit A hereto, may
take the form of an exchange of any standard form of written telecommunication
between you and the Company. Each offering of Bonds through you will be
governed by this Agreement, as supplemented by the applicable Terms Agreement,
and this Agreement and such Terms Agreement shall inure to the benefit of and
be binding upon each Underwriter participating in the offering of such Bonds.
At their date of issuance, the Bonds of each Series underwritten by you
will be secured by a pledge to the Indenture Trustee of, among other things,
Conventional Certificates (as defined in the Indenture) (collectively, the
"Conventional Certificates"). The Bonds are more fully described in the
Registration Statement (as defined below). Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33-47913), a related
preliminary prospectus and related preliminary prospectus supplements for the
registration of the Bonds under the Securities Act of 1933 (the "1933 Act"),
which registration statement, as most recently amended, was declared effective
on February 16, 1994. Such registration statement, as from time to time
amended through the date of the Terms Agreement, including all exhibits thereto
and all documents therein incorporated by reference from time to time pursuant
to Item 12 of Form S-3 under the 1933 Act that were filed under the Securities
Exchange Act of 1934 (the "1934 Act"), on or before the effective date of such
registration statement, but excluding the Statement of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of 1939 (the "1939
Act"), is hereinafter referred to as the "Registration Statement." The
prospectus in the form in which it appears in the Registration Statement,
including all documents therein incorporated by reference from time to time
pursuant to the 1934 Act, is hereinafter referred to as the "Basic Prospectus".
The Basic Prospectus, as amended to the date hereof and as supplemented by the
prospectus supplement or supplements relating to a particular Series of the
Bonds, each in the form first filed after the date of the related Terms
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Agreement with the Commission pursuant to Rule 424 under the 1933 Act,
including any documents incorporated by reference therein pursuant to Item 12
of Form S-3 under the 1933 Act that were filed under the 1934 Act on or before
the date of such prospectus supplement (such prospectus supplement, including
such incorporated documents, in the form first filed after the date of the
related Terms Agreement pursuant to Rule 424(b) being hereinafter termed the
"Prospectus Supplement"), is hereinafter referred to as the "Final Prospectus".
Any reference herein to the terms "amend", "amendment" or "supplement" with
respect to the Registration Statement, the Final Prospectus or the Prospectus
Supplement shall be deemed to refer to and include the filing of any document
under the 1934 Act after the effective date of the Registration Statement or
the issue date of the Final Prospectus or Prospectus Supplement, as the case
may be, deemed to be incorporated therein by reference pursuant to Item 12 of
Form S-3 under the 1933 Act.
SECTION 1. Representations and Warranties. The Company and Capstead
(on behalf of itself and its wholly owned subsidiary, Capstead Capital
Corporation ("CCC"), as applicable), jointly and severally, represent and
warrant to you as of the date hereof, and to each Underwriter named in a Terms
Agreement as of the date thereof (in each case the "Representation Date"), as
follows:
(a) The Registration Statement, at the time it became
effective, complied and, as of the date hereof, does comply, in all
material respects with the requirements of the 1933 Act and the rules
and regulations of the Commission thereunder (the "1933 Act
Regulations") and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Final
Prospectus at the time it is mailed to the Commission for filing
pursuant to Rule 424 under the Act and at the Closing Time referred to
in Section 2 will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that the representations and
warranties in this subsection shall not apply to statements in or
omissions from (i) the Registration Statement or Final Prospectus made
in reliance upon and in conformity with information furnished to the
Company in writing by any Underwriter through you expressly for use in
the Registration Statement or Final Prospectus or (ii) the Current
Report (as defined in Section 3(b) below), or in any amendment thereof
or supplement thereto, incorporated by reference in such Registration
Statement or such Final Prospectus (or any amendment thereof or
supplement thereto). There are no material contracts or documents of
the Company which are required to be filed as exhibits to the
Registration Statement by the 1933 Act or the 1933 Act Regulations which
have not been so filed.
(b) At the time the Registration Statement became effective
the Indenture Trustee was duly qualified under the requirements of the
1939 Act and the rules and regulations of the Commission thereunder (the
"1939 Act Regulations"), and at the Closing Time the Indenture will be
so qualified and will conform in all material respects with the
requirements of the 1939 Act and the 1939 Act Regulations.
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(c) The documents incorporated by reference in the
Registration Statement and the applicable Final Prospectus, at the time
they were or hereafter are filed with the Commission, complied and will
comply in all material respects with the requirements of the 1934 Act
and the rules and regulations of the Commission thereunder, and, when
read together and with the other information in the applicable Final
Prospectus, at the time the Registration Statement and any amendments
thereof became effective, and at the time such Final Prospectus is filed
with the Commission, did not and will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the representations and warranties in this subsection
shall not apply to the Current Report.
(d) The accountants who reported on the balance sheet included
or incorporated by reference in the Registration Statement are
independent public accountants as required by the 1933 Act and the 1933
Act Regulations.
(e) The balance sheet of the Company included or incorporated
by reference in the Registration Statement presents fairly the financial
position of the Company at the date indicated, and has been prepared in
conformity with generally accepted accounting principles.
(f) Since the respective dates as of which information is
given in the Registration Statement or, if later, the applicable Final
Prospectus, except as otherwise stated therein, there has been no
material adverse change in the condition, financial or otherwise,
earnings, business affairs, or business prospects of the Company.
(g) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with power and authority (corporate and other) to own, lease
and operate its properties and conduct its business as described in the
Registration Statement, and, at the Closing Time, the Company will be
duly qualified as a foreign corporation to transact business and will be
in good standing in the State of Texas. The Company is not required to
qualify to do business as a foreign corporation under the laws of any
other state. The Company has no subsidiaries.
(h) The authorized, issued and outstanding capital stock of
the Company is as set forth (or incorporated) in the Registration
Statement, and the shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully paid
and non-assessable, and are owned of record and beneficially by
Capstead, free and clear of any lien, charge, option, warrant, security
interest, encumbrance, voting trust or similar arrangement.
(i) Neither the Company nor Capstead is in violation of its
charter or bylaws. The Company is not in default in the performance or
observance of any obligation,
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agreement, covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which it is
a party or by which it or its properties may be bound, which violations
or defaults separately or in the aggregate would have a material adverse
effect on the Company.
(j) The Company owns or possesses or has obtained all material
governmental licenses, permits, consents, orders, approvals and other
authorizations necessary to lease, own or license, as the case may be,
and to operate, its properties and to carry on its business as described
in the Registration Statement or, if later, the applicable Final
Prospectus; and the Company has conducted and is conducting its business
so as to comply in all material respects with all applicable laws,
administrative regulations and administrative and court decrees.
(k) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending
against the Company or, to the knowledge of the Company and Capstead,
threatened against the Company (except as set forth in the Registration
Statement or, if later, the applicable Final Prospectus) which could
reasonably be expected to result in any material adverse change in the
condition, financial or otherwise, earnings, business affairs, or
business prospects of the Company which could reasonably be expected to
interfere with or materially and adversely affect the consummation of
the transactions contemplated herein.
(l) The execution and delivery of this Agreement, the Original
Indenture, the related Series Supplement, the related pooling and
servicing agreement ("Pooling and Servicing Agreement"), the related
mortgage loan purchase agreement executed by CCC ("Mortgage Loan
Purchase Agreement") and the related assignment, assumption and
recognition agreements executed by the Company and CCC (as applicable,
the "Assignment Agreements"), the incurrence of the obligations herein
set forth and the consummation of the transactions contemplated herein
and therein have been, and the execution and delivery of each Terms
Agreement and the consummation of the transactions contemplated therein
will have been (before the issuance of the related Bonds), duly
authorized by the Company and/or Capstead, as applicable, by all
necessary action (corporate and other); this Agreement, the Original
Indenture, the related Series Supplement, the related Pooling and
Servicing Agreement, the related Mortgage Loan Purchase Agreement and
each Assignment Agreement have each been, and the Terms Agreement, when
executed and delivered, will have been, duly executed and delivered by
the Company, CCC and/or Capstead, as applicable, enforceable in
accordance with their terms, subject, as to enforceability of remedies,
to applicable bankruptcy, insolvency, reorganization, or other laws
affecting creditors' rights generally, and to general principles of
equity and equitable remedies (regardless of whether the enforceability
of such remedies is considered in a proceeding in equity or at law).
Neither the execution and delivery of this Agreement, the Original
Indenture, the related Series Supplement, the related Pooling and
Servicing Agreement, the related Mortgage Loan Purchase Agreement, the
related Assignment Agreements or the
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Terms Agreement, the incurrence of the obligations herein or therein set
forth, nor the consummation of the transactions contemplated herein or
therein will conflict with or constitute a breach of, or default under,
or result in the creation or imposition of any lien, mortgage, pledge,
charge, security interest or encumbrance (collectively, "Lien") upon any
property or assets of the Company, CCC or Capstead, as applicable,
pursuant to any contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which the Company, CCC or Capstead, as
applicable, is a party or by which any of them may be bound, or to which
any of the property or assets of any of them is subject (other than the
Lien created pursuant to the Indenture), which separately or in the
aggregate are material, nor will any such action result in any violation
of the provisions of the charter or bylaws of either of the Company, CCC
or Capstead, or, to the best of such entity's knowledge, of any law,
administrative regulation or administrative or court decree.
(m) The issuance of the Bonds underwritten by you has been
duly authorized by the Company (or will have been so authorized prior to
each issuance of Bonds underwritten by you) and, when such Bonds are
executed and authenticated and delivered in accordance with the
Indenture and sold to the Underwriters pursuant to this Agreement and
any Terms Agreement, such Bonds will be entitled to the benefits and
security provided by the Indenture and will constitute the legal, valid
and binding non-recourse obligations of the Company enforceable in
accordance with their terms, but otherwise subject, as to enforceability
of remedies, to applicable bankruptcy, insolvency, reorganization or
other laws affecting creditors' rights generally, and to general
principles of equity and equitable remedies (regardless of whether the
enforceability of such remedies is considered in a proceeding in equity
or at law).
(n) The Bonds of each Series underwritten by you and the
Indenture will conform in all material respects to the respective
descriptions thereof contained in the applicable Final Prospectus,
except that no representation or warranty is made that the Bonds conform
with any description thereof contained in the Current Report.
(o) At the time of execution of the related Pooling and
Servicing Agreement, the Company will own the Mortgage Loans being
transferred to the Trust pursuant to such Pooling and Servicing
Agreement, free and clear of any lien, adverse claim, mortgage, charge,
pledge or other encumbrance or security interest, and will not have
assigned to any other person any of its right, title or interest in such
Mortgage Loans; and, upon the execution of the related Pooling and
Servicing Agreement, the Company will transfer all its right, title and
interest in such Mortgage Loans to the Certificate Trustee.
(p) As of the Closing Time with respect to a Series of Bonds,
the Mortgage Loans will be duly and validly assigned in blank or to the
Certificate Trustee (or its nominee), the related Mortgage Notes will be
endorsed in blank or to the Certificate Trustee (or its nominee) and
delivered to the Certificate Trustee or to an agent on its behalf and,
where required in order to transfer all right, title and interest to a
Mortgage Loan, upon the
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recordation of assignments to the Certificate Trustee of the related
mortgages in the public records in which such mortgage shall have been
recorded, the Certificate Trustee will own each such Mortgage Loan,
subject to no prior lien, mortgage, security interest, pledge, charge or
other encumbrance, except as permitted under the related Pooling and
Servicing Agreement.
(q) At the Closing Time with respect to a Series of Bonds, the
Company will own (i) the Conventional Certificates listed in Schedule A
to the Series Supplement relating to the applicable Series of Bonds and
(ii) the money or other assets specified or referred to in the granting
clauses of such Series Supplement as being pledged to the Indenture
Trustee at Closing Time (together, the "Initial Collateral"), free and
clear of any Lien, except the Lien of the Indenture; the Company has
power and authority (corporate and other) to assign, pledge and deliver
the Initial Collateral to the Indenture Trustee under the Indenture, and
will have duly authorized such assignment, pledge and delivery to the
Indenture Trustee by all necessary corporate action.
(r) As of the Closing Time with respect to a Series of Bonds,
the Company will have assigned, pledged and delivered to the Indenture
Trustee under the Indenture all of its right, title and interest in and
to, among other things, (i) Conventional Certificates with an aggregate
outstanding principal balance as of such Closing Time at least equal to
the aggregate original principal amount of the Bonds of the applicable
Series then being issued and (ii) cash and/or other assets, if any, in
the amount set forth in the related Series Supplement.
(s) At the Closing Time with respect to a Series of Bonds,
each Conventional Certificate listed on Schedule A to the Series
Supplement relating to the applicable Series of Bonds will have been
duly and validly assigned, pledged and delivered to the Indenture
Trustee, or its nominee, and together with such assignment, pledge and
delivery of each Conventional Certificate, the filing of a UCC-1
financing statement with respect to the Conventional Certificates in the
office of the Secretary of State of the State of Texas and in such other
jurisdictions, if any, as the Company deems appropriate and the
possession by the Indenture Trustee, or its nominee, of the Conventional
Certificates and of the monies and/or other assets, if any, specified in
the related Series Supplement, will create as security for repayment of
the Bonds a valid, perfected first security interest. The information
set forth with respect to the Conventional Certificates in Schedule A to
the related Series Supplement will as of the Closing Time of such Series
be true and correct in all material respects.
(t) The Company is not, and will not as a result of the offer
and sale of the Bonds as contemplated in this Agreement and any
applicable Terms Agreement become, an "investment company" or under the
"control" of an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company
Act") which would be required to register under the Investment Company
Act.
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(u) The related Pooling and Servicing Agreement will not be
required to be qualified under the Trust Indenture Act of 1939, as
amended.
(v) The representations and warranties made by the Company in
the Indenture and the related Pooling and Servicing Agreement and made
in any Officers' Certificate of the Company delivered pursuant to the
Original Indenture or the related Pooling and Servicing Agreement will
be true and correct at the time made and at the Closing Time.
(w) The related Pooling and Servicing Agreement, the
Conventional Certificates created thereby and the mortgage loans
evidenced thereby shall conform in all material respects to the
respective descriptions thereof contained in the applicable Final
Prospectus, except that no representation is made that the Conventional
Certificates conform with the descriptions thereof (if any) contained in
the Current Report.
(x) Any certificate signed by an officer of the Company or
Capstead and delivered to you or to counsel for the Underwriters shall
be deemed a representation and warranty by the Company or Capstead,
respectively, to each Underwriter as to the matters covered thereby.
(y) No consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or body of
the United States is required for the issue and sale of the Bonds, or
the consummation by the Company of the other transactions contemplated
by this Agreement, each Terms Agreement or the Indenture, except such
consents, approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Bonds by the Underwriters or
as have been obtained.
(z) At the Closing Time of a Series, the Bonds of such Series
shall have been rated in the highest rating category by at least two
nationally recognized statistical rating organizations or in such lower
rating categories as are acceptable to the Underwriters.
(aa) Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of this Agreement,
the related Terms Agreement, the Indenture and the Bonds have been paid
or will be paid at or prior to the Closing Time.
(bb) All of the information regarding the characteristics of
the Mortgage Loans contained in the Registration Statement or furnished
to you by the Company in writing or by electronic transmission is true
and correct.
SECTION 2. Sale and Delivery to the Underwriters; Closing. The
several commitments of the Underwriters to purchase Bonds pursuant to any Terms
Agreement shall be deemed to have been made on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, severally and
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not jointly, and each Underwriter, severally and not jointly, agrees to
purchase from the Company, the respective original principal amounts of the
Bonds set forth in the applicable Terms Agreement opposite the name of such
Underwriter, plus any additional original principal amount of Bonds which such
Underwriter may be obligated to purchase pursuant to Section 11 hereof.
Delivery of, and payment of the purchase price for, the Bonds shall be
made at the office of Andrews & Kurth L.L.P., 1717 Main Street, Suite 3700,
Dallas, Texas 75201, or at such other place as shall be agreed upon by you and
the Company, at 10:00 A.M. (Dallas time) on the date set forth in the
applicable Terms Agreement, or such other time as shall be agreed upon by you
and the Company (such time and date being referred to as the "Closing Time").
Payment shall be made in immediately available or next day funds as specified
in the Terms Agreement, payable to or upon the order of the Company, against
delivery to you for the respective accounts of the Underwriters of the Bonds to
be purchased by them. Such Bonds shall be in such denominations and registered
in such names as you may request in writing at least two business days prior to
the Closing Time. The Bonds will be made available for your examination in
Dallas, Texas not later than 10:00 A.M. on the Business Day prior to the
Closing Time.
SECTION 3. Covenants of the Company. The Company covenants with you,
and with each Underwriter participating in the offering of the applicable
Series of Bonds, as follows:
(a) Immediately following the execution of each Terms
Agreement, the Company will prepare a Final Prospectus setting forth the
principal amount of Bonds covered thereby and their terms not otherwise
specified in the Indenture, the names of the Underwriters participating
in the offering and the principal amount of Bonds which each severally
has agreed to purchase, the names of any Underwriters acting as
co-managers with you in connection with the offering, the price at which
the Bonds are to be purchased by the Underwriters from the Company, and
such other information as you and the Company deem appropriate in
connection with the offering of the Bonds. The Company will promptly
transmit copies of the Final Prospectus to the Commission for filing
pursuant to Rule 424 of the 1933 Act Regulations and will furnish to the
Underwriters named therein as many copies of the Final Prospectus as you
shall reasonably request.
(b) The Company will cause any materials provided by you
pursuant to Section 8 below ("Section 8 Materials") with respect to the
Bonds that are delivered by you to the Company pursuant to Section 8
hereof to be filed with the Commission on a Current Report on Form 8-K
(the "Current Report") pursuant to Rule 13a-11 under the 1934 Act not
later than the Business Day immediately following the Business Day on
which all such Section 8 Materials are delivered to counsel for the
Company by you prior to 3:00 p.m. Dallas, Texas time, and will promptly
advise you when such Current Report has been filed, provided that in any
event the Company will cause the Section 8 Materials to be so filed not
later than the date on which the related Final Prospectus is required to
be so filed pursuant to Rule 424 under the 1933 Act. Such Current
Report shall be incorporated by reference in such Final Prospectus and
the related Registration Statement. Notwithstanding the two preceding
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<PAGE> 10
sentences, the Company shall have no obligation to file any Section 8
Materials which, in the reasonable determination of the Company (a "Non-
Filing Determination"), are not required to be filed pursuant to the
Kidder Letter or the PSA Letter (as defined in Section 8 below), or
which contain erroneous information or contain any untrue statement of a
material fact or, when read in conjunction with the Final Prospectus and
Prospectus Supplement, omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading (it being understood, however, that the Company shall have no
obligation to review or pass upon the accuracy or adequacy of, or to
correct, any Section 8 Materials); provided that, in the event of a
Non-Filing Determination, the Company shall immediately notify you in
writing of the reasons for such Non-Filing Determination; and, provided,
further, that the Company shall file those Section 8 Materials for which
you have specifically confirmed in writing that the items giving rise to
the Non-Filing Determination are complete and correct and that you are
advising the Company to file such Section 8 Materials.
(c) The Company will notify you immediately, and in writing
confirm the notice, (i) of the receipt of any comments from the
Commission, (ii) of any request by the Commission for any amendment to
the Registration Statement or any amendment or supplement to the Final
Prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that
purpose, (iv) of receipt by the Company of any notification with respect
to the suspension of the qualification of the Bonds for sale in any
jurisdiction or the initiation or threat of any proceeding for that
purpose, and (v) of the happening of any event which makes untrue any
statement of a material fact made in, or results in the omission of
material information from, the Registration Statement or in any Final
Prospectus then required to be distributed or which requires the making
of a change in the Registration Statement or any such Final Prospectus
in order to make any material statements therein, in the light of the
circumstances under which they were made, not misleading. The Company
will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at
the earliest possible moment.
(d) The Company will give you notice of its intention to file
any amendment to the Registration Statement or any amendment or
supplement to the Final Prospectus, whether pursuant to the 1934 Act,
1933 Act or otherwise, and will not file any such amendment or
supplement without furnishing a copy thereof to you and counsel for the
Underwriters and obtaining your consent to such filing, which consent
shall not be unreasonably withheld or delayed.
(e) The Company will deliver to you, as soon as practicable,
as many signed copies of the Registration Statement as originally filed
and of each amendment thereto, with signed consents and exhibits filed
therewith (including exhibits incorporated by reference therein and
documents incorporated by reference in the Final Prospectus), and will
also
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<PAGE> 11
deliver to you such number of conformed copies of the Registration
Statement as originally filed and of each amendment thereto (including
consents and exhibits) as you may reasonably request.
(f) The Company will furnish to each Underwriter, from time to
time during the period when the Final Prospectus is required to be
delivered under the 1933 Act, such number of copies of the Final
Prospectus (as amended or supplemented), other than exhibits to the
related Current Report, as it may reasonably request for the purposes
contemplated by the 1933 Act or the 1934 Act.
(g) If at any time when a prospectus relating to the Bonds is
required to be delivered under the 1933 Act any event occurs as a result
of which the applicable Final Prospectus as then amended or supplemented
would include an untrue statement of a material fact, or omit to state
any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend such Final Prospectus to comply
with the 1933 Act, the Company, subject to subparagraph (d) above,
promptly will prepare and file with the Commission an amendment or
supplement which will correct such statement or omission or an amendment
which will effect such compliance; provided, however, that the Company
will not be required to file any such amendment or supplement with
respect to any Section 8 Materials incorporated by reference in the
Final Prospectus other than any amendments or supplements of such
Section 8 Materials that the Company determines to file in accordance
therewith.
(h) The Company will endeavor, in cooperation with you and
counsel for the Underwriters, to qualify the Bonds for offering and sale
under the applicable securities and Blue Sky laws of such jurisdictions
as you may reasonably designate, and will maintain such qualification in
effect for a period of not less than one year after the date hereof,
unless the offering and sale of the Bonds is exempt from such
qualification under the Secondary Mortgage Market Enhancement Act of
1984, and will cooperate with you and counsel for the Underwriters, to
determine the eligibility of the Bonds for investment by institutional
investors in such jurisdictions. The Company will, at your request or
the request of counsel for the Underwriters, file such statements and
reports as may be required by the laws of each jurisdiction in which the
Bonds have been qualified as above provided. Notwithstanding the
foregoing, no such qualification shall be required in any jurisdiction
where, as a result thereof, the Company would be subject to general
service of process, other than by reason of the offer and sale of the
Bonds, qualification as a foreign corporation or to taxation as a
foreign corporation doing business in such jurisdiction.
(i) The Company will make generally available to its security
holders and will deliver to you as soon as practicable an earnings
statement, conforming to the requirements of Section 11(a) of the 1933
Act, covering a period of at least twelve months beginning after
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<PAGE> 12
the effective date of the Registration Statement. Compliance with Rule
158 under the 1933 Act shall satisfy the requirements of this paragraph.
(j) So long as any Bonds are outstanding, the Company will
furnish to you (or cause to be furnished to you) as soon as practicable
upon your written request:
(i) copies of the annual reports and other items
required to be delivered to the Bondholders pursuant to the
Indenture;
(ii) copies of any reports and financial statements
furnished to or filed with the Commission or any national
securities exchange by the Company; and
(iii) information as to the outstanding principal
balances of the mortgage loans underlying the Conventional
Certificates, and, to the extent that such information has been
maintained in the ordinary course of business by the Company,
such other information as may reasonably be requested by you
which in your judgment is necessary or appropriate to the
maintenance of a secondary market in the Bonds.
(k) So long as any Bonds of any Series underwritten by you are
outstanding, Capstead will furnish to you within five days after they
are available, upon your written request, copies of all reports filed by
Capstead under the 1934 Act.
(l) The Company, during the period when the Prospectus is
required to be delivered under the 1933 Act, will file promptly all
documents required to be filed with the Commission pursuant to Section
13 or 14 of the 1934 Act; provided, however, that the Company will not
be required to file any amendment or supplement to the Current Report
incorporated by reference in the Prospectus other than any amendments or
supplements thereto that are furnished to the Company by you pursuant to
Section 8 hereof which the Company determines to file in accordance
therewith.
(m) The Company shall prepare and file with the Commission,
within the period provided in the related Final Prospectus, its Current
Report on Form 8-K which shall include such detailed information,
schedules and reports (the "Detailed Description") regarding the
Conventional Certificates and the mortgage loans underlying such
Conventional Certificates relating to the Series of Bonds offered by
such Final Prospectus (the "Mortgage Loans") as you may reasonably
request.
(n) During the period, if any, commencing on the date of the
applicable Terms Agreement and expiring on the date specified in such
Terms Agreement (the "Stand-Off Period"), neither the Company nor
Capstead or any subsidiary thereof will, without your prior written
consent or as may be otherwise permitted by such Terms Agreement, offer
or sell, or enter into any agreement to sell to the public, any
mortgage-related or
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<PAGE> 13
mortgage-backed securities issued by any of them which are similar to
the Bonds. The provisions of this subparagraph (n) do not apply to
securities issued or guaranteed by GNMA, FNMA or FHLMC.
SECTION 4. Payment of Expenses. Unless otherwise specified in the
applicable Terms Agreement, the Company will pay, and Capstead will cause the
Company to pay, the following expenses incident to the performance of the
Company's obligations under this Agreement and the applicable Terms Agreement:
(i) the filing of the Registration Statement with respect to the Bonds and all
amendments thereto, (ii) the printing or photocopying and delivery to the
Underwriters, in such quantities as you may reasonably request, of copies of
this Agreement and the Terms Agreement, (iii) the preparation, registration,
issuance and delivery to the Underwriters of the Bonds underwritten pursuant to
this Agreement, (iv) the fees and disbursements of the Company's counsel, (v)
the printing and delivery to the Underwriters, in such quantities as you may
reasonably request, of copies of the Registration Statement with respect to the
Bonds underwritten pursuant to this Agreement and all amendments thereto, of
any preliminary prospectus and preliminary prospectus supplement and of the
Final Prospectus and all amendments and supplements thereto and all documents
incorporated therein (other than exhibits to the Current Report), of any
private placement memoranda with respect to Bonds that are to be privately
placed, and of any Blue Sky and Legal Investment Surveys, and (vi) the printing
or photocopying and delivery to the Underwriters, in such quantities as you may
reasonably request, of copies of the Indenture. In addition, you will pay (or
cause to be paid) the remaining expenses incident to the transactions
contemplated by this Agreement and the applicable Terms Agreement, including
and without limitation those related to: (A) the qualification of the Bonds
underwritten pursuant to this Agreement under securities and Blue Sky laws and
the determination of the eligibility of the Bonds for investment in accordance
with the provisions of Section 3(h), including filing fees and the reasonable
fees and disbursements of counsel for the Underwriters in connection therewith
and in connection with the preparation of any Blue Sky Survey and Legal
Investment Survey, (B) the fees and expenses of your counsel, (C) the fees and
expenses of the Independent Accountants under Section 5(f) hereof, (D) the fees
charged by investment rating agencies for rating the Bonds underwritten
pursuant to this Agreement, (E) the fees and expenses, if any, incurred in
connection with the listing of the Bonds underwritten pursuant to this
Agreement on any national securities exchange, and (F) the fees and expenses of
the Indenture Trustee and its counsel.
If this Agreement is terminated by you in accordance with the provisions
of Section 5 or 10(b)(i), the Company shall, and Capstead will cause the
Company to, reimburse the Underwriters for all of their out-of-pocket expenses,
including the reasonable fees and disbursements of counsel for the
Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase the Bonds pursuant to any Terms Agreement are
subject to the accuracy in all material respects of the representations and
warranties of the Company and Capstead herein contained, to the performance by
the Company and Capstead of their obligations hereunder, and to the following
further conditions:
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<PAGE> 14
(a) At the applicable Closing Time (i) no stop order
suspending the effectiveness of the Registration Statement shall have
been issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission, (ii) the rating assigned as of the date of
the applicable Terms Agreement by any nationally recognized securities
rating agency to the Bonds to be underwritten at such time pursuant to
this Agreement shall not have been lowered since that date and (iii)
there shall not have come to your attention any fact that would cause
you to believe that the Final Prospectus at the time it was required to
be delivered to a purchaser of the Bonds to be underwritten at such time
pursuant to this Agreement contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances existing at such time,
not misleading.
(b) At the applicable Closing Time you shall have received:
(1) An opinion, addressed to the Underwriters and dated the Closing
Time, of Andrews & Kurth L.L.P., counsel to the Company, in form and substance
reasonably satisfactory to you and counsel for the Underwriters, to the effect
that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware.
(ii) The Company has corporate power and authority to
own, lease and operate its properties and conduct its business as
described in the applicable Final Prospectus; and the Company is
qualified as a foreign corporation to transact business in the
State of Texas and each other jurisdiction where the nature of
its assets requires such qualification.
(iii) All the authorized, issued and outstanding capital
stock of the Company has been duly authorized and validly issued
and is fully paid and non-assessable, and is owned of record by
Capstead, to the knowledge of such counsel, free and clear of any
lien, security interest, encumbrance, option, warrant, voting
trust or similar arrangement.
(iv) The Company is not in violation of its charter or
bylaws. To the best of such counsel's knowledge, the Company is
not in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any
material contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which it is a party or by which it
or its properties may be bound.
(v) To the best of such counsel's knowledge, the Company
owns or possesses or has obtained all material governmental
licenses, permits, consents, orders, approvals and other
authorizations necessary to lease or own, as the case may be, and
to operate, its properties and to carry on its businesses as
presently
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<PAGE> 15
conducted; and, to the best of such counsel's knowledge, the
Company has conducted and is conducting its businesses so as to
comply in all material respects with all applicable laws.
(vi) There is no action, suit or proceeding before or by
any court or governmental agency or body, domestic or foreign,
now pending, or, to the best of such counsel's knowledge,
threatened against the Company which could reasonably be expected
to interfere with or adversely affect the consummation of the
transactions contemplated herein.
(vii) The execution and delivery of this Agreement, the
applicable Terms Agreement and the Indenture (including the
applicable Series Supplement), the incurrence of the obligations
herein and therein set forth and the consummation of the
transactions contemplated herein and therein have been duly
authorized by the Company, by all necessary action; this
Agreement and the applicable Terms Agreement have been duly
authorized, executed and delivered by the Company; and the
Indenture (including the applicable Series Supplement) has been
duly authorized, executed and delivered by the Company and
constitutes a legal, valid and binding agreement of the
Company, enforceable in accordance with its terms, subject, as to
enforceability of remedies, to applicable bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights
generally and to general principles of equity and equitable
remedies (regardless of whether the enforceability of such
remedies is considered in a proceeding at law or in equity).
(viii) Neither the execution and delivery of this
Agreement, the applicable Terms Agreement or the Indenture, the
incurrence of the obligations herein or therein set forth, nor
the consummation of the transactions contemplated herein or
therein, to the best of such counsel's knowledge, will conflict
with or constitute a breach of, or default under, or result in
the creation or imposition of any Lien upon any property or
assets of the Company pursuant to, any material contract,
indenture, mortgage, loan agreement, note, lease or other
instrument to which the Company is a party or by which it may be
bound, or to which any of its assets is subject (other than the
Lien created by the Indenture) which separately or in the
aggregate are material, nor will any such action result in any
violation of the provisions of the charter or bylaws of the
Company or, to the best of such counsel's knowledge, of any law,
administrative regulation or administrative or court decree.
(ix) No filing or, registration with, notice to or
consent, approval, authorization or order or other action of, any
court or governmental authority or agency, is required for the
consummation by the Company of the transactions contemplated by
this Agreement or the applicable Terms Agreement, except such as
have been obtained and except such as may be required under state
securities or Blue
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<PAGE> 16
Sky laws in connection with the distribution of the Bonds
referred to in such Terms Agreement by the Underwriters.
(x) The issuance of the Bonds to be underwritten at such
time pursuant to this Agreement has been duly authorized by the
Company and such Bonds have been duly executed and delivered by
the Company and, assuming due authorization, execution and
delivery of the Indenture by the Indenture Trustee, when
authenticated by the Indenture Trustee in accordance with the
terms of the Indenture and delivered to and paid for by the
Underwriters pursuant to the applicable Terms Agreement, will
constitute legal, valid and binding non-recourse obligations of
the Company, enforceable in accordance with their terms, subject,
as to enforceability of remedies, to applicable bankruptcy,
insolvency, reorganization or other laws affecting creditors'
rights generally and to general principles of equity and
equitable remedies (regardless of whether the enforceability of
such remedies is considered in a proceeding at law or in equity),
and the Bonds are entitled to the benefits and security provided
by the Indenture.
(xi) The Bonds to be underwritten at such time pursuant
to this Agreement and the Indenture conform in all material
respects to the respective descriptions thereof contained in the
applicable Final Prospectus (excluding any descriptions thereof
in the Current Report, as to which no opinion need be rendered).
(xii) At the Closing Time, the Company had corporate
power and authority to assign, pledge and deliver the Initial
Collateral to the Indenture Trustee under the Indenture, and had
duly authorized such assignment, pledge and delivery to the
Indenture Trustee by all necessary corporate action.
(xiii) Immediately prior to the grant to the Indenture
Trustee of the Conventional Certificates securing the Bonds to be
underwritten at such time pursuant to this Agreement, the Company
owned such Conventional Certificates, free and clear of any Lien,
except the lien of the Indenture; each such Conventional
Certificate has been duly and validly assigned, pledged and
delivered by the Company to the Indenture Trustee or its nominee
under the Indenture; the Indenture, together with such
assignment, pledge and delivery of each such Conventional
Certificate, the filing of a UCC-1 financing statement with
respect to the Conventional Certificates with the office of the
Secretary of State of the State of Texas and in such other
jurisdictions, if any, as such counsel deems appropriate, and the
possession by the Indenture Trustee, or its nominee, of the
Conventional Certificates not represented by book-entry accounts
and of the other assets comprising the Initial Collateral, create
as security for such Bonds a valid and perfected security
interest in the Trust Estate as security for the repayment of
such Bonds free and clear of any prior Lien; a UCC-1 financing
statement with respect to the security interest created by the
Indenture has been filed in the office of the
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<PAGE> 17
Secretary of State of the State of Texas and in such other
offices, if any, as such counsel deems appropriate; no other
recordings or filings in any jurisdiction are necessary to
perfect the security interest of the Indenture Trustee in the
Initial Collateral as against any third party, and no further
action is required to create, attach or perfect such security
interest except that:
(A) appropriate continuation statements with respect to the
UCC-1 financing statements referred to above must be filed
within six months prior to the expiration of each
consecutive five-year period commencing upon the date of
initial filing, and
(B) with respect to items of Initial Collateral and the
distributions thereof, a perfected security interest in
which is perfected by delivery of possession, possession
of such items must be maintained by the Indenture Trustee
or its bailee (other than an affiliate of the Company).
(xiv) The Registration Statement is effective under the
1933 Act, and, to the best of such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement
has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or threatened by the Commission.
The Indenture has been duly qualified under the 1939 Act.
(xv) The Registration Statement and the applicable Final
Prospectus, and each amendment or supplement thereto (other than
the financial statements, schedules, notes thereto, and the
financial and statistical data included therein and any documents
incorporated by reference in the Registration Statement and the
applicable Final Prospectus, including without limitation the
Current Report, in each case as to which no opinion need be
rendered), as of their respective effective or issue dates,
complied as to form in all material respects with the
requirements of the 1933 Act, the 1933 Act Regulations, the 1939
Act and the 1939 Act Regulations; and each document, if any,
filed pursuant to the 1934 Act (other than the financial
statements, schedules, notes thereto, and the financial and
statistical data included therein and any documents incorporated
by reference in the Registration Statement and the applicable
Final Prospectus, including without limitation the Current
Report, in each case as to which no opinion need be rendered) and
incorporated by reference in the applicable Final Prospectus,
complied when so filed as to form in all material respects with
the 1934 Act and the rules and regulations thereunder.
(xvi) The statements in the applicable Final Prospectus
under the caption "Certain Federal Income Tax Consequences", to
the extent they constitute matters of law or legal conclusions,
have been prepared or reviewed by such counsel and correctly
represent the opinion of such counsel; the descriptions in such
Final
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<PAGE> 18
Prospectus of statutes, legal and governmental proceedings and
contracts and other documents are accurate and fairly present the
information required to be shown.
(xvii) To the best of such counsel's knowledge, there are
no legal or governmental proceedings pending or threatened which
are required to be disclosed therein, nor any contracts or
documents of a character required to be described or referred to
in the Registration Statement or to be filed as exhibits thereto
other than those described or referred to therein or filed as
exhibits thereto (other than financial statements, schedules, and
notes thereto and the financial and statistical data included
therein and the other documents, if any, incorporated by
reference therein, as to which no opinion need be rendered).
(xviii) The Company is not, and will not as a result of
the offer and sale of the Bonds as contemplated in this Agreement
and any applicable Terms Agreement, become an "investment
company" or under the "control" of an "investment company" as
such terms are defined in the Investment Company Act which would
be required to register under the Investment Company Act.
(xix) Nothing has come to the attention of such counsel
that would lead them to believe that the Registration Statement
or any amendment thereto (other than the financial statements,
schedules, notes thereto and the financial and statistical data
included therein and any documents incorporated by reference
therein including without limitation the Current Report related
thereto, in each case as to which no opinion need be rendered),
at their respective effective dates, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Final Prospectus or any
amendment or supplement thereto (other than the Current Report
related thereto, in each case as to which no opinion need be
rendered), at their respective issue dates or, as amended or
supplemented (except as aforesaid), at Closing Time, contained an
untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(xx) The Bonds to be underwritten at such time pursuant
to this Agreement, or the Classes thereof as are identified in
such opinion for these purposes, will be "mortgage related
securities", as defined in Section 3(a)(41) of the 1934 Act, so
long as such Bonds or the identified Classes are rated in one of
the two highest rating categories by at least one nationally
recognized statistical rating organization.
(2) The opinion, addressed to the Underwriters and dated the Closing
Time, of counsel to Capstead in form and substance reasonably satisfactory to
you and counsel for the Underwriters, to the effect that:
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<PAGE> 19
(i) Capstead has been duly organized and is validly
existing as a corporation, in good standing under the laws of the
jurisdiction of its organization with corporate power and
authority to own, lease and operate its properties and conduct
its business as described in the applicable Final Prospectus.
(ii) Capstead is not, nor will it be, as a result of its
entering into this Agreement and consummating the transactions
contemplated hereby, in violation of its charter or bylaws, and
to the best of such counsel's knowledge, is not in default in the
performance or observance of any obligation, agreement, covenant
or condition contained in any material contract, indenture,
mortgage, loan agreement, note, lease or other instrument to
which it is a party or by which it or its properties may be
bound.
(iii) There is no action, suit or proceeding before or by
any court or governmental agency or body, domestic or foreign,
now pending, or, to the best of such counsel's knowledge, against
Capstead which could reasonably be expected to interfere with or
adversely affect the consummation of the transactions
contemplated herein.
(iv) The execution and delivery of this Agreement and the
applicable Terms Agreement, the incurrence of the obligations
herein and therein set forth and the consummation of the
transactions contemplated herein and therein have been duly
authorized by Capstead by all necessary corporate action; and
this Agreement and the applicable Terms Agreement have been duly
authorized, executed and delivered by Capstead.
(v) No filing or registration with, notice to or consent,
approval, authorization or order or other action of, any court or
governmental authority or agency, is required for the
consummation by Capstead of the transactions contemplated by this
Agreement or the applicable Terms Agreement, except such as have
been obtained and except such as may be required under state
securities or Blue Sky laws in connection with the distribution
of the Bonds to be underwritten at such time pursuant to this
Agreement by the Underwriters.
(c) At the Closing Time you shall have received the opinion of
Andrews & Kurth L.L.P., addressed to the Underwriters and dated the
Closing Time, with respect to certain tax matters, in substantially the
same form as their opinion filed as Exhibit 8.1 of the Registration
Statement.
(d) At the Closing Time you shall have received the favorable
opinion, dated the Closing Time, of Brown & Wood LLP, counsel for the
Underwriters, with respect to the matters set forth in clauses (i),
(vii), (x), (xi), (xiv), (xv), (xix) and (xx) of paragraph (b)(1) of
this Section 5 and in clause (iv) of paragraph (b)(2) of this Section 5.
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<PAGE> 20
(e) At the Closing Time there shall not have been, since the
date of the applicable Terms Agreement or since the respective dates as
of which information is given in the Registration Statement, any
material adverse change in the condition, financial or otherwise,
earnings, business affairs, regulatory situation or business prospects
of the Company or Capstead, whether or not arising in the ordinary
course of business, and you shall have received, at the Closing Time, a
certificate of the Chairman of the Board, the President, any Senior
Executive Vice President, Executive Vice President, Senior Vice
President, Vice President or Authorized Officer of the Company and of
Capstead to the effect that there has been no such material adverse
change and to the effect that the other representations and warranties
of the Company and Capstead contained in Section 1 are true and correct
with the same force and effect as though made at and as of the Closing
Time.
(f) The Company and you shall have received from Deloitte &
Touche (the "Independent Accountants") an agreed upon procedures letter,
dated as of the date of the applicable Terms Agreement and delivered
simultaneously with the printing of the Final Prospectus, in form and
substance satisfactory to you. In addition, the Company and you shall
have received from the Independent Accountants an agreed upon procedures
letter, in form and substance satisfactory to you, with respect to the
Section 8 Materials.
(g) [Reserved]
(h) At the Closing Time, you and the Company shall have
received the favorable opinion of counsel for the Indenture Trustee,
addressed to the Underwriters and the Company and dated the Closing
Time, in form and substance satisfactory to you and counsel for the
Underwriters and the Company, to the effect that:
(i) The Indenture Trustee is duly incorporated, validly
existing and in good standing as a national banking association
under the laws of the United States of America, with full
corporate and trust power and authority to conduct its business
and affairs as a Indenture Trustee;
(ii) The Indenture Trustee has full power and authority
to execute and deliver the Indenture and to perform its
obligations thereunder;
(iii) The Indenture Trustee has duly accepted the office
of Indenture Trustee under the Indenture; and
(iv) The Indenture Trustee has duly authorized, executed
and delivered the Indenture.
(i) At the Closing Time, the Bonds then to be underwritten
pursuant to this Agreement shall be rated in the highest rating category
by the rating agencies requested to rate such Bonds or such other rating
category as the related Terms Agreement shall state.
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<PAGE> 21
(j) At the Closing Time, counsel for the Underwriters shall
have been furnished with such documents and opinions (including copies
of insurance policies described in the applicable Final Prospectus and
opinions of counsel with respect to such policies) as they may
reasonably require for the purpose of enabling them to pass upon the
Registration Statement, the applicable Final Prospectus, the issuance
and sale of the Bonds then to be underwritten pursuant to this Agreement
as contemplated in the applicable Terms Agreement and related
proceedings, or in order to evidence the accuracy of any of the
representations and warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company
and Capstead in connection with the issuance and sale of the Bonds then
to be underwritten pursuant to this Agreement as contemplated in the
applicable Terms Agreement and in the Indenture shall be reasonably
satisfactory in form and substance to you and counsel for the
Underwriters.
If any condition in this Section shall not have been fulfilled when and
as required to be fulfilled, this Agreement and the applicable Terms Agreement
may be terminated by you by notice to the Company at any time at or prior to
the Closing Time, and such termination shall be without liability of any party
to any other party except as provided in Section 4.
SECTION 6. Indemnification. (a) The Company and Capstead, jointly and
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15
of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact
contained in the Registration Statement (or any amendment
thereto), or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make
the statements therein not misleading or arising out of any
untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, preliminary prospectus
supplement or the Final Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements
therein in the light of the circumstances under which they were
made not misleading; provided, however, that (A) the Company
shall not be liable in any such case if such untrue statement or
omission or such alleged untrue statement or omission was made
(1) in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through you expressly
for use in the Registration Statement (or any amendment thereto)
or in any preliminary prospectus, preliminary prospectus
supplement or each Final Prospectus (or any amendment or
supplement thereto) or (2) in any Current Report or any amendment
or supplement thereof, except to the extent that any untrue
statement or alleged untrue statement therein results (or is
alleged to have resulted) directly from an error (a "Mortgage
Collateral Error") in the information concerning the
characteristics of the Mortgage Loans furnished by the Company to
you in writing or by electronic transmission that was used in the
-21-
<PAGE> 22
preparation of either (x) any Section 8 Materials (or amendments
or supplements thereof) included in such Current Report (or
amendment or supplement thereof) or (y) any written or electronic
materials furnished to prospective investors on which the Section
8 Materials (or amendments or supplements thereof) were based;
(B) such indemnity with respect to any Corrected Statement (as
defined below) in such Final Prospectus (or supplement thereto)
shall not inure to the benefit of any Underwriter (or any person
controlling any Underwriter) from whom the person asserting any
loss, claim, damage or liability purchased the Bonds that are the
subject thereof if such person did not receive a copy of a
supplement to such Final Prospectus at or prior to the
confirmation of the sale of such Bonds and the untrue statement
or admission of a material fact contained in such Final
Prospectus (or supplement thereto) was corrected (a "Corrected
Statement") in such other supplement and such supplement was
furnished by the Company to you prior to the delivery of such
confirmation; and (C) such indemnity with respect to any Mortgage
Collateral Error shall not inure to the benefit of any
Underwriter (or any person controlling the Underwriter) from whom
the person asserting any loss, claim, damage or liability
received any Section 8 Materials (or any written or electronic
materials on which the Section 8 Materials are based) that were
prepared on the basis of such Mortgage Collateral Error, if,
prior to the time of confirmation of the sale of the applicable
Bonds to such person, the Company notified you in writing of the
Mortgage Collateral Error or provided in written or electronic
form information superseding or correcting such Mortgage
Collateral Error (in any such case a "Corrected Mortgage
Collateral Error"), and such Underwriter failed to notify such
person thereof or to deliver to such person corrected Section 8
Materials (or underlying written or electronic materials relating
thereto);
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation,
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based, in
each case, upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company;
(iii) against any and all expense whatsoever, as incurred
(including the reasonable fees and disbursements of counsel
chosen by you) reasonably incurred in investigating, preparing or
defending against any litigation, or investigation or proceeding
by any governmental agency or body, commenced or threatened or
any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under paragraphs (i)
or (ii) above;
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, Capstead
-22-
<PAGE> 23
and each person, if any, who controls the Company or Capstead within the
meaning of Section 15 of the 1933 Act and the officers and directors of
any such person against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this
Section, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or any preliminary prospectus,
preliminary prospectus supplement or the Final Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with
(i) written information furnished to the Company by such Underwriter
expressly for use in the Registration Statement (or any amendment
thereto) or in any preliminary prospectus, preliminary prospectus
supplement or each Final Prospectus (or any amendment or supplement
thereto) or (ii) any Section 8 Materials (or amendments or supplements
thereof) furnished to the Company by such Underwriter pursuant to
Section 8 hereof and incorporated by reference in such Registration
Statement or the related Final Prospectus or any amendment or supplement
thereto (except that no such indemnity shall be available for any
losses, claims, damages or liabilities, or actions in respect thereof,
resulting from any Mortgage Collateral Error, other than a Corrected
Mortgage Collateral Error).
(c) Promptly after receipt by an indemnified party under
Section 6 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 6, notify such indemnifying party
in writing of the commencement thereof; but the omission so to notify
such indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section 6.
In case any such action is brought against any indemnified party, and it
notifies the indemnifying party or parties of the commencement thereof,
the indemnifying party or parties will be entitled to participate
therein, and to the extent that they may elect by written notice
delivered to an indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, that
if the defendants in any such action include both an indemnified party
and an indemnifying party and such indemnified party shall have
reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or addition to
those available to any indemnifying party, such indemnified party or
parties shall have the right to select separate counsel to assert such
legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of
notice from an indemnifying party or parties to such indemnified party
of their election so to assume the defense of such action and approval
by such indemnified party or counsel, such indemnifying party or parties
will not be liable to such indemnified party under this Section 6 for
any legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof unless (i) such indemnified
party shall have employed separate counsel in connection with the
assertion of legal defenses in accordance with the proviso to the next
preceding sentence (it being understood, however, that the indemnifying
party or parties shall not be liable for the expenses of more than one
separate counsel approved by the indemnified party or parties in the
case of subparagraph (a) or (b) above, representing the indemnified
parties under subparagraph
-23-
<PAGE> 24
(a) or (b) above, who are parties to such action), (ii) the indemnifying
party or parties shall not have employed counsel satisfactory to the
indemnified party or parties to represent such indemnified party or
parties within a reasonable time after notice of commencement of the
action or (iii) the indemnifying party or parties have authorized the
employment of counsel for an indemnified party at the expense of the
indemnifying parties; and except that, if clause (i) or (iii) is
applicable, such liability shall be only in respect of the counsel
referred to in such clause (i) or (iii).
(d) The indemnity agreement provided by this Section 6 shall
be in addition to any liability the Company and the Underwriters shall
otherwise have.
SECTION 7. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 6 is for any reason held to be unavailable to or insufficient to hold
harmless the indemnified parties although applicable in accordance with its
terms, the Company and Capstead, on the one hand, and the Underwriters on the
other, shall:
(a) in the case of any losses, claims, damages and liabilities
(or actions in respect thereof) relating to a class or classes of any
Series of Bonds (a "Class" or "Classes," as the case may be) which do
not arise out of or are not based upon any untrue statement or omission
of a material fact in any Section 8 Materials (or any amendments or
supplements thereof), contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by said
indemnity agreement incurred in respect of any Class or Classes
underwritten pursuant to this Agreement by the Company or Capstead and
the Underwriter of such Class or Classes, as incurred, in such
proportions that the Underwriter of such Class or Classes is responsible
for that portion represented by the percentage that the difference
between the proceeds to the Company appearing on the cover page of the
applicable Final Prospectus and the total of all proceeds received by
such Underwriter from the sale of all Bonds underwritten by it (the
"Underwriting Discount") bears to the total proceeds received by such
Underwriter from such Bonds, and the Company and Capstead are
responsible for the balance;
(b) in the case of any losses, claims, damages and liabilities
(or actions in respect thereof) which arise out of or are based upon any
untrue statement or omission of a material fact in any Section 8
Materials (or any amendments or supplements thereof), contribute to the
aggregate losses, liabilities, claims, damages and expenses of the
nature contemplated by said indemnity agreement incurred in respect of
any Class or Classes underwritten pursuant to this Agreement by the
Company or Capstead, and the Underwriter of such Class or Classes, as
incurred, in such proportion as is appropriate to reflect the relative
fault of the Company and Capstead on the one hand and such Underwriter
on the other hand in connection with the statements or omissions which
resulted in such losses, liabilities, claims, damages and expenses (or
actions in respect thereof) as well as any other relevant equitable
-24-
<PAGE> 25
considerations; provided that in no event shall such Underwriter be
responsible for an amount greater than the excess, if any, of (i) the
total proceeds received by such Underwriter in the sale of all Bonds
underwritten by it (taking into account any gains or losses realized by
such Underwriter in any hedging transactions directly related to the
Bonds) over (ii) the proceeds received by the Company in respect of the
Bonds purchased by such Underwriter.
provided, however, that no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the 1933 Act shall
have the same rights to contribution as such Underwriter and each director of
the Company, each officer of the Company and Capstead who signed the
Registration Statement, and each person, if any, who controls the Company or
Capstead within the meaning of Section 15 of the 1933 Act and the officers and
directors of any such person shall have the same rights to contribution as the
Company or Capstead.
SECTION 8. Computational Materials and Structural Term Sheets. (a) As
soon as practicable and in no event later than 3:00 p.m. Dallas, Texas time one
Business Day before the date on which the Final Prospectus relating to the
Bonds of a Series is required to be filed by the Company with the Commission
pursuant to Rule 424 under the 1933 Act, you shall deliver to the Company five
complete copies of all materials provided by you to prospective investors
regarding the Class or Classes being underwritten by you which constitute (i)
"Computational Materials" within the meaning of the no-action letter dated May
20, 1994 issued by the Division of Corporation Finance of the Commission to
Kidder, Peabody Acceptance Corporation I, Kidder, Peabody & Co. Incorporated,
and Kidder Structured Asset Corporation and the no-action letter dated May 27,
1994 issued by the Division of Corporation Finance of the Commission to the
Public Securities Association (together, the "Kidder Letters") and the filing
of such material is a condition of the relief granted in such letter (such
materials being the "Computational Materials"), and (ii) "Structural Term
Sheets" within the meaning of the no-action letter dated February 17, 1995
issued by the Division of Corporation Finance of the Commission to the Public
Securities Association (the "PSA Letter") and the filing of such material is a
condition of the relief granted in such letter (such materials being the
"Structural Term Sheets"). Each delivery of Computational Materials or
Structural Terms Sheets to the Company pursuant to this paragraph (a) shall be
effected by delivering four copies of such materials to counsel for the Company
at Andrews & Kurth L.L.P., 1717 Main Street, Suite 3700, Dallas, Texas 75201,
or such other address specified by such counsel to you in writing, and one copy
of such materials to the Company.
(b) You represent and warrant to and agree with the Company,
as of the date of the related Terms Agreement and as of the Closing
Date, that:
(i) the Computational Materials furnished to the
Company pursuant to Section 8(a) constitute (either in original,
aggregated or consolidated form) all of the materials furnished
to prospective investors by the Underwriters prior to the time of
-25-
<PAGE> 26
delivery thereof to the Company that are required to be filed
with the Commission with respect to the related Bonds in
accordance with the Kidder Letters, and such Computational
Materials comply with the requirements of the Kidder Letters;
(ii) the Structural Term Sheets furnished to the Company
by such Underwriter pursuant to Section 8(a) constitute all of
the materials furnished to prospective investors by such
Underwriter prior to the time of delivery thereof to the Company
that are required to be filed with the Commission as "Structural
Term Sheets" with respect to the related Offered Securities in
accordance with the PSA Letter, and such Structural Term Sheets
comply with the requirements of the PSA Letter; and
(iii) on the date any such Computational Materials or
Structural Term Sheets with respect to such Bonds (or any written
or electronic materials furnished to prospective investors on
which the Computational Materials or Structural Term Sheets are
based) were last furnished to each prospective investor and on
the date of delivery thereof to the Company pursuant to Section
8(a) and on the related Closing Date, such Computational
Materials or Structural Term Sheets (or any such written or
electronic materials furnished to prospective investors on which
the Computational Materials or Structural Term Sheets are based)
did not and will not include any untrue statement of a material
fact or, when read in conjunction with the Final Prospectus and
Prospectus Supplement, omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading.
Notwithstanding the foregoing, you make no representation or warranty as to
whether any Computational Materials or Structural Term Sheets (or any written
or electronic materials on which the Computational Materials or Structural Term
Sheets are based) included or will include any untrue statement resulting
directly from any Mortgage Collateral Error (except any Corrected Mortgage
Collateral Error, with respect to materials prepared after the receipt by you
from the Company of notice of such Corrected Mortgage Collateral Error or
materials superseding or correcting such Corrected Mortgage Collateral Error).
(c) You acknowledge and agree that the Company has not authorized and
will not authorize the distribution of any Computational Materials or
Structural Term Sheets to any prospective investor, and agree that any
Computational Materials or Structural Term Sheets with respect to any Series of
Bonds furnished to prospective investors from and after the date hereof shall
include a disclaimer in form reasonably satisfactory to the Company. You agree
that you will not represent to investors that any Computational Materials or
Structural Term Sheets were prepared or disseminated on behalf of the Company.
This disclaimer shall not alter the rights or obligations of the parties hereto
pursuant to Sections 6 and 7 hereof.
(d) If, at any time when a prospectus relating to the Bonds of a
Series is required to be delivered under the 1933 Act, it shall be necessary to
amend or supplement the related Final
-26-
<PAGE> 27
Prospectus as a result of an untrue statement of a material fact contained in
any Computational Materials or Structural Term Sheets provided by you pursuant
to this Section 8 or the omission to state therein a material fact required,
when considered in conjunction with the Final Prospectus and Prospectus
Supplement, to be stated therein or necessary to make the statements therein,
when read in conjunction with the Final Prospectus and Prospectus Supplement,
not misleading, or if it shall be necessary to amend or supplement any Current
Report relating to any Computational Materials or Structural Term Sheets to
comply with the 1933 Act or the rules thereunder, you promptly will prepare and
furnish to the Company for filing with the Commission an amendment or
supplement which will correct such statement or omission or an amendment which
will effect such compliance. You represent and warrant to the Company, as of
the date of delivery of such amendment or supplement to the Company, that such
amendment or supplement will not include any untrue statement of a material
fact or, when read in conjunction with the Final Prospectus and Prospectus
Supplement, omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Company shall
have no obligation to file such amendment or supplement if the Company
determines that (i) such amendment or supplement contains any untrue statement
of a material fact or, when read in conjunction with the Final Prospectus and
Prospectus Supplement, omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading (it being
understood, however, that the Company shall have no obligation to review or
pass upon the accuracy or adequacy of, or to correct, any such amendment or
supplement provided by the Underwriter to the Company pursuant to this
paragraph (d)) or (ii) such filing is not required under the Act; provided
that, in the event the Company makes such a determination, it shall immediately
notify you in writing of the reasons for such determination; and, provided,
further, that it shall file such amendment or supplement if you specifically
confirm in writing to the Company that (A) such amendment or supplement does
not contain any untrue statement of a material fact or, when read in
conjunction with the Final Prospectus and Prospectus Supplement, omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading and (B) you are advising the Company to file
such amendment or supplement.
(e) You will cooperate with, and provide any information necessary to
the Independent Accountants so that they may complete and deliver their agreed-
upon procedures letter described in Section 5(f) hereof in a timely manner so
that such letter may be delivered to the Company by not later than 5:00 p.m.
New York time, on the Business Day before the date on which the Current Report
described in Section 3(b) is required to be filed with the Commission.
SECTION 9. Representations, Warranties, and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of the Company or Capstead
submitted pursuant hereto or as contemplated hereby, shall remain operative and
in full force and effect, regardless of any investigation made by or on behalf
of the Company or Capstead or a controlling person thereof, and shall survive
delivery of any Bonds to the Underwriters.
-27-
<PAGE> 28
SECTION 10. Termination of Agreement. (a) This Agreement may be
terminated for any reason at any time by either the Company or you upon the
giving of thirty days' written notice of such termination to the other party
hereto; provided, however, that if a Terms Agreement has been entered into but
the applicable Closing Time has not occurred, this Agreement shall not be
terminated pursuant to this Section 10(a) prior to such Closing Time.
(b) You may terminate this Agreement or such Terms Agreement, by notice
to the Company, at any time at or prior to the Closing Time, (i) if there has
been, since the respective dates as of which information is given in the
Registration Statement or the applicable Final Prospectus, any material adverse
change in the condition, financial or otherwise, earnings, business affairs,
regulatory situation or business prospects of the Company or Capstead, whether
or not arising in the ordinary course of business, (ii) if there shall have
occurred any material adverse change in the financial markets of the United
States or any outbreak or escalation of hostilities or other national or
international calamity or crisis the effect of which is such as to make it, in
your judgment, impracticable to market the Bonds or enforce contracts for the
sale of the Bonds, or (iii) if trading in any securities of the Company has
been suspended by the Commission or a national securities exchange, or if
trading generally on either the American Stock Exchange or the New York Stock
Exchange shall have been suspended, or minimum or maximum prices for trading
have been fixed, or maximum ranges for prices for securities have been
required, by either of said exchanges or by order of the Commission or any
other governmental authority, or if a banking moratorium shall have been
declared by either Federal or New York authorities, or (iv) if the rating
assigned by any nationally recognized securities rating agency requested to
rate any specific debt securities of the Company as of the date of any
applicable Terms Agreement shall have been lowered since that date or if any
such rating agency shall have publicly announced that it has under surveillance
or review, with possible negative implications, its requested rating of such
debt securities of the Company, or (v) if there shall have come to your
attention any facts that would cause you to believe that the applicable Final
Prospectus, at the time it was required to be delivered to a purchaser of the
Bonds offered thereby, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in light of the circumstances existing at the time of such delivery,
not misleading.
(c) In the event of any such termination, (i) the covenants set forth
in Section 3 with respect to any offering of Bonds shall remain in effect so
long as any Underwriter owns any such Bonds purchased from the Company pursuant
to the applicable Terms Agreement and (ii) the provisions of Section 4, the
indemnity agreement set forth in Section 6, the contribution provisions set
forth in Section 7, and the provisions of Sections 8, 9 and 14 shall remain in
effect.
SECTION 11. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at the Closing Time to purchase the Bonds which
it or they are obligated to purchase hereunder and under the applicable Terms
Agreement (the "Defaulted Bonds"), you shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than
all, of the Defaulted Bonds in such amounts as may be agreed upon and upon the
terms herein set forth and
-28-
<PAGE> 29
under the applicable Terms Agreement. If, however, you have not completed such
arrangements within such 24-hour period, then:
(a) if the aggregate original principal amount of Defaulted
Bonds does not exceed 10% of the aggregate original principal amount of
the Bonds to be purchased pursuant to such Terms Agreement, the
non-defaulting Underwriters named in such Terms Agreement shall be
obligated to purchase the full amount thereof in the proportions that
their respective underwriting obligations thereunder bear to the
underwriting obligations of all non-defaulting Underwriters; and
(b) if the aggregate original principal amount of Defaulted
Bonds exceeds 10% of the aggregate original principal amount of the
Bonds to be purchased pursuant to such Terms Agreement, the applicable
Terms Agreement shall terminate without any liability on the part of any
non-defaulting Underwriter.
No action taken pursuant to this Section 11 and nothing in this
Agreement shall relieve any defaulting Underwriter from liability in respect of
its default.
In the event of any such default which does not result in a termination
of this Agreement or such applicable Terms Agreement, either you or the Company
shall have the right to postpone the Closing Time for a period of time not
exceeding seven days in order to effect any required changes in the
Registration Statement or in any other documents or arrangements.
SECTION 12. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of written telecommunication. Notices to the
Company shall be directed to its agent for service set forth on the cover page
of the Registration Statement, notices to the Company shall be directed to it
at CityPlace Center East, 2711 N. Haskell Avenue, Suite 900, Dallas, Texas
75204, Attention: Ronn K. Lytle and notices to you shall be directed to you
c/o Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167,
Attention: Joseph Jurkowski, Esq., or in respect of any Terms Agreement, to
such other person and place agreed upon by those of you who are parties to such
Terms Agreements.
SECTION 13. Parties. This Agreement shall inure to the benefit of and
be binding upon you, the Company and Capstead, and any Terms Agreement shall
inure to the benefit of and be binding upon the Company and Capstead and any
Underwriter who becomes a party to such Terms Agreement, and their respective
successors. Nothing expressed or mentioned in this Agreement or any Terms
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the parties hereto and their respective successors and
the controlling persons and officers and directors referred to in Sections 6
and 7 and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any Terms Agreement or
any provision herein or therein contained. This Agreement and any Terms
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the parties
-29-
<PAGE> 30
hereto and thereto and their respective successors, and said controlling
persons and officers and directors and their heirs and legal representatives,
and for the benefit of no other person, firm or corporation. No purchaser of
Bonds from any Underwriter shall be deemed to be a successor by reason merely
of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT AND EACH TERMS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
[Remainder of Page Intentionally Left Blank]
-30-
<PAGE> 31
If the foregoing is in accordance with your understanding hereof, the
form of acceptance set forth below should be signed by you, whereupon this
instrument along with all counterparts will become a binding agreement among
the Company, Capstead, and us in accordance with its terms.
Very truly yours,
CMC SECURITIES CORPORATION III
By: /s/ Andrew F. Jacobs
----------------------------------
Andrew F. Jacobs
Senior Vice President - Asset
and Liability Management
CAPSTEAD MORTGAGE CORPORATION
By: /s/ Andrew F. Jacobs
----------------------------------
Andrew F. Jacobs
Senior Vice President - Asset
and Liability Management
ACCEPTED at New York, New York as
of the date first above written.
BEAR, STEARNS & CO. INC.
By: /s/ Jeffrey Verschleiser
--------------------------------
Name: Jeffrey Verschleiser
---------------------------
Title: Senior Managing Director
--------------------------
Underwriting Agreement - Signature Page
<PAGE> 32
EXHIBIT A
CMC SECURITIES CORPORATION III
(a Delaware corporation)
Collateralized Mortgage Obligations, Series 199_-__
Terms Agreement
Dated: ___________________
CMC Securities Corporation III
CityPlace Center East
2711 N. Haskell Avenue
Suite 900
Dallas, Texas 75204
Re: Underwriting Agreement dated ________ __, 199_
Title of Bonds:
Section 1. The Bonds: The Series 199_-__ Bonds (the "Series 199_-__ Bonds")
shall be as follows:
(a) Principal amount to be issued: $_____________
(b) Public offering price:
(c) Purchase price:
[plus accrued interest from _______________.]
(d) Payment Dates:
(e) Accrual Periods:
(f) Bond Rating: It is a condition to the issuance of the Series 199_-
__ Bonds that they be rated "___" by _______________.
<PAGE> 33
Section 2. Closing; Stand-Off Period:
(a) Closing date and location:
(b) Type of funds to be delivered by the Underwriters at the Closing:
(c) Expiration date of Stand-Off Period:
(d) Securities excluded from Stand-Off Period restrictions:
Section 3. Co-managers:
Section 4. Purchase by the Underwriter(s):
The Underwriter(s) agrees, subject to the terms and provisions herein
and of the above-referenced Underwriting Agreement (as modified and amended by
the terms hereof), which is incorporated herein in its entirety and made a part
hereof, to purchase [the entire aggregate principal amount of the Series 199_-
__ Bonds in the Classes set forth in Section 1 hereof].
[Name of Underwriter]
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
[Name of Underwriter]
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 34
Accepted:
CMC SECURITIES CORPORATION III
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
Accepted:
CAPSTEAD MORTGAGE CORPORATION
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 1
EXHIBIT 4.1
CMC SECURITIES CORPORATION III,
Issuer,
and
THE FIRST NATIONAL BANK OF CHICAGO
Trustee
INDENTURE
Dated as of March 1, 1998
Relating to
COLLATERALIZED MORTGAGE OBLIGATIONS
(Issuable in Series)
(Senior/Subordinate Bonds)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINITIONS......................................................................2
SECTION 1.1 General Definitions......................................................2
"Accountant"......................................................................2
"Accrual Date"....................................................................2
"Act".............................................................................2
"Accrued Bond Interest"...........................................................2
"Administrator"...................................................................2
"Advice"..........................................................................3
"Affiliate".......................................................................3
"Agent"...........................................................................3
"Aggregate Certificate Balance"...................................................3
"Aggregate Current Principal Amount"..............................................3
"Aggregate Imputed Principal Balance".............................................3
"Assumed Reinvestment Rate".......................................................3
"Authenticating Agent"............................................................3
"Available Funds".................................................................3
"Bankruptcy Coverage Termination Date"............................................3
"Bankruptcy Loss".................................................................4
"Bankruptcy Loss Amount"..........................................................4
"Beneficial Owner"................................................................4
"Board of Directors"..............................................................4
"Bondholder" or "Holder"..........................................................4
"Bond Interest Rate"..............................................................4
"Bond Redemption Date"............................................................4
"Bond Register" and "Bond Registrar"..............................................4
"Bonds"...........................................................................4
"Book Entry Bonds"................................................................4
"Book Entry Nominee"..............................................................4
"Book Entry Termination"..........................................................4
"Business Day"....................................................................4
"Certificate".....................................................................5
"Certificate Account".............................................................5
"Certificate Principal Balance"...................................................5
"Certificate Rate"................................................................5
"Certificate Trustee".............................................................5
"Class"...........................................................................5
"Class Current Principal Balance".................................................5
"Class Imputed Principal Balance".................................................5
"Class Original Principal Amount".................................................5
"Class Redemption Amount".........................................................6
</TABLE>
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"Clearing Agency".......................................................................6
"Clearing Agency Participants"..........................................................6
"Closing Date"..........................................................................6
"Code"..................................................................................6
"COFI"..................................................................................6
"COFI Bond".............................................................................6
"Collateral Group"......................................................................6
"Collection Account"....................................................................6
"Commission"............................................................................6
"Compound Interest Bond"................................................................6
"Conventional Certificate"..............................................................7
"Conventional Certificate Prepayment Reserve Amount"....................................7
"Corporate Trust Office"................................................................7
"Cross-over Date".......................................................................7
"Current Principal Amount"..............................................................7
"Debt Service Reduction"................................................................7
"Debt Service Requirement"..............................................................8
"Deceased Holder Bonds".................................................................8
"Default"...............................................................................8
"Deficient Valuation"...................................................................8
"Definitive Bonds"......................................................................8
"Disqualified Organization".............................................................8
"Distribution"..........................................................................8
"Distribution Date".....................................................................8
"Eligible Account"......................................................................8
"Eligible Investments"..................................................................8
"Eligible Substitute Certificate"......................................................10
"ERISA"................................................................................10
"ERISA Prohibited Bonds"...............................................................10
"ERISA Restricted Bonds"...............................................................10
"Event of Default".....................................................................10
"Excess Bankruptcy Loss"...............................................................10
"Excess Fraud Loss"....................................................................10
"Excess Losses"........................................................................11
"Excess Special Hazard Loss"...........................................................11
"Expense Fund".........................................................................11
"Expense Reserve Amount"...............................................................11
"FHLMC"................................................................................11
"First SAB Paydown Date"...............................................................11
"FNMA".................................................................................11
"Formula Rate Bond"....................................................................11
</TABLE>
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"Fraud Loss"....................................................................11
"Fraud Loss Amount".............................................................11
"Fraud Loss Coverage Termination Date"..........................................11
"Future Value"..................................................................12
"GNMA"..........................................................................12
"Grant".........................................................................12
"Guarantor".....................................................................12
"Guaranty Agreement"............................................................12
"Highest Lawful Rate"...........................................................12
"Highest Priority Junior Class".................................................12
"Holder"........................................................................12
"Imputed Principal Balance".....................................................12
"Indenture" or "this Indenture".................................................13
"Independent"...................................................................13
"Index".........................................................................13
"Individual Bond"...............................................................13
"Initial Interest Payment Date": ...............................................13
"Interest Accrual Period".......................................................13
"Interest Delay Period".........................................................14
"Interest Determination Date"...................................................14
"Interest Only Bond"............................................................14
"Interest Payment Date".........................................................14
"Interest Shortfall"............................................................14
"Issuer"........................................................................14
"Issuer Order" and "Issuer Request".............................................14
"Issuer Resolution".............................................................14
"Junior Bond"...................................................................14
"Junior Bond Writedown Amount"..................................................14
"Junior Imputed Principal Balance"..............................................15
"Letter Agreement"..............................................................15
"LIBOR".........................................................................15
"LIBOR Bond"....................................................................15
"LIBOR Interest Accrual Period".................................................15
"Liquidated Mortgage Loan"......................................................15
"Liquidation Proceeds"..........................................................15
"Manager".......................................................................15
"Maturity"......................................................................15
"Maximum Bond Interest Rate Assumption".........................................15
"Maximum Variable Interest Rate"................................................16
"Month of Closing"..............................................................16
"Monthly Payment"...............................................................16
</TABLE>
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"Mortgaged Properties"..........................................................16
"Net Interest Shortfall"........................................................16
"Net Liquidation Proceeds"......................................................16
"New York Agent"................................................................16
"New York Office"...............................................................16
"Non-Disqualification Opinion"..................................................16
"Non-permitted Foreign Holder"..................................................16
"Non-U.S. Person"...............................................................16
"Notional Amount"...............................................................17
"Officers' Certificate".........................................................17
"Opinion of Counsel"............................................................17
"Original Principal Amount".....................................................17
"Outstanding"...................................................................17
"Overdue Bond"..................................................................18
"Paying Agent"..................................................................18
"Payment Date"..................................................................18
"Payment Date Statement"........................................................18
"Permitted Encumbrance".........................................................18
"Person"........................................................................19
"Plan"..........................................................................19
"Pledged Account"...............................................................19
"Pool Scheduled Principal Balance"..............................................19
"Pooling and Administration Agreement"..........................................19
"Predecessor Bonds".............................................................19
"Prepayment Period".............................................................19
"Principal Distribution Amount".................................................19
"Principal Only Bond"...........................................................19
"Principal Payment Date"........................................................19
"Principal Prepayment"..........................................................19
"Principal Receipts.............................................................19
"Principal Reduction Date"......................................................20
"Proceeding"....................................................................20
"Qualified GIC".................................................................20
"Qualified Liquidation".........................................................20
"Qualified Nominee".............................................................20
"Rating Agency" or "Rating Agencies"............................................21
"Realized Losses"...............................................................21
"Record Date"...................................................................21
"Redemption Date"...............................................................21
"Redemption Price"..............................................................21
"Reference Bank"................................................................21
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"Reinvestment Income"...........................................................22
"REMIC".........................................................................22
"REMIC Loss"....................................................................22
"REMIC Provisions"..............................................................22
"Remittance Date"...............................................................22
"Reserve Interest Rate".........................................................22
"Residual Bond".................................................................22
"Residual Interest".............................................................22
"Residual Interest Holders".....................................................22
"Responsible Officer"...........................................................22
"Restricted Bond"...............................................................23
"SAB Amount"....................................................................23
"SAB Bond"......................................................................23
"SAB Payment Date"..............................................................23
"SAB Principal Payment".........................................................23
"Sale"..........................................................................23
"Schedule of Certificates"......................................................23
"Scheduled Principal Balance"...................................................23
"Senior Bond"...................................................................23
"Series"........................................................................23
"Series Supplement".............................................................23
"Special Hazard Loss"...........................................................24
"Special Hazard Loss Amount"....................................................24
"Special Hazard Coverage Termination Date"......................................24
"Special Payment Date"..........................................................24
"Special Payment Date Statement"................................................24
"Special Record Date"...........................................................24
"Startup Day"...................................................................24
"Stated Maturity"...............................................................24
"Straight Pass-Through Conventional Certificate"................................24
"Tender Date"...................................................................25
"Trust Estate"..................................................................25
"Trust Indenture Act" or "TIA"..................................................25
"Trustee".......................................................................25
"Uncertificated Certificate"....................................................25
"Unpaid Interest"...............................................................25
"Variable Rate Bond Redemption Price"...........................................25
"Variable Rate Bonds"...........................................................25
"Variable Rate Interest Accrual Period".........................................25
"Vice President"................................................................25
"Voting Record Date"............................................................26
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SECTION 1.2 RESERVED.........................................................26
SECTION 1.3 Calculations Respecting Mortgage Loans Underlying Certificates...26
ARTICLE II - THE BONDS....................................................................28
SECTION 2.1 Forms Generally..................................................28
SECTION 2.2 Form of Trustee's Certificate of Authentication..................28
SECTION 2.3 Bonds Issuable in Series and Classes; General Provisions with
Respect to Principal and Interest Payments.......................29
SECTION 2.4 Denominations....................................................36
SECTION 2.5 Execution, Authentication, Delivery and Dating...................36
SECTION 2.6 Temporary Bonds..................................................36
SECTION 2.7 Registration, Registration of Transfer and Exchange..............37
SECTION 2.8 Mutilated, Destroyed, Lost or Stolen Bonds.......................38
SECTION 2.9 Payments of Principal and Interest...............................39
SECTION 2.10 Persons Deemed Owners............................................45
SECTION 2.11 Cancellation.....................................................45
SECTION 2.12 Authentication and Delivery of Bonds.............................45
SECTION 2.13 Book Entry Bonds.................................................51
SECTION 2.14 Termination of Book Entry System.................................52
SECTION 2.15 Restrictions on Transfer of Certain Classes of Bonds.............53
ARTICLE III - COVENANTS...................................................................56
SECTION 3.1 Payment of Bonds.................................................56
SECTION 3.2 Maintenance of Office or Agency..................................56
SECTION 3.3 Money for Bond Payments to Be Held in Trust......................57
SECTION 3.4 Corporate Existence..............................................59
SECTION 3.5 Protection of Trust Estate.......................................59
SECTION 3.6 Opinions as to Trust Estate......................................60
SECTION 3.7 Performance of Obligations.......................................61
SECTION 3.8 Negative Covenants...............................................61
SECTION 3.9 Annual Statement as to Compliance................................62
SECTION 3.10 Contribution of Assets...........................................63
SECTION 3.11 Successor Substituted............................................63
ARTICLE IV - SATISFACTION AND DISCHARGE...................................................64
SECTION 4.1 Satisfaction and Discharge of Indenture..........................64
SECTION 4.2 Application of Trust Money.......................................65
SECTION 4.3 REMIC Matters....................................................66
SECTION 4.4 Reinstatement....................................................68
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ARTICLE V - DEFAULTS AND REMEDIES............................................................69
SECTION 5.1 Event of Default....................................................69
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment..................70
SECTION 5.3 Proceedings.........................................................72
SECTION 5.4 Remedies............................................................72
SECTION 5.5 [Reserved]..........................................................73
SECTION 5.6 Trustee May File Proofs of Claim....................................73
SECTION 5.7 Trustee May Enforce Claims without Possession of Bonds..............73
SECTION 5.8 Application of Money Collected......................................74
SECTION 5.9 Limitation on Suits.................................................75
SECTION 5.10 Restoration of Rights and Remedies..................................76
SECTION 5.11 Rights and Remedies Cumulative......................................76
SECTION 5.12 Delay or Omission Not Waiver........................................76
SECTION 5.13 Control by Bondholders..............................................76
SECTION 5.14 Waiver of Past Defaults.............................................77
SECTION 5.15 Undertaking for Costs...............................................78
SECTION 5.16 Waiver of Stay or Extension Laws....................................78
SECTION 5.17 Sale of Trust Estate................................................78
SECTION 5.18 Action on Bonds.....................................................81
SECTION 5.19 No Recourse to Other Trust Estates or Other Assets of the Issuer....81
SECTION 5.20 Application of the TIA..............................................81
ARTICLE VI - THE TRUSTEE.....................................................................82
SECTION 6.1 Duties of Trustee...................................................82
SECTION 6.2 Notice of Default...................................................83
SECTION 6.3 Rights of Trustee...................................................83
SECTION 6.4 Not Responsible for Recitals or Issuance of Bonds...................84
SECTION 6.5 May Hold Bonds......................................................84
SECTION 6.6 Money Held in Trust.................................................84
SECTION 6.7 Compensation and Reimbursement......................................84
SECTION 6.8 Disqualification; Conflicting Interests.............................86
SECTION 6.9 Eligibility; Trustee's Capital and Surplus..........................87
SECTION 6.10 Resignation and Removal; Appointment of Successor...................87
SECTION 6.11 Acceptance of Appointment by Successor..............................88
SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business of
Trustee.............................................................89
SECTION 6.13 Preferential Collection of Claims Against Issuer....................89
SECTION 6.14 Co-trustees and Separate Trustees...................................90
SECTION 6.15 Authenticating Agents...............................................91
SECTION 6.16 Alternate Trustees..................................................92
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ARTICLE VII - BONDHOLDERS' LISTS AND REPORTS...................................................93
SECTION 7.1 Issuer to Furnish Trustee Names and Addresses of Bondholders..........93
SECTION 7.2 Preservation of Information; Communications to Bondholders............93
SECTION 7.3 Reports by Trustee....................................................93
SECTION 7.4 Reports by Issuer.....................................................94
ARTICLE VIII - ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL,
AND RELEASES..........................................................95
SECTION 8.1 Collection of Moneys..................................................95
SECTION 8.2 Collection Accounts...................................................95
SECTION 8.3 Reserved..............................................................98
SECTION 8.4 Reserved..............................................................98
SECTION 8.5 Reserved..............................................................98
SECTION 8.6 General Provisions Regarding Pledged Accounts.........................98
SECTION 8.7 Reports by Trustee to Bondholders....................................101
SECTION 8.8 Reports by Trustee...................................................102
SECTION 8.9 Reports by Independent Accountants...................................102
SECTION 8.10 Expense Fund.........................................................103
SECTION 8.11 Substitution of Certificates with Eligible Substitute Certificates...104
ARTICLE IX - SUPPLEMENTAL INDENTURES..........................................................106
SECTION 9.1 Supplemental Indentures without Consent of Bondholders...............106
SECTION 9.2 Supplemental Indentures with Consent of Bondholders..................108
SECTION 9.3 Execution of Supplemental Indentures.................................109
SECTION 9.4 Effect of Supplemental Indentures....................................110
SECTION 9.5 Conformity with Trust Indenture Act..................................110
SECTION 9.6 Reference in Bonds to Supplemental Indentures........................110
SECTION 9.7 Amendments to Governing Documents....................................110
ARTICLE X - REDEMPTION OF BONDS...............................................................112
SECTION 10.1 Redemption...........................................................112
SECTION 10.2 Form of Redemption Notice............................................112
SECTION 10.3 Bonds Payable on Payment Date........................................112
SECTION 10.4 Right of Redemption by Holder........................................113
SECTION 10.5 Withdrawal of Requests...............................................115
SECTION 10.6 Redemption Register..................................................116
SECTION 10.7 Reserved.............................................................116
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ARTICLE XI - MISCELLANEOUS..................................................................117
SECTION 11.1 Compliance Certificates and Opinions...............................117
SECTION 11.2 Form of Documents Delivered to Trustee.............................117
SECTION 11.3 Acts of Bondholders................................................118
SECTION 11.4 Notices, etc. to Trustee and Issuer................................119
SECTION 11.5 Notices and Reports to Bondholders; Waiver of Notices..............120
SECTION 11.6 Rules by Trustee and Agents........................................120
SECTION 11.7 Conflict with Trust Indenture Act..................................120
SECTION 11.8 Effect of Headings and Table of Contents...........................120
SECTION 11.9 Successors and Assigns.............................................121
SECTION 11.10 Severability.......................................................121
SECTION 11.11 Benefits of Indenture..............................................121
SECTION 11.12 Legal Holidays.....................................................121
SECTION 11.13 GOVERNING LAW......................................................121
SECTION 11.14 Counterparts.......................................................122
SECTION 11.15 Recording of Indenture.............................................122
SECTION 11.16 Corporate Obligation...............................................122
SECTION 11.17 Inspection.........................................................122
SECTION 11.18 Usury..............................................................122
SECTION 11.19 REMIC Status.......................................................123
SECTION 11.20 Reserved...........................................................123
SECTION 11.21 Appointment of Tax Matters Partner.................................123
</TABLE>
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<PAGE> 11
INDENTURE, dated as of March 1, 1998 (herein, as amended or
supplemented from time to time as permitted hereby, called this "Indenture"),
between CMC Securities Corporation III, a Delaware corporation (herein, together
with its permitted successors and assigns, called the "Issuer"), and The First
National Bank of Chicago, as trustee (herein, together with its permitted
successors in the trusts hereunder, called the "Trustee").
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for one or more series (a "Series") of its Collateralized
Mortgage Obligations ("Bonds"), issuable as provided in this Indenture. Each
Series of such Bonds will be issued only under a separate supplement to this
Indenture duly executed and delivered by the Issuer and the Trustee and limited
to the amount therein described. Each Series of Bonds shall be non-recourse
obligations of the Issuer and shall be limited in right of payment to amounts
available from the Trust Estate (as defined herein) relative thereto as provided
in this Indenture and the Issuer shall not otherwise be liable for payments on
the Bonds. All covenants and agreements made by the Issuer herein are for the
benefit and security of the holders of the Bonds. The Issuer is entering into
this Indenture, and the Trustee is accepting the trusts created hereby, for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged.
All things necessary to make this Indenture a valid agreement of the
Issuer in accordance with its terms have been done.
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ARTICLE I
DEFINITIONS
SECTION 1.1 General Definitions.
Except as otherwise specified or as the context may otherwise require,
the following terms have the respective meanings set forth below (as
supplemented, to the extent indicated below, by the provisions of the Series
Supplement for a particular Series) for all purposes of this Indenture, and the
definitions of such terms are applicable to the singular as well as to the
plural forms of such terms and to the masculine as well as to the feminine and
neuter genders of such terms. Whenever any reference is made to an amount the
determination or calculation of which is governed by Section 1.3, the provisions
of Section 1.3 shall be applicable to such determination or calculation, whether
or not reference is specifically made to Section 1.3, unless some other method
of calculation or determination is expressly specified in the particular
provision. Whenever reference is made herein to an Event of Default or Default
necessitating or involving action by the Trustee, such reference shall be
construed to refer only to an Event of Default or Default of which the Trustee
is deemed to have notice or knowledge pursuant to Section 6.1(d). All other
terms used herein which are defined in the Trust Indenture Act (as hereinafter
defined), either directly or by reference therein, have the meanings assigned to
them therein.
"Accountant": A Person engaged in the practice of accounting who
(except when this Indenture provides that an Accountant must be Independent) may
be employed by or affiliated with the Issuer or an Affiliate of the Issuer.
"Accrual Date": With respect to any Series, the date upon which
interest begins accruing on the Bonds of such Series, as specified in such Bonds
and the related Series Supplement.
"Act": With respect to any Bondholder, as defined in Section 11.3.
"Accrued Bond Interest": With respect to any Bond of a Series, other
than a Principal Only Bond, on any Interest Payment Date an amount equal to the
interest accrued on the Imputed Principal Balance or Notional Amount, as
applicable, thereof prior to such Interest Payment Date during the related
Interest Accrual Period at the applicable Bond Interest Rate, less such Bond's
share of any Net Interest Shortfalls and the interest portion of any Excess
Losses and Realized Losses incurred on the mortgage loans underlying the
Conventional Certificates securing such Series in the calendar month preceding
the month in which such Interest Payment Date occurs and which are then
allocable to the Class of such Bonds, in accordance with the provisions of the
related Series Supplement. Interest accrued on a Bond for the purposes of this
definition shall be calculated on the basis of a 360-day year consisting of
twelve months of thirty days each.
"Administrator": As to each Series and at any relevant time, the Person
then acting as administrator under the Pooling and Administration Agreement
applicable to such Series.
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"Advice": With respect to an Uncertificated Certificate, an instrument
or instruments evidencing and acknowledging the transfer or pledge of such
Uncertificated Certificate to the Trustee, issued by one or more entities
maintaining books on which transfers or pledges of such Uncertificated
Certificate are recorded in accordance with applicable statutes and regulations.
"Affiliate": of any specified Person: Any other Person controlling or
controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agent": Any Bond Registrar, Paying Agent or Authenticating Agent.
"Aggregate Certificate Balance": With respect to the Certificates
securing a Series, the aggregate of the Certificate Principal Balances for all
such Certificates as of the date of determination.
"Aggregate Current Principal Amount": With respect to any Series, the
sum of the Class Current Principal Amounts of all Classes of Bonds of such
Series Outstanding at the time of determination.
"Aggregate Imputed Principal Balance": With respect to any Series, the
sum of the Class Imputed Principal Balances of all Classes of Bonds of such
Series Outstanding at the time of determination.
"Assumed Reinvestment Rate": With respect to any Series for any period,
the respective percentage or percentages per annum, if any, specified in the
related Series Supplement, compounded monthly unless otherwise specified in the
related Series Supplement.
"Authenticating Agent": With respect to any particular Series, the
Person, if any, named as Authenticating Agent for such Series in the related
Series Supplement or appointed by the Trustee at the request of the Issuer
pursuant to Section 6.15, until any successor Authenticating Agent for such
Series is named, and thereafter "Authenticating Agent" shall mean such
successor.
"Available Funds": With respect to a Series of Bonds, as defined in
the Series Supplement relative thereto.
"Bankruptcy Coverage Termination Date": With respect to any relevant
Series of Bonds, the earlier of (a) the Payment Date on which the amount of
Bankruptcy Losses incurred on the mortgage loans underlying the Conventional
Certificates securing such Series of Bonds and not previously deducted from the
Bankruptcy Loss Amount relative to such Series of Bonds equals or exceeds such
Bankruptcy Loss Amount on such Payment Date, and (b) the Cross-over Date
relative to such Series of Bonds.
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"Bankruptcy Loss": Unless otherwise specified in the related Series
Supplement, a loss incurred on a mortgage loan underlying a Conventional
Certificate securing a Series of Bonds as a consequence of a Debt Service
Reduction or a Deficient Valuation.
"Bankruptcy Loss Amount": With respect to any relevant Series of Bonds,
the amount specified in the related Series Supplement, as adjusted from time to
time in accordance with such Series Supplement.
"Beneficial Owner": With respect to a Book Entry Bond, the Person who
is the beneficial owner of such Bond as reflected on the books of the Clearing
Agency for the Class or on the books of a Person maintaining an account with
such Clearing Agency (directly or as an indirect participant, in accordance with
the rules of such Clearing Agency).
"Board of Directors": Either the Board of Directors of the Issuer or
the Executive Committee or Finance Committee, if any, of that Board.
"Bondholder" or "Holder": The Person in whose name a Bond is registered
in the Bond Register.
"Bond Interest Rate": With respect to any Series or Class, the annual
rate at which interest accrues on the Bonds of such Series or Class, as
specified in the related Series Supplement.
"Bond Redemption Date": With respect to a Series of Bonds, as defined
in the Series Supplement relative thereto.
"Bond Register" and "Bond Registrar": As defined in Section 2.7.
"Bonds": Any bonds authorized by, and authenticated and delivered
under, this Indenture.
"Book Entry Bonds": As specified in the related Series Supplement,
Bonds of any Class which are issued in book entry form and held in the form of a
single certificate issued in the name of a Clearing Agency registered with the
Commission.
"Book Entry Nominee": As defined in Section 2.15.
"Book Entry Termination": The time at which the book entry registration
of the Book Entry Bonds shall terminate, as specified in Section 2.14.
"Business Day": Any day that is not a Saturday, Sunday or other day on
which commercial banking institutions in the City of New York or in the city in
which the Corporate Trust Office is located are authorized or obligated by law
or executive order to be closed, or as otherwise set forth in the related Series
Supplement.
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"Certificate": A Conventional Certificate which is Granted to the
Trustee under this Indenture and the related Series Supplement as security for a
particular Series. The term "Certificates" means all of the Conventional
Certificates (if any) Granted to the Trustee under this Indenture and the
related Series Supplement as security for a particular Series. The term
"outstanding Certificates" as of any date means all of the Certificates other
than any Certificates which have been fully paid as of such date.
"Certificate Account": With respect to a Series of Bonds collateralized
by Conventional Certificates, the account designated as the Certificate Account
in respect thereof in the related Pooling and Administration Agreement.
"Certificate Principal Balance": As of the date of any determination
with respect to any Certificate, the aggregate of the Scheduled Principal
Balances of the mortgage loans underlying such Certificate at such time.
"Certificate Rate": With respect to any Certificate, the pass-through
rate of interest payable to the holder thereof as indicated thereon. In the
event that any Certificate provides for a pass-through rate of interest which is
calculated on a mortgage loan by mortgage loan basis (equal as to each such
mortgage loan to the interest rate borne thereby less the servicing, Certificate
Trustee and other fees specified in such Certificate) the Certificate Rate for
such Certificate at the time of any determination shall be the weighted average
of such individual mortgage loan coupon rates less such servicing, certificate
trustee and other fees, as applicable.
"Certificate Trustee": With respect to any Series of Bonds
collateralized by Conventional Certificates, the entity designated as Trustee
under the related Pooling and Administration Agreement.
"Class": With respect to any Series, each subdivision of the Bonds
created pursuant to the related Series Supplement, such subdivisions having the
characteristics and designations set forth in such related Series Supplement.
"Class Current Principal Balance": With respect to any Class of Bonds
of any Series, and as of any date of determination, the sum of the Current
Principal Amounts of all Outstanding Bonds of such Class at such date.
"Class Imputed Principal Balance": With respect to any Class of Bonds
of a Series as of any date of determination, the sum of the Imputed Principal
Balance of all Outstanding Bonds of such Class at such date.
"Class Original Principal Amount": With respect to any Class of Bonds
of a Series, the aggregate Original Principal Amount of the Bonds of such Class
on the date of issuance thereof, as specified in the related Series Supplement.
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"Class Redemption Amount": With respect to any Class or Classes of
Bonds of any Series, the amount or amounts described in Section 10.4(b) hereof
and determined in accordance with the provisions of the applicable Series
Supplement.
"Clearing Agency": An organization registered as a "clearing agency"
pursuant to Section 17A of the Securities and Exchange Act of 1934, as amended,
and the regulations of the Commission thereunder. The Clearing Agency for any
Class of Book Entry Bonds will be specified in the related Series Supplement.
"Clearing Agency Participants": The entities for whom the Clearing
Agency will maintain book entry records of ownership and transfer of Book Entry
Bonds, which may include securities brokers and dealers, banks and trust
companies and clearing corporations and certain other organizations.
"Closing Date": With respect to any Series, the date on which Bonds of
such Series are first executed, authenticated and delivered.
"Code": The Internal Revenue Code of 1986, as it may be amended from
time to time and as it may be interpreted under regulations promulgated by the
Treasury Department and published rulings issued by the United States Internal
Revenue Service from time to time.
"COFI": The per annum rate equal to the monthly weighted average cost
of funds for member institutions of the Eleventh District of the Federal Home
Loan Bank System, as published by the Federal Home Loan Bank of San Francisco.
"COFI Bond": With respect to any relevant Series, any Bond thereof the
interest rate on which is determined by reference to COFI, as specified in the
related Series Supplement.
"Collateral Group": With respect to any Series, a group of one or more
outstanding Certificates and/or any other assets which may be included in the
Trust Estate securing such Series which have the characteristics described in
the related Series Supplement.
"Collection Account": With respect to any Series, the trust account or
accounts created and maintained pursuant to Section 8.2, which account shall be
an Eligible Account.
"Commission": The Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or if at
any time such Commission is not existing and performing the duties now assigned
to it under the Trust Indenture Act, then the body performing such duties at
such time under the Trust Indenture Act or similar legislation replacing the
Trust Indenture Act.
"Compound Interest Bond": A Bond on which interest accrues and is added
to the principal of such Bond on each related Interest Payment Date through the
Initial Interest Payment Date for
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such Bond, but with respect to which neither interest nor principal is due or
payable until such Initial Interest Payment Date.
"Conventional Certificate": A conventional mortgage pass through
certificate administered by the Administrator for a particular Series (or one of
the Administrators if there is more than one for a particular Series) and
representing a fractional undivided interest in a pool of conventional mortgage
loans secured by single family (one-to-four unit) or multifamily residences,
which certificate is Granted to the Trustee under this Indenture and the related
Series Supplement as security for such Series. The term "outstanding
Conventional Certificates" as of any date means the Conventional Certificates
other than the Conventional Certificates which have been fully paid as of such
date.
"Conventional Certificate Prepayment Reserve Amount": With respect to
the Straight Pass-Through Conventional Certificates, if any, securing a Series
at any time, an amount equal to interest for such period of time, if any, as may
be specified in the related Series Supplement, at the respective Certificate
Rates for such Conventional Certificates, on their respective Certificate
Principal Balances as of the date of determination.
"Corporate Trust Office": The principal corporate trust office of the
Trustee located at One National Plaza, Suite 0126, Chicago, Illinois 60670-0126,
Attention: Corporate Trust Department or at such other address as the Trustee
may designate from time to time by notice to the Bondholders and the Issuer, or
the principal corporate trust office of any successor Trustee.
"Cross-over Date": With respect to a Series of Bonds, unless otherwise
specified in the Series Supplement relative thereto, the Payment Date on which
the Class Imputed Principal Balances of all Classes of Junior Bonds of such
Series have been reduced to zero.
"Current Principal Amount": With respect to any Bond of any Series as
of any date of determination, the sum of:
(a) the Original Principal Amount of such Bond, and
(b) if such Bond is a Compound Interest Bond, the aggregate
amount of interest, if any, accrued on such Bond and added to the
principal thereof on each Interest Payment Date for such Series through
the Interest Payment Date immediately preceding such date of
determination,
reduced by all prior payments, if any, made with respect to principal (including
payments with respect to amounts previously added to principal as described in
clause (b) above) of such Bond.
"Debt Service Reduction": With respect to a mortgage loan underlying
the Conventional Certificates securing a Series, as defined in the related
Pooling and Administration Agreement.
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"Debt Service Requirement": Except as otherwise provided in the related
Series Supplement, with respect to a particular Payment Date for a Series, the
Available Funds.
"Deceased Holder Bonds": Bonds as to which redemption is requested
pursuant to Section 10.4 by the personal representative, surviving joint tenant
or surviving tenant by the entirety of a deceased Holder.
"Default": Any occurrence which is, or with the giving of notice or the
lapse of time or both would become, an Event of Default.
"Deficient Valuation": With respect to a mortgage loan underlying any
Conventional Certificate securing a Series of Bonds, as defined in the related
Pooling and Administration Agreement.
"Definitive Bonds": Bonds other than Book Entry Bonds.
"Disqualified Organization": (i) the United States, any State or
political subdivision hereof, any foreign government, any international
organization, or any agency or instrumentality of any of the foregoing, (ii) any
organization (other than a farmer's cooperative described in Section 521 of the
Code) that is exempt from the tax imposed by Chapter 1 of the Code and not
subject to the tax imposed by Section 511 of the Code; (iii) any rural electric
or telephone cooperative described in Section 1381(a)(2)(C) of the Code; or (iv)
any other person whose holding of the residual interests of the REMIC may cause
the REMIC to incur a liability for any tax imposed under the Code that would not
otherwise be imposed but for the purchase or transfer of the residual interests
to such person. For purposes of clause (i) of the previous sentence, a
corporation shall not be treated as an instrumentality of the United States or
of any State or political subdivision thereof, if (i) all of the activities of
such corporation are subject to the tax imposed by Chapter 1 of the Code, and
(ii) a majority of the board of directors of such corporation is not selected by
the United States or any State or political subdivision (except that this clause
(ii) shall not apply to the Federal Home Loan Mortgage Corporation).
"Distribution": With respect to any Certificate, the amount of the
monthly remittance payable to the holder of such Certificate in accordance with
its terms.
"Distribution Date": The date on which a particular Distribution is
payable to the holder of the related Certificate in accordance with its terms,
as more particularly described in the related Series Supplement.
"Eligible Account": With respect to any Series, as defined in the
related Pooling and Administration Agreement.
"Eligible Investments": Except to the extent expanded or restricted by
the Series Supplement for the Series of which such obligations or securities
form part of the Trust Estate, each of the following:
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(i) obligations of, or guaranteed as to principal and
interest by, the United States or any agency or instrumentality thereof
when such obligations are backed by the full faith and credit of the
United States;
(ii) repurchase agreements on obligations of, or guaranteed
as to principal and interest by, the United States or any agency or
instrumentality thereof when such obligations are backed by the full
faith and credit of the United States, provided that the unsecured
obligations of the party agreeing to repurchase such obligations are at
the time of purchase rated by the Rating Agency in its highest
long-term rating category;
(iii) certificates of deposit, time deposits and bankers
acceptances of any United States bank or trust company incorporated
under the laws of the United States or any state, including the
Trustee; provided that the debt obligations of such bank or trust
company (or, in the case of a subsidiary in a bank holding system, debt
obligations of the bank holding company) at the date of the acquisition
thereof have been rated by the Rating Agency in its highest long-term
rating category;
(iv) pooled or common trust funds of the Trustee, acting as
trustee and custodian and not in its commercial capacity and
representing ownership solely of the investments listed in clauses (i)
through (iii) above which have been approved by any Rating Agency
requesting to review such funds; any pooled or common trust funds which
provide for demand withdrawals shall be conclusively deemed to satisfy
any maturity requirements for Eligible Investments set forth in this
Indenture;
(v) deposits, including deposits with the Trustee, which are
fully insured by the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC, as the case may be;
(vi) participation certificates and senior debt obligations
issued by FHLMC;
(vii) commercial paper of any corporation incorporated under
the laws of the United States or any state thereof, including corporate
affiliates of the Trustee, which has an original maturity of not more
than 365 days and which, at the time of purchase, is rated by the
Rating Agency in its highest short-term rating category;
(viii) debt obligations rated by the Rating Agency at the time
at which the investment is made in its highest long-term rating
category (or those investments specified in (iii) above with depository
institutions which have debt obligations rated by the Rating Agency in
its highest long-term rating category);
(ix) money market funds which, at the time of purchase, are
rated AAA/m by Standard & Poor's and by the Rating Agency (or, if the
Rating Agency is Duff & Phelps Credit Rating Co., by Moody's Investors
Service, Inc.) in its highest long-term rating category, and which
funds invest only in other Eligible Investments, any such money market
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funds which provide for demand withdrawals being conclusively deemed to
satisfy any maturity requirements for Eligible Investments set forth in
this Indenture; or
(x) any other demand, money market or time deposit
obligation, security or investment which is acceptable to each of the
Rating Agencies rating such obligation, security or investment.
provided, however, that no instrument or security shall be an Eligible
Investment if such instrument or security evidences either (a) a right
to receive only interest payments with respect to the obligations
underlying such instrument, or (b) both principal and interest payments
derived from obligations underlying such instrument and the interest
and principal payments with respect to such instrument provide a yield
to maturity greater than 120% of the yield to maturity at par of the
underlying obligations; and provided, further, that if any such
instrument is redeemable by the issuer thereof, it shall not be
redeemable at less than par and if redeemable by any party, such
redemption must be without penalty or discount.
If the Bonds are rated by more than one Rating Agency, each reference in this
definition of "Eligible Investments" to the Rating Agency shall be construed, in
the case of each of subparagraphs (ii), (iii), (iv), (vii), (viii), (ix) and
(x), as a reference to each Rating Agency rating the Bonds that has assigned a
rating to the type of Eligible Investments referred to in such subparagraph.
"Eligible Substitute Certificate": A Certificate Granted pursuant to
Section 8.11 for one or more Certificates previously Granted to the Trustee as
collateral for a Series of Bonds, which substituted Certificate, unless
otherwise specified in the related Series Supplement (i) is a Certificate issued
by the same entity (i.e., sponsor of conventional pass-through certificates)
which issued the Certificate for which it is substituted; (ii) has an annual
interest rate (pass-through rate) which is not more than 1% greater or not more
than 1% less than the interest rate of the Certificate for which it is
substituted; (iii) has scheduled Distributions for each Distribution Date
subsequent to the Distribution Date on or preceding which such substitution
occurs which will not cause any Class of Bonds of such Series to be paid in full
later than the Stated Maturity of such Class of Bonds; (iv) has a maturity date
not earlier than one year prior to, and in no event later than, the maturity
date of the Certificate for which it is substituted; and (v) the outstanding
Certificate Principal Balance of which is at least equal to the outstanding
Certificate Principal Balance of the Certificate for which it is substituted.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Prohibited Bonds": With respect to a Series of Bonds, the
Classes of Bonds designated as such in the related Series Supplement.
"ERISA Restricted Bonds": With respect to a Series of Bonds, the
Classes of Bonds designated as such in the related Series Supplement.
"Event of Default": The meaning specified in Section 5.1.
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"Excess Bankruptcy Loss": With respect to a Series of Bonds and any
Payment Date in respect thereof on which a Bankruptcy Loss or Bankruptcy Losses
is or are allocable to the Bonds of such Series, the amount, if any, by which
such Bankruptcy Loss or Bankruptcy Losses exceeds or exceed the applicable
Bankruptcy Loss Amount (excluding the principal portion of any Debt Service
Reductions that would otherwise be included in such excess amount).
"Excess Fraud Loss": With respect to a Series of Bonds and any Payment
Date in respect thereof on which a Fraud Loss or Fraud Losses is or are
allocable to the Bonds of such Series, the amount, if any, by which such Fraud
Loss or Fraud Losses exceeds or exceed the applicable Fraud Loss Amount.
"Excess Losses": With respect to a Series of Bonds and a Payment Date,
an amount equal to the sum of Excess Bankruptcy Losses (other than Debt Service
Reductions), Excess Fraud Losses and Excess Special Hazard Losses.
"Excess Special Hazard Loss": With respect to a Series of Bonds and any
Payment Date in respect thereof on which a Special Hazard Loss is allocable to
the Bonds of such Series, the amount, if any, by which such Special Hazard Loss
or Special Hazard Losses exceeds or exceed the applicable Special Hazard Loss
Amount.
"Expense Fund": With respect to any Series, the account, if any,
required to be created and maintained with the Trustee pursuant to Section 8.1
which account shall be an Eligible Account.
"Expense Reserve Amount": With respect to any Series, the amount, if
any, specified in the related Series Supplement.
"FHLMC": Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.
"First SAB Paydown Date": With respect to a Class of SAB Bonds, the
first Principal Payment Date for such Class as specified in the related Series
Supplement.
"FNMA": Federal National Mortgage Association, a federally chartered
and privately owned corporation organized and existing under the Federal
National Mortgage Association Charter Act, or any successor thereto.
"Formula Rate Bond": A Bond, if any, designated as such in a Series
Supplement.
"Fraud Loss": With respect to any Series and any mortgage loan
underlying a Conventional Certificate collateralizing such Series, a loss on
such Mortgage Loan by reason of a default arising from fraud, dishonesty or
misrepresentation in connection with such mortgage loan, including loss by
reason of the denial of coverage under any related primary mortgage insurance
policy because of such fraud, dishonesty or misrepresentation.
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"Fraud Loss Amount": With respect to any relevant Series of Bonds, the
amount specified in the related Series Supplement, as adjusted from time to time
in accordance with such Series Supplement.
"Fraud Loss Coverage Termination Date": With respect to any relevant
Series of Bonds, the earlier of (a) the Payment Date on which the amount of
Fraud Losses incurred on the mortgage loans underlying the Conventional
Certificates securing such Series of Bonds and not previously deducted from the
Fraud Loss Amount relative to such Series of Bonds, equals or exceeds the Fraud
Loss Amount on such Payment Date, and (b) the Cross-over Date relative to such
Series of Bonds.
"Future Value": With respect to any cash or Eligible Investment held or
to be deposited in a Pledged Account for a Series, as of any particular date
subsequent to the date of determination, the sum of such cash or Eligible
Investment and the investment income which can be earned thereon to such
subsequent date, determined in accordance with such assumptions or requirements
as may be specified in the related Series Supplement.
"GNMA": The Government National Mortgage Association, a wholly owned
corporate instrumentality of the United States within the Department of Housing
and Urban Development, or any successor thereto.
"Grant": To grant, bargain, sell, warrant, alienate, remise, release,
convey, assign, transfer, mortgage, pledge, create and grant a security interest
in and right of set-off against, deposit, set over and confirm. A Grant of a
Certificate or of any other instrument shall include all rights, powers and
options (but none of the obligations) of the Granting party thereunder,
including without limitation the immediate and continuing right to claim for,
collect, receive and give receipts for principal and interest payments in
respect of such Certificate and all other moneys payable thereunder, to give and
receive notices and other communications, to make waivers or other agreements,
to exercise all rights and options, to bring Proceedings in the name of the
Granting party or otherwise, and generally to do and receive anything which the
Granting party is or may be entitled to do or receive thereunder or with respect
thereto.
"Guarantor": The party to a Guaranty Agreement with the Issuer and the
Trustee.
"Guaranty Agreement": As to any Series or any Class of Bonds of any
Series which is directly insured, guaranteed or otherwise backed, the insurance
policy, surety bond, letter of credit or similar agreement pursuant to which
such insurance, guaranty or other backing is furnished.
"Highest Lawful Rate": As defined in Section 11.18.
"Highest Priority Junior Class": At any time and with respect to any
Series, that Class of Junior Bonds having (a) the then highest priority of
payment of principal under the related Series Supplement (determined without
regard to any acceleration pursuant to Article V) and (b) a Class Imputed
Principal Balance greater than zero.
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"Holder": A Bondholder.
"Imputed Principal Balance": With respect to a Bond of a Series as of
any date of determination, the amount equal to the lesser of (a) the Current
Principal Amount of such Bond at such date or, in the case of an Interest Only
Bond, the Notional Amount thereof at such date, and (b) the Original Principal
Amount of such Bond or, in the case of an Interest Only Bond, the Notional
Amount thereof on the date of issuance thereof, plus, in the case of a Compound
Interest Bond, the aggregate amount of interest, if any, accrued on such Bond
and added to the principal thereof on each Interest Payment Date for such Series
through the Interest Payment Date immediately preceding such date of
determination, less the sum of (i) all amounts paid on account of principal on
such Bond, or, in the case of an Interest Only Bond, applied in reduction of the
Notional Amount thereof, prior to such date of determination; (ii) all Realized
Losses allocated to such Bond, or, in the case of an Interest Only Bond, applied
in reduction of the Notional Amount thereof, prior to such date of determination
which remain unpaid on such date of determination; and (iii) the portion of any
Junior Bond Writedown Amount allocated to such Bond prior to such date of
determination.
"Indenture" or "this Indenture": This instrument as originally executed
and, if from time to time supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
as so supplemented or amended. All references in this instrument to designated
"Articles", "Sections", "Subsections" and other subdivisions are to the
designated Articles, Sections, Subsections and other subdivisions of this
instrument as originally executed. The words "herein", "hereof", "hereunder" and
other words of similar import refer to this Indenture as a whole and not to any
particular Article, Section, Subsection or other subdivision.
"Independent": When used with respect to any specified Person means
such a Person who (1) is in fact independent of the Issuer and any other obligor
upon the Bonds, (2) does not have any direct financial interest or any material
indirect financial interest in the Issuer or in any such other obligor or in an
Affiliate of the Issuer or such other obligor, and (3) is not connected with the
Issuer or any such other obligor as an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions. Whenever it
is herein provided that any Independent Person's opinion or certificate shall be
furnished to the Trustee, such Person shall be appointed by an Issuer Order and
such opinion or certificate shall state that the signer has read this definition
and that the signer is Independent within the meaning thereof.
"Index": With respect to a Series of Bonds a Class or Classes of which
are Variable Rate Bonds the interest rate on which is determined from time to
time by reference to a predetermined index, as defined in the related Series
Supplement.
"Individual Bond": With respect to a Class of Bonds of a Series, as
defined in the related Series Supplement.
"Initial Interest Payment Date": With respect to any Class of Compound
Interest Bonds of any Series, the Principal Payment Date on which the
outstanding principal of the Class of Bonds of such Series whose final
installment of principal has the latest Stated Maturity of principal prior to
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<PAGE> 24
the Stated Maturity of the final installment of principal of such Class of
Compound Interest Bonds is paid in full.
"Interest Accrual Period": With respect to any Payment Date or
Redemption Date for a Series of Bonds, the period specified in the related
Series Supplement for which interest accrued on the Outstanding Bonds of such
Series, or a certain Class thereof, as specified in the related Series
Supplement, during such period is to be paid or, if applicable, deferred and
added to principal, including, unless expressly stated to the contrary or the
context otherwise requires, each Variable Rate Interest Accrual Period.
"Interest Delay Period": With respect to any Class of Bonds of a
Series, the length of time, if any, between the end of each Interest Accrual
Period and the day immediately preceding the corresponding Interest Payment
Date.
"Interest Determination Date": With respect to any Class or Classes of
Variable Rate Bonds of a Series, the date specified in the related Series
Supplement on which the Bond Interest Rate at which interest shall accrue on
such Variable Rate Bonds during the next succeeding Variable Rate Interest
Accrual Period is determined.
"Interest Only Bond": A Bond of a Series which is entitled only to
payments of interest thereon on the basis of the Notional Amount thereof, and on
which no principal is payable, as more particularly described in the related
Series Supplement.
"Interest Payment Date": As to any Series or Class, any date specified
in the related Series Supplement as one of the fixed dates on which an
installment of interest on the Bonds of such Series or Class is due and payable
to the extent of Available Funds on such date.
"Interest Shortfall": Unless otherwise specified in the related Series
Supplement, with respect to a mortgage loan underlying a Conventional
Certificate securing a Series of Bonds, as defined in the related Pooling and
Administration Agreement.
"Issuer": CMC Securities Corporation III, a Delaware corporation, until
a successor Person shall have become the Issuer pursuant to the applicable
provisions of this Indenture, and thereafter "Issuer" shall mean such successor
Person.
"Issuer Order" and "Issuer Request": A written order or request signed
in the name of the Issuer by its Chairman, President, or a Vice President, and
by its Treasurer, an Assistant Treasurer, Controller, an Assistant Controller,
Secretary, or an Assistant Secretary, and delivered to the Trustee.
"Issuer Resolution": A copy of a resolution certified by the Chairman,
President, any Vice President, Secretary or any Assistant Secretary of the
Issuer to have been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification and delivered to the Trustee.
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"Junior Bond": With respect to a Series of Bonds, a Bond of a Class of
such Series which Class is subordinated in right of payment of principal and/or
interest to the Classes of Senior Bonds of such Series, as more particularly
described in the related Series Supplement.
"Junior Bond Writedown Amount": Except as otherwise specified in the
related Series Supplement, with respect to any Class of Junior Bonds of a Series
and a Payment Date, the amount by which the sum of the Class Imputed Principal
Balances of all Classes of Bonds of such Series, after reducing such Class
Imputed Principal Balances on such Payment Date by payments of principal then
made thereon and the allocation of Realized Losses then allocable thereto,
exceeds the related Pool Scheduled Principal Balance of the Mortgage Loans
underlying the Conventional Certificates collateralizing such Series of Bonds.
"Junior Imputed Principal Balance": With respect to a Series of Bonds
and a Payment Date, the amount equal to the sum of the Class Imputed Principal
Balances of the Junior Bonds outstanding at such time.
"Letter Agreement": With respect to a Class of Book Entry Bonds, the
letter agreement among the Issuer, the Trustee and the Clearing Agency governing
book entry transfers of, and certain other matters with respect to, such Book
Entry Bonds and attached as an exhibit to the related Series Supplement.
"LIBOR": As set forth in the related Series Supplement for any Class of
Variable Rate Bonds the Bond Interest Rate on which is determined by reference
to the London Interbank Offered Rate from time to time, as determined in the
manner specified in the related Series Supplement.
"LIBOR Bond": With respect to any relevant Series, any Bond thereof the
interest rate on which is determined by reference to LIBOR, as specified in the
related Series Supplement.
"LIBOR Interest Accrual Period": With respect to any Class of LIBOR
Bonds of a Series, the interest accrual period in respect thereof, as specified
in the related Series Supplement.
"Liquidated Mortgage Loan": With respect to a Series of Bonds
collateralized by Conventional Certificates, as defined in the related Pooling
and Administration Agreement.
"Liquidation Proceeds": With respect to a Series of Bonds
collateralized by Conventional Certificates, as defined in the related Pooling
and Administration Agreement.
"Manager": The entity, if any, specified in the related Series
Supplement which shall perform certain administrative functions with respect to
a Series of the Bonds.
"Maturity": With respect to any Bond, the date on which the entire
unpaid principal amount of such Bond becomes due and payable as therein or
herein provided, whether at the Stated Maturity of the final installment of such
principal or by declaration of acceleration, call for redemption or otherwise.
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"Maximum Bond Interest Rate Assumption": With respect to any relevant
Series and any relevant Class or Classes of Variable Rate Bonds, if any, for any
Variable Rate Interest Accrual Period for which the applicable interest rate on
such Variable Rate Bonds has not yet been determined in accordance with Section
2.3, an assumed interest rate on such Bonds as specified in the related Series
Supplement.
"Maximum Variable Interest Rate": With respect to any relevant Series
and any relevant Class or Classes of Variable Rate Bonds thereof, the Bond
Interest Rate specified as such for any Class of Variable Rate Bonds in the
related Series Supplement.
"Month of Closing": With respect to any Series, the month in which the
Closing Date occurs.
"Monthly Payment": With respect to a mortgage loan underlying a
Conventional Certificate, as defined in the related Pooling and Administration
Agreement.
"Mortgaged Properties": Unless otherwise specified in the related
Series Supplement, as to any Series, the properties securing the mortgage notes
evidencing the mortgage loans pooled to form the Conventional Certificates
securing such Series.
"Net Interest Shortfall": Unless otherwise defined in the related
Series Supplement, with respect to any Series and any Payment Date in respect
thereof, the amount defined as such in the related Pooling and Administration
Agreement by reference to the immediately preceding Distribution Date.
"Net Liquidation Proceeds": With respect to a Series of Bonds
collateralized by Conventional Certificates, as defined in the related Pooling
and Administration Agreement.
"New York Agent": With respect to each Series, the agent initially
appointed by the Issuer for purposes of presentation and surrender of Bonds for
registration of transfer and exchange and for notices and demands to or upon the
Issuer pursuant to Section 3.2, as specified in the related Series Supplement.
"New York Office": With respect to each Series, the office initially
appointed by the Issuer for purposes of presentation and surrender of Bonds for
registration of transfer and exchange and for notices and demands to or upon the
Issuer pursuant to Section 3.2, as specified in the related Series Supplement.
"Non-Disqualification Opinion": Except as otherwise provided in the
related Series Supplement, with respect to any action proposed to be taken under
this Indenture where an election to treat the Trust Estate securing a Series (or
any portion thereof) and any other assets set forth in such election as one or
more REMICs has been made or will be made, an Opinion of Counsel to the effect
that the taking of such action will not cause a REMIC Loss.
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"Non-permitted Foreign Holder": As defined in Section 2.15.
"Non-U.S. Person": An individual, corporation, partnership or other
person other than: a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, or an estate or trust that
is subject to U.S. federal income tax regardless of the source of its income.
"Notional Amount": With respect to an Interest Only Bond of a Series,
the notional amount forming the basis of the determination of interest accrued
on such Bond, as more particularly described in the related Series Supplement.
"Officers' Certificate": A Certificate signed by the Chairman, the
President or a Vice President, and by the Treasurer, an Assistant Treasurer, the
Controller, an Assistant Controller, the Secretary or an Assistant Secretary of
the Issuer or of such other Person as is delivering such certificate, and
delivered to the Trustee. Unless otherwise specified, any reference in this
Indenture to an Officers' Certificate shall be to an Officers' Certificate of
the Issuer.
"Opinion of Counsel": A written opinion of counsel who may, except as
otherwise expressly provided in this Indenture, be counsel for the Issuer and
who shall be satisfactory to the Trustee.
"Original Principal Amount": In respect of a Bond, its outstanding
principal amount on the date of issuance thereof.
"Outstanding": With respect to Bonds of a Series, as of the date of
determination, all Bonds of such Series theretofore authenticated and delivered
under this Indenture except:
(i) Definitive Bonds theretofore cancelled by the
Bond Registrar or delivered to the Bond Registrar for
cancellation;
(ii) Bonds or portions thereof for whose payment or
redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the
Issuer) in trust for the Holders of such Bonds; provided,
however, that if such Bonds are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or
provision therefor, satisfactory to the Trustee, has been
made;
(iii) Bonds in exchange for or in lieu of which other
Bonds have been authenticated and delivered pursuant to this
Indenture unless proof satisfactory to the Trustee is
presented that any such Bonds are held by a bona fide
purchaser; and
(iv) Bonds alleged to have been destroyed, lost or
stolen which have been paid as provided for in Section 2.8;
provided, however, that in determining whether the Holders of the requisite
percentage of the Aggregate Current Principal Amount of the Outstanding Bonds or
of the Outstanding Bonds of any
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<PAGE> 28
Series have given any request, demand, authorization, direction, notice, consent
or waiver hereunder, Bonds owned by the Issuer, any other obligor upon the Bonds
or any Affiliate of the Issuer or such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent, or waiver, only Bonds which the Trustee knows to be
so owned shall be so disregarded. Bonds so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Bonds and that the pledgee is not the Issuer, any other obligor upon the Bonds
or any Affiliate of the Issuer or such other obligor. If an election has been
made or will be made to treat the Trust Estate and any other assets securing
such Series set forth in such election, as one or more REMICs, solely for
purposes of a Non-Disqualification Opinion and for purposes of determining
whether a Non-Disqualification Opinion must be delivered pursuant to any
requirement of this Indenture, a Bond shall not be deemed to cease to be
Outstanding pursuant to clause (ii) above prior to the date on which the money
is payable to Holders of the Bonds.
"Overdue Bond": As defined in Section 2.9(c).
"Paying Agent": The Trustee or any other depository institution or
trust company that is authorized by the Issuer pursuant to Section 3.3 to pay
the principal of, or interest on, any Bonds on behalf of the Issuer.
"Payment Date": As to any Series or Class, any day which is specified
in the related Series Supplement as an Interest Payment Date or Principal
Payment Date for the Bonds of such Series or Class.
"Payment Date Statement": As defined in Section 2.9(e).
"Permitted Encumbrance": Any lien, charge, security interest, mortgage
or other encumbrance (other than the lien of this Indenture) Granted by the
Issuer in any portion of a Trust Estate, provided that:
(i) such lien, charge, security interest or
encumbrance extends only to a portion of such Trust Estate
which is limited to cash deliverable or payable to or at the
order of the Issuer,
(ii) such lien, charge, security, interest, mortgage
or other encumbrance secures, directly or indirectly,
indebtedness which the Issuer is permitted to incur under the
terms of this Indenture and its Certificate of Incorporation,
and
(iii) the beneficiary of such lien, charge, security
interest, mortgage or other encumbrance shall have agreed that
in connection with the enforcement thereof it will not bring
any Proceeding seeking, or which would result in, the sale of
any portion of any Trust Estate and will not file any petition
for the commencement of insolvency proceedings with respect to
the Issuer under the federal bankruptcy laws,
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as now or hereafter in effect, or any other present or future
federal or state bankruptcy, insolvency or similar law, or for
the appointment of any receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of
the Issuer or of any of its property, or seeking an order for
the winding up or liquidation of the affairs of the Issuer
until not less than 91 days after payment in full of all
Outstanding Bonds.
"Person": Any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan": Any Person which is an employee benefit plan, trust or account
subject to Title I of ERISA or an individual retirement account or employee
benefit plan, trust or account subject to Section 4975 of the Code or comparable
provisions of any subsequent enactment or a governmental plan defined in Section
3(2) of ERISA subject to any federal, state or local law which is, to a material
extent, similar to the foregoing provisions of ERISA or the Code.
"Pledged Account": With respect to a Series of Bonds, the Collection
Account relative thereto.
"Pool Scheduled Principal Balance": With respect to a Series of Bonds
collateralized by Conventional Certificates, as defined in the related Pooling
and Administration Agreement.
"Pooling and Administration Agreement": As to any Conventional
Certificate, the agreement pursuant to which such Conventional Certificate was
issued and is governed.
"Predecessor Bonds": With respect to any particular Bond of a Series
and Class, every previous Bond of that Series and Class evidencing all or a
portion of the same debt as that evidenced by such particular Bond; and, for the
purpose of this definition, any Bond of a Series authenticated and delivered
under Section 2.8 in lieu of a lost, destroyed or stolen Bond of the same Series
shall be deemed to evidence the same debt as the lost, destroyed or stolen Bond.
"Prepayment Period": With respect to a Series of Bonds and a Principal
Payment Date, the calendar month preceding such Payment Date.
"Principal Distribution Amount": With respect to any Payment Date for a
Series, an amount determined as provided in the related Series Supplement (which
amount may, to the extent specified in the related Series Supplement, be a
negative number).
"Principal Only Bond": A Bond of a Series which is entitled only to
payments of principal thereof and on which no interest will accrue or be
payable.
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"Principal Payment Date": With respect to any Series or Class, any date
specified in the related Series Supplement as a fixed date on which an
installment of principal is due and payable to the extent of Available Funds on
such date.
"Principal Prepayment": With respect to any Series, as defined in the
related Pooling and Administration Agreement.
"Principal Receipts": With respect to any Series, as defined in the
related Series Supplement.
"Principal Reduction Date": With respect to a particular Series, any
Principal Payment Date.
"Proceeding": Any suit in equity, action at law or other judicial or
administrative proceeding.
"Qualified GIC": A guaranteed investment contract or surety bond
Granted or to be Granted to the Trustee to provide for the investment of funds
in a Pledged Account for a particular Series and ensuring a minimum rate of
return on investments of such funds, which contract or surety bond shall
(a) be an obligation of an insurance company or other
corporation whose claims paying ability rating or credit standing, as
applicable, is acceptable to each of the Rating Agencies which at all
times that such contract is in force, are rating the Bonds of such
Series;
(b) provide that the Trustee may exercise all of the rights of
the Issuer under such contract or surety bond without the necessity of
the taking of any action by the Issuer;
(c) provide that if at any time the then current claims paying
ability rating or credit standing, as applicable, of the obligor under
such guaranteed investment contract is such that continued investment
pursuant to such contract of funds included in the Trust Estate for
such Series would result in a downgrading of any rating of the Bonds of
such Series, the Trustee may terminate such contract and be entitled to
the return of all funds previously invested thereunder, together with
accrued interest thereon at the interest rate provided under such
contract through the date of delivery of such funds to the Trustee; and
(d) meet such other standards as may be specified in the
Series Supplement for such Series.
"Qualified Liquidation": With respect to any Series, the plan or plans
for the complete liquidation of the REMIC or REMICs, as applicable, relative to
such Series, within the meaning of Section 860F(a)(4), adopted by the Issuer
within 90 days prior to the final Payment Date of such Series.
"Qualified Nominee": A Person in whose name Certificates or Eligible
Investments Granted to the Trustee may be registered as nominee of the Trustee
in lieu of registration directly in the name
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of the Trustee, provided that the following conditions shall be satisfied in
connection with such registration:
(a) the instruments governing the creation and operation of
the nominee provide that neither the nominee nor any owner of an
interest in the nominee (other than the Trustee) shall have any
interest, beneficial or otherwise, in any Certificates or Eligible
Investments at any time held in the name of the nominee, except for the
purpose of transferring and holding legal title thereto;
(b) the nominee and the Trustee have entered into a binding
agreement:
(i) establishing that any Certificates or Eligible
Investments held in the name of the nominee are to be held by
the nominee as agent (other than commission agent or broker)
or nominee for the account of the Trustee, and
(ii) appointing the Trustee as the agent and
attorney of the nominee with full power and authority
irrevocably to sell, assign, endorse, transfer and deliver any
Certificates or Eligible Investments standing in the name of
the nominee, and to execute and deliver all such instruments
as may be necessary and proper for such purpose; and
(c) in connection with the registration of any Certificate or
Eligible Investment in the name of the nominee, all requirements under
applicable governmental regulations nec essary to effect a valid
registration of transfer of such Certificate or Eligible Investment are
complied with.
"Rating Agency" or "Rating Agencies": With respect to each Series of
Bonds at any relevant time, the rating agency or agencies requested by the
Issuer to rate, and then rating, the Bonds of such Series. The Rating Agencies
for each Series of Bonds will be specified in the related Series Supplement.
"Realized Losses": With respect to any Series collateralized by
Conventional Certificates, as defined in the related Pooling and Administration
Agreement, including Excess Losses.
"Record Date": With respect to any Series or Class, a date specified in
the related Series Supplement as a date on which the Holders of Bonds of such
Series or Class entitled to receive a payment of principal or interest (or
notice of a payment in full of principal) on the succeeding Payment Date are
determined.
"Redemption Date": With respect to any Series of Bonds, any Payment
Date on which Bonds of such Series may be redeemed at the option of the Issuer
pursuant to Section 10.1 or Section 10.4.
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"Redemption Price": Except as otherwise specified in the related Series
Supplement, with respect to any Bond of a particular Series to be redeemed in
whole or in part pursuant to Article X hereof, an amount equal to 100% of the
Imputed Principal Balance of the Bond to be so redeemed, together with (except
in the case of a Principal Only Bond) interest on such amount at the applicable
Bond Interest Rate through the Interest Accrual Period for the date of
redemption, other than any installments of interest due and payable on or before
the applicable Redemption Date.
"Reference Bank": A bank providing quotations for use in determining
LIBOR as specified in the related Series Supplement for any Series of Bonds
having one or more Classes of LIBOR Bonds.
"Reinvestment Income": With respect to a Series of Bonds and any
related Payment Date, all interest, income and other return on capital received
from the investment of amounts standing to the credit of the related Collection
Account since the previous Payment Date or in the case of the first Payment
Date, since the Closing Date.
"REMIC": A "real estate mortgage investment conduit" within the meaning
of Section 860D of the Code. References herein to "a REMIC", "each REMIC", "the
REMIC", or "any REMIC" are to each REMIC established pursuant to each Series
Supplement.
"REMIC Loss": The failure of a REMIC to qualify or to continue to
qualify as a REMIC or the imposition of a tax under the REMIC Provisions on any
income of a REMIC.
"REMIC Provisions": Provisions of the federal income tax law relating
to real estate mortgage investment conduits, which appear at Section 860A
through 860G of Subchapter M of Chapter 1 of the Code, and related provisions,
and regulations and rulings promulgated thereunder, as the foregoing are in
effect from time to time.
"Remittance Date": Unless otherwise specified in the related Series
Supplement, the 18th day of any month or if such 18th day is not a Business Day,
the Business Day immediately preceding.
"Reserve Interest Rate": With respect to any Class of Variable Rate
Bonds of a Series, as set forth in the related Series Supplement.
"Residual Bond": With respect to any Series, as defined in the related
Series Supplement.
"Residual Interest": Except as otherwise provided in the related Series
Supplement, with respect to any Series for which a REMIC election or elections
has or have been made or will be made in respect of the Trust Estate or other
assets specified in such election and securing such Series, any rights to
receive payments under this Indenture which rights are designated as a residual
interest in a REMIC within the meaning of Section 860G(a)(2) of the Code.
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"Residual Interest Holders": Except as otherwise provided in the
related Series Supplement, with respect to any Series for which a REMIC election
or elections has or have been made or will be made in respect of the Trust
Estate or other assets specified in such election and securing such Series, the
owner or assignee of the Residual Interest of each such REMIC or an undivided
interest in the Residual Interest of each such REMIC.
"Responsible Officer": With respect to the Trustee, the chairman or
vice-chairman of the board of directors, the chairman or vice-chairman of the
executive committee of the board of directors, the president, any Vice
President, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any trust officer or assistant trust officer, the
controller, any assistant controller or any other officer of the Trustee
customarily performing functions similar to those per formed by any of the above
designated officers and also, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Bond": With respect to any relevant Series, as defined in
the related Series Supplement.
"SAB Amount": With respect to any SAB Bond of a Series comprising a
Class or Classes of SAB Bonds, and any SAB Payment Date, the scheduled principal
payment for such Bond as determined from the table of Scheduled Principal
Balances of SAB Bonds in the related Series Supplement.
"SAB Bond": A Scheduled Amortization Bond, as specifically identified
in the related Series Supplement, with respect to which principal is payable on
each SAB Payment Date of such Series only up to the amount of the SAB Principal
Payment indicated for such SAB Payment Date.
"SAB Payment Date": With respect to any Series that includes a Class or
Classes of SAB Bonds, any Payment Date on which a payment of principal on the
SAB Bonds of such Series is required to be made, the first of such dates being
the First SAB Paydown Date.
"SAB Principal Payment": With respect to any Series of Bonds that
includes a Class or Classes of SAB Bonds, and to each SAB Payment Date relative
to such Series, the SAB Amount for such SAB Payment Date plus any portion of a
SAB Amount unpaid from a previous SAB Payment Date, all as specified in the
related Series Supplement.
"Sale": As defined in Section 5.17.
"Schedule of Certificates": Schedule A to a Series Supplement listing,
the Conventional Certificates being Granted to the Trustee on the Closing Date
for such Series.
"Scheduled Principal Balance": With respect to a mortgage loan
underlying a Conventional Certificate, as defined in the related Pooling and
Administration Agreement.
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"Senior Bond": With respect to a Series of Senior/Subordinated Bonds, a
Bond of a Class of such Series which Class is preferred in right of payment of
principal and/or interest to the Classes of Junior Bonds of such Series, as more
particularly described in the related Series Supplement.
"Series": Each separate series of Bonds issued pursuant to this
Indenture and a Series Supplement thereto setting forth the specific terms of
such Series of Bonds, which series may, as provided in the related Series
Supplement, be divided into two or more Classes.
"Series Supplement": A supplemental indenture to this Indenture that
authorizes a particular Series of Bonds.
"Special Hazard Loss": Unless otherwise specified in the related Series
Supplement, with respect to a mortgage loan underlying a Conventional
Certificate securing a Series of Bonds, the principal portion of such mortgage
loan not recovered from insurance proceeds and liquidation proceeds or otherwise
as a result of any casualty loss not covered by standard hazard insurance,
including a loss resulting from vandalism, earthquake, flood, mud flow, and a
loss from partial damage caused by reason of application of any coinsurance
clause in an applicable standard hazard policy, including the amount of any
unrecovered advance made by the servicer of each mortgage loan incurring a
Special Hazard Loss.
"Special Hazard Loss Amount": With respect to any relevant Series of
Bonds, the amount specified in the related Series Supplement, as adjusted from
time to time in accordance with such Series Supplement.
"Special Hazard Coverage Termination Date": With respect to any
relevant Series of Bonds, the earlier of (a) the Payment Date on which the
amount of Special Hazard Losses incurred on the mortgage loans underlying the
Conventional Certificates securing such Series of Bonds and not previously
deducted from the Special Hazard Loss Amount relative to such Series of Bonds,
equals or exceeds the Special Hazard Loss Amount on such Payment Date, and (b)
the Cross-over Date relative to such Series of Bonds.
"Special Payment Date": With respect to any Overdue Bond of any Series
or Class, the fixed day specified in the related Series Supplement during each
month following the month in which any amount due on such Overdue Bond was not
paid.
"Special Payment Date Statement": As defined in Section 2.9(f).
"Special Record Date": With respect to any Special Payment Date for the
Bonds of a Series, the date as of which the Holders of Bonds of the related
Series or any Class within such Series entitled to receive a payment of
principal (other than a payment in full of all unpaid principal of a Bond) or
interest, or notice of payment in full of principal, on such Special Payment
Date are to be determined, which date shall be as specified in the related
Series Supplement.
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"Startup Day": With respect to any Series in respect of which one or
more REMIC elections have been made, as defined in the Series Supplement
relative thereto in respect of each such REMIC.
"Stated Maturity": With respect to any installment of principal of or
interest on any Bond, the date specified in such Bond as the fixed date on which
such installment is due and payable to the extent of Available Funds.
"Straight Pass-Through Conventional Certificate": A Conventional
Certificate under the terms of which no interest is distributable to the holder
thereof with respect to prepaid principal of any underlying mortgage loan for
any period after the date of any such prepayment, with the result that the
amount of interest distributable to the holder of such Conventional Certificate
on the Distribution Date on which such prepaid principal is distributed might be
less than one month's interest at the applicable Certificate Rate on the
Certificate Principal Balance of such Certificate, determined before giving
effect to the Distribution due on such Distribution Date.
"Tender Date": With respect to a Series, a day specified in the related
Series Supplement for each Payment Date on or before which date a Bondholder
must submit notice to the Trustee requesting redemption of his or its Bonds or
submit notice requesting withdrawal of such a request for redemption pursuant to
Section 10.4.
"Trust Estate": With respect to any Series, all money, instruments and
other property subject or intended to be subject to the lien of this Indenture
for the benefit of such Series as of any particular time (including, without
limitation, all property and interests Granted to the Trustee in the Series
Supplement for such Series), including all proceeds thereof.
"Trust Indenture Act" or "TIA": The Trust Indenture Act of 1939 as it
may be amended from time to time.
"Trustee": The First National Bank of Chicago, as trustee, until a
successor Person shall have become the Trustee pursuant to the applicable
provisions of this Indenture, and thereafter "Trustee" shall mean such successor
Person. Pursuant to Section 6.16, the Issuer may appoint a different Person to
serve as an alternate to the Trustee and when a different Person is so appointed
pursuant to Section 6.16 and the related Series Supplement, the term Trustee
shall, with respect to such Series of Bonds, refer to the alternate Person so
appointed.
"Uncertificated Certificate": A Certificate issued in book-entry form
and not represented by an instrument.
"Unpaid Interest": With respect to a Class and an Interest Payment
Date, the excess of the Accrued Bond Interest for such Class on such Interest
Payment Date over the amount actually paid in respect of interest on such Class
on such Interest Payment Date.
"Variable Rate Bond Redemption Price": With respect to a Series that
includes one or more Classes of Variable Rate Bonds, as defined in the related
Series Supplement.
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"Variable Rate Bonds": A Bond (including a LIBOR Bond) on which
interest accrues at any time at a Bond Interest Rate that is adjusted, according
to a predetermined index, at fixed periodic intervals, all as set forth in the
related Series Supplement.
"Variable Rate Interest Accrual Period": The period specified in the
related Series Supplement for any Class of Variable Rate Bonds, and including
each LIBOR Interest Accrual Period.
"Vice President": With respect to the Issuer or the Trustee, any vice
president, whether or not designated by a number or a word or words added before
or after the title "vice president".
"Voting Record Date": Unless specified otherwise in the related Series
Supplement for any Series of Bonds, the record date specified in TIA Section
316(c).
SECTION 1.2 RESERVED.
SECTION 1.3 Calculations Respecting Mortgage Loans Underlying
Certificates.
(a) In connection with all calculations required to be made
pursuant to this Indenture with respect to Distributions on any
Certificate, any payments on the underlying mortgage loans or any
payments on any other assets included in a Trust Estate, and with
respect to the income which can be earned from the reinvestment of
Distributions and of any other amounts receivable for deposit in a
Pledged Account, the rules set forth in this Section 1.3 shall be
applied except to the extent supplemented or modified herein or in the
Series Supplement for any particular Series.
(b) If a Series Supplement provides that calculations with
respect to Distributions on all or any part of the Certificates
securing the related Series shall be made on a mortgage
loan-by-mortgage loan basis, then such calculations shall be based upon
current information as to the terms of such mortgage loans and reports
of payments received on such mortgage loans supplied to the Trustee or
the Issuer, as the case may be, by the Person responsible for the
servicing thereof and satisfying such requirements, if any, as may be
set forth in such Series Supplement. To the extent it is not patently
incorrect on its face, such information may be conclusively relied upon
in making such calculation.
(c) For any Certificate with respect to which calculations
required to be made pursuant to this Indenture are not made on a
mortgage loan-by-mortgage loan basis, such calculations shall be made
on the basis of information or accountings as to Distributions on such
Certificate furnished by the related Administrator and satisfying such
requirements, if any, with respect thereto as may be set forth in the
Series Supplement for the Series secured thereby.
To the extent they are not patently incorrect on their face, such
information or accountings may be conclusively relied upon in making
such calculations.
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(d) Except as specified in a particular Series Supplement,
each Distribution receivable with respect to a Certificate, unless
actually received earlier, shall be assumed to be received at the time
specified in the related Series Supplement and shall be assumed to be
immediately deposited in the related Collection Account and reinvested
on the next succeeding Business Day at the applicable Assumed
Reinvestment Rate. Unless the related Series Supplement provides
otherwise, all principal of and interest on investments held in a
Pledged Account shall be assumed to be received on the date due and
immediately deposited in such Pledged Account and reinvested on the
next succeeding Business Day at the applicable Assumed Reinvestment
Rate. Unless the related Series Supplement provides otherwise, all
funds assumed to be reinvested at the applicable Assumed Reinvestment
Rate shall be assumed to remain so invested until the Business Day next
preceding the Principal Reduction Date or Interest Payment Date on
which they are required to be available in the related Collection
Account for application, in accordance with the terms hereof and of the
related Series Supplement, to payments of principal of or interest on
the Bonds of the related Series. All funds eligible to be invested
pursuant to a Qualified GIC shall (subject, however, to any limitations
contained in such Qualified GIC) be assumed to be invested thereunder
on the next Business Day after the assumed date of receipt and to
remain invested thereunder until the Business Day preceding the
Principal Reduction Date on which such funds are, or might be, required
to be available for application pursuant to this Indenture or the
applicable Series Supplement.
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ARTICLE II
THE BONDS
SECTION 2.1 Forms Generally.
The Bonds of each Series and the Trustee's certificate of
authentication thereon shall be in substantially the form or forms set forth in
the Series Supplement pursuant to which such Bonds are constituted and as may in
the Issuer's judgment be necessary, appropriate or convenient to permit the
Bonds to be issued and sold to or held in bearer form by non-United States
Persons, to establish entitlement to an exemption from United States withholding
tax or reporting requirements with respect to payments on the Bonds, or to
comply, or facilitate compliance, with other applicable laws. Each Series of
Bonds may have such letters, numbers or other marks of identification and such
legends or endorsements placed thereon as may be required to comply with the
rules of any securities exchange on which the Bonds may be listed, or as may,
consistently herewith, be determined by the officers executing such Bonds, as
evidenced by their execution thereof. While Bonds may contain the
above-referenced provisions with respect to Bonds issued in bearer form, no
Bonds may actually be issued in bearer form until the Issuer and the Trustee
shall have entered into an appropriate supplemental indenture pursuant to
Section 9.1(8) providing for such issuance. Any portion of the text of any Bond
may be set forth on the reverse thereof with an appropriate reference on the
face of the Bond.
The definitive Bonds shall be printed, lithographed or engraved or
produced by any combination of these methods on steel engraved borders or may be
produced in any other manner permitted by the rules of any securities exchange
on which the Bonds may be listed, all as determined by the officers executing
such Bonds, as evidenced by their execution thereof.
Each Class of Book Entry Bonds shall be evidenced by one or more
certificates physically held by the Clearing Agency, which certificates may be
typewritten, printed, lithographed, mimeo graphed or otherwise produced.
SECTION 2.2 Form of Trustee's Certificate of Authentication.
The form of the Trustee's certificate of authentication is as follows:
This is one of the Bonds referred to in the within-mentioned Indenture.
----------------------------------------------
The First National Bank of Chicago, as Trustee
By
--------------------------------------------
Authorized Signatory
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SECTION 2.3 Bonds Issuable in Series and Classes; General
Provisions with Respect to Principal and Interest
Payments.
The aggregate principal amount of Bonds that may be issued pursuant to
this Indenture is unlimited.
The Bonds may, as provided herein, at the election of and as authorized
by the Board of Directors, be issued in one or more Series, each of which Series
may consist of only one Class of Bonds or may be divided into two or more
Classes, and shall be designated generally as the "Collateralized Mortgage
Obligations" of the Issuer, with such further particular designations added or
incorporated in such title for the Bonds of any particular Series or Class as
the Board of Directors may determine. Each Series shall include at least one
Class of Bonds which are not Compound Interest Bonds and may, but need not,
include one or more Classes of Compound Interest Bonds.
If a Series of Bonds includes more than one Class, the Classes of Bonds
of such Series shall have such Stated Maturities as shall be specified in the
related Series Supplement. Subject to the provisions of Section 3.1, Section
5.19 and Section 8.2(d), the principal of each Bond shall be payable in
installments ending no later than the Stated Maturity of the final installment
of the principal thereof unless the unpaid principal of such Bond becomes due
and payable at an earlier date by declaration of acceleration, redemption or
otherwise.
All payments of principal on the Bonds of a Series shall be applied on
each Payment Date prior to the occurrence of an Event of Default among the
Classes of such Bonds in accordance with the order of priority of payment set
out, and otherwise upon the terms specified in, the related Series Supplement.
Except to the extent specified in the related Series Supplement for a Series of
Bonds, payments of principal on each Class of Bonds, other than a Class of Bonds
subject to redemption at the request of a Holder, shall be made pro rata among
all Outstanding Bonds of such Class, without preference or priority of any kind.
The aggregate amount of principal of and interest on the Bonds of a
Series due and payable on each Payment Date for such Series shall be equal to
the Debt Service Requirement for such Series for such Payment Date. All payments
made with respect to any Bond shall be applied first to the interest then due
and payable on such Bond and then to the principal thereof. All computations of
interest accrued on any Bond shall be made as if each year consisted of twelve
months of thirty days each.
Interest shall accrue on the Imputed Principal Balance of each
Outstanding Bond of a Series at the Bond Interest Rate relative thereto over the
related Interest Accrual Period and (other than interest accrued on any Compound
Interest Bonds of such Series, which shall be payable as described below) shall
be payable on each Interest Payment Date for such Series in an amount equal to
the lesser of (a) Available Funds on such Interest Payment Date, after payment
of all amounts payable in priority to such interest payment, as determined
pursuant to the related Series Supplement, and (b) Accrued Bond Interest for
such Interest Payment Date.
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Interest at the applicable Bond Interest Rate shall accrue on the
Imputed Principal Balance of each Outstanding Compound Interest Bond of a Series
from the Accrual Date for such Series, but none of such accrued interest shall
be payable until the Initial Interest Payment Date for such Compound Interest
Bond (or the first Interest Payment Date thereafter if the Debt Service
Requirement for such Initial Interest Payment Date is exactly equal to the
aggregate amount of principal of and interest on all other Classes of Bonds of
such Series which is payable on such Initial Interest Payment Date). On each
Interest Payment Date prior to the Initial Interest Payment Date for a Compound
Interest Bond, Accrued Bond Interest on such Bond during the related Interest
Accrual Period shall be added to the Current Principal Amount of such Bond and
shall thereafter accrue interest. Except as otherwise specified in the related
Series Supplement, on the Initial Interest Payment Date for the Compound
Interest Bonds of a Series, Accrued Bond Interest on such Bonds for the related
Interest Accrual Period shall be payable in an amount not in excess of the
difference between (a) the Debt Service Requirement on the related Series for
such Initial Interest Payment Date and (b) the aggregate amount of principal of
and interest on all other Bonds of the related Series required to be paid on
such date. The portion, if any, of such interest which is not paid on such
Initial Interest Payment Date shall be added to the principal of such Compound
Interest Bonds on such Initial Interest Payment Date and shall thereafter accrue
interest in the manner set forth above. On each Interest Payment Date after the
Initial Interest Payment Date for a Class of Compound Interest Bonds Accrued
Bond Interest on the Class Imputed Principal Balance of such Class shall be
payable to the extent of Available Funds as specified in the related Series
Supplement.
In the case of a Class or Classes of Bonds which are Variable Rate
Bonds, the related Series Supplement shall specify the method of calculating the
Bond Interest Rate at any time to be borne by such Variable Rate Bonds. On each
Interest Determination Date relative to a Class of Variable Rate Bonds the
interest rate of which is calculated by reference to an Index, until such
Variable Rate Bonds are paid in full, the Trustee shall determine the rate of
interest pursuant to the relevant Index for the purposes of such Interest
Determination Date in accordance with the mechanism specified in the related
Series Supplement, and the resulting Bond Interest Rate to be applicable to such
Variable Rate Bonds for the next Variable Rate Interest Accrual Period.
Promptly after its determination thereof, the Trustee shall advise the
Issuer of the rate of interest applicable to each Class of Variable Rate Bonds
of a Series for the next succeeding Variable Rate Interest Accrual Period.
In determining LIBOR or the Reserve Interest Rate and the resulting
Bond Interest Rate for each relevant Variable Rate Interest Accrual Period for
any relevant Class of Variable Rate Bonds, the Trustee may conclusively rely and
shall be protected in relying upon the offered rates quoted (whether quoted in
writing, electronically or orally) by the Reference Banks or other banks as to
LIBOR or the Reserve Interest Rates, as appropriate, in effect from time to
time. The Trustee shall have no liability or responsibility to any Person for
(i) its selection of other banks for purposes of determining the Reserve
Interest Rate or (ii) its inability, following a good faith reasonable effort,
to determine LIBOR or a Reserve Interest Rate, all as provided for in the
definition of "LIBOR" in the related Series Supplement.
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The establishment of a rate of interest by reference to an Index and
the Reserve Interest Rate and the resulting Bond Interest Rate for each relevant
Variable Rate Interest Accrual Period relative to a Series of Bonds shall (in
the absence of manifest error) be final, conclusive and binding upon the Holder
or the Issuer and any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns.
Unless otherwise specified in the related Series Supplement,
calculation of the amount of interest accrued on the Bonds of any Class of any
Series during an Interest Accrual Period shall be made on the assumption that
any payment of principal on the Bonds of such Class made on a Principal
Reduction Date occurring during such Interest Accrual Period (other than on the
first day thereof) was instead paid on the first day of such Interest Accrual
Period.
Any Unpaid Interest on a Class of Bonds shall be paid subject to and as
provided in the related Series Supplement. Unless otherwise specified in the
related Series Supplement, no interest shall accrue on any Unpaid Interest.
Notwithstanding any of the foregoing provisions with respect to
payments of principal of and interest on the Bonds, if the Bonds of a Series
have become or been declared due and payable following an Event of Default and
such acceleration of maturity and its consequences have not been rescinded and
annulled, payments of principal of and interest on such Bonds shall be made in
accordance with Section 5.8.
Each Bond shall bear upon the face thereof the designation so selected
for the Series and Class to which it belongs.
Each Series of Bonds shall be created by a Series Supplement authorized
by the Board of Directors and establishing the terms and provisions of such
Series, specifying the Certificates and any other property to be included in the
Trust Estate therefor and Granting such Trust Estate as security for the Series
of Bonds created thereby. The several Series may differ in respect of any of the
following matters:
(1) designation of the Series;
(2) dating of the Bonds of the Series and Accrual Date;
(3) the number of Classes, including the number of Classes of
Compound Interest Bonds, if any, the number of Classes of SAB
Bonds, if any, the number of Classes of Variable Rate Bonds,
if any, the number of Classes of Formula Rate Bonds, if any,
the number of Classes of Senior Bonds, if any, the number of
Classes of Junior Bonds, if any, and the maximum aggregate
principal amount of Bonds of each such Class which may be
issued;
(4) the Bond Interest Rate (if any) for each Class, and if such
Series of Bonds includes a Class or Classes of Variable Rate
Bonds, the method of calculating the Bond
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Interest Rate borne at any time by such Variable Rate Bonds;
and if such Series of Bonds includes a Class of Formula Rate
Bonds, the method of calculating the Bond Interest Rate borne
at any time by such Formula Rate Bonds;
(5) the Stated Maturity of the final installment of principal of
each Class of Bonds of such Series entitled to payments of
principal;
(6) the place or places for the payment of the final installment
of principal;
(7) the priority of principal payments among the Classes entitled
to payments of principal and within each Class of the Series
entitled to payments of principal;
(8) the denominations of the Bonds of such Series;
(9) if such Series of Bonds includes a Class of Formula Rate
Bonds, restrictions relating to the transfer of such Class of
Formula Rate Bonds;
(10) whether the Bonds of such Series may be authenticated by an
Authenticating Agent, and, if so, the Person appointed as
Authenticating Agent for such Series;
(11) the Interest Payment Dates, Principal Payment Dates and
Special Payment Dates;
(12) the amount, if any, to be deposited at the Closing Date in the
Collection Account for such Series;
(13) whether a Qualified GIC is to be Granted to the Trustee with
respect to the investment of funds in any Pledged Account for
such Series, and, if so, the standards applicable to such
Qualified GIC, including the conditions, if any, under which
the Trustee shall be required to terminate such Qualified GIC;
(14) any items required to be delivered to the Trustee on the
Closing Date for such Series pursuant to the last paragraph of
Section 2.12;
(15) whether calculations with respect to the mortgage loans
underlying the Certificates securing such Series are to be
made on a mortgage loan-by-mortgage loan basis or on the basis
of the assumptions set forth in Section 1.3, and, if
applicable, any modifications to such assumptions to be used
in making calculations with respect to the Certificates
securing such Series;
(16) if calculations with respect to the mortgage loans underlying
the Certificates securing such Series are to be made on a
basis other than mortgage loan-by-mortgage loan, the
characteristics to be used in grouping such Certificates (and
any other assets to be included in any Collateral Group) into
Collateral Groups;
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(17) (a) the requirements for verification of data supplied in
connection with the Conventional Certificates securing such
Series by the related Administrator regarding the underlying
mortgage loans, and (b) the documents relating to such
Conventional Certificates required to be delivered to the
Trustee pursuant to Section 2.12(k);
(18) the circumstances, if any, under which the Bonds of such
Series will be subject to redemption by Holders pursuant to
Article X and any supplement to or modification of the
requirements of Section 10.4 which are to apply to such
Series;
(19) the extent to which all or any portion of the interest accrued
but not payable on any Compound Interest Bonds of such Series
is to be included in the calculation of the Principal
Distribution Amount for any Payment Date for such Series;
(20) if an election has been or will be made to treat the Trust
Estate or any other assets specified in such election and
securing the Series or any portion thereof as a REMIC, the
designation of a certain Class or Classes of such Series as
"regular interests" in each such REMIC established in respect
of such Series and the designation of a single Class of such
Series as the "residual interest" in each such REMIC
established in respect of such Series;
(21) provisions with respect to the following terms for which the
definitions set forth in Article I require or permit further
specification, to the extent applicable to any Series of
Bonds, in the related Series Supplement:
(a) "Accrued Bond Interest",
(b) "Assumed Reinvestment Rate",
(c) "Available Funds",
(d) "Bankruptcy Loss Amount",
(e) "Book Entry Termination" (if each Series is
issued with Book Entry Bonds),
(f) "Calculation Date",
(g) "COFI",
(h) "Collateral Group",
(i) "Debt Service Requirement",
(j) "Earliest Bond Redemption Date",
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(k) "ERISA Prohibited Bond",
(l) "ERISA Restricted Bond",
(m) "Eligible Investments" (if the definition of
such term is to be expanded or restricted
for such Series),
(n) "Expense Reserve Amount",
(o) "First SAB Paydown Date" (if such Series is
issued with one or more Classes of SAB
Bonds),
(p) "Formula Rate Bond" (if such Series is
issued with a Class of Formula Rate Bonds),
(q) "Fraud Loss Amount",
(r) "Highest Bond Interest Rate",
(s) "Index",
(t) "Interest Accrual Period",
(u) "Interest Determination Date",
(v) "LIBOR",
(w) "LIBOR Interest Accrual Period",
(x) "Manager",
(y) "Maximum Bond Interest Rate Assumption",
(z) "Maximum Variable Interest Rate",
(aa) "Net Interest Shortfall",
(bb) "New York Agent",
(cc) "New York Office",
(dd) "Paying Agent" (if there will be a Paying
Agent other than the Trustee for such
Series),
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(ee) "Principal Distribution Amount",
(ff) "Record Date",
(gg) "Redemption Price",
(hh) "Restricted Bond",
(ii) "SAB Bond" (if such Series is issued with
one or more Classes of SAB Bonds),
(jj) "SAB Payment Date" (if such Series is
issued with one or more Classes of SAB
Bonds),
(kk) "Special Allocation Bonds" (if such Series
is issued with one or more Special
Allocation Funds),
(ll) "Special Hazard Loss Amount",
(mm) "Special Record Date",
(nn) "SAB Principal Payment" (if such Series is
issued with one or more Classes of SAB
Bonds),
(oo) "Tender Date",
(pp) "Termination Date" (if such Series is
issued with Book Entry Bonds);
(qq) "Variable Rate Interest Accrual Period" (if
such Series is issued with one or more
Classes of Variable Rate Bonds), and
(rr) "Variable Rate Bond Redemption Price",
(22) if applicable, registration, payment and other procedures to
be followed with respect to Certificates issued in book entry
form;
(23) any other provisions expressing or referring to the terms and
conditions upon which the Bonds of that Series are to be
issued under this Indenture; and
(24) The Series Supplement relative to each Series of Bonds secured
by assets in respect of which one or more REMIC elections have
been made shall specify each of the following in respect of
each such REMIC:
(i) the "Startup Day" for the purposes
of the REMIC Provisions;
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(ii) the "latest possible maturity date" of
the regular interests of such REMIC for the purposes
of Section 860(G)(a)(1) of the Code;
(iii) each regular interest and Residual
Interest in such REMIC; and
(iv) the Prepayment Assumption in respect
of such Series of Bonds.
SECTION 2.4 Denominations.
The Bonds of each Series shall be issuable only as registered Bonds in
the denominations prescribed by the terms of the Series Supplement creating the
particular Series.
SECTION 2.5 Execution, Authentication, Delivery and Dating.
The Bonds shall be executed on behalf of the Issuer by its Chairman,
President or one of its Vice Presidents. The signature of any of these officers
on the Bonds may be manual or facsimile.
Bonds bearing the manual or facsimile signature of individuals who were
at any time the proper officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Bonds or did not hold
such offices at the date of such Bonds.
At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Bonds executed by the Issuer to the
Trustee for authentication; and the Trustee shall authenticate and deliver such
Bonds as in this Indenture provided and not otherwise.
Each Bond shall be dated as of the date specified in the related Series
Supplement.
No Bond shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Bond a
certificate of authentication substantially in the form provided for herein
executed by the Trustee or by any Authenticating Agent for the Series of which
it is a part by the manual signature of one of its authorized officers or
employees, and such certificate upon any Bond shall be conclusive evidence, and
the only evidence, that such Bond has been duly authenticated and delivered
hereunder.
SECTION 2.6 Temporary Bonds.
Pending the preparation of Definitive Bonds, the Issuer may execute,
and upon Issuer Order the Trustee shall authenticate and deliver, temporary
Bonds which are printed, lithographed, type written, mimeographed or otherwise
produced, in any authorized denomination, substantially of the
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tenor of the Definitive Bonds in lieu of which they may be so issued and with
such variations as the officers executing such Bonds may determine, as evidenced
by their execution of such Bonds.
If temporary Bonds are issued, the Issuer will cause Definitive Bonds
to be prepared without unreasonable delay. After the preparation of Definitive
Bonds, the temporary Bonds shall be exchangeable for Definitive Bonds upon
surrender of the temporary Bonds at the office or agency of the Issuer to be
maintained as provided in Section 3.2, without charge to the Holder. Upon
surrender or cancellation of any one or more temporary Bonds, the Issuer shall
execute and the Trustee shall authenticate and deliver and exchange therefor a
like principal amount of Definitive Bonds of the same Series and Class and of
authorized denominations. Until so exchanged, the temporary Bonds shall in all
respects be entitled to the same benefits under this Indenture as Definitive
Bonds of the same Class and Series.
SECTION 2.7 Registration, Registration of Transfer and Exchange.
The Issuer shall cause to be kept a register (the "Bond Register") in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Bonds and the registration of transfers of
Bonds. The Trustee is hereby initially appointed "Bond Registrar" for the
purpose of registering Bonds and transfers of Bonds as herein provided. Upon any
resignation of any Bond Registrar appointed by the Issuer, the Issuer shall
promptly appoint a successor or, in the absence of such appointment, shall
assume the duties of Bond Registrar. In the event that the Trustee is acting as
Bond Registrar and the Trustee resigns as Trustee with respect to one or more
Series of Bonds, the Trustee may resign as Bond Registrar with respect to the
Bonds of such Series or Classes, as applicable.
Each Authenticating Agent for a Series, unless it is appointed Bond
Registrar for such Series, and the Trustee, for any Series for which it is not
the Bond Registrar, shall be a co-Bond Registrar for such Series. The Issuer
shall cause each co-Bond Registrar for a Series to furnish the Bond Registrar
for such Series promptly after each authentication of a Bond by it appropriate
information with respect thereto for entry by the Bond Registrar into the Bond
Register. If the Trustee shall at any time not be authorized to keep and
maintain the Bond Register, the Trustee shall have the right to inspect such
Bond Register at all reasonable times and to rely conclusively upon a
certificate of the Person in charge of the Bond Register as to the names and
addresses of the Holders of the Bonds and the principal amounts and numbers of
such Bonds as held. In the event that the Trustee is acting as Authenticating
Agent and the Trustee resigns as Trustee with respect to one or more Series of
Bonds, the Trustee may resign as Authenticating Agent with respect to the Bonds
of such Series or Classes, as applicable.
Subject to restrictions, if any, in the related Series Supplement, upon
surrender for registration of transfer of any Bond at the office or agency of
the Issuer to be maintained as provided in Section 3.2, the Issuer shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Bonds of any authorized
denominations, of the same Series and of a like aggregate principal amount and
Class.
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At the option of the Holder, Bonds may be exchanged for other Bonds of
any authorized denominations, of the same Series and of a like aggregate initial
principal amount and Class, upon surrender of the Bonds to be exchanged at such
office or agency. Bonds (other than Book Entry Bonds) of a Class which are
subject to redemption at the request of Bondholders and which are redeemed in
part, but not in whole, pursuant to Section 10.4 shall be surrendered at such
office or agency in exchange for new Bond certificates, without service charge,
in an aggregate principal amount equal to and in exchange for the unredeemed
portion of such Bond so surrendered. Whenever any Bonds are so surrendered for
exchange, the Issuer shall execute, and the Trustee shall authenticate and
deliver, the Bonds which the Bondholder making the exchange is entitled to
receive.
Subject to restrictions, if any, in the related Series Supplement, all
Bonds issued upon any registration of transfer or exchange of Bonds shall be the
valid obligations of the Issuer, evidencing the same debt, and entitled to the
same benefits under this Indenture, as the Bonds surrendered upon such
registration of transfer or exchange.
Every Bond 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 Trustee duly executed, by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Bonds, but the Issuer or the Bond Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge as may be imposed
in connection with any registration of transfer or exchange of Bonds, other than
exchanges pursuant to Section 2.8 not involving any transfer.
Except as otherwise specified in the related Series Supplement, neither
the Issuer nor the Bond Registrar shall be required to issue, register the
transfer of or exchange any Bonds which are subject to redemption at the request
of Bondholders of any Series during a period beginning at the opening of
business five (5) Business Days prior to the selection of Bonds of that Series
to be redeemed pursuant to Bondholder redemption under Section 10.4 and ending
at the close of business on the day of the mailing of any relevant notice of
redemption. No Bond which has been tendered for Bondholder redemption may be
transferred or exchanged unless such request for redemption is withdrawn.
In the case of a Class of Book Entry Bonds, the provisions of this
Section 2.7 may be supplemented by provisions in the related Series Supplement
and by applicable rules established by the Clearing Agency for such Class
providing for transfer of registration of Book Entry Bonds on the books of the
Clearing Agency.
SECTION 2.8 Mutilated, Destroyed, Lost or Stolen Bonds.
If (1) any mutilated Bond is surrendered to the Trustee or the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Bond, and (2) there is delivered to the Trustee such security or indemnity as
may be required by it to save each of the Issuer and the Trustee harmless, then,
in the absence of notice to the Issuer or the Trustee that such Bond has been
acquired
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by a bona fide purchaser, the Issuer shall execute and upon its request the
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Bond, a new Bond or Bonds of the same
Series, tenor, aggregate initial principal amount and Class bearing a number not
contemporaneously outstanding; provided, however, that if any such mutilated,
destroyed, lost or stolen Bond shall have become or shall be about to become due
and payable, or shall have become subject to redemption in full, instead of
issuing a new Bond, the Issuer may pay such Bond without surrender thereof,
except that any mutilated Bond shall be surrendered. If, after the delivery of
such new Bond or payment of a destroyed, lost or stolen Bond pursuant to the
proviso to the preceding sentence, a bona fide purchaser of the original Bond in
lieu of which such new Bond was issued presents for payment such original Bond,
the Issuer and the Trustee shall be entitled to recover such new Bond (or such
payment) from the Person to whom it was delivered or any Person taking such new
Bond from such Person, except a bona fide purchaser, and shall be entitled to
recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expenses incurred by the Issuer or the Trustee in
connection therewith.
Upon the issuance of any new Bond under this Section, the Issuer or the
Bond Registrar may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the Trustee or Bond
Registrar) connected therewith.
Every new Bond issued pursuant to this Section in lieu of any
destroyed, lost or stolen Bond shall constitute an original additional
contractual obligation of the Issuer, whether or not the destroyed, lost or
stolen Bond 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 Bonds of the same Series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Bonds.
SECTION 2.9 Payments of Principal and Interest.
(a) Any installment of interest or principal on a Bond, or the
Redemption Price of any Bond called for redemption, payable on any
Bonds of any Series which is punctually paid or duly provided for by
the Issuer on the applicable Payment Date shall be paid to the Person
in whose name such Bond (or one or more Predecessor Bonds) is
registered at the close of business on the Record Date for such Payment
Date in the manner provided for in the related Series Supplement. Any
installment of interest or principal not punctually paid or duly
provided for shall be payable in the manner and to the Persons
specified in subsec tion (c) of this Section 2.9.
(b) All reductions in the principal amount of a Bond (or one
or more Predecessor Bonds) effected by payments of installments of
principal made on any Payment Date or by the allocation of any Realized
Losses or a Junior Bond Write Down Amount to such Bond
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shall be binding upon all Holders of such Bond and of any Bond issued
upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, whether or not such payment or allocation of losses is
noted on such Bond. The final installment of principal of each Bond
(including the Redemption Price of any Bond called for redemption, if
such redemption will result in payment of the entire unpaid principal
amount of such Bond) shall be payable only upon presentation and
surrender thereof on or after the Payment Date therefor at the office
or agency of the Issuer maintained by it for such purpose in the
Borough of Manhattan, the City of New York, State of New York, pursuant
to Section 3.2.
Whenever, on the basis of Distributions on the Certificates
securing a Series received and expected to be received on the related
Distribution Date, the Issuer expects that the entire remaining unpaid
principal amount of any Bonds of such Series will become due and
payable on the next Principal Payment Date, unless specified otherwise
in the related Series Supplement it shall mail or cause to be mailed,
no later than five days prior to such Principal Payment Date, to each
Person in whose name a Bond to be so retired is registered at the close
of business on the tenth Business Day prior to such Principal Payment
Date, notwithstanding the Record Date otherwise applicable with respect
to such Series, a notice to the effect that:
(i) the Issuer expects that funds sufficient to pay
such final installment will be available in the Collection
Account on such Principal Payment Date, and
(ii) if such funds are available, (A) such final
installment will be payable on such Principal Payment Date,
but only upon presentation and surrender of such Bond at the
office or agency of the Issuer maintained for such purpose
pursuant to Section 3.2 (the address of which shall be set
forth in such notice), and (B) no interest shall accrue on
such Bond after such Principal Payment Date.
Notices in connection with redemptions or special redemptions of Bonds
shall contain the information set forth in, and be mailed in accordance
with, Section 10.2.
(c) If the entire amount of Accrued Bond Interest on any Class
of Bonds of a Series is not paid in full on any Interest Payment Date
by reason of a shortfall in Available Funds over the amount required to
pay such Accrued Bond Interest and any amount required to be paid out
of Available Funds in priority to such Accrued Bond Interest, the
amount of interest not paid on such Interest Payment Date (such amount
being the "Unpaid Interest") shall be payable on the following Interest
Payment Date, to the extent that Available Funds on such following
Interest Payment Date are sufficient and subject at all times to any
order of priority of payments out of Available Funds specified in the
related Series Supplement. No interest shall accrue or be payable on
any amounts of Unpaid Interest.
If the entire Principal Distribution Amount or aggregate
Accrued Bond Interest payable out of Available Funds on any Series of
Bonds on a Payment Date, or the entire Redemption Price payable in
connection with the redemption in whole of any Bond, which is due and
payable on any Redemption Date, shall not have been punctually paid or
duly
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provided for when and as due and payable (any Bond on which such an
amount due and pay able has not been punctually paid or duly provided
for being hereinafter referred to as an "Overdue Bond"), then each such
amount, together with, in the case of any Redemption Price not paid
when due, interest thereon from the date such amount was due until
paid, at the Bond Interest Rate of the related Bonds, shall be payable
on each subsequent Special Payment Date, to the extent only that funds
are available therefor in the related Collection Account, to the Person
entitled thereto as provided below. No interest shall accrue or be
payable on any Overdue Bond or any unpaid interest in respect thereof
except as expressly provided above.
Any reduction in the principal amount of any Overdue Bond (or
one or more Predecessor Bonds) effected by any payments made on a
Special Payment Date shall be binding upon all Holders of such Bond and
of any Bond issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, whether or not such payment is
noted on such Bond. Payments of interest on any overdue portion of the
Redemption Price of any Bond called for redemption shall, except as
provided below with respect to payment of the entire amount remaining
due on an Overdue Bond, be made to the Person entitled thereto as
provided below by check mailed to such Person's address as it appears
in the Bond Register or, if the criteria specified in paragraph (ii) of
Section 2.9(a) are fulfilled, by wire transfer to a depository
institution satisfactory to the Trustee, or by such other means as may
be agreed between the Trustee and the Holder of such Bond.
If funds sufficient to pay the entire amount remaining due on
any Overdue Bonds of a particular Class are expected to be available on
the next Special Payment Date for such Series, as shown on the Special
Payment Date Statement for such Special Payment Date, the Trustee, on
behalf of the Issuer, will notify each Person in whose name an Overdue
Bond to be so retired is registered at the close of business on the
Special Record Date that would otherwise be applicable to such Special
Payment Date, by notice mailed no later than five days after such
otherwise applicable Special Record Date, that sufficient funds are
expected to be available to make such payment and that, if such funds
are available, such payment will be made only upon presentation and
surrender of such Overdue Bond at the office or agency of the Issuer
maintained for such purpose pursuant to Section 3.2 (the address of
which shall be set forth in such notice). Upon the giving of such
notice, the entire amount then due and payable on any such Overdue Bond
shall, if sufficient funds are so available therefor, be payable only
upon presentation and surrender of such Overdue Bond to the office or
agency of the Issuer maintained for that purpose.
Other amounts payable with respect to any Overdue Bond as
provided above on any Special Payment Date shall be payable (i) to the
Person in whose name that Bond (or one or more Predecessor Bonds) is
registered at the close of business on the Special Record Date for such
Special Payment Date or (ii) in any other lawful manner not
inconsistent with the requirements of any securities exchange on which
such Bond may be listed and upon such notice as may be required by such
exchange, if, after notice given by the Issuer to the Trustee
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of the proposed payment pursuant to this provision, such manner of
payment shall be deemed practicable by the Trustee.
(d) Subject to the foregoing provisions of this Section, each
Bond delivered under this Indenture upon registration of transfer of or
in exchange for or in lieu of any other Bond shall carry the rights to
unpaid principal and interest that were carried by such other Bond. Any
checks mailed pursuant to subsection (a) or (c) of this Section 2.9 and
returned undelivered shall be held in accordance with Section 3.3.
(e) Not later than each Calculation Date for a Series, the
Trustee shall prepare and deliver to the Issuer a Payment Date
Statement with respect to the following Payment Date setting forth the
following items (unless otherwise specified in the related Series
Supplement):
(i) the Debt Service Requirement with respect to
such Series for the following Payment Date;
(ii) the aggregate amount of interest accrued during
the Interest Accrual Period relating to such Payment Date on
all Outstanding Bonds of such Series;
(iii) the aggregate amount of Accrued Bond Interest
payable (to the extent of Available Funds) on each Class of
Bonds of such Series then Outstanding, in accordance with the
order of priority of payment in the Series Supplement;
(iv) the amount of Net Interest Shortfalls and the
interest portion of all Realized Losses allocable to the Bonds
of such Series, or any Class or Classes thereof, on such
Payment Date;
(v) the aggregate amount of principal payable out
of Available Funds for such Payment Date in respect of each
Class of Bonds of such Series then Out standing, the principal
portion of any Realized Losses then allocable to the Bonds of
such Series and the Classes of Bonds to which such Realized
Losses are required to be allocated pursuant to the related
Series Supplement, and the amount of any Junior Bond Writedown
Amount then allocable to any Class of Junior Bonds of such
Series and the Class or Classes of Junior Bonds to which it is
allocable;
(vi) if such following Payment Date is an Initial
Interest Payment Date for any Class of Compound Interest Bonds
of such Series, the amount of interest payable thereon on such
Interest Payment Date, the amount of the installment of
principal, if any, due and payable on such Class of Compound
Interest Bonds on such Payment Date, and the amount, if any,
of accrued interest to be added to the principal of such Class
of Compound Interest Bonds on such Payment Date;
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(vii) whether the amount expected to be available in
the Collection Account on such Payment Date will be sufficient
to pay on such Payment Date all amounts specified in clauses
(iii) and (v) above, and, if not, the percentages of each such
amount which may be paid in accordance with the priorities set
forth in Section 8.2 from the amounts expected to be available
in the Collection Account for such Series;
(viii) the amounts included in such statement pursuant
to clauses (iii) and (v) above, expressed in each case per
Individual Bond, to be paid on such Payment Date and the
amount of Realized Losses and the portion of the Junior Bond
Write Down Amount, if any, to be allocated to each Individual
Bond of a Class of such Series;
(ix) Reserved
(x) Reserved
(xi) Reserved
(xii) Reserved
(xiii) the amount, if any, to be withdrawn from the
Collection Account by the Trustee in respect of the following
Payment Date pursuant to Section 8.2(d);
(xiv) the amount, if any, to be withdrawn from the
Collection Account and paid over to any firm of Independent
Accountants in respect of the following Payment Date pursuant
to Section 8.2(d);
(xv) Reserved
(xvi) the amount, if any, to be withdrawn from the
Collection Account after such following Payment Date and
transferred to the Expense Fund pursuant to Section 8.2(d);
(xvii) the amount, if any, to be withdrawn from the
Collection Account and paid over to the Issuer or its assignee
or the Residual Interest Holders in respect of the following
Payment Date pursuant to Section 8.2(d); and
(xviii) the Class Imputed Principal Balance and the
Class Current Principal Amount of the Bonds of each Class of
such Series which will remain after giving effect to the
payments and allocating all Realized Losses and Junior Bond
Write Down Amounts to be made or allocated on such Payment
Date (and, in the case of Compound Interest Bonds, after
giving effect to the interest accrued during the Inter-
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est Accrual Period for such Payment Date and added to the
principal thereof) expressed both on an aggregate basis and
per Individual Bond.
Each Payment Date Statement shall be delivered by the Trustee
to the Issuer and, where required by the applicable Series Supplement,
to the firm of Independent Accountants appointed by the Issuer pursuant
to Section 8.9(a). If the actual amount of Distributions received by
the Trustee on a Distribution Date differs from the expected amount of
Distributions used by the Trustee in accordance with Section 1.3(b) or
1.3(c), whichever is applicable, in determining the Debt Service
Requirement for a Payment Date, the Trustee shall immediately on such
Distribution Date (i) recompute all amounts in the related Payment Date
Statement to reflect the actual amount of Distributions on such
Distribution Date, (ii) revise such Payment Date Statement accordingly,
and (iii) deliver such revised Payment Date Statement to the Issuer
and, where required by the applicable Series Supple ment, to the
Independent Accountants. Upon such delivery, such revised Payment Date
Statement shall be controlling for all purposes under this Indenture.
(f) Not later than the fifth day after the Special Record Date
applicable to any Special Payment Date for any Overdue Bond of a
particular Series, the Trustee shall deliver to the Issuer a statement
(a "Special Payment Date Statement") with respect to such Series
setting forth:
(i) the amount of any overdue principal or any
overdue portion of the Redemption Price of any Overdue Bond of
such Series called for redemption and all unpaid interest
accrued on any Overdue Bonds called for redemption through the
preceding Special Payment Date or the Interest Accrual Period
for the preceding Payment Date (in the case of the first
Special Payment Date after such Bonds became Overdue Bonds)
which was not paid on such preceding Special Payment Date or
Payment Date, expressed both on an aggregate basis and per
Individual Bond of each Class included in such Overdue Bonds,
(ii) the amount of interest due and payable on such
Special Payment Date on the overdue portion of the Redemption
Price of any Bond of such Series called for redemption,
expressed both on an aggregate basis and per Individual Bond
of each Class included in such Overdue Bonds,
(iii) if such Special Payment Date is also a Payment
Date for that Series, the amounts required to be set forth in
clauses (i) through (v) of the Payment Date Statement with
respect to such Payment Date,
(iv) whether the amount expected to be on deposit in
the related Collection Account and available for payment to
the Bondholders in accordance with the priorities set forth in
Section 8.2(c) on such Special Payment Date and, if
applicable, such Payment Date is sufficient to pay on such
Special Payment Date all amounts specified in clauses (i)
through (iii) above, and, if not, the percentages of
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each amount specified in clauses (i) through (iii) above which
may be paid, in accordance with the priorities set forth in
said Section 8.2(c), from the amount expected to be on deposit
in the Collection Account for such Series on such Special
Payment Date and, if applicable, such Payment Date, and
(v) the amounts included in such Special Payment
Date Statement pursuant to clauses (i) through (iii) above,
expressed in each case per Individual Bond of each Class of
Bonds of such Series covered by such Special Payment Date
Statement which will remain unpaid after giving effect to
payment of the amounts expected to be on deposit in the
related Collection Account and available for payment on such
Special Payment Date and, if applicable, such Payment Date.
SECTION 2.10 Persons Deemed Owners.
Prior to due presentment for registration of transfer of any Bond, the
Issuer, the Trustee, any Agent and any other agent of the Issuer or the Trustee
may treat the Person in whose name any Bond is registered as the owner of such
Bond (a) on the applicable Record Date or Special Record Date for the purpose of
receiving payments of the principal of and interest on such Bond and (b) on any
other date for all other purposes whatsoever, whether or not such Bond is an
Overdue Bond, and neither the Issuer, the Trustee, any Agent nor any other agent
of the Issuer or the Trustee shall be affected by notice to the contrary.
SECTION 2.11 Cancellation.
All Bonds surrendered for payment, registration of transfer, exchange
or redemption shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly cancelled by it. The Issuer may
at any time deliver to the Trustee for cancellation any Bond previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Bonds so delivered shall be promptly cancelled by the
Trustee. No Bonds shall be authenticated in lieu of or in exchange for any Bonds
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Bonds held by the Trustee shall be held by the Trustee
in accordance with its standard retention policy, unless the Issuer shall direct
by an Issuer Order that they be destroyed or returned to it.
SECTION 2.12 Authentication and Delivery of Bonds.
Bonds of any one or more Series may from time to time be executed by
the Issuer and delivered to the Trustee for authentication, and thereupon the
same shall be authenticated and deliv ered by the Trustee, upon Issuer Request
and upon receipt by the Trustee of the following:
(a) an Issuer Resolution authorizing the execution,
authentication and delivery of such Bonds and the related Series
Supplement;
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(b) in case the Bonds to be authenticated and delivered are of
any Series not theretofore created, an appropriate Series Supplement,
accompanied by an Issuer Resolution authorizing such Series Supplement
(and, in the case of the first Series to be authenticated and delivered
hereunder, authorizing this Indenture), designating the new Series to
be created and prescribing, consistent with the applicable provisions
of this Indenture, the terms and provisions relating to the Bonds of
such Series;
(c) Opinions of Counsel addressed to the Trustee, complying
with the requirements of Section 11.1, and, except to the extent
provided otherwise in the related Series Supplement, to the effect
that:
(i) all instruments furnished to the Trustee in
connection with such Bonds conform to the requirements of this
Indenture and constitute all the documents required to be
delivered hereunder for the Trustee to authenticate and
deliver the Bonds then applied for;
(ii) all conditions precedent provided for in this
Indenture relating to the authentication and delivery of the
Bonds applied for have been complied with;
(iii) the Issuer has corporate power to execute and
deliver the Series Supplement relating to such Bonds (and, in
the case of the first Series to be authenti cated and
delivered hereunder, this Indenture), and to issue such Bonds
and has duly taken all necessary corporate action for those
purposes;
(iv) assuming due execution and delivery thereof by
the Trustee, this Indenture and the related Series Supplement,
as executed and delivered by the Issuer, are the valid, legal
and binding obligations of the Issuer, enforceable in
accordance with their terms, subject to bankruptcy,
reorganization, insolvency, arrangement, moratorium,
fraudulent or preferential conveyance and other similar laws
of general application affecting the enforcement of creditors'
rights generally and to general principles of equity
(regardless whether such enforceability is considered in a
proceeding in equity or at law); and the execution of such
Series Supplement is authorized or permitted by Section 9.1 of
this Indenture;
(v) the Bonds then applied for, when issued,
delivered, authenticated and paid for, will be the valid,
legal and binding non-recourse obligations of the Issuer,
entitled to the benefits of this Indenture and the related
Series Supplement, equally and ratably with all other Bonds of
such Series, except to the extent specified otherwise in the
related Series Supplement, if any, theretofore issued,
authenticated, delivered and paid for and then Outstanding
hereunder, and enforceable in accordance with their terms,
subject to bankruptcy, reorganization, insolvency,
arrangement, moratorium, fraudulent or preferential conveyance
and other similar laws of general application affecting the
enforcement of creditors' rights generally
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and to general principles of equity (regardless whether such
enforceability is considered in a proceeding in equity or at
law);
(vi) if a Guaranty Agreement applies to such Series,
such Guaranty Agreement has been duly executed and delivered
by the Guarantor and constitutes a valid, legal and binding
obligation of the Guarantor enforceable in accordance with its
terms, subject to bankruptcy, reorganization, insolvency,
arrangement, mora torium, fraudulent or preferential
conveyance and other similar laws of general application
affecting creditors' rights generally and to general
principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in
equity);
(vii) the Issuer has corporate power and authority to
Grant the Trust Estate for such Series to the Trustee as
security for the Bonds of such Series and has duly authorized
such Grant to the Trustee by all necessary corporate action;
(viii) the Series Supplement delivered to the Trustee
with such Opinion of Counsel creates a valid lien and/or
security interest in and subjects the Certificates securing
such Series and all proceeds therefrom and the Pledged
Accounts or Funds for such Series to the lien and security
interest of this Indenture;
(ix) such action has been taken with respect to
delivery of possession of the Trust Estate and with respect to
the recording and filing of this Indenture, the Series
Supplement for such Series, any other indentures supplemental
hereto and any other requisite documents and with respect to
the execution and filing of any financing statements as is
necessary to make effective and to perfect a first priority
lien and security interest created by this Indenture in the
Trust Estate for such Series, with either the details of such
action being recited therein, or the absence of any such
action being necessary to make such lien and security interest
effective and perfected being stated therein; and, with any
recording, filing, re-recording and re-filing of this
Indenture, the Series Supplement for such Series, any other
indentures supplemental hereto and any other requisite
documents and any execution and filing of any financing
statements and continuation statements that will, in the
opinion of such counsel, be required to maintain the lien and
security interest created by this Indenture in the Trust
Estate for such Series until February 15 of the year in which
the first Opinion of Counsel with respect to such Series is
required to be delivered under Section 3.6 being described
therein;
(x) this Indenture and the Series Supplement for
such Series have been duly qualified under the TIA, or that no
qualification of such Indenture under the TIA is necessary;
the execution of the Series Supplement for such Series
requires the requalification of this Indenture under the TIA,
or that no requalification of the Indenture under the TIA is
necessary by virtue of the execution of such Series
Supplement;
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(xi) the Issuer is not required to register as an
"investment company" under the Investment Company Act, as such
term is defined thereunder, and the Issuer is not under the
"control" of an "investment company," as such terms are
defined in the Investment Company Act;
(xii) the Pooling and Administration Agreement for
each such Con ventional Certificate has been duly authorized,
executed and delivered by the Administrator and constitutes
the legal, valid and binding agreement of the Administrator
enforceable in accordance with its terms, subject to
bankruptcy, reorganization, insolvency, arrangement,
moratorium, fraudulent or preferential conveyance and other
similar laws of general application affecting creditors'
rights generally and to general principles of equity
(regardless of whether such enforceability is considered in a
proceeding at law or in equity);
(xiii) each Conventional Certificate Granted to the
Trustee is validly issued and outstanding and entitled to the
benefit of the related Pooling and Administration Agreement;
(xiv) no authorization, approval or consent of any
governmental body having jurisdiction in the premises which
has not been obtained by the Issuer is required for the valid
issuance and delivery of the Bonds; and
(xv) if an election or elections has or have been or
will be made to treat the Trust Estate securing the Series, or
any other assets securing a Series, as identified in such
election or elections, as a REMICs, (1) assuming the proper
making of each such election, (2) compliance with the
pertinent provisions of this Indenture, and (3) continuing
compliance with the applicable provisions of the Code, the
Trust Estate or such assets will qualify as a REMIC, each
Class of Bonds designated in the related Series Supplement as
"regular interests" in a REMIC will be treated as "regular
interests" in such REMIC and each Class of Bonds or other
security designated in the related Series Supplement as a
"residual interest" in a REMIC will be treated, in the
aggregate, as the single Class of "residual interests" in such
REMIC.
The Opinion of Counsel delivered to the Trustee at the closing
of the related Series of Bonds may differ from the Opinion of Counsel
described in this Section 2.12(c) so long as the Opinion of Counsel so
delivered is acceptable to each Rating Agency, which shall be
conclusively evidenced by the delivery at the Closing of each such
Rating Agency's rating letter.
(d) an Officers' Certificate complying with the requirements
of Section 11.1 and stating that:
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(i) the Issuer is not in Default under this
Indenture and the issuance of the Bonds applied for will not
result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, the Issuer's
certificate of incorporation or by-laws or any indenture,
mortgage, deed of trust or other agreement or instrument to
which the Issuer is a party or by which it is bound, or any
order of any court or administrative agency entered in any
proceeding to which the Issuer is a party or by which it may
be bound or to which it may be subject;
(ii) all conditions precedent provided in this
Indenture relating to the authentication and delivery of the
Bonds applied for have been complied with;
(iii) the Issuer is the owner of each Certificate
securing such Series, has not assigned any interest or
participation in any such Certificate (or, if any such
interest or participation has been assigned, it has been
released) and has the right to Grant each such Certificate to
the Trustee;
(iv) the Issuer has Granted to the Trustee all of
its right, title, and interest in each such Certificate; and
(v) attached thereto are true and correct copies of
letters signed by one or more nationally recognized
statistical rating agencies confirming that the Bonds of such
Series have been rated in the rating category specified for
such Class in the Prospectus Supplement or Private Placement
Memorandum (as applicable) relative to such Series by each
such rating agency.
(e) [Reserved]
(f) All of the Certificates and any other assets to be
included in a Collateral Group securing such Series, or, in the case of
Uncertificated Certificates, Advices issued for each such
Uncertificated Certificate by the Person or Persons in whose name such
Uncertificated Certificate is registered, in each case as listed on
Schedule A to the applicable Series Supplement; which Certificates,
assets and Uncertificated Certificates
(i) shall have
(A) an aggregate initial Certificate
Principal Amount at least equal to the aggregate
initial Original Principal Amount of the Bonds
proposed to be authenticated and delivered, and
(B) aggregate scheduled Distributions on
each Distribution Date which, together with
(1) the amount, if any, to be
deposited in the Collection Account on the
Closing Date pursuant to clause (g) below,
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(2) income that can be earned from
the reinvestment of Distributions and to
which the Bondholders are entitled (as
specified in the related Series Supplement)
and all other amounts receivable with
respect to the assets securing such Series,
computed as described in subsection
(e)(i)(E) above, and
(3) all other amounts, if any,
available for such purpose and required
hereby or by the related Series Supplement
to be depos ited in the Collection Account
on or prior to the Payment Date immediately
following the related Distribution Date, are
sufficient,
when applied, in accordance with the terms hereof and
the related Series Supplement, to payments of
principal of and interest on the Bonds (under the
Maximum Bond Interest Rate Assumption if such Series
of Bonds includes a Class or Classes of Variable Rate
Bonds),
(1) to pay on each Payment Date for
such Series (after deduction of all fees and
expenses then due to the Trustee pursuant to
the related Series Supplement) all interest
(under the Maximum Bond Interest Rate
Assumption if such Series of Bonds includes
a Class or Classes of Variable Rate Bonds)
then due and payable on the Bonds proposed
to be authenticated and delivered, and
(2) to pay the entire principal
amount of each Class of such Bonds on or
prior to the Stated Maturity of the final
installment of principal thereof;
The certificate delivered to the Trustee pursuant to Section 2.12(d)
shall conclusively evidence compliance with such requirement.
(ii) shall otherwise satisfy each of the
requirements established for such Certificates in the related
Series Supplement; and
(iii) shall have been registered in the name of the
Trustee (or, if requested by the Trustee, in the name of a
Qualified Nominee); provided, that the Issuer may, at its sole
option, instead request the Trustee to cause all of such
Certificates to be so registered promptly following the
Closing Date for such Series, in which event such Certificates
shall be accompanied by such powers and shall otherwise be in
such form as shall permit the registration thereof in the name
of the Trustee or its Qualified Nominee without the taking of
any further action other than presentation for registration of
transfer and payment of the applicable fees in connection
therewith. (The Trustee, by its acceptance of such
Certificates, shall be deemed to have agreed to present them
for registration of transfer no later than the opening of
business on the last Business Day of the Month of Closing and
to pay the
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applicable transfer fees, subject to its right of
reimbursement under Section 6.7); and, provided, further that
in the case of Certificates issuable in book-entry form only,
in lieu of delivering such Certificates the Issuer shall take
such actions to effect the Grant thereof to the Trustee as are
specified in the related Series Supplement.
(g) Cash in the amount, if any, required by the terms of the
related Series Supplement to be deposited in the Collection Account for
such Series and held by the Trustee and applied in accordance with
Section 8.2, and if there is an Expense Fund for such Series, cash or
Eligible Investments in the amount specified in the related Series
Supplement.
(h) [Reserved]
(i) Such certificates, insurance policies, surety bonds,
instruments, opinions or other documents as may be required by the
terms of the Series Supplement creating such Series.
(j) If such Series or any Class or Classes of such Series is
directly insured, guaranteed or otherwise backed, the Guaranty
Agreement for such Series.
(k) A certificate of an Independent Person appointed by an
Issuer Order, whose regular business activity includes valuing
securities similar to the Certificates securing such Series, as to the
fair market value of such Certificates, which determination of fair
market value shall, unless otherwise provided in the related Series
Supplement, be based upon generally available market quotations as of a
date not earlier than three Business Days prior to the related Closing
Date.
(l) Such other documents, certificates, instruments or
opinions as may be required by the terms of the Series Supplement
creating such Series of Bonds.
SECTION 2.13 Book Entry Bonds.
Unless provided otherwise in the related Series Supplement, each Class
of Bonds subject to redemption at the request of Bondholders shall, and any
other class of any Series, may, if specified in the related Series Supplement,
be issued initially as a single certificate in the name of a Clearing Agency
maintaining book entry records with respect to ownership and transfer of such
Bonds, or its nominee, or a custodian bank of such Clearing Agency, or its
nominee, and registration of such Bonds may not be transferred by the Trustee or
Bond Registrar except under the conditions, if any, described in the related
Series Supplement. In such case, the Trustee shall deal with the Clearing Agency
and Clearing Agency Participants as representatives of the Beneficial Owners of
such Bonds for purposes of exercising the rights of Bondholders hereunder, as
provided in the related Series Supplement. Requests and directions from, and
votes of, such representatives shall not be deemed to be inconsistent if they
are made with respect to different Beneficial Owners.
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SECTION 2.14 Termination of Book Entry System.
(a) Except as otherwise provided in the related Series
Supplement, the book entry system through the Clearing Agency with
respect to any Class of Book Entry Bonds may be terminated upon the
happening of any of the following:
(i) The Clearing Agency or the Issuer advises the
Trustee that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities under the
respective Letter Agreement and the Issuer is unable to
locate a qualified successor clearing agency satisfactory
to the Trustee and the Issuer;
(ii) The Issuer, in its sole discretion but with the
consent of the Trustee, elects to terminate the book entry
system by notice to the Clearing Agency and the Trustee;
or
(iii) After the occurrence of an Event of Default (at
which time the Trustee shall use all reasonable efforts to
promptly notify each Beneficial Owner through the Clearing
Agency of such Event of Default when such notice shall be
given pursuant to Section 6.2, the Beneficial Owners of a
majority in Aggregate Current Principal Amount of the Book
Entry Bonds advise the Trustee in writing, through the
related Clearing Agency Participants and the Clearing
Agency, that the continuation of a book entry system
through the Clearing Agency to the exclusion of any
Definitive Bond certificates being issued to any person
other than the Clearing Agency or its nominee is no longer
in the best interests of the Beneficial Owners.
(b) Upon the occurrence of any event described in subsection
(a) above, the Trustee shall use all reasonable efforts to notify all
Beneficial Owners, through the Clearing Agency, of the occurrence of
such event and of the availability of Definitive Bond certificates to
Beneficial Owners requesting the same, in an Aggregate Current
Principal Amount representing the interest of each, making such
adjustments and allowances as it may find necessary or appropriate as
to accrued interest and previous calls for redemption or special
redemption. Definitive Bond certificates shall be issued only upon
surrender to the Trustee of the Bond by the Clearing Agency,
accompanied by registration instructions for the Definitive Bond
certificates. Neither the Issuer nor the Trustee shall be liable for
any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon
issuance of the Definitive Bond certificates, all references herein and
in the Series Supplement to obligations imposed upon or to be performed
by the Clearing Agency shall cease to be applicable and the provisions
relating to Definitive Bonds shall be applicable.
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SECTION 2.15 Restrictions on Transfer of Certain Classes of Bonds.
(a) No legal or beneficial interest in all or any portion of
any Residual Bonds of any Series may be transferred directly or
indirectly to (i) a Disqualified Organization or an agent of a
Disqualified Organization (including a broker, nominee, or middleman),
(ii) an entity that holds REMIC residual securities as nominee to
facilitate the clearance and settlement of such securities through
electronic book entry changes in accounts of participating
organizations (a "Book-Entry Nominee"), or (iii) an individual,
corporation, partnership or other person unless such transferee (A) is
not a Non-U.S. Person or (B) is a Non-U.S. Person that will hold such
Residual Bond in connection with the conduct of a trade or business
within the United States and has furnished the transferor and the
Trustee with an effective Internal Revenue Service Form 4224 or (C) is
a Non-U.S. Person that has delivered to both the transferor and the
Trustee an opinion of a nationally recognized tax counsel to the effect
that the transfer of a Residual Bond to it is in accordance with the
requirements of the Code and the regulations promulgated thereunder and
that such transfer of a Residual Bond will not be disregarded for
federal income tax purposes (any such person who is not covered by
clause (A), (B) or (C) above being referred to herein as "Non-permitted
Foreign Holder"), and any such purported transfer shall be void and
have no effect. The Trustee shall not authenticate and deliver a
Residual Bond in connection with any transfer thereof unless the
transferor shall have provided to the Trustee an affidavit,
substantially in the form attached as Exhibit B to the related Series
Supplement, signed by the transferee.
The affidavit described in the preceding paragraph, if not
executed in connection with the initial issuance of the Residual Bonds
of any relevant Series, shall be accompanied by a written statement in
the form attached as Exhibit E to the related Series Supplement, signed
by the transferor of any such Residual Bond. The Residual Bonds (if
any) of each Series shall bear a legend referring to the foregoing
restrictions contained in this paragraph and the preceding paragraph.
Upon written notice to the Trustee that any legal or
beneficial interest in any portion of a Residual Bond of any Series has
been transferred, directly or indirectly, to a Disqualified
Organization or agent thereof (including a broker, nominee, or
middleman) in contravention of the foregoing restrictions, (i) such
transferee shall be deemed to hold such Residual Bond in constructive
trust for the last transferor who was not a Disqualified Organization
or agent thereof, and such transferor shall be restored as the owner of
such Residual Bond as completely as if such transfer had never
occurred, provided that the Trustee may, but is not required to,
recover any payments made to such transferee with respect to such
Residual Bond and return such recovery to the transferor, and (ii) the
Trustee agrees, at the Issuer's expense, to furnish to the Internal
Revenue Service and to any transferor of such Residual Bond or such
agent (within 60 days of the request therefor by the transferor or
agent) such information necessary to the application of Section 860E(e)
of the Code as may be required by the Code, including but not limited
to the present value of the total anticipated excess inclusions with
respect to such Residual Bond (or portion thereof) for periods after
such transfer. At the election of the Trustee, the cost to the Trustee
of computing and furnishing
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such information may be charged to the transferor or such agent
referred to above; however, the Trustee shall in no event be excused
from furnishing such information.
The restrictions on transfers of the Residual Bonds of any
Series set forth in the preceding three paragraphs shall cease to apply
to transfers (and the applicable portions of the legend to such
Residual Bonds may be deleted) after delivery to the Trustee of an
Opinion of Counsel to the effect that the elimination of such
restrictions will not cause a REMIC Loss.
(b) No transfer of a Restricted Bond of any Series shall be
made unless such transfer is exempt from the registration requirements
of the Securities Act of 1933, as amended (the "Act"), and any
applicable state securities laws, or is made in accordance with the Act
and any applicable state securities laws. As a condition precedent to
the transfer of a Restricted Bond, (i) the Trustee shall require a
written opinion of counsel, which counsel shall be acceptable to the
Trustee, that such transfer may be made pursuant to an exemption from
the Act and any applicable state securities laws (which opinion shall
not be at the expense of the Trustee) or (ii) the Trustee shall require
the transferee to execute an investment letter in the form
substantially as set forth in Exhibit F to the related Series
Supplement or in such other form as may be acceptable to the Trustee,
certifying as to the facts surrounding such transfer. The holder of any
Restricted Bond desiring to effect the transfer thereof shall, and
hereby agrees to, indemnify the Trustee and the Issuer against any
liability that may result if the transfer thereof is not so exempt or
is not made in accordance with such federal and state laws. Such
agreement to so indemnify the Trustee and the Issuer shall survive the
termination of this Agreement.
(c) No transfer of an ERISA Restricted Bond (if any) of a
Series shall be made to any Person unless the Trustee has received (A)
either (i) a certificate substantially in the form of Exhibit D to the
related Series Supplement, from such transferee to the effect that such
transferee is not a Plan or a Person that is using the assets of a Plan
to acquire such ERISA Restricted Bond or (ii) a certificate in such
form and substance as shall be satisfactory to the Trustee and the
Issuer in lieu of the Certificate attached as Exhibit D or (B) an
opinion of counsel, which counsel shall be satisfactory to the Trustee
and the Issuer to the effect that the purchase and holding of such
ERISA Restricted Bond will not constitute or result in the assets of
the Trust Estate being deemed to be "plan assets" subject to the
prohibited transactions provisions of ERISA or Section 4975 of the Code
and will not subject the Trustee, the Certificate Trustee, the
Administrator relative to such Series or the Issuer to any obligation
in addition to those undertaken in this Indenture or in the related
Pooling and Administration Agreement; provided, however, that the
Trustee will not require such certificate or opinion if, as a result of
a change of law or otherwise, counsel satisfactory to the Trustee has
rendered an opinion to the effect that the purchase and holding of an
ERISA Restricted Bond by a Plan or a Person that is purchasing or
holding such ERISA Restricted Bond with the assets of a Plan will not
constitute or result in a prohibited transaction under ERISA or Section
4975 of the Code. The preparation and delivery of the certificate and
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opinions referred to above shall not be an expense of the Trust Estate,
the Trust, the Certificate Trustee, the Administrator relative to such
Series or the Issuer.
(i) No transfer of an ERISA Prohibited Bond shall be
made to any Person unless the Trustee has received a
certificate (substantially in the form of Exhibit B to the
related Series Supplement in the case of a Residual Bond, or
containing a certification substantially as set forth in
paragraph 17 of Exhibit B to the related Series Supplement, in
the case of an ERISA Prohibited Bond that is not a Residual
Bond) from such transferee to the effect that, among other
things, such transferee is not a Plan or a Person that is
using the assets of a Plan to acquire any such Bond. The
preparation and delivery of such certificate shall not be an
expense of the Trust Estate, the Trustee, the Issuer.
(d) Subject to Section 6.1 hereof, the Trustee may
conclusively rely upon any certificate, affidavit or opinion delivered
pursuant to Section 2.15(a), (b), or (c).
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ARTICLE III
COVENANTS
SECTION 3.1 Payment of Bonds.
The Issuer will pay or cause to be duly and punctually paid the
principal of, and interest on, the Bonds of each Series in accordance with the
terms of such Bonds and this Indenture. The Bonds of each Series shall be
non-recourse obligations of the Issuer and shall be limited in right of payment
to amounts available from the Trust Estate relative to such Series as provided
in this Indenture and the Issuer shall not otherwise be liable for payments on
the Bonds. No person shall be personally liable for any amounts payable under
the Bonds. If any other provision of this Indenture conflicts or is deemed to
conflict with the provisions of this Section 3.1, the provisions of this Section
3.1 shall control.
SECTION 3.2 Maintenance of Office or Agency.
The Issuer will maintain in the Borough of Manhattan, the City of New
York, the State of New York an office or agency where Bonds may be presented or
surrendered for payment or may be surrendered for registration of transfer or
exchange, and where notices and demands to or upon the Issuer in respect of the
Bonds and this Indenture may be served. The Issuer will give prompt written
notice to the Trustee of the location and any change in the location of such
office or agency. Until written notice of any change in the location of such
office or agency is delivered to the Trustee or if at any time the Issuer shall
fail to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, Bonds may be so presented or surrendered, and
such notices and demands may be made or served, at the New York Office, and the
Issuer hereby appoints the New York Agent as its agent in the City of New York,
for the foregoing purposes.
The Issuer may also from time to time designate one or more other
offices or agencies (in or outside the City of New York) where the Bonds may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that (i) no such designation or
rescission shall in any manner relieve the Issuer of its obligation to maintain
an office or agency in the Borough of Manhattan, the City of New York, the State
of New York for the purposes set forth in the preceding paragraph, (ii)
presentations or surrenders of Bonds for payment may be made only in the City of
New York, the State of New York and (iii) any designation of an office or agency
for payment of Bonds shall be subject to Section 3.3. The Issuer will give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
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SECTION 3.3 Money for Bond Payments to Be Held in Trust.
All payments of amounts due and payable with respect to any Bonds which
are to be made from amounts withdrawn from the related Collection Account
pursuant to Section 8.2(c) or Section 5.8 shall be made on behalf of the Issuer
by the Trustee or by a Paying Agent, and no amounts so withdrawn from a
Collection Account for payments of Bonds shall be paid over to the Issuer under
any circumstances except as provided in this Section 3.3 or in Section 5.8.
When the Issuer shall have a Paying Agent for a Series that is not also
the Bond Registrar for such Series, it shall furnish, or cause the Bond
Registrar for such Series to furnish, no later than
(a) the fifth calendar day after each Record Date for such
Series, and
(b) the fifth calendar day after each Special Record Date
applicable to a Special Payment Date for such Series,
a list, in such form as such Paying Agent may reasonably require, of the names
and addresses of the Holders of Bonds of such Series and of the number of
Individual Bonds of each Class of such Series held by each such Holder.
Whenever the Issuer shall have a Paying Agent other than the Trustee,
it will, on or before the Business Day next preceding each Payment Date and
Special Payment Date for each Series of Bonds, direct the Trustee to deposit
with such Paying Agent an aggregate sum sufficient to pay the amounts then
becoming due (to the extent funds are then available for such purpose in the
Collection Account for such Series), such sum to be held in trust for the
benefit of the Persons entitled thereto. Any moneys deposited with a Paying
Agent in excess of an amount sufficient to pay the amounts then becoming due on
the Bonds with respect to which such deposit was made shall, upon Issuer Order,
be paid over by such Paying Agent to the Trustee for application in accordance
with Article VIII.
Any Paying Agent shall be appointed by Issuer Order. The Issuer shall
not appoint any Paying Agent (other than the Trustee) which is not, at the time
of such appointment, a depository institution or trust company whose obligations
would be Eligible Investments pursuant to clause (ii) of the definition of the
term "Eligible Investment". In the event that the Trustee is acting as Paying
Agent and the Trustee resigns as Trustee with respect to one or more Series of
Bonds (or to the extent permitted in any Series Supplement, with respect to one
or more Classes within a Series), the Trustee may resign as Paying Agent with
respect to the Bonds of such Series or Classes, as applicable. The Issuer will
cause each Paying Agent other than the Trustee to execute and deliver to the
Trustee an instrument in which such Paying Agent shall agree with the Trustee
(and if the Trustee acts as Paying Agent, it hereby so agrees), subject to the
provisions of this Section, that such Paying Agent will:
(1) allocate all sums received for payment to the Holders of
Bonds of each Series for which it is acting as Paying Agent on each
Payment Date and Special Payment Date
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among such Holders in the proportion specified in the applicable
Payment Date Statement and Special Payment Date Statement, as the case
may be, in each case to the extent permitted by applicable law;
(2) hold all sums held by it for the payment of amounts due
with respect to the Bonds in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(3) if such Paying Agent is not the Trustee, immediately
resign as a Paying Agent and forthwith pay to the Trustee all sums held
by it in trust for the payment of Bonds if at any time it ceases to
meet the standards set forth above required to be met by a Paying Agent
at the time of its appointment;
(4) if such Paying Agent is not the Trustee, give the Trustee
notice of any Default by the Issuer (or any other obligor upon the
Bonds) in the making of any payment required to be made with respect to
any Series of Bonds for which it is acting as Paying Agent;
(5) if such Paying Agent is not the Trustee, at any time
during the continuance of any such Default, upon the written request of
the Trustee, forthwith pay to the Trustee all sums so held in trust by
such Paying Agent; and
(6) comply with all requirements of the Code with respect to
the withholding from any payments made by it on any Bonds of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith; provided,
however, that with respect to withholding and reporting requirements
applicable to original issue discount (if any) on any Class of Bonds,
the Issuer shall have first provided the calculations pertaining
thereto to the Trustee.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent, if other than the Trustee, to pay to the Trustee
all sums held in trust by such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by 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.
Except as provided by applicable law, any money held by the Trustee or
any Paying Agent in trust for the payment of any amount due with respect to any
Bond and remaining unclaimed for two and one-half years after such amount has
become due and payable to the Holder of such Bond (or, if earlier, three months
prior to the date on which such amount would escheat to a governmental entity
under applicable law) shall be discharged from such trust and paid to the
Issuer; and the Holder of such Bond shall thereafter, as an unsecured general
creditor, look only to the Issuer for payment thereof (but only to the extent of
the amounts so paid to the Issuer), and all liability of the Trustee or such
Paying Agent with respect to such trust money shall thereupon cease; provided,
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however, that if an election has been or will be made to treat the Trust Estate
securing the Series or any other assets specified in a REMIC election relative
to such Series, as a REMIC, any such unclaimed funds shall be paid to the state
pursuant to applicable escheat laws and in such event the Holder of such Bond
shall thereafter look only to such state for payment thereof and all liability
of the Issuer, the Trustee or such Paying Agent with respect to such trust money
shall thereupon cease. The Trustee may adopt and employ, at the expense of the
Issuer, any reasonable means of notification of such repayment (including, but
not limited to, mailing notice of such repayment to Holders whose Bonds have
been called but have not been surrendered for redemption or whose right to or
interest in moneys due and payable but not claimed is determinable from the
records of the Trustee or any Agent, at the last address of record for each such
Holder).
SECTION 3.4 Corporate Existence.
(a) Subject to Section 3.4(b) and (c), the Issuer will keep in
full effect its existence, rights and franchises as a corporation under
the laws of the State of Delaware or under the laws of any other state
or the United States of America, and will obtain and preserve its
qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Indenture, the Bonds or
any of the Certificates.
(b) Any corporation into which the Issuer hereunder may be
merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which such Issuer
hereunder shall be a party, shall be the successor Issuer under this
Indenture without the execution or filing of any paper, instrument or
further act to be done on the part of the parties hereto, anything
herein, or in any agreement relating to such merger or consolidation,
by which any such Issuer may seek to retain certain powers, rights and
privileges theretofore obtaining for any period of time following such
merger or consolidation, to the contrary notwithstanding.
(c) Upon any consolidation or merger of or other succession to
the Issuer in accordance with Section 3.4(b) hereof, the Person formed
by or surviving such consolidation or merger (if other than the Issuer)
may exercise every right and power of the Issuer under this Indenture
with the same effect as if such Person had been named as the Issuer
herein.
SECTION 3.5 Protection of Trust Estate.
The Issuer will from time to time execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance, and other
instruments, and will take such other action as may be necessary or advisable to
(i) Grant more effectively all or any portion of a Trust
Estate,
(ii) maintain or preserve the lien of this Indenture or carry
out more effectively the purposes hereof,
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(iii) perfect, publish notice of, or protect the validity of,
any Grant made or to be made by this Indenture,
(iv) enforce any of the Certificates, or
(v) preserve and defend title to any Certificate or other
instrument included in a Trust Estate and the rights of the Trustee,
and of the Bondholders of the Series secured thereby, in such
Certificate or other instrument against the claims of all persons and
parties.
The Issuer hereby designates the Trustee its agent and attorney-in-fact to
execute, upon the Issuer's failure to do so, any financing statement,
continuation statement or other instrument required pursuant to this Section
3.5; provided, however, that such designation shall not be deemed to create a
duty in the Trustee to monitor the compliance of the Issuer with the foregoing
covenants and provided, further, that the duty of the Trustee to execute any
instrument required pursuant to this Section 3.5 shall arise only if the Trustee
has knowledge of any failure of the Issuer to comply with the provisions of this
Section 3.5.
SECTION 3.6 Opinions as to Trust Estate.
On or before February 15 in each calendar year, the Issuer shall
furnish to the Trustee an Opinion of Counsel either stating that, in the opinion
of such counsel, such action has been taken with respect to the recording,
filing, re-recording and re-filing of this Indenture, any indentures
supplemental hereto and any other requisite documents and with respect to the
execution and filing of any financing statements and continuation statements as
is necessary to maintain the lien and security interest created by this
Indenture with respect to the Trust Estate for such Series and reciting the
details of such action or stating that in the opinion of such counsel no such
action is necessary to maintain such lien and security interest. Such Opinion of
Counsel shall also describe the recording, filing, re-recording and re-filing of
this Indenture, any indentures supplemental hereto and any other requisite
documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest of this Indenture with respect to the
Trust Estate for such Series until February 15 in the following calendar year.
The Trustee shall not remove any portion of any Trust Estate that
consists of money or is evidenced by an instrument, certificate or other writing
from the jurisdiction in which it was held at the date the most recent opinion
of Counsel was delivered pursuant to this Section 3.6 (or from the jurisdiction
in which it was held as described in the Opinion of Counsel delivered at the
Closing Date pursuant to Section 2.12(c), if no Opinion of Counsel has yet been
delivered pursuant to this Section 3.6) or cause or permit ownership or the
pledge of any portion of the Trust Estate that consists of book-entry securities
to be recorded on the books of a Person located in a different juris diction
from the jurisdiction in which such ownership or pledge was recorded at such
date unless the Trustee shall have first received an Opinion of Counsel to the
effect that the lien and security interest
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created by this Indenture with respect to such property will continue to be
maintained after giving effect to such action or actions.
SECTION 3.7 Performance of Obligations.
The Issuer will not take any action or permit any action to be taken by
others which would release any Person from any of such Person's covenants or
obligations under any instrument included in a Trust Estate, or which would
result in the amendment, hypothecation, subordination, termination or discharge
of, or impair the validity or effectiveness of, any such instrument, except as
expressly provided in this Indenture.
SECTION 3.8 Negative Covenants.
The Issuer will not:
(a) sell, transfer, exchange or otherwise dispose of any
portion of a Trust Estate except as expressly permitted by this
Indenture;
(b) claim any credit on, or make any deduction from, the
principal of, or interest on, any of the Bonds by reason of the payment
of any taxes levied or assessed upon any por tion of a Trust Estate;
(c) (i) engage in any business or activity other than in
connection with, or relating to, the issuance of Bonds pursuant to this
Indenture or any Series Supplement or the issuance of bonds permitted
under clause (d) below, or (ii) amend Article III or VIII of its
Certificate of Incorporation, as in effect on the Closing Date for the
initial Series of Bonds, without, in each case, the consent of the
Holders of not less than 662/3% of the Aggregate Current Principal
Amount of the Bonds of each Series then Outstanding;
(d) issue bonds under any other indenture unless such bonds
are non-recourse obligations of the Issuer;
(e) incur, assume, guaranty or agree to indemnify any
indebtedness of any Person, except for such indebtedness as may be
incurred by the Issuer in connection with the issuance of a Series of
Bonds pursuant to this Indenture or any Series Supplement or as
permitted under clause (d) above or indebtedness which, if consisting
of indebtedness other than Bonds or indebtedness permitted under clause
(d) above, (i) shall either be (1) subordinate to each Series of Bonds
issued pursuant to the Indenture or (2) secured by collateral other
than the Trust Estate and to which the creditor with respect to such
indebtedness has recourse only to such collateral and not to any other
assets of the Issuer and (ii) shall provide that the holder thereof may
not file a petition in any bankruptcy or insolvency proceeding with
respect to the Issuer until not less than 91 days after payment in full
of all Outstanding Bonds issued pursuant to this Indenture;
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(f) dissolve or liquidate in whole or in part;
(g) merge or consolidate with any corporation other than an
Affiliate of the Issuer, any such merger or consolidation with an
Affiliate of the Issuer to be subject to the following conditions:
(1) the surviving or resulting entity shall be a
corporation organized under the laws of the United States or
any state thereof and its certificate of incorporation shall
contain substantially the same restrictions as are contained
in Articles III and VIII of the Issuer's Certificate of
Incorporation;
(2) the surviving or resulting corporation (if other
than the Issuer) shall expressly assume by an indenture
supplemental hereto all of the Issuer's obligations hereunder;
(3) the consummation of such merger or consolidation
shall not result in the lowering of any rating of the
Outstanding Bonds of any Series by the rating agencies that
rated the initial Series of Bonds; and
(4) immediately after consummation of the merger or
consolidation no Default shall exist with respect to any
Series;
(h) (1) permit the validity or effectiveness of this Indenture
or any Grant under the related Series Supplement to be impaired, or
permit the lien of this Indenture to be amended, hypothecated,
subordinated, terminated or discharged with respect to any Series, or
permit any Person to be released from any covenants or obligations with
respect to any Series under this Indenture, except as may be expressly
permitted hereby or by any Series Supplement, (2) permit any lien,
charge, security interest, mortgage or other encumbrance (other than
the lien of this Indenture or any Permitted Encumbrance) to be created
on or extend to or otherwise arise upon or burden the Trust Estate for
any Series or any part thereof or any interest therein or the proceeds
thereof, so long as such proceeds remain a part of the Trust Estate, or
(3) permit the lien of this Indenture not to constitute a valid first
priority security interest in the Trust Estate securing any Series; or
(i) take any action, or omit to take any action, if such
action or omission may (i) cause any Trust Estate or any other assets
securing a Series of Bonds and in respect of which a REMIC election has
been made to fail to qualify as a REMIC during any taxable year, or
(ii) cause or permit any REMIC relative to any Series to engage in any
"prohibited transaction" as defined in Section 860F of the Code.
SECTION 3.9 Annual Statement as to Compliance.
On or before 120 days after the end of the first fiscal year of the
Issuer which ends more than three months after the Closing Date for a Series,
and each fiscal year thereafter, the Issuer shall
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deliver to the Trustee a brief statement with respect to such Series, signed by
its principal executive officer, principal financial officer or principal
accounting officer, that
(1) a review of the fulfillment by the Issuer during such year
of its obligations under this Indenture has been made under such
officer's supervision; and
(2) to the best of such officer's knowledge, based on such
review, the Issuer has complied with all conditions and covenants under
this Indenture throughout such year, or, if there has been a Default in
the fulfillment of any such obligation, specifying each such Default
known to such officer and the nature and status thereof. For purposes
of this paragraph, such compliance shall be determined without regard
to any period of grace or requirement of notice provided under the
Indenture.
SECTION 3.10 Contribution of Assets.
Except as otherwise provided in the related Series Supplement, if an
election has been made or will be made to treat the Trust Estate or any other
assets specified in such election securing the related Series as a REMIC,
following the Closing Date, the Trustee shall not accept any contribution of
additional assets to the Trust Estate or such other assets, unless it has
received a Non-Disqualification Opinion with respect thereto and an opinion of
counsel that the contribution will not result in the imposition of a penalty tax
under the Code on the related REMIC.
SECTION 3.11 Successor Substituted.
Upon any consolidation or merger in accordance with Section 3.8(g), the
person resulting from or surviving such consolidation or merger (if other than
the Issuer) shall succeed to, and be substituted for, and may exercise every
right and power of the Issuer under the Indenture with the same effect as if
such Person had been named as the Issuer herein. Promptly upon the occurrence of
any such succession, such Person shall give notice thereof to the Trustee.
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ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture.
Whenever the following conditions shall have been satisfied with
respect to a Series:
(1) either
(A) all Bonds of such Series theretofore
authenticated and delivered (other than (i) Bonds which have
been destroyed, lost or stolen and which have been replaced or
paid as provided in Section 2.8, and (ii) Bonds for whose
payment money has theretofore been deposited in trust and
thereafter repaid to the Issuer, as provided in Section 3.3)
have been delivered to the Trustee for cancellation; or
(B) all Bonds of such Series not theretofore
delivered to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at the
Stated Maturity of the final installment of the
principal thereof within one year, or
(iii) are to be called for redemption within
one year under irrevocable arrangements satisfactory
to the Trustee for the giving of notice of redemption
by the Trustee in the name, and at the expense, of
the Issuer,
and, in the case of any Series in respect of the assets
securing which a REMIC election or elections have been made,
the Issuer has delivered to the Trustee a Non-Disqualification
Opinion relevant to the actions specified in clauses (i), (ii)
or (iii) above, and has deposited or caused to be deposited
with the Trustee, in trust for such purpose, an amount
sufficient to pay and discharge the Aggregate Imputed
Principal Balance at such time of the Bonds of such Series,
together with an amount equal to the aggregate amount of
interest that will have accrued on such Series of Bonds (under
the Maximum Bond Interest Rate Assumption if such Series of
Bonds includes a Class or Classes of Variable Rate Bonds);
(2) the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer with respect to such Series; and
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(3) the Issuer has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent herein provided for the satisfaction and discharge of this
Indenture with respect to such Series have been complied with;
then, upon Issuer Request, authorized by a Board Resolution, this Indenture and
the related Series Supplement and the lien, rights and interests created hereby
and thereby shall cease to be of further effect with respect to such Series, and
the Trustee and each co-trustee and separate trustee, if any, then acting as
such hereunder shall, at the expense of the Issuer, execute and deliver all such
instruments as may be necessary to acknowledge the satisfaction and discharge of
this Indenture and the related Series Supplement with respect to such Series and
shall pay, or assign or transfer and deliver, all cash, securities and other
property held by it as part of the Trust Estate or other assets for such Series
remaining after satisfaction of the conditions specified in clauses (1) and (2)
above, (x) with respect to each Series of Bonds for which an election to treat
the Trust Estate and any other assets specified in such election and securing
the Bonds as one or more REMICs has not been made and will not be made, to the
Issuer or upon Issuer Order or (y) with respect to each Series of Bonds for
which such an election has been made or will be made, and upon receipt by the
Trustee of a Non- Disqualification Opinion as required by Section 4.3, as
provided in the related Series Supplement.
In the absence of an Issuer Request authorized by a Board Resolution,
the payment of all Outstanding Bonds of all Series shall not render this
Indenture inoperative or prevent the Issuer from issuing additional Series of
Bonds from time to time thereafter as herein provided.
Notwithstanding the satisfaction and discharge of this Indenture with
respect to a Series, the obligations of the Issuer to the Trustee under Section
6.7, the obligations of the Trustee to the Issuer and to the Holders of Bonds of
such Series under Section 3.3, the obligations of the Trustee to the Holders of
Bonds of such Series under Section 4.2, the obligation of the Trustee to
determine and publish notices of the rates to be borne by the Variable Rate
Bonds pursuant to Section 2.3, the provisions of Article II with respect to
lost, stolen, destroyed or mutilated Bonds of such Series, registration of
transfers of Bonds of such Series, and rights to receive payments of principal
of and interest on the Bonds of such Series, and the rights, privileges and
immunities of the Trustee under Article VI shall survive.
SECTION 4.2 Application of Trust Money.
All money deposited with the Trustee pursuant to Sections 3.3 and 4.1
shall be held in trust and applied by it, in accordance with the provisions of
the Bonds and this Indenture, to the payment, either directly or through any
Paying Agent, as the Trustee may determine, to the Persons entitled thereto, of
the principal and interest for whose payment such money has been deposited with
the Trustee.
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SECTION 4.3 REMIC Matters.
(a) Each Series Supplement shall contain a statement
specifying whether or not it is intended that one or more REMIC
elections be made in respect of the Trust Estate and other assets
specified in such Series Supplement and securing the Bonds issued
thereby. If an election or elections are made as aforesaid, it is
intended that each REMIC specified in the related Series Supplement
shall constitute, and the affairs thereof shall be conducted so as to
qualify each such REMIC as, a "real estate mortgage investment conduit"
as defined in and in accordance with the REMIC Provisions. In
furtherance of such intention, and with respect to each such REMIC, the
Issuer covenants and agrees that it shall:
(i) prepare and file, or cause to be prepared and
filed, in a timely manner, a U.S. Real Estate Mortgage
Investment Conduit Income Tax Return (Form 1066) and prepare
and file or cause to be prepared and filed with the Internal
Revenue Service and applicable state or local tax authorities
income tax or information returns for each taxable year with
respect to each calendar year as the taxable year and the
accrual method of accounting, containing such information and
at the times and in the manner as may be required by the Code
or state or local tax laws, regulations, or rules, and shall
furnish or cause to be furnished to the related Bondholders
the schedules, statements or information at such times and in
such manner as may be required thereby;
(ii) within thirty days of the Closing Date of each
such Series, shall furnish or cause to be furnished to the
Internal Revenue Service, on Form 8811 or as otherwise may be
required by the Code, the name, title, address, and telephone
number of the person that the holders of the related Bonds may
contact for tax information relating thereto (and the Issuer
shall act as the representative of each relevant Trust Estate
for this purpose), together with such additional information
as may be required by such Form, and shall update such
information at the time or times in the manner required by the
Code;
(iii) make or cause to be made an election on behalf
of such REMIC, to be treated as a REMIC on its federal tax
return for its first taxable year (and, if necessary, under
applicable state law);
(iv) prepare and forward, or cause to be prepared
and forwarded, to the related Bondholders and to the Internal
Revenue Service and, if necessary, state tax authorities, all
information returns or reports, or furnish or cause to be
furnished by telephone, mail, publication or other appropriate
method such information, as and when required to be provided
to them in accordance with the REMIC Provisions, including
without limitation, the calculation of any original issue
discount using the Prepayment Assumption specified in the
related Series Supplement;
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(v) provide information necessary for the
computation of tax imposed on the transfer of a Residual
Interest of each such REMIC (including the information
required by Treasury Regulation 1.860D-1(b)(5)(ii)) to the
Internal Revenue Service and to a Disqualified Organization,
or an agent (including a broker, nominee or other middleman)
of a Disqualified Organization, or a pass-through entity in
which a Disqualified Organization is the record holder of an
interest and to any other Person specified in Section
860E(e)(3) and (6) of the Code as liable for the tax imposed
under Section 860E(e) of the Code (the reasonable cost of
computing and furnishing such information may be charged to
the Person liable for such tax);
(vi) conduct the affairs of each such REMIC at all
time that any Bonds relative thereto are Outstanding so as to
maintain the status thereof as a REMIC under the REMIC
Provisions;
(vii) not knowingly or intentionally take any action
or omit to take any action that would cause the termination of
the REMIC status of each such REMIC;
(viii) exercise reasonable care not to allow the
creation of any "interests" in each such REMIC within the
meaning of Section 860D(d)(2) of the Code other than as
provided in the related Series Supplement ;
(ix) exercise reasonable care not to allow the
occurrence of any "prohibited transactions" within the meaning
of Section 860F of the Code in respect of any such REMIC,
unless the Issuer shall have provided a Non-Disqualification
Opinion to the Trustee that such occurrence would not result
in a REMIC Loss in respect of such REMIC;
(x) exercise reasonable care not to allow such
REMIC to receive income from the performance of services or
from assets not permitted under the REMIC Provisions to be
held by a REMIC;
(xi) pay from amounts in the Trust Estate the amount
of any federal or state law, including prohibited transaction
taxes, taxes on certain contributions to such REMIC after the
Startup Day relative thereto, and taxes on net income from
foreclosure property, imposed on such REMIC and as the same
shall be due and payable (but such obligation shall not
prevent the Issuer or any other appropriate Person from
contesting any such tax in appropriate proceedings and shall
not prevent the Issuer from withholding payment of such tax,
if permitted by law, pending the outcome of such proceedings);
(xii) ensure that all federal, state or local income
tax or information returns shall be signed by the Issuer or
such other person as may be required to sign such returns by
the Code or state or local laws, regulations or rules; and
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(xiii) maintain such records relating to each such
REMIC, including but not limited to the income, expenses,
individual mortgage loans (including mortgaged property)
relative to such REMIC, other assets and liabilities of the
Trust Estate relative to such REMIC, and the fair market value
and adjusted basis of the property of each determined at such
intervals as may be required by the Code, as may be necessary
to prepare the foregoing returns, schedules, statement or
information.
(b) Reserved
(c) The Issuer shall cause the first federal income tax return
of each REMIC relative to a Series of Bonds to include the information
required by Treasury Regulation Section 1.860D-1(d)(2) and Treasury
Regulation Section 1.860F-4(b)(2).
(d) Except as otherwise provided in the related Series
Supplement, where an election has been made or will be made to treat
the Trust Estate or any other assets specified in such election and
securing the Series as one or more REMICs, the termination of each such
REMIC shall be effected by the Issuer pursuant to a Qualified
Liquidation and only after delivery by the Issuer to the Trustee of a
Non-Disqualification Opinion.
SECTION 4.4 Reinstatement.
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Sections 4.1 and 4.2 by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Issuer's
obligations under the Indenture and the Bonds shall be revived and reinstated as
though no deposit had occurred pursuant to Section 4.1 until such time as the
Trustee or such Paying Agent is permitted to apply all such money or obligations
in accordance with Sections 4.1 and 4.2; provided, however, that if the Issuer
has made payment of interest on or principal of any of the Bonds because of the
reinstatement of its obligations, the Issuer shall be subrogated to the Holders
of the Bonds to receive such payment from the money or obligations held by the
Trustee or such Paying Agent.
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ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.1 Event of Default.
(A) "Event of Default", wherever used herein, means, with respect to a
Series of Bonds issued hereunder, except to the extent specified otherwise in
the related Series Supplement for such Series of Bonds, any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) if the Issuer shall
(A) subject to clause 5.1(B) hereof, default in the
payment when and as due of any installment of principal of or
interest on any Bond of such Series, or
(B) default in the payment of the Redemption Price of
any Bond of such Series which has been called for redemption
pursuant to Article X,
and, except in the case of any such default in the payment of
principal, such default or failure shall continue for a period of five
days;
(2) if the Issuer shall breach or default in the due
observance of any one or more of the covenants set forth in clauses
(a), (c)(ii), (f) or (g) of Section 3.8;
(3) Reserved
(4) Reserved
(5) the entry of a decree or order for relief by a court
having jurisdiction in respect of the Issuer in an involuntary case
under the federal bankruptcy laws, as now or hereafter in effect, or
any other present or future federal or state bankruptcy, insolvency or
similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Issuer or of
any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Issuer and the continuance of any
such decree or order unstayed and in effect for a period of 60
consecutive days; or
(6) the commencement by the Issuer of a voluntary case under
the federal bankruptcy laws, as now or hereafter in effect, or any
other present or future federal or state bankruptcy, insolvency or
similar law, or the consent by the Issuer to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other
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similar official of the Issuer or of any substantial part of its
property or the making by the Issuer of an assignment for the benefit
of creditors or the failure by the Issuer generally to pay its debts as
such debts become due or the taking of corporate action by the Issuer
in furtherance of any of the foregoing.
(B) Neither (a) the allocation of Realized Losses to any Class of Bonds
of a Series, nor (b) the reduction of the Imputed Principal Balance of any Bond
of any Class of a Series by reason of the application of a Junior Bond Write
Down Amount, nor (c) the failure to pay the full amount of any principal
entitlement or any Accrued Bond Interest or any Unpaid Interest on any Class of
Bonds of a Series by reason of the insufficiency of Available Funds on a Payment
Date and the order of allocation of payments from Available Funds specified in
the related Series Supplement, shall constitute an Event of Default under this
Indenture or any Series Supplement, it being expressly agreed and understood
that the Issuer's obligation to make payment on the Bonds of any Series on any
Payment Date constitutes an obligation to pay an aggregate amount equal to the
Available Funds on such Payment Date.
(C) Payments on the Bonds of any Series shall be made on each Payment
Date from Available Funds subject to and in accordance with the order of
priority of payments specified in the related Series Supplement. No recourse
shall be had to the Issuer or any of its assets, other than the Trust Estate
securing the related Series, in the event of (a) a failure by any Holder of a
Bond of any Series to recover by the Stated Maturity thereof or at all the
Current Principal Amount of such Bond by reason of the incurrence of
delinquencies or Realized Losses on the mortgage loans evidenced by the
Conventional Certificates securing such Series or by the application to such
Bond of any portion of a Junior Bond Write Down Amount, or (b) a failure by any
Holder of a Bond of any Series to recover the full amount of any Accrued Bond
Interest or Unpaid Interest thereon by reason of the insufficiency of Available
Funds on any Payment Date and the order of allocation of payments from Available
Funds specified in the related Series Supplement.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.
(A) Except to the extent specified otherwise in the Series Supplement
relating to any Series of Bonds, if an Event of Default occurs and is continuing
with respect to a Series, then and in every such case the Holders of Senior
Bonds representing not less than 100% of the Aggregate Current Principal Amount
of the Outstanding Senior Bonds of that Series may declare all the Bonds of that
Series to be immediately due and payable, by a notice in writing to the Issuer
and the Trustee, and upon any such declaration of such Bonds, an amount equal to
(i) the Aggregate Imputed Principal Balance of the Bonds of such Series at the
time of such declaration; (ii) the aggregate of (x) Accrued Bond Interest on
each Class of Bonds of such Series that is due and unpaid as of the Interest
Payment Date most recently preceding such declaration, and (y) any Unpaid
Interest outstanding as of the date of such declaration, and (iii) an amount
equal to the excess of (x) the Aggregate Current Principal Amount of such Bonds
of such Series over (y) the Aggregate Imputed Principal Balance of the Bonds of
such Series, calculated at the time of such declaration, shall, subject to
Section 5.3 hereof, become immediately due and payable.
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(B) Except to the extent specified otherwise in the Series Supplement
relating to any Series of Bonds, the Holders of Junior Bonds of such Series
shall have no right to exercise the rights referred to in clause (A) above until
the Class Imputed Principal Balance of each Class of the Senior Bonds of such
Series has been reduced to zero. If any date on or after the date on which the
Class Imputed Principal Balance of each Class of the Senior Bonds of a Series
has been reduced to zero, an Event of Default occurs and is continuing with
respect to such Series, then and in every such case the Holders of the Highest
Priority Junior Class of such Series representing not less than 662/3% of the
Aggregate Current Principal Amount of such Class may declare all the Bonds of
that Series to be immediately due and payable, by notice in writing to the
Issuer and the Trustee, in which event the outstanding Bonds of such Series
shall be accelerated in the same manner and with the same effect as provided in
clause (A) above.
(C) Except to the extent specified otherwise in the Series Supplement
relating to any Series of Bonds, at any time after such a declaration of
acceleration of maturity of the Bonds of a Series has been made and before a
judgment or decree for payment of the money due has been obtained by the Trustee
as hereinafter in this Article provided, the Holders of Bonds representing 100%
of the Aggregate Current Principal Amount of the Outstanding Senior Bonds of
such Series (if such declaration is made pursuant to clause (A) above), or the
Holders of the Highest Priority Junior Class of such Series representing not
less than 662/3% of such Class (if such declaration is made pursuant to clause
(B) above), by written notice to the Issuer and the Trustee, may rescind and
annul such declaration and its consequences if
(1) the Issuer delivered or caused to be delivered to the
Trustee a Non-Disqual ification Opinion regarding the actions described
in this subsection, if one or more REMIC elections has or have been
made in respect of the assets securing the Series, and the Issuer has
paid or deposited with the Trustee a sum sufficient to pay
(i) all payments of principal of, and interest on,
all Bonds of that Series and all other amounts which would
then be due hereunder or upon such Bonds if the Event of
Default giving rise to such acceleration had not occurred; and
(ii) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel; and
(2) all Events of Default in respect to such Series, other
than the nonpayment of the principal of Bonds of that Series which have
become due solely by such acceleration, have been cured or waived as
provided in Section 5.14.
No such rescission shall affect any subsequent Default or impair any right
consequent thereon.
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SECTION 5.3 Proceedings.
Subject to the provisions of Section 3.1 and the following sentence, if
an Event of Default occurs and is continuing with respect to a Series, the
Trustee may in its discretion proceed to protect and enforce its rights and the
rights of the Bondholders by such appropriate Proceedings as the Trustee shall
deem most effective 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 enforce any other proper remedy.
Any proceedings brought by the Trustee on behalf of the Bondholders or any
Bondholder against the Issuer shall be limited to the preservation, enforcement
and foreclosure of the liens, assignments, rights and security interests under
the Indenture and no attachment, execution or other unit or process shall be
sought, issued or levied upon any assets, properties or funds of the Issuer,
other than the Trust Estate relative to the Series of Bonds in respect of which
such Event of Default has occurred. If there is a foreclosure of any such liens,
assignments, rights and security interests under this Indenture, by private
power of sale or otherwise, no judgment for any deficiency upon the indebtedness
represented by the Bonds may be sought or obtained by the Trustee or any
Bondholder against the Issuer.
SECTION 5.4 Remedies.
If an Event of Default shall have occurred and be continuing in respect
to a Series of Bonds and the Bonds of such Series have been declared due and
payable and such declaration and its conse quences have not been rescinded and
annulled, the Trustee may do one or more of the following:
(a) institute Proceedings for the collection of all amounts
then payable on the Bonds of that Series, or under this Indenture in
respect to that Series of Bonds, whether by declaration or otherwise,
enforce any judgment obtained and collect from the Issuer (other than
from the Trust Estate or other assets securing any other Series of
Bonds) moneys adjudged due;
(b) in accordance with Section 5.17, sell the Trust Estate and
other assets, if any, securing the Bonds of that Series or any portion
thereof or rights or interest therein, at one or more public or private
Sales called and conducted in any manner permitted by law;
(c) institute Proceedings from time to time for the complete
or partial foreclosure of this Indenture with respect to the Trust
Estate securing the Bonds of that Series; and
(d) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and
enforce the rights and remedies of the Trustee or the Holders of the
Bonds hereunder, including, without limitation, any action specified in
the Series Supplement for any Series of Bonds.
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SECTION 5.5 [Reserved].
SECTION 5.6 Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, composition or other judicial
Proceeding relative to the Issuer or any other obligor upon any of the Bonds or
the property of the Issuer or of such other obligor or their creditors, the
Trustee (irrespective of whether the Bonds of any Series shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand on the Issuer for the payment of
any overdue principal or interest) shall be entitled and empowered, by
intervention in such Proceeding or otherwise, to
(i) file and prove a claim for the whole amount of principal
and interest owing and unpaid in respect of the Bonds of each Series
issued hereunder and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the Bondholders allowed in such Proceeding, and
(ii) collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same,
and any receiver, assignee, trustee, liquidator, or sequestrator (or other
similar official) in any such Proceeding is hereby authorized by each Bondholder
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 Bondholders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Bondholder any plan
of reorganization, arrangement, adjustment, or composition affecting any of the
Bonds or the rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Bondholder in any such Proceeding.
SECTION 5.7 Trustee May Enforce Claims without Possession of
Bonds.
All rights of action and claims under this Indenture or any of the
Bonds may be prosecuted and enforced by the Trustee without the possession of
any of the Bonds 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 be, in
accordance with Section 5.8, for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel and,
except to the extent specified otherwise in the Series Supplement for any Series
of Bonds, for the ratable benefit of the Holders of the Bonds of the Series in
respect of which such judgment has been recovered.
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SECTION 5.8 Application of Money Collected.
If the Bonds of a Series have been declared due and payable following
an Event of Default and such declaration and its consequences have not been
rescinded and annulled, any money collected by the Trustee with respect to such
Series of Bonds pursuant to this Article or otherwise and any monies that may
then be held or thereafter received by the Trustee with respect to such Series
of Bonds shall be applied in the following order, at the date or dates fixed by
the Trustee and, in case of the distribution of the entire amount due on account
of principal of, and interest on, such Bonds, upon presentation and surrender
thereof:
First: To the payment of all amounts due the Trustee under
Section 6.7;
Second: Except to the extent specified otherwise in the Series
Supplement for any Series of Bonds, to the payment of amounts then due
and unpaid upon the Outstanding Bonds of such Series for:
(a) the aggregate of the Accrued Bond Interest on
each Class of Bonds Outstanding that is due and unpaid as of
the Interest Payment Date most recently preceding date of any
declaration made pursuant to Section 5.2(A), together with any
Unpaid Interest outstanding as of such date of declaration,
such amount to be paid ratably among the Bonds of such Series
without preference or priority of any kind
(b) interest on the Class Imputed Principal Balance
of each Class of Bonds (including interest on any Class of
Compound Interest Bonds) of such Series then Outstanding at
the Bond Interest Rate applicable thereto, for the period from
the end of the Interest Accrual Period with respect to the
Interest Payment Date most recently preceding the date of any
declaration made pursuant to Section 5.2(A), to the date
specified for such Class in the related Series Supplement,
(less such Class' share of the Net Interest Shortfalls and the
interest portion of any Realized Losses incurred during the
aforesaid accrual period on the mortgage loans underlying the
Conventional Certificates securing such Series), such amount
to be paid ratably among the Bonds of such Series, without
preference or priority of any kind;
Third: Except to the extent specified otherwise in the Series
Supplement for any Series of Bonds, to the payment of the Aggregate
Imputed Principal Balance of the Bonds of such Series, the Imputed
Principal Balance of each Bond of such Series ratably, without
preference or priority of any kind;
Fourth: Except to the extent specified in the Series
Supplement for any Series of Bonds, to the payment of the excess of (a)
the Aggregate Current Principal Amount of the Bonds of such Series over
(b) the Aggregate Imputed Principal Balance of such Bonds, each such
Bond's respective share of such excess amount, ratably, without
preference or priority of any kind; and
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Fifth: Except as otherwise provided in the related Series
Supplement, to the payment of the remainder, if any, (i) to the Issuer
or any other Person legally entitled thereto if one or more REMIC
elections has or have not been made in respect of the assets securing
the Bonds of such Series or (ii) if such an election or elections has
or have been or will be made, to the Residual Interest in the REMIC
that includes such assets, as stipulated in the related Series
Supplement.
SECTION 5.9 Limitation on Suits.
No Holder of a Bond of any Series shall have any right to institute any
Proceedings, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to such Series;
(2) (a) all of the Holders of the Classes of Senior Bonds of
such Series having Class Imputed Principal Balances greater than zero
or (b) in the event that no Class of Senior Bonds of such Series has a
Class Imputed Principal Balance greater than zero, the Holders of the
Highest Priority Junior Class of such Series representing not less than
662/3% of the Aggregate Current Principal Amount of such Class shall
have made written request to the Trustee to institute Proceedings in
respect of such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
Proceeding; and
(5) no direction inconsistent with such written requests has
been given to the Trustee during such 60-day period by (a) any Holder
of a Class of Senior Bonds of such Series having Class Imputed
Principal Balances greater than zero or (b) in the event that no Class
of Senior Bonds of such Series has a Class Imputed Principal Balance
greater than zero, any Holder of the Highest Priority Junior Class of
such Series;
it being understood and intended that no one or more Holders of Bonds shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Bonds or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all the Holders
of Bonds of the same Series, except to the extent specified otherwise in the
Series Supplement for any Series.
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SECTION 5.10 Restoration of Rights and Remedies.
If the Trustee or any Bondholder has instituted any Proceeding to
enforce any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Bondholder, then and in every such case the Issuer, the
Trustee and the Bondholders shall, subject to any determination in such
Proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the
Bondholders shall continue as though no such Proceeding had been instituted.
SECTION 5.11 Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Trustee or
to the Bondholders 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 5.12 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Bond to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Bondholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Bondholders, as the
case may be.
SECTION 5.13 Control by Bondholders.
If an Event of Default is declared by or at the direction of the
Holders of Senior Bonds of a Series pursuant to Section 5.2(A) above, the
Holders of Bonds representing more than 50% of the Aggregate Current Principal
Amount of the Outstanding Senior Bonds of such Series shall have the right to
direct the time, method and place of conducting any Proceeding for any remedy
available to the Trustee with respect to such Series or exercising any trust or
power conferred on the Trustee with respect to such Series. If an Event of
Default is declared by or at the direction of the Holders of the Highest
Priority Junior Class of a Series pursuant to Section 5.2(B) above (and subject
to the conditions therein contained), the Holders of the Highest Priority Junior
Class of such Series representing more than 50% of the Aggregate Current
Principal Amount of such Class shall have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the Trustee
with respect to such Series or exercising any trust or power conferred on the
Trustee. Any direction given by the Holders of Senior Bonds or Junior Bonds
pursuant to this Section 5.13 shall be subject to the following conditions:
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(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) any direction to the Trustee to undertake a Sale of a
Trust Estate shall be by the Holders of Bonds secured thereby
representing the percentage of the Aggregate Current Principal Amount
of the Outstanding Bonds specified in Section 5.17(b)(1), unless
Section 5.17(b)(2) is applicable, or except to the extent specified
otherwise in the Series Supplement for any Series of Bonds,
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction; provided,
however, that, subject to Section 6.1, the Trustee need not take any
action which it determines might involve it in liability or be unjustly
prejudicial to the Bondholders not consenting.
SECTION 5.14 Waiver of Past Defaults.
(a) Except to the extent specified otherwise in the Series
Supplement for any Series of Bonds, the Holders of Bonds representing
100% of the Aggregate Current Principal Amount of the Outstanding
Senior Bonds of a Series may on behalf of the Holders of all the Bonds
of such Series waive any past Default hereunder with respect to such
Series and its consequences, except a Default in the payment of any
installment of principal of, or interest on, any Bond of that Series.
Upon any such waiver, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been
cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right
consequent thereon.
(b) Except to the extent specified otherwise in the Series
Supplement for any Series of Bonds, the Holders of the Highest Priority
Junior Class of such Series representing not less than 662/3% of the
Aggregate Current Principal Amount of such Class may on behalf of all
the Junior Bonds of such Series waive any past Default hereunder in
respect of which such Holders would have been entitled to exercise
their rights pursuant to Section 5.2(B), and may waive the consequences
of such Default, except, in either case, a Default
(1) in the payment of any installment of principal
of, or interest on, any Bond of that Series, or
(2) in respect of a covenant or provision hereof
which under Section 9.2 cannot be modified or amended without
the consent of each Outstanding Junior Bond affected.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for
every purpose of this Indenture; but no
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such waiver shall extend to any subsequent or other Default or impair
any right consequent thereon.
SECTION 5.15 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Bond by his
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,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, except to the extent specified otherwise in the Series Supplement
relating to any Series of Bonds, to any suit instituted by any Bondholder, or
group of Bondholders, holding in the aggregate Bonds representing more than 10%
of the Aggregate Current Principal Amount of the Outstanding Bonds of a Series,
or to any suit instituted by any Bondholder for the enforcement of the payment
of any installment of interest on any Bond on or after the Stated Maturity
thereof expressed in such Bond or for the enforcement of the payment of the
entire remaining unpaid principal amount of any Bond on or after the Stated
Maturity of the final installment of the principal thereof (or, in the case of
any Bond called for redemption, on or after the applicable Redemption Date).
SECTION 5.16 Waiver of Stay or Extension Laws.
The Issuer covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants in, or the
performance of, this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 5.17 Sale of Trust Estate.
(a) The power to effect any sale (a "Sale") of any portion of
a Trust Estate pursuant to Section 5.4 shall not be exhausted by any
one or more Sales as to any portion of such Trust Estate remaining
unsold, but shall continue unimpaired until the entire such Trust
Estate shall have been sold or all amounts payable on the Bonds of the
Series secured thereby and under this Indenture with respect thereto
shall have been paid. The Trustee may from time to time postpone any
public Sale by public announcement made at the time and place of such
Sale. The Trustee hereby expressly waives its right to any amount fixed
by law as compensation for any Sale.
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(b) To the extent permitted by law, and except as specified
otherwise in the Series Supplement for any Series of Bonds, the Trustee
shall not in any private Sale sell or otherwise dispose of the Trust
Estate, or any portion thereof, securing a Series of Bonds which has
been declared due and payable unless
(1) if such Sale is effected consequent on a
declaration made by the Holders of Senior Bonds of a Series
pursuant to Section 5.2(A), the Holders of all Outstanding
Senior Bonds of such Series consent to, or direct the Trustee
to make, such Sale, or, if such Sale is effected consequent on
a declaration made by the Holders of the Highest Priority
Junior Class of such Series representing not less than 66 2/3%
of the Aggregate Current Principal of such Class pursuant to
Section 5.2(B), the Holders of the Highest Priority Junior
Class of such Series representing not less than 66 2/3% of the
Aggregate Current Principal of such Class consent to, or
direct the Trustee to make, such a Sale, or
(2) the proceeds of such Sale would be not less than
the entire amount which would be distributable to the Holders
of the Senior Bonds or the Junior Bonds, as the case may be,
of such Series, in full payment thereof in accordance with
Section 5.8.
The foregoing provisions shall not preclude or limit the ability of the
Trustee to purchase all or any portion of the Trust Estate at a private
Sale, provided that, unless otherwise specified in the related Series
Supplement, in no event (except as may be compelled or required by
applicable law or court order in which case the provisions of Section
4.3 shall apply if appropriate) shall the Trustee purchase or sell the
Trust Estate or any portion thereof (if an election or elections has or
have been made or will be made to treat the Trust Estate or such other
assets specified in such election securing the Series as a REMIC)
unless it either (i) has received a Non-Disqualification Opinion, or
(ii) the proceeds of such Sale net of any tax on "prohibited
transactions" as defined in Section 860F of the Code that is payable
from the Trust Estate would be not less than the entire amount that
would be distributable to the Holders of the Bonds, in full payment
thereof in accordance with Section 5.8, and such sale meets the
requirements of Section 4.3.
(c) Except as otherwise provided in the related Series
Supplement, unless the Holders of all Outstanding Bonds have otherwise
consented or directed the Trustee, at any public Sale of all or any
portion of a Trust Estate at which a minimum bid equal to or greater
than the amount described in paragraph (2) of subsection (b) of this
Section 5.17 and the amount of any tax on "prohibited transactions" as
defined in Section 860F of the Code that would be payable from the
Trust Estate if an election or elections has or have been made or will
be made to treat the Trust Estate or such other assets specified in
such election securing the Series as a REMIC, has not been established
by the Trustee and no Person bids an amount equal to or greater than
such amount, the Trustee shall bid an amount at least $1.00 more than
the highest other bid.
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(d) In connection with a Sale of all or any portion of a
Trust Estate
(1) any Holder or Holders of Bonds of the Series
secured thereby may bid for and purchase the property offered
for Sale, and upon compliance with the terms of such Sale may
hold, retain and possess and dispose of such property, without
further accountability, and may, in paying the purchase money
therefor, deliver any Outstanding Bonds of such Series or
claims for interest thereon in lieu of cash up to the amount
which shall, upon distribution of the net proceeds of such
Sale, be payable thereon, and such Bonds, in case the amounts
so payable thereon shall be less than the amount due thereon,
shall be returned to the Holders thereof after being
appropriately stamped to show such partial payment; for the
purposes of this clause (1), the principal amount of
indebtedness of the Issuer evidenced by any Outstanding Bond
delivered in lieu of cash shall be the Imputed Principal
Balance of such Bond.
(2) the Trustee may bid for and acquire the property
offered for Sale in connection with any public Sale thereof,
and, in lieu of paying cash therefor, may make settlement for
the purchase price by crediting the gross Sale price against
the sum of (A) the amount which would be distributable to the
Holders of the Bonds of the Series secured thereby as a result
of such Sale in accordance with Section 5.8 and (B) the
expenses of the Sale and of any Proceedings in connection
therewith which are reimbursable to it, without being required
to produce the Bonds of such Series in order to complete any
such Sale or in order for the net Sale price to be credited
against such Bonds, and any property so acquired by the
Trustee shall be held and dealt with by it in accordance with
the provisions of this Indenture;
(3) the Trustee shall execute and deliver an
appropriate instrument of conveyance transferring its interest
in any portion of such Trust Estate in connec tion with a Sale
thereof;
(4) the Trustee is hereby irrevocably appointed the
agent and attorney-in-fact of the Issuer to transfer and
convey its interest in any portion of such Trust Estate in
connection with a Sale thereof, and to take all action
necessary to effect such Sale; and
(5) no purchaser or transferee at such a Sale shall
be bound to ascertain the Trustee's authority, inquire into
the satisfaction of any conditions precedent or see to the
application of any moneys.
(e) Notwithstanding anything in this Indenture to the
contrary, if an Event of Default specified in Section 5.1(A)(1) is the
Event of Default, or one of the Events of Default, on the basis of
which the Bonds of a Series have been declared due and payable, then
the Trustee may, in its sole discretion, sell the Trust Estate securing
such Series without
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compliance with this Section 5.17, but except as otherwise provided in
the related Series Supplement, subject to and in compliance with
Section 4.3.
SECTION 5.18 Action on Bonds.
The Trustee's right to seek and recover judgment on a Series of Bonds
or under this Indenture shall not be affected by the seeking, obtaining or
application of any other relief under or with respect to this Indenture. Neither
the lien of this Indenture nor any rights or remedies of the Trustee or the
Holders of Bonds of any Series shall be impaired by the recovery of any judgment
by the Trustee against the Issuer or by the levy of any execution under such
judgment upon any portion of the Trust Estate securing such Series.
SECTION 5.19 No Recourse to Other Trust Estates or Other Assets
of the Issuer.
Except to the extent provided otherwise in the related Series
Supplement, the Trust Estate Granted to the Trustee as security for a particular
Series will serve as security only for that Series. Except to the extent
provided otherwise in the related Series Supplement, Holders of Bonds of one
Series shall have no recourse against the Trust Estate Granted to the Trustee as
security for any other Series, and no judgment against the Issuer for any amount
due with respect to one Series of Bonds may be enforced against either the Trust
Estate securing any other Series or any other assets of the Issuer, nor may any
prejudgment lien or other attachment be sought against any such other Trust
Estate or any other assets of the Issuer.
SECTION 5.20 Application of the TIA.
(a) Pursuant to Section 3.16(a) of the TIA, all provisions
automatically provided for in Section 3.16(a) are hereby expressly
excluded.
(b) Section 3.16(b) of the TIA requires the following
provision to be included herein:
Notwithstanding any other provision of the indenture
to be qualified, the right of any holder of any indenture
security to receive payment of the principal of and interest
on such indenture security, on or after the respective due
dates expressed in such indenture security, or to institute
suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without
the consent of such holder, except as to a postponement of an
interest payment consented to as provided in paragraph (2) of
subsection (a), and except that such indenture may contain
provisions limiting or denying the right of any such holder to
institute any such suit, if and to the extent that the
institution or prosecution thereof or the entry of judgment
therein would, under applicable law, result in the surrender,
impairment, waiver, or loss of the lien of such indenture upon
any property subject to such lien.
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ARTICLE VI
THE TRUSTEE
SECTION 6.1 Duties of Trustee.
(a) The Trustee shall be subject to TIA Section 315(c).
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that
are specifically set forth in this Indenture and no others and
no implied covenants or obligations of the Trustee shall be
read into this Indenture.
(2) 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.
The Trustee shall, however, examine such certificates and
opinions to determine whether they conform to the requirements
of this Inden ture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own wilful
misconduct, except that:
(1) This paragraph does not limit the effect of
subsection (b) of this Section.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless
it is proved that the Trustee was negligent in ascertaining
the pertinent facts.
(3) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section
5.4 or Section 5.17.
(d) For all other purposes under this Indenture, the Trustee
shall not be deemed to have notice of any Event of Default described in
Section 5.1(A)(2), 5.1(A)(5) or 5.1(A)(6) or any default (other than a
default in payment to the Trustee) under any Pooling and Administration
Agreement or any Guaranty Agreement unless a Responsible Officer
assigned to and working in the Trustee's corporate trust department has
actual knowledge thereof or unless written notice of any event which is
in fact such an Event of Default or Default is received by the Trustee
at the Corporate Trust Office, and such notice references the Bonds
generally, the Bonds of any Series, the Issuer, any Trust Estate or
this Indenture.
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(e) 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; provided, however, that the Trustee shall not refuse or fail to
perform any of its duties hereunder solely as a result of nonpayment of
its normal fees and expenses and further provided that nothing in this
Section 6.1(e) shall be construed to limit the exercise by the Trustee
of any right or remedy permitted under this Indenture or otherwise in
the event of the Issuer's failure to pay the Trustee's fees and
expenses pursuant to Section 6.7. In determining that such repayment or
indemnity is not reasonably assured to it, the Trustee must consider
not only the likelihood of repayment or indemnity by or on behalf of
the Issuer but also the likelihood of repayment or indemnity from
amounts payable to it from the applicable Trust Estate pursuant to
Sections 6.7 and 8.2(d).
(f) Every provision of this Indenture that in any way relates
to the Trustee is subject to the provisions of this Section.
(g) Notwithstanding any extinguishment of all right, title and
interest of the Issuer in and to the Trust Estate following an Event of
Default and a consequent declaration of acceleration of the Maturity of
the Bonds, whether such extinguishment occurs through a Sale of the
Trust Estate to another Person, the acquisition of the Trust Estate by
the Trustee or otherwise, the rights, powers and duties of the Trustee
with respect to the Trust Estate (or the proceeds thereof) and the
Holders of the Bonds and the rights of the Bondholders shall, to the
extent permitted by law, continue to be governed by the terms of this
Indenture.
SECTION 6.2 Notice of Default.
Within 90 days after the occurrence of any Default known to the
Trustee, the Trustee shall transmit by mail to all Holders of Bonds of each
Series as to which such Default has occurred notice of each such Default, unless
such Default shall have been cured or waived, provided, however, that except in
the case of a Default of the type described in Section 5.1(A)(1), the Trustee
shall be protected in withholding such 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 determine that the withholding
of such notice is in the interests of the Holders of the Bonds of the Series
affected by such Default.
SECTION 6.3 Rights of Trustee.
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
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(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee
shall not be liable for any action it takes or omits to take in good
faith in reliance on the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or
within its rights or powers.
SECTION 6.4 Not Responsible for Recitals or Issuance of Bonds.
The recitals contained herein and in the Bonds, except the certificates
of authentication on the Bonds, shall be taken as the statements of the Issuer,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations with respect to any Trust Estate or as to the validity
or sufficiency of this Indenture or of the Bonds. The Trustee shall not be
accountable for the use or application by the Issuer of Bonds or the proceeds
thereof or any money paid to the Issuer or upon Issuer Order pursuant to the
provisions hereof.
SECTION 6.5 May Hold Bonds.
The Trustee, any Agent, or any other agent of the Issuer, in its
individual or any other capacity, may become the owner or pledgee of Bonds and,
subject to Sections 6.8 and 6.13, may oth erwise deal with the Issuer or any
Affiliate of the Issuer with the same rights it would have if it were not
Trustee, Agent, or such other agent.
SECTION 6.6 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by this Indenture or by law, but
shall be accounted for separately for each Series. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Issuer and except to the extent of income or other gain on
investments which are obligations of the Trustee, in its commercial capacity,
and income or other gain actually received by the Trustee on investments, which
are obligations of others.
SECTION 6.7 Compensation and Reimbursement.
(a) The Issuer agrees
(1) subject to any separate written agreement with the
Trustee, to pay the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
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(2) except as otherwise expressly provided herein, 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 or bad faith; and
(3) to indemnify the Trustee and its agents for, and
to hold them harmless against, any loss, liability or expense
incurred without negligence or bad faith on their part,
arising out of, or in connection with, the acceptance or
administration of this trust, including the costs and expenses
of defending themselves against any claim in connection with
the exercise or performance of any of their powers or duties
hereunder, provided that:
(i) with respect to any such claim, the
Trustee shall have given the Issuer written notice
thereof promptly after the Trustee shall have
knowledge thereof;
(ii) while maintaining absolute control over
its own defense, the Trustee shall cooperate and
consult fully with the Issuer in preparing such
defense; and
(iii) notwithstanding anything to the
contrary in this Section 6.7(a)(3), the Issuer shall
not be liable for settlement of any such claim by the
Trustee entered into without the prior consent of the
Issuer.
Subject to Section 6.10, the Trustee agrees to fully perform
its duties under this Indenture notwithstanding any failure on the part
of the Issuer to make any payments, reimbursements or indemnifications
to the Trustee pursuant to this Section 6.7.
(b) The Issuer may remit payment for such fees and expenses to
the Trustee or, in the absence thereof, the Trustee may reimburse
itself from time to time pursuant to Section 8.2(d) hereof for payments
of its fees and expenses hereunder from moneys on deposit in the
Collection Account.
(c) Notwithstanding the provisions of Section 6.1(e) and
6.7(a)(1), (2) and (3) hereof, the fees, expenses, disbursements and
advances payable to the Trustee pursuant to Section 6.7(a)(1) and (2)
and any indemnity payments due to the Trustee pursuant to Section
6.7(a)(3) shall not in the aggregate on any Payment Date exceed the
Expense Reserve Amount, if any; provided, however, that the Trustee
shall advance any amounts in excess thereof due under this Section 6.7.
(d) If the Bonds have been declared due and payable following
an Event of Default pursuant to Section 5.2, which acceleration of
Maturity and its consequences have
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not been rescinded and annulled and moneys collected by the Trustee are
being applied in accordance with Section 5.8 as may be amended by any
Series Supplement, expenses, disbursements and advances due the Trustee
under 6.7(a)(2) and indemnity payments due to the Trustee under Section
6.7(a)(3) hereof shall no longer be subject to the provisions of
Section 6.7(c).
(e) As security for the payment obligations of the Issuer
pursuant to the foregoing provisions of this Section 6.7, the Issuer
hereby Grants to the Trustee a lien ranking at all times senior to the
lien of the Bonds with respect to which any claim of the Trustee under
this Section arose and senior to all other liens, if any, upon all
property and funds held or collected as part of the Trust Estate for
such Bonds by the Trustee in its capacity as such. The Trustee shall
not (i) exercise or enforce such senior lien in any manner, or (ii)
institute any Proceeding against the Issuer for any payments,
reimbursements, or indemnifications to the Trustee or to enforce such
lien, in either case unless (i) the Bonds have been declared due and
payable following an Event of Default pursuant to Section 5.2, (ii)
such acceleration of Maturity and its consequences have not been
rescinded and annulled, and (iii) moneys collected by the Trustee are
being applied in accordance with Section 5.8, as may be amended by any
Series Supplement.
(f) Subject to the last sentence of Section 6.7(e), nothing in
this Section 6.7 shall be construed to limit (except as otherwise
expressly provided in subsection (e) of this Section 6.7) the exercise
by the Trustee of any right or remedy permitted under the Indenture or
otherwise in the event of the Issuer's failure to pay the amounts due
the Trustee pursuant to this Section 6.7.
SECTION 6.8 Disqualification; Conflicting Interests.
In addition to the conflicting interests specified in TIA Section
310(b), the Trustee shall be deemed to have a conflicting interest under said
Section 310(b) upon the occurrence of a default, if by reason of supplements or
amendments to this Indenture as originally executed there shall be created
covenants, restrictions, conditions or additional events of default which
(1) unless otherwise provided in the related Series
Supplement, would give the Holders of Bonds of any Series any rights
with respect to the Trust Estate or any other property held by the
Trustee for the benefit of Holders of Bonds of any other Series with
respect to which it is also serving as Trustee, or
(2) is sufficiently likely to involve a material conflict of
interest between Series of Bonds that it is advisable in the public
interest or for the protection of Holders of Bonds of any Series that
the Trustee disqualify itself from acting as such with respect to one
or more applicable Series of Bonds.
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SECTION 6.9 Eligibility; Trustee's Capital and Surplus.
The Trustee shall at all times meet the then current capital and
surplus requirements of the TIA and shall have a combined capital and surplus of
at least $50,000,000 or be a member or subsidiary of a bank holding system, the
aggregate combined capital and surplus of which is at least $50,000,000. If the
Trustee or the members of the bank holding company system of which it is a part
publish annual reports of condition of the type described in TIA Section
310(a)(2), its (or such bank holding company system's) combined capital and
surplus for purposes of TIA Section 310(a)(2) shall be as set forth in the
latest such report or reports. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of TIA Section 310(a)(2), it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.
SECTION 6.10 Resignation and Removal; Appointment of Successor.
(a) Subject to the provisions of the Series Supplement with
respect to any Series of Bonds, the Trustee may resign at any time with
respect to the Bonds of one or more Series (or for fewer than all
Classes within any such Series) by giving written notice thereof to the
Issuer. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor
Trustee.
(b) The Trustee may be removed at any time with respect to any
Series, or any Class within any Series, by Act of the Holders
representing more than 50% of the Aggregate Current Principal Amount of
the Outstanding Bonds of that Series, delivered to the Trustee and to
the Issuer.
(c) If at any time following a default:
(1) the Trustee shall have a conflicting interest under
Section 6.8 and TIA Section 310(b) and shall fail to resign
or eliminate such conflicting interest in accordance with TIA
Section 310(b) after written request therefor by the Issuer
or by any Bondholder, or
(2) the Trustee shall cease to be eligible under Section
6.9 or shall become incapable of acting or shall be adjudged
a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall
take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Issuer by a Board Resolution may remove
the Trustee, and the Issuer shall join with the Trustee in the
execution, delivery and performance of all instruments and agreements
necessary or proper to appoint a successor Trustee and to vest in such
successor Trustee any property, title, right or power deemed necessary
or desirable,
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subject to the other provisions of this Indenture; provided, however,
if the Issuer does not join in such appointment within fifteen (15)
days after the receipt by it of a request to do so, or in case an event
of default has occurred and is continuing, the Trustee may petition a
court of competent jurisdiction to make such appointment, or (ii)
subject to Section 5.15, and, in the case of a conflicting interest as
described in clause (1) above, unless the Trustee's duty to resign has
been stayed as provided in TIA Section 310(b), any Bondholder who has
been a bona fide Holder of a Bond for at least six months may, on
behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(d) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the
Trustee with respect to the Bonds of one or more Series, or any Class
within such Series, for any cause, the Issuer by a Board Resolution
shall promptly appoint a successor Trustee with respect to such Series
or such Class. If within one year after such resignation, removal or
incapability or the occurrence of such vacancy a successor Trustee with
respect to any Series shall be appointed by Act of the Holders of Bonds
representing more than 50% of the Aggregate Current Principal Amount of
the Outstanding Bonds of that Series delivered to the Issuer and the
retiring Trustee, the successor Trustee so appointed shall, forthwith
upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Issuer. If no
successor Trustee shall have been so appointed by the Issuer or
Bondholders and shall have accepted appointment in the manner
hereinafter provided, any Bondholder who has been a bona fide Holder of
a Bond for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee.
(e) The Issuer shall give or shall cause to be given notice of
each resignation and each removal of the Trustee and each appointment
of a successor Trustee to the Holders of Bonds of each Series affected
thereby. Each notice shall include the name of the successor Trustee
and the address of its Corporate Trust Office.
(f) Except as otherwise provided in the Series Supplement with
respect to a Series, any costs or expenses incurred in connection with
the resignation or removal of the Trustee with respect to such Series
shall be paid by the Trustee.
SECTION 6.11 Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Issuer and the retiring Trustee an instrument accepting such
appointment, and thereupon the resigna tion 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. Notwithstanding the foregoing, on request of the
Issuer or the successor Trustee, such retiring Trustee shall, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee (provided, however, that if the
retiring
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Trustee has been removed or has resigned, pursuant to Section 6.10, with respect
to less than all Series for which it is Trustee, or for less than all Classes
within any such Series, then such transfer shall be limited to its rights and
powers with respect to each Series or Class with respect to which it has
resigned or been removed), and shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee hereunder
(provided, however, that if the retiring Trustee has been removed or has
resigned, pursuant to Section 6.10, with respect to less than all Series for
which it is Trustee, or for less than all Classes within any such Series, then
such assignment, transfer and delivery by the retiring Trustee shall be limited
to the property and money held by it for the benefit of the Holders of Bonds of
the Series or Class with respect to which it has resigned or been removed);
provided, however, that the execution and delivery of any such instruments by
the retiring Trustee and the succession of a new Trustee shall not in any way
(i) impair or release the liens of the retiring Trustee provided for in Section
6.7, (ii) constitute a waiver of any charges due the retiring Trustee under the
Indenture, or (iii) constitute a waiver of any right of the retiring Trustee to
institute proceedings to enforce any rights or remedies available to the
retiring Trustee pursuant to this Indenture. Upon request of any such successor
Trustee, the Issuer shall execute and deliver any and all instruments for more
fully and certainly vesting in and con firming to such successor Trustee all
such rights, powers and trusts.
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.
SECTION 6.12 Merger, Conversion, Consolidation or Succession to
Business of Trustee.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Bonds have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Bonds so authenticated with the same effect as if
such successor Trustee had authenticated such Bonds.
SECTION 6.13 Preferential Collection of Claims Against Issuer.
The Trustee, and any co-trustee or separate trustee authorized in
Section 6.14, shall be subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b), and a Trustee, co-trustee or separate
trustee who has resigned or been removed shall be subject to TIA Section 311(a)
to the extent indicated.
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SECTION 6.14 Co-trustees and Separate Trustees.
At any time or times, for the purpose of meeting the legal requirements
of the TIA or of any jurisdiction in which any of a Trust Estate may at the time
be located, or the requirements of the Series Supplement with respect to any
Series of Bonds, the Issuer and the Trustee shall have power to appoint, and,
upon the written request of the Trustee or of the Holders of Bonds representing
more than 50% of the Aggregate Current Principal Amount of the Outstanding Bonds
of the Series or Class, as the case may be, secured by the Trust Estate with
respect to which a co-trustee or separate trustee is being appointed, the Issuer
shall for such purpose join with the Trustee in the execution, delivery and
performance of all instruments and agreements necessary or proper to appoint,
one or more Persons approved by the Trustee either to act as co-trustee, jointly
with the Trustee, of all or any part of such Trust Estate, or to act as separate
trustee of any such property, in either case with such powers as may be provided
in the instrument of appointment, and to vest in such Person or Persons in the
capacity aforesaid, any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Section. If the Issuer does
not join in such appointment within 15 days after the receipt by it of a request
so to do, or in case an Event of Default has occurred and is continuing, the
Trustee alone shall have power to make such appointment.
Should any written instrument from the Issuer be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right or power, any and all
such instruments shall, on request, be executed, acknowledged and delivered by
the Issuer.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms:
(1) The Bonds shall be authenticated and delivered and all
rights, powers, duties and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Trustee hereunder, shall
be exercised, solely by the Trustee.
(2) The Trustee at any time, by an instrument in writing
executed by it, with the concurrence of the Issuer evidenced by a Board
Resolution, may accept the resignation of or remove any co-trustee or
separate trustee appointed under this Section, and, in case an Event of
Default has occurred and is continuing, the Trustee shall have power to
accept the resignation of, or remove, any such co-trustee or separate
trustee without the concurrence of the Issuer. Upon the written request
of the Trustee, the Issuer shall join with the Trustee in the
execution, delivery and performance of all instruments and agreements
necessary or proper to effectuate such resignation or removal. A
successor to any co-trustee or separate trustee so resigned or removed
may be appointed in the manner provided in this Section.
(3) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Trustee, or
any other such trustee hereunder, and the
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Trustee shall not be personally liable by reason of any act or omission
of any co-trustee or other such separate trustee hereunder.
(4) Any Act of Bondholders delivered to the Trustee shall be
deemed to have been delivered to each such co-trustee and separate
trustee.
SECTION 6.15 Authenticating Agents.
Upon the request of the Issuer, the Trustee shall appoint an
Authenticating Agent with power to act on its behalf and subject to its
direction in the authentication and delivery of the Bonds of each Series
designated for such authentication by the Issuer and containing provisions
therein for such authentication (or with respect to which the Issuer has made
other arrangements, satisfactory to the Trustee and such Authenticating Agent,
for notation on the Bonds of such Series of the authority of an Authenticating
Agent appointed after the initial authentication and delivery of such Bonds) in
connection with transfers and exchanges under Sections 2.6 and 2.7, as fully to
all intents and purposes as though the Authenticating Agent had been expressly
authorized by those Sections to authenticate and deliver Bonds of such Series.
Notwithstanding the foregoing, if an Authenticating Agent for a Series is
designated in the related Series Supplement, no separate request or appointment
shall be required. For all purposes of this Indenture (other than in connection
with the authentication and delivery of Bonds pursuant to Sections 2.5 and 2.12
in connection with their initial issuance and for purposes of Section 2.8), the
authentication and delivery of Bonds by the Authenticating Agent pursuant to
this Section shall be deemed to be the authentication and delivery of Bonds "by
the Trustee." Such Authenticating Agent shall at all times be a Person that both
meets the requirements of Section 6.9 for the Trustee hereunder and has its
principal office in the Borough of Manhattan, City and State of New York.
Any Authenticating Agent for a Series shall also serve as Bond
Registrar or co-Bond Registrar for such Series, as provided in Section 2.7. Any
Authenticating Agent appointed by the Trustee pursuant to the terms of this
Section 6.15 or pursuant to the terms of any Supplemental Indenture shall
deliver to the Trustee as a condition precedent to the effectiveness of such
appointment an instrument accepting the trusts, duties and responsibilities of
Authenticating Agent and of Bond Registrar or co-Bond Registrar and indemnifying
the Trustee for and holding the Trustee harmless against, any loss, liability or
expense (including reasonable attorneys, fees) incurred without negligence or
bad faith on its part, arising out of or in connection with the acceptance,
administration of the trust or exercise of authority by such Authenticating
Agent, Bond Registrar or co-Bond Registrar.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authenticating Agent, shall be the successor of the Authenticating Agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any further act on the part of the
parties hereto or the Authenticating Agent or such successor corporation.
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Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and the Issuer. The Trustee may at any time
terminate the agency of any Authenticating Agent by giving written notice of
termination to such Authenticating Agent and the Issuer. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time any
Authenticating Agent shall cease to be eligible under this Section, the Trustee
shall promptly appoint a successor Authenticating Agent, shall give written
notice of such appointment to the Issuer and shall mail notice of such
appointment to all Holders of Bonds of the applicable Series.
The Trustee agrees, subject to Section 6.1(e), to pay to any
Authenticating Agent from time to time reasonable compensation for its services
and the Trustee shall be entitled to be reimbursed for such payments, subject to
Section 6.7. The provisions of Sections 2.10, 6.4 and 6.5 shall be applicable to
any Authenticating Agent.
SECTION 6.16 Alternate Trustees.
Whenever the Issuer shall so determine, a Person different than the
initial Trustee may be appointed by the Issuer to act as an alternate Trustee
with respect to any Series of Bonds proposed to be issued hereunder. Such
alternate Trustee shall also satisfy the eligibility requirements of the TIA and
this Article VI. The Issuer shall have the power to appoint a separate Trustee
to act as Trustee with respect to any Series of Bonds proposed to be issued
hereunder and each such alternate Trustee and the Issuer alone shall have the
power to execute and deliver an agreement supplemental hereto, which agreement
supplemental hereto may be the Series Supplement for such Series of Bonds, which
shall contain such provisions as shall be deemed necessary or desirable to
confirm that all the rights, powers, trust and duties of the Trustee with
respect to the Outstanding Bonds of any Series as to which the Trustee initially
named in the Series Supplement for such Series is not retiring, shall continue
to be vested in such initial Trustee, and shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trust hereunder by more than one Trustee with respect
to the Outstanding Bonds of any Series as to which the initial Trustee named
herein is not to be the Trustee or with respect to any proposed Series of Bonds,
it being understood that nothing herein or in such supplemental agreement shall
constitute such Trustees as co-Trustees of the same trust and that each such
Trustee shall be a Trustee of a separate trust or trusts with respect to
different Series of Bonds each concurrently Outstanding. No separate or
alternate Trustee shall accept its appointment unless, at the time of such
acceptance such separate Trustee shall be qualified and eligible under this
Article VI.
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ARTICLE VII
BONDHOLDERS' LISTS AND REPORTS
SECTION 7.1 Issuer to Furnish Trustee Names and Addresses of
Bondholders.
(a) The Issuer will furnish or cause to be furnished to the
Trustee (i) semi-annually, not less than 45 days nor more than 60 days
after each Interest Payment Date for a Series, a list, in such form as
the Trustee may reasonably require, of the names and addresses of the
Holders of Bonds of such Series, and (ii) at such other times, as the
Trustee may request in writing, within 30 days after receipt by the
Issuer of any such request, a list of similar form and content as of a
date not more that 10 days prior to the time such list is furnished;
provided, however, that so long as the Trustee is the Bond Registrar,
no such list shall be required to be furnished. If the Bonds of a
particular Series have Interest Payment Dates which are more frequent
than semi-annual, then the applicable Interest Payment Dates for
purposes of clause (i) of the preceding sentence shall be the Interest
Payment Date occurring closest to six months after the Closing Date for
such Series and each Interest Payment Date occurring at six-month
intervals thereafter.
(b) In addition to furnishing to the Trustee the Bondholder
lists, if any, required under subsection (a), the Issuer shall also
furnish all Bondholder lists, if any, required under Section 3.3 at the
times required by said Section 3.3.
SECTION 7.2 Preservation of Information; Communications to
Bondholders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Bonds
contained in the most recent list, if any, furnished to the Trustee as
provided in Section 7.1 and the names and addresses of the Holders of
Bonds received by the Trustee in its capacity as Bond 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 Issuer, the Trustee and the Bond Registrar shall have
the protection of TIA Section 312(c).
SECTION 7.3 Reports by Trustee.
(a) In addition to any report required to be delivered by the
Trustee to the Holders of Bonds of any Series pursuant to TIA Section
313(a), additional reports may be required to be delivered by the
Trustee as set forth in the Series Supplement for any Series of Bonds.
(b) For purposes of the information required to be included in
any reports to be delivered by the Trustee pursuant to TIA Sections
313(a)(3), 313(b)(1) (if applicable), 313(b)(2),
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or pursuant to the Series Supplement for any Series of Bonds as may be
required pursuant to Section 7.3(a), the principal amount of "indenture
securities" outstanding on the date as of which such information is
provided shall be the Aggregate Current Principal Amount of the then
Outstanding Bonds of the particular Series covered by the report.
(c) With respect to any report required to be delivered by the
Trustee pursuant to TIA Section 313(a) or (b), or as otherwise required
pursuant to Section 7.3(a), the Trustee shall mail any such report to
all Holders of such Series of Bonds within 30 days after May 15 of each
year (the "reporting date"), commencing with the year after the
issuance of such Series of Bonds.
(d) Unless provided otherwise in the Series Supplement for any
Series of Bonds, upon written request in form satisfactory to the
Trustee received by the Trustee at least fif teen days prior to the
next Payment Date, the Trustee will provide notice to a Bondholder on
such Payment Date of such Bondholder's priority status with respect to
such Bondholder's requests for redemption pursuant to Section 10.4.
SECTION 7.4 Reports by Issuer.
The Issuer (a) shall file with the Trustee within 15 days after it
files them with the Commission copies of the annual reports and of the
information, documents, and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) which
the Issuer is required to file with the Commission pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and (b) shall also comply with the
other provisions of TIA Section 314(a).
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ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
SECTION 8.1 Collection of Moneys.
Except as otherwise expressly provided herein, the Trustee may demand
payment or delivery of, and shall receive and collect, directly and without
intervention or assistance of any fiscal agent or other intermediary, all money
and other property payable to or receivable by the Trustee pursuant to this
Indenture. The Trustee shall hold all such money and property received by it as
part of the Trust Estate with respect to which it was received, and shall apply
it as provided in this Indenture. If the Trustee shall not have received a
Distribution with respect to any Certificate by the Business Day immediately
following the related Distribution Date, the Trustee shall, unless the Issuer
shall have made provisions satisfactory to the Trustee for delivery to the
Trustee of an amount equal to such Distribution, request the issuer or guarantor
of such Certificate, as appropriate, to make such payment as promptly as
practicable or legally permitted. If the Trustee shall subsequently receive any
such Distribution, it may withdraw such request. Notwithstanding any other
provision hereof, the Trustee shall deliver to the Issuer or its designee or
assignee any Distribution received with respect to a Certificate after the
related Distribution Date to the extent that the Issuer previously made payment
or provision for payment with respect to such Distribution in accordance with
this Section 8.1, and any such Distribution shall not be deemed part of the
Trust Estate for the related Series.
Except as otherwise expressly provided in this Indenture, if, following
any request by the Trustee for payment of a late Distribution, any default
occurs in the making of such payment, or if a default occurs in any other
performance required under any Certificate with respect to any Series, the
Trustee may, and upon the request of the Holders of Bonds representing more than
50% of the Aggregate Current Principal Amount of the Outstanding Bonds of the
affected Series shall, take such action as may be appropriate to enforce such
payment or performance including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right to claim a
Default or Event of Default with respect to such Series under this Indenture and
to proceed thereafter as provided in Article V.
SECTION 8.2 Collection Accounts.
(a) On or before the Closing Date for a Series, the Issuer
shall open, at the Corporate Trust Office, one or more accounts (each
of which shall be an Eligible Account) which shall collectively be the
"Collection Account" for such Series. The Trustee shall promptly
deposit in the related Collection Account all Distributions received by
it with respect to Certificates securing the Bonds of a Series (other
than Distributions required to be delivered to the Issuer pursuant to
Section 8.1). All Distributions deposited from time to time in a
Collection Account, any amount required to be deposited in the
Collection Account for a Series pursuant to Section 2.12(g) and the
terms of the related Series Supplement, all
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other deposits therein pursuant to this Indenture, and all investments
made with such moneys, including all income or other gain from such
investments, shall be held by the Trustee in such Collection Account as
part of the Trust Estate for the related Series as herein provided,
subject to withdrawal by the Trustee for the purposes set forth in
subsections (c) and (d) of this Section 8.2. All funds withdrawn from a
Collection Account pursuant to subsection (c) of this Section 8.2 for
the purpose of making payments to the Holders of Bonds of the related
Series shall be applied in accordance with Section 3.3.
(b) So long as no Default or Event of Default shall have
occurred and be continuing with respect to a Series of Bonds, all or a
portion of the related Collection Account shall be invested and
reinvested by the Trustee at the Issuer's direction or pursuant to the
provisions of the related Series Supplement in one or more Eligible
Investments bearing interest or sold at discount. No such investment
shall mature later than the Business Day immediately preceding the next
Principal Reduction Date for such Series unless permitted otherwise by
the Rating Agencies.
Notwithstanding the foregoing,
(i) except as permitted by clause (ii) below, no
investment of any amount held in a Collection Account may
mature later than the Business Day immediately preceding the
next Payment Date for Bonds of the related Series unless
permitted otherwise by the Rating Agencies,
(ii) any investment (including repurchase
agreements) on which the Trustee (or any agent of the Trustee
acceptable to the Rating Agency or Agencies that rated such
Series) is the obligor, may mature on a Payment Date or
Special Pay ment Date if, under this Section 8.2, such
investment could otherwise mature on the Business Day
immediately preceding such Payment Date or Special Payment
Date and
(iii) if there are any Overdue Bonds of a Series
Outstanding, funds then in the related Collection Account may
be invested in investments maturing later than the Business
Day immediately preceding the next Special Payment Date,
unless permitted otherwise by the Rating Agencies, only to the
extent that after giving effect to such proposed investment
the amount of funds that would be on deposit in the Collection
Account (including therein the amount of Distributions and
proceeds of investments scheduled to be deposited in such
Collection Account prior to such next Special Payment Date)
and would be available to make payments on the Bonds of such
Series on such next Special Payment Date, exceeds any payments
of principal of or interest on any Overdue Bonds of such
Series due and payable on such next Special Payment Date.
All income or other gains from investment of moneys deposited
in a Collection Account shall be deposited by the Trustee in such
Collection Account
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immediately upon receipt, and any loss resulting from such investment
shall be charged to such Collection Account.
(c) Unless the Bonds of a Series have been declared due and
payable pursuant to Section 5.2 and moneys collected by the Trustee
with respect to such Series are being applied in accordance with
Section 5.8, amounts on deposit in the related Collection Account on
any Payment Date or Special Payment Date shall be withdrawn from such
Collection Account, in the amounts required, for application as
follows:
(i) on any Special Payment Date, except to the
extent provided otherwise in the applicable Series Supplement
and to the extent permitted by applicable law,
first, to the payment of all interest due
with respect to any Overdue Bonds of such Series
called for redemption, pro rata without any
preference or priority as to Maturity, and
second, to the payment of amounts due with
respect to principal of such Overdue Bonds
(including any portion of an installment of
principal required to be paid which was not paid
therefor, and any amounts remaining unpaid on
Bonds with respect to which the Redemption Price
was not paid in full on the applicable Redemption
Date), in the order in which such amounts became
due and pro rata among all amounts which became
due on the same date, each such amount being the
amount thereof set forth in the applicable
Special Payment Date Statement; and
(ii) on any Payment Date, in accordance with the
order of priority of payment specified in the related Series
Supplement;
each such amount being the amount thereof set forth in the applicable
Special Payment Date Statement or Payment Date Statement, as the case
may be.
(d) On or after each Payment Date for a Series, so long as the
Trustee shall have prepared a Payment Date Statement in respect of such
Payment Date and shall have made, or, in accordance with Section 3.3,
set aside from amounts in the Collection Account for such Series an
amount sufficient to make the payment of principal of and interest on
the Bonds of such Series then required to be made as indicated in such
Payment Date Statement, the cash balance, if any, then remaining in the
related Collection Account, less the amount of Distributions due on the
related Certificates but not received on the immediately preceding
Distribution Date and the amount of any Reinvestment Income then
payable to the Bond Manager, shall be withdrawn from such Collection
Account by the Trustee and applied
first, to the payment of any unpaid amount due the
Trustee pursuant to Section 6.7,
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second, to the payment of any unpaid amount due any
firm of Independent Accountants pursuant to Section 8.9(a),
third, to the extent required by the related Series
Supplement, to deposit an amount in the related Expense Fund
(any amount so deposited being released from the lien of the
Indenture pursuant to Section 8.10).
Except as otherwise provided in the related Series Supplement, the
balance, if any, of the amount so withdrawn shall be released from the
lien of this Indenture and paid by the Trustee (i) with respect to each
Series of Bonds for which a REMIC election or elections has or have not
been made and will not be made, to the Issuer or, upon Issuer Order, to
its assignee, or (ii) where such an election or elections has or have
been made or will be made, to the Residual Interest that is entitled to
such assets as stipulated in the related Series Supplement, in each
case subject to satisfaction of the following conditions:
(i) no Default or Event of Default shall have
occurred and be continuing,
(ii) an Independent Accountant shall have delivered
to the Trustee the certificate or opinion in respect of such
Payment Date required by Section 8.9(b);
(iii) the Issuer shall have delivered to the Trustee
an Officers' Certificate stating that all conditions precedent
to such release specified in this subsection (d) have been
satisfied, and
(iv) the Issuer shall have delivered to the Trustee
an Opinion of Counsel to the effect that all documents
delivered to the Trustee in connection with such release
comply as to form with the requirements of this subsection (d)
and all conditions precedent to such release specified in this
subsection (d) have been satisfied.
SECTION 8.3 Reserved.
SECTION 8.4 Reserved.
SECTION 8.5 Reserved.
SECTION 8.6 General Provisions Regarding Pledged Accounts.
(a) Each Pledged Account shall relate solely to the Bonds of
the Series with respect to which it was established and to the
Certificates and other property securing such Series. Funds and other
property in each Pledged Account shall not be commingled with any other
moneys or property of the Issuer or any Affiliate thereof.
Notwithstanding the foregoing, the Trustee may hold any funds or other
property received or held by it as part of a Pledged Account in
collective accounts maintained by it in the normal course of its
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business and containing funds or property held by it for other Persons
(which may include the Issuer or an Affiliate), provided that such
accounts are under the sole control of the Trustee and the Trustee
maintains adequate records indicating the ownership of all such funds
or property and the portions thereof held for credit to each Pledged
Account.
(b) The Issuer will not direct the Trustee to make any
investment of any funds in a Pledged Account or to sell any investment
held in a Pledged Account except under the following terms and
conditions:
(i) each such investment shall be made in the name
of the Trustee (in its capacity as such) or in the name of a
Qualified Nominee of the Trustee (or, if, as indicated by an
Opinion of Counsel delivered to the Trustee, applicable law
provides for perfection of pledges of an investment not
evidenced by a certificate or other instrument through
registration of such pledge on books maintained by or on
behalf of the issuer of such investment, such pledge may be so
registered),
(ii) the Trustee shall have sole control over such
investment, the income thereon and the proceeds thereof,
(iii) any certificate or other instrument evidencing
such investment shall be delivered directly to the Trustee or
its agent, and
(iv) the proceeds of each sale of such an investment
shall be remitted by the purchaser thereof directly to the
Trustee for deposit in the Pledged Account in which such
investment was held.
(c) Except as otherwise provided in the related Series
Supplement, if a REMIC election or elections has or have been made or
will be made in respect of the assets securing such Series, prior to
any disposition of any investment in a Pledged Account that would
result in a gain to a REMIC of such Series, the Trustee shall inform
the Issuer of its intention to dispose of such investment and of the
possibility that such disposition could result in the imposition of
taxes on "prohibited transactions" as defined in Section 860F of the
Code. If any amounts are needed for disbursement from a Pledged Account
and sufficient uninvested funds are not available therein to make such
disbursement, in the absence of an Issuer Order for the liquidation of
investments held therein in an amount sufficient to provide the
required funds, the Trustee shall cause to be sold or otherwise
converted to cash a sufficient amount of the investments in such
Pledged Account.
(d) The Trustee shall not in any way be held liable by reason
of any insufficiency in any Pledged Account except for losses on
investments which are liabilities of the Trustee (or of any agent of
the Trustee).
(e) All investments of funds in a Pledged Account and all
sales of investments held in a Pledged Account shall, except as
provided below, be made by the Trustee in
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accordance with an Issuer Order. Subject to compliance with the
requirements of Section 8.2(b), such Issuer Order may authorize the
Trustee to make the specific investments set forth therein, to make
investments from time to time consistent with the general instructions
set forth therein, or to make specific investments pursuant to written,
telegraphic or telephonic instructions of the employees or agents of
the Issuer identified therein, in each case in such amounts as such
Issuer Order shall specify.
In the event that:
(i) the Issuer shall have failed to give investment
directions to the Trustee by 12:30 p.m. Eastern Time on any
Business Day authorizing the Trustee to invest the funds then
in a Pledged Account,
(ii) a Default or Event of Default with respect to
such Series shall have occurred and be continuing but the
Bonds of such Series shall not have been declared due and
payable pursuant to Section 5.2, or
(iii) an Event of Default with respect to such Series
shall have occurred and be continuing, the Bonds of such
Series shall have been declared due and payable pursuant to
Section 5.2, and amounts collected or receivable from the
related Trust Estate are being applied in accordance with
Section 5.8,
the Trustee shall invest and reinvest the funds then in each related
Pledged Account to the fullest extent practicable, in such manner as
the Trustee shall from time to time determine, but only in one or more
Eligible Investments bearing interest or sold at a discount. All
investments made pursuant to clause (i) above shall mature on the next
Business Day following the date of such investment, all such
investments made pursuant to clause (ii) above shall mature no later
than the maturity date therefor permitted by Section 8.2(b), or by the
terms of any related Series Supplement, whichever is applicable, and
all investments made pursuant to clause (iii) above shall mature no
later than the first date following the date of such investment on
which the Trustee proposes to make a distribution to Holders of Bonds
of the related Series pursuant to Section 5.8.
(f) Subject to the restriction on the maturity of investments
set forth in Sections 8.2(b), or in any related Series Supplement, and
notwithstanding paragraph (e) above, the Issuer will give appropriate
and timely investment directions to the Trustee such that at the close
of business on not more than two Business Days in any one calendar year
not more than an aggregate of $50,000 of funds in the Pledged Accounts
for a Series are not invested pursuant, directly or indirectly, to an
Issuer Order in Eligible Investments bearing interest or sold at a
discount which mature on or after the opening of business on the next
Business Day.
(g) Unless it shall have otherwise agreed in writing with the
Issuer, the Trustee shall not be required to enter into repurchase
obligations for the investment of funds in any
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Pledged Account with any Person whose repurchase obligations would be
Eligible Investments only if the requirements of subclause (b) of
clause (iii) of the definition of the term "Eligible Investments" were
complied with in connection with such investment.
SECTION 8.7 Reports by Trustee to Bondholders.
On each Payment Date for a Series the Trustee shall deliver a written
report
(a) to each Holder of Bonds of a Class of such Series on which
a payment of principal and interest is then being made, setting forth
the amount of such payment which represents principal and the amount
which represents interest, and the principal amount of an Individual
Bond of each such Class after giving effect to the payment of principal
made on such Payment Date;
(b) to each Holder of Bonds of a Class of such Series on which
a payment of interest only is then being made, setting forth the Class
Current Principal Amount and Class Imputed Principal Balance of Bonds
of each Class of such Series Outstanding after giving effect to the
payment of principal made on such Payment Date and the allocation of
all Realized Losses and any Junior Bond Writedown Amount then allocable
to such Class and after including in the aggregate principal amount of
Compound Interest Bonds Outstanding the amount of any accrued interest
added to the principal amount thereof on such Payment Date; and
(c) to each Holder of a Compound Interest Bond of such Series
(but only if such Holder shall not have received on such Payment Date a
payment of interest equal to the entire amount of Accrued Bond Interest
on such Bond for such Payment Date, or since the related Accrual Date
if no Payment Date has yet occurred), setting forth
(i) the information contained in the report
delivered pursuant to clause (b) above,
(ii) the interest accrued on an Individual Bond of
such Class of Compound Interest Bonds through the Interest
Accrual Period for such Payment Date and added to the
principal of such Compound Interest Bond, and
(iii) the principal amount of an Individual Bond of
such Class of Compound Interest Bonds after giving effect to
the addition thereto of interest accrued thereon during the
Interest Accrual Period for such Payment Date.
(d) to each Holder of Bonds of a Class of such Series, the
aggregate amount of Realized Losses and any Junior Bond Write Down
Amount allocated to the Bonds of such Class on such Payment Date;
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(i) the amount of any Realized Losses or portion of
any Junior Bond Write Down Amount allocated to an Individual
Bond of such Class on such Payment Date; and
(ii)the Imputed Principal Balance and the Current
Principal Amount of an Individual Bond of such Class on such
Payment Date,
in the case of (iii) above, after application of all payments of principal on
such Bonds and allocation of any Realized Losses and the Junior Bond Write Down
Amount, if any, allocable on such Payment Date.
SECTION 8.8 Reports by Trustee.
In addition to any statements required to be delivered or prepared by
the Trustee pursuant to Sections 2.9 or 8.2, the Trustee shall deliver to the
Issuer and the Independent Accountants appointed pursuant to Section 8.9, within
two Business Days after the request of either the Issuer or such Independent
Accountants, a written report setting forth the amount of each Pledged Account
or Fund established hereunder and the identity of the investments included
therein. Without limiting the generality of the foregoing, the Trustee shall,
upon the request of the Issuer, promptly transmit to the Issuer copies of all
accountings of, and information with respect to, Distributions furnished it by
the issuer of, or the paying agent for, each Certificate and shall promptly
notify the Issuer if, or on the third Business Day after any Distribution Date
in the case of a Conventional Certificate, any related Distribution then due or
any portion thereof has not been received by the Trustee.
SECTION 8.9 Reports by Independent Accountants.
(a) At the Closing Date for a Series the Issuer shall appoint
the firm of Independent Accountants which prepares and delivers the
certificate or opinion required to be delivered under Section 2.12(e)
as its Independent Accountants for purposes of preparing and delivering
the reports or certificates with respect to such Series required by
this Section 8.9. Upon any resignation by such firm the Issuer shall
promptly notify the Trustee and appoint a successor thereto that shall
also be a firm of Independent Accountants of recognized national
reputation. If the Issuer shall fail to appoint a successor to a firm
of Independent Accountants which has resigned on or before the
fifteenth day after such resignation, the Trustee shall promptly notify
the Issuer of such failure in writing. If the Issuer shall not have
appointed a successor within ten days thereafter the Trustee shall
promptly appoint a successor firm of Independent Accountants of
recognized national reputation. The fees of such successor shall be
payable by the Issuer, and any fees not so paid by the Issuer may be
paid by the Trustee on behalf of the Issuer, from amounts otherwise
payable to the Issuer from the related Collection Account pursuant to
Sec tion 8.2(d).
(b) The Issuer, or the Trustee on behalf of the Issuer, shall
direct the firm of Independent Accountants appointed pursuant to
subsection (a) (or any successor firm so
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appointed) to review, and prepare and deliver to the Trustee a report
or certificate with respect to each Payment Date Statement specified in
the related Series Supplement delivered by the Trustee pursuant to
Section 2.9(e).
Such report or certificate shall state that
(i) such Independent Accountants have reviewed
such Payment Date Statement,
(ii) they have performed the calculations required
to be made in connection therewith,
(iii) they have reviewed the accountings of the
related Distributions and of the related Collection Account
furnished by the Trustee with respect to the Distribution Date
relative to such Payment Date Statement, and
(iv) based upon such review, such firm of
Independent Accountants has no material exceptions to the
Trustee's calculations set forth in any of such State ments,
or that all of such exceptions are set forth in such report or
certificate.
Such report or certificate shall be delivered to the Trustee, and a
copy of such report or certificate shall be delivered to the Issuer,
prior to the close of business on the second Business Day following the
related Calculation Date. If such firm of Independent Accountants sets
forth any material exceptions to the Trustee's Payment Date Statement
in its report or certificate, the Trustee's Payment Date Statement
shall be deemed to have been amended to reflect such exceptions, and a
copy of such report shall be delivered to each Rating Agency rating the
related Bonds.
(c) If the Trustee shall fail to deliver to the Issuer any
Payment Date Statement by the due date therefor, the Issuer shall, at
the opening of business on the next Business Day after such due date,
direct the firm of Independent Accountants appointed pursuant to
subsection (a) to prepare and deliver to the Trustee such Payment Date
Statement at the expense of the Issuer, no later than 2:00 p.m. on the
Business Day following the day on which such direction was given. Any
fees of such Independent Accountants not paid by the Issuer may be paid
by the Trustee, on behalf of the Issuer, from amounts otherwise payable
to the Issuer from the related Collection Account pursuant to Section
8.2(d).
SECTION 8.10 Expense Fund.
(a) Except as otherwise provided in the related Series
Supplement, any cash or Eligible Investments received by the Trustee
for deposit in the Expense Fund for a Series pursuant to Sections
2.12(g) or 8.2(d) hereof, together with any other Eligible Investments
in which amounts in such Expense Fund are or will be invested or
reinvested during the term
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of the Bonds of such Series, shall be held by the Trustee subject to
disbursement and withdrawal as herein provided, but shall not be
security for the Bonds of such Series.
(b) Except as otherwise provided in the related Series
Supplement all or a portion of the Expense Fund for a Series shall be
invested and reinvested at the Issuer's direction in one or more
Eligible Investments.
(c) Except as otherwise provided in the related Series
Supplement amounts on deposit in the Expense Fund for a Series shall be
applied by the Trustee to the payment of expenses relating to the
administration of the Bonds of such Series (other than interest expense
on such Bonds) specified in the related Series Supplement to the extent
that such expenses have not been paid by the Issuer or from other
sources.
(d) Except as otherwise provided in the related Series
Supplement, upon full and final payment of all Outstanding Bonds of the
related Series and payment of all unpaid expenses relating to the
administration of the Bonds of such Series (other than interest expense
on such Bonds) covered by such Expense Fund, the Trustee shall pay to
or upon the order of the Issuer all amounts remaining on deposit in the
Expense Fund for such Series.
SECTION 8.11 Substitution of Certificates with Eligible Substitute
Certificates.
(a) Except as otherwise provided in the related Series
Supplement, the Issuer shall have the right to Grant one or more
Eligible Substitute Certificates for any one or more Certificates
securing a Series of Bonds, any such substitution to take place on a
Payment Date, subject, however, to satisfaction of the following
conditions:
(i) no Default or Event of Default shall have
occurred and be continuing;
(ii) if the Eligible Substitute Certificates to be
Granted in substitution for the Certificates to be released
are issued in definitive or certificated form, such Eligible
Substitute Certificates, registered in the name of the Trustee
(or, if requested by the Trustee, in the name of its Qualified
Nominee) shall have been delivered to the Trustee;
(iii) if the Eligible Substitute Certificates to be
Granted in substitution for the Certificates to be released
are issuable in book entry form only, the Trustee shall have
received (A) written notification or confirmation from the
operator of the book-entry system that ownership of such
Eligible Substitute Certificates has been registered in the
name of the Trustee or a Qualified Nominee or (B) notification
from a bank, broker, clearing corporation or other Person that
maintains securities accounts for the Issuer or the Trustee
and is acting in that capacity with respect to such Eligible
Substitute Certificates that either (1) ownership of such
Eligible Substitute Certificates in the name of the Issuer and
the Grant thereof to the Trustee have been entered on the
securities accounts books of such Person or (2) ownership
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of such Eligible Substitute Certificates in the name of the
Trustee has been entered on the securities accounts books of
such Person;
(iv) the Trustee shall have received a certificate
or opinion from a firm of Independent Accountants stating that
(A) such firm has reviewed (1) the terms of the Certificates
proposed to be released and of the Eligible Substitute
Certificates proposed to be Granted in substitution therefor,
(2) the Issuer's calculations of the Certificate Principal
Balance of the Certificates to be released and of the Eligible
Substitute Certificates to be granted in substitution therefor
and the Issuer's calculations of the aggregate Certificate
Principal Balance of all of the Certificates pledged to secure
the Bonds immediately following the substitutions and (3) the
Issuer's calculations demonstrating that the Eligible
Substitute Certificates proposed to be Granted in substitution
for the Certificates to be released satisfy all conditions
precedent to such release and substitution set forth in the
Indenture and the related Series Supplement that are of a type
that can be verified by mathematical computations and (B)
based on such review, nothing has come to their attention that
the Issuer's calculations were not made in compliance with the
terms of the Indenture and the related Series Supplement and
are not mathematically correct;
(v) the Trustee shall have received an Officers'
Certificate stating that all conditions precedent to such
release specified in this subsection (a) and in the related
Series Supplement have been satisfied;
(vi) the Trustee shall have received an Opinion of
Counsel to the effect (A) that all documents delivered to the
Trustee in connection with such release comply as to the form
with the requirements of this subsection (a) and the
requirements, if any, set forth in the related Series
Supplement, (B) that all conditions to such release specified
in this subsection (a) and in the related Series Supplement
have been satisfied and (C) of the opinion required by Section
2.12(c) but only as applicable to the portion of the Trust
Estate comprised of the Eligible Substitute Certificates; and
(vii) the Trustee shall have received a certificate
of an Independent Person, whose regular business activity
includes valuing securities similar to such Eligible
Substitute Certificates, as to the fair market value of such
Eligible Substitute Certificates, which determination of fair
market value shall be based upon generally available market
quotations as of a date not earlier than three Business Days
prior to the date of Grant to the Trustee.
(b) Upon any such Grant, the Trustee shall transfer and assign
the replaced Certificates to the Issuer whereupon they shall be
released from, and no longer subject to, the lien of the Indenture.
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ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Supplemental Indentures without Consent of Bondholders.
Without the consent of the Holders of any Bonds, the Issuer, 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
satisfactory to the Trustee, for any of the following purposes:
(1) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Trustee any property subject or required to
be subjected to the lien of this Indenture, or to subject to the lien
of this Indenture additional property;
(2) to add to the conditions, limitations and restrictions on
the authorized amount, terms and purposes of the issuance,
authentication and delivery of any Series of Bonds, as herein set
forth, additional conditions, limitations and restrictions thereafter
to be observed;
(3) to set forth the terms of, and security for, any Series
that has not theretofore been authorized by a Series Supplement;
(4) to modify or eliminate any of the terms of this Indenture;
provided, however, that
(A) such supplemental indenture shall expressly
provide that any such modifications or eliminations shall not
be effective with respect to any Outstanding Bond of any
Series created prior to the execution of such supplemental
indenture; and
(B) the Trustee may, in its discretion, decline to
enter into any such supplemental indenture which, in its
opinion, would adversely affect its own rights, duties or
immunities;
(5) to evidence the succession of another Person to the
Issuer, and the assumption by any such successor of the covenants of
the Issuer herein and in the Bonds contained, or the appointment of an
alternate Trustee under Section 6.16;
(6) to add to the covenants of the Issuer, for the benefit of
the Holders of all Bonds or of the Bonds of any Series, or to surrender
any right or power herein conferred upon the Issuer;
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(7) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to amend any other pro visions with respect to
matters or questions arising under this Indenture; provided that such
action shall not adversely affect in any material respect the interests
of the Holders of any Series of Bonds; and provided, further, that the
amendment shall not be deemed to adversely affect in any material
respect the interests of the Holders of any Series of Bonds if the
Person requesting the amendment obtains a letter from each Rating
Agency that the amendment would not result in the downgrading or
withdrawal of the ratings then assigned to any Series of Bonds;
(8) to provide for the issuance of Bonds of any Series
(including Bonds of a Series theretofore authorized and then
Outstanding) or any Class within such Series in bearer form with
coupons ("Bearer Bonds") and for the exchangeability of Bearer Bonds
and Bonds of the same Series and Class issued in registered form
("Registered Bonds"); any such supplemental indenture may provide for
payments on Bearer Bonds only outside the United States and for
appointment of a foreign Paying Agent that does not satisfy the
requirements of clause (ii) of the definition of the term "Eligible
Investments" but is otherwise acceptable to the rating agencies that
rated the initial Series of the Bonds and may also contain any
provisions as may in the Issuer's judgment be necessary, appropriate or
convenient (a) to permit the Bonds to be issued and sold to or held in
bearer form by non-United States Persons, (b) to establish entitlement
to an exemption from United States withholding tax or reporting
requirements with respect to payments on the Bonds, (c) to comply, or
facilitate compliance, with other applicable laws or regulations, (d)
to provide for usual and customary provisions for communication (by
notice publication, maintenance of lists of holders of Bearer Bonds who
have provided names and addresses for such purpose, or otherwise) with
holders of Bearer Bonds, or (e) to otherwise effectuate provisions for
the issuance of Bearer Bonds and their exchangeability with Registered
Bonds (under no circumstances will this provision allow the Trustee or
the Issuer to issue a second Class of "residual interests" as defined
in the Code);
(9) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under TIA or under any similar federal
statute hereafter enacted, and to modify, eliminate or add to the
provisions of this Indenture to such extent as shall be necessary or
appropriate to conform to any provisions of the TIA, as the same may
from time to time be amended; or
(10) if a REMIC election or elections has or have been made or
will be made in respect of the Trust Estate or such other assets
specified in such election and securing the Bonds of a Series, to
modify, eliminate or add to the provisions of this Indenture to such
extent as shall be necessary (i) to maintain the qualification of such
assets as a REMIC under the Code or (ii) to avoid or minimize the risk
of the imposition of any tax on the Issuer, the Trust Estate or another
Person under the Code that would be a claim against the Issuer, Trust
Estate or such other Person, as the case may be, or (iii) to prevent a
REMIC Loss, provided that (a) there shall have been delivered an
Opinion of Counsel to the effect that such action
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is necessary to maintain such qualification or to avoid any such tax or
minimize the risk of its imposition or to prevent such prohibited
transaction, respectively, and (b) such supplemental indenture shall
not have any of the effects described in paragraphs (1) through (6) of
the proviso to Section 9.2 of this Indenture.
SECTION 9.2 Supplemental Indentures with Consent of Bondholders.
With the consent of the Holders of Bonds representing not less than
two-thirds of the Aggregate Current Principal Amount of all Outstanding Bonds in
case Outstanding Bonds of all Series are to be affected or with the consent of
the Holders of Bonds representing not less than two-thirds of the Aggregate
Current Principal Amount of the Outstanding Bonds of each Series to be affected
in case one or more, but less than all, of the Series of Outstanding Bonds are
to be affected, by Act of said Holders delivered to the Issuer and the Trustee,
the Issuer, 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 relating to such Series or of modifying in any
manner the rights of the Holders of the Bonds of such Series under this
Indenture; provided, however, that no such supplemental indenture shall, without
the consent of the Holder of each Outstanding Bond affected thereby:
(1) change the Stated Maturity of the final installment of the
principal of, or any installment of interest on, any Bond or reduce the
principal amount thereof, the Bond Interest Rate thereon or the
Redemption Price with respect thereto, change Bond Redemption Date for
any Series of Bonds, change any place of payment where, or the coin or
currency in which, any Bond or any interest thereon is payable, or
impair the right to institute suit for the enforcement of the payment
of any installment of interest due on any Bond on or after the Stated
Maturity thereof or for the enforcement of the payment of the entire
remaining unpaid principal amount of any Bond on or after the Stated
Maturity of the final installment of the principal thereof (or, in the
case of redemption, on or after the applicable Redemption Date);
(2) reduce the percentage of the Aggregate Current Principal
Amount of the Outstanding Bonds of any Series, the consent of the
Holders of which is required for any such supplemental indenture, or
the consent of the Holders of which is required for any waiver of
compliance with provisions of this Indenture or Defaults hereunder and
their con sequences provided for in this Indenture;
(3) modify any of the provisions of this Section, Section 5.13
or Section 5.17(b), except to increase any percentage specified therein
or to provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each
Outstanding Bond affected thereby;
(4) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
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(5) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of a
Trust Estate or terminate the lien of this Indenture on any property at
any time subject hereto or deprive the Holder of any Bond of the
security afforded by the lien of this Indenture; or
(6) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the Debt Service Requirement for
any Payment Date for any Series of Bonds (including the calculation of
any of the individual components of such Debt Service Requirement) or
to affect rights of the Holders of Bonds of any Series to the benefits
of any provisions for the mandatory redemption of Bonds of such Series
contained herein or in the related Series Supplement.
Notwithstanding any of the foregoing, prior to the date on which the
Class Imputed Principal Balance of each Class of Senior Bonds of a Series has
been reduced to zero, no amendment, variation or modification shall be made to
Article V hereof in respect of any Series of Bonds without the consent of the
Holders representing not less than 100% of the Aggregate Current Principal
Amount of all Outstanding Senior Bonds of such Series. The consent of the
Holders of any Junior Bonds of such Series shall not be required to be obtained
prior to making any amendment for such series to Article V above for so long as
any Senior Bond of such Series is Outstanding. Upon reduction to zero of the
Class Imputed Principal Balance of each Class of Senior Bonds of a Series, no
amendment, variation or modification to Article V hereof shall be made in
respect of such Series of Bonds without the consent of the Holders representing
not less than 662/3% of the Aggregate Current Principal Amount of the Highest
Priority Junior Class of such Series.
The Trustee may in its discretion determine whether or not any Bonds of
any particular Series would be affected by any supplemental indenture and any
such determination shall be conclusive upon the Holders of all Bonds, whether
theretofore or thereafter authenticated and delivered hereunder. The Trustee
shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Bondholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section, the Issuer shall mail to the
Holders of the Bonds of each Series to which such supplemental indenture relates
a notice setting forth in general terms the substance of such supplemental
indenture. Any failure of the Issuer to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
supplemental indenture.
SECTION 9.3 Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying
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upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. In addition, in
executing any supplemental indenture which modifies an existing trust created by
this Indenture, the Trustee shall require, as a condition of such execution or
acceptance if a REMIC election or elections has or have been made or will be
made in respect of the Trust Estate or such other assets specified in such
election and securing such Series of Bonds, a Non-Disqualification Opinion. The
Trustee may, but shall not (except to the extent required in the case of a
supplemental indenture entered into under Section 9.1(8)) be obligated to, enter
into any such supplemental indenture which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
SECTION 9.4 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Bonds of any Series to which such supplemental indenture relates which have
theretofore been or thereafter are authenticated and delivered hereunder shall
be bound thereby.
SECTION 9.5 Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of TIA as then in effect so long as this Indenture
shall then be qualified under TIA.
SECTION 9.6 Reference in Bonds to Supplemental Indentures.
Bonds authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article which relates to the Series of
which such Bonds are a part may, and if required by the Issuer shall, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Issuer shall so determine, new Bonds so modified
as to conform, in the opinion of Trustee and the Issuer, to any such
supplemental indenture which relates to the Series of which such Bonds are a
part may be prepared and executed by the Issuer and authenticated and delivered
by the Trustee in exchange for Outstanding Bonds of such Series.
SECTION 9.7 Amendments to Governing Documents.
Except as is otherwise provided in Section 3.8(c) the Trustee shall,
upon Issuer Request, consent to any proposed amendment to the Issuer's governing
documents, or an amendment to or waiver of any provision of any other document
relating to the Issuer's governing documents, such consent to be given without
the necessity of obtaining the consent of the Holders of any Bonds upon receipt
by the Trustee of:
(1) an Officer's Certificate, to which such proposed amendment
or waiver shall be attached, stating that such attached copy is a true
copy of the proposed amendment or
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waiver and that all conditions precedent to such consent specified in
this Section 9.7 have been satisfied; and
(2) written confirmation from each of the rating agencies that
rated any Series of the Issuer's Bonds that the implementation of the
proposed amendment or waiver will not adversely affect their respective
ratings of any Series of Bonds.
Notwithstanding the foregoing, the Trustee may decline to consent to a
proposed waiver or amendment that adversely affects its own rights, duties or
immunities under the Indenture or otherwise.
Nothing in this Section 9.7 shall be construed to require that any
Person obtain the consent of the Trustee to any amendment or waiver or any
provision of any document where the making of such amendment or the giving of
such waiver without obtaining the consent of the Trustee is not prohibited by
the Indenture or by the terms of the document that is the subject of the
proposed amendment or waiver.
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ARTICLE X
REDEMPTION OF BONDS
SECTION 10.1 Redemption.
All the Bonds of a Series may be redeemed in whole, but not in part, on
any Payment Date for such Series in accordance with and subject to the
provisions relating to such redemption contained in the related Series
Supplement. If the Issuer shall elect to redeem the Bonds of a Series pursuant
to this Section 10.1 and the related Series Supplement, it shall furnish notice
of such election to the Trustee not later than thirty (30) days prior to the
Payment Date selected for such redemption, whereupon all such Bonds shall be due
and payable on such Payment Date upon the furnishing of a notice pursuant to
Section 10.2 to each Holder of such Bonds.
SECTION 10.2 Form of Redemption Notice.
Unless otherwise specified in the related Series Supplement notices of
redemptions of Bonds shall be given by the Trustee in the name and at the
expense of the Issuer and shall be mailed, or caused to be mailed, no later than
five days prior to such Payment Date on which such Bonds are to be redeemed to
the Persons who were Holders of such Bonds at the close of business on the tenth
Business Day prior to such Payment Date notwithstanding the Record Date
otherwise applicable.
Unless otherwise provided in the related Series Supplement, no prior
notice of redemption at the request of a Bondholder or redemption of Book Entry
Bonds shall be required.
All notices of redemption shall state:
(1) the Payment Date on which such redemption will take place,
(2) the Redemption Price at which the Bonds of such Series
will be redeemed,
(3) the fact of payment in full on such Bonds, the place where
such Bonds are to be surrendered for payment of the Redemption Price
(which shall be the office or agency of the Issuer to be maintained as
provided in Section 3.2), and that no interest shall accrue on such
Bond for any period after the date fixed for redemption.
Failure to give notice of redemption, or any defect therein, to any Holder of
any Bond selected for redemption shall not impair or affect the validity of the
redemption of any other Bond.
SECTION 10.3 Bonds Payable on Payment Date.
Notice of redemption having been given as provided in Section 10.2, the
Bonds or portions thereof so to be redeemed shall, on the applicable Payment
Date, become due and payable at the
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Redemption Price and (unless the Issuer shall default in the payment of the
Redemption Price) no interest shall accrue on such Payment Date.
SECTION 10.4 Right of Redemption by Holder.
(a) Unless the Bonds of a Series have been declared due and
payable prior to their Stated Maturity by reason of an Event of
Default, a Holder may request the redemption of Bonds of one or more
Classes of such Series if the related Series Supplement provides that
such Class or Classes shall be subject to redemption as so provided in
this Section 10.4. A Bondholder may request redemption by delivering
the following to the Trustee on or before the Tender Date: (i) a
written request for redemption in form satisfactory to the Trustee
(such as the form appearing on the back of each Bond), by the
Bondholder or the Bondholder's legal representative, with appropriate
evidence of authority; (ii) in the case of Definitive Bonds, the
certificate or certificates representing the Bond or Bonds for which
redemption is being requested, and (iii) in the case of a request on
behalf of a deceased Holder, appropriate evidence of death and any tax
waivers requested by the Trustee. With respect to each Class of Bonds
subject to redemption at the request of Holders, on each Payment Date
for such Series, the Issuer shall redeem Bonds with respect to which
redemption has been properly requested in the order of priority
described in paragraph (b) of this Section 10.4 and subject to the
limitations that (1) except as set forth in such subsection (b), the
Issuer shall not, on any one Payment Date, redeem from any personal
representative, surviving joint tenant or surviving tenant by the
entirety of a deceased Holder more than one hundred Individual Bonds of
such Series or redeem from any other Holder more than ten Individual
Bonds of such Series, unless all other Holders of Bonds for which
redemption has been properly requested for such Payment Date have had
their Bonds redeemed up to such limitations, and (2) with respect to
each Class of a Series subject to redemption pursuant to this Section
10.4, the Issuer shall, on each Redemption Date, only make redemptions
to the extent of the aggregate amount of principal payable on the Bonds
of such Class on such Payment Date, rounded down to the nearest
Individual Bond (the "Class Redemption Amount"). Bonds which have been
accepted for Redemption shall become due and payable on the applicable
Redemption Date and shall cease to bear interest as of the end of the
Interest Accrual Period for such Redemption Date. Upon presentation and
surrender of such Bonds for redemption on or after the Redemption Date
therefor, such Bonds shall be redeemed by the Issuer at the Redemption
Price, together with accrued interest. Installments of interest due on
or prior to a Redemption Date shall continue to be payable to the
Holders of such Bonds as of the applicable Record Date according to
their terms and the provisions of Section 2.9.
(b) Subject to the limitations provided in subsection (a) of
this Section 10.4, with respect to each Redemption Date and with
respect to each Class, requests for redemption of Deceased Holder Bonds
shall be accepted in the order of receipt of such requests by the
Trustee to the extent permitted by the one hundred Individual Bond
limitation referred to in Section 10.4(a); requests for redemption of
Bonds other than Deceased Holder Bonds shall be accepted in the order
of receipt of such requests by the Trustee to the extent permitted by
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the ten Individual Bond limitation referred to in Section 10.4(a),
after all requests for redemption of Deceased Holder Bonds of the same
Class theretofore submitted have been accepted within the one hundred
Individual Bond limitation. With respect to each Redemption Date, the
Issuer shall accept requests for redemption of Deceased Holder Bonds in
excess of the one hundred Individual Bond limitation, but only to the
extent of the Class Redemption Amount for such Class for such Series
after all requests for redemption in this subsection (b) with respect
to such Redemption Date within the one hundred Individual Bond and ten
Individual Bond limitations set forth above have been accepted. With
respect to each Redemption Date, the Issuer shall accept requests for
redemption of Bonds other than Deceased Holder Bonds in excess of the
ten Individual Bond limitation, but only to the extent of the Class
Redemption Amount for such Class for such Series after all other
requests for redemption in this subsection (b) with respect to such
Redemption Date within the one hundred Individual Bond and ten
Individual Bond limitations set forth above have been accepted. With
respect to each Redemption Date, the Issuer shall accept requests for
redemption of Bonds other than Deceased Holder Bonds in excess of the
ten Individual Bond limitation, but only to the extent of the Class
Redemption Amount for such Class for such Series after all other
requests for redemption in this subsection (b) with respect to such
Redemption Date have been accepted. Subject to the foregoing
provisions, requests for redemption shall be accepted in the order that
they were received by the Trustee.
(c) In order to obtain redemption, the Holder or the personal
representative, surviving joint tenant or surviving tenant by the
entirety of a deceased Holder must deliver to the Trustee on or before
the Tender Date preceding the Redemption Date: (i) a written request
for redemption in form satisfactory to the Trustee (such as the form
appearing on the certificate representing the Bonds), signed by the
Holder or the Holder's legal representative (with appropriate evidence
of authority), (ii) the certificates representing the Bond or Bonds for
which redemption is being requested, and (iii) in the case of Deceased
Holder Bonds, appropriate evidence of death and any tax waivers
required by the Trustee. No particular forms of request for redemption
or authority to request redemption are necessary (but the form set
forth on the form of Bond in Section 2.2 shall be sufficient). Requests
for redemption of Bonds received by the Trustee after the Tender Date
preceding the Redemption Date, and requests for redemption not accepted
in respect of such Redemption Date, whether on behalf of a deceased
Holder or otherwise, will be treated as a request for redemption on the
next succeeding Redemption Date, and the Bonds submitted will be held
by the Trustee, until the request is accepted or withdrawn, except that
the Trustee, in its discretion, may cancel the certificates
representing any such Bonds provided that it shall maintain a record of
the Bonds so cancelled and such Bonds shall continue to be deemed
Outstanding for all purposes. Within the first five Business Days of
any month, the Trustee shall notify each Holder whose Bonds have been
accepted for redemption in whole or in part on the Redemption Date in
such month. Only whole Individual Bonds may be redeemed.
(d) For purposes of this Section, the death of a tenant by the
entirety, joint tenant or tenant in common will be deemed the death of
a Holder, and the entire principal amount of the Bond so held will be
deemed to be a Deceased Holder Bond. The death of a person
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who, during his lifetime, was entitled to substantially all of the
beneficial interests of ownership of a Bond will be deemed the death of
the Holder, regardless of the registered Holder, if such beneficial
interest can be established to the satisfaction of the Trustee. Such
beneficial interest shall be deemed to exist in typical cases of street
name of nominee ownership, ownership under the Uniform Gifts to Minors
Act, community property or other joint ownership arrangement between a
husband and wife, and trust and certain other arrangements where a
person has substantially all of the beneficial ownership interests in
the Bonds during his or her lifetime. Beneficial interest shall include
the power to sell, transfer or otherwise dispose of a Bond and the
right to receive the proceeds therefrom, as well as interest and
principal payable with respect thereto.
(e) To the extent that the Class Redemption Amount as defined
under Section 10.4(a) for a Principal Payment Date exceeds the
aggregate amount of Bonds of a Class to be redeemed on such Principal
Payment Date at the option of the Holders of such Class, Bonds of such
Class shall be mandatorily redeemed by the Issuer at the price
specified in the related Series Supplement. Unless otherwise provided
in the related Series Supplement, if less than all of the Bonds of any
such Class are to be redeemed, the particular Bonds to be redeemed
shall be selected by the Trustee from the Outstanding Bonds of such
Series not previously called or accepted for redemption, not more than
30 days prior to the applicable Principal Payment Date. The Trustee
shall select the Bonds to be redeemed by random lot. Only whole
Individual Bonds may be redeemed.
The Trustee shall promptly notify the Issuer in writing of the
Individual Bonds selected for redemption pursuant to this Section
10.4(e) and, in the case of any Bond selected for partial redemption,
the principal amount thereof to be redeemed.
(f) Beneficial Owners of Book Entry Bonds may tender their
interest in Bonds for redemption on any Principal Payment Date subject
to the limitations established in this Section 10.4. If, and to the
extent provided in the related Series Supplement, the Clearing Agency
will receive requests for redemption and requests for withdrawal,
determine the order of receipt of request for redemption, select Bonds
to be mandatorily redeemed, provide notices of redemption and/or make
payments of the redemption price and accrued interest, if any, in
accordance with the terms and provisions of the related Series
Supplement and the rules and procedures of the Clearing Agency.
(g) Each of the terms and provisions of this Section 10.4 may
be modified, with respect to any Series, by the related Series
Supplement.
SECTION 10.5 Withdrawal of Requests.
Any requests for redemption pursuant to Section 10.4 may be withdrawn
by the persons making the same upon the delivery of a written request for such
withdrawal received by the Trustee not later than the Tender Date for a given
Redemption Date on which such Bond would otherwise be redeemable pursuant to
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Section 10.4. If not so withdrawn, the redemption request will be irre- vocable
with respect to the selection of Bonds for redemption on the Redemption Date
within such month. In the event a request for redemption has been withdrawn as
provided herein, the Trustee shall return the certificate representing the Bond
or Bonds in respect of which the redemption request has been withdrawn or, in
the case of Bonds the certificates of which were cancelled by the Trustee
pursuant to Section 10.4(c), the Issuer shall execute, and the Trustee shall
authenticate and deliver, new certificates representing the Bonds in respect of
which the redemption request has been withdrawn, such new Bonds to be of the
same date and tenor as the Bonds cancelled under Section 10.4(c) in the amount
which remains outstanding.
SECTION 10.6 Redemption Register.
The Trustee shall maintain at its Corporate Trust Office a register in
which it shall record, in the order of receipt, all requests for redemption
received by the Trustee under Section 10.4. The Trustee may establish such
procedures as it may deem fair and equitable in order to determine the order of
receipt of requests for redemption received by the Trustee on a single day, and
any such determination shall be conclusive. In establishing procedures for
determining the order of receipt of request for redemption, the Trustee may
designate from time to time any particular person, department or office as the
designated recipient of such requests and provide that, after Holders have been
notified in writing of such designation, no request for redemption will be
deemed received until received by the person, department or office so
designated. Unless withdrawn as provided in Section 10.5, all such requests
shall remain in effect until the Bonds which are the subject of such request
have been redeemed.
SECTION 10.7 Reserved.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Compliance Certificates and Opinions.
Upon any application or request by the Issuer to the Trustee to take
any action under any provision of this Indenture, the Issuer shall furnish to
the Trustee an Officers' Certificate stating that all conditions 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, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, including one furnished
pursuant to specific requirements of this Indenture relating to a particular
application or request (other than certificates provided pursuant to TIA Section
314(a)(4)) shall include and shall be deemed to include (regardless of whether
specifically stated therein) the following:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 11.2 Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
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Any certificate or opinion of an officer of the Issuer may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Issuer, stating that the
information with respect to such factual matters is in the possession of the
Issuer, unless such officer or counsel knows, or in the exercise of reasonable
care should know, that the certificate or opinion or representations with
respect to such matters are erroneous. Any opinion of counsel may be based on
the written opinion of other counsel, in which event such Opinion of Counsel
shall be accompanied by a copy of such other counsel's opinion and shall include
a state ment to the effect that such counsel believes that such counsel and the
Trustee may reasonably rely upon the opinion of such other counsel.
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.
Wherever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's right to rely upon the truth and accuracy of
any statement or opinion contained in any such document as provided in Section
6.1(b)(2).
Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default is a condition
precedent to the taking of any action by the Trustee at the request or direction
of the Issuer, then notwithstanding that the satisfaction of such condition is a
condition precedent to the Issuer's right to make such request or direction, the
Trustee shall be protected in acting in accordance with such request or
direction if it does not have knowledge of the occurrence and continuation of
such Default or Event of Default as provided in Section 6.1(d).
SECTION 11.3 Acts of Bondholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given
or taken by Bondholders may be embod ied in and evidenced by one or
more instruments of substantially similar tenor signed by such
Bondholders in person or by agent duly appointed in writing; and,
except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the
Trustee, and, where it is hereby expressly required, to the Issuer.
Such instrument or instruments (and the action embodied therein and
evidenced thereby) are
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herein sometimes referred to as the "Act" of the Bondholders 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 (subject to Section
6.1) conclusive in favor of the Trustee and the Issuer, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved 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 the execution thereof. Whenever such execution is by an officer of
a corporation or a member of a partnership on behalf of such
corporation or partnership, such certificate or affidavit shall also
constitute sufficient proof of his authority.
(c) The ownership of Bonds shall be proved by the Bond
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Bonds shall bind
the Holder of every Bond 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 Trustee or the
Issuer in reliance thereon, whether or not notation of such action is
made upon such Bonds.
(e) The Voting Record Date specified in this Indenture, or in
the related Series Supplement for any Series of Bonds, shall be
applicable with respect to all Acts of Bond holders under this Section
11.3.
SECTION 11.4 Notices, etc. to Trustee and Issuer.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Bondholders or other documents provided or permitted by this Indenture
to be made upon, given or furnished to, or filed with
(1) the Trustee by any Bondholder or by the Issuer 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, or
(2) the Issuer by the Trustee or by any Bondholder shall be
sufficient for every purpose hereunder (except as provided in Section
5.1(A)(3) and (4)) if in writing and mailed, first-class
postage-prepaid, to the Issuer addressed to it at 2711 N. Haskell,
Suite 1000, Dallas, Texas 75204 or at any other address previously
furnished in writing to the Trustee by the Issuer.
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SECTION 11.5 Notices and Reports to Bondholders; Waiver of Notices.
Where this Indenture provides for notice to Bondholders of any event or
the mailing of any report to Bondholders, such notice or report shall be
sufficiently given (unless otherwise herein expressly provided) if mailed,
first-class postage prepaid, to each Bondholder affected by such event or to
whom such report is required to be mailed, at the address of such Bondholder as
it appears on the Bond Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice or the mailing
of such report. In any case where a notice or report to Bondholders is mailed in
the manner provided above, neither the failure to mail such notice or report,
nor any defect in any notice or report so mailed, to any particular Bondholder
shall affect the sufficiency of such notice or report with respect to other
Bondholders, and any notice or report which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given or provided.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Bondholders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Bondholders when such 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.
SECTION 11.6 Rules by Trustee and Agents.
The Trustee may make reasonable rules for any meeting of Bondholders.
Any Agent may make reasonable rules and set reasonable requirements for its
functions.
SECTION 11.7 Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with the duties
imposed by operation of TIA Section 318(c), the imposed duties under the TIA
shall control.
SECTION 11.8 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 hereof.
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SECTION 11.9 Successors and Assigns.
All covenants and agreements in this Indenture by the Issuer shall bind
its successors and assigns, whether so expressed or not.
SECTION 11.10 Severability.
In case any provision in this Indenture or in the Bonds shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.11 Benefits of Indenture.
Nothing in this Indenture or in the Bonds, expressed or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, any separate trustee or co-trustee appointed under Section 6.14, any
alternate trustee appointed under Section 6.16 and the Bondholders, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 11.12 Legal Holidays.
In any case where the date of any Payment Date, Redemption Date,
Special Payment Date, or any other date on which principal of or interest on any
Bond or Overdue Bond is proposed to be paid shall not be a Business Day, then
(notwithstanding any other provision of the Bonds or this Indenture) payment
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the nominal date of any such
Payment Date, Redemption Date, Special Payment Date, or other date for the
payment of principal of or interest on any Bond or Overdue Bond, as the case may
be, and no interest shall accrue for the period from and after any such nominal
date, provided such payment is made in full on such next succeeding Business
Day.
SECTION 11.13 GOVERNING LAW.
IN VIEW OF THE FACT THAT BONDHOLDERS ARE EXPECTED TO RESIDE IN MANY
STATES AND OUTSIDE THE UNITED STATES AND THE DESIRE TO ESTABLISH WITH CERTAINTY
THAT THIS INDENTURE WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAW OF A STATE HAVING A WELL-DEVELOPED BODY OF COMMERCIAL
AND FINANCIAL LAW RELEVANT TO TRANSACTIONS OF THE TYPE CONTEMPLATED HEREIN, THIS
INDENTURE, EACH SERIES SUPPLEMENT AND EACH BOND SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PER FORMED THEREIN.
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SECTION 11.14 Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 11.15 Recording of Indenture.
This Indenture is subject to recording in any appropriate public
recording offices, such recording to be effected by the Issuer and at its
expense in compliance with any Opinion of Counsel delivered pursuant to Section
2.12(c) or 3.6.
SECTION 11.16 Corporate Obligation.
No recourse may be taken, directly or indirectly, against any
incorporator, subscriber to the capital stock, stockholder, officer or director
of the Issuer or the Trustee or of any predecessor or successor of the Issuer or
the Trustee with respect to the Issuer's obligations with respect to the Bonds
or the obligations of the Issuer or the Trustee under this Indenture or any
certificate or other writing delivered in connection herewith or therewith.
SECTION 11.17 Inspection.
The Issuer agrees that, on reasonable prior notice, it will permit any
representative of the Trustee, during the Issuer's normal business hours, to
examine all of the books of account, records, reports and other papers of the
Issuer, to make copies and extracts therefrom, to cause such books to be audited
by Independent Accountants selected by the Trustee, and to discuss its affairs,
finances and accounts with its officers, employees and Independent Accountants
(and by this provision the Issuer hereby authorizes its Accountants to discuss
with such representatives such affairs, finances and accounts), all at such
reasonable times and as often as may be reasonably requested. Any expense
incident to the exercise by the Trustee of any right under this Section 11.17
shall be borne by the Issuer.
SECTION 11.18 Usury.
The amount of interest payable or paid on any Bond under the terms of
this Indenture shall be limited to an amount which shall not exceed the maximum
nonusurious rate of interest allowed by the applicable laws of the United States
or the State of New York (whichever shall permit the higher rate), which could
lawfully be contracted for, charged or received (the "Highest Lawful Rate"). In
the event any payment of interest on any Bond exceeds the Highest Lawful Rate,
the Issuer stipulates that such excess amount will be deemed to have been paid
as a result of an error on the part of both the Trustee, acting on behalf of the
Holder of such Bond, and the Issuer, and the Holder receiving such excess
payment shall promptly, upon discovery of such error or upon notice thereof from
the Issuer or the Trustee, refund the amount of such excess or, at the option of
the Trustee, apply the excess to the payment of principal of such Bond, if any,
remaining unpaid. In
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addition, all sums paid or agreed to be paid to the Trustee for the benefit of
Holders of Bonds for the use, forbearance or detention of money shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such Bonds.
SECTION 11.19 REMIC Status.
The provisions of this Indenture shall be construed so as to carry out
the intention of the parties that the Trust Estate and any other assets
specified in such REMIC election or elections and securing a Series of Bonds, be
treated as a REMIC, if a REMIC election or elections has or have been made or
will be made in respect of the Trust Estate or such other assets, at all times
so long as any Bond of such Series is Outstanding (or would be treated as
Outstanding for purposes of a Non-Disqualification Opinion).
SECTION 11.20 Reserved.
SECTION 11.21 Appointment of Tax Matters Partner.
If a REMIC election or elections has or have been made or will be made
in respect of the Trust Fund or any other assets specified in such REMIC
election or elections which assets secure the Bonds of a Series, the tax matters
partner for each such REMIC and for all purposes of the Code shall be the Person
designated as such in the related Series Supplement.
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IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Indenture to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
CMC SECURITIES CORPORATION III
By: /s/ Andrew F. Jacobs
--------------------------------------
Name: Andrew F. Jacobs
Title: Senior Vice President-
Asset and Liability Management
STATE OF TEXAS )
:ss.:
COUNTY OF DALLAS )
On the 31st day of March, 1998, before me personally came Andrew F.
Jacobs to me known, who, being by me duly sworn, did depose and say that he
resides in Dallas, Texas; that he is a Senior Vice President of CMC SECURITIES
CORPORATION III, the corporation described in and that executed the above
instrument; and that he signed his name thereto by order of the Board of
Directors of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Chris T. Krecek
----------------------------------
Notary Public
Indenture - Signature Page
<PAGE> 135
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By:/s/ R. Tarnas
------------------------------------
Name: R. Tarnas
Title: Vice President
STATE OF TEXAS )
:ss.:
COUNTY OF DALLAS )
On the ____ day of March, 1998 before me personally came
____________________ to me known, who, being by me duly sworn, did depose and
say that he/she resides in Chicago, Illinois; that he/she is a ___________ of
The First National Bank of Chicago, the national banking association described
in and that executed the above instrument as Trustee; and that he/she signed
his/her name thereto by order of the Board of Directors of said national banking
association.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
-----------------------------------
Notary Public
Indenture - Signature Page
<PAGE> 1
EXHIBIT 4.2
CMC SECURITIES CORPORATION III,
Issuer
and
THE FIRST NATIONAL BANK OF CHICAGO,
Trustee
Series 1998-1 Supplement
Dated as of March 31, 1998
to
INDENTURE
Dated as of March 1, 1998
$593,796,659
COLLATERALIZED MORTGAGE OBLIGATIONS
Series 1998-1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRELIMINARY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GRANTING CLAUSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. Designation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3. Dating of Series 1998-1 Bonds; Calculation of Interest Accrued. . . . . . . . . . . . . . . . . . . . . 22
SECTION 4. Transfer of ERISA Restricted and ERISA Prohibited Bonds. . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5. Aggregate Principal Amount; Classes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6. Denominations of Series 1998-1 Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 7. Authentication of Series 1998-1 Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 8. Payment Dates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 9. Places for Payment of Principal of Series 1998-1 Bonds;
Payments on Book Entry Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 10. Payment on the Bonds Before Acceleration; Reports to Bondholders. . . . . . . . . . . . . . . . . . . . 26
SECTION 11. Payment on the Bonds on and after Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 12. Allocation of Realized Losses, Net Interest Shortfalls, Subordinate
Bonds Writedown Amounts and Component P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 13. Transfer of Certificates to Trustee; Deposits to Collection Account;
Pledged Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 14. Requirements for Issuance of Series 1998-1 Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 15. Calculations with Respect to Underlying Mortgage Loans. . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 16. Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 17. Actions by Trustee as Holder of Conventional Certificates. . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 18. REMIC Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 19. Form of Series 1998-1 Bonds; Matters Relating to Book Entry Bonds. . . . . . . . . . . . . . . . . . . 48
SECTION 20. The Master Servicers and the Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 21. Supplements, Modifications and Ratifications of Indenture. . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 22. Certain Matters Regarding Registration of Transfer and
Exchange of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 23. Rule 144A Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 24. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 25. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 26. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Schedule A - Schedule of Certificates
Appendix A - Planned Balances
</TABLE>
- i -
<PAGE> 3
EXHIBITS
Exhibit A-1 - Form of Bond (Class A-1, A-2, A-3, A-4, A-5, A-6, A-8,
A-10, A-11, A-12, A-13, A-14, A-15, A-16, A-17, A-18,
A-19)
Exhibit A-2 - Form of Bond (Class P)
Exhibit A-3 - Form of Bond (Class A-7, A-9, X, 2-X)
Exhibit A-4 - Form of Bond (Class B-1, B-2, B-3, 2-B-1, 2-B-2, 2-B-3,
3-B-1, 3-B-2 and 3-B-3)
Exhibit A-5 - Form of Bond (Class B-4, B-5, B-6, 2-B-4, 2-B-5, 2-B-6,
3-B-4, 3-B-5 and 3-B-6)
Exhibit A-6 - Form of Bond (Class R-1)
Exhibit A-7 - Form of Bond (Class R-2)
Exhibit A-8 - Form of Bond (Class R-3)
Exhibit B - Form of Transferee Affidavit and Agreement (Residual
Bonds)
Exhibit C-1 - Form of Transferee Representation Letter (Private Bonds)
Exhibit C-2 - Form of Transferor Representation Letter (Private Bonds)
Exhibit C-3 - Form of Rule 144A Transferee Representation Letter
(Private Bonds)
Exhibit D-1 - Letter of Representations (Book Entry Bonds Other than
Other Subordinate Bonds)
Exhibit D-2 - Letter of Representations (Other Subordinate Bonds)
Exhibit E - Form of Transferor Certificate (Residual Bonds)
- ii -
<PAGE> 4
Series 1998-1 Supplement dated as of March 31, 1998, between CMC
SECURITIES CORPORATION III, a Delaware corporation (together with its
successors and assigns as provided in the Indenture referred to below, the
"Issuer") and THE FIRST NATIONAL BANK OF CHICAGO, a national bank (together
with its successors in trust thereunder as provided in the Indenture, the
"Trustee"), as trustee under an Indenture dated as of March 1, 1998 (such
Indenture, as thereafter amended and supplemented, is referred to herein as the
"Indenture").
PRELIMINARY STATEMENT
Section 2.3 of the Indenture provides, among other things, that the
Issuer, when authorized by its Board of Directors, and the Trustee may enter
into an indenture supplemental to the Indenture for the purpose of authorizing
a Series of Bonds and to specify certain terms of such Series of Bonds. The
Board of Directors of the Issuer has duly authorized the creation of a Series
of Bonds in an aggregate principal amount of $593,796,659 to be known as its
Collateralized Mortgage Obligations, Series 1998-1 (the "Series 1998-1 Bonds",
with references herein to "Bonds" being references solely to the Series 1998-1
Bonds)), and the Issuer and the Trustee are executing and delivering this
Series 1998-1 Supplement in order to provide for the Series 1998-1 Bonds. All
terms used in this Series 1998-1 Supplement that are defined in the Indenture,
either directly or by reference therein, have the meanings assigned to them
therein as supplemented by Section 1 hereof, if applicable, except to the
extent the context clearly requires otherwise. Any such defined term that is
defined in the Indenture as relating to a particular Series rather than to all
Bonds generally shall, when used in this Series 1998-1 Supplement, relate to
the Series 1998-1 Bonds, whether or not expressly so stated herein.
GRANTING CLAUSES
The Issuer hereby Grants to the Trustee, for the exclusive benefit of
the Holders of the Series 1998-1 Bonds, all of the Issuer's right, title and
interest in and to (a) the mortgage pass-through certificates listed in
Schedule A to this Series 1998-1 Supplement, which the Issuer has caused to be
delivered to the Trustee herewith and which Conventional Certificates evidence
interests in pools of mortgage loans on one- to four-family residential
properties and individual condominium units, and all Distributions with respect
thereto payable at any time on or after the first Distribution Date, (b) each
Pledged Account for the Series 1998-1 Bonds, including all income from the
investment of funds in each such Pledged Account, (c) the Initial Deposit and
(c) all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or other liquid property. Such Grants are made, however,
in trust, to secure the Series 1998-1 Bonds, equally and ratably, without
prejudice or distinction between any Series 1998-1 Bond and any other Series
1998-1 Bond by reason of difference in time of issuance or otherwise, and to
secure (i) the payment of all amounts due on the Series 1998-1 Bonds as such
amounts become due in accordance with their terms, (ii) the payment of all
other sums payable under the Indenture or this Series 1998-1 Supplement with
respect to the Series 1998-1 Bonds, and (iii) compliance with the provisions of
the Indenture and this Series 1998-1 Supplement with respect to the Series
1998-1 Bonds, all as provided in the Indenture and this Series 1998-1
Supplement.
<PAGE> 5
The Trustee acknowledges such Grants, accepts the trusts hereunder in
accordance with the provisions hereof and of the Indenture, and agrees to
perform the duties herein or therein required in accordance with Article VI of
the Indenture.
SECTION 1. Certain Defined Terms.
Sections 1.1 and 2.3 of the Indenture provide that the meaning of
certain defined terms used in the Indenture shall, when applied to the Bonds of
a particular Series, be as defined in said Section 1.1 but with such additional
provisions as are specified in the related Series Supplement. With respect to
the Series 1998-1 Bonds, the following provisions shall govern the defined
terms set forth below:
"Accrual Date": With respect to all Classes of Bonds which pay
interest, March 1, 1998.
"Accrued Bond Interest": For any interest-bearing Class of Bonds for
any Payment Date, the interest accrued during the related Interest Accrual
Period at the applicable Bond Interest Rate on the Class Current Principal
Balance (or in the case of a Class of Interest Only Bonds, the Class Notional
Balance) of such Class immediately prior to such Payment Date, calculated on
the basis of a 360-day year consisting of twelve 30-day months, less (i) in the
case of an interest-bearing Class of Senior Bonds, such Class's share of any
Net Interest Shortfall and the interest portion of any Excess Special Hazard
Losses and, after the applicable Cross-Over Date, the interest portion of any
Realized Losses applicable to its related Mortgage Loan Group and (ii) in the
case of a Class of Subordinate Bonds, such Class's share of any Net Interest
Shortfall and the interest portion of any Realized Losses applicable to its
related Mortgage Loan Group. No Accrued Bond Interest will be payable with
respect to any Class of Bonds after the Payment Date on which the Class Current
Principal Balance or Class Notional Balance of such Class has been reduced to
zero.
"Adjustment Amount": For each anniversary of the Cut-off Date, for
each Mortgage Loan Group, the amount, if any, by which the applicable Special
Hazard Loss Amount (without giving effect to the deduction of the Adjustment
Amount for such anniversary) exceeds the lesser of (A) an amount calculated by
the Certificate Trustee and approved by each of the Rating Agencies, which
amount shall not be less than $500,000, and (B) the greater of (x) 1.0% (or if
greater than 1.0%, the highest percentage of Mortgage Loans of the applicable
Mortgage Loan Group by principal balance secured by Mortgaged Properties in any
five-digit California ZIP code area) of the outstanding principal balance of
all the Mortgage Loans of the applicable Mortgage Loan Group on the
Distribution Date immediately preceding such anniversary and (y) twice the
outstanding principal balance of the Mortgage Loan of the applicable Mortgage
Loan Group which has the largest outstanding principal balance on the
Distribution Date immediately preceding such anniversary.
"Allocable Share": With respect to any Class of Subordinate Bonds of
any Bond Group:
(a) as to any Payment Date and amounts payable pursuant
to clauses (i), (iv) and (vi) of the applicable Subordinate Optimal
Principal Amount for such Bond Group, the fraction, expressed as a
percentage, the numerator of which is the Class Current Principal
Balance of such Class and the denominator of which is the aggregate of
the Class Current Principal Balances of all Classes of the Subordinate
Bonds of such Bond Group; and
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(b) as to any Payment Date and amounts distributable
pursuant to clauses (ii), (iii) and (v) of the applicable Subordinate
Optimal Principal Amount for such Bond Group, and as to each Class of
Subordinate Bonds of such Bond Group (other than the Class of
Subordinate Bonds of such Bond Group having the lowest numerical
designation as to which the Class Prepayment Distribution Trigger
shall not be applicable) for which (x) the related Class Prepayment
Distribution Trigger has been satisfied on such Distribution Date, the
fraction, expressed as a percentage, the numerator of which is the
Class Current Principal Balance of such Class and the denominator of
which is the aggregate of the Class Current Principal Balances of all
Classes of Subordinate Bonds of such Bond Group and (y) the related
Class Prepayment Distribution Trigger has not been satisfied on such
Payment Date, 0%; provided that if on a Payment Date, the Class
Current Principal Balance of any Class of Subordinate Bonds of such
Bond Group for which the related Class Prepayment Distribution Trigger
was satisfied on such Payment Date is reduced to zero, any amounts
paid pursuant to this clause (b), to the extent of such Class's
remaining Allocable Share, shall be paid to the remaining Classes of
Subordinate Bonds of such Bond Group which satisfy the related Class
Prepayment Distribution Trigger and to the Class of Subordinate Bonds
of such Bond Group having the lowest numerical designation in
reduction of their respective Current Principal Balances in the order
of their numerical Class designations.
"Available Funds": As to any Payment Date, the aggregate of the Group
1 Available Funds, Group 2 Available Funds and Group 3 Available Funds.
"BAFSB": As defined in the Pooling and Servicing Agreement.
"Bond Group": Each of the Group 1 Bonds, the Group 2 Bonds and the
Group 3 Bonds. The Group 1 Bonds are related to Mortgage Loan Group 1 which is
represented by Conventional Certificate 1998-1A. The Group 2 Bonds are related
to Mortgage Loan Group 2 which is represented by Conventional Certificate
1998-1B. The Group 3 Bonds are related to Mortgage Loan Group 3 which is
represented by Conventional Certificate 1998-1C.
"Bond Interest Rate": With respect to any Class of Bonds (other than
the Class P Bonds), the annual interest rate thereon set forth, or determined
as provided with respect thereto, in Section 5. Any monthly calculation of
interest at a stated rate shall be based upon annual interest at such rate
divided by twelve.
"Bond Redemption Date": With respect to a Bond Group, the
Distribution Date on which BSMCC or its designee exercises its option to
purchase the Mortgage Loans in the related Mortgage Loan Group pursuant to
Section 10.01 of the Pooling and Servicing Agreement.
"Book Entry Bonds": As defined in Section 3(b) hereof.
"BSMCC": As defined in the Pooling and Servicing Agreement.
"Business Day": As defined in the Pooling and Servicing Agreement.
"Buydown Fund": As defined in the Pooling and Servicing Agreement.
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<PAGE> 7
"Buydown Fund Account": As defined in the Pooling and Servicing
Agreement.
"Cendant": As defined in the Pooling and Servicing Agreement.
"Certificate Trustee": As defined in the Pooling and Servicing
Agreement.
"Class": Each class subdivision of the Bonds created hereunder
pursuant to Section 5.
"Class A-7 Notional Balance": On any date, an amount equal to the sum
of (i) the product of (A) 8.8888888889% and (B) the Class Current Principal
Balance of the Class A-1 Bonds, (ii) the product of (A) 14.9544582575% and (B)
the Class Current Principal Balance of the Class A-2 Bonds, (iii) the product
of (A) 7.4074074074% and (B) the Class Current Principal Balance of the Class
A-3 Bonds, (iv) the product of (A) 4.4444444444% and (B) the Class Current
Principal Balance of the Class A-4 Bonds, and (v) the product of (A)
3.7037037037% and (B) the Class Current Principal Balance of the Class A-6
Bonds.
"Class A-9 Notional Balance": On any date, the product of
2.4610272767% and the Class Current Principal Balance of the Class A-8 Bonds.
"Class A-15 Incremental Interest Amount": With respect to each of the
first 24 Payment Dates, an amount equal to the excess of the Accrued Bond
Interest on the Class A-15 Bonds for each such Payment Date over the amount of
such Accrued Bond Interest calculated as if such Class A-15 Bonds had a Bond
Interest Rate of 7.00% per annum.
"Class A-19 Optimal Principal Amount": For any Payment Date occurring
(a) prior to the Payment Date in April 2003, zero and (b) for any Payment Date
occurring after the first five years following the Closing Date, will as
follows: for any Payment Date during the sixth, seventh, eighth and ninth
years after the Closing Date, 30%, 40%, 60% and 80%, respectively, of the Class
A-19 Pro Rata Optimal Principal Amount for such Payment Date; and, for any
Payment Date thereafter, 100% of the Class A-19 Pro Rata Optimal Principal
Amount for such Payment Date. Notwithstanding the foregoing, if on any Payment
Date the Class Current Principal Balance of each Class of Group 1 Senior Bonds
(other than the Class A-19 Bonds and Component P-1) has been reduced to zero,
the Class A-19 Optimal Principal Amount shall equal the Group 1 Senior P&I
Optimal Principal Amount to the extent not paid on such Payment Date to other
Classes of Group 1 Senior Bonds.
"Class A-19 Pro Rata Optimal Principal Amount": For any Payment Date,
an amount equal to the product of (x) the sum of the Group 1 Senior P&I Optimal
Principal Amount and the Group 1 Subordinate Optimal Principal Amount for such
Payment Date multiplied by (y) a fraction, the numerator of which is the Class
Current Principal Balance of the Class A- 19 Bonds immediately prior to such
Payment Date and the denominator of which is the aggregate of the Class Current
Principal Balances of all Classes of Group 1 Bonds (other than Component P-1)
immediately prior to such Payment Date.
"Class Current Principal Balance": With respect to any Class of Bonds
(other than a Class of Interest Only Bonds), the sum of the Current Principal
Balances of all Bonds in such Class. The Class Current Principal Balance of
the Class P Bonds shall equal the sum of the Component P
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<PAGE> 8
Principal Balances. The Class Current Principal Balance of each Class of
Interest Only Bonds shall be zero.
"Class Imputed Principal Balance": As used in the Indenture, "Class
Imputed Principal Balance" shall have the same meaning as "Class Current
Principal Balance" as defined herein.
"Class Notional Balance": The Class A-7 Notional Balance, the Class
A-9 Notional Balance, the Class X Notional Balance, or the Class 2-X Notional
Balance, as applicable.
"Class Prepayment Payment Trigger": For a Class of Subordinate Bonds
in any Bond Group for any Payment Date, the Class Prepayment Payment Trigger is
satisfied if the fraction (expressed as a percentage), the numerator of which
is the aggregate of the Class Current Principal Balances of such Class and each
Class subordinate thereto, if any, and the denominator of which is the
aggregate of the Scheduled Principal Balances of all of the Mortgage Loans in
the related Mortgage Loan Group as of the related Due Date, equals or exceeds
such percentage calculated as of the Closing Date.
"Class X Notional Balance": Immediately prior to a given Payment
Date, the aggregate of the Scheduled Principal Balances of the Group 1 Mortgage
Loans on the second preceding Due Date, less the Class Current Principal
Balance of the Class R-1 Bonds.
"Class 2-X Notional Balance": Immediately prior to a given Payment
Date, the aggregate of the Scheduled Principal Balances of the Group 2 Mortgage
Loans on the second preceding Due Date.
"Clearing Agency": The registered Holder of the single Bond
evidencing each Class of the Book Entry Bonds. The initial Clearing Agency
with respect to each Class of Book Entry Bonds shall be The Depository Trust
Company of New York, the nominee for which is Cede & Co. The Clearing Agency
shall at all times be a "clearing corporation" as defined in Article 8 of the
Uniform Commercial Code of the State of New York.
"Closing Date": As defined in the Pooling and Servicing Agreement.
"Component Current Principal Balance": With respect to any P
Component as of any Payment Date, the initial principal amount of such
Component as of the Closing Date as reduced by (i) all amounts paid on previous
Payment Dates on such P Component (other than with respect to Component P
Deferred Amounts), (ii) the principal portion of all Realized Losses allocated
prior to such Payment Date to such P Component (taking account of the Loss
Allocation Limitation applicable to the Bond Group of such P Component) and
(iii) any applicable Component P Cash Shortfalls, in each case for previous
Payment Dates.
"Component P-1": A component of the Class P Bonds identified and
having the characteristics described in Section 5.
"Component P-2": A component of the Class P Bonds identified and
having the characteristics described in Section 5.
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<PAGE> 9
"Component P-3": A component of the Class P Bonds identified and
having the characteristics described in Section 5.
"Component P Cash Shortfall": With respect to Component P-1 and
Component P-2, the Component P-1 Cash Shortfall and the Component P-2 Cash
Shortfall, respectively.
"Component P-1 Cash Shortfall": As defined in Section 10(a)(i)(C).
"Component P-2 Cash Shortfall": As defined in Section 10(a)(iii)(B).
"Component P Deferred Amount": With respect to Component P-1 and
Component P-2, respectively, and each Payment Date through the Cross-Over Date
for the related Bond Group, the aggregate of all amounts allocable on such
Payment Date to Component P-1 and Component P-2, as applicable, in respect of
the principal portion of Realized Losses (other than Excess Special Hazard
Losses) on Mortgage Loans in the related Mortgage Loan Group and the related
Component P Cash Shortfall, and all amounts previously allocated in respect of
such Realized Losses (other than Special Hazard Excess Losses) and such
Component P Cash Shortfalls to such Component P and not paid on prior Payment
Dates. No interest shall accrue on any Component P Deferred Amount.
"Component P Deferred Payment Writedown Amount": With respect to a
given Component P-1 and Component P-2, respectively, and any Payment Date, the
amount, if any, paid on such date in respect of the related Component P
Deferred Amount pursuant to Section 10(a)(i)(A) fourth or 10(a)(iii)(A) fourth,
respectively.
"Component P Principal Payment Amount": With respect to each of
Component P-1 and P-2, on each Payment Date, an amount, without duplication,
equal to the sum of:
(i) the applicable PO Percentage of the principal portion
of all Monthly Payments due on each Outstanding Mortgage Loan that is
a Discount Mortgage Loan in the related Mortgage Loan Group on the
related Due Date as specified in the amortization schedule at the time
applicable thereto (after adjustments for previous principal
prepayments, but before any adjustment to such amortization schedule
by reason of any other bankruptcy or similar proceeding or any
moratorium or similar waiver or grace period);
(ii) the applicable PO Percentage of the Scheduled
Principal Balance of each Discount Mortgage Loan in the related
Mortgage Loan Group which was the subject of a Voluntary Principal
Prepayment in full received by the related Master Servicer during the
applicable Prepayment Period;
(iii) the applicable PO Percentage of all Voluntary
Principal Prepayments in part for each Discount Mortgage Loan in the
related Mortgage Loan Group received by the related Master Servicer
during the applicable Prepayment Period;
(iv) the lesser of (a) the applicable PO Percentage of the
sum of (A) all Net Liquidation Proceeds allocable to principal
received with respect to each Discount Mortgage
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<PAGE> 10
Loan in the related Mortgage Loan Group which became a Liquidated
Mortgage Loan during the related Prepayment Period (other than a
Discount Mortgage Loan described in the immediately following clause
(B)) and (B) the Scheduled Principal Balance of each such Discount
Mortgage Loan purchased by an Insurer from the Trustee during the
related Prepayment Period pursuant to the related Primary Mortgage
Insurance Policy, if any, or otherwise; and (b) the applicable PO
Percentage of the sum of (A) the Scheduled Principal Balance of each
Discount Mortgage Loan in the related Mortgage Loan Group which became
a Liquidated Mortgage Loan during the related Prepayment Period (other
than a Discount Mortgage Loan described in the immediately following
clause (B)) and (B) the Scheduled Principal Balance of each such
Discount Mortgage Loan in the related Mortgage Loan Group that was
purchased by an Insurer from the Trustee during the related Prepayment
Period pursuant to the related Primary Mortgage Insurance Policy, if
any, or otherwise, less (C) in the case of clause (b), the applicable
PO Percentage of the principal portion of Excess Special Hazard Losses
with respect to Discount Mortgage Loans in the related Mortgage Loan
Group incurred during the related Prepayment Period; and
(v) the applicable PO Percentage of the sum of (a) the
Scheduled Principal Balance of each Discount Mortgage Loan or REO
Property (which previously secured a Discount Mortgage Loan) in the
related Mortgage Loan Group which was repurchased by BSMCC in
connection with such Payment Date pursuant to Section 2.02 or 2.03 of
the Pooling and Servicing Agreement and (b) the excess, if any, of the
Scheduled Principal Balance of a Discount Mortgage Loan in the related
Mortgage Loan Group that has been replaced by BSMCC with a Discount
Mortgage Loan that is a Substitute Mortgage Loan pursuant to Section
2.05 of the Pooling and Servicing Agreement in connection with such
Payment Date over the Scheduled Principal Balance of such Substitute
Mortgage Loan.
"Conventional Certificates": The certificates pledged to secure the
Series 1998-1 Bonds, as set forth on Schedule A hereto.
"Corporate Trust Office": As defined in the Pooling and Servicing
Agreement.
"Corresponding Class": With respect to any REMIC I Interest, the
REMIC II Interest appearing opposite such REMIC I Interest in the table in
Section 18(n) and respect to any REMIC II Interest, the Class, Classes, or
Component appearing opposite such REMIC II Interest in the table included in
Section 18(o).
"Current Principal Balance": With respect to any Bond (other than a
Bond of a Class of Interest Only Bonds) as of any Payment Date, the initial
principal amount of such Bond as of the Closing Date, as reduced by (i) all
amounts paid on previous Payment Dates on such Bond with respect to principal,
(ii) the principal portion of all Realized Losses allocated prior to such
Payment Date to such Bond (taking account of the Loss Allocation Limitation
applicable to the Bond Group of such Bond) and (iii) in the case of a
Subordinate Bond of a Bond Group, such Bond's pro rata share, if any, of the
applicable Subordinate Bond Writedown Amount for such Bond Group and/or any
applicable Component P Deferred Payment Writedown Amount, in each case for
previous Payment Dates. Notwithstanding the foregoing, solely for purposes of
giving consents, directions, waivers, approvals, requests and notices, the
Class R-1, Class R-2 and Class R-3 Bonds after the
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<PAGE> 11
Payment Date on which they receive the payment of the last dollar of their
original principal amount shall be deemed to have a Current Principal Balance
equal to their Current Principal Balance on the day immediately preceding such
Payment Date.
"Cut-off Date": As defined in the Pooling and Servicing Agreement.
"Determination Date": As defined in the Pooling and Servicing
Agreement.
"Discount Mortgage Loan": Any Mortgage Loan in Mortgage Loan Group 1
or Mortgage Loan Group 2 with a Net Rate less than 6.75% per annum or 6.50% per
annum, respectively.
"Distribution Date": As defined in the Pooling and Servicing
Agreement.
"Due Date": As defined in the Pooling and Servicing Agreement.
"Due Period": As defined in the Pooling and Servicing Agreement.
"ERISA Prohibited Bonds": The Class R-1, Class R-2 and Class R-3
Bonds.
"ERISA Restricted Bonds": The Class A-7, Class A-9, Class X, Class
2-X, Class B-3, Class B-4, Class B-5, Class B-6, Class 2-B-3, Class 2-B-4,
Class 2-B-5, Class 2-B-6, Class 3-B-3, Class 3-B-4, Class 3-B-5 and Class 3-B-6
Bonds.
"Excess Special Hazard Losses": Any Special Hazard Losses occurring
after the Special Hazard Termination Date.
"Global Bond Certificate": Any Other Subordinate Certificate
registered in the name of the Clearing Agency or its nominee, beneficial
interests in which are reflected on the books of the Person maintaining an
account with such Clearing Agency (directly or as an indirect participant in
accordance with rules of such Clearing Agency).
"Group Available Funds": As defined in the Pooling and Servicing
Agreement.
"Group 1 Available Funds, "Group 2 Available Funds, "Group 3 Available
Funds": As defined in the Pooling and Servicing Agreement; provided, however,
that for purposes of this Series 1998-1 Supplement, on each Payment Date the
Group 1 Available Funds shall include the Class A-15 Incremental Interest
Amount with respect to such Payment Date.
"Group 1 Bonds": The Group 1 Senior Bonds and the Group 1 Subordinate
Bonds.
"Group 2 Bonds": The Group 2 Senior Bonds and the Group 2 Subordinate
Bonds.
"Group 3 Bonds": The Group 3 Senior Bonds and the Group 3 Subordinate
Bonds.
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<PAGE> 12
"Group 1 Cross-Over Date": The first Payment Date on which the
aggregate of the Class Current Principal Balances of the Group 1 Subordinate
Bonds has been reduced to zero (giving effect to all payments on such Payment
Date).
"Group 2 Cross-Over Date": The first Payment Date on which the
aggregate of the Class Current Principal Balances of the Group 2 Subordinate
Bonds has been reduced to zero (giving effect to all payments on such Payment
Date).
"Group 3 Cross-Over Date": The first Payment Date on which the
aggregate of the Class Current Principal Balances of the Group 3 Subordinate
Bonds has been reduced to zero (giving effect to all payments on such Payment
Date).
"Group 1 Loss Allocation Limitation": The meaning specified in
Section 12(a)(E) hereof.
"Group 2 Loss Allocation Limitation": The meaning specified in
Section 12(a)(E) hereof.
"Group 3 Loss Allocation Limitation": The meaning specified in
Section 12(a)(E) hereof.
"Group 1 Mortgage Loans": As defined in the Pooling and Servicing
Agreement.
"Group 2 Mortgage Loans": As defined in the Pooling and Servicing
Agreement.
"Group 3 Mortgage Loans": As defined in the Pooling and Servicing
Agreement.
"Group 1 Original Subordinate Principal Balance": The sum of the
Class Current Principal Balances of each Class of Group 1 Subordinate Bonds as
of the Closing Date.
"Group 2 Original Subordinate Principal Balance": The sum of the
Class Current Principal Balances of each Class of Group 2 Subordinate Bonds as
of the Closing Date.
"Group 3 Original Subordinate Principal Balance": The sum of the
Class Current Principal Balances of each Class of Group 3 Subordinate Bonds as
of the Closing Date.
"Group 1 Senior Bonds": The Class A-1, Class A-2, Class A-3, Class
A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class A-9, Class A-10, Class
A-11, Class A-12, Class A-13, Class A-14, Class A-15, Class A-16, Class A-17,
Class A- 18, Class A-19, Class X and Class R-1 Bonds and Component P-1.
"Group 2 Senior Bonds": The Class 2-A, Class 2-X and Class R-2 Bonds
and Component P-2.
"Group 3 Senior Bonds": The Class 3-A and Class R-3 Bonds and
Component P-3.
"Group 1 Senior P&I Bonds": All Group 1 Senior Bonds other than the
Class A-7, Class A-9 and Class X Bonds and Component P-1.
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<PAGE> 13
"Group 2 Senior P&I Bonds": All Group 2 Senior Bonds other than the
Class 2-X Bonds and Component P-2.
"Group 3 Senior P&I Bonds": All Group 3 Senior Bonds.
"Group 1 Senior P&I Optimal Principal Amount, Group 2 Senior P&I
Optimal Principal Amount or Group 3 Senior P&I Optimal Principal Amount": As
to any Payment Date, with respect to the Senior P&I Bonds of the applicable
Bond Group, an amount equal to the sum, without duplication, of the following
(but in no event greater than the aggregate of the Class Current Principal
Balances of each Class of Bonds of the Senior P&I Bonds of such Bond Group
(including the Component Current Principal Balance of Component P-3 in the case
of Bond Group 3) immediately prior to such Payment Date):
(i) the applicable Senior Percentage of the applicable
Non-PO Percentage of the principal portion of all Monthly Payments due
on each Outstanding Mortgage Loan in the related Mortgage Loan Group
on the related Due Date as specified in the amortization schedule at
the time applicable thereto (after adjustments for previous Principal
Prepayments but before any adjustment to such amortization schedule by
reason of any bankruptcy or similar proceeding or any moratorium or
similar waiver or grace period);
(ii) the applicable Senior Prepayment Percentage of the
applicable Non-PO Percentage of the Scheduled Principal Balance of
each Mortgage Loan in the related Mortgage Loan Group which was the
subject of a Voluntary Principal Prepayment in full received by the
related Master Servicer during the related Prepayment Period;
(iii) the applicable Senior Prepayment Percentage of the
applicable Non-PO Percentage of all Voluntary Principal Prepayments in
part received by the related Master Servicer during the related
Prepayment Period with respect to each Mortgage Loan in the related
Mortgage Loan Group;
(iv) the lesser of (a) the applicable Senior Prepayment
Percentage of the sum of (A) all Net Liquidation Proceeds allocable to
principal received in respect of each Mortgage Loan of the related
Mortgage Loan Group which became a Liquidated Mortgage Loan during the
related Prepayment Period (other than Mortgage Loans described in the
immediately following clause (B)) and (B) the Scheduled Principal
Balance of each such Mortgage Loan purchased by an Insurer from the
Certificate Trustee during the related Prepayment Period, pursuant to
the related Primary Mortgage Insurance Policy, if any, or otherwise;
and (b) the applicable Senior Percentage of the applicable Non-PO
Percentage for such Bond Group of the sum of (A) the Scheduled
Principal Balance of each Mortgage Loan of the related Mortgage Loan
Group which became a Liquidated Mortgage Loan during the related
Prepayment Period (other than the Mortgage Loans described in the
immediately following clause (B)) and (B) the Scheduled Principal
Balance of each such Mortgage Loan that was purchased by an Insurer
from the Certificate Trustee during the related Prepayment Period
pursuant to the related Primary Mortgage Insurance Policy, if any, or
otherwise less (C) in the case of clause (b), the then applicable
Senior Percentage of the Non-PO Percentage for such Bond Group of the
principal portion of Excess Special Hazard Losses on each Mortgage
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<PAGE> 14
Loan in the related Mortgage Loan Group incurred during the related
Prepayment Period; and
(v) the applicable Senior Prepayment Percentage of the
applicable Non-PO Percentage of the sum of (a) the Scheduled Principal
Balance of each Mortgage Loan or REO Property of the related Mortgage
Loan Group which was purchased by BSMCC in connection with such
Payment Date pursuant to Section 2.02 or 2.03 of the Pooling and
Servicing Agreement and (b) the excess, if any, of the Scheduled
Principal Balance of a Mortgage Loan in the related Mortgage Loan
Group that has been replaced by BSMCC with a Substitute Mortgage Loan
pursuant to Section 2.04 of the Pooling and Servicing Agreement in
connection with such Payment Date over the Scheduled Principal Balance
of such Substitute Mortgage Loan.
"Group 1 Senior Percentage": On any Payment Date, the lesser of (i)
100% and (ii) the percentage (carried to six places rounded up) obtained by
dividing the aggregate of the Class Current Principal Balances of all the Group
1 Senior P&I Bonds immediately preceding such Payment Date by the aggregate
Scheduled Principal Balance of the Mortgage Loans (other than the PO Percentage
of each Discount Mortgage Loan) in the related Mortgage Loan Group as of the
beginning of the related Due Period.
"Group 2 Senior Percentage": On any Payment Date, the lesser of (i)
100% and (ii) the percentage (carried to six places rounded up) obtained by
dividing the aggregate of the Class Current Principal Balances of all the Group
2 Senior P&I Bonds immediately preceding such Payment Date by the aggregate
Scheduled Principal Balance of the Mortgage Loans (other than the PO Percentage
of each Discount Mortgage Loan) in the related Mortgage Loan Group as of the
beginning of the related Due Period.
"Group 3 Senior Percentage": On any Payment Date, the lesser of (i)
100% and (ii) the percentage (carried to six places rounded up) obtained by
dividing the aggregate of the Class Current Principal Balances of all the Group
3 Senior P&I Bonds immediately preceding such Payment Date by the aggregate
Scheduled Principal Balance of the Mortgage Loans in the related Mortgage Loan
Group as of the beginning of the related Due Period.
"Group 1 Senior Prepayment Percentage, Group 2 Senior Prepayment
Percentage or Group 3 Senior Prepayment Percentage": On any Payment Date
occurring during the periods set forth below, as follows:
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<PAGE> 15
<TABLE>
<CAPTION>
Period (months inclusive) Senior Prepayment Percentage
<S> <C>
April, 1998 - March, 2003 100%
April, 2003 - March, 2004 Senior Percentage for the related Bond Group plus 70%
of the applicable Subordinate Percentage for such Bond
Group
April, 2004 - March, 2005 Senior Percentage for the related Bond Group plus 60%
of the applicable Subordinate Percentage for such Bond
Group
April, 2005 - March, 2006 Senior Percentage for the related Bond Group plus 40%
of the applicable Subordinate Percentage for such Bond
Group
April, 2006 - March, 2007 Senior Percentage for the related Bond Group plus 20%
of the applicable Subordinate Percentage for such Bond
Group
March, 2007 and thereafter Senior Percentage for the related Bond Group
</TABLE>
Notwithstanding the foregoing, if on any Payment Date the applicable Senior
Percentage for a Bond Group exceeds the Senior Percentage for such Bond Group
as of the Closing Date, the Senior Prepayment Percentage for such Bond Group
for such Payment Date will equal 100%. On the Payment Date on which the Class
Current Principal Balances of the Senior Bonds of a Bond Group are reduced to
zero, the Senior Prepayment Percentage for such Bond Group shall be the minimum
percentage sufficient to effect such reduction and thereafter shall be zero.
In addition, no reduction of the applicable Senior Prepayment Percentage for a
Bond Group shall occur on any Payment Date unless, as of the last day of the
month preceding such Payment Date, (i) the aggregate Scheduled Principal
Balance of Mortgage Loans in the related Mortgage Loan Group delinquent 60 days
or more (including for this purpose any such Mortgage Loans in foreclosure and
such Mortgage Loans with respect to which the related Mortgaged Property has
been acquired by the related Trust), averaged over the last six months, as a
percentage of the sum of the aggregate of the Class Current Principal Balances
of the Subordinate Bonds of such Bond Group does not exceed 50% and (ii)
cumulative Realized Losses on such Mortgage Loans do not exceed (a) 30% of the
applicable Original Subordinate Principal Balance of such Bond Group if such
Payment Date occurs between and including April 2003 and March 2004, (b) 35% of
the Original Subordinate Principal Balance of such Bond Group if such Payment
Date occurs between and including April 2004 and March 2005, (c) 40% of the
applicable Original Subordinate Principal Balance if such Payment Date occurs
between and including April 2005 and March 2006, (d) 45% of the applicable
Original Subordinate Principal Balance for such Bond Group if such Payment Date
occurs between and including April 2006 and March 2007, and (e) 50% of the
applicable Original Subordinate Principal Balance for such Bond Group if such
Payment Date occurs during or after April 2007.
"Group 1 Subordinate Bonds": The Class B-1, Class B-2, Class B-3,
Class B-4, Class B-5 and Class B-6 Bonds.
"Group 2 Subordinate Bonds": The Class 2-B-1, Class 2-B-2, Class
2-B-3, Class 2-B-4, Class 2-B-5 and Class 2-B-6 Bonds.
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<PAGE> 16
"Group 3 Subordinate Bonds": The Class 3-B-1, Class 3-B-2, Class
3-B-3, Class 3-B-4, Class 3-B-5 and Class 3-B-6 Bonds.
"Group 1 Subordinate Bond Writedown Amount": As to any Payment Date,
the amount by which (a) the sum of the Class Current Principal Balances of all
the Group 1 Bonds and the Component Current Principal Balance of Component P-1
(after giving effect to the payment of principal and the allocation of
applicable Realized Losses and any applicable Component P Deferred Payment
Writedown Amount and Component P Cash Shortfall in reduction of the Class
Current Principal Balances of such Bonds and the Component Current Principal
Balance of Component P-1 on such Payment Date) exceeds (b) the aggregate
Scheduled Principal Balances of the Group 1 Mortgage Loans on the Due Date
related to such Payment Date.
"Group 2 Subordinate Bond Writedown Amount": As to any Payment Date,
the amount by which (a) the sum of the Class Current Principal Balances of all
the Group 2 Bonds and the Component Current Principal Balance of Component P-2
(after giving effect to the payment of principal and the allocation of
applicable Realized Losses and any applicable Component P Deferred Payment
Writedown Amount and Component P Cash Shortfall in reduction of the Class
Current Principal Balances of such Bonds and the Component Current Principal
Balance of Component P-2 on such Payment Date) exceeds (b) the aggregate
Scheduled Principal Balances of the Group 2 Mortgage Loans on the Due Date
related to such Payment Date.
"Group 3 Subordinate Bond Writedown Amount": As to any Payment Date,
the amount by which (a) the sum of the Class Current Principal Balances of all
the Group 3 Bonds and the Component Current Principal Balance of Component P-3
(after giving effect to the payment of principal and the allocation of
applicable Realized Losses in reduction of the Class Current Principal Balances
of such Bonds and the Component Current Principal Balance of such Component P-3
on such Payment Date) exceeds (b) the aggregate Scheduled Principal Balances of
the Group 3 Mortgage Loans on the Due Date related to such Payment Date.
"Group 1 Subordinate Optimal Principal Amount, Group 2 Subordinate
Optimal Principal Amount or Group 3 Subordinate Optimal Principal Amount": As
to any Payment Date, an amount equal to the sum, without duplication, of the
following (but in no event greater than the aggregate of the Class Current
Principal Balances of the Subordinate Bonds of the relevant Bond Group
immediately prior to such Payment Date):
(i) the applicable Subordinate Percentage of the
applicable Non-PO Percentage of the principal portion of all Monthly
Payments due on each Outstanding Mortgage Loan in the related Mortgage
Loan Group on the related Due Date as specified in the amortization
schedule at the time applicable thereto (after adjustment for previous
Principal Prepayments but before any adjustment to such amortization
schedule by reason of any bankruptcy or similar proceeding or any
moratorium or similar waiver or grace period);
(ii) the applicable Subordinate Prepayment Percentage of
the applicable Non-PO Percentage of the Scheduled Principal Balance of
each Mortgage Loan in the related Mortgage Loan Group that was the
subject of a Voluntary Principal Prepayment in full received by the
related Master Servicer during the related Prepayment Period;
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<PAGE> 17
(iii) the applicable Subordinate Prepayment Percentage of
the applicable Non-PO Percentage of each Voluntary Principal Payment
in part received by the related Master Servicer during the related
Prepayment Period with respect to each Mortgage Loan in the related
Mortgage Loan Group;
(iv) the excess, if any, of the applicable Non-PO
Percentage of (A) all Net Liquidation Proceeds allocable to principal
received on each Mortgage Loan in the related Mortgage Loan Group
which became a Liquidated Mortgage Loan during the related Prepayment
Period over (B) (I) the sum of the amounts payable pursuant to clause
(iv) of the definition of "Group 1 Senior P&I Optimal Principal
Amount," "Group 2 Senior P&I Optimal Principal Amount" or "Group 3
Senior P&I Optimal Principal Amount" for the applicable Bond Group
plus (II) in the case of Bond Group 1 or 2, the amount payable with
respect to Component P-1 or P-2, respectively, pursuant to clause (iv)
of the definition of Component P Principal Payment Amount on such
Payment Date;
(v) the applicable Subordinate Prepayment Percentage of
the applicable Non-PO Percentage of the sum of (a) the Scheduled
Principal Balance of each Mortgage Loan or REO Property in the related
Mortgage Loan Group which was purchased by BSMCC in connection with
such Payment Date pursuant to Section 2.02 or 2.03 of the Pooling and
Servicing Agreement and (b) the excess, if any, of the Scheduled
Principal Balance of a Mortgage Loan in the related Mortgage Loan
Group that has been replaced by BSMCC with a Substitute Mortgage Loan
pursuant to Section 2.04 of the Pooling and Servicing Agreement in
connection with such Payment Date over the Scheduled Principal Balance
of such substitute Mortgage Loan; and
(vi) on the Payment Date on which the Class Current
Principal Balances of the Senior P&I Bonds of the relevant Bond Group
have all been reduced to zero, 100% of any applicable Senior P&I
Optimal Principal Amount.
After the aggregate of the Class Current Principal Balances of the Subordinate
Bonds of a Bond Group have been reduced to zero, the Subordinate Optimal
Principal Amount for such Bond Group shall be zero.
"Group 1 Subordinate Percentage, Group 2 Subordinate Percentage or
Group 3 Subordinate Percentage": On any Payment Date, 100% minus the
applicable Senior Percentage of the relevant Bond Group.
"Group 1 Subordinate Prepayment Percentage, Group 2 Subordinate
Prepayment Percentage or Group 3 Subordinate Prepayment Percentage": On any
Payment Date, 100% minus the applicable Senior Prepayment Percentage for the
relevant Bond Group, except that on any Payment Date after the aggregate of the
Class Current Principal Balances of the Senior Bonds of such Bond Group have
each been reduced to zero, the Subordinate Prepayment Percentage for such Bond
Group will equal 100%.
"Imputed Principal Balance": As used in the Indenture, "Imputed
Principal Balance" shall have the same meaning as "Current Principal Balance"
herein.
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<PAGE> 18
"Individual Bond": As defined in Section 10(f).
"Individual Bond Certificate": Any Other Subordinate Bond registered
in the name of a Holder other than the Clearing Agency or its nominee.
"Initial Deposit": $35,000.00, which is equal to (i) twelve months'
interest on the initial Class Current Principal Balance of the Class A-15 Bonds
at the rate of 0.75% per annum (which is the amount by which the Bond Interest
Rate for the Class A-15 Bonds for the first twelve Interest Accrual Periods
exceeds 7.00% per annum) plus (ii) twelve months' interest on the initial Class
Current Principal Balance of the Class A-15 Bonds at the rate of 0.25% per
annum (which is the amount by which the Bond Interest Rate for the Class A-15
Bonds for the thirteenth through twenty-fourth Interest Accrual Periods exceeds
7.00% per annum.
"Initial Purchaser": BSMCC.
"Institutional Accredited Investor": Any Person meeting the
requirements of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act or any entity all of the equity holders in which come within
such paragraphs.
"Insurance Proceeds": As defined in the Pooling and Servicing
Agreement.
"Insurer": As defined in the Pooling and Servicing Agreement.
"Interest Accrual Period": With respect to each Payment Date, for
each Class of Bonds, the calendar month preceding the month in which the
Payment Date occurs, commencing with March 1998.
"Interest Only Bonds": The Class A-7, Class A-9, Class X and Class 2-X
Bonds.
"Interest Shortfall": As defined in the Pooling and Servicing
Agreement.
"Junior Bonds": Any of the Subordinate Bonds.
"Junior Bond Writedown Amount": Zero.
"Letter Agreements": The Letter of Representations to The Depository
Trust Company from the Trustee and the Issuer dated March 30, 1998, with
respect to the Book Entry Bonds other than the Other Subordinate Bonds, a copy
of which is attached hereto as Exhibit D-1, and the Letter of Representations
to The Depository Trust Company from the Trustee and the Issuer dated March 30,
1998, with respect to the Other Subordinate Bonds, a copy of which is attached
hereto as Exhibit D-2.
"LIBOR": With respect to each Interest Accrual Period for the Class
A-11 and Class A-12 Bonds, the London Interbank Offered Rate for one-month
United States dollar-denominated deposits determined in accordance with the
following provisions:
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<PAGE> 19
(i) Commencing on March 30, 1998, with respect to the
Class A-11 and Class A-12 Bonds, and monthly thereafter on the second
business day prior to the first day of the related Interest Accrual
Period for the Class A-11 and Class A-12 Bonds (each, a "LIBOR
Determination Date"), until the Class Current Principal Balances of
such Classes of Bonds have been reduced to zero, the Trustee will
request each of the designated reference banks meeting the criteria
set forth herein (the "Reference Banks") to inform the Trustee of the
quotation offered by its principal London office for making one-month
United States dollar deposits in leading banks in the London interbank
market, as of 11:00 a.m. (London time) on such LIBOR Determination
Date. (For purposes of calculating LIBOR, "business day" means a day
on which banks are open for dealing in foreign currency and exchange
in London and New York City.) In lieu of making a request of the
Reference Banks, the Trustee may rely on the quotations for those
Reference Banks that appear at such time on the Reuters Screen LIBO
Page (as defined in the International Swap Dealers Association Inc.
Code of Standard Wording, Assumptions and Provisions for Swaps, 1986
Edition), to the extent available.
(ii) LIBOR will be established by the Trustee on each
LIBOR Determination Date as follows:
(a) If on any LIBOR Determination Date two or
more Reference Banks provide such offered quotations, LIBOR
for the next Interest Accrual Period shall be the arithmetic
mean of such offered quotations (rounded upwards if necessary
to the nearest whole multiple of 1/32%).
(b) If on any LIBOR Determination Date only one
or none of the Reference Banks provides such offered
quotations, LIBOR for the next Interest Accrual Period shall
be whichever is the higher of (i) LIBOR as determined on the
previous LIBOR Determination Date or (ii) the Reserve Interest
Rate. The "Reserve Interest Rate" shall be the rate per annum
which the Trustee determines to be either (i) the arithmetic
mean (rounded upwards if necessary to the nearest whole
multiple of 1/32%) of the one-month United States dollar
lending rates that New York City banks selected by the Trustee
are quoting, on the relevant LIBOR Determination Date, to the
principal London offices of at least two of the Reference
Banks to which such quotations are, in the opinion of the
Trustee, being so made, or (ii) in the event that the Trustee
can determine no such arithmetic mean, the lowest one-month
United States dollar lending rate which New York City banks
selected by the Trustee are quoting on such LIBOR
Determination Date to leading European banks.
(c) If on the first LIBOR Determination Date, the
Trustee is required but is unable to determine the Reserve
Interest Rate in the manner provided in paragraph (b) above,
LIBOR shall be 5.6875%. If on any subsequent LIBOR
Determination Date, the Trustee is required but is unable to
determine the Reserve Interest Rate in the manner provided in
paragraph (b) above, LIBOR shall be LIBOR for the immediately
preceding LIBOR Determination Date.
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<PAGE> 20
(iii) Each Reference Bank shall (i) be a leading bank
engaged in transactions in Eurodollar deposits in the international
Eurocurrency market, (ii) not control, be controlled by, or be under
common control with the Trustee, and (iii) have an established place
of business in London. If any such Reference Bank should be unwilling
or unable to act as such or if the Trustee should terminate the
appointment of any such Reference Bank, the Trustee will promptly
appoint another leading bank meeting the criteria specified above.
(iv) The establishment of LIBOR on each LIBOR Determination
Date by the Trustee and the Trustee's calculation of the rate of
interest applicable to the Class A-11 and Class A-12 Bonds for the
related Interest Accrual Period shall (in the absence of manifest
error) be final and binding.
"Liquidated Mortgage Loan": A "Liquidated Mortgage Loan" as defined
in the Pooling and Servicing Agreement.
"Loss Allocation Limitation": The Group 1 Loss Allocation Limitation,
the Group 2 Loss Allocation Limitation or the Group 3 Loss Allocation
Limitation, as applicable.
"Master Servicer": As defined in the Pooling and Servicing Agreement.
"Mortgage Loan": As defined in the Pooling and Servicing Agreement.
"Mortgage Loan Group": As defined in the Pooling and Servicing
Agreement.
"Mortgage Loan Group 1": As defined in the Pooling and Servicing
Agreement.
"Mortgage Loan Group 2": As defined in the Pooling and Servicing
Agreement.
"Mortgage Loan Group 3": As defined in the Pooling and Servicing
Agreement.
"Net Interest Shortfall": As defined in the Pooling and Servicing
Agreement.
"Net Liquidation Proceeds": As defined in the Pooling and Servicing
Agreement.
"Net Rate": As defined in the Pooling and Servicing Agreement.
"New York Agent": The Trustee, at the New York Office.
"New York Office": The office designated as such in Section 7.
"Non-Discount Mortgage Loan": Any Group 1 Mortgage Loan or Group 2
Mortgage Loan with a Net Rate equal to or greater than 6.75% or 6.50%,
respectively.
"Non-PO Percentage": With respect to any Discount Mortgage Loan in
Mortgage Loan Group 1 or Mortgage Loan Group 2, the Net Rate thereof divided by
6.75% or 6.50%, respectively.
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<PAGE> 21
With respect to any Non-Discount Mortgage Loan in Mortgage Loan Group 1 or
Mortgage Loan Group 2, 100%. With respect to any Mortgage Loan in Mortgage
Loan Group 3, 100%.
"Non-U.S. Person": A Person other than a United States Person.
"Offered Bond": Any Class P, Class A-1, Class A-2, Class A-3, Class
A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class A-9, Class A-10, Class
A-11, Class A-12, Class A-13, Class A-14, Class A-15, Class A-16, Class A-17,
Class A-18, Class A-19, Class X, Class B-1, Class B-2, Class B-3, Class 2-A,
Class 2-X, Class 2-B-1, Class 2-B-2, Class 2-B-3, Class 3-A, Class 3-B-1, Class
3-B-2, Class 3-B-3, Class R-1, Class R-2 and Class R-3.
"Offered Subordinate Bonds": The Class B-1, Class B-2, Class B-3,
Class 2-B-1, Class 2-B-2, Class 2-B-3, Class 3-B-1, Class 3-B-2 and Class 3-B-3
Bonds.
"Original Subordinate Principal Balance": Each of the Group 1
Original Subordinate Principal Balance, Group 2 Original Subordinate Principal
Balance and Group 3 Original Subordinate Principal Balance.
"Other Subordinate Bonds": The Class B-4, Class B-5, Class B-6, Class
2-B-4, Class 2-B-5, Class 2-B-6, Class 3-B-4, Class 3-B-5 and Class 3-B-6
Bonds.
"Outstanding Mortgage Loan": As defined in the Pooling and Servicing
Agreement.
"Outstanding Principal Balance": As defined in the Pooling and
Servicing Agreement.
"P Component": Component P-1, Component P-2 or Component P-3, as
applicable.
"PAC Bonds": The PAC I Bonds and the PAC II Bonds.
"PAC I Bonds": The Class A-1, Class A-2, Class A-3, Class A-4 and
Class A-6 Bonds.
"PAC II Bonds": The Class A-5, Class A-8, Class A-10, Class A-13,
Class A-14, Class A-15, Class A-16, Class A- 17 and Class A-18 Bonds.
"Payment Date": The twenty-fifth day of each month, or if such day is
not a Business Day, the next succeeding Business Day, commencing in April 1998.
"Permitted Transferee": As to a Residual Bond, a transferee of such
Residual Bond that is not a Disqualified Organization and not a Non-U.S. Person
and satisfies the requirements for a transferee of a Residual Bond under
Section 2.15 of the Indenture.
"Planned Balance": With respect to each Class of PAC Bonds and a
given Payment Date, the amount set forth as the "Planned Balance" with respect
thereto on Appendix A.
"PO Percentage": With respect to any Discount Mortgage Loan in
Mortgage Loan Group 1 or Mortgage Loan Group 2, the fraction, expressed as a
percentage, equal to 6.75% or 6.50%,
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<PAGE> 22
respectively, minus the Net Rate thereof divided by 6.75% or 6.50%,
respectively. With respect to any Non-Discount Mortgage Loan in Mortgage Loan
Group 1 or Mortgage Loan Group 2 and each Mortgage Loan in Mortgage Loan Group
3, 0%.
"Pooling and Servicing Agreement": The Pooling and Servicing
Agreement dated as of March 1, 1998, between the Issuer, BAFSB, Cendant, First
Chicago National Processing Corporation and The First National Bank of Chicago,
as trustee.
"Prepayment Assumption": 250% SPA with respect to the Group 1 Bonds,
250% SPA with respect to the Group 2 Bonds, and 315% SPA with respect to the
Group 3 Bonds.
"Prepayment Period": As defined in the Pooling and Servicing
Agreement.
"Primary Mortgage Insurance Policy": As defined in the Pooling and
Servicing Agreement.
"Principal Prepayment": As defined in the Pooling and Servicing
Agreement.
"pro rata": Unless otherwise specified, with respect to payments or
allocations among Classes of Bonds and, if applicable, a Component P, payments
or allocations pro rata based on Class Current Principal Balances and, if
applicable, Component Current Principal Balances.
"Protected Account": As defined in the Pooling and Servicing
Agreement.
"QIB": A "qualified institutional buyer" as defined in Rule 144A
promulgated under the Act.
"Rating Agencies": As defined in the Pooling and Servicing Agreement.
"Realized Loss": As defined in the Pooling and Servicing Agreement.
"Record Date": With respect to any Payment Date, the close of
business on the last Business Day of the month immediately preceding the month
of such Payment Date.
"REMIC I": One of three separate REMICs comprising the Trust Estate,
the assets of which consist of the assets granted to the Trustee other than the
REMIC I Interests, REMIC II Interests, any amounts on deposit in any Buydown
Fund Account, any Buydown Funds in any Protected Account, any amounts on
deposit in any Servicing Accounts and the Initial Deposit.
"REMIC II": One of three separate REMICs comprising the Trust Estate,
the assets of which consist of the REMIC I Interests.
"REMIC III": One of three separate REMICs comprising the Trust
Estate, the assets of which consist of the REMIC II Interests and the Initial
Deposit.
"REMIC I Interest": Any one of the REMIC Group I Interest, REMIC
Group II Interest, or REMIC Group III Interest, as each are identified in
Section 18(n).
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<PAGE> 23
"REMIC II Interest": Any of the classes of regular interests in REMIC
II described as such in Section 18(o).
"REMIC I Interest Balance": As to each class of REMIC I Interest and
any Payment Date, the initial REMIC I Interest Balance thereof set forth in
Section 18(n) less the sum of (i) the aggregate amount of principal allocable
thereto on previous Payment Dates pursuant to Section 18; and (ii) any Realized
Losses allocable thereto on previous Payment Dates pursuant to Section 12.
"REMIC II Interest Balance": As to each class of REMIC II Interest
and any Payment Date, the initial REMIC II Interest Balance thereof set forth
in Section 18(o) less the sum of (i) the aggregate amount of principal
allocable thereto on previous Payment Dates pursuant to Section 18; and (ii)
any Realized Losses allocable thereto on previous Payment Dates pursuant to
Section 12.
"REMIC I Interest Rate": As to each REMIC I Interest, the applicable
"REMIC I Interest Rate," if any, set forth in Section 18(n).
"REMIC II Interest Rate": As to each REMIC II Interest, the
applicable "REMIC II Interest Rate," if any, set forth in Section 18(o).
"REO Property": As defined in the Pooling and Servicing Agreement.
"Repurchase Price": As defined in the Pooling and Servicing
Agreement.
"Residual Bonds": Any of the Class R-1, Class R-2 and Class R-3
Bonds.
"Residual Interest": As to REMIC I, the Class R-1 Bonds; as to REMIC
II, the Class R-2 Bonds; and as to REMIC III, the Class R-3 Bonds.
"Restricted Bonds": The Other Subordinate Bonds.
"Rule 144A Certificate": A certificate in the form attached hereto as
Exhibit C-3.
"Scheduled Principal": As defined in the Pooling and Servicing
Agreement.
"Scheduled Principal Balance": As defined in the Pooling and
Servicing Agreement.
"Securities Act": The Securities Act of 1933, as amended.
"Senior Bonds": The Group 1 Senior Bonds, Group 2 Senior Bonds and/or
Group 3 Senior Bonds, as the context requires.
"Senior P&I Bonds": The Group 1 Senior P&I Bonds, Group 2 Senior P&I
Bonds and Group 3 Senior P&I Bonds, as the context requires.
"Series 1998-1 Bonds": Each Class of Bonds set forth in Section 5
hereof.
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<PAGE> 24
"Series REMIC": Any of REMIC I, REMIC II or REMIC III.
"SPA": The assumed fixed schedule of prepayments on a pool of new
mortgage loans with such schedule given as a monthly sequence of prepayment
rates, expressed as annualized percent values. These values start at 0.2% per
year in the first month and increase by 0.2% per year in each succeeding month
until month 30, ending at 6.0% per year. At such time, the rate remains
constant at 6.0% per year for the balance of the remaining term. Multiples of
SPA are calculated from this prepayment rate series.
"Special Hazard Loss": As defined in the Pooling and Servicing
Agreement.
"Special Hazard Loss Amount": Upon the initial issuance of the Bonds,
the "Special Hazard Loss Amount" for the Group 1 Mortgage Loans will equal the
aggregate of the Scheduled Principal Balances as of the Cut-off Date of the
highest percentage of Mortgage Loans of the Mortgage Loan Group 1 (by principal
balance) secured by Mortgaged Properties in any single California five-digit
ZIP code area ($4,842,479) and the "Special Hazard Loss Amount" for the Group 2
and Group 3 Mortgage Loans will equal twice the outstanding principal balance
of the Mortgage Loan in the applicable Mortgage Loan Group which has the
largest outstanding principal balance as of the Cut-off Date (or $1,545,777 and
$1,358,885, respectively). As of any Payment Date, the Special Hazard Loss
Amount for each Mortgage Loan Group will equal the initial Special Hazard Loss
Amount for such Mortgage Loan Group minus the sum of (i) the aggregate amount
of Special Hazard Losses that would have been previously allocated to the
Subordinate Bonds of the related Bond Group in the absence of the Loss
Allocation Limitation and (ii) the Adjustment Amount for such Mortgage Loan
Group.
"Special Hazard Termination Date": For any Mortgage Loan Group, the
Payment Date upon which the applicable Special Hazard Loss Amount has been
reduced to zero or a negative number (or the applicable Group 1, Group 2 or
Group 3 Cross-Over Date, if earlier).
"Special Payment Date": As defined in Section 8 hereof.
"Stated Maturity": With respect to a Class of Bonds, as specified in
Section 5.
"Startup Day": As defined in Section 18.
"Subordinate Bonds": The Group 1 Subordinate Bonds, Group 2
Subordinate Bonds and Group 3 Subordinate Bonds.
"Subordinate Optimal Principal Amount": Any of the Group 1
Subordinate Optimal Principal Amount, the Group 2 Subordinate Optimal Principal
Amount or the Group 3 Subordinate Optimal Principal Amount.
"Substitute Mortgage Loan": As defined in the Pooling and Servicing
Agreement.
"Transferor": A transferor of a Residual Bond.
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<PAGE> 25
"Trust": As defined in the Pooling and Servicing Agreement.
"Trust Fund": As defined in the Pooling and Servicing Agreement.
"United States Person": A Person who is (a) a citizen or resident of
the United States, (b) a corporation, partnership or other entity created or
organized in, or under the laws of, the United States or any political
subdivision thereof (except, in the case of a partnership, as otherwise
provided by Treasury regulations), (c) an estate, the income of which is
includible in gross income for United States federal income tax purposes
regardless of its source, or (d) a trust whose administration is subject to the
primary supervision of a United States court and which has one or more of
United States persons who have the authority to control all substantial
decisions of the trust.
"Voluntary Principal Prepayment": As defined in the Pooling and
Servicing Agreement.
SECTION 2. Designation.
The Series 1998-1 Bonds shall be designated generally as the Issuer's
Collateralized Mortgage Obligations, Series 1998-1.
SECTION 3. Dating of Series 1998-1 Bonds; Calculation of Interest
Accrued.
(a) The Series 1998-1 Bonds that are authenticated and delivered
by the Trustee to or upon the order of the Issuer on the Closing Date for the
Series 1998-1 Bonds shall be dated March 31, 1998. All other Series 1998-1
Bonds that are authenticated after the Closing Date for the Series 1998-1 Bonds
for any other purpose under the Indenture shall be dated the date of their
authentication. Interest accruing on each Class of Bonds during each Interest
Accrual Period will be calculated on the assumption that principal payments on,
and allocations of losses to, such Bonds are made (or, if applicable, the
related Class Notional Balance is reduced) on the last day of the preceding
Interest Accrual Period, and not on the following Payment Date when actually
made (or reduced).
(b) Each Class of Bonds, other than the Residual Bonds, shall
constitute Classes of Book Entry Bonds.
(c) For purposes of the Indenture, the Senior Bonds shall
constitute Classes of "Senior Bonds," and the Subordinate Bonds shall
constitute Classes of "Junior Bonds."
SECTION 4. Transfer of ERISA Restricted and ERISA Prohibited Bonds.
No transfer of an ERISA Restricted Bond or an ERISA Prohibited Bond
may be made except as provided in Section 2.15 of the Indenture.
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<PAGE> 26
SECTION 5. Aggregate Principal Amount; Classes.
The aggregate principal amount of Series 1998-1 Bonds that may be
authenticated and delivered under this Series 1998-1 Supplement shall be
$593,796,659 except for Series 1998-1 Bonds authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Series
1998-1 Bonds pursuant to Sections 2.6, 2.7, 2.8 or 9.6 of the Indenture. Such
aggregate principal amount shall be divided among the forty-five Classes having
designations, original Class Current Principal Balances, Bond Interest Rates
and Stated Maturities of their final installment of principal as follows:
<TABLE>
<CAPTION>
Approximate Initial Stated Maturity
Class Bond Current (Payment Date
Designation Interest Rate Principal Balance Occurring In)
----------- ------------- ------------------- ---------------
<S> <C> <C> <C>
Class P Bonds (1) $335,906.00 May 2028
Class A-1 Bonds 6.15% $11,738,000.00 May 2028
Class A-2 Bonds 6.15% $13,947,904.00 May 2028
Class A-3 Bonds 6.25% $24,555,000.00 May 2028
Class A-4 Bonds 6.45% $40,938,000.00 May 2028
Class A-5 Bonds 6.75% $24,875,000.00 May 2028
Class A-6 Bonds 6.50% $7,610,000.00 May 2028
Class A-7 Bonds 6.75% (2) May 2028
Class A-8 Bonds 6.75% $75,183,096.00 May 2028
Class A-9 Bonds 6.75% (2) May 2028
Class A-10 Bonds 6.75% $25,000,000.00 May 2028
Class A-11 Bonds (3) $50,378,029.00 May 2028
Class A-12 Bonds (4) $13,060,971.00 May 2028
Class A-13 Bonds 7.00% $3,054,625.00 May 2028
Class A-14 Bonds 7.00% $7,614,250.00 May 2028
Class A-15 Bonds (5) $3,500,000.00 May 2028
Class A-16 Bonds 5.00% $2,024,125.00 May 2028
Class A-17 Bonds 6.75% $26,000,000.00 May 2028
Class A-18 Bonds 6.40% $26,000,000.00 May 2028
Class A-19 Bonds 6.40% $41,592,353.00 May 2028
Class X Bonds (6) (6) May 2028
Class B-1 Bonds 6.75% $9,774,163.00 May 2028
Class B-2 Bonds 6.75% $3,743,297.00 May 2028
Class B-3 Bonds 6.75% $1,871,649.00 May 2028
Class B-4 Bonds 6.75% $1,455,726.00 May 2028
Class B-5 Bonds 6.75% $831,844.00 May 2028
</TABLE>
- 23 -
<PAGE> 27
<TABLE>
<CAPTION>
Approximate Initial Stated Maturity
Class Bond Current (Payment Date
Designation Interest Rate Principal Balance Occurring In)
----------- ------------- ------------------- ---------------
<S> <C> <C> <C>
Class B-6 Bonds 6.75% $1,039,805.00 May 2028
Class 2-A Bonds 6.50% $85,476,274.00 April 2013
Class 2-X Bonds (6) (6) April 2013
Class 2-B-1 Bonds 6.50% $1,457,300.00 April 2013
Class 2-B-2 Bonds 6.50% $441,600.00 April 2013
Class 2-B-3 Bonds 6.50% $264,900.00 April 2013
Class 2-B-4 Bonds 6.50% $220,800.00 April 2013
Class 2-B-5 Bonds 6.50% $132,500.00 April 2013
Class 2-B-6 Bonds 6.50% $132,506.00 April 2013
Class 3-A Bonds (7) $86,188,450.00 April 2028
Class 3-B-1 Bonds (7) $2,104,500.00 April 2028
Class 3-B-2 Bonds (7) $492,600.00 April 2028
Class 3-B-3 Bonds (7) $268,700.00 April 2028
Class 3-B-4 Bonds (7) $233,900.00 April 2028
Class 3-B-5 Bonds (7) $134,300.00 April 2028
Class 3-B-6 Bonds (7) $134,386.00 April 2028
Class R-1 Bonds 6.75% $100.00 April 2028
Class R-2 Bonds 6.50% $50.00 April 2028
Class R-3 Bonds (7) $50.00 April 2028
</TABLE>
- ----------
(1) The Class P Bonds are principal only bonds and shall not bear
interest. The Current Principal Balance of the Class P Bonds
initially shall be the amount shown above and is composed of three
components ("COMPONENT P-1", "COMPONENT P-2" and "COMPONENT P-3")
equal to (i) in the case of Component P-1 and Component P-2, the PO
Percentage of each Discount Mortgage Loan in Mortgage Loan Groups 1
and 2, respectively, or $133,931 and $191,975, respectively, and in
the case of Component P-3, $10,000 of principal payable from all Group
3 Mortgage Loans.
(2) The Class A-7 and Class A-9 Bonds are interest only bonds.
(3) During the initial Interest Accrual Period, interest shall accrue on
the Class A-11 Bonds at the rate of 6.5375% per annum. During each
Interest Accrual Period thereafter, interest shall accrue on the Class
A-11 Bonds at a per annum rate of LIBOR plus 0.85%, subject to a
maximum rate of 8.50% per annum and a minimum rate of 0.85% per annum.
(4) During the initial Interest Accrual Period, interest will accrue on
the Class A-12 Bonds at the rate of 7.5696% per annum. During each
Interest Accrual Period thereafter, interest shall accrue on the Class
A-12 Bonds at a per annum rate equal to 29.50714% -- (3.857143 x
LIBOR), subject to a maximum rate of 29.50714% per annum and a minimum
rate of 0.00% per annum.
- 24 -
<PAGE> 28
(5) During the initial twelve Interest Accrual Periods, interest shall
accrue on the Class A-15 Bonds at the rate of 7.75% per annum. During
the next twelve Interest Accrual Periods, interest shall accrue on the
Class A-15 Bonds at the rate of 7.25% per annum. During each Interest
Accrual Period thereafter, interest will accrue on the Class A-15
Bonds at a per annum rate of 7.00%.
(6) The Class X Bonds and the Class 2-X Bonds are interest only bonds.
(7) The Group 3 Bonds will bear interest at a variable rate equal to the
weighted average of the Net Rates of the Group 3 Mortgage Loans.
SECTION 6. Denominations of Series 1998-1 Bonds.
Each Class of Book Entry Bonds shall be evidenced by a single Bond
representing the initial Class Current Principal Balance or initial Class
Notional Balance, as applicable, of such Class of Bonds as of the Closing Date.
The Senior Bonds (other than the Residual Bonds) shall be issued in minimum
denominations of $1,000 and integral multiples of $1.00 in excess thereof and
the Subordinate Bonds shall be issued in minimum denominations of $25,000 and
integral multiples of $1.00 in excess thereof. Each Class of Residual Bonds
shall be issued in certificated fully-registered form in a single Bond of $100
in the case of the Class R-1 Bonds, and $50, in the case of the Class R-2 and
Class R-3 Bonds. Notwithstanding the foregoing, one Bond of each Class of
Bonds, other than the Residual Bonds, may be issued in a different principal or
notional balance. All of the Book Entry Bonds shall initially be registered on
the Bond Register in the name of Cede & Co., the nominee of the Clearing
Agency, and no Beneficial Owner thereof will receive a Definitive Bond
representing such Beneficial Owner's interest in the Book Entry Bonds, except
in the case of Individual Bond Certificates, and except in the event of Book
Entry Termination.
SECTION 7. Authentication of Series 1998-1 Bonds.
The Series 1998-1 Bonds may be authenticated by the Trustee at the
Trustee's office in the Borough of Manhattan, City and State of New York
currently located at 14 Wall Street, 8th Floor, New York, New York 10005,
Attention: Corporate Trust (the "New York Office"). There shall be no
Authenticating Agent for the Series 1998-1 Bonds unless the appointment of an
Authenticating Agent is required as a condition to the listing of the Series
1998-1 Bonds on any stock exchange.
SECTION 8. Payment Dates.
For purposes of the Indenture, the Interest Payment Dates and
Principal Payment Dates for the Series 1998-1 Bonds are each Payment Date. For
purposes of the Indenture the Special Payment Dates for the Series 1998-1 Bonds
are the 25th day of any calendar month in which any Outstanding Series 1998-1
Bonds are Overdue Bonds.
SECTION 9. Places for Payment of Principal of Series 1998-1 Bonds;
Payments on Book Entry Bonds.
(a) The final payment of principal in retirement of each Series
1998-1 Bond, other than a Class A-7 Bond, Class A-9 Bond, Class X Bond and
Class 2-X Bond, or the final payment of
- 25 -
<PAGE> 29
interest in respect of a Class A-7 Bond, Class A-9 Bond, Class X Bond and Class
2-X Bond, or the final payment of contingent interest in respect of a Residual
Bond (or the Redemption Price of any such Series 1998-1 Bond called for
redemption in full), shall be payable upon presentation and surrender thereof
only at the office of the Trustee in the Borough of Manhattan, City and State
of New York.
(b) Each payment of principal of and interest on a Book Entry Bond
shall be paid to the Clearing Agency, which shall credit the amount of such
payments to the accounts of its Clearing Agency Participants in accordance with
its normal procedures. Each Clearing Agency Participant shall be responsible
for disbursing such payments to the Beneficial Owners of the Book Entry Bonds
that it represents and to each indirect participating brokerage firm (a
"brokerage firm" or "indirect participating firm") for which it acts as agent.
Each brokerage firm shall be responsible for disbursing funds to the Beneficial
Owners of the Book Entry Bonds that it represents. All such credits and
disbursements are to be made by the Clearing Agency and the Clearing Agency
Participants in accordance with the provisions of the Bonds. Neither the
Trustee, the Bond Registrar nor the Issuer shall have any responsibility
therefor except as otherwise provided by applicable law.
SECTION 10. Payment on the Bonds Before Acceleration; Reports to
Bondholders.
(a) Before acceleration, if any, of the Bonds pursuant to Section
5.2 of the Indenture, the Trustee shall, on each Payment Date commencing in
April 1998, pay interest and principal on the Bonds in the following priority
and amounts:
(i) Group 1 Senior Bonds. (A) On each Payment Date prior to the
acceleration, if any, of the Bonds, the Group 1 Available Funds shall be paid
in the following order of priority among the Group 1 Senior Bonds except as
otherwise noted; provided that on each of the first 24 Payment Dates the Class
A-15 Incremental Interest Amount with respect to such Payment Date shall be
applied solely to make payments of Accrued Bond Interest on the Class A-15
Bonds for each such Payment Date:
first, to the interest-bearing Classes of Group 1 Senior Bonds, the
Accrued Bond Interest on each such Class for such Payment Date, any
shortfall in available amounts to pay such Accrued Bond Interest being
allocated among such Classes in proportion to the amount of Accrued
Bond Interest otherwise payable thereon;
second, to the interest-bearing Classes of Group 1 Senior Bonds, any
Accrued Bond Interest thereon remaining unpaid from previous Payment
Dates to the extent of remaining Group 1 Available Funds, with any
shortfall in available amounts to pay such unpaid Accrued Bond
Interest being allocated among such Classes in proportion to the
amount of such Accrued Bond Interest remaining unpaid for each such
Class for such Payment Date;
third, on and before the Group 1 Cross-Over Date, to the Group 1
Senior Bonds (other than the Class A- 7, Class A-9 and Class X Bonds)
in reduction of the Class Current Principal Balances or Component
Current Principal Balances thereof, as applicable:
- 26 -
<PAGE> 30
(a) the Group 1 Senior P&I Optimal Principal Amount for such
Payment Date, in the following order of priority:
first, to the Class A-19 Bonds up to the Class A-19 Optimal
Principal Amount for such Payment Date, until the Class
Current Principal Balance thereof has been reduced to zero;
second, to the Class R-1 Bonds until the Class Current
Principal Balance thereof has been reduced to zero;
third, concurrently to the Class A-1 and Class A-10 Bonds in
the percentages of 70.1278527901% and 29.8721472099%,
respectively, until the Class Current Principal Balance of the
Class A-1 Bonds has been reduced to its Planned Balance for
such Payment Date;
fourth, concurrently to the Class A-2, Class A-17 and Class
A-18 Bonds in the percentages of 46.0874438277%,
26.9562780862% and 26.9562780862%, respectively, until the
Class Current Principal Balance of the Class A-2 Bonds has
been reduced to its Planned Balance for such Payment Date;
fifth, concurrently to the Class A-3 and Class A-10 Bonds in
the percentages of 83.0823887667% and 16.9176112333%,
respectively, until the Class Current Principal Balance of the
Class A-3 Bonds has been reduced to its Planned Balance for
such Payment Date;
sixth, concurrently to the Class A-4 and Class A-10 Bonds in
the percentages of 80.3211586902% and 19.6788413098%,
respectively, until the Class Current Principal Balance of the
Class A-4 Bonds has been reduced to the greater of its Planned
Balance for such Payment Date or $20,530,000;
seventh, sequentially, to the Class A-4 and Class A-6 Bonds,
in that order, until their respective Class Current Principal
Balances have been reduced to their respective Planned
Balances for such Payment Date;
eighth, concurrently to the Class A-8, Class A-10, Class A-17
and Class A-18 Bonds in the percentages of 62.2031621534%,
8.2735568848%, 14.7616404809% and 14.7616404809%,
respectively, until the Class Current Principal Balance of the
Class A-8 Bonds has been reduced to its Planned Balance for
such Payment Date;
ninth, to the Class A-5 Bonds until the Class Current
Principal Balance thereof has been reduced to its Planned
Balance for such Payment Date;
- 27 -
<PAGE> 31
tenth, concurrently to the Class A-13 and Class A-16 Bonds in
the percentages of 87.5% and 12.5%, respectively, until their
respective Class Current Principal Balances have been reduced
to their respective Planned Balances for such Payment Date;
eleventh, concurrently to the Class A-14, Class A-15 and Class
A-16 Bonds in the percentages of 59.9452842072%,
27.5547157928% and 12.5%, respectively, until their respective
Class Current Principal Balances have been reduced to their
respective Planned Balances for such Payment Date;
twelfth, concurrently to the Class A-11 and Class A-12 Bonds,
pro rata, until their respective Class Current Principal
Balances have been reduced to zero;
thirteenth, concurrently to the Class A-8, Class A-10, Class
A-17 and Class A-18 Bonds in the percentages set forth in
clause eighth above, without regard to the Planned Balance of
the Class A-8 Bonds for such Payment Date, until the Class
Current Principal Balance of the Class A-8 Bonds has been
reduced to zero;
fourteenth, to the Class A-5 Bonds without regard to the
Planned Balance thereof for such Payment Date, until the Class
Current Principal Balance of the Class A-5 Bonds has been
reduced to zero;
fifteenth, concurrently to the Class A-13 and Class A-16 Bonds
in the percentages set forth in clause tenth above, without
regard to the Planned Balance of the Class A-13 Bonds for such
Payment Date, until the Class Current Principal Balance of the
Class A-13 Bonds has been reduced to zero;
sixteenth, concurrently to the Class A-14, Class A-15 and
Class A-16 Bonds in the percentages set forth in clause
eleventh above, without regard to their respective Planned
Balances for such Payment Date, until their respective Class
Current Principal Balances have been reduced to zero;
seventeenth, concurrently to the Class A-1 and Class A-10
Bonds in the percentages set forth in clause third above,
without regard to the Planned Balance of the Class A-1 Bonds
for such Payment Date, until the Class Current Principal
Balance of the Class A-1 Bonds has been reduced to zero;
eighteenth, concurrently to the Class A-2, Class A-17 and
Class A-18 Bonds in the percentages set forth in clause fourth
above, without regard to the Planned Balance of the Class A-2
Bonds for such Payment Date, until the Class Current Principal
Balance of the Class A-2 Bonds has been reduced to zero;
- 28 -
<PAGE> 32
nineteenth, concurrently to the Class A-3 and Class A-10 Bonds
in the percentages set forth in clause fifth above, without
regard to the Planned Balance of the Class A-3 Bonds for such
Payment Date, until the Class Current Principal Balance of the
Class A-3 Bonds has been reduced to zero;
twentieth, concurrently to the Class A-4 and Class A-10 Bonds
in the percentages set forth in clause sixth above, without
regard to the Planned Balance of the Class A-4 Bonds for such
Payment Date, until the Class Current Principal Balance of the
Class A-4 Bonds has been reduced to $20,530,000; and
twenty-first, sequentially, to the Class A-4 and Class A-6
Bonds, in that order, without regard to their respective
Planned Balances for such Payment Date, until their respective
Class Current Principal Balances have been reduced to zero;
and
(b) the Component P Principal Payment Amount for Component P-1 and
such Payment Date, to the Class P Bonds, until the Component Current Principal
Balance of Component P-1 has been reduced to zero; and
fourth, the Component P Deferred Amount for Component P-1 for such
Payment Date, to the Class P Bonds; provided, that (i) on any Payment
Date, payments pursuant to this priority fourth shall not exceed the
excess, if any, of (x) the Group 1 Available Funds remaining after
giving effect to payments pursuant to clauses first through third
above over (y) the sum of the amount of Accrued Bond Interest for such
Payment Date and Accrued Bond Interest remaining unpaid from previous
Payment Dates on all Classes of Group 1 Subordinate Bonds then
outstanding, (ii) such payments shall not reduce the Component Current
Principal Balance of Component P-1, and (iii) no payment shall be made
in respect of the Component P Deferred Amount for Component P-1 after
the Group 1 Cross-Over Date.
(B) On each Payment Date prior to the acceleration, if any, of the
Bonds and after the Group 1 Cross-Over Date, payments of principal on the
outstanding Group 1 Senior Bonds (other than the Class A-7, Class A-9 and Class
X Bonds and Component P-1) shall be made pro rata among all such Group 1 Senior
Bonds, regardless of the allocation, or sequential nature, of principal
payments described in priority third (a) above, and the Component P Principal
Payment for Component P-1 shall be paid to the Class P Bonds until the
Component Current Principal Balance of Component P-1 has been reduced to zero.
(C) If, after payments have been made pursuant to priorities first
and second of this Section 10(a)(i) on any Payment Date, the remaining Group 1
Available Funds, are less than the sum of the Group 1 Senior P&I Optimal
Principal Amount and the Component P Principal Payment Amount for Component P-1
for such Payment Date, such amounts shall be proportionately reduced, and such
remaining Group 1 Available Funds shall be paid on the Group 1 Senior Bonds
(other than the Class A-7, Class A-9 and Class X Bonds) on the basis of such
reduced amounts. Notwithstanding any reduction in principal payable to the
Component P-1 pursuant to this paragraph,
- 29 -
<PAGE> 33
the Component Current Principal Balance of Component P-1 shall be reduced not
only by principal so paid but also by the difference between (i) principal
payable to the Class P Bonds with respect to Component P-1 in accordance with
clause (b) of priority third above and (ii) principal actually paid to the
Class P Bonds with respect to Component P-1 after giving effect to this
paragraph (such difference, the "Component P-1 Cash Shortfall" with respect to
such Payment Date). The Component P-1 Cash Shortfall with respect to any
Payment Date shall be added to the Component P Deferred Amount applicable to
Component P-1.
(ii) Group 1 Subordinate Bonds. On each Payment Date prior to the
acceleration, if any, of the Bonds, the Group 1 Available Funds remaining after
the payments made pursuant to Section 10(a)(i) shall be paid to the Group 1
Subordinate Bonds sequentially, in the following order, to the Class B-1, Class
B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Bonds, in each case up to an
amount equal to and in the following order: (a) the Accrued Bond Interest
thereon for such Payment Date, (b) any Accrued Bond Interest thereon remaining
undistributed from previous Payment Dates and (c) such Class's Allocable Share
for such Payment Date.
(iii) Group 2 Senior Bonds. (A) On each Payment Date prior to the
acceleration, if any, of the Bonds, the Group 2 Available Funds shall be paid
in the following order of priority among the Group 2 Senior Bonds except as
otherwise noted:
first, to the interest-bearing Classes of Group 2 Senior Bonds, the
Accrued Bond Interest on each such Class for such Payment Date, any
shortfall in available amounts to pay such Accrued Bond Interest being
allocated among such Classes in proportion to the amount of Accrued
Bond Interest otherwise payable thereon;
second, to the interest-bearing Classes of Group 2 Senior Bonds, any
Accrued Bond Interest thereon remaining undistributed from previous
Payment Dates to the extent of remaining Group 2 Available Funds, with
any shortfall in available amounts to pay such unpaid Accrued Bond
Interest being allocated among such Classes in proportion to the
amount of such Accrued Bond Interest remaining undistributed for each
such Class for such Payment Date;
third, to the Group 2 Senior Bonds (other than the Class 2-X Bonds) in
reduction of the Class Current Principal Balances or Component Current
Principal Balance thereof, as applicable:
(a) the Group 2 Senior P&I Optimal Principal Amount for
such Payment Date, in the following order of
priority:
(i) to the Class R-2 Bonds until the Class
Current Principal Balance thereof has been
reduced to zero;
(ii) to the Class 2-A Bonds until the Class
Current Principal Balance of the Class 2-A
Bonds has been reduced to zero; and
- 30 -
<PAGE> 34
(b) the Component P Principal Payment Amount for
Component P-2 for such Payment Date, to the Class P
Bonds, until the Component Current Principal Balance
of Component P-2 has been reduced to zero; and
fourth, the Component P Deferred Amount for Component P-2 for such
Payment Date, to the Class P Bonds; provided that (i) on any Payment
Date, payments pursuant to this priority fourth shall not exceed the
excess, if any, of (x) the Group 2 Available Funds remaining after
giving effect to payments pursuant to clauses first through third
above over (y) the sum of the amount of Accrued Bond Interest for such
Payment Date and Accrued Bond Interest remaining unpaid from previous
Payment Dates on all Classes of Group 2 Subordinate Bonds then
outstanding, (ii) such payments shall not reduce the Component Current
Principal Balance of Component P-2 and (iii) no payment shall be made
in respect of the Component P Deferred Amount for Component P-2 after
the Group 2 Cross-Over Date.
(B) If, after payments have been made pursuant to priorities first
and second of this Section 10(a)(iii) on any Payment Date, the remaining Group
2 Available Funds are less than the sum of the Group 2 Senior P&I Optimal
Principal Amount and the Component P Principal Payment Amount for Component P-2
for such Payment Date, such amounts shall be proportionately reduced, and such
remaining Group 2 Available Funds shall be paid on the Group 2 Senior Bonds
(other than the Class 2-X Bonds) on the basis of such reduced amounts.
Notwithstanding any reduction in principal payable to the Class P Bonds
pursuant to this paragraph, the Component Current Principal Balance of
Component P-2 shall be reduced not only by principal so paid but also by the
difference between (i) principal payable to the Class P Bonds with respect to
Component P-2 in accordance with clause (b) of priority third above and (ii)
principal actually paid to the Class P Bonds with respect to Component P-2
after giving effect to this paragraph (such difference, the "Component P-2 Cash
Shortfall" with respect to such Payment Date). The Component P-2 Cash
Shortfall with respect to any Payment Date shall be added to the Component P
Deferred Amount applicable to Component P-2.
(iv) Group 2 Subordinate Bonds. On each Payment Date prior to the
acceleration, if any, of the Bonds, the Group 2 Available Funds remaining after
the payments made pursuant to Section 10(a)(iii) shall be paid to the Group 2
Subordinate Bonds sequentially, in the following order, to the Class 2-B-1,
Class 2-B-2, Class 2-B-3, Class 2-B-4, Class 2-B-5 and Class 2-B-6 Bonds, in
each case up to an amount equal to and in the following order: (a) the Accrued
Bond Interest thereon for such Payment Date, (b) any Accrued Bond Interest
thereon remaining unpaid from previous Payment Dates and (c) such Class's
Allocable Share for such Payment Date.
(v) Group 3 Senior Bonds. On each Payment Date prior to the
acceleration, if any, of the Bonds, the Group 3 Available Funds shall be paid
in the following order of priority among the Group 3 Senior Bonds except as
otherwise noted:
- 31 -
<PAGE> 35
first, to the interest-bearing Classes of Group 3 Senior Bonds, the
Accrued Bond Interest on each such Class for such Payment Date, any
shortfall in available amounts to pay such Accrued Bond Interest being
allocated among such Classes in proportion to the amount of Accrued
Bond Interest otherwise payable thereon;
second, to the interest-bearing Classes of Group 3 Senior Bonds, any
Accrued Bond Interest thereon remaining unpaid from previous Payment
Dates, to the extent of remaining Group 3 Available Funds, with any
shortfalls in available amounts being allocated between such Classes
in proportion to the amount of Accrued Bond Interest remaining unpaid
for each such Class for such Payment Date;
third, the Group 3 Senior P&I Optimal Principal Amount for such
Payment Date in the following order of priority: (a) to the Class R-3
Bonds until the Class Current Principal Balance thereof has been
reduced to zero; and (b) concurrently to the Class 3-A Bonds and
Component P-3, pro rata, until the Class Current Principal Balance and
the Component Current Principal Balance thereof, respectively, have
been reduced to zero.
(vi) Group 3 Subordinate Bonds. On each Payment Date prior to the
acceleration, if any, of the Bonds, the Group 3 Available Funds remaining after
the payments made pursuant to Section 10(a)(v) shall be paid among the Group 3
Subordinate Bonds sequentially, in the following order, to the Class 3-B-1,
Class 3-B-2, Class 3-B-3, Class 3-B-4, Class 3-B-5 and Class 3-B-6 Bonds, in
each case up to an amount equal to and in the following order: (a) the Accrued
Bond Interest thereon for such Payment Date, (b) any Accrued Bond Interest
thereon remaining unpaid from previous Payment Dates and (c) such Class's
Allocable Share for such Payment Date.
(b) On each Payment Date, any Available Funds remaining in the
Collection Account after payment of interest and principal as described above
shall be paid to the Class R-1 Bonds.
(c) No Accrued Bond Interest shall be payable with respect to any
Class of Bonds after the Payment Date on which the Current Class Principal
Balance or Class Notional Balance of such Class has been reduced to zero.
(d) On each Payment Date, the Trustee shall pay to the Holders of
the Class R-2 and Class R-3 Bonds as contingent interest any remaining amounts
in REMIC II and REMIC III, respectively, after all amounts otherwise required
to be paid have been so paid, which remaining amounts shall not reduce the
Class Current Principal Balances of the Class R-2 and Class R-3 Bonds.
(e) Payment of the above amounts to each Bondholder shall be made
(i) by check mailed to each Bondholder entitled thereto at the address
appearing in the Bond Register or (ii) upon receipt by the Trustee on or before
the fifth Business Day preceding the Record Date of written instructions from a
Bondholder holding Bonds representing an initial aggregate Current Principal
Balance or Class Notional Balance of not less than $1,000,000 by wire transfer
to a United States dollar account maintained by the payee at any United States
depository institution with appropriate facilities for receiving such a wire
transfer; provided, however, that the final payment in respect of each Class of
Bonds shall be made as provided in Section 9(a).
- 32 -
<PAGE> 36
(f) Concurrently with each payment to Bondholders, the Trustee
shall forward by first-class mail to each Bondholder, with a copy to the Issuer
and the Rating Agencies, a statement setting forth the following information,
expressed with respect to clauses (i) through (vi) of Section 10(a) in the
aggregate and with respect to an individual Bond representing an initial
Current Principal Balance of $1,000, or in the case of a Class of Interest Only
Bonds, a Class Notional Balance of $1,000, or in the case of the Residual
Bonds, an initial Current Principal Balance of $50 (in each case, an
"Individual Bond" with respect to the applicable Class):
(i) the Class Current Principal Balance (or Class
Notional Balance in the case of a Class of Interest Only Bonds) of
each Class of Bonds immediately prior to such Payment Date;
(ii) the amount of the payment allocable to principal on
each applicable Class of Bonds;
(iii) the aggregate amount of interest accrued at the
related Bond Interest Rate with respect to each Class of
interest-bearing Bonds during the related Interest Accrual Period;
(iv) the Net Interest Shortfall and any other adjustments
to interest at the related Bond Interest Rate necessary to account for
any difference between interest accrued and aggregate interest paid
with respect to each Class of interest-bearing Bonds;
(v) the amount of the payment allocable to interest on
each Class of interest-bearing Bonds;
(vi) the Bond Interest Rates for each Class of
interest-bearing Bonds with respect to such Payment Date;
(vii) the Class Current Principal Balance (or Class
Notional Balance in the case of a Class of Interest Only Bonds) of
each Class of Bonds after such Payment Date;
(viii) the amount of any Monthly Advances, Compensating
Interest Payments and outstanding unreimbursed advances by the Master
Servicers included in such payment, separately stated for each
Mortgage Loan Group;
(ix) the amount of any Realized Losses (listed separately
for each Mortgage Loan Group) during the related Prepayment Period and
cumulatively since the Cut-off Date and the amount and source
(separately identified) of any payment in respect thereof included in
such payment;
(x) the amount of Scheduled Principal and Principal
Prepayments, including but separately identifying the principal amount
of Principal Prepayments, Insurance Proceeds, the purchase price in
connection with the purchase of Mortgage Loans, cash deposits in
connection with the substitutions of Mortgage Loans and Net
Liquidation Proceeds) with respect to each Mortgage Loan Group and the
number and principal balance of Mortgage Loans purchased or
substituted for during the relevant period and cumulatively since the
Cut-off Date with respect to each Mortgage Loan Group;
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(xi) the number of Mortgage Loans (excluding REO Property)
in each Mortgage Loan Group remaining in the Trust Fund as of the end
of the related Due Period;
(xii) information for each Mortgage Loan Group regarding
any Mortgage Loan delinquencies as of the end of the related Due
Period, including the aggregate number, aggregate Outstanding
Principal Balance and aggregate Scheduled Principal Balance of
Mortgage Loans delinquent one month, two months and three months or
more;
(xiii) for each Mortgage Loan Group, the number of Mortgage
Loans in the foreclosure process as of the end of the related Due
Period and the aggregate Outstanding Principal Balance of such
Mortgage Loans;
(xiv) for each Mortgage Loan Group, the number and
aggregate Outstanding Principal Balance of all Mortgage Loans as to
which the Mortgaged Properties were REO Properties as of the end of
the related Due Period;
(xv) the book value (the sum of (A) the Outstanding
Principal Balance of the Mortgage Loan, (B) accrued interest through
the date of foreclosure and (C) foreclosure expenses) of any REO
Property in each Mortgage Loan Group; provided, however, that in the
event that such information is not available to the relevant Master
Servicer and the Trustee on the Payment Date, such information shall
be furnished promptly after it becomes available;
(xvi) the amount of Realized Losses allocated to each Class
of Bonds since the prior Payment Date and in the aggregate for all
prior Payment Dates; and
(xvii) the then applicable Senior Percentage, Senior
Prepayment Percentage, Subordinate Percentage and Subordinate
Prepayment Percentage for each Bond Group.
The information set forth above shall be calculated, or reported, as the case
may be, by the Trustee based on data provided by the Master Servicers pursuant
to Section 6.02 of the Pooling and Servicing Agreement [and, with respect to
prior periods, Section 6.06 of the Pooling and Servicing Agreement], upon which
the Trustee may conclusively rely. The information furnished by the Master
Servicers shall be sufficient for the Trustee to calculate any statement it is
required to make.
(f) By April 30 of each year beginning in 1999, the Trustee will
furnish a report to each Holder of the Bonds of record at any time during the
prior calendar year as to the aggregate of amounts reported pursuant to
subclauses (e)(ii) and (e)(v) above with respect to the Bonds, plus information
with respect to the amount of servicing compensation and such other customary
information as the Master Servicers may determine to be necessary and/or to be
required by the Internal Revenue Service or by a federal or state law or rules
or regulations to enable such Holders to prepare their tax returns for such
calendar year. Such obligations shall be deemed to have been satisfied to the
extent that substantially comparable information shall be provided by the
Trustee pursuant to the requirements of the Code.
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SECTION 11. Payment on the Bonds on and after Acceleration.
On each Payment Date, if the Bonds are declared due and payable
pursuant to Section 5.2 of the Indenture, (i) Accrued Bond Interest on each
Class of interest-bearing Bonds shall be paid pro rata in accordance with the
amount of unpaid Accrued Bond Interest on each such Class of Bonds from
Available Funds, (ii) payments of principal on each outstanding Class of the
Bonds (other than the Class A-7, Class A-9, Class X and Class 2-X Bonds) shall
be paid pro rata out of remaining Available Funds until the Class Current
Principal Balance of each such outstanding Class has been reduced to zero and
(iii) any remaining Available Funds shall be used to repay any previously
unpaid Realized Losses (including interest and principal) allocated to the
Bonds, pro rata in accordance with such unpaid Realized Losses.
SECTION 12. Allocation of Realized Losses, Net Interest Shortfalls,
Subordinate Bonds Writedown Amounts and Component P.
(a) (A) On each Payment Date, with respect to the Group 1
Bonds, the principal portion of each Realized Loss on a Group 1 Mortgage Loan
(other than any Excess Special Hazard Loss) shall be allocated as follows:
(i) The applicable PO Percentage of the principal portion
of any such Realized Loss on a Discount Mortgage Loan in Mortgage Loan
Group 1 and any Component P Cash Shortfall relating to Component P-1
shall be allocated to Component P-1 until the Component Current
Principal Balance thereof is reduced to zero; and
(ii) The applicable Non-PO Percentage of the principal
portion of any such Realized Loss shall be allocated as follows:
first, to the Class B-6 Bonds until the Class Current
Principal Balance thereof has been reduced to zero;
second, to the Class B-5 Bonds until the Class
Current Principal Balance there has been reduced to zero;
third, to the Class B-4 Bonds until the Class Current
Principal Balance thereof has been reduced to zero;
fourth, to the Class B-3 Bonds until the Class
Current Principal Balance thereof has been reduced to zero;
fifth, to the Class B-2 Bonds until the Class Current
Principal Balance thereof has been reduced to zero;
sixth, to the Class B-1 Bonds until the Class Current
Principal Balance thereof has been reduced to zero;
seventh, to the Classes of Group 1 Senior P&I Bonds,
pro rata.
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(B) On each Payment Date, with respect to the Group 2
Bonds, the principal portion of each Realized Loss on a Group 2 Mortgage Loan
shall be allocated as follows:
(i) The applicable PO Percentage of the principal portion
of any such Realized Loss on a Discount Mortgage Loan in Mortgage Loan
Group 2 and any Component P Cash Shortfall relating to Component P-2
shall be allocated to Component P-2 until the Component Current
Principal Balance thereof is reduced to zero; and
(ii) The applicable Non-PO Percentage of the
principal portion of such Realized Loss (other than any Excess Special
Hazard Loss) shall be allocated as follows:
first, to the Class 2-B-6 Bonds until the Class
Current Principal Balance thereof has been reduced to zero;
second, to the Class 2-B-5 Bonds until the Class
Current Principal Balance thereof has been reduced to zero;
third, to the Class 2-B-4 Bonds until the Class
Current Principal Balance thereof has been reduced to zero;
fourth, to the Class 2-B-3 Bonds until the Class
Current Principal Balance thereof has been reduced to zero;
fifth, to the Class 2-B-2 Bonds until the Class
Current Principal Balance thereof has been reduced to zero;
sixth, to the Class 2-B-1 Bonds until the Class
Current Principal Balance thereof has been reduced to zero;
seventh, to the Class 2-A Bonds.
(C) With respect to any Payment Date, with respect to
Group 3 Bonds, the principal portion of each Realized Loss on a Group 3
Mortgage Loan (other than any Excess Special Hazard Loss) shall be allocated as
follows:
first, to the Class 3-B-6 Bonds until the Class
Current Principal Balance thereof has been reduced to zero;
second, to the Class 3-B-5 Bonds until the Class
Current Principal Balance thereof has been reduced to zero;
third, to the Class 3-B-4 Bonds until the Class
Current Principal Balance thereof has been reduced to zero;
fourth, to the Class 3-B-3 Bonds until the Class
Current Principal Balance thereof has been reduced to zero;
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fifth, to the Class 3-B-2 Bonds until the Class
Current Principal Balance thereof has been reduced to zero;
sixth, to the Class 3-B-1 Bonds until the Class
Current Principal Balance thereof has been reduced to zero;
seventh, to the Group 3 Senior P&I Bonds, pro rata.
(D) With respect to any Payment Date, the principal
portion of any Excess Special Hazard Loss with respect to a Mortgage Loan in a
Mortgage Loan Group shall be allocated as follows:
(i) with respect to any Discount Mortgage Loan in
Mortgage Loan Group 1 or Mortgage Loan Group 2, the applicable PO
Percentage of any such Excess Special Hazard Loss and any Component P
Cash Shortfall relating to Component P-1 or P-2 shall be allocated to
Component P-1 and Component P-2, respectively; and
(ii) with respect to any Mortgage Loan, the applicable
Non-PO Percentage of any such Excess Special Hazard Loss shall be
allocated pro rata among all Classes of Bonds of the related Bond
Group (other than the Stripped P Components of the Class P Bonds, and
the Class A-7, Class A-9, Class X and Class 2-X Bonds).
(E) Notwithstanding the foregoing, no such allocation of
the principal portion of any Realized Loss shall be made on any Payment Date to
(A) any Class of Group 1 Bonds or Component P-1 to the extent that such
allocation would result in the reduction of the aggregate of the Class Current
Principal Balances of all the Group 1 Bonds and the Component Current Principal
Balance of Component P-1 as of such Payment Date, after giving effect to all
payments and prior allocations of the principal portion of Realized Losses on
such date, to an amount less than the aggregate of the Scheduled Principal
Balances of all of the Group 1 Mortgage Loans as of the preceding Due Date
(such limitation, the "Group 1 Loss Allocation Limitation"), (B) any Class of
Group 2 Bonds or Component P-2 to the extent that such allocation would result
in the reduction of the aggregate of the Class Current Principal Balances of
all the Group 2 Bonds and the Component Current Principal Balance of Component
P-2 as of such Payment Date, after giving effect to all payments and prior
allocations of the principal portion of Realized Losses on such date, to an
amount less than the aggregate of the Scheduled Principal Balances of the Group
2 Mortgage Loans as of the preceding Due Date (such limitation, the "Group 2
Loss Allocation Limitation") and (C) a Class of Group 3 Bonds or Component P-3
to the extent that such allocation would result in the reduction of the
aggregate of the Class Current Principal Balances of all the Group 3 Bonds and
the Component Current Principal Balance of Component P-3 as of such Payment
Date, after giving effect to all payments and prior allocations of Realized
Losses on such date, to an amount less than the aggregate of the Scheduled
Principal Balances of the Group 3 Mortgage Loans as of the preceding Due Date
(such limitation, the "Group 3 Loss Allocation Limitation").
(b) Any Realized Losses allocated to a Class of Bonds pursuant to
Subsection 12(a) shall be allocated among the Bonds of such Class in proportion
to their respective Current Principal Balances. Any allocation of Realized
Losses pursuant to this Subsection 12(b) shall be
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accomplished by reducing the Class Current Principal Balance of the related
Class of Bonds or the Component Current Principal Balance of the related P
Component on the related Payment Date in accordance with Subsection 12(c).
(c) All allocations of the principal portion of Realized Losses in
accordance with this Section 12 shall be accomplished on a Payment Date by
reducing the Class Current Principal Balances of the applicable Classes and the
Component Current Principal Balances of the applicable P Components by their
appropriate shares of any such losses occurring during the month preceding the
month of such Payment Date, after giving effect to payments made on such
Payment Date, except that the aggregate amount of the principal portion of
Realized Losses to be allocated to Component P-1 or Component P-2 on any
Payment Date through the Group 1 Cross-Over Date or the Group 2 Cross-Over
Date, as applicable, will be taken into account in determining payments in
respect of the applicable Component P Deferred Amount for such Payment Date.
(d) On each Payment Date, the Indenture Trustee shall determine
the Group 1 Subordinate Bond Writedown Amount, Group 2 Subordinate Bond
Writedown Amount and Group 3 Subordinate Bond Writedown Amount, respectively,
if any. Any such Group 1 Subordinate Bond Writedown Amount, Group 2
Subordinate Bond Writedown Amount or Group 3 Subordinate Bond Writedown Amount,
respectively, shall effect a corresponding reduction in the Class Current
Principal Balance of (i) if prior to the Group 1 Cross-Over Date, the Group 2
Cross-Over Date or Group 3 Cross-Over Date, as applicable, the Current
Principal Balances of the Group 1 Subordinate Bonds, the Group 2 Subordinate
Bonds and the Group 3 Subordinate Bonds, respectively, in the reverse order of
their numerical Class designations and (ii) from and after the Group 1
Cross-Over Date, the Group 2 Cross-Over Date or Group 3 Cross-Over Date, as
applicable, the Group 1 Senior Bonds (excluding Component P-1), the Group 2
Senior Bonds (excluding Component P-2) and the Group 3 Senior Bonds,
respectively, pro rata, which reduction shall occur on such Payment Date after
giving effect to payments made on such Payment Date.
(e) On each Payment Date, on or prior to the Group 1 Cross-Over
Date, the Indenture Trustee shall determine the Component P Deferred Payment
Writedown Amount, if any, for each of Component P-1 and Component P-2 for such
Payment Date. Any such Component P Deferred Payment Writedown Amount shall
effect a corresponding reduction in the Class Current Principal Balance of the
Subordinate Bonds of the applicable Bond Group, in the reverse order of their
numerical Class designations.
(f) Net Interest Shortfalls shall be allocated among the Classes
of Bonds in a Bond Group in proportion to the amount of Accrued Bond Interest
that would have been allocated thereto in the absence of such shortfalls. The
interest portion of Realized Losses in a Mortgage Loan Group shall be allocated
first to the Classes of Subordinate Bonds in the related Bond Group in reverse
order of their numerical designations and, following the applicable Cross- Over
Date, such Realized Losses will be allocated to the Classes of
interest-bearing Senior Bonds in the related Bond Group in proportion to the
amount of Accrued Bond Interest that would have been allocated thereto in the
absence of such Realized Losses.
(g) Any Realized Loss allocated to a Class or Component P shall be
allocated to the Corresponding Class of REMIC I Interest and the Corresponding
Class of REMIC II Interest.
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SECTION 13. Transfer of Certificates to Trustee; Deposits to Collection
Account; Pledged Accounts.
(a) The Conventional Certificates shall have been registered in
the name of the Trustee or its Qualified Nominee by no later than the Closing
Date pursuant to Section 2.12(f)(iii) of the Indenture. The Trustee shall have
confirmed in writing on or prior to the Closing Date that it is holding such
Conventional Certificates as Trustee.
(b) On the Closing Date, the Issuer shall deposit or cause to be
deposited in the Collection Account the Initial Deposit. The Issuer shall not
be required to make or cause to be made any other deposit of funds in the
Collection Account on the Closing Date. The Initial Deposit shall be held in a
separate sub-account of the Collection Account and shall not be invested. On
each Payment Date, the Class A-15 Incremental Interest Amount shall be paid as
provided in Section 10(a)(i)(A); provided, however, that (i) if on any Payment
Date (A) the remaining amount of the Initial Deposit, after payments on the
Bonds otherwise to be made on such Payment Date, exceeds (B) an amount equal to
1% of the aggregate of the Scheduled Principal Balances of the Mortgage Loans
in all of the Mortgage Loan Groups, the amount by which the amount referred to
in clause (A) exceeds the amount referred to in clause (B) shall be deducted
from the remaining amount of the Initial Deposit and paid to the Holder of the
Class R-3 Bonds and (ii) on the twenty-fourth Payment Date, after payments on
the Bonds otherwise to be made on such Payment Date, any remaining amount of
the Initial Deposit shall be paid to the Holder of the Class R-3 Bonds.
(c) A Qualified GIC shall not be granted to the Trustee with
respect to the investment of funds in any Pledged Account for the Series 1998-1
Bonds.
SECTION 14. Requirements for Issuance of Series 1998-1 Bonds.
Except as otherwise expressly provided immediately below and elsewhere
herein, no additional items shall be required to be delivered to the Trustee
pursuant to Sections 2.12(k) and 2.12(n) of the Indenture in connection with
the issuance of the Series 1998-1 Bonds:
(a) An executed counterpart of the Pooling and Servicing
Agreement.
(b) A certificate of a vice president of BSMCC, dated as of the
Closing Date, certifying that the representations and warranties made by BSMCC
in the Loan Purchase Agreements are true and correct as of the Closing Date.
SECTION 15. Calculations with Respect to Underlying Mortgage Loans.
Calculations with respect to the Mortgage Loans underlying the
Conventional Certificates granted as security for the Series 1998-1 Bonds shall
be made on a mortgage loan-by-mortgage loan basis to the extent required to
determine the amounts to be paid on the Bonds on each Payment Date.
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<PAGE> 43
SECTION 16. Redemption.
If on a Bond Redemption Date, BSMCC or its designee, or the Issuer, as
applicable, exercises its rights to purchase the Mortgage Loans in a Mortgage
Loan Group pursuant to Section 10.01 of the Pooling and Servicing Agreement, on
such Bond Redemption Date the Trustee shall apply the Repurchase Price in
effecting a full redemption of the Bonds of the related Bond Group.
SECTION 17. Actions by Trustee as Holder of Conventional Certificates.
(a) With the consent of the Holders of Series 1998-1 Bonds
representing not less than 66-2/3% of the aggregate Principal Balance of all
Outstanding Series 1998-1 Bonds, by Act of said Holders delivered to the Issuer
and the Trustee, the Issuer, when authorized by an Issuer Resolution, and the
Trustee may take any action that by the terms of the Pooling and Servicing
Agreement requires the consent of the holder of the Conventional Certificates,
including but not limited to: (1) entering into any amendments to the Pooling
and Servicing Agreement; (2) removing or consenting to the removal of, and
appointing or consenting to the appointment of, a successor Master Servicer;
and (3) removing or consenting to the removal of, and appointing or consenting
to the appointment of, the Person acting as trustee under the Pooling and
Servicing Agreement; provided, however, that no such action shall, without the
consent of the Holder of each Outstanding Bond affected thereby:
(1) reduce the amount of, or delay the timing of,
payments received on its related Trust Fund that are
required to be distributed on any Conventional
Certificate or change the repurchase price with
respect thereto, change any place of payment where,
or the coin or currency in which, any Conventional
Certificate or any interest thereon is payable, or
impair the right to institute suit for the
enforcement of the payment of any installment of
interest or principal due on any Conventional
Certificate or adversely affect the tax consequences
to any holder of a Conventional Certificate;
(2) change the requirement of the consent of the holders
of the Conventional Certificate for any such action
pursuant to the Pooling and Servicing Agreement;
(3) modify any of the provisions of this Section, except
to increase any percentage specified herein; or
(4) permit the creation of any lien ranking prior to or
on a parity with the related Trust created by the
Pooling and Servicing Agreement with respect to any
part of its related Trust Fund or terminate the
related Trust created by the Pooling and Servicing
Agreement on any property at any time subject thereto
or deprive the Holder of any Bond of the security
afforded by the Conventional Certificate;
provided, however, that notwithstanding the foregoing provisions of this
Section, Issuer and the Trustee may, without the consent of any Holder of any
Series 1998-1 Bonds, consent to the release from or termination of a Trust
created by the Pooling and Servicing Agreement with respect to any
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Mortgage Loan when such action by the Issuer and the Trustee is specifically
authorized by any other provision of the Indenture, this Series 1998-1
Supplement or the Pooling and Servicing Agreement.
The Trustee may in its discretion determine whether or not any Series
1998-1 Bonds would be affected by any proposed action and any such
determination shall be conclusive upon the Holders of all Series 1998-1 Bonds,
whether theretofore or thereafter authenticated and delivered hereunder. The
Trustee shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Bondholders under this
Section to approve the particular form of any written instrument proposed to
effect such action, but it shall be sufficient if such Act shall approve the
substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
written instrument proposed to effect such action pursuant to this Section, the
Issuer shall mail to the Holders of the Series 1998-1 Bonds to which such
action relates a notice setting forth in general terms the substance of such
action. Any failure of the Issuer to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
action.
(b) The Issuer hereby acknowledges and agrees that should the
Person acting as trustee under the Pooling and Servicing Agreement demand
indemnity satisfactory to it as a condition precedent to taking any action
requested by the Trustee, as holder of the Conventional Certificates, the
Trustee hereunder shall have no duty or obligation to advance its own funds in
fulfillment of such indemnity, but rather may request such indemnity from the
Issuer or from the Holders of the Series 1998-1 Bonds.
SECTION 18. REMIC Administration.
(a) The Trustee shall perform all duties of the Issuer under
Section 4.3 of the Indenture. The Trustee shall make elections to treat REMIC
I, REMIC II and REMIC III as REMICs under the Code and, if necessary, under
applicable state law. Such elections will be made on Forms 1066 or other
appropriate federal tax or information return or any appropriate state return
for the taxable year ending on the last day of the calendar year in which the
Bonds are issued. For the purposes of the REMIC elections in respect of the
Trust Estate, each Class of Bonds having no Components (other than the Class
R-1, Class R-2 and Class R-3 Bonds), and each Component shall be designated as
the "regular interests" and the Class R-3 Bonds shall be designated as the sole
class of "residual interest" in REMIC III. The REMIC I Interests shall be
designated as "regular interests" and the Class R-1 Bonds shall be designated
as the sole class of "residual interest" in REMIC I. The REMIC II Interests
shall be designated as "regular interests" and the Class R-2 Bonds shall be
designated as the sole class of "residual interest" in REMIC II. The Trustee
shall not permit the creation of any "interests" in the Trust Estate (within
the meaning of Section 860G of the Code) other than the interests represented
by the REMIC I Interests, REMIC II Interests and the Bonds (including the
Components).
(b) The Closing Date is hereby designated as the "startup day" of
each of REMIC I, REMIC II and REMIC III within the meaning of Section
860G(a)(9) of the Code.
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(c) The Trustee shall pay out of its own funds, without any right
of reimbursement from the Trust Estate, any and all expenses relating to any
tax audit of the Trust Estate (including, but not limited to, any professional
fees or any administrative or judicial proceedings with respect thereto that
involved the Internal Revenue Service or state tax authorities), other than the
expense of obtaining any tax related Opinion of Counsel not obtained in
connection with such an audit and other than taxes, in either case except as
specified in the Pooling and Servicing Agreement. The Holder of the Class R-1
Bonds shall be the tax matters person of REMIC I, the Holder of the Class R-2
Bonds shall be the tax matters person of REMIC II and the Holder of the Class
R-3 Bonds shall be the tax matters person of REMIC III, in each case in the
manner provided under Treasury Regulations Section 1.860F-4(d) and Temporary
Treasury Regulations Section 301.6231(a)(7)-1 and the Trustee is hereby
irrevocably designated and shall serve as attorney-in-fact and agent for any
such Persons that are tax matters persons. The Trustee, as designated by the
tax matters persons, shall (i) act on behalf of REMIC I, REMIC II and REMIC III
in relation to any tax matter or controversy involving REMIC I, REMIC II or
REMIC III and (ii) represent REMIC I, REMIC II or REMIC III in any
administrative or judicial proceeding relating to an examination or audit by
any governmental taxing authority with respect thereto. To the extent
authorized under the Code and the regulations promulgated thereunder, the
Issuer hereby irrevocably appoints and authorizes the Trustee to be its
attorney-in-fact for purposes of signing any tax returns required to be filed
on behalf of the REMICs.
(d) The Trustee shall prepare or cause to be prepared, sign and
file all of the tax returns in respect of each Series REMIC, other than tax
returns required to be filed by a Master Servicer pursuant to the Pooling and
Servicing Agreement. The expenses of preparing and filing such returns shall
be borne by the Trustee without any right of reimbursement therefor. The
Trustee shall cause the first federal income tax return of each Series REMIC to
include the information required by Treasury Regulation Section 1.860D-1(d)(2)
and Treasury Regulation Section 1.860F-4(b)(2).
(e) The Trustee shall perform on behalf of the Trust Estate all
reporting and other tax compliance duties that are the responsibility of the
Trust Estate under the Code, REMIC Provisions or other compliance guidance
issued by the Internal Revenue Service or any state or local taxing authority.
Among its other duties, as required by the Code, the REMIC Provisions or other
such compliance guidance, the Trustee shall provide (i) to any Transferor of a
Class R-1, Class R-2 or a Class R-3 Bond such information as is necessary for
the application of any tax relating to the transfer of a Class R-1, Class R-2
or a Class R-3 Bond to any Person who is not a Permitted Transferee, (ii) to
Bondholders such information or reports as are required by the Code or the
REMIC Provisions including reports relating to interest, original issue
discount and market discount or premium (using the Prepayment Assumption) and
(iii) to the Internal Revenue Service the name, title, address and telephone
number of the person who will serve as the representative of the Trust Estate.
The Prepayment Assumption for the purposes of Section 4.3(b)(iv) of the
Indenture is the Prepayment Assumption as defined in Section 1 hereof.
(f) The Trustee shall take such action and shall cause the Trust
Estate created hereunder to take such action as shall be necessary to create or
maintain the status of each Series REMIC as a REMIC under the REMIC Provisions.
The Trustee shall not take any action, cause REMIC I, REMIC II or REMIC III to
take any action or fail to take (or fail to cause to be taken) any action
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that, under the REMIC Provisions, if taken or not taken, as the case may be,
could (i) endanger the status of any of the Series REMICs as a REMIC or (ii)
result in the imposition of a tax upon the Trust Estate (including but not
limited to the tax on prohibited transactions as defined in Section 860F(a)(2)
of the Code and the tax on contributions to a REMIC set forth in Section
860G(d) of the Code) (either such event, an "Adverse REMIC Event") unless the
Trustee has received an Opinion of Counsel (at the expense of the party seeking
to take such action but in no event shall such Opinion of Counsel be an expense
of the Trustee) to the effect that the contemplated action will not, with
respect to any of the Series REMICs created hereunder, endanger such status or
result in the imposition of such a tax. The Trustee shall cause the Master
Servicers not to take or fail to take any action (whether or not authorized
hereunder) as to which the Trustee has received an Opinion of Counsel (which
such Opinion of Counsel shall not be an expense of the Trustee) to the effect
that an Adverse REMIC Event could occur with respect to such action. At all
times as may be required by the Code, the Trustee will take no action, nor
permit any such action, that it knows will cause substantially all of the
assets of the Trust Estate (other than the Initial Deposit) to not consist of
"qualified mortgages" as defined in Section 860G(a)(3) of the Code or
"permitted investments" as defined in Section 860G(a)(5) of the Code.
(g) In the event that any tax is imposed on a "prohibited
transaction" of any of the Series REMICS created hereunder as defined in
Section 860F(a)(2) of the Code, on "net income from foreclosure property" of
any of the Series REMICs as defined in Section 860G(c) of the Code, on any
contributions to any of the Series REMICs after the Startup Day therefor
pursuant to Section 860G(d) of the Code, or any other tax is imposed by the
Code or any applicable provisions of state or local tax laws, such tax shall be
charged (i) to the Trustee pursuant to Section 17(m) hereof, if such tax arises
out of or results from a breach by the Trustee of any of its obligations
hereunder, (ii) to the applicable Master Servicer pursuant to the Pooling and
Servicing Agreement, if such tax arises out of or results from a breach by such
Master Servicer of any of its obligations under the Pooling and Servicing
Agreement, or otherwise (iii) from the applicable Group Available Funds.
(h) On or before April 15 of each calendar year, commencing April
15, 1999, the Trustee shall deliver to each Master Servicer and each Rating
Agency a certificate from a Responsible Officer of the Trustee stating the
Trustee's compliance with this Section 18.
(i) The Trustee shall, for federal income tax purposes, maintain
books and records with respect to the each Series REMIC on a calendar year and
on an accrual basis.
(j) The Trustee shall not permit the acquisition of any assets by
any of the Series REMICs unless it shall have received an Opinion of Counsel
(which such Opinion of Counsel shall not be an expense of the Trustee) to the
effect that the inclusion of such assets in such Series REMICs will not cause
any of the Series REMICs to fail to qualify as a REMIC at any time that any
Bonds are outstanding or subject any of the Series REMICs to any tax under the
REMIC Provisions or other applicable provisions of federal, state and local law
or ordinances.
(k) The Trustee shall not enter into any arrangement by which any
of the Series REMICs will receive a fee or other compensation for services nor
permit such REMICs to receive any income from assets other than "qualified
mortgages" as defined in Section 860G(a)(3) of the Code or "permitted
investments" as defined in Section 860G(a)(5) of the Code.
- 43 -
<PAGE> 47
(l) Solely for purposes of satisfying Section 1.860G-1(a)(4)(iii)
of the Treasury Regulations, the "latest possible maturity date" of each
regular interest in REMIC I, REMIC II and REMIC III would be reduced to zero is
the Payment Date occurring in May 2028.
(m) The Trustee agrees to indemnify the Trust Estate, the Issuer
and the Master Servicers for any taxes and costs including, without limitation,
any reasonable attorneys' fees imposed on or incurred by the Trust Estate, the
Issuer or the Master Servicers, as a result of a breach of the Trustee's
covenants set forth in Section 18 hereof.
(n) The REMIC I Interests shall be issued as non-certificated
interests. The Trustee shall be the sole holder of the REMIC I Interests,
which shall not be transferable under any circumstances. The Class R-1 Bonds
shall be issued in fully registered certificated form and shall be executed and
authenticated as provided herein. Principal of and interest on the REMIC I
Interests shall derive from receipts on the Conventional Certificates and be
allocated to the Corresponding Classes of REMIC II Interests in the manner set
forth in the following table.
- 44 -
<PAGE> 48
<TABLE>
<CAPTION>
CONVENTIONAL CORRESPONDING CLASS OF REMIC I INITIAL REMIC REMIC I CORRESPONDING CLASS OF REMIC II INTEREST OR BOND
CERTIFICATE INTEREST OR BOND I BALANCE INTEREST RATE
INTEREST PRINCIPAL INTEREST PRINCIPAL
<S> <C> <C> <C> <C> <C>
1998-1A REMIC Group I REMIC Group I $415,921,769 (1) II-A-1, II-A-2, II-A-3, II-P-1, II-A-1, II-A-2,
Interest, R-1 Interest, R-1 II-A-4, II-A-5, II-A-6, II-A-3, II-A-4, II-A-5,
II-A-8, II-A-10, II-A- II-A-6, II-A-8,
11, II-A-12, II-A-13, II-A-10, II-A-11,
II-A-14, II-A-15, II-A- II-A-12, II-A-13,
16, II-A-17, II-A-18, II-A-14, II-A-15, II-A-
II-A-19, II-X, II-B-1, 16, II-A-17, II-A-18,
II-B-2, II-B-3, II-B-4, II-A-19, II-B-1, II-B-
II-B-5, II-B-6 2, II-B-3, II-B-4,
II-B-5, II-B-6
1998-1B REMIC Group II REMIC Group II $ 88,317,906 (2) II-2-A, II-2-X, II-P-2, II-2-A, II-2-B-
Interest Interest II-2-B-1, II-2-B-2, II- 1, II-2-B-2, II-2-B-3,
1-B-3, II-2-B-4, II-2- II-2-B-4, II-2-B-5,
B-5, II-2-B-6, Class II-2-B-6, Class R-2
R-2
1998-1C REMIC Group III REMIC Group III $ 89,556,886 (3) II-3-A, II-2-B-1, II-3- II-P-3, II-3-A, II-2-B-
Interest Interest B-3, II-3-B-4, II-3-B- 1, II-3-B-2, II-3-B-3,
5, II-3-B-6, II-R-3 II-3-B-4, II-3-B-5, II-
3-B-6, II-R-3
</TABLE>
- ----------
(1) Weighted average of the Net Rate of the Group I Mortgage Loans.
(2) Weighted average of the Net Rate of the Group II Mortgage Loans.
(3) Weighted average of the Net Rate of the Group III Mortgage Loans.
- 45 -
<PAGE> 49
(o) The REMIC II Interests shall be issued as non-certificated
interests. The Trustee shall be the sole holder of the REMIC II Interests,
which shall not be transferable under any circumstances. The Class R-2 Bonds
shall be issued in fully registered certificated form and shall be executed and
authenticated as provided herein. Principal of and interest on the REMIC II
Interests shall be allocated to the Corresponding Classes of Bonds in the
manner set forth in the following table.
<TABLE>
<CAPTION>
Latest Possible
REMIC II Initial REMIC II REMIC II Corresponding Class of Maturity Date
Interest Balance Interest Rate Bonds or Components (Payment Date in)
Interest Principal
<S> <C> <C> <C> <C> <C>
II-P-1 $133,931 None N/A P-1 May 2028
II-P-2 $191,975 None N/A P-2 May 2028
II-P-3 $10,000 None N/A P-3 May 2028
II-A-1 $11,738,000 6.75% A-1, A-7 A-1 May 2028
II-A-2 $13,947,904 6.75% A-2, A-7 A-2 May 2028
II-A-3 $24,555,000 6.75% A-3, A-7 A-3 May 2028
II-A-4 $40,938,000 6.75% A-4, A-7 A-4 May 2028
II-A-5 $24,875,000 6.75% A-5 A-5 May 2028
II-A-6 $7,610, 000 6.75% A-6, A-7 A-6 May 2028
II-A-8 $75,183,096 6.75% A-8 A-8 May 2028
II-A-10 $25,000,000 6.75% A-10 A-10 May 2028
II-A-11 $50,378,029 6.75% A-11 A-11 May 2028
II-A-12 $13,060,971 6.75% A-12 A-12 May 2028
II-A-13 $3,054,625 7.00% A-13 A-13 May 2028
II-A-14 $7,614,250 7.00% A-14 A-14 May 2028
II-A-15 $3,500,000 7.00% A-15 A-15 May 2028
II-A-16 $2,024,125 5.00% A-16 A-16 May 2028
II-A-17 $26,000,000 6.75% A-9, A-17 A-17 May 2028
II-A-18 $26,000,000 6.75% A-9, A-18 A-18 May 2028
II-A-19 $41,592,353 6.75% A-19 A-19 May 2028
II-X (1) X N/A May 2028
II-B-1 $9,774,163 6.75% B-1 B-1 May 2028
II-B-2 $3,743,297 6.75% B-2 B-2 May 2028
</TABLE>
- 46 -
<PAGE> 50
<TABLE>
<CAPTION>
<CAPTION>
Latest Possible
REMIC II Initial REMIC II REMIC II Corresponding Class of Maturity Date
Interest Balance Interest Rate Bonds or Components (Payment Date in)
Interest Principal
<S> <C> <C> <C> <C> <C>
II-B-3 $1,871,469 6.75% B-3 B-3 May 2028
II-B-4 $1,455,726 6.75% B-4 B-4 May 2028
II-B-5 $831,844 6.75% B-5 B-5 May 2028
II-B-6 $1,039,805 6.75% B-6 B-6 May 2028
II-2-A $85,476,274 6.50% 2-A 2-A May 2028
II-2-X (1) 2-X N/A May 2028
II-2-B-1 $1,457,300 6.50% 2-B-1 2-B-1 May 2028
II-2-B-2 $441,600 6.50% 2-B-2 2-B-2 May 2028
II-2-B-3 $264,900 6.50% 2-B-3 2-B-3 May 2028
II-2-B-4 $220,800 6.50% 2-B-4 2-B-4 May 2028
II-2-B-5 $132,500 6.50% 2-B-5 2-B-5 May 2028
II-2-B-6 $132,506 6.50% 2-B-6 2-B-6 May 2028
II-3-A $86,188,450 (2) 3-A 3-A May 2028
II-3-B-1 $2,104,500 (2) 3-B-1 3-B-1 May 2028
II-3-B-2 $492,600 (2) 3-B-2 3-B-2 May 2028
II-3-B-3 $268,700 (2) 3-B-3 3-B-3 May 2028
II-3-B-4 $223,900 (2) 3-B-4 3-B-4 May 2028
II-3-B-5 $134,300 (2) 3-B-5 3-B-5 May 2028
II-3-B-6 $134,386 (2) 3-B-6 3-B-6 May 2028
II-R-3 $50 (2) R-3 R-3 May 2028
</TABLE>
(1) The II-X REMIC II and II-2-X REMIC II Interest will bear interest on
their respective notional balances at variable rates equal, in the
case of the Class II-X REMIC II Interests, to the weighted average of
the excess, if any, of (a) the Net Rates on each Group 1 Mortgage Loan
over (b) 6.75% per annum, and in the case of the Class II-2-X REMIC II
Interests to the weighted average of the excess, if any, of (a) the
Net Rates on each Group 2 Mortgage Loan over (b) 6.50% per annum,
which shall equal (a) the excess of the interest rate on the REMIC
Group I Interest over 6.75% and (b) the excess of the interest rate on
the REMIC Group II Interest over 6.50% respectively. The notional
balances of the II-X REMIC II Interest and II-2-X REMIC Interests
shall equal the Class Notional Balances of the 1998-1A and 1998-1B
Certificates, respectively.
(2) This REMIC II Interest will bear interest at a variable rate equal to
the Net Rates of the Group 3 Mortgage Loans.
- 47 -
<PAGE> 51
(p) The expenses of the Trust Estate shall be paid by REMIC I.
SECTION 19. Form of Series 1998-1 Bonds; Matters Relating to Book Entry
Bonds.
(a) The Series 1998-1 Bonds shall be in the respective forms
attached hereto as Exhibits A-1 through A-8. If the Series 1998-1 Bonds are
listed on any stock exchange at any time after the Closing Date, then the
Issuer shall, if required as a condition to such listing, prepare and deliver
to the Trustee Series 1998-1 Bonds in substantially the same form as the Series
1998-1 Bonds issued on the Closing Date, but with such other additional
features and such modifications, if any, as shall be deemed by the Issuer to be
necessary or appropriate in order to comply with the requirements of such stock
exchange for the listing of the Series 1998-1 Bonds on such exchange. Series
1998-1 Bonds in the form issued on the Closing Date shall thereafter be
exchangeable for Series 1998-1 Bonds in such revised form to the same extent as
temporary Bonds are exchangeable for definitive Bonds pursuant to Section 2.6
of the Indenture. The Issuer shall also include in the Series 1998-1 Bonds of
any Class any information required to be set forth therein pursuant to the Code
and applicable regulations thereunder.
(b) The Clearing Agency, the Issuer and the Trustee have entered
or will enter into the Letter Agreements. Each Class of Book Entry Bonds will
be issued and registered in the form of a single typewritten bond certificate
to be delivered to the Clearing Agency by the Issuer substantially in the
respective forms for each such Class of Bonds attached as exhibits hereto.
Such Bond certificates for each such Class of Bonds shall be initially
registered on the Bond Register in the name of the nominee of such Clearing
Agency and no Beneficial Owner will receive a certificate representing its
interests in any Class of Book Entry Bonds except in the case of Individual
Bond Certificates as provided herein and except in the event that the Trustee
issues Definitive Bonds, as provided in Section 2.14 of the Indenture.
(c) Prior to Book Entry Termination, except for Individual Bond
Certificates, each Bond other than the Residual Bonds will remain registered in
the name of the Clearing Agency or its nominee and at all times: (i)
registration of such Bonds may not be transferred by the Trustee or the Bond
Registrar except to another Clearing Agency; (ii) ownership and transfers of
registration of such Bonds on the books of the Clearing Agency shall be
governed by applicable rules established by the Clearing Agency; (iii) the
Clearing Agency may collect its usual and customary fees, charges and expenses
from its Clearing Agency Participants; (iv) the Trustee shall deal with the
Clearing Agency, Clearing Agency Participants and indirect participating firms
as representatives of the Beneficial Owners of the Book Entry Bonds for
purposes of exercising the rights of Holders under the Indenture, and requests
and directions for and votes of such representatives shall not be deemed to be
inconsistent if they are made with respect to different Beneficial Owners; and
(v) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Clearing Agency with respect to its Clearing
Agency Participants and furnished by the Clearing Agency Participants with
respect to indirect participating firms and their direct or indirect Beneficial
Owners.
(d) After Book Entry Termination, Definitive Bonds shall, after
execution and delivery of a supplemental indenture containing any provisions,
which in the opinion of the Issuer are necessary for such purpose, be issued to
the Beneficial Owners of Book Entry Bonds outstanding at the time of such Book
Entry Termination and such Bonds shall no longer be "Book Entry Bonds."
- 48 -
<PAGE> 52
SECTION 20. The Master Servicers and the Trustee.
The Master Servicers, pursuant to the Pooling and Servicing Agreement,
will provide the Certificate Trustee who will provide the Trustee with certain
information concerning the Mortgage Loans underlying the Conventional
Certificates. The Trustee shall not be required to recompute, verify or
recalculate the information supplied to it by the Issuer or any Master Servicer
and may conclusively rely and shall be protected in relying on the accuracy of
all such information in performing its duties and responsibilities hereunder.
SECTION 21. Supplements, Modifications and Ratifications of Indenture.
(a) The Trustee will be required to mail, in each year when
required by the TIA, to all Bondholders a brief report relating to its
eligibility and qualifications to continue as the Trustee under the Indenture,
any amounts advanced by it under the Indenture, the amount, interest rate and
maturity date of certain indebtedness owing by the Issuer to it in the
Trustee's commercial capacity, the property and funds physically held by the
Trustee as such, any release or substitution of property subject to the lien of
the Indenture which has not been previously reported, any additional Series of
Bonds not previously reported and any action taken by the Trustee which
materially affects the Series 1998-1 Bonds and which has not been previously
reported.
(b) Any references in the Indenture to "the Trust Estate securing
a Series as a REMIC" are hereby deemed to refer to "each Series REMIC as
REMIC".
(c) References to "Residual Interest Holders" in the Indenture are
hereby deemed to refer to the Holders of the Class R-1, Class R-2 and Class R-3
Bonds with respect to the related Series REMIC.
(d) For purposes of clause (y) of the first paragraph of Section
4.1 of the Indenture, the final distribution of assets in each Series REMIC
after all Bonds have received all required principal and interest payments
shall be made as follows: (i) in the case of an optional redemption pursuant to
Section 16 of this Series 1998-1 Supplement with respect to the REMIC I, to the
purchaser of the Mortgage Loans of the related Mortgage Loan Group, and with
respect to REMIC II, to the Class R-2 Bonds, and with respect to REMIC III, to
the Class R-3 Bonds and (ii) in all other cases to the Class R-1, Class R-2 and
Class R-3 Bonds pursuant to this Series 1998-1 Supplement.
(e) For purposes of Section 5. 8 of the Indenture, Clause Second
(b), interest shall be paid to the twenty- fifth day before the date fixed for
payment in Section 5.8 in the case of all Classes of Bonds (other than the
Class P Bonds).
(f) For purposes of Section 5.8 of the Indenture, Clause Fifth,
subclause (ii), the remaining assets included in each Series REMIC shall be
paid to the Class R-1, Class R-2 and Class R-3 Bonds to the extent such assets
remain in the REMIC I, REMIC II or REMIC III, respectively.
(g) For purposes of Section 8.2(d) of the Indenture, assets
released from the Indenture pursuant to such Section and payable to the
Residual Interest shall be paid to the Class R-1, Class
- 49 -
<PAGE> 53
R-2 and Class R-3 Bonds to the extent such assets remain in the REMIC I, REMIC
II or REMIC III, respectively.
(h) Section 1.1 of the Indenture is hereby amended to restate
subsection (x) of the definition of "Eligible Investments" as follows:
(x) any other demand, money market or time deposit
obligation, security or investment which is acceptable to each of the
Rating Agencies as confirmed in writing by each such Rating Agency.
(i) The Indenture as modified and supplemented by this Series
1998-1 Supplement with respect to the Series 1998-1 Bonds (but which
modification and supplement shall not apply to any other Series of Bonds unless
otherwise specified in the related Series Supplement) is in all respects
ratified and confirmed, and the Indenture as so modified and supplemented by
this Series 1998-1 Supplement shall be read, taken and construed as one and the
same instrument.
(j) Any references in the Indenture to "Administrator" are hereby
deemed to refer to the applicable Master Servicer under the Pooling and
Servicing Agreement. Any references to the "Pooling and Administration
Agreement" in the Indenture are hereby deemed to refer to the "Pooling and
Servicing Agreement." The following definitions in Section 1.1 of the
Indenture shall not be applicable to the Series 1998-1 Bonds: "Bankruptcy
Coverage Termination Date", "Bankruptcy Loss", "Bankruptcy Loss Amount",
"Business Day", "Conventional Certificate Prepayment Reserve Amount",
"Cross-over Date", "Debt Service Reduction", "Deficient Valuation", "Excess
Bankruptcy Loss", "Excess Fraud Loss", "Excess Special Hazard Loss", "Expense
Reserve Amount", "Fraud Loss", "Fraud Loss Amount", "Fraud Loss Coverage
Termination Date", "Manager", "Net Interest Shortfall", "Net Liquidation
Proceeds", "Realized Losses", "Reinvestment Income", "Remittance Date",
"Reserve Interest Rate", "Special Hazard Loss", "Special Hazard Loss Amount",
"Special Hazard Coverage Termination Date", and "Variable Rate Bond Redemption
Price". Under Section 2.3 of the Indenture, the Bond Administrator shall
determine the interest applicable to each Class of Variable Rate Bonds instead
of the Trustee. In Section 3.3 of the Indenture the last sentence shall be
amended to read as follows "The Trustee may adopt and employ any reasonable
means of notification of such repayment (including but not limited to, mailing
notice of such repayment to Holders whose Bonds have been called but have not
been surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Trustee or any
Agent, at the last address of record for each such holder)." Section 6.7 of
the Indenture shall be completely restated as follows "The Trustee shall be
compensated and reimbursed for its expenses pursuant to the provisions of the
Pooling and Servicing Agreement." Section 8.9 of the Indenture shall not apply.
(k) For purposes of determining whether an "Event of Default"
under the Indenture has occurred, the Stated Maturity Date of each Class of
Bonds shall be deemed to be the Payment Date occurring in May 2028.
(l) In lieu of delivering reports to Bondholders pursuant to
Section 8.7 of the Indenture, the Trustee shall deliver the reports pursuant to
Section 10(f) hereof.
- 50 -
<PAGE> 54
SECTION 22. Certain Matters Regarding Registration of Transfer and
Exchange of Bonds.
(a) Subject to Section 19(b) and upon the satisfaction of the
applicable conditions set forth below, upon surrender for registration of
transfer of any Bond at any office or agency of the Trustee maintained for such
purpose, the Trustee shall sign, countersign and shall deliver, in the name of
the designated transferee or transferees, a new Bond of a like Class and
aggregate Current Principal Balance or Class Notional Balance, as applicable,
but bearing a different number.
(b) By acceptance of an Individual Bond Certificate, each holder
of such an Individual Bond Certificate acknowledges the restrictions on the
transfer of such Bond set forth in the applicable legends on the face thereof
and agrees that it will transfer such a Bond only as provided herein. Section
2.15(b) of the Indenture shall not apply with respect to transfers of
Individual Bond Certificates. In addition to the provisions of paragraph (f)
below, the following restrictions shall apply with respect to the transfer and
registration of transfer of an Individual Bond Certificate to a transferee that
takes delivery in the form of an Individual Bond Certificate:
(i) In the event that a transfer of an Individual Bond
Certificate is to be made under this Section 22(b)(i), (A) the Issuer
may direct the Trustee to require an Opinion of Counsel acceptable to
and in form and substance satisfactory to the Trustee and the Issuer
that such transfer shall be made pursuant to an exemption, describing
the applicable exemption and the basis therefor, from the Securities
Act and applicable state securities laws or is being made pursuant to
such Securities Act and applicable state securities laws, which
Opinion of Counsel shall not be an expense of the Trustee or the
Issuer and (B) the Trustee shall require the transferee to execute a
representation letter, substantially in the form of Exhibit C-1
hereto, and the Trustee shall require the transferor to execute a
representation letter, substantially in the form of Exhibit C-2
hereto, each acceptable to and in form and substance satisfactory to
the Issuer and the Trustee certifying to the Issuer and the Trustee
the facts surrounding such transfer, which representation letters
shall not be an expense of the Trustee or the Issuer. Any Holder of an
Individual Bond Certificate desiring to effect such transfer shall,
and does hereby agree to, indemnify the Trustee and the Issuer against
any liability that may result if the transfer is not so exempt or is
not made in accordance with such applicable federal and state laws.
(ii) Transfers of Individual Bond Certificates may be made
in accordance with this Section 22(b)(ii) if the prospective
transferee of such Individual Bond Certificate provides the Trustee
and the Issuer with a Rule 144A Certificate, which certificate shall
not be an expense of the Trustee or the Issuer. No transfer of any
Individual Bond Certificates may be made pursuant to this Section
22(b)(ii) by the Issuer. Any Holder of an Individual Bond Certificate
desiring to effect such transfer shall, and does hereby agree to,
indemnify the Trustee and the Issuer against any liability that may
result if the transfer is not so exempt or is not made in accordance
with such applicable federal and state laws.
(c) Subject to paragraph (f), so long as a Global Bond Certificate
of a Class of Other Subordinate Bonds is outstanding and is held by or on
behalf of the Clearing Agency, transfers of beneficial interests in such Global
Bond Certificate, or transfers by Holders of Individual Bond Certificates of
such Class to transferees that take delivery in the form of beneficial
interests in the
- 51 -
<PAGE> 55
applicable Global Bond Certificate, may be made only in accordance with this
paragraph (c) and in accordance with the rules of the Clearing Agency:
(i) In the case of a beneficial interest in a Global Bond
Certificate being transferred to an Institutional Accredited Investor,
such transferee shall be required to take delivery in the form of an
Individual Bond Certificate or Certificates and the Trustee shall
register such transfer only upon compliance with the provisions of
paragraph (b)(i).
(ii) In the case of a beneficial interest in a Global Bond
Certificate being transferred to a transferee that takes delivery in
the form of one or more Individual Bond Certificates of the applicable
Class, except as set forth in clause (i) above, the Trustee shall
register such transfer only upon compliance with the provisions of
paragraph (b)(ii).
(iii) In the case of an Individual Bond Certificate being
transferred to a transferee that takes delivery in the form of a
beneficial interest in the Global Bond Certificate of the applicable
Class, the Trustee shall register such transfer if the transferee has
provided the Trustee with a Rule 144A Certificate or comparable
evidence as to its QIB status.
(iv) No restrictions shall apply with respect to the
transfer or registration of transfer of a beneficial interest in the
Global Bond Certificate of a Class to a transferee that takes delivery
in the form of a beneficial interest in the Global Bond Certificate of
such Class; provided that each such transferee shall be deemed to have
made such representations and warranties contained in the Rule 144A
Certificate as are sufficient to establish that it is a QIB.
(d) Subject to paragraph (f) below, an exchange of a beneficial
interest in a Global Bond Certificate of a Class for one or more Individual
Bond Certificates of such Class, an exchange of one or more Individual Bond
Certificates of a Class for a beneficial interest in the Global Bond
Certificate of such Class and an exchange of one or more Individual Bond
Certificates of a Class for one or more other Individual Bond Certificates of
such Class (in each case, whether or not such exchange is made in anticipation
of subsequent transfer, and, in the case of the Global Bond Certificate of such
Class, so long as such Bond is outstanding and is held by or on behalf of the
Clearing Agency) may be made only in accordance with this paragraph (d) and in
accordance with the rules of the Clearing Agency:
(i) A holder of a beneficial interest in a Global Bond
Certificate of a Class may at any time exchange such beneficial
interest for an Individual Bond Certificates of such Class.
(ii) A holder of one or more Individual Bond Certificates
of a Class may exchange such Individual Bond Certificate or Individual
Bond Certificates for a beneficial interest in the Global Bond
Certificate of such Class if such holder furnishes to the Trustee a
Rule 144A Certificate or comparable evidence as to its QIB status.
- 52 -
<PAGE> 56
(iii) A holder of an Individual Bond Certificate of a Class
may exchange such Individual Bond Certificate for an equal aggregate
principal amount of Individual Bond Certificates of such Class in
different authorized denominations without any certification.
(e) (i) Upon acceptance for exchange or transfer of an
Individual Bond Certificate of a Class for a beneficial interest in a
Global Bond Certificate of such Class as provided herein, the Trustee
shall cancel such Individual Bond Certificate and shall (or shall
request the Clearing Agency to) endorse on the schedule affixed to the
applicable Global Bond Certificate (or on a continuation of such
schedule affixed to the Global Bond Certificate and made a part
thereof) or otherwise make in its books and records an appropriate
notation evidencing the date of such exchange or transfer and an
increase in the bond certificate balance of the Global Bond
Certificate equal to the bond certificate balance of such Individual
Bond Certificate exchanged or transferred therefor.
(ii) Upon acceptance for exchange or transfer of a
beneficial interest in a Global Bond Certificate of a Class for an
Individual Certificate of such Class as provided herein, the Trustee
shall (or shall request the Clearing Agency to) endorse on the
schedule affixed to such Global Bond Certificate (or on a continuation
of such schedule affixed to such Global Bond Certificate and made a
part thereof) or otherwise make in its books and records an
appropriate notation evidencing the date of such exchange or transfer
and a decrease in the bond certificate balance of such Global Bond
Certificate equal to the bond certificate balance of such Individual
Bond Certificate issued in exchange therefor or upon transfer thereof.
(f) Subject to the restrictions on transfer and exchange set forth
in this Section 22, the Holder of any Individual Bond Certificate may transfer
or exchange the same in whole or in part (in an initial Current Principal
Balance equal to the minimum authorized denomination or any integral multiple
of $1.00 in excess thereof) by surrendering such Individual Bond Certificate to
the Trustee, together with an executed instrument of assignment and transfer
satisfactory in form and substance to the Trustee in the case of transfer and a
written request for exchange in the case of exchange. The holder of a
beneficial interest in a Global Bond Certificate may, subject to the rules and
procedures of the Clearing Agency, cause the Clearing Agency (or its nominee)
to notify the Trustee in writing of a request for transfer or exchange of such
beneficial interest for one or more Individual Bond Certificates. Following a
proper request for transfer or exchange, the Trustee shall, within five
Business Days of the Trustee's receipt of such request, and the other
documentation, if any, required hereunder, sign, countersign and deliver to the
transferee (in the case of transfer) or holder (in the case of exchange) or
send by first class mail at the risk of the transferee (in the case of
transfer) or holder (in the case of exchange) to such address as the transferee
or holder, as applicable, may request, one or more Individual Bond
Certificates, as the case may require, for a like aggregate initial Current
Principal Balance and in such authorized denomination or denominations as may
be requested. The presentation for transfer or exchange of any Individual Bond
Certificate shall not be valid unless made to the Trustee by the registered
holder in person, or by a duly authorized attorney-in-fact.
(g) The references in the Indenture to Exhibit D of this Series
1998-1 Supplement shall instead be to Exhibit C-1 or Exhibit C-3.
- 53 -
<PAGE> 57
(h) Any Person acquiring a beneficial interest in a Global Bond
Certificate or a Book Entry Bond which is an ERISA Restricted Bond, by
acquisition of such beneficial interest: (i) shall be deemed to have
represented to the Trustee that such Person is not a Plan, a Person acting on
behalf of a Plan or a Person using the assets of a Plan (each, a "Plan
Investor"), or, in the case of an insurance company, is either not a Plan
Investor or is eligible for an exemption from the applicable prohibited
transaction provisions of ERISA and the Code, or (ii) shall have delivered to
the Trustee an opinion of counsel satisfactory to the Trustee and the Issuer to
the effect that the purchase and holding of such Bonds will not constitute or
result in a prohibited transaction under ERISA or the Code and will not (a)
cause the assets of the Trust Estate to be treated as "plan assets" within the
meaning of Department of Labor regulations set forth in 29 C.F.R. Section
2510.3-101, (b) give rise to any fiduciary duty under ERISA on the part of the
Issuer, the Master Servicers, the Certificate Trustee, the Trustee or their
respective affiliates or (c) be treated as, or result in, a prohibited
transaction under Sections 406 or 407 of ERISA or Section 4975 of the Code.
SECTION 23. Rule 144A Information.
For so long as any Other Subordinate Bonds Certificates are
outstanding and are "restricted securities" within the meaning of Rule
144(a)(3) of the Securities Act, (1) the Issuer will provide or cause to be
provided to any holder of such Bonds and any prospective purchaser thereof
designated by such a holder, upon the request of such holder or prospective
purchaser, the information required to be provided to such holder or
prospective purchaser by Rule 144A(d)(4) under the Securities Act; and (2) the
Issuer shall update such information from time to time in order to prevent such
information from becoming false and misleading and will take such other actions
as are necessary to ensure that the safe harbor exemption from the registration
requirements of the Securities Act under Rule 144A is and will be available for
resales of such Bonds conducted in accordance with Rule 144A.
SECTION 24. Counterparts.
This Series 1998-1 Supplement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all of such counterparts shall together constitute but one and the same
instrument.
SECTION 25. GOVERNING LAW.
AS PROVIDED IN SECTION 11.13 OF THE INDENTURE, THIS SERIES SUPPLEMENT
AND EACH SERIES 1998-1 BOND ISSUED HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED THEREIN.
SECTION 26. Notices.
(a) All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally or
by telecopy or mailed by registered mail, postage prepaid, to (a) in the case
of the Issuer, 2711 North Haskell Avenue, Suite 1000, Dallas,
- 54 -
<PAGE> 58
Texas 75204, Attention: Julie A. Moore, Telecopy No. (214) 874-2599,
Confirmation No. (214) 874-2501, and (b) in the case of the Trustee, 1 National
Plaza, Suite 0126, Chicago, Illinois 60670, Attention: Corporate Trust
Services Division, Telecopy No. (302) 407-1708, or (302) 407-2088 Confirmation
No. (302) 407-4000, or such other address or telecopy number as may hereafter
be furnished by any of the parties hereto, in writing, to the other parties
hereto. Unless otherwise specified herein, any notice required or permitted to
be mailed to a Bondholder shall be given by registered mail, postage prepaid,
at the address of such Holder as shown. Any notice so mailed within the time
prescribed herein shall be conclusively presumed to have been duly given,
whether or not the Bondholder receives such notice.
(b) The Trustee shall as soon as practicable notify the Rating
Agencies in writing of the following circumstances:
(i) any amendment to the Indenture or this supplement
pursuant to Section 9.1 or 9.2 of the Indenture, in
which case the Trustee shall accompany such notice
with a copy of the executed supplemental indenture
effecting such amendment;
(ii) the occurrence of an Event of Default and the action,
if any, taken as a consequence thereof;
(iii) the resignation or removal of the Trustee and the
appointment of any successor Trustee;
(iv) the final Payment Date on the Bonds; and
(v) each Payment Date Statement.
The Issuer shall, as soon as practicable, notify the Rating Agencies of the
appointment of any successor Trustee pursuant to Section 6.10 of the Indenture
in the event that the resigning or removed Trustee is unable so to do. All
notices to the Rating Agencies under this Section 24 shall be deemed to have
been duly given if mailed by registered mail, postage prepaid, or express
courier service, to (a) in the case of Moody's, Moody's Investors Service,
Inc., 99 Church Street, New York, New York 10007, Attention: MBS Monitoring
Department and (b) in the case of DCR, Duff & Phelps Credit Rating Co., 55 East
Monroe Street, Chicago, Illinois 60603, Attention: Structured Finance Group.
Failure to give any notice as required by this clause (b) of Section 24 shall
not constitute a breach hereof by any party hereto.
- 55 -
<PAGE> 59
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Series
1998-1 Supplement to be duly executed by their respective officers thereunto
duly authorized and duly attested in the case of the Issuer to be hereunto
affixed all as of the day and year first above written.
CMC SECURITIES CORPORATION III
By: /s/ Andrew F. Jacobs
-------------------------------------
Name: Andrew F. Jacobs
Title: Senior Vice President - Asset
and Liability Management
Attest: /s/ David Barbour
--------------------------
Name: David Barbour
Title: Assistant Secretary
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By: /s/ R. Tarnas
----------------------------------
Name: R. Tarnas
----------------------------------
Title: Vice President
----------------------------------
Series Supplement - Signature Page
<PAGE> 60
STATE OF TEXAS )
) : ss.:
COUNTY OF DALLAS )
On the 31st day of March, 1998, before me personally came ANDREW F.
JACOBS, to me known, who, being by me duly sworn, did depose and say that he
resides at Dallas, Texas; that he is the Senior Vice President--Asset and
Liability Management of CMC SECURITIES CORPORATION III, the corporation that
executed the above instrument as Issuer; and that he signed his name thereto by
order of the Board of Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARY SEAL] /s/ Chris T. Krecek
-----------------------------------------
Notary Public
STATE OF ILL )
) : ss.:
COUNTY OF COOK )
On the 31st day of March, 1998, before me personally came R. Tarnas,
to me known, who, being by me duly sworn did depose and say that he/she resides
at _________________; that he/she is Vice President of THE FIRST NATIONAL BANK
OF CHICAGO, the national bank described in and that executed the above
instrument as Trustee; and that he/she signed his/her name thereto by order of
the Board of Directors of said national bank.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARY SEAL] /s/ Nilda Sierra
-----------------------------------------
Notary Public
Series Supplement - Signature Page
<PAGE> 61
EXHIBIT A-1
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUIRED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT 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.
THIS BOND IS A REGULAR INTEREST IN A REMIC. PRINCIPAL OF THIS BOND IS PAYABLE
IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF
THIS BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
THIS BOND IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT
OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE
INDENTURE REFERRED TO HEREIN, AND THE ISSUER IS NOT OTHERWISE LIABLE FOR
PAYMENTS ON THIS BOND.
CMC SECURITIES CORPORATION III
COLLATERALIZED MORTGAGE OBLIGATIONS, SERIES 1998-1
CLASS __________
DUE: _______________
ACCRUAL DATE: March 1, 1998
ISSUE DATE: March 31, 1998
$_______________________ CUSIP NO.________________
_______% BOND INTEREST RATE CERTIFICATE NUMBER 0001
CMC SECURITIES CORPORATION III, a corporation duly organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of ____________ DOLLARS ($_____________)
in monthly payments of principal and interest on the twenty-fifth day of each
month or, if such day is not a Business Day, then the next succeeding Business
Day (each a "Payment Date"), commencing in April 1998 and ending on or before
the Payment Date occurring in ______________. This Bond is one of a duly
authorized issue of non-recourse Bonds of the Issuer, designated as its
Collateralized Mortgage Obligations, Series 1998-1. The Bonds are issued in
multiple classes under the Issuer's Indenture dated as of March 1, 1998, as
amended (herein called the "Indenture"), to which Indenture and all indentures
supplemental thereto, including the Series 1998-1 Supplement dated as of March
31, 1998 (the "Series 1998-1 Supplement"), between the Issuer and The First
National Bank of Chicago, as indenture trustee (the "Indenture Trustee", which
term includes any successor Trustee under the Indenture), which authorized the
Bonds, reference is hereby made for a statement of the respective
<PAGE> 62
rights thereunder of the Issuer, the Indenture Trustee and the holders of the
Bonds and the terms upon which the Bonds are, and are to be, authenticated and
delivered.
The Bonds are collateralized by three separate series of mortgage pass-
through certificates (the "Conventional Certificates"), each of which series
evidences the entire beneficial ownership interest in one of three pools of
Mortgage Loans. Each pool of Mortgage Loans has been deposited into a separate
trust (each, a "Trust") pursuant to the terms of the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") dated as of March 1, 1998
among the Issuer, as depositor, Bank of America, FSB and Cendant Mortgage
Corporation, as master servicers (the "Master Servicers"), and The First
National Bank of Chicago, as certificate trustee (the "Certificate Trustee").
Each Trust has created a series of Conventional Certificates for the benefit of
the Issuer in exchange for the related pool of Mortgage Loans. The
Conventional Certificates were pledged to the Indenture Trustee under the terms
of the Indenture.
All capitalized terms used without definition in this Bond shall have
the meanings assigned to such terms in the Indenture or the Series 1998-1
Supplement, as applicable.
This Bond does not purport to summarize the Indenture or the Series
1998-1 Supplement and reference should be made to the Indenture and the Series
1998-1 Supplement for the interests, rights and limitations of rights,
benefits, obligations and duties of the holders of the Bond thereunder, and the
rights, duties and immunities of the Indenture Trustee.
Payments of principal of and interest on this Bond will be paid in
accordance with the terms of the Series 1998-1 Supplement and will be made out
of the Available Funds for such Payment Date, to the extent and subject to the
limitations set forth in the Series 1998-1 Supplement, on each Payment Date to
the Person in whose name this Bond is registered at the close of business on
the last Business Day of the month immediately preceding the month of such
distribution (the "Record Date"). All sums payable on this Bond are payable in
the coin or currency of the United States of America as at the time of payment
is legal tender for the payment of public and private debts.
Realized Losses, Net Interest Shortfalls and certain writedown amounts
shall be allocated among the Classes of Bonds on the applicable Payment Date in
the manner set forth in the Series 1998-1 Supplement. To the extent provided
in the Series 1998-1 Supplement, the Subordinate Bonds will be subordinated in
right of payment to the other Classes of Bonds and each Class of the
Subordinate Bonds will be subordinated in right of payment to each of the other
Classes of Subordinate Bonds with a lower numerical designation, if any. All
Realized Losses, Net Interest Shortfalls and writedown amounts allocated to any
Class of Bonds will be allocated pro rata among the outstanding Bonds of such
Class, as described in the Series 1998-1 Supplement.
The Bonds are limited in right of payment to certain collections and
recoveries respecting the Mortgage Loans and certain other assets, all as more
specifically set forth in the Series 1998-1 Supplement.
So long as this Bond is registered in the name of a Depository or its
nominee, the Indenture Trustee will make payments of principal of and interest
on this Bond by wire transfers of immediately available funds to the Depository
or its nominee. Otherwise, all payments on this Bond under the Series 1998-1
Supplement will be made by or on behalf of the Indenture Trustee as provided in
the Indenture. Notwithstanding the above, the final payment on this Bond will
be made
-2-
<PAGE> 63
after due notice by the Indenture Trustee of the pendency of such payment and
only upon presentation and surrender of this Bond at its principal Corporate
Trust Office or such other offices or agencies appointed by the Indenture
Trustee for that purpose and such other locations provided in the Series 1998-1
Supplement.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Holders of Bonds representing
two-thirds of the Aggregate Current Principal Amount of all Bonds at the time
Outstanding, in case Outstanding Bonds of all Series are to be affected, or
with the consent of the Holders of two-thirds of the Aggregate Current
Principal Amount of all the Bonds at the time Outstanding of each Series to be
affected, in case one or more, but less than all, of the Series of Bonds then
Outstanding are to be affected; provided however, that prior to the date on
which the Class Imputed Principal Balance of each Class of Senior Bonds of a
Series has been reduced to zero, no amendment, variation or modification shall
be made to Article V of the Indenture in respect of any Series of Bonds without
the consent of the Holders representing not less than 100% of the Aggregate
Current Principal Amount of all Outstanding Senior Bonds of such Series. The
consent of the Holders of any Junior Bonds of such Series shall not be required
to be obtained prior to making any amendment for such series to Article V of
the Indenture for so long as any Senior Bond of such Series is Outstanding.
Upon reduction to zero of the Class Imputed Principal Balance of each Class of
Senior Bonds of a Series, no amendment, variation or modification to Article V
of the Indenture shall be made in respect of such Series of Bonds without the
consent of the Holders representing not less than two-thirds of the Aggregate
Current Principal Amount of the Highest Priority Junior Class of such Series.
The Indenture also contains provisions permitting the Holders of Bonds
representing specified percentages of the Aggregate Current Principal Amount of
the Bonds of a Series at the time Outstanding on behalf of the Holders of all
the Bonds of such Series, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder, at the time of
the giving thereof, of this Bond (or any one or more Predecessor Bonds) shall
be conclusive and binding upon such Holder and upon all future holders of this
Bond and of any Bond 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 Bond. The Indenture also permits the Indenture
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of the Holders of the Bonds of any Series issued
thereunder.
The Bonds are issuable in fully-registered form only, without coupons,
in denominations as specified in the Series 1998-1 Supplement. As provided in
the Series 1998-1 Supplement and subject to any limitations on transfer of this
Bond by a Depository or its nominee and certain limitations set forth in the
Series 1998-1 Supplement, the transfer of this Bond is registrable in the Bond
Register upon surrender of this Bond for registration or transfer at the
principal Corporate Trust Office of the Indenture Trustee or such other offices
or agencies appointed by the Indenture Trustee for that purpose and such other
locations provided in the Series 1998-1 Supplement, duly endorsed by, or
accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Indenture Trustee and the Bond Registrar
duly executed by, the Holder hereof or such Holder's attorney duly authorized
in writing, and thereupon one or more new
-3-
<PAGE> 64
Bonds of the same Class in the same aggregate Principal Balance will be issued
to the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations therein
set forth, this Bond is exchangeable for a new Bond of the same Class in the
same denomination. No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee 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 Bonds.
At its option, Bear Stearns Mortgage Capital Corporation ("BSMCC") or
its designee (or if BSMCC or its designee does not exercise such option, the
Issuer) may, upon giving written notice to the Issuer, each Master Servicer,
the Certificate Trustee and the Indenture Trustee, repurchase from the Issuer
all of the remaining Mortgage Loans of any Mortgage Loan Group, and thereby
effect an early termination of the related Certificates and redemption of the
Bonds of the related Bond Group, on any Payment Date when the aggregate
outstanding principal balance of the Mortgage Loans in such Mortgage Loan
Groups is equal to or less than 5% of the aggregate outstanding principal
balance of the Mortgage Loans in such Mortgage Loan Group as of the Cut-off
Date. Upon any such optional repurchase, the Trust Estate will terminate and
any remaining assets in the Trust Estate shall be released to the repurchasing
party.
The Issuer, the Indenture Trustee and the Bond Registrar and any agent
of the Issuer, the Indenture Trustee or the Bond Registrar may treat the Person
in whose name this Bond is registered as the owner hereof for all purposes, and
none of the Issuer, the Master Servicers, the Indenture Trustee, the Bond
Registrar or any such agent shall be affected by notice to the contrary.
Unless the certificate of authentication hereon has been executed by the
Bond Registrar, by manual signature, this Bond shall not be entitled to any
benefit under the Series 1998-1 Supplement or be valid for any purpose.
-4-
<PAGE> 65
THIS BOND AND THE SERIES 1998-1 SUPPLEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
Capitalized terms used herein and not defined herein shall have the
meaning given them in the Series 1998-1 Supplement.
IN WITNESS WHEREOF, CMC Securities Corporation III has caused this Bond
to be duly executed.
Dated: March 31, 1998 CMC SECURITIES CORPORATION III
By:
----------------------------------
Wade Walker
Vice President - Asset and
Liability Management
CERTIFICATION OF AUTHENTICATION
THIS IS A CLASS _____________ BOND REFERRED TO IN THE WITHINMENTIONED
INDENTURE.
THE FIRST NATIONAL BANK OF CHICAGO,
AS INDENTURE TRUSTEE
BY:
----------------------------------
AUTHORIZED SIGNATORY
<PAGE> 66
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
Bond shall be construed as though they were written out in full according to
applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT-- ____ Custodian ______
TEN ENT--as tenants by the (Cus) (Minor)
entireties
JT TEN--as joint tenants with Under Uniform Gifts to Minors
rights of survivor-
ship and not as Tenants Act _____________________
in Common (State)
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED
THOUGH NOT IN THE ABOVE LIST.
<PAGE> 67
FORM OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
- --------------------------------------------------------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address of assignee)
the within Bond and does hereby irrevocably constitute and appoint
______________________ (Attorney) to transfer the said Bond in the Bond
Register, with full power of substitution in the premises.
Dated:
---------------------- -------------------------------------
NOTICE: The signature to this
assignment must correspond
with the name as written upon
the face of this Bond in every
particular without alteration
or enlargement or any change
whatever.
- -----------------------------------
SIGNATURE GUARANTEED: The
signature must be guaranteed by a
commercial bank or trust company
or by a member firm of the New
York Stock Exchange or another
national securities exchange.
Notarized or witnessed signatures
are not acceptable.
<PAGE> 68
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of payment:
Payment shall be made, by wire transfer or otherwise, in immediately
available funds, to _____________________________________, for the account of
__________________________, account number ___________, or, if mailed by check,
to _______________________________. Applicable reports and statements should
be mailed to ______________________________. This information is provided by
_________________________________, the assignee named above, or
____________________________________, as its agent.
<PAGE> 69
EXHIBIT A-2
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT 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.
THIS CLASS P BOND REPRESENTS A REMIC REGULAR INTEREST FOR FEDERAL INCOME TAX
PURPOSES. PRINCIPAL OF THIS BOND IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF THIS BOND AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
THIS BOND IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT
OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE
INDENTURE REFERRED TO HEREIN, AND THE ISSUER IS NOT OTHERWISE LIABLE FOR
PAYMENTS ON THIS BOND.
THIS CLASS P BOND SHALL NOT BE ENTITLED TO ANY PAYMENTS WITH RESPECT TO
INTEREST.
CMC SECURITIES CORPORATION III
COLLATERALIZED MORTGAGE OBLIGATIONS, SERIES 1998-1
CLASS P
DUE: May 25, 2028
ACCRUAL DATE: March 1, 1998
ISSUE DATE: March 31, 1998
$335,906 CUSIP NO. 125715 FT4
CERTIFICATE NUMBER 0001
CMC SECURITIES CORPORATION III, a corporation duly organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of THREE HUNDRED THIRTY FIVE THOUSAND
NINE HUNDRED AND SIX ($335,906) in monthly payments of principal on the
twenty-fifth day of each month or, if such day is not a Business Day, then the
next succeeding Business Day (each a "Payment Date"), commencing in April 1998
and ending on or before the Payment Date occurring in May 2028. This Bond is
one of a duly authorized issue of non-recourse Bonds of the Issuer, designated
as its Collateralized Mortgage Obligations, Series 1998-1. The Bonds are
issued in multiple classes under the Issuer's Indenture dated as of March 1,
1998, as amended (herein called the "Indenture"), to which Indenture and all
indentures supplemental thereto, including the Series 1998-1 Supplement dated
as of March 31, 1998 (the
<PAGE> 70
"Series 1998-1 Supplement"), between the Issuer and The First National Bank of
Chicago, as indenture trustee (the "Indenture Trustee", which term includes any
successor Trustee under the Indenture), which authorized the Bonds, reference
is hereby made for a statement of the respective rights thereunder of the
Issuer, the Indenture Trustee and the holders of the Bonds and the terms upon
which the Bonds are, and are to be, authenticated and delivered.
The Bonds are collateralized by three separate series of mortgage pass-
through certificates (the "Conventional Certificates"), each of which series
evidences the entire beneficial ownership interest in one of three pools of
Mortgage Loans. Each pool of Mortgage Loans has been deposited into a separate
trust (each, a "Trust") pursuant to the terms of the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") dated as of March 1, 1998
among the Issuer, as depositor, Bank of America, FSB and Cendant Mortgage
Corporation, as master servicers (the "Master Servicers"), and The First
National Bank of Chicago, as certificate trustee (the "Certificate Trustee").
Each Trust has created a series of Conventional Certificates for the benefit of
the Issuer in exchange for the related pool of Mortgage Loans. The
Conventional Certificates were pledged to the Indenture Trustee under the terms
of the Indenture.
All capitalized terms used without definition in this Bond shall have
the meanings assigned to such terms in the Indenture or the Series 1998-1
Supplement, as applicable.
This Bond does not purport to summarize the Indenture or the Series
1998-1 Supplement and reference should be made to the Indenture and the Series
1998-1 Supplement for the interests, rights and limitations of rights,
benefits, obligations and duties of the holders of the Bond thereunder, and the
rights, duties and immunities of the Indenture Trustee.
This Bond shall not be entitled to any payments in respect of interest.
Payments of principal on this Bond will be paid in accordance with the terms of
the Series 1998-1 Supplement out of Available Funds for such Payment Date, to
the extent and subject to the limitations set forth in the Series 1998-1
Supplement, on each Payment Date to the Person in whose name this Bond is
registered at the close of business on the last Business Day of the month
immediately preceding the month of such Payment Date (the "Record Date"). All
sums payable on this Bond are payable in the coin or currency of the United
States of America as at the time of payment is legal tender for the payment of
public and private debts.
Realized Losses, Net Interest Shortfalls and certain writedown amounts
shall be allocated among the Classes of Bonds on the applicable Payment Date in
the manner set forth in the Series 1998-1 Supplement. To the extent provided
in the Series 1998-1 Supplement, the Subordinate Bonds will be subordinated in
right of payment to the other Classes of Bonds and each Class of the
Subordinate Bonds will be subordinated in right of payment to each of the other
Classes of Subordinate Bonds with a lower numerical designation, if any. All
Realized Losses , Net Interest Shortfalls and writedown amounts allocated to
any Class of Bonds will be allocated pro rata among the outstanding Bonds of
such Class, as described in the Series 1998-1 Supplement.
The Bonds are limited in right of payment to certain collections and
recoveries respecting the Mortgage Loans and certain other assets, all as more
specifically set forth in the Series 1998-1 Supplement.
-2-
<PAGE> 71
So long as this Bond is registered in the name of a Depository or its
nominee, the Indenture Trustee will make payments of principal on this Bond by
wire transfers of immediately available funds to the Depository or its nominee.
Otherwise, all payments on this Bond under the Series 1998-1 Supplement will be
made by or on behalf of the Indenture Trustee as provided in the Indenture.
Notwithstanding the above, the final payment on this Bond will be made after
due notice by the Indenture Trustee of the pendency of such payment and only
upon presentation and surrender of this Bond at its principal Corporate Trust
Office or such other offices or agencies appointed by the Indenture Trustee for
that purpose and such other locations provided in the Series 1998-1 Supplement.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Holders of Bonds representing
two-thirds of the Aggregate Current Principal Amount of all Bonds at the time
Outstanding, in case Outstanding Bonds of all Series are to be affected, or
with the consent of the Holders of two-thirds of the Aggregate Current
Principal Amount of all the Bonds at the time Outstanding of each Series to be
affected, in case one or more, but less than all, of the Series of Bonds then
Outstanding are to be affected; provided however, that prior to the date on
which the Class Imputed Principal Balance of each Class of Senior Bonds of a
Series has been reduced to zero, no amendment, variation or modification shall
be made to Article V of the Indenture in respect of any Series of Bonds without
the consent of the Holders representing not less than 100% of the Aggregate
Current Principal Amount of all Outstanding Senior Bonds of such Series. The
consent of the Holders of any Junior Bonds of such Series shall not be required
to be obtained prior to making any amendment for such series to Article V of
the Indenture for so long as any Senior Bond of such Series is Outstanding.
Upon reduction to zero of the Class Imputed Principal Balance of each Class of
Senior Bonds of a Series, no amendment, variation or modification to Article V
of the Indenture shall be made in respect of such Series of Bonds without the
consent of the Holders representing not less than two-thirds of the Aggregate
Current Principal Amount of the Highest Priority Junior Class of such Series.
The Indenture also contains provisions permitting the Holders of Bonds
representing specified percentages of the Aggregate Current Principal Amount of
the Bonds of a Series at the time Outstanding on behalf of the Holders of all
the Bonds of such Series, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder, at the time of
the giving thereof, of this Bond (or any one or more Predecessor Bonds) shall
be conclusive and binding upon such Holder and upon all future holders of this
Bond and of any Bond 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 Bond. The Indenture also permits the Indenture
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of the Holders of the Bonds of any Series issued
thereunder.
The Bonds are issuable in fully-registered form only, without coupons,
in denominations as specified in the Series 1998-1 Supplement. As provided in
the Series 1998-1 Supplement and subject to any limitations on transfer of this
Bond by a Depository or its nominee and certain limitations set forth in the
Series 1998-1 Supplement, the transfer of this Bond is registrable in the Bond
Register upon surrender of this Bond for registration or transfer at the
principal Corporate Trust Office of the Indenture Trustee or such other offices
or agencies appointed by the Indenture
-3-
<PAGE> 72
Trustee for that purpose and such other locations provided in the Series 1998-1
Supplement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Indenture
Trustee and the Bond Registrar duly executed by, the Holder hereof or such
Holder's attorney duly authorized in writing, and thereupon one or more new
Bonds of the same Class in the same aggregate Principal Balance will be issued
to the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations therein
set forth, this Bond is exchangeable for a new Bond of the same Class in the
same denomination. No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee 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 Bonds.
At its option, Bear Stearns Mortgage Capital Corporation ("BSMCC") or
its designee (or if BSMCC or its designee does not exercise such option, the
Issuer) may, upon giving written notice to the Issuer, each Master Servicer,
the Certificate Trustee and the Indenture Trustee, repurchase from the Issuer
all of the remaining Mortgage Loans of any Mortgage Loan Group, and thereby
effect an early termination of the related Certificates and redemption of the
Bonds of the related Bond Group, on any Payment Date when the aggregate
outstanding principal balance of the Mortgage Loans in such Mortgage Loan
Groups is equal to or less than 5% of the aggregate outstanding principal
balance of the Mortgage Loans in such Mortgage Loan Group as of the Cut-off
Date. Upon any such optional repurchase, the Trust Estate will terminate and
any remaining assets in the Trust Estate shall be released to the repurchasing
party.
The Issuer, the Indenture Trustee and the Bond Registrar and any agent
of the Issuer, the Indenture Trustee or the Bond Registrar may treat the Person
in whose name this Bond is registered as the owner hereof for all purposes, and
none of the Issuer, the Master Servicers, the Indenture Trustee, the Bond
Registrar or any such agent shall be affected by notice to the contrary.
Unless the certificate of authentication hereon has been executed by the
Bond Registrar, by manual signature, this Bond shall not be entitled to any
benefit under the Series 1998-1 Supplement or be valid for any purpose.
-4-
<PAGE> 73
THIS BOND AND THE SERIES 1998-1 SUPPLEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
Capitalized terms used herein and not defined herein shall have the
meaning given them in the Series 1998-1 Supplement.
IN WITNESS WHEREOF, CMC Securities Corporation III has caused this Bond
to be duly executed.
Dated: March 31, 1998 CMC SECURITIES CORPORATION III
BY:
----------------------------------
Wade Walker
Vice President - Asset and
Liability Management
CERTIFICATION OF AUTHENTICATION
THIS IS A CLASS P BOND REFERRED TO IN THE WITHIN MENTIONED INDENTURE.
THE FIRST NATIONAL BANK OF CHICAGO,
AS INDENTURE TRUSTEE
BY:
----------------------------------
AUTHORIZED SIGNATORY
<PAGE> 74
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
Bond shall be construed as though they were written out in full according to
applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT--______ Custodian ________
TEN ENT--as tenants by the (Cus) (Minor)
entireties Under Uniform Gifts to Minors
JT TEN--as joint tenants with
rights of survivor- Act _________________________
ship and not as Tenants (State)
in Common
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED
THOUGH NOT IN THE ABOVE LIST.
<PAGE> 75
FORM OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
________________________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE _______________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address of assignee)
the within Bond and does hereby irrevocably constitute and appoint
______________________ (Attorney) to transfer the said Bond in the Bond
Register, with full power of substitution in the premises.
Dated:
---------------------- -------------------------------------
NOTICE: The signature to this
assignment must correspond
with the name as written upon
the face of this Bond in every
particular without alteration
or enlargement or any change
whatever.
- -----------------------------------
SIGNATURE GUARANTEED: The
signature must be guaranteed by a
commercial bank or trust company
or by a member firm of the New
York Stock Exchange or another
national securities exchange.
Notarized or witnessed signatures
are not acceptable.
<PAGE> 76
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of payment:
Payment shall be made, by wire transfer or otherwise, in immediately
available funds, to _____________________________________, for the account of
__________________________, account number ___________, or, if mailed by check,
to _______________________________. Applicable reports and statements should
be mailed to ______________________________. This information is provided by
_________________________________, the assignee named above, or
____________________________________, as its agent.
<PAGE> 77
EXHIBIT A-3
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT 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.
THIS CLASS ___________ BOND REPRESENTS A REMIC REGULAR INTEREST FOR FEDERAL
INCOME TAX PURPOSES.
THIS BOND IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT
OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE
INDENTURE REFERRED TO HEREIN, AND THE ISSUER IS NOT OTHERWISE LIABLE FOR
PAYMENTS ON THIS BOND.
THE CLASS ____________ BOND SHALL NOT BE ENTITLED TO ANY PAYMENTS WITH RESPECT
TO PRINCIPAL.
NEITHER THIS BOND NOR ANY BENEFICIAL INTEREST HEREIN MAY BE TRANSFERRED UNLESS
THE INDENTURE TRUSTEE HAS RECEIVED EITHER (A) A CERTIFICATE FROM SUCH
TRANSFEREE TO THE EFFECT THAT (I) SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT
PLAN, TRUST OR ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SUBJECT TO SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR A GOVERNMENTAL PLAN
DEFINED IN SECTION 3(32) OF ERISA SUBJECT TO ANY FEDERAL STATE OR LOCAL LAW
WHICH IS, TO MATERIAL EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR
THE CODE ("SIMILAR LAW") (EACH, A "BENEFIT PLAN") AND IS NOT AN ENTITY,
INCLUDING AN INSURANCE COMPANY SEPARATE ACCOUNT OR INSURANCE COMPANY GENERAL
ACCOUNT, WHOSE UNDERLYING ASSETS INCLUDE BENEFIT PLAN ASSETS BY REASON OF A
BENEFIT PLAN'S INVESTMENT IN THE ENTITY (SUCH BENEFIT PLAN OR ENTITY, A
"BENEFIT PLAN INVESTOR") OR (II) IF SUCH TRANSFEREE IS AN INSURANCE COMPANY, TO
THE EFFECT THAT SUCH COMPANY IS NOT A BENEFIT PLAN INVESTOR, IS ELIGIBLE FOR AN
EXEMPTION TO THE APPLICABLE PROHIBITED TRANSACTION PROVISIONS OF ERISA, THE
CODE AND SIMILAR LAW OR IS USING THE ASSETS OF ITS GENERAL ACCOUNT TO PURCHASE
THE SECURITIES AT A TIME IN WHICH THE AMOUNT OF THE RESERVES FOR CONTRACTS
ISSUED TO BENEFIT PLANS THAT VARY WITH THE INVESTMENT EXPERIENCE OF THE
INSURANCE COMPANY'S GENERAL ACCOUNT DOES NOT EXCEED 10% OF THE TOTAL
LIABILITIES OF SUCH GENERAL ACCOUNT OR (III) IN SUCH OTHER FORM AND SUBSTANCE
AS SHALL BE SATISFACTORY TO THE INDENTURE TRUSTEE AND THE ISSUER, OR (B) AN
OPINION OF COUNSEL SATISFACTORY TO THE
<PAGE> 78
INDENTURE TRUSTEE AND THE ISSUER TO THE EFFECT THAT THE PURCHASE AND HOLDING OF
SUCH BOND (I) WILL NOT CONSTITUTE OR RESULT IN THE ASSETS OF THE TRUST ESTATE
BEING DEEMED TO BE "PLAN ASSETS" SUBJECT TO THE FIDUCIARY RESPONSIBILITY
PROVISIONS OF ERISA OR PROHIBITED TRANSACTIONS PROVISIONS OF SECTION 4975 OF
THE CODE OR SIMILAR LAW OR (II) WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED
TRANSACTION WITHIN THE MEANING OF SECTION 406 OR SECTION 407 OF ERISA OR
SECTION 4975 OF THE CODE OR SIMILAR LAW, AND WILL NOT SUBJECT THE TRUSTEE, THE
CERTIFICATE TRUSTEE, THE ISSUER, THE ADMINISTRATOR OR ANY SERVICER TO ANY
OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA,
SECTION 4975 OF THE CODE OR SIMILAR LAW) IN ADDITION TO THOSE UNDERTAKEN IN THE
INDENTURE AND THE POOLING AND SERVICING AGREEMENT.
CMC SECURITIES CORPORATION III
COLLATERALIZED MORTGAGE OBLIGATIONS, SERIES 1998-1
CLASS __________
DUE: _______________
ACCRUAL DATE: March 1, 1998
ISSUE DATE: March 31, 1998
$____________ DENOMINATION CUSIP NO. __________
_________ % BOND INTEREST RATE CERTIFICATE NUMBER __________
CMC SECURITIES CORPORATION III, a corporation duly organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received hereby promises to pay to CEDE & CO. or
registered assigns, interest on the Class _____________ Notional Amount of the
Class ____________ Bonds in monthly payments on the twenty-fifth day of each
month or, if such day is not a Business Day, then the next succeeding Business
Day (each a "Payment Date"), commencing in April 1998 and ending on or before
the Payment Date occurring in PAYMENT DATE~. This Bond is one of a duly
authorized issue of non-recourse Bonds of the Issuer, designated as its
Collateralized Mortgage Obligations, Series 1998-1. The Bonds are issued in
multiple classes under the Issuer's Indenture dated as of March 1, 1998, as
amended (herein called the "Indenture"), to which Indenture and all indentures
supplemental thereto, including the Series 1998-1 Supplement dated as of March
31, 1998 (the "Series 1998-1 Supplement"), between the Issuer and The First
National Bank of Chicago, as indenture trustee (the "Indenture Trustee", which
term includes any successor Trustee under the Indenture), which authorized the
Bonds, reference is hereby made for a statement of the respective rights
thereunder of the Issuer, the Indenture Trustee and the holders of the Bonds
and the terms upon which the Bonds are, and are to be, authenticated and
delivered.
The Bonds are collateralized by three separate series of mortgage pass-
through certificates (the "Conventional Certificates"), each of which series
evidences the entire beneficial ownership interest in one of three pools of
Mortgage Loans. Each pool of Mortgage Loans has been deposited into a separate
trust (each, a "Trust") pursuant to the terms of the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") dated as of March 1, 1998
among the Issuer, as depositor, Bank of America, FSB and Cendant Mortgage
Corporation, as master servicers (the "Master
-2-
<PAGE> 79
Servicers"), and The First National Bank of Chicago, as certificate trustee
(the "Certificate Trustee"). Each Trust has created a series of Conventional
Certificates for the benefit of the Issuer in exchange for the related pool of
Mortgage Loans. The Conventional Certificates were pledged to the Indenture
Trustee under the terms of the Indenture.
All capitalized terms used without definition in this Bond shall have
the meanings assigned to such terms in the Indenture or the Series 1998-1
Supplement, as applicable.
This Bond does not purport to summarize the Indenture or the Series
1998-1 Supplement and reference should be made to the Indenture and the Series
1998-1 Supplement for the interests, rights and limitations of rights,
benefits, obligations and duties of the holders of the Bond thereunder, and the
rights, duties and immunities of the Indenture Trustee.
This Bond shall not be entitled to payments of principal. Payments of
interest on this Bond will be paid in accordance with the terms of the Series
1998-1 Supplement and will be made out of the Available Funds for such Payment
Date, to the extent and subject to the limitations set forth in the Series
1998-1 Supplement, on each Payment Date to the Person in whose name this Bond
is registered at the close of business on the last Business Day of the month
immediately preceding the month of such distribution (the "Record Date"). All
sums payable on this Bond are payable in the coin or currency of the United
States of America as at the time of payment is legal tender for the payment of
public and private debts.
Realized Losses, Net Interest Shortfalls and certain writedown amounts
shall be allocated among the Classes of Bonds on the applicable Payment Date in
the manner set forth in the Series 1998-1 Supplement. To the extent provided
in the Series 1998-1 Supplement, the Subordinate Bonds will be subordinated in
right of payment to the other Classes of Bonds and each Class of the
Subordinate Bonds will be subordinated in right of payment to each of the other
Classes of Subordinate Bonds with a lower numerical designation, if any. All
Realized Losses, Net Interest Shortfalls and writedown amounts allocated to any
Class of Bonds will be allocated pro rata among the outstanding Bonds of such
Class, as described in the Series 1998-1 Supplement.
The Bonds are limited in right of payment to certain collections and
recoveries respecting the Mortgage Loans and certain other assets, all as more
specifically set forth in the Series 1998-1 Supplement.
So long as this Bond is registered in the name of a Depository or its
nominee, the Indenture Trustee will make payments of principal of and interest
on this Bond by wire transfers of immediately available funds to the Depository
or its nominee. Otherwise, all payments on this Bond under the Series 1998-1
Supplement will be made by or on behalf of the Indenture Trustee as provided in
the Indenture. Notwithstanding the above, the final payment on this Bond will
be made after due notice by the Indenture Trustee of the pendency of such
payment and only upon presentation and surrender of this Bond at its principal
Corporate Trust Office or such other offices or agencies appointed by the
Indenture Trustee for that purpose and such other locations provided in the
Series 1998-1 Supplement.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Holders of Bonds
-3-
<PAGE> 80
representing two-thirds of the Aggregate Current Principal Amount of all Bonds
at the time Outstanding, in case Outstanding Bonds of all Series are to be
affected, or with the consent of the Holders of two-thirds of the Aggregate
Current Principal Amount of all the Bonds at the time Outstanding of each
Series to be affected, in case one or more, but less than all, of the Series of
Bonds then Outstanding are to be affected; provided however, that prior to the
date on which the Class Imputed Principal Balance of each Class of Senior Bonds
of a Series has been reduced to zero, no amendment, variation or modification
shall be made to Article V of the Indenture in respect of any Series of Bonds
without the consent of the Holders representing not less than 100% of the
Aggregate Current Principal Amount of all Outstanding Senior Bonds of such
Series. The consent of the Holders of any Junior Bonds of such Series shall
not be required to be obtained prior to making any amendment for such series to
Article V of the Indenture for so long as any Senior Bond of such Series is
Outstanding. Upon reduction to zero of the Class Imputed Principal Balance of
each Class of Senior Bonds of a Series, no amendment, variation or modification
to Article V of the Indenture shall be made in respect of such Series of Bonds
without the consent of the Holders representing not less than two-thirds of the
Aggregate Current Principal Amount of the Highest Priority Junior Class of such
Series.
The Indenture also contains provisions permitting the Holders of Bonds
representing specified percentages of the Aggregate Current Principal Amount of
the Bonds of a Series at the time Outstanding on behalf of the Holders of all
the Bonds of such Series, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder, at the time of
the giving thereof, of this Bond (or any one or more Predecessor Bonds) shall
be conclusive and binding upon such Holder and upon all future holders of this
Bond and of any Bond 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 Bond. The Indenture also permits the Indenture
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of the Holders of the Bonds of any Series issued
thereunder.
The Bonds are issuable in fully-registered form only, without coupons,
in denominations as specified in the Series 1998-1 Supplement. As provided in
the Series 1998-1 Supplement and subject to any limitations on transfer of this
Bond by a Depository or its nominee and certain limitations set forth in the
Series 1998-1 Supplement, the transfer of this Bond is registrable in the Bond
Register upon surrender of this Bond for registration or transfer at the
principal Corporate Trust Office of the Indenture Trustee or such other offices
or agencies appointed by the Indenture Trustee for that purpose and such other
locations provided in the Series 1998-1 Supplement, duly endorsed by, or
accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Indenture Trustee and the Bond Registrar
duly executed by, the Holder hereof or such Holder's attorney duly authorized
in writing, and thereupon one or more new Bonds of the same Class in the same
aggregate Principal Balance will be issued to the designated transferee or
transferees.
As provided in the Indenture and subject to certain limitations therein
set forth, this Bond is exchangeable for a new Bond of the same Class in the
same denomination. No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee 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 Bonds.
-4-
<PAGE> 81
At its option, Bear Stearns Mortgage Capital Corporation ("BSMCC") or
its designee (or if BSMCC or its designee does not exercise such option, the
Issuer) may, upon giving written notice to the Issuer, each Master Servicer,
the Certificate Trustee and the Indenture Trustee, repurchase from the Issuer
all of the remaining Mortgage Loans of any Mortgage Loan Group, and thereby
effect an early termination of the related Certificates and redemption of the
Bonds of the related Bond Group, on any Payment Date when the aggregate
outstanding principal balance of the Mortgage Loans in such Mortgage Loan
Groups is equal to or less than 5% of the aggregate outstanding principal
balance of the Mortgage Loans in such Mortgage Loan Group as of the Cut-off
Date. Upon any such optional repurchase, the Trust Estate will terminate and
any remaining assets in the Trust Estate shall be released to the repurchasing
party.
The Issuer, the Master Servicers, the Indenture Trustee and the Bond
Registrar and any agent of the Issuer, the Master Servicers, the Indenture
Trustee or the Bond Registrar may treat the Person in whose name this Bond is
registered as the owner hereof for all purposes, and none of the Issuer, the
Master Servicers, the Indenture Trustee, the Bond Registrar or any such agent
shall be affected by notice to the contrary.
Unless the certificate of authentication hereon has been executed by the
Bond Registrar, by manual signature, this Bond shall not be entitled to any
benefit under the Series 1998-1 Supplement or be valid for any purpose.
-5-
<PAGE> 82
THIS BOND AND THE SERIES 1998-1 SUPPLEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
Capitalized terms used herein and not defined herein shall have the
meaning given them in the Series 1998-1 Supplement.
IN WITNESS WHEREOF, CMC Securities Corporation III has caused this Bond
to be duly executed.
Dated: March 31, 1998 CMC SECURITIES CORPORATION III
BY:
----------------------------------
Wade Walker
Vice President - Asset and
Liability Management
CERTIFICATION OF AUTHENTICATION
THIS IS A CLASS ______ BOND REFERRED TO IN THE WITHIN-MENTIONED
INDENTURE.
THE FIRST NATIONAL BANK OF CHICAGO,
AS INDENTURE TRUSTEE
BY:
----------------------------------
AUTHORIZED SIGNATORY
<PAGE> 83
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
Bond shall be construed as though they were written out in full according to
applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT--_____ Custodian _______
TEN ENT--as tenants by the (Cus) (Minor)
entireties Under Uniform Gifts to Minors
JT TEN--as joint tenants with
rights of survivor- Act ______________________
ship and not as Tenants (State)
in Common
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED
THOUGH NOT IN THE ABOVE LIST.
<PAGE> 84
FORM OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
________________________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address of assignee)
the within Bond and does hereby irrevocably constitute and appoint
______________________ (Attorney) to transfer the said Bond in the Bond
Register, with full power of substitution in the premises.
Dated:
---------------------- -------------------------------------
NOTICE: The signature to this
assignment must correspond
with the name as written upon
the face of this Bond in every
particular without alteration
or enlargement or any change
whatever.
- -----------------------------------
SIGNATURE GUARANTEED: The
signature must be guaranteed by a
commercial bank or trust company
or by a member firm of the New
York Stock Exchange or another
national securities exchange.
Notarized or witnessed signatures
are not acceptable.
<PAGE> 85
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of payment:
Payment shall be made, by wire transfer or otherwise, in immediately
available funds, to _____________________________________, for the account of
__________________________, account number ___________, or, if mailed by check,
to _______________________________. Applicable reports and statements should
be mailed to ______________________________. This information is provided by
_________________________________, the assignee named above, or
____________________________________, as its agent.
<PAGE> 86
EXHIBIT A-4
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUIRED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT 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.
THIS BOND IS A REGULAR INTEREST IN A REMIC. PRINCIPAL OF THIS BOND IS PAYABLE
IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF
THIS BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
THIS CLASS _________ BOND IS SUBORDINATED TO THE EXTENT DESCRIBED IN THE SERIES
1998-1 SUPPLEMENT REFERENCED HEREIN.
THIS BOND IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT
OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE
INDENTURE REFERRED TO HEREIN, AND THE ISSUER IS NOT OTHERWISE LIABLE FOR
PAYMENTS ON THIS BOND.
CMC SECURITIES CORPORATION III
COLLATERALIZED MORTGAGE OBLIGATIONS, SERIES 1998-1
CLASS___________
DUE:______________
ACCRUAL DATE: March 1, 1998
ISSUE DATE: March 31, 1998
$_______________ CUSIP NO.____________
___ % BOND INTEREST RATE CERTIFICATE NUMBER_________
CMC SECURITIES CORPORATION III, a corporation duly organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of ___________ DOLLARS ($__________) in
monthly payments of principal and interest on the twenty-fifth day of each
month or, if such day is not a Business Day, then the next succeeding Business
Day (each a "Payment Date"), commencing in April 1998 and ending on or before
the Payment Date occurring in____________. This Bond is one of a duly
authorized issue of non-recourse Bonds of the Issuer, designated as its
Collateralized Mortgage Obligations, Series 1998-1. The Bonds are issued in
multiple classes under the Issuer's Indenture dated as of March 1, 1998, as
amended (herein called the "Indenture"), to which Indenture and all indentures
supplemental thereto, including the Series 1998-1 Supplement dated as of March
31, 1998 (the
<PAGE> 87
"Series 1998-1 Supplement"), between the Issuer and The First National Bank of
Chicago, as indenture trustee (the "Indenture Trustee", which term includes any
successor Trustee under the Indenture), which authorized the Bonds, reference
is hereby made for a statement of the respective rights thereunder of the
Issuer, the Indenture Trustee and the holders of the Bonds and the terms upon
which the Bonds are, and are to be, authenticated and delivered.
The Bonds are collateralized by three separate series of mortgage pass-
through certificates (the "Conventional Certificates"), each of which series
evidences the entire beneficial ownership interest in one of three pools of
Mortgage Loans. Each pool of Mortgage Loans has been deposited into a separate
trust (each, a "Trust") pursuant to the terms of the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") dated as of March 1, 1998
among the Issuer, as depositor, Bank of America, FSB and Cendant Mortgage
Corporation, as master servicers (the "Master Servicers"), and The First
National Bank of Chicago, as certificate trustee (the "Certificate Trustee").
Each Trust has created a series of Conventional Certificates for the benefit of
the Issuer in exchange for the related pool of Mortgage Loans. The
Conventional Certificates were pledged to the Indenture Trustee under the terms
of the Indenture.
All capitalized terms used without definition in this Bond shall have
the meanings assigned to such terms in the Indenture or the Series 1998-1
Supplement, as applicable.
This Bond does not purport to summarize the Indenture or the Series
1998-1 Supplement and reference should be made to the Indenture and the Series
1998-1 Supplement for the interests, rights and limitations of rights,
benefits, obligations and duties of the holders of the Bond thereunder, and the
rights, duties and immunities of the Indenture Trustee.
Payments of principal of and interest on this Bond will be paid in
accordance with the terms of the Series 1998-1 Supplement out of the Available
Funds for such Payment Date, to the extent and subject to the limitations set
forth in the Series 1998-1 Supplement, on each Payment Date to the Person in
whose name this Bond is registered at the close of business on the last
Business Day of the month immediately preceding the month of such distribution
(the "Record Date"). All sums payable on this Bond are payable in the coin or
currency of the United States of America as at the time of payment is legal
tender for the payment of public and private debts.
Realized Losses, Net Interest Shortfalls and certain writedown amounts
shall be allocated among the Classes of Bonds on the applicable Payment Date in
the manner set forth in the Series 1998-1 Supplement. To the extent provided
in the Series 1998-1 Supplement, the Subordinate Bonds will be subordinated in
right of payment to the other Classes of Bonds and each Class of the
Subordinate Bonds will be subordinated in right of payment to each of the other
Classes of Subordinate Bonds with a lower numerical designation, if any. All
Realized Losses, Net Interest Shortfalls and writedown amounts allocated to any
Class of Bonds will be allocated pro rata among the outstanding Bonds of such
Class, as described in the Series 1998-1 Supplement.
The Bonds are limited in right of payment to certain collections and
recoveries respecting the Mortgage Loans and certain other assets, all as more
specifically set forth in the Series 1998-1 Supplement.
-2-
<PAGE> 88
So long as this Bond is registered in the name of a Depository or its
nominee, the Indenture Trustee will make payments of principal of and interest
on this Bond by wire transfers of immediately available funds to the Depository
or its nominee. Otherwise, all payments on this Bond under the Series 1998-1
Supplement will be made by or on behalf of the Indenture Trustee as provided in
the Indenture. Notwithstanding the above, the final payment on this Bond will
be made after due notice by the Indenture Trustee of the pendency of such
payment and only upon presentation and surrender of this Bond at its principal
Corporate Trust Office or such other offices or agencies appointed by the
Indenture Trustee for that purpose and such other locations provided in the
Series 1998-1 Supplement.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Holders of Bonds representing
two-thirds of the Aggregate Current Principal Amount of all Bonds at the time
Outstanding, in case Outstanding Bonds of all Series are to be affected, or
with the consent of the Holders of two-thirds of the Aggregate Current
Principal Amount of all the Bonds at the time Outstanding of each Series to be
affected, in case one or more, but less than all, of the Series of Bonds then
Outstanding are to be affected; provided however, that prior to the date on
which the Class Imputed Principal Balance of each Class of Senior Bonds of a
Series has been reduced to zero, no amendment, variation or modification shall
be made to Article V of the Indenture in respect of any Series of Bonds without
the consent of the Holders representing not less than 100% of the Aggregate
Current Principal Amount of all Outstanding Senior Bonds of such Series. The
consent of the Holders of any Junior Bonds of such Series shall not be required
to be obtained prior to making any amendment for such series to Article V of
the Indenture for so long as any Senior Bond of such Series is Outstanding.
Upon reduction to zero of the Class Imputed Principal Balance of each Class of
Senior Bonds of a Series, no amendment, variation or modification to Article V
of the Indenture shall be made in respect of such Series of Bonds without the
consent of the Holders representing not less than two-thirds of the Aggregate
Current Principal Amount of the Highest Priority Junior Class of such Series.
The Indenture also contains provisions permitting the Holders of Bonds
representing specified percentages of the Aggregate Current Principal Amount of
the Bonds of a Series at the time Outstanding on behalf of the Holders of all
the Bonds of such Series, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder, at the time of
the giving thereof, of this Bond (or any one or more Predecessor Bonds) shall
be conclusive and binding upon such Holder and upon all future holders of this
Bond and of any Bond 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 Bond. The Indenture also permits the Indenture
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of the Holders of the Bonds of any Series issued
thereunder.
The Bonds are issuable in fully-registered form only, without coupons,
in denominations as specified in the Series 1998-1 Supplement. As provided in
the Series 1998-1 Supplement and subject to any limitations on transfer of this
Bond by a Depository or its nominee and certain limitations set forth in the
Series 1998-1 Supplement, the transfer of this Bond is registrable in the Bond
Register upon surrender of this Bond for registration or transfer at the
principal Corporate
-3-
<PAGE> 89
Trust Office of the Indenture Trustee or such other offices or agencies
appointed by the Indenture Trustee for that purpose and such other locations
provided in the Series 1998-1 Supplement, duly endorsed by, or accompanied by
an assignment in the form below or other written instrument of transfer in form
satisfactory to the Indenture Trustee and the Bond Registrar duly executed by,
the Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Bonds of the same Class in the same aggregate
Principal Balance will be issued to the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations therein
set forth, this Bond is exchangeable for a new Bond of the same Class in the
same denomination. No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee 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 Bonds.
At its option, Bear Stearns Mortgage Capital Corporation ("BSMCC") or
its designee (or if BSMCC or its designee does not exercise such option, the
Issuer) may, upon giving written notice to the Issuer, each Master Servicer,
the Certificate Trustee and the Indenture Trustee, repurchase from the Issuer
all of the remaining Mortgage Loans of any Mortgage Loan Group, and thereby
effect an early termination of the related Certificates and redemption of the
Bonds of the related Bond Group, on any Payment Date when the aggregate
outstanding principal balance of the Mortgage Loans in such Mortgage Loan
Groups is equal to or less than 5% of the aggregate outstanding principal
balance of the Mortgage Loans in such Mortgage Loan Group as of the Cut-off
Date. Upon any such optional repurchase, the Trust Estate will terminate and
any remaining assets in the Trust Estate shall be released to the repurchasing
party.
The Issuer, the Indenture Trustee and the Bond Registrar and any agent
of the Issuer, the Indenture Trustee or the Bond Registrar may treat the Person
in whose name this Bond is registered as the owner hereof for all purposes, and
none of the Issuer, the Master Servicers, the Indenture Trustee, the Bond
Registrar or any such agent shall be affected by notice to the contrary.
Unless the certificate of authentication hereon has been executed by the
Bond Registrar, by manual signature, this Bond shall not be entitled to any
benefit under the Series 1998-1 Supplement or be valid for any purpose.
-4-
<PAGE> 90
THIS BOND AND THE SERIES 1998-1 SUPPLEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
Capitalized terms used herein and not defined herein shall have the
meaning given them in the Series 1998-1 Supplement.
IN WITNESS WHEREOF, CMC Securities Corporation III has caused this Bond
to be duly executed.
Dated: March 31, 1998 CMC SECURITIES CORPORATION III
BY:
----------------------------------
Wade Walker
Vice President - Asset and
Liability Management
CERTIFICATION OF AUTHENTICATION
THIS IS A CLASS __________ BOND REFERRED TO IN THE WITHINMENTIONED
INDENTURE.
THE FIRST NATIONAL BANK OF CHICAGO,
AS INDENTURE TRUSTEE
BY:
----------------------------------
AUTHORIZED SIGNATORY
<PAGE> 91
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
Bond shall be construed as though they were written out in full according to
applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT--_____Custodian _________
TEN ENT--as tenants by the (Cus) (Minor)
entireties Under Uniform Gifts to Minors
JT TEN--as joint tenants with
rights of survivor- Act _____________________
ship and not as Tenants (State)
in Common
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED
THOUGH NOT IN THE ABOVE LIST.
<PAGE> 92
FORM OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
________________________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE________________________________________________________________________
- --------------------------------------------------------------------------------
(Please print or typewrite name and address of assignee)
the within Bond and does hereby irrevocably constitute and appoint
______________________ (Attorney) to transfer the said Bond in the Bond
Register, with full power of substitution in the premises.
Dated:
---------------------- -------------------------------------
NOTICE: The signature to this
assignment must correspond
with the name as written upon
the face of this Bond in every
particular without alteration
or enlargement or any change
whatever.
- -----------------------------------
SIGNATURE GUARANTEED: The
signature must be guaranteed by a
commercial bank or trust company
or by a member firm of the New
York Stock Exchange or another
national securities exchange.
Notarized or witnessed signatures
are not acceptable.
<PAGE> 93
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of payment:
Payment shall be made, by wire transfer or otherwise, in immediately
available funds, to _____________________________________, for the account of
__________________________, account number ___________, or, if mailed by check,
to _______________________________. Applicable reports and statements should
be mailed to ______________________________. This information is provided by
_________________________________, the assignee named above, or
____________________________________, as its agent.
<PAGE> 94
EXHIBIT A-5
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUIRED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT 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 INTEREST REPRESENTED BY THIS CLASS __________ BOND HAS NOT BEEN AND WILL
NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS OR "BLUE SKY" LAWS, AND MAY NOT DIRECTLY OR
INDIRECTLY BE OFFERED OR SOLD OR OTHERWISE DISPOSED OF WITHOUT COMPLIANCE WITH
SUCH LAWS. IN CONNECTION WITH ANY TRANSFER OF THIS BOND, THE INDENTURE TRUSTEE
SHALL REQUIRE EITHER (A) A REPRESENTATION LETTER FROM THE TRANSFEROR AND
TRANSFEREE DEMONSTRATING COMPLIANCE WITH APPLICABLE SECURITIES LAWS AND THE
INDENTURE TRUSTEE MAY REQUIRE AN OPINION OF COUNSEL WITH RESPECT THERETO OR (B)
A RULE 144A INVESTMENT LETTER FROM THE TRANSFEREE STATING, AMONG OTHER THINGS,
THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER."
NEITHER THIS BOND NOR ANY BENEFICIAL INTEREST HEREIN MAY BE TRANSFERRED UNLESS
THE INDENTURE TRUSTEE HAS RECEIVED EITHER (A) A CERTIFICATE FROM SUCH
TRANSFEREE TO THE EFFECT THAT (i) SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT
PLAN, TRUST OR ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SUBJECT TO SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR A GOVERNMENTAL PLAN
DEFINED IN SECTION 3(32) OF ERISA SUBJECT TO ANY FEDERAL STATE OR LOCAL LAW
WHICH IS, TO MATERIAL EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR
THE CODE ("SIMILAR LAW") (EACH, A "BENEFIT PLAN") AND IS NOT AN ENTITY,
INCLUDING AN INSURANCE COMPANY SEPARATE ACCOUNT OR INSURANCE COMPANY GENERAL
ACCOUNT, WHOSE UNDERLYING ASSETS INCLUDE BENEFIT PLAN ASSETS BY REASON OF A
BENEFIT PLAN'S INVESTMENT IN THE ENTITY (SUCH BENEFIT PLAN OR ENTITY, A
"BENEFIT PLAN INVESTOR") OR (ii) IF SUCH TRANSFEREE IS AN INSURANCE COMPANY, TO
THE EFFECT THAT SUCH COMPANY IS NOT A BENEFIT PLAN INVESTOR, IS ELIGIBLE FOR AN
EXEMPTION TO THE APPLICABLE PROHIBITED TRANSACTION PROVISIONS OF ERISA, THE
CODE AND SIMILAR LAW OR IS USING THE ASSETS OF ITS GENERAL ACCOUNT TO PURCHASE
THE SECURITYS AT A TIME IN WHICH THE AMOUNT OF THE RESERVES FOR CONTRACTS
ISSUED TO BENEFIT PLANS THAT VARY WITH THE INVESTMENT EXPERIENCE OF THE
INSURANCE COMPANY'S GENERAL ACCOUNT DOES NOT EXCEED 10% OF THE
<PAGE> 95
TOTAL LIABILITIES OF SUCH GENERAL ACCOUNT OR (iii) IN SUCH OTHER FORM AND
SUBSTANCE AS SHALL BE SATISFACTORY TO THE INDENTURE TRUSTEE AND THE ISSUER, OR
(B) AN OPINION OF COUNSEL SATISFACTORY TO THE INDENTURE TRUSTEE AND THE ISSUER
TO THE EFFECT THAT THE PURCHASE AND HOLDING OF SUCH SECURITY (i) WILL NOT
CONSTITUTE OR RESULT IN THE ASSETS OF THE TRUST ESTATE BEING DEEMED TO BE "PLAN
ASSETS" SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR
PROHIBITED TRANSACTIONS PROVISIONS OF SECTION 4975 OF THE CODE OR SIMILAR LAW
OR (ii) WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION WITHIN THE
MEANING OF SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975 OF THE CODE OR
SIMILAR LAW, AND WILL NOT SUBJECT THE INDENTURE TRUSTEE, THE CERTIFICATE
TRUSTEE, THE ISSUER, THE BOND ADMINISTRATOR, THE MASTER SERVICERS OR ANY
SERVICER TO ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES
UNDER ERISA, SECTION 4975 OF THE CODE OR SIMILAR LAW) IN ADDITION TO THOSE
UNDERTAKEN IN THE INDENTURE.
THIS CLASS ____________ BOND IS SUBORDINATED TO THE EXTENT DESCRIBED HEREIN AND
IN THE SERIES 1998-1 SUPPLEMENT REFERENCED HEREIN.
THIS BOND IS A REGULAR INTEREST IN A REMIC. PRINCIPAL OF THIS BOND IS PAYABLE
IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF
THIS BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
THIS BOND IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT
OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE
INDENTURE REFERRED TO HEREIN, AND THE ISSUER IS NOT OTHERWISE LIABLE FOR
PAYMENTS ON THIS BOND.
CMC SECURITIES CORPORATION III
COLLATERALIZED MORTGAGE OBLIGATIONS, SERIES 1998-1
CLASS __________
DUE:_______________
ACCRUAL DATE: March 1, 1998
ISSUE DATE: March 31, 1998
$______________ CUSIP NO. _____________
______ % BOND INTEREST RATE CERTIFICATE NUMBER ____________
CMC SECURITIES CORPORATION III, a corporation duly organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of ___________ DOLLARS ($ _____________)
in monthly payments of principal and interest on the twenty-fifth day of each
month or, if such day is not a Business Day, then the next succeeding Business
Day (each a "Payment Date"), commencing in April 1998 and ending on or before
the Payment Date occurring in _________________. This Bond is one of a duly
authorized issue of non-recourse Bonds of the Issuer, designated as its
Collateralized Mortgage Obligations, Series
-2-
<PAGE> 96
1998-1. The Bonds are issued in multiple classes under the Issuer's Indenture
dated as of March 1, 1998, as amended (herein called the "Indenture"), to which
Indenture and all indentures supplemental thereto, including the Series 1998-1
Supplement dated as of March 31, 1998 (the "Series 1998-1 Supplement"), between
the Issuer and The First National Bank of Chicago, as indenture trustee (the
"Indenture Trustee", which term includes any successor Trustee under the
Indenture), which authorized the Bonds, reference is hereby made for a
statement of the respective rights thereunder of the Issuer, the Indenture
Trustee and the holders of the Bonds and the terms upon which the Bonds are,
and are to be, authenticated and delivered.
The Bonds are collateralized by three separate series of mortgage pass-
through certificates (the "Conventional Certificates"), each of which series
evidences the entire beneficial ownership interest in one of three pools of
Mortgage Loans. Each pool of Mortgage Loans has been deposited into a separate
trust (each, a "Trust") pursuant to the terms of the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") dated as of March 1, 1998
among the Issuer, as depositor, Bank of America, FSB and Cendant Mortgage
Corporation, as master servicers (the "Master Servicers"), and The First
National Bank of Chicago, as certificate trustee (the "Certificate Trustee").
Each Trust has created a series of Conventional Certificates for the benefit of
the Issuer in exchange for the related pool of Mortgage Loans. The
Conventional Certificates were pledged to the Indenture Trustee under the terms
of the Indenture.
All capitalized terms used without definition in this Bond shall have
the meanings assigned to such terms in the Indenture or the Series 1998-1
Supplement, as applicable.
This Bond does not purport to summarize the Indenture or the Series
1998-1 Supplement and reference should be made to the Indenture and the Series
1998-1 Supplement for the interests, rights and limitations of rights,
benefits, obligations and duties of the holders of the Bond thereunder, and the
rights, duties and immunities of the Indenture Trustee.
Payments of principal of and interest on this Bond will be paid in
accordance with the terms of the Series 1998-1 Supplement and will be made out
of the Available Funds for such Payment Date, to the extent and subject to the
limitations set forth in the Series 1998-1 Supplement, on each Payment Date to
the Person in whose name this Bond is registered at the close of business on
the last Business Day of the month immediately preceding the month of such
distribution (the "Record Date"). All sums payable on this Bond are payable in
the coin or currency of the United States of America as at the time of payment
is legal tender for the payment of public and private debts.
Realized Losses, Net Interest Shortfalls and certain writedown amounts
shall be allocated among the Classes of Bonds on the applicable Payment Date in
the manner set forth in the Series 1998-1 Supplement. To the extent provided
in the Series 1998-1 Supplement, the Subordinate Bonds will be subordinated in
right of payment to the other Classes of Bonds and each Class of the
Subordinate Bonds will be subordinated in right of payment to each of the other
Classes of Subordinate Bonds with a lower numerical designation, if any. All
Realized Losses, Net Interest Shortfalls and writedown amounts allocated to any
Class of Bonds will be allocated pro rata among the outstanding Bonds of such
Class, as described in the Series 1998-1 Supplement.
The Bonds are limited in right of payment to certain collections and
recoveries respecting the Mortgage Loans, all as more specifically set forth in
the Series 1998-1 Supplement.
-3-
<PAGE> 97
So long as this Bond is registered in the name of a Depository or its
nominee, the Indenture Trustee will make payments of principal of and interest
on this Bond by wire transfers of immediately available funds to the Depository
or its nominee. Otherwise, all payments on this Bond under the Series 1998-1
Supplement will be made by or on behalf of the Indenture Trustee as provided in
the Indenture. Notwithstanding the above, the final payment on this Bond will
be made after due notice by the Indenture Trustee of the pendency of such
payment and only upon presentation and surrender of this Bond at its principal
Corporate Trust Office or such other offices or agencies appointed by the
Indenture Trustee for that purpose and such other locations provided in the
Series 1998-1 Supplement.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Holders of Bonds representing
two-thirds of the Aggregate Current Principal Amount of all Bonds at the time
Outstanding, in case Outstanding Bonds of all Series are to be affected, or
with the consent of the Holders of two-thirds of the Aggregate Current
Principal Amount of all the Bonds at the time Outstanding of each Series to be
affected, in case one or more, but less than all, of the Series of Bonds then
Outstanding are to be affected; provided however, that prior to the date on
which the Class Imputed Principal Balance of each Class of Senior Bonds of a
Series has been reduced to zero, no amendment, variation or modification shall
be made to Article V of the Indenture in respect of any Series of Bonds without
the consent of the Holders representing not less than 100% of the Aggregate
Current Principal Amount of all Outstanding Senior Bonds of such Series. The
consent of the Holders of any Junior Bonds of such Series shall not be required
to be obtained prior to making any amendment for such series to Article V of
the Indenture for so long as any Senior Bond of such Series is Outstanding.
Upon reduction to zero of the Class Imputed Principal Balance of each Class of
Senior Bonds of a Series, no amendment, variation or modification to Article V
of the Indenture shall be made in respect of such Series of Bonds without the
consent of the Holders representing not less than two-thirds of the Aggregate
Current Principal Amount of the Highest Priority Junior Class of such Series.
The Indenture also contains provisions permitting the Holders of Bonds
representing specified percentages of the Aggregate Current Principal Amount of
the Bonds of a Series at the time Outstanding on behalf of the Holders of all
the Bonds of such Series, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder, at the time of
the giving thereof, of this Bond (or any one or more Predecessor Bonds) shall
be conclusive and binding upon such Holder and upon all future holders of this
Bond and of any Bond 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 Bond. The Indenture also permits the Indenture
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of the Holders of the Bonds of any Series issued
thereunder.
The Bonds are issuable in fully-registered form only, without coupons,
in denominations as specified in the Series 1998-1 Supplement. As provided in
the Series 1998-1 Supplement and subject to any limitations on transfer of this
Bond by a Depository or its nominee and certain limitations set forth in the
Series 1998-1 Supplement, the transfer of this Bond is registrable in the Bond
Register upon surrender of this Bond for registration or transfer at the
principal Corporate Trust Office of the Indenture Trustee or such other offices
or agencies appointed by the Indenture Trustee for that purpose and such other
locations provided in the Series 1998-1 Supplement, duly
-4-
<PAGE> 98
endorsed by, or accompanied by an assignment in the form below or other written
instrument of transfer in form satisfactory to the Indenture Trustee and the
Bond Registrar duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, and thereupon one or more new Bonds of the same
Class in the same aggregate Principal Balance will be issued to the designated
transferee or transferees.
As provided in the Indenture and subject to certain limitations therein
set forth, this Bond is exchangeable for a new Bond of the same Class in the
same denomination. No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee 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 Bonds.
At its option, Bear Stearns Mortgage Capital Corporation ("BSMCC") or
its designee (or if BSMCC or its designee does not exercise such option, the
Issuer) may, upon giving written notice to the Issuer, each Master Servicer,
the Certificate Trustee and the Indenture Trustee, repurchase from the Issuer
all of the remaining Mortgage Loans of any Mortgage Loan Group, and thereby
effect an early termination of the related Certificates and redemption of the
Bonds of the related Bond Group, on any Payment Date when the aggregate
outstanding principal balance of the Mortgage Loans in such Mortgage Loan
Groups is equal to or less than 5% of the aggregate outstanding principal
balance of the Mortgage Loans in such Mortgage Loan Group as of the Cut-off
Date. Upon any such optional repurchase, the Trust Estate will terminate and
any remaining assets in the Trust Estate shall be released to the repurchasing
party.
The Issuer, the Indenture Trustee and the Bond Registrar and any agent
of the Issuer, the Indenture Trustee or the Bond Registrar may treat the Person
in whose name this Bond is registered as the owner hereof for all purposes, and
none of the Issuer, the Master Servicers, the Indenture Trustee, the Bond
Registrar or any such agent shall be affected by notice to the contrary.
Unless the certificate of authentication hereon has been executed by the
Bond Registrar, by manual signature, this Bond shall not be entitled to any
benefit under the Series 1998-1 Supplement or be valid for any purpose.
-5-
<PAGE> 99
THIS BOND AND THE SERIES 1998-1 SUPPLEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
Capitalized terms used herein and not defined herein shall have the
meaning given them in the Series 1998-1 Supplement.
IN WITNESS WHEREOF, CMC Securities Corporation III has caused this Bond
to be duly executed.
Dated: March 31, 1998 CMC SECURITIES CORPORATION III
BY:
----------------------------------
Wade Walker
Vice President - Asset and
Liability Management
CERTIFICATION OF AUTHENTICATION
THIS IS A CLASS ______________ BOND REFERRED TO IN THE WITHIN-MENTIONED
INDENTURE.
THE FIRST NATIONAL BANK OF CHICAGO,
AS INDENTURE TRUSTEE
BY:
----------------------------------
AUTHORIZED SIGNATORY
<PAGE> 100
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
Bond shall be construed as though they were written out in full according to
applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT-- _____Custodian _________
TEN ENT--as tenants by the (Cus) (Minor)
entireties Under Uniform Gifts to Minors
JT TEN--as joint tenants with
rights of survivor- Act ____________________
ship and not as Tenants (State)
in Common
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED
THOUGH NOT IN THE ABOVE LIST.
<PAGE> 101
FORM OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
________________________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE________________________________________________________________________
- --------------------------------------------------------------------------------
(Please print or typewrite name and address of assignee)
the within Bond and does hereby irrevocably constitute and appoint
______________________ (Attorney) to transfer the said Bond in the Bond
Register, with full power of substitution in the premises.
Dated:
---------------------- -------------------------------------
NOTICE: The signature to this
assignment must correspond
with the name as written upon
the face of this Bond in every
particular without alteration
or enlargement or any change
whatever.
- -----------------------------------
SIGNATURE GUARANTEED: The
signature must be guaranteed by a
commercial bank or trust company
or by a member firm of the New
York Stock Exchange or another
national securities exchange.
Notarized or witnessed signatures
are not acceptable.
<PAGE> 102
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of payment:
Payment shall be made, by wire transfer or otherwise, in immediately
available funds, to _____________________________________, for the account of
__________________________, account number ___________, or, if mailed by check,
to _______________________________. Applicable reports and statements should
be mailed to ______________________________. This information is provided by
_________________________________, the assignee named above, or
____________________________________, as its agent.
<PAGE> 103
EXHIBIT A-6
THIS BOND HAS BEEN DESIGNATED AS A "RESIDUAL INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" CREATED BY THE SERIES 1998-1 SUPPLEMENT REFERRED
TO BELOW PURSUANT TO THE RELATED PROVISIONS OF THE INTERNAL REVENUE CODE OF
1986 (THE "CODE" ) .
NO TRANSFER OF THIS BOND MAY BE MADE TO AN EMPLOYEE BENEFIT PLAN, OR PERSON
USING "PLAN ASSETS" OF ANY PLAN TO EFFECT SUCH ACQUISITION (INCLUDING ANY
INSURANCE COMPANY UNDER THE CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND THE
SERIES 1998-1 SUPPLEMENT), SUBJECT TO SECTION 406 OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE CODE.
THIS BOND, THE INDENTURE AND THE SERIES 1998-1 SUPPLEMENT MAY BE AMENDED
WITHOUT THE CONSENT OF THE HOLDER HEREOF, AND IN A MANNER THAT MAY ADVERSELY
AFFECT THE INTERESTS OF THE HOLDER HEREOF, IF NECESSARY TO PREVENT THE
DISQUALIFICATION OF THE TRUST ESTATE AS A REMIC.
ANY RESALE, TRANSFER, OR OTHER DISPOSITION OF THIS BOND MAY BE MADE ONLY IF THE
PROPOSED TRANSFEREE PROVIDES AN AFFIDAVIT TO THE INDENTURE TRUSTEE THAT (1)
SUCH TRANSFEREE IS NOT (A) THE UNITED STATES, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY POSSESSION OF THE UNITED STATES, OR ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN AN INSTRUMENTALITY WHICH IS
A CORPORATION IF ALL OF ITS ACTIVITIES ARE SUBJECT TO TAX AND, EXCEPT FOR THE
FEDERAL HOME LOAN MORTGAGE CORPORATION, A MAJORITY OF ITS BOARD OF DIRECTORS IS
NOT SELECTED BY SUCH GOVERNMENTAL UNIT), (B) ANY FOREIGN GOVERNMENT, ANY
INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE
FOREGOING, (C) ANY ORGANIZATION (OTHER THAN CERTAIN FARMERS' COOPERATIVES
DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED BY
CHAPTER 1 OF THE CODE (UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX IMPOSED
BY SECTION 511 OF THE CODE ON UNRELATED BUSINESS TAXABLE INCOME), (D) A RURAL
ELECTRIC AND TELEPHONE COOPERATIVE DESCRIBED IN SECTION 1381(A)(2)(C) OF THE
CODE, AND (E) ANY OTHER PERSON SO DESIGNATED BY THE INDENTURE TRUSTEE BASED ON
AN OPINION OF COUNSEL (ANY SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (A),
(B), (C), (D), OR (E) BEING HEREINAFTER REFERRED TO AS A "DISQUALIFIED
ORGANIZATION"), OR (2) AN AGENT OF A DISQUALIFIED ORGANIZATION.
NOTWITHSTANDING THE REGISTRATION IN THE BOND REGISTER OR ANY TRANSFER, SALE, OR
OTHER DISPOSITION OF THIS BOND TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A
DISQUALIFIED
<PAGE> 104
ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL FORCE OR
EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED TO BE A SECURITYHOLDER
FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF
DISTRIBUTIONS ON THIS BOND. EACH HOLDER OF THIS BOND, BY ACCEPTANCE OF THIS
BOND, SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH.
IF ANY RESALE, TRANSFER, OR OTHER DISPOSITION OF THIS BOND IS MADE TO ANY OF
CERTAIN "PASS-THROUGH ENTITIES" DESCRIBED IN SECTION 860E(E)(6) OF THE CODE,
AND A DISQUALIFIED ORGANIZATION IS THE RECORD HOLDER OF AN INTEREST IN SUCH
ENTITY, THEN A TAX MAY BE IMPOSED ON SUCH ENTITY.
NO TRANSFER OF THIS BOND MAY BE MADE TO A PERSON THAT IS NOT A UNITED STATES
PERSON, AS DEFINED IN THE SERIES 1998-1 SUPPLEMENT REFERRED TO BELOW.
THIS BOND IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT
OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE
INDENTURE REFERRED TO HEREIN, AND THE ISSUER IS NOT OTHERWISE LIABLE FOR
PAYMENTS ON THIS BOND.
CMC SECURITIES CORPORATION III
COLLATERALIZED MORTGAGE OBLIGATIONS, SERIES 1998-1
CLASS R-1 BOND
DUE: May 25, 2028
ACCRUAL DATE: March 1, 1998
ISSUE DATE: March 31, 1998
$100 CUSIP NO. 125715 HA3
6.75% BOND INTEREST RATE CERTIFICATE NUMBER 0001
CMC SECURITIES CORPORATION III, a corporation duly organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received hereby promises to pay to BEAR STEARNS SECURITIES
CORP. or registered assigns, the principal sum of ONE HUNDRED AND NO/100
DOLLARS ($100.00) in monthly payments of principal and interest on the
twenty-fifth day of each month or, if such day is not a Business Day, then the
next succeeding business day (each a "Payment Date"), commencing in April 1998
and ending on or before the Payment Date occurring in May 2028. This Bond is
one of a duly authorized issue of non-recourse Bonds of the Issuer, designated
as its Collateralized Mortgage Obligations, Series 1998-1. The Bonds are
issued in multiple classes under the Issuer's Indenture dated as of March 1,
1998, as
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<PAGE> 105
amended (herein called the "Indenture"), to which Indenture and all indentures
supplemental thereto, including the Series 1998-1 Supplement dated as of March
31, 1998 (the "Series 1998-1 Supplement"), between the Issuer and The First
National Bank of Chicago, as indenture trustee (the "Indenture Trustee", which
term includes any successor Trustee under the Indenture), which authorized the
Bonds, reference is hereby made for a statement of the respective rights
thereunder of the Issuer, the Indenture Trustee and the holders of the Bonds
and the terms upon which the Bonds are, and are to be, authenticated and
delivered.
The Bonds are collateralized by three separate series of mortgage pass-
through certificates (the "Conventional Certificates"), each of which series
evidences the entire beneficial ownership interest in one of three pools of
Mortgage Loans. Each pool of Mortgage Loans has been deposited into a separate
trust (each, a "Trust") pursuant to the terms of the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") dated as of March 1, 1998
among the Issuer, as depositor, Bank of America, FSB and Cendant Mortgage
Corporation, as master servicers (the "Master Servicers"), and The First
National Bank of Chicago, as certificate trustee (the "Certificate Trustee").
Each Trust has created a series of Conventional Certificates for the benefit of
the Issuer in exchange for the related pool of Mortgage Loans. The
Conventional Certificates were pledged to the Indenture Trustee under the terms
of the Indenture.
All capitalized terms used without definition in this Bond shall have
the meanings assigned to such terms in the Indenture or the Series 1998-1
Supplement, as applicable.
This Bond does not purport to summarize the Indenture or the Series
1998-1 Supplement and reference should be made to the Indenture and the Series
1998-1 Supplement for the interests, rights and limitations of rights,
benefits, obligations and duties of the holders of the Bond thereunder, and the
rights, duties and immunities of the Indenture Trustee.
Payments of principal of and interest on this Bond will be paid in
accordance with the terms of the Series 1998-1 Supplement and will be made out
of the Available Funds for such Payment Date, to the extent and subject to the
limitations set forth in the Series 1998-1 Supplement, on each Payment Date to
the Person in whose name this Bond is registered at the close of business on
the last Business Day of the month immediately preceding the month of such
distribution (the "Record Date"). All sums payable on this Bond are payable in
the coin or currency of the United States of America as at the time of payment
is legal tender for the payment of public and private debts.
Realized Losses, Net Interest Shortfalls and certain writedown amounts
shall be allocated among the Classes of Bonds on the applicable Payment Date in
the manner set forth in the Series 1998-1 Supplement. To the extent provided
in the Series 1998-1 Supplement, the Subordinate Bonds will be subordinated in
right of payment to the other Classes of Bonds and each Class of the
Subordinate Bonds will be subordinated in right of payment to each of the other
Classes of Subordinate Bonds with a lower numerical designation, if any. All
Realized Losses, Net Interest Shortfalls and writedown amounts allocated to any
Class of Bonds will be allocated pro rata among the outstanding Bonds of such
Class, as described in the Series 1998-1 Supplement.
-3-
<PAGE> 106
The Bonds are limited in right of payment to certain collections and
recoveries respecting the Mortgage Loans and certain other assets, all as more
specifically set forth in the Series 1998-1 Supplement.
So long as this Bond is registered in the name of a Depository or its
nominee, the Indenture Trustee will make payments of principal of and interest
on this Bond by wire transfers of immediately available funds to the Depository
or its nominee. Otherwise, all payments on this Bond under the Series 1998-1
Supplement will be made by or on behalf of the Indenture Trustee as provided in
the Indenture. Notwithstanding the above, the final payment on this Bond will
be made after due notice by the Indenture Trustee of the pendency of such
payment and only upon presentation and surrender of this Bond at its principal
Corporate Trust Office or such other offices or agencies appointed by the
Indenture Trustee for that purpose and such other locations provided in the
Series 1998-1 Supplement.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Holders of Bonds representing
two-thirds of the Aggregate Current Principal Amount of all Bonds at the time
Outstanding, in case Outstanding Bonds of all Series are to be affected, or
with the consent of the Holders of two-thirds of the Aggregate Current
Principal Amount of all the Bonds at the time Outstanding of each Series to be
affected, in case one or more, but less than all, of the Series of Bonds then
Outstanding are to be affected; provided however, that prior to the date on
which the Class Imputed Principal Balance of each Class of Senior Bonds of a
Series has been reduced to zero, no amendment, variation or modification shall
be made to Article V of the Indenture in respect of any Series of Bonds without
the consent of the Holders representing not less than 100% of the Aggregate
Current Principal Amount of all Outstanding Senior Bonds of such Series. The
consent of the Holders of any Junior Bonds of such Series shall not be required
to be obtained prior to making any amendment for such series to Article V of
the Indenture for so long as any Senior Bond of such Series is Outstanding.
Upon reduction to zero of the Class Imputed Principal Balance of each Class of
Senior Bonds of a Series, no amendment, variation or modification to Article V
of the Indenture shall be made in respect of such Series of Bonds without the
consent of the Holders representing not less than two-thirds of the Aggregate
Current Principal Amount of the Highest Priority Junior Class of such Series.
The Indenture also contains provisions permitting the Holders of Bonds
representing specified percentages of the Aggregate Current Principal Amount of
the Bonds of a Series at the time Outstanding on behalf of the Holders of all
the Bonds of such Series, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder, at the time of
the giving thereof, of this Bond (or any one or more Predecessor Bonds) shall
be conclusive and binding upon such Holder and upon all future holders of this
Bond and of any Bond 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 Bond. The Indenture also permits the Indenture
Trustee to amend or waive certain terms
-4-
<PAGE> 107
and conditions set forth in the Indenture without the consent of the Holders of
the Bonds of any Series issued thereunder.
The Bonds are issuable in fully-registered form only, without coupons,
in denominations as specified in the Series 1998-1 Supplement. As provided in
the Series 1998-1 Supplement and subject to any limitations on transfer of this
Bond by a Depository or its nominee and certain limitations set forth in the
Series 1998-1 Supplement, the transfer of this Bond is registrable in the Bond
Register upon surrender of this Bond for registration or transfer at the
principal Corporate Trust Office of the Indenture Trustee or such other offices
or agencies appointed by the Indenture Trustee for that purpose and such other
locations provided in the Series 1998-1 Supplement, duly endorsed by, or
accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Indenture Trustee and the Bond Registrar
duly executed by, the Holder hereof or such Holder's attorney duly authorized
in writing, and thereupon one or more new Bonds of the same Class in the same
aggregate Principal Balance will be issued to the designated transferee or
transferees.
As provided in the Indenture and subject to certain limitations therein
set forth, this Bond is exchangeable for a new Bond of the same Class in the
same denomination. No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee 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 Bonds.
At its option, Bear Stearns Mortgage Capital Corporation ("BSMCC") or
its designee (or if BSMCC or its designee does not exercise such option, the
Issuer) may, upon giving written notice to the Issuer, each Master Servicer,
the Certificate Trustee and the Indenture Trustee, repurchase from the Issuer
all of the remaining Mortgage Loans of any Mortgage Loan Group, and thereby
effect an early termination of the related Certificates and redemption of the
Bonds of the related Bond Group, on any Payment Date when the aggregate
outstanding principal balance of the Mortgage Loans in such Mortgage Loan
Groups is equal to or less than 5% of the aggregate outstanding principal
balance of the Mortgage Loans in such Mortgage Loan Group as of the Cut-off
Date. Upon any such optional repurchase, the Trust Estate will terminate and
any remaining assets in the Trust Estate shall be released to the repurchasing
party.
The Issuer, the Indenture Trustee and the Bond Registrar and any agent
of the Issuer, the Indenture Trustee or the Bond Registrar may treat the Person
in whose name this Bond is registered as the owner hereof for all purposes, and
none of the Issuer, the Master Servicers, the Indenture Trustee, the Bond
Registrar or any such agent shall be affected by notice to the contrary.
Unless the certificate of authentication hereon has been executed by the
Bond Registrar, by manual signature, this Bond shall not be entitled to any
benefit under the Series 1998-1 Supplement or be valid for any purpose.
-5-
<PAGE> 108
THIS BOND AND THE SERIES 1998-1 SUPPLEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
Capitalized terms used herein and not defined herein shall have the
meaning given them in the Series 1998-1 Supplement.
IN WITNESS WHEREOF, CMC Securities Corporation III has caused this Bond
to be duly executed.
Dated: March 31, 1998 CMC SECURITIES CORPORATION III
BY:
----------------------------------
Wade Walker
Vice President - Asset and
Liability Management
CERTIFICATION OF AUTHENTICATION
THIS IS A CLASS R-1 BOND REFERRED TO IN THE WITHIN MENTIONED INDENTURE.
THE FIRST NATIONAL BANK OF CHICAGO,
AS INDENTURE TRUSTEE
BY:
----------------------------------
AUTHORIZED SIGNATORY
<PAGE> 109
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
Bond shall be construed as though they were written out in full according to
applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT--____ Custodian _________
TEN ENT--as tenants by the (Cus) (Minor)
entireties Under Uniform Gifts to Minors
JT TEN--as joint tenants with
rights of survivor- Act __________________
ship and not as Tenants (State)
in Common
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED
THOUGH NOT IN THE ABOVE LIST.
<PAGE> 110
FORM OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
________________________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE________________________________________________________________________
- --------------------------------------------------------------------------------
(Please print or typewrite name and address of assignee)
the within Bond and does hereby irrevocably constitute and appoint
______________________ (Attorney) to transfer the said Bond in the Bond
Register, with full power of substitution in the premises.
Dated:
---------------------- -------------------------------------
NOTICE: The signature to this
assignment must correspond
with the name as written upon
the face of this Bond in every
particular without alteration
or enlargement or any change
whatever.
- -----------------------------------
SIGNATURE GUARANTEED: The
signature must be guaranteed by a
commercial bank or trust company
or by a member firm of the New
York Stock Exchange or another
national securities exchange.
Notarized or witnessed signatures
are not acceptable.
<PAGE> 111
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of payment:
Payment shall be made, by wire transfer or otherwise, in immediately
available funds, to _____________________________________, for the account of
__________________________, account number ___________, or, if mailed by check,
to _______________________________. Applicable reports and statements should
be mailed to ______________________________. This information is provided by
_________________________________, the assignee named above, or
____________________________________, as its agent.
<PAGE> 112
EXHIBIT A-7
THIS BOND HAS BEEN DESIGNATED AS A "RESIDUAL INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" CREATED BY THE SERIES 1998-1 SUPPLEMENT REFERRED
TO BELOW PURSUANT TO THE RELATED PROVISIONS OF THE INTERNAL REVENUE CODE OF
1986 (THE "CODE" ) .
NO TRANSFER OF THIS BOND MAY BE MADE TO AN EMPLOYEE BENEFIT PLAN, OR PERSON
USING "PLAN ASSETS" OF ANY PLAN TO EFFECT SUCH ACQUISITION (INCLUDING ANY
INSURANCE COMPANY UNDER THE CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND THE
SERIES 1998-1 SUPPLEMENT), SUBJECT TO SECTION 406 OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE CODE.
THIS BOND, THE INDENTURE AND THE SERIES 1998-1 SUPPLEMENT MAY BE AMENDED
WITHOUT THE CONSENT OF THE HOLDER HEREOF, AND IN A MANNER THAT MAY ADVERSELY
AFFECT THE INTERESTS OF THE HOLDER HEREOF, IF NECESSARY TO PREVENT THE
DISQUALIFICATION OF THE TRUST ESTATE AS A REMIC.
ANY RESALE, TRANSFER, OR OTHER DISPOSITION OF THIS BOND MAY BE MADE ONLY IF THE
PROPOSED TRANSFEREE PROVIDES AN AFFIDAVIT TO THE INDENTURE TRUSTEE THAT (1)
SUCH TRANSFEREE IS NOT (A) THE UNITED STATES, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY POSSESSION OF THE UNITED STATES, OR ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN AN INSTRUMENTALITY WHICH IS
A CORPORATION IF ALL OF ITS ACTIVITIES ARE SUBJECT TO TAX AND, EXCEPT FOR THE
FEDERAL HOME LOAN MORTGAGE CORPORATION, A MAJORITY OF ITS BOARD OF DIRECTORS IS
NOT SELECTED BY SUCH GOVERNMENTAL UNIT), (B) ANY FOREIGN GOVERNMENT, ANY
INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE
FOREGOING, (C) ANY ORGANIZATION (OTHER THAN CERTAIN FARMERS' COOPERATIVES
DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED BY
CHAPTER 1 OF THE CODE (UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX IMPOSED
BY SECTION 511 OF THE CODE ON UNRELATED BUSINESS TAXABLE INCOME), (D) A RURAL
ELECTRIC AND TELEPHONE COOPERATIVE DESCRIBED IN SECTION 1381(A)(2)(C) OF THE
CODE, AND (E) ANY OTHER PERSON SO DESIGNATED BY THE INDENTURE TRUSTEE BASED ON
AN OPINION OF COUNSEL (ANY SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (A),
(B), (C), (D), OR (E) BEING HEREINAFTER REFERRED TO AS A "DISQUALIFIED
ORGANIZATION"), OR (2) AN AGENT OF A DISQUALIFIED ORGANIZATION.
NOTWITHSTANDING THE REGISTRATION IN THE BOND REGISTER OR ANY TRANSFER, SALE, OR
OTHER DISPOSITION OF THIS BOND TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A
DISQUALIFIED
<PAGE> 113
ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL FORCE OR
EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED TO BE A SECURITYHOLDER
FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF
DISTRIBUTIONS ON THIS BOND. EACH HOLDER OF THIS BOND, BY ACCEPTANCE OF THIS
BOND, SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH.
IF ANY RESALE, TRANSFER, OR OTHER DISPOSITION OF THIS BOND IS MADE TO ANY OF
CERTAIN "PASS-THROUGH ENTITIES" DESCRIBED IN SECTION 860E(E)(6) OF THE CODE,
AND A DISQUALIFIED ORGANIZATION IS THE RECORD HOLDER OF AN INTEREST IN SUCH
ENTITY, THEN A TAX MAY BE IMPOSED ON SUCH ENTITY.
NO TRANSFER OF THIS BOND MAY BE MADE TO A PERSON THAT IS NOT A UNITED STATES
PERSON, AS DEFINED IN THE SERIES 1998-1 SUPPLEMENT REFERRED TO BELOW.
THIS BOND IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT
OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE
INDENTURE REFERRED TO HEREIN, AND THE ISSUER IS NOT OTHERWISE LIABLE FOR
PAYMENTS ON THIS BOND.
CMC SECURITIES CORPORATION III
COLLATERALIZED MORTGAGE OBLIGATIONS, SERIES 1998-1
CLASS R-2 BOND
DUE: April 25, 2013
ACCRUAL DATE: March 1, 1998
ISSUE DATE: March 31, 1998
$50 CUSIP NO. 125715 HB1
6.50% BOND INTEREST RATE CERTIFICATE NUMBER 0001
CMC SECURITIES CORPORATION III, a corporation duly organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received hereby promises to pay to BEAR STEARNS SECURITIES
CORP. or registered assigns, the principal sum of FIFTY AND NO/100 DOLLARS
($50.00) in monthly payments of principal and interest on the twenty-fifth day
of each month or, if such day is not a Business Day, then the next succeeding
business day (each a "Payment Date"), commencing in April 1998 and ending on or
before the Payment Date occurring in April 2013. This Bond is one of a duly
authorized issue of non-recourse Bonds of the Issuer, designated as its
Collateralized Mortgage Obligations, Series 1998-1. The Bonds are issued in
multiple classes under the Issuer's Indenture dated as of March 1, 1998, as
amended (herein called
-2-
<PAGE> 114
the "Indenture"), to which Indenture and all indentures supplemental thereto,
including the Series 1998-1 Supplement dated as of March 31, 1998 (the "Series
1998-1 Supplement"), between the Issuer and The First National Bank of Chicago,
as indenture trustee (the "Indenture Trustee", which term includes any
successor Trustee under the Indenture), which authorized the Bonds, reference
is hereby made for a statement of the respective rights thereunder of the
Issuer, the Indenture Trustee and the holders of the Bonds and the terms upon
which the Bonds are, and are to be, authenticated and delivered.
The Bonds are collateralized by three separate series of mortgage pass-
through certificates (the "Conventional Certificates"), each of which series
evidences the entire beneficial ownership interest in one of three pools of
Mortgage Loans. Each pool of Mortgage Loans has been deposited into a separate
trust (each, a "Trust") pursuant to the terms of the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") dated as of March 1, 1998
among the Issuer, as depositor, Bank of America, FSB and Cendant Mortgage
Corporation, as master servicers (the "Master Servicers"), and The First
National Bank of Chicago, as certificate trustee (the "Certificate Trustee").
Each Trust has created a series of Conventional Certificates for the benefit of
the Issuer in exchange for the related pool of Mortgage Loans. The
Conventional Certificates were pledged to the Indenture Trustee under the terms
of the Indenture.
All capitalized terms used without definition in this Bond shall have
the meanings assigned to such terms in the Indenture or the Series 1998-1
Supplement, as applicable.
This Bond does not purport to summarize the Indenture or the Series
1998-1 Supplement and reference should be made to the Indenture and the Series
1998-1 Supplement for the interests, rights and limitations of rights,
benefits, obligations and duties of the holders of the Bond thereunder, and the
rights, duties and immunities of the Indenture Trustee.
Payments of principal of and interest on this Bond will be paid in
accordance with the terms of the Series 1998-1 Supplement and will be made out
of the Available Funds for such Payment Date, to the extent and subject to the
limitations set forth in the Series 1998-1 Supplement, on each Payment Date to
the Person in whose name this Bond is registered at the close of business on
the last Business Day of the month immediately preceding the month of such
distribution (the "Record Date"). All sums payable on this Bond are payable in
the coin or currency of the United States of America as at the time of payment
is legal tender for the payment of public and private debts.
Realized Losses, Net Interest Shortfalls and certain writedown amounts
shall be allocated among the Classes of Bonds on the applicable Payment Date in
the manner set forth in the Series 1998-1 Supplement. To the extent provided
in the Series 1998-1 Supplement, the Subordinate Bonds will be subordinated in
right of payment to the other Classes of Bonds and each Class of the
Subordinate Bonds will be subordinated in right of payment to each of the other
Classes of Subordinate Bonds with a lower numerical designation, if any. All
Realized Losses, Net Interest Shortfalls and writedown amounts allocated to any
Class of Bonds will be allocated pro rata among the outstanding Bonds of such
Class, as described in the Series 1998-1 Supplement.
-3-
<PAGE> 115
The Bonds are limited in right of payment to certain collections and
recoveries respecting the Mortgage Loans and certain other assets, all as more
specifically set forth in the Series 1998-1 Supplement.
So long as this Bond is registered in the name of a Depository or its
nominee, the Indenture Trustee will make payments of principal of and interest
on this Bond by wire transfers of immediately available funds to the Depository
or its nominee. Otherwise, all payments on this Bond under the Series 1998-1
Supplement will be made by or on behalf of the Indenture Trustee as provided in
the Indenture. Notwithstanding the above, the final payment on this Bond will
be made after due notice by the Indenture Trustee of the pendency of such
payment and only upon presentation and surrender of this Bond at its principal
Corporate Trust Office or such other offices or agencies appointed by the
Indenture Trustee for that purpose and such other locations provided in the
Series 1998-1 Supplement.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Holders of Bonds representing
two-thirds of the Aggregate Current Principal Amount of all Bonds at the time
Outstanding, in case Outstanding Bonds of all Series are to be affected, or
with the consent of the Holders of two-thirds of the Aggregate Current
Principal Amount of all the Bonds at the time Outstanding of each Series to be
affected, in case one or more, but less than all, of the Series of Bonds then
Outstanding are to be affected; provided however, that prior to the date on
which the Class Imputed Principal Balance of each Class of Senior Bonds of a
Series has been reduced to zero, no amendment, variation or modification shall
be made to Article V of the Indenture in respect of any Series of Bonds without
the consent of the Holders representing not less than 100% of the Aggregate
Current Principal Amount of all Outstanding Senior Bonds of such Series. The
consent of the Holders of any Junior Bonds of such Series shall not be required
to be obtained prior to making any amendment for such series to Article V of
the Indenture for so long as any Senior Bond of such Series is Outstanding.
Upon reduction to zero of the Class Imputed Principal Balance of each Class of
Senior Bonds of a Series, no amendment, variation or modification to Article V
of the Indenture shall be made in respect of such Series of Bonds without the
consent of the Holders representing not less than two-thirds of the Aggregate
Current Principal Amount of the Highest Priority Junior Class of such Series.
The Indenture also contains provisions permitting the Holders of Bonds
representing specified percentages of the Aggregate Current Principal Amount of
the Bonds of a Series at the time Outstanding on behalf of the Holders of all
the Bonds of such Series, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder, at the time of
the giving thereof, of this Bond (or any one or more Predecessor Bonds) shall
be conclusive and binding upon such Holder and upon all future holders of this
Bond and of any Bond 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 Bond. The Indenture also permits the Indenture
Trustee to amend or waive certain terms
-4-
<PAGE> 116
and conditions set forth in the Indenture without the consent of the Holders of
the Bonds of any Series issued thereunder.
The Bonds are issuable in fully-registered form only, without coupons,
in denominations as specified in the Series 1998-1 Supplement. As provided in
the Series 1998-1 Supplement and subject to any limitations on transfer of this
Bond by a Depository or its nominee and certain limitations set forth in the
Series 1998-1 Supplement, the transfer of this Bond is registrable in the Bond
Register upon surrender of this Bond for registration or transfer at the
principal Corporate Trust Office of the Indenture Trustee or such other offices
or agencies appointed by the Indenture Trustee for that purpose and such other
locations provided in the Series 1998-1 Supplement, duly endorsed by, or
accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Indenture Trustee and the Bond Registrar
duly executed by, the Holder hereof or such Holder's attorney duly authorized
in writing, and thereupon one or more new Bonds of the same Class in the same
aggregate Principal Balance will be issued to the designated transferee or
transferees.
As provided in the Indenture and subject to certain limitations therein
set forth, this Bond is exchangeable for a new Bond of the same Class in the
same denomination. No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee 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 Bonds.
At its option, Bear Stearns Mortgage Capital Corporation ("BSMCC") or
its designee (or if BSMCC or its designee does not exercise such option, the
Issuer) may, upon giving written notice to the Issuer, each Master Servicer,
the Certificate Trustee and the Indenture Trustee, repurchase from the Issuer
all of the remaining Mortgage Loans of any Mortgage Loan Group, and thereby
effect an early termination of the related Certificates and redemption of the
Bonds of the related Bond Group, on any Payment Date when the aggregate
outstanding principal balance of the Mortgage Loans in such Mortgage Loan
Groups is equal to or less than 5% of the aggregate outstanding principal
balance of the Mortgage Loans in such Mortgage Loan Group as of the Cut-off
Date. Upon any such optional repurchase, the Trust Estate will terminate and
any remaining assets in the Trust Estate shall be released to the repurchasing
party.
The Issuer, the Indenture Trustee and the Bond Registrar and any agent
of the Issuer, the Indenture Trustee or the Bond Registrar may treat the Person
in whose name this Bond is registered as the owner hereof for all purposes, and
none of the Issuer, the Master Servicers, the Indenture Trustee, the Bond
Registrar or any such agent shall be affected by notice to the contrary.
Unless the certificate of authentication hereon has been executed by the
Bond Registrar, by manual signature, this Bond shall not be entitled to any
benefit under the Series 1998-1 Supplement or be valid for any purpose.
-5-
<PAGE> 117
THIS BOND AND THE SERIES 1998-1 SUPPLEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
Capitalized terms used herein and not defined herein shall have the
meaning given them in the Series 1998-1 Supplement.
IN WITNESS WHEREOF, CMC Securities Corporation III has caused this Bond
to be duly executed.
Dated: March 31, 1998 CMC SECURITIES CORPORATION III
BY:
----------------------------------
Wade Walker
Vice President - Asset and
Liability Management
CERTIFICATION OF AUTHENTICATION
THIS IS A CLASS R-2 BOND REFERRED TO IN THE WITHIN MENTIONED INDENTURE.
THE FIRST NATIONAL BANK OF CHICAGO,
AS INDENTURE TRUSTEE
BY:
----------------------------------
AUTHORIZED SIGNATORY
<PAGE> 118
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
Bond shall be construed as though they were written out in full according to
applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT-- ____ Custodian ________
TEN ENT--as tenants by the (Cus) (Minor)
entireties Under Uniform Gifts to Minors
JT TEN--as joint tenants with
rights of survivor- Act _______________
ship and not as Tenants (State)
in Common
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED
THOUGH NOT IN THE ABOVE LIST.
<PAGE> 119
FORM OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
________________________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE _______________________________________________________________________
- --------------------------------------------------------------------------------
(Please print or typewrite name and address of assignee)
the within Bond and does hereby irrevocably constitute and appoint
______________________ (Attorney) to transfer the said Bond in the Bond
Register, with full power of substitution in the premises.
Dated:
---------------------- -------------------------------------
NOTICE: The signature to this
assignment must correspond
with the name as written upon
the face of this Bond in every
particular without alteration
or enlargement or any change
whatever.
- -----------------------------------
SIGNATURE GUARANTEED: The
signature must be guaranteed by a
commercial bank or trust company
or by a member firm of the New
York Stock Exchange or another
national securities exchange.
Notarized or witnessed signatures
are not acceptable.
<PAGE> 120
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of payment:
Payment shall be made, by wire transfer or otherwise, in immediately
available funds, to _____________________________________, for the account of
__________________________, account number ___________, or, if mailed by check,
to _______________________________. Applicable reports and statements should
be mailed to ______________________________. This information is provided by
_________________________________, the assignee named above, or
____________________________________, as its agent.
<PAGE> 121
EXHIBIT A-8
THIS BOND HAS BEEN DESIGNATED AS A "RESIDUAL INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" CREATED BY THE SERIES 1998-1 SUPPLEMENT REFERRED
TO BELOW PURSUANT TO THE RELATED PROVISIONS OF THE INTERNAL REVENUE CODE OF
1986 (THE "CODE" ) .
NO TRANSFER OF THIS BOND MAY BE MADE TO AN EMPLOYEE BENEFIT PLAN, OR PERSON
USING "PLAN ASSETS" OF ANY PLAN TO EFFECT SUCH ACQUISITION (INCLUDING ANY
INSURANCE COMPANY UNDER THE CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND THE
SERIES 1998-1 SUPPLEMENT), SUBJECT TO SECTION 406 OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE CODE.
THIS BOND, THE INDENTURE AND THE SERIES 1998-1 SUPPLEMENT MAY BE AMENDED
WITHOUT THE CONSENT OF THE HOLDER HEREOF, AND IN A MANNER THAT MAY ADVERSELY
AFFECT THE INTERESTS OF THE HOLDER HEREOF, IF NECESSARY TO PREVENT THE
DISQUALIFICATION OF THE TRUST ESTATE AS A REMIC.
ANY RESALE, TRANSFER, OR OTHER DISPOSITION OF THIS BOND MAY BE MADE ONLY IF THE
PROPOSED TRANSFEREE PROVIDES AN AFFIDAVIT TO THE INDENTURE TRUSTEE THAT (1)
SUCH TRANSFEREE IS NOT (A) THE UNITED STATES, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY POSSESSION OF THE UNITED STATES, OR ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN AN INSTRUMENTALITY WHICH IS
A CORPORATION IF ALL OF ITS ACTIVITIES ARE SUBJECT TO TAX AND, EXCEPT FOR THE
FEDERAL HOME LOAN MORTGAGE CORPORATION, A MAJORITY OF ITS BOARD OF DIRECTORS IS
NOT SELECTED BY SUCH GOVERNMENTAL UNIT), (B) ANY FOREIGN GOVERNMENT, ANY
INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE
FOREGOING, (C) ANY ORGANIZATION (OTHER THAN CERTAIN FARMERS' COOPERATIVES
DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED BY
CHAPTER 1 OF THE CODE (UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX IMPOSED
BY SECTION 511 OF THE CODE ON UNRELATED BUSINESS TAXABLE INCOME), (D) A RURAL
ELECTRIC AND TELEPHONE COOPERATIVE DESCRIBED IN SECTION 1381(A)(2)(C) OF THE
CODE, AND (E) ANY OTHER PERSON SO DESIGNATED BY THE INDENTURE TRUSTEE BASED ON
AN OPINION OF COUNSEL (ANY SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (A),
(B), (C), (D), OR (E) BEING HEREINAFTER REFERRED TO AS A "DISQUALIFIED
ORGANIZATION"), OR (2) AN AGENT OF A DISQUALIFIED ORGANIZATION.
NOTWITHSTANDING THE REGISTRATION IN THE BOND REGISTER OR ANY TRANSFER, SALE, OR
OTHER DISPOSITION OF THIS BOND TO A DISQUALIFIED
<PAGE> 122
ORGANIZATION OR AN AGENT OF A DISQUALIFIED ORGANIZATION, SUCH REGISTRATION
SHALL BE DEEMED TO BE OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON
SHALL NOT BE DEEMED TO BE A SECURITYHOLDER FOR ANY PURPOSE HEREUNDER,
INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS BOND. EACH
HOLDER OF THIS BOND, BY ACCEPTANCE OF THIS BOND, SHALL BE DEEMED TO HAVE
CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH.
IF ANY RESALE, TRANSFER, OR OTHER DISPOSITION OF THIS BOND IS MADE TO ANY OF
CERTAIN "PASS-THROUGH ENTITIES" DESCRIBED IN SECTION 860E(E)(6) OF THE CODE,
AND A DISQUALIFIED ORGANIZATION IS THE RECORD HOLDER OF AN INTEREST IN SUCH
ENTITY, THEN A TAX MAY BE IMPOSED ON SUCH ENTITY.
NO TRANSFER OF THIS BOND MAY BE MADE TO A PERSON THAT IS NOT A UNITED STATES
PERSON, AS DEFINED IN THE SERIES 1998-1 SUPPLEMENT REFERRED TO BELOW.
THIS BOND IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT
OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE
INDENTURE REFERRED TO HEREIN, AND THE ISSUER IS NOT OTHERWISE LIABLE FOR
PAYMENTS ON THIS BOND.
CMC SECURITIES CORPORATION III
COLLATERALIZED MORTGAGE OBLIGATIONS, SERIES 1998-1
CLASS R-3 BOND
DUE: April 25, 2028
ACCRUAL DATE: March 1, 1998
ISSUE DATE: March 31, 1998
$50 CUSIP NO. 125715 HC8
VARIABLE BOND INTEREST RATE CERTIFICATE NUMBER 0001
CMC SECURITIES CORPORATION III, a corporation duly organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received hereby promises to pay to BEAR STEARNS SECURITIES
CORP. or registered assigns, the principal sum of FIFTY AND NO/100 DOLLARS
($50.00) in monthly payments of principal and interest on the twenty-fifth day
of each month or, if such day is not a Business Day, then the next succeeding
business day (each a "Payment Date"), commencing in April 1998 and ending on or
before the Payment Date occurring in April 2028. This Bond is one of a duly
authorized issue of non-recourse Bonds of the Issuer, designated as its
Collateralized Mortgage Obligations, Series 1998-1. The Bonds are issued in
multiple classes under the Issuer's Indenture dated as of March 1, 1998, as
amended (herein called
-2-
<PAGE> 123
the "Indenture"), to which Indenture and all indentures supplemental thereto,
including the Series 1998-1 Supplement dated as of March 31, 1998 (the "Series
1998-1 Supplement"), between the Issuer and The First National Bank of Chicago,
as indenture trustee (the "Indenture Trustee", which term includes any
successor Trustee under the Indenture), which authorized the Bonds, reference
is hereby made for a statement of the respective rights thereunder of the
Issuer, the Indenture Trustee and the holders of the Bonds and the terms upon
which the Bonds are, and are to be, authenticated and delivered.
The Bonds are collateralized by three separate series of mortgage pass-
through certificates (the "Conventional Certificates"), each of which series
evidences the entire beneficial ownership interest in one of three pools of
Mortgage Loans. Each pool of Mortgage Loans has been deposited into a separate
trust (each, a "Trust") pursuant to the terms of the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") dated as of March 1, 1998
among the Issuer, as depositor, Bank of America, FSB and Cendant Mortgage
Corporation, as master servicers (the "Master Servicers"), and The First
National Bank of Chicago, as certificate trustee (the "Certificate Trustee").
Each Trust has created a series of Conventional Certificates for the benefit of
the Issuer in exchange for the related pool of Mortgage Loans. The
Conventional Certificates were pledged to the Indenture Trustee under the terms
of the Indenture.
All capitalized terms used without definition in this Bond shall have
the meanings assigned to such terms in the Indenture or the Series 1998-1
Supplement, as applicable.
This Bond does not purport to summarize the Indenture or the Series
1998-1 Supplement and reference should be made to the Indenture and the Series
1998-1 Supplement for the interests, rights and limitations of rights,
benefits, obligations and duties of the holders of the Bond thereunder, and the
rights, duties and immunities of the Indenture Trustee.
Payments of principal of and interest on this Bond will be paid in
accordance with the terms of the Series 1998-1 Supplement and will be made out
of the Available Funds for such Payment Date, to the extent and subject to the
limitations set forth in the Series 1998-1 Supplement, on each Payment Date to
the Person in whose name this Bond is registered at the close of business on
the last Business Day of the month immediately preceding the month of such
distribution (the "Record Date"). All sums payable on this Bond are payable in
the coin or currency of the United States of America as at the time of payment
is legal tender for the payment of public and private debts.
Realized Losses, Net Interest Shortfalls and certain writedown amounts
shall be allocated among the Classes of Bonds on the applicable Payment Date in
the manner set forth in the Series 1998-1 Supplement. To the extent provided
in the Series 1998-1 Supplement, the Subordinate Bonds will be subordinated in
right of payment to the other Classes of Bonds and each Class of the
Subordinate Bonds will be subordinated in right of payment to each of the other
Classes of Subordinate Bonds with a lower numerical designation, if any. All
Realized Losses, Net Interest Shortfalls and writedown amounts allocated to any
Class of Bonds will be allocated pro rata among the outstanding Bonds of such
Class, as described in the Series 1998-1 Supplement.
-3-
<PAGE> 124
The Bonds are limited in right of payment to certain collections and
recoveries respecting the Mortgage Loans and certain other assets, all as more
specifically set forth in the Series 1998-1 Supplement.
So long as this Bond is registered in the name of a Depository or its
nominee, the Indenture Trustee will make payments of principal of and interest
on this Bond by wire transfers of immediately available funds to the Depository
or its nominee. Otherwise, all payments on this Bond under the Series 1998-1
Supplement will be made by or on behalf of the Indenture Trustee as provided in
the Indenture. Notwithstanding the above, the final payment on this Bond will
be made after due notice by the Indenture Trustee of the pendency of such
payment and only upon presentation and surrender of this Bond at its principal
Corporate Trust Office or such other offices or agencies appointed by the
Indenture Trustee for that purpose and such other locations provided in the
Series 1998-1 Supplement.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Holders of Bonds representing
two-thirds of the Aggregate Current Principal Amount of all Bonds at the time
Outstanding, in case Outstanding Bonds of all Series are to be affected, or
with the consent of the Holders of two-thirds of the Aggregate Current
Principal Amount of all the Bonds at the time Outstanding of each Series to be
affected, in case one or more, but less than all, of the Series of Bonds then
Outstanding are to be affected; provided however, that prior to the date on
which the Class Imputed Principal Balance of each Class of Senior Bonds of a
Series has been reduced to zero, no amendment, variation or modification shall
be made to Article V of the Indenture in respect of any Series of Bonds without
the consent of the Holders representing not less than 100% of the Aggregate
Current Principal Amount of all Outstanding Senior Bonds of such Series. The
consent of the Holders of any Junior Bonds of such Series shall not be required
to be obtained prior to making any amendment for such series to Article V of
the Indenture for so long as any Senior Bond of such Series is Outstanding.
Upon reduction to zero of the Class Imputed Principal Balance of each Class of
Senior Bonds of a Series, no amendment, variation or modification to Article V
of the Indenture shall be made in respect of such Series of Bonds without the
consent of the Holders representing not less than two-thirds of the Aggregate
Current Principal Amount of the Highest Priority Junior Class of such Series.
The Indenture also contains provisions permitting the Holders of Bonds
representing specified percentages of the Aggregate Current Principal Amount of
the Bonds of a Series at the time Outstanding on behalf of the Holders of all
the Bonds of such Series, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder, at the time of
the giving thereof, of this Bond (or any one or more Predecessor Bonds) shall
be conclusive and binding upon such Holder and upon all future holders of this
Bond and of any Bond 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 Bond. The Indenture also permits the Indenture
Trustee to amend or waive certain terms
-4-
<PAGE> 125
and conditions set forth in the Indenture without the consent of the Holders of
the Bonds of any Series issued thereunder.
The Bonds are issuable in fully-registered form only, without coupons,
in denominations as specified in the Series 1998-1 Supplement. As provided in
the Series 1998-1 Supplement and subject to any limitations on transfer of this
Bond by a Depository or its nominee and certain limitations set forth in the
Series 1998-1 Supplement, the transfer of this Bond is registrable in the Bond
Register upon surrender of this Bond for registration or transfer at the
principal Corporate Trust Office of the Indenture Trustee or such other offices
or agencies appointed by the Indenture Trustee for that purpose and such other
locations provided in the Series 1998-1 Supplement, duly endorsed by, or
accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Indenture Trustee and the Bond Registrar
duly executed by, the Holder hereof or such Holder's attorney duly authorized
in writing, and thereupon one or more new Bonds of the same Class in the same
aggregate Principal Balance will be issued to the designated transferee or
transferees.
As provided in the Indenture and subject to certain limitations therein
set forth, this Bond is exchangeable for a new Bond of the same Class in the
same denomination. No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee 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 Bonds.
At its option, Bear Stearns Mortgage Capital Corporation ("BSMCC") or
its designee (or if BSMCC or its designee does not exercise such option, the
Issuer) may, upon giving written notice to the Issuer, each Master Servicer,
the Certificate Trustee and the Indenture Trustee, repurchase from the Issuer
all of the remaining Mortgage Loans of any Mortgage Loan Group, and thereby
effect an early termination of the related Certificates and redemption of the
Bonds of the related Bond Group, on any Payment Date when the aggregate
outstanding principal balance of the Mortgage Loans in such Mortgage Loan
Groups is equal to or less than 5% of the aggregate outstanding principal
balance of the Mortgage Loans in such Mortgage Loan Group as of the Cut-off
Date. Upon any such optional repurchase, the Trust Estate will terminate and
any remaining assets in the Trust Estate shall be released to the repurchasing
party.
The Issuer, the Indenture Trustee and the Bond Registrar and any agent
of the Issuer, the Indenture Trustee or the Bond Registrar may treat the Person
in whose name this Bond is registered as the owner hereof for all purposes, and
none of the Issuer, the Master Servicers, the Indenture Trustee, the Bond
Registrar or any such agent shall be affected by notice to the contrary.
Unless the certificate of authentication hereon has been executed by the
Bond Registrar, by manual signature, this Bond shall not be entitled to any
benefit under the Series 1998-1 Supplement or be valid for any purpose.
-5-
<PAGE> 126
THIS BOND AND THE SERIES 1998-1 SUPPLEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
Capitalized terms used herein and not defined herein shall have the
meaning given them in the Series 1998-1 Supplement.
IN WITNESS WHEREOF, CMC Securities Corporation III has caused this Bond
to be duly executed.
Dated: March 31, 1998 CMC SECURITIES CORPORATION III
BY:
----------------------------------
Wade Walker
Vice President - Asset and
Liability Management
CERTIFICATION OF AUTHENTICATION
THIS IS A CLASS R-3 BOND REFERRED TO IN THE WITHIN MENTIONED INDENTURE.
THE FIRST NATIONAL BANK OF CHICAGO,
AS INDENTURE TRUSTEE
BY:
----------------------------------
AUTHORIZED SIGNATORY
<PAGE> 127
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
Bond shall be construed as though they were written out in full according to
applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT-- ____ Custodian _______
TEN ENT--as tenants by the (Cus) (Minor)
entireties Under Uniform Gifts to Minors
JT TEN--as joint tenants with
rights of survivor- Act _____________
ship and not as Tenants (State)
in Common
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED
THOUGH NOT IN THE ABOVE LIST.
<PAGE> 128
FORM OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
- --------------------------------------------------------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address of assignee)
the within Bond and does hereby irrevocably constitute and appoint
______________________ (Attorney) to transfer the said Bond in the Bond
Register, with full power of substitution in the premises.
Dated:
---------------------- -------------------------------------
NOTICE: The signature to this
assignment must correspond
with the name as written upon
the face of this Bond in every
particular without alteration
or enlargement or any change
whatever.
- -----------------------------------
SIGNATURE GUARANTEED: The
signature must be guaranteed by a
commercial bank or trust company
or by a member firm of the New
York Stock Exchange or another
national securities exchange.
Notarized or witnessed signatures
are not acceptable.
<PAGE> 129
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of payment:
Payment shall be made, by wire transfer or otherwise, in immediately
available funds, to _____________________________________, for the account of
__________________________, account number ___________, or, if mailed by check,
to _______________________________. Applicable reports and statements should
be mailed to ______________________________. This information is provided by
_________________________________, the assignee named above, or
____________________________________, as its agent.
<PAGE> 130
EXHIBIT B
FORM OF TRANSFEREE AFFIDAVIT AND AGREEMENT
(RESIDUAL BONDS)
[DATE]
STATE OF ___________________ )
) ss.:
COUNTY OF __________________ )
The undersigned, _______________________, being first duly sworn, deposes,
represents and warrants:
1. That he is a [Title of Officer] of [Name of Owner], a [savings
institution][corporation] duly organized and existing under the laws of the
State of _______________ (the "Owner"), record or beneficial owner of CMC
Securities Corporation III Collateralized Mortgage Obligations, Series 1998-1,
[Class R-1][Class R-2][Class R-3] Bonds (the "Residual Bonds") having an
initial Class Current Principal Balance of $_______________, on behalf of which
he makes this affidavit and agreement. The Bonds were issued pursuant to the
Indenture (the "Indenture") dated as of March 1, 1998 and the Series 1998-1
Supplement thereto (the "Series Supplement") dated as of March 31, 1998, each
between CMC Securities Corporation III and The First National Bank of Chicago,
as Indenture Trustee (the "Indenture Trustee").
2. That the Owner (i) is and will be a "Permitted Transferee" as
of ______________, ______ and (ii) is acquiring the Bonds for its own account
or for the account of another Owner from which it has received an affidavit in
substantially the same form as this affidavit. A "Permitted Transferee" is any
person other than a "disqualified organization" or a Non-U.S. Person. For this
purpose, a "disqualified organization" means any of the following: (i) the
United States, any State or political subdivision thereof, any foreign
government, any international organization, or any agency or instrumentality of
any of the foregoing, (ii) any organization (other than a farmers' cooperative
described in Section 521 of the Internal Revenue Code of 1986 (the "Code)) that
is exempt from the tax imposed by Chapter 1 of the Code and not subject to the
tax imposed by Section 511 of the Code, (iii) rural electric or telephone
cooperatives described in Section 1381(a)(2)(C) of the Code or (iv) any other
Person whose holding of an ownership interest in a Residual Bond may cause the
related REMIC to incur a liability for any tax imposed under the Code that
would not otherwise be imposed but for the transfer of an ownership interest in
a Residual Bond to such Person. For purposes of clause (i) of the previous
sentence, a corporation shall not be treated as an instrumentality of the
United States or of any State or political subdivision thereof, if (i) all of
the activities of such corporation are subject to the tax imposed by Chapter 1
of the Code, and (ii) a majority of the board of directors of such corporation
is not selected by the United States or any State or political subdivision
thereof (except that this clause (ii) shall not apply to the Federal Home Loan
Mortgage Corporation). The terms "United States," "State" and "international
organization" shall have the meanings set forth in Section 7701 of the Code or
successor provisions.
<PAGE> 131
3. That the Owner is aware (i) of the tax that would be imposed
on the Trust Estate if a Residual Bond is transferred to a disqualified
organization under Section 860E(e) of the Code and that any Owner that is a
disqualified organization will be obligated to reimburse the Trust Estate for
any such tax; (ii) that such tax would be on the transferor, or, if such
transfer is through an agent (which person includes a broker, nominee or
middleman) for a disqualified organization, on the agent; (iii) that the person
otherwise liable for the tax shall be relieved of liability for the tax if the
transferee furnishes to such person an affidavit that the transferee is not a
disqualified organization and, at the time of transfer, such person does not
have actual knowledge that the affidavit is false; and (iv) that the Residual
Bonds may be "noneconomic residual interests" within the meaning of Treasury
regulation section 1.860E-1(c)(2) and that the transferor of an ownership
interest in a "noneconomic residual interest" will remain liable for any taxes
due with respect to the income on such residual interest, unless no significant
purpose of the transfer is to enable the transferor to impede the assessment or
collection of tax.
4. That the Owner is aware of the tax imposed on a "pass-through
entity" holding the Residual Bonds if at any time during the taxable year of
the pass-through entity a disqualified organization is the record holder of an
interest in such entity. For this purpose, a "pass-through entity" includes a
regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives.
5. That the Owner is aware that the Trustee will not register the
transfer of any Residual Bonds unless the transferee, or the transferee's
agent, delivers to the Indenture Trustee, among other things, an affidavit in
substantially the same form as this affidavit. The Owner expressly agrees that
it will not consummate any such transfer if it knows or believes that any of
the representations contained in such affidavit and agreement are false.
6. That the Owner consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to
constitute a reasonable arrangement to ensure that the Residual Bonds will only
be owned, directly or indirectly, by Owners that are Permitted Transferees.
7. That the Owner's taxpayer identification number is
_______________.
8. That the Owner has reviewed the restrictions set forth on the
face of the Residual Bonds and the provisions of Section 2.15 of the Indenture
under which the Residual Bonds were issued (and, in particular, the Owner is
aware that such Section authorizes the Indenture Trustee to deliver payments to
a person other than the Owner and negotiate a mandatory sale by the Indenture
Trustee in the event that the Owner holds such Residual Bonds in violation of
Section 3); and that the Owner expressly agrees to be bound by and to comply
with such restrictions and provisions.
9. That the Owner is not acquiring and will not transfer the
Residual Bonds in order to impede the assessment or collection of any tax.
10. That the Owner anticipates that it will, so long as it holds
the Residual Bonds, have sufficient assets to pay any taxes owed by the holder
of such Residual Bonds.
-2-
<PAGE> 132
11. That the Owner has no present knowledge that it may become
insolvent or subject to a bankruptcy proceeding for so long as it holds the
Residual Bonds.
12. That the Owner has no present knowledge or expectation that it
will be unable to pay any United States taxes owed by it so long as any of the
Residual Bonds remain outstanding. In this regard, the Owner hereby represents
to and for the benefit of the Person from whom it acquired the Residual Bonds
that the Owner intends to pay taxes associated with holding the Residual Bonds
as they become due, fully understanding that it may incur tax liabilities in
excess of any cash flows generated by the Residual Bonds.
13. That the Owner is not acquiring the Residual Bonds with the
intent to transfer such Bonds to any person or entity that will not have
sufficient assets to pay any taxes owed by the holder of such Bonds, or that
may become insolvent or subject to a bankruptcy proceeding, for so long as such
Residual Bonds remain outstanding.
14. That Owner will, in connection with any transfer that it makes
of any of the Residual Bonds, obtain from its transferee the representations
required by Section 2.15 of the Indenture under which the Residual Bonds were
issued and will not consummate any such transfer if it knows, or knows facts
that should lead it to believe, that any such representations are false.
15. That Owner will, in connection with any transfer that it makes
of any of the Residual Bonds, represent and warrant that it is not transferring
the Residual Bonds to impede the assessment or collection of any tax and that
it has no actual knowledge that the proposed transferee: (i) has insufficient
assets to pay any taxes owed by such transferee as holder of the Residual
Bonds; (ii) may become insolvent or subject to a bankruptcy proceeding, for so
long as the Residual Bonds remain outstanding; and (iii) is not a "Permitted
Transferee."
16. That the Owner is a United States Person.
17. That the Owner is not an employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the
Code, nor a Person acting, directly or indirectly, on behalf of any such plan,
and understands that registration of transfer of any Security to any such
employee benefit plan, or to any person acting on behalf of such plan, will not
be made unless such employee benefit plan delivers a certification of facts and
an opinion of its counsel, addressed and satisfactory to the Indenture Trustee
and the Issuer to the effect that such transfer will not (a) cause the assets
of the Trust Estate to be treated as "plan assets" within the meaning of
Department of Labor regulations set forth in 29 C.F.R. Section 2510.3-101, (b)
give rise to any fiduciary duty under ERISA on the part of the Issuer or the
Indenture Trustee, or (c) be treated as, or result in, a prohibited transaction
under Section 406 or 407 of ERISA or Section 4975 of the Code.
-3-
<PAGE> 133
IN WITNESS WHEREOF, the [Title of Office] has caused this instrument to be
executed on its behalf, by the undersigned officer this _____ day of
____________________, _____.
[NAME OF OWNER]
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
Personally appeared before me the above-named [Name of Owner], known or
proved to me to be the same person who executed the foregoing instrument and to
be a [Title of Office] of the Owner, and acknowledged to me that he executed
the same as his free act and deed and the free act and deed of the Owner.
Subscribed and sworn before me this ______ day of ________________, ______.
--------------------------------------------------
NOTARY PUBLIC
COUNTY OF
----------------------------------------
STATE OF
-----------------------------------------
My Commission expires:
---------------------------
<PAGE> 134
EXHIBIT C-1
FORM OF TRANSFEREE REPRESENTATION LETTER
(PRIVATE BONDS)
[DATE]
CMC Securities Corporation III
2711 N. Haskell Ave.
Suite 900
Dallas, Texas 75204
The First National Bank of Chicago
1 National Plaza, Suite 0126
Chicago, Illinois 60670
CMC Securities Corporation III
Collateralized Mortgage Obligations, Series 1998-1
Ladies and Gentlemen:
In connection with the sale by ____________________ (the "Transferor")
to ____________________ (the "Transferee") of $_____________ initial Class
Current Principal Balance of Collateralized Mortgage Obligations, Series 1998-
1, Class __________, (the "Private Bonds"), issued pursuant to the Indenture
(the "Indenture") dated March 1, 1998 and the Series 1998-1 Supplement (the
"Series Supplement") thereto dated March 31, 1998, each between CMC Securities
Corporation III, as Issuer (the "Issuer"), and The First National Bank of
Chicago, as Trustee. Capitalized terms used herein and not otherwise defined
shall have the meanings assigned thereto in the Indenture or the Series
Supplement, as applicable.
In connection with such acquisition, the Transferee hereby certifies and
agrees:
1. The Transferee is acquiring the Private Bonds either (a)
for its own account or for accounts for which it exercises sole
investment discretion and not with a view to or for sale in connection
with any distribution thereof, subject nevertheless to any requirement
of law that the disposition of the Transferee's property shall at all
times be and remain within its control, or (b) for resale to "Qualified
Institutional Buyers" within the meaning of Rule 144A under the 1933 Act
or an "accredited investor" of the type specified in Rule 3a-7(a)(2)(i)
of the Investment Company Act of 1940, as amended (the "1940 Act") and
in accordance with the provisions of the Indenture and the Series
Supplement.
2. The Transferee has received, and has had an opportunity to
review, (a) a copy of the Private Placement Memorandum dated March 30,
1998 relating to the Private Bonds
<PAGE> 135
(the "Memorandum"), (b) a copy of the Indenture and the Series
Supplement and (c) such other information concerning the Private Bonds,
the Trust and the Issuer as has been requested by the Transferee and is
relevant to the Transferee's decision to purchase the Private Bonds.
The Transferee has had any questions arising from such review answered
by the Issuer to the satisfaction of the Transferee. If the Transferee
did not acquire the Private Bonds from the Transferor in connection with
the initial distribution of the Private Bonds and was provided with a
copy of the Memorandum related to the original sale (the "Original
Sale") of the Private Bonds by the Issuer, the Transferee acknowledges
that such Memorandum was provided to it by the Transferor, that the
Memorandum was prepared by the Issuer solely for use in connection with
the Original Sale and neither the Issuer nor any of its affiliates
participated in or facilitated in any way the acquisition of the Private
Bonds by the Transferee from the Transferor, and the Transferee agrees
that it will look solely to the Transferor and not to the Issuer or any
of its affiliates with respect to any damage, liability, claim or
expense arising out of, resulting from or in connection with (i) any
error or omission, or alleged error or omission, contained in the
Memorandum or (ii) any information, development or event arising after
the date of the Memorandum.
3. The Transferee is an "accredited investor" of the type
specified in Rule 3a-7(a)(2)(i) under the 1940 Act, and has such
expertise, knowledge and sophistication in financial and business
matters generally, and in financial and business matters related to
securities similar to the Private Bonds in particular, as to be capable
of evaluating the merits and risks of an investment in the Private
Bonds. The Transferee (or any account referred to above) is able to
bear the economic risks of such an investment.
4. The Transferee will comply with all applicable federal and
state securities laws in connection with any subsequent resale of the
Private Bonds by the Transferee.
5. The Transferee understands that (a) the Private Bonds have
not been and will not be registered under the Securities Act of 1933, as
amended (the "1933 Act"), (b) the Issuer is not required to so register
the Private Bonds, (c) the Private Bonds may be resold only if
registered pursuant to the provisions of the 1933 Act, or if an
exemption from such registration is available, (d) the Private Bonds may
not be resold if such transfer would result in the registration of the
Issuer as an "investment company" under the 1940 Act, (e) the Agreement
contains restrictions regarding the transfer of the Private Bonds, (f)
the Private Bonds will bear a legend to the foregoing effect and (g) a
stop order may be placed in the Bond Register relating to the Private
Bonds against the transfer of any Bond subject to compliance with the
1933 Act, the rules and regulation thereunder and state securities laws.
6. The Transferee is not an employee benefit plan subject to
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the Internal Revenue Code of 1986, as amended (the "Code")
(a "Plan") a Person acting on behalf of a Plan or a Person using the
assets of a Plan (each, a "Plan Investor"), or, in the case of an
insurance
-2-
<PAGE> 136
company, is either not a Plan Investor or is eligible for an exemption
from the applicable prohibited transaction provisions of ERISA and the
Code, or (ii) has attached hereto or delivered to the Trustee an opinion
of counsel satisfactory to the Trustee and the Issuer to the effect that
the purchase and holding of such Private Bonds will not constitute or
result in a prohibited transaction under ERISA or the Code and will not
(a) cause the assets of the Trust Estate to be treated as "plan assets"
within the meaning of Department of Labor regulations set forth in 29
C.F.R. Section 2510.3-101, (b) give rise to any fiduciary duty under
ERISA on the part of the Issuer, the master servicers, the certificate
trustee, the Trustee or their respective affiliates or (c) be treated
as, or result in, a prohibited transaction under Sections 406 or 407 of
ERISA or Section 4975 of the Code.
7. The Transferee will not nor has it authorized or will it
authorize any person to (a) offer, pledge, sell, dispose of or otherwise
transfer any Bond, any interest in any Bond or any other similar
security to any person in any manner, (b) solicit any offer to buy or to
accept a pledge, disposition or other transfer of any Bond, any interest
in any Bond or any other similar security from any person in any manner,
(c) otherwise approach or negotiate with respect to any Bond, any
interest in any Bond or any other similar security with any person in
any manner, (d) make any general solicitation by means of general
advertising or in any other manner, or (e) take any other action, that
(as to any of (a) through (e) above) would constitute a distribution of
any Bond under the 1933 Act, that would render the disposition of any
Bond a violation of Section 5 of the 1933 Act or any state securities
laws, that would result in the registration of the Issuer as an
"investment company" under the 1940 Act, or that would require
registration or qualification pursuant thereto. The Transferee will not
sell or otherwise transfer any of the Private Bonds, except in
compliance with the provisions of the Agreement. Without limiting the
generality of the foregoing sentence, if the Transferee sells any of the
Private Bonds, the Transferee will comply with any applicable
requirements set forth in, and will obtain from any purchaser any
representations required pursuant to, Section 2.15 of the Indenture.
Very truly yours,
-------------------------------------------
(Transferee)
By:
----------------------------------------
Name:
------------------------------
Title:
-----------------------------
-3-
<PAGE> 137
EXHIBIT C-2
FORM OF TRANSFEROR REPRESENTATION LETTER
(PRIVATE BONDS)
[DATE]
CMC Securities Corporation III
2711 N. Haskell, Suite 900
Dallas, Texas 75204
First National Bank of Chicago
1 National Plaza
Chicago, Illinois 60670
CMC Securities Corporation III
Collateralized Mortgage Obligations, Series 1998-1
Ladies and Gentlemen:
In connection with the sale by _______________________ (the
"Transferor") to _______________________ of $_______________ initial Class
Current Principal Balance of Collateralized Mortgage Obligations, Series 1998-
1, Class __, (the "Private Bonds"), issued pursuant to the Indenture (the
"Indenture") dated March 1, 1998 and the Series 1998-1 Supplement thereto (the
"Series Supplement") dated March 31, 1998, each between CMC Securities
Corporation III, as Issuer and The First National Bank of Chicago, as Trustee
(the "Indenture Trustee"). The Transferor hereby certifies, represents and
warrants to, and covenants with, the Issuer and the Trustee that:
Neither the Transferor nor anyone acting on its behalf has (a)
offered, pledged, sold, disposed of or otherwise transferred any Private Bond,
any interest in any Private Bond or any other similar security to any person in
any manner, (b) has solicited any offer to buy or to accept a pledge,
disposition or other transfer of any Private Bond, any interest in any Private
Bond or any other similar security from any person in any manner, (c) has
otherwise approached or negotiated with respect to any Private Bond, any
interest in any Private Bond or any other similar security with any person in
any manner, (d) has made any general solicitation by means of general
advertising or in any other manner, or (e) has taken any other action, that (as
to any of (a) through (d) above) would constitute a distribution of the Private
Bond under the Securities Act of 1933 (the "Act"), that would render the
disposition of any Private Bond a violation of Section 5 of the Act or any
state securities law, or that would require registration or qualification
pursuant thereto. The Transferor will not act in any manner set forth in the
foregoing sentence with respect to any Private Bond. The Transferor has not
and will not sell or otherwise transfer any of the Private Bonds, except in
compliance with the provisions of the Indenture and the Series Supplement.
<PAGE> 138
[Remainder of Page Intentionally Left Blank]
-2-
<PAGE> 139
Very truly yours,
---------------------------------------------
(Transferor)
By:
------------------------------------------
Name:
------------------------------
Title:
------------------------------
-3-
<PAGE> 140
EXHIBIT C-3
FORM OF RULE 144A TRANSFEREE REPRESENTATION
(PRIVATE BONDS)
CMC Securities Corporation III
Collateralized Mortgage Obligations, Series 1998-1
In connection with the sale by ____________________ (the "Transferor")
to ____________________ (the "Transferee") of $__________ initial Class Current
Principal Balance of Collateralized Mortgage Obligations, Series 1998-1, Class
__________ (the "Rule 144A Bonds"), issued pursuant to an Indenture (the
"Indenture") dated March 1, 1998 and the Series 1998-1 Supplement (the "Series
Supplement") thereto dated March 31, 1998, each between CMC Securities
Corporation III, as Issuer (the "Issuer") and The First National Bank of
Chicago, as Trustee (the "Indenture Trustee").
1. The Transferee warrants and represents to, and covenants
with, the Transferor, the Indenture Trustee and the Issuer pursuant to Section
____ of the Series Supplement as follows:
a. The Transferee understands that the Rule 144A Bonds
have not been registered under the Securities Act of 1933, as
amended (the "1933 Act") or the securities laws of any state.
b. The Transferee considers itself a substantial,
sophisticated institutional investor having such knowledge and
experience in financial and business matters that it is capable
of evaluating the merits and risks of investment in the Rule 144A
Bonds.
c. The Transferee has been furnished with all
information regarding the Rule 144A Bonds that it has requested
from the Transferor and the Indenture Trustee.
d. Neither the Transferee nor anyone acting on its
behalf has offered, transferred, pledged, sold or otherwise
disposed of the Rule 144A Bonds, any interest in the Rule 144A
Bonds or any other similar security to, or solicited any offer to
buy or accept a transfer, pledge or other disposition of the Rule
144A Bonds, any interest in the Rule 144A Bonds or any other
similar security from, or otherwise approached or negotiated with
respect to the Rule 144A Bonds, any interest in the Rule 144A
Bonds or any other similar security with, any person in any
manner, or made any general solicitation by means of general
advertising or in any other manner, or taken any other action.
that would constitute a distribution of the Rule 144A Bonds under
the 1933 Act or that would render the disposition of the Rule
144A Bonds a violation of Section 5 of the 1933 Act or require
registration pursuant thereto, nor will it act, nor has it
authorized or will it authorize any person to act, in such manner
with respect to the Rule 144A Bonds.
<PAGE> 141
e. The Transferee is a "qualified institutional buyer"
as that term is defined in Rule 144A under the 1933 Act and has
completed either of the forms of certification to that effect
attached hereto as Annex 1 or Annex 2. The Transferee is aware
that the sale to it is being made in reliance on Rule 144A. The
Transferee is acquiring the Rule 144A Bonds for its own account
or the account of other qualified institutional buyers and
understands that such Rule 144A Bonds may be resold, pledged or
transferred only (i) to a person reasonably believed to be a
qualified institutional buyer that purchases for its own account
or for the account of a qualified institutional buyer to whom
notice is given that the resale, pledge or transfer is being made
in reliance on Rule 144A, or (ii) pursuant to another exemption
from registration under the 1933 Act.
[3]. The Transferee is not an employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the
Internal Revenue Code of 1986, as amended (the "Code") (a "Plan"), a Person
acting on behalf of a Plan or a Person using the assets of a Plan (each, a
"Plan Investor"), or, in the case of an insurance company, is either not a Plan
Investor or is eligible for an exemption from the applicable prohibited
transaction provisions of ERISA and the Code, or (ii) has attached hereto or
delivered to the Indenture Trustee an opinion of counsel satisfactory to the
Indenture Trustee and the Issuer to the effect that the purchase and holding of
such Rule 144A Bonds will not constitute or result in a prohibited transaction
under ERISA or the Code and will not (a) cause the assets of the Trust Estate
to be treated as "plan assets" within the meaning of Department of Labor
regulations set forth in 29 C.F.R. Section 2510.3-101, (b) give rise to any
fiduciary duty under ERISA on the part of the Issuer, the master servicers, the
certificate trustee, the Indenture Trustee or their respective affiliates or
(c) be treated as, or result in, a prohibited transaction under Sections 406 or
407 of ERISA or Section 4975 of the Code.
Very truly yours,
---------------------------------------------
Print Name of Transferee
By:
----------------------------------------
Name:
Title:
Taxpayer Identification:
No.
----------------------------------------
Date:
--------------------------------------
C-2
<PAGE> 142
ANNEX 1 TO EXHIBIT C-3
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees Other Than Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the Rule
144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Transferee.
2. In connection with purchases by the Transferee, the Transferee is
a "qualified institutional buyer" as that term is defined in Rule 144A under
the Securities Act of 1933 ("Rule 144A") because (i) the Transferee owned
and/or invested on a discretionary basis $__________ (2) in securities (except
for the excluded securities referred to below) as of the end of the
Transferee's most recent fiscal year (such amount being calculated in
accordance with Rule 144A) and (ii) the Transferee satisfies the criteria in
the category marked below.
_______ Corporation, etc. The Transferee is a corporation (other
than a bank, savings and loan association or similar
institution), Massachusetts or similar business trust,
partnership, or charitable organization described in
Section 501(c)(3) of the Internal Revenue Code.
_______ Bank. The Transferee (a) is a national bank or banking
institution organized under the laws of any State,
territory or the District of Columbia, the business of
which is substantially confined to banking and is
supervised by the State or territorial banking commission
or similar official or is a foreign bank or equivalent
institution, and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual financial
statements, a copy of which is attached hereto.
_______ Savings and Loan. The Transferee (a) is a savings and
loan association, building and loan association,
cooperative bank, homestead association or similar
institution, which is supervised and examined by a State
or Federal authority having supervision over any such
institutions or is a foreign savings and loan association
or equivalent institution and (b) has an audited net worth
of at least $25,000,000 as demonstrated in its latest
annual financial statements.
- ----------------------------------
(2) Transferee must own and/or invest on a discretionary basis at
least $100,000,000 in securities unless Transferee is a dealer, and, in that
case, Transferee must own and/or invest on a discretionary basis at least
$10,000,000 in securities.
ANNEX 1 to EXHIBIT C-3-1
<PAGE> 143
_______ Broker-dealer. The Transferee is a dealer registered
pursuant to Section 15 of the Securities Exchange Act of
1934.
_______ Insurance Company. The Transferee is an insurance company
whose primary and predominant business activity is the
writing of insurance or the reinsuring of risks
underwritten by insurance companies and which is subject
to supervision by the insurance commissioner or a similar
official or agency of a State, territory or the District
of Columbia.
_______ State or Local Plan. The Transferee is a plan established
and maintained by a State. its political subdivisions, or
any agency or instrumentality of the State or its
political subdivisions, for the benefit of its employees.
_______ ERISA Plan. The Transferee is an employee benefit plan
within the meaning of Title I of the Employee Retirement
Income Security Act of 1974.
_______ Investment Adviser. The Transferee is an investment
adviser registered under the Investment Advisers Act of
1940.
_______ SBIC. The Transferee is a Small Business Investment
Company licensed by the U.S. Small Business Administration
under Section 301(c) or (d) of the Small Business
Investment Act of 1958.
_______ Business Development Company. The Transferee is a
business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
_______ Trust Fund. The Transferee is a trust fund whose trustee
is a bank or trust company and whose participants are
exclusively (a) plans established and maintained by a
State, its political subdivisions, or any agency or
instrumentality of the State or its political
subdivisions, for the benefit of its employees, or (b)
employee benefit plans within the meaning of Title I of
the Employee Retirement Income Security Act of 1974, but
is not a trust fund that includes as participants
individual retirement accounts or H.R. 10 plans.
3. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Transferee, (ii) securities
that are part of an unsold allotment to or subscription by the Transferee, if
the Transferee is a dealer, (iii) bank deposit notes and certificates of
deposit, (iv) loan participations, (v) repurchase agreements, (vi) securities
owned but subject to a repurchase agreement and (vii) currency, interest rate
and commodity swaps.
4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Transferee, the
Transferee used the cost of such securities to the Transferee and did not
include any of the securities referred to in the preceding paragraph. Further,
in determining such aggregate amount, the Transferee may have included
securities owned
ANNEX 1 to EXHIBIT C-3-2
<PAGE> 144
by subsidiaries of the Transferee, but only if such subsidiaries are
consolidated with the Transferee in its financial statements prepared in
accordance with generally accepted accounting principles and if the investments
of such subsidiaries are managed under the Transferee's direction. However,
such securities were not included if the Transferee is a majority-owned,
consolidated subsidiary of another enterprise and the Transferee is not itself
a reporting company under the Securities Exchange Act of 1934.
5. The Transferee acknowledges that it is familiar with Rule 144A
and understands that the seller to it and other parties related to the Bonds
are relying and will continue to rely on the statements made herein because one
or more sales to the Transferee may be in reliance on Rule 144A.
6. Will the Transferee be purchasing the Rule 144A Bonds only for
the Transferee's own account?
Yes _____ No _____.
If the answer to the foregoing question is "no", the Transferee agrees
that, in connection with any purchase of securities sold to the Transferee for
the account of a third party (including any separate account) in reliance on
Rule 144A, the Transferee will only purchase for the account of a third party
that at the time is a "qualified institutional buyer" within the meaning of
Rule 144A. In addition, the Transferee agrees that the Transferee will not
purchase securities for a third party unless the Transferee has obtained a
current representation letter from such third party or taken other appropriate
steps contemplated by Rule 144A to conclude that such third party independently
meets the definition of "qualified institutional buyer" set forth in Rule 144A.
23. The Transferee will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein
during the period between the date of this certification and the date the
Transferee purchases the Rule 144A Bonds. Unless such notice is given, the
Transferee's purchase of the Rule 144A Bonds will constitute a reaffirmation of
this certification as of the date of such purchase.
---------------------------------------------
Print Name of Transferee
By:
------------------------------------------
Name:
Title:
Date:
----------------------------------------
ANNEX 1 to EXHIBIT C-3-3
<PAGE> 145
ANNEX 2 TO EXHIBIT C-3
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees That Are Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the Rule
144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Transferee or, if the
Transferee is a "qualified institutional buyer" as that term is defined in Rule
144A under the Securities Act of 1933 ("Rule 144A") because Transferee is part
of a Family of Investment Companies (as defined below), is such an officer of
the Adviser.
2. In connection with purchases by Transferee, the Transferee is a
"qualified institutional buyer" as defined in SEC Rule 144A because (i) the
Transferee is an investment company registered under the Investment Company Act
of 1940, and (ii) as marked below, the Transferee alone, or the Transferee's
Family of Investment Companies, owned at least $100,000,000 in securities
(other than the excluded securities referred to below) as of the end of the
Transferee's most recent fiscal year. For purposes of determining the amount
of securities owned by the Transferee or the Transferee's Family of Investment
Companies, the cost of such securities was used.
_______ The Transferee owned $___________ in securities (other
than the excluded securities referred to below) as of the
end of the Transferee's most recent fiscal year (such
amount being calculated in accordance with Rule 144A).
_______ The Transferee is part of a Family of Investment Companies
which owned in the of aggregate $_______________ in
securities (other than the excluded securities referred to
below) as of the end of the Transferee's most recent
fiscal year (such amount being calculated in accordance
with Rule 144A).
3. The term "Family of Investment Companies" as used herein means
two or more registered investment companies (or series thereof) that have the
same investment adviser or investment advisers that are affiliated (by virtue
of being majority owned subsidiaries of the same parent or because one
investment adviser is a majority owned subsidiary of the other).
4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Transferee or are part of
the Transferee's Family of Investment Companies, (ii) bank deposit notes and
certificates of deposit, (iii) loan participations, (iv) repurchase agreements,
(v) securities owned but subject to a repurchase agreement and (vi) currency,
interest rate and commodity swaps.
ANNEX 2 to EXHIBIT C-3-1
<PAGE> 146
5. The Transferee is familiar with Rule 144A and understands that
each of the parties to which this certification is made are relying and will
continue to rely on the statements made herein because one or more sales to the
Transferee will be in reliance on Rule 144A. In addition, the Transferee will
only purchase for the Transferee's own account.
6. The Transferee will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein
during the period between the date of this certification and the date the
Transferee purchases the Rule 144A Bonds. Unless such notice is given, the
Transferee's purchase of the Rule 144A Bonds will constitute a reaffirmation of
this certification as of the date of such purchase.
---------------------------------------------
Print Name of Transferee
By:
------------------------------------------
Name:
Title:
IF AN ADVISER:
---------------------------------------------
Print Name of Transferee
Date:
----------------------------------------
ANNEX 2 to EXHIBIT C-3-2
<PAGE> 147
EXHIBIT D
LETTER OF REPRESENTATIONS
(Intentionally Omitted)
<PAGE> 148
EXHIBIT E
FORM OF TRANSFEROR CERTIFICATE
(Residual Bonds)
[DATE]
CMC Securities Corporation III
2711 N. Haskell, Suite 900
Dallas, Texas 75204
The First National Bank of Chicago
1 National Plaza, Suite 0126
Chicago, Illinois 60670
CMC Securities Corporation III
Collateralized Mortgage Obligations, Series 1998-1
Dear Sirs:
This letter is delivered to you in connection with the sale by
_____________________ (the "Transferor") to
___________________________________________ (the "Purchaser") of the
Collateralized Mortgage Obligations, Series 1998-1, Class [R-1][Class
R-2][Class R-3] (the "Residual Bonds"), issued pursuant to the Indenture (the
"Indenture") dated as of March 1, 1998 and the Series 1998-1 Supplement, dated
as of March 31, 1998, each between CMC Securities Corporation III, as Issuer
(the "Issuer"), and The First National Bank of Chicago, as Trustee (the
"Indenture Trustee"). All terms used herein and not otherwise defined shall
have the meaning set forth in the Indenture for the Series Supplement, as
applicable.
The Transferor hereby certifies, represents and warrants to, and
covenants with, the Issuer and the Indenture Trustee that:
1. No purpose of the Transferor relating to the sale of the
Residual Bonds by the Transferor to the Purchaser is or will be to impede the
assessment or collection of any tax.
2. The Transferor understands that the Purchaser has delivered to
the Indenture Trustee a transferee affidavit and agreement in the form attached
to the Series Supplement as Exhibit B. The Transferor does not know or believe
that any representation contained therein is false.
3. The Transferor has at the time of the transfer conducted a
reasonable investigation of the financial condition of the Purchaser as
contemplated by Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result
of that investigation, the Transferor has determined that the Purchaser has
historically paid its debts as they have become due and has found no
significant
<PAGE> 149
evidence to indicate that the Purchaser will not continue to pay its debts as
they become due in the future. The Transferor understands that the transfer of
the Residual Bonds may not be respected for United States income tax purposes
(and the Transferor may continue to be liable for United States income taxes
associated therewith) unless the Transferor has conducted such an
investigation.
4. The Transferor has no actual knowledge that the proposed
Transferee is a Disqualified Organization, an agent of a Disqualified
Organization or a Non-U.S. Person.
Very truly yours,
-----------------------------------
(Transferor)
<PAGE> 1
EXHIBIT 10.1
CMC SECURITIES CORPORATION III,
as Depositor
BANK OF AMERICA, FSB
and
CENDANT MORTGAGE CORPORATION
as Master Servicers
and
FIRST CHICAGO NATIONAL PROCESSING CORPORATION
as Custodian
and
THE FIRST NATIONAL BANK OF CHICAGO
as Certificate Trustee
----------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of March 1, 1998
----------------------------------
CMC Securities Corporation III
Collateralized Mortgage Obligations
Series 1998-1
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TABLE OF CONTENTS
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ARTICLE I- DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - CONVEYANCE OF MORTGAGE LOANS . . . . . . . . . . . . . . . . . . 18
Section 2.01. Conveyance of Mortgage Loans to Certificate Trustee . . 18
Section 2.02. Acceptance of Mortgage Loans by Certificate Trustee . . 21
Section 2.03. Representations, Warranties and Covenants of the
Master Servicers . . . . . . . . . . . . . . . . . . 23
Section 2.04 Assignment of Interest in the Mortgage Loan Purchase
Agreement . . . . . . . . . . . . . . . . . . . . . 24
Section 2.05 Substitution of Mortgage Loans . . . . . . . . . . . . 25
Section 2.06. Representations and Warranties Concerning the
Depositor . . . . . . . . . . . . . . . . . . . . . 26
Section 2.07. The Custodian . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE III - ADMINISTRATION AND SERVICING OF MORTGAGE LOANS . . . . . . . . 28
Section 3.01. Master Servicers to Master Service . . . . . . . . . . 28
Section 3.02. Delivery of Documents to Successor Master Servicers . . 28
Section 3.03. Collection of Mortgage Loan Payments . . . . . . . . . 29
Section 3.04. Collection of Taxes, Assessments and Similar Items;
Servicing Accounts . . . . . . . . . . . . . . . . . 29
Section 3.05. Access to Certain Documentation and Information
Regarding the Mortgage Loans . . . . . . . . . . . . 30
Section 3.06. Maintenance of Primary Mortgage Insurance Policies;
Collection Thereunder . . . . . . . . . . . . . . . 31
Section 3.07. Maintenance of Hazard Insurance and Fidelity Coverage . 31
Section 3.08. Due-on-Sale Clauses; Assumption Agreements . . . . . . 32
Section 3.09. Realization upon Defaulted Mortgage Loans . . . . . . . 33
Section 3.10. Certificate Trustee to Cooperate; Release of Mortgage
Files . . . . . . . . . . . . . . . . . . . . . . . 34
Section 3.11. Master Servicing Compensation . . . . . . . . . . . . . 35
Section 3.12. Annual Statement of Compliance . . . . . . . . . . . . 36
Section 3.13. Annual Independent Public Accountants'
Servicing Report . . . . . . . . . . . . . . . . . . 36
Section 3.14. REMIC-Related Covenants . . . . . . . . . . . . . . . . 37
Section 3.15. Additional Information . . . . . . . . . . . . . . . . 37
Section 3.16. Master Servicer Reports . . . . . . . . . . . . . . . . 37
ARTICLE IV- ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.01. Protected Accounts . . . . . . . . . . . . . . . . . . 39
Section 4.02. Certificate Account . . . . . . . . . . . . . . . . . . 41
Section 4.03. Permitted Withdrawals and Transfers from the
Certificate Account . . . . . . . . . . . . . . . . 42
Section 4.04 Buydown Fund Accounts . . . . . . . . . . . . . . . . . 45
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ARTICLE V - CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 5.01. The Certificates . . . . . . . . . . . . . . . . . . . 46
Section 5.02. Certificates Issuable in Series; Authorized
Denominations . . . . . . . . . . . . . . . . . . . 46
Section 5.03. Registration of Transfer and Exchange of
Certificates . . . . . . . . . . . . . . . . . . . . 47
Section 5.04. Mutilated, Destroyed, Lost or Stolen Certificates . . . 47
Section 5.05. Persons Deemed Owners . . . . . . . . . . . . . . . . . 48
Section 5.06. Office for Transfer of Certificates . . . . . . . . . . 48
ARTICLE VI - PAYMENTS TO CERTIFICATEHOLDERS . . . . . . . . . . . . . . . . . 48
Section 6.01. Distributions to Certificateholders . . . . . . . . . . 48
Section 6.02. Statements to Certificateholders . . . . . . . . . . . 48
Section 6.03. Monthly Advances . . . . . . . . . . . . . . . . . . . 50
Section 6.04. Compensating Interest Payments . . . . . . . . . . . . 51
Section 6.05. Reports of Foreclosures and Abandonment of
Mortgaged Property . . . . . . . . . . . . . . . . . 51
ARTICLE VII - THE MASTER SERVICERS . . . . . . . . . . . . . . . . . . . . . 51
Section 7.01. Liabilities of the Master Servicers . . . . . . . . . . 51
Section 7.02. Merger or Consolidation of a Master Servicer . . . . . 51
Section 7.03. Indemnification of the Certificate Trustee . . . . . . 51
Section 7.04. Limitation on Liability of the Master Servicer and
Others . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.05. No Master Servicer to Resign . . . . . . . . . . . . . 53
Section 7.06. Sale and Assignment of Master Servicing . . . . . . . . 53
ARTICLE VIII - DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 8.01. Events of Default . . . . . . . . . . . . . . . . . . . 54
Section 8.02. Certificate Trustee to Act; Appointment of Successor . 55
Section 8.03. Notification to Certificateholders . . . . . . . . . . 56
Section 8.04. Waiver of Defaults . . . . . . . . . . . . . . . . . . 56
Section 8.05. List of Certificateholders . . . . . . . . . . . . . . 57
ARTICLE IX - CONCERNING THE CERTIFICATE TRUSTEE . . . . . . . . . . . . . . . 57
Section 9.01. Duties of Certificate Trustee . . . . . . . . . . . . . 57
Section 9.02. Certain Matters Affecting the Certificate Trustee . . . 59
Section 9.03. Certificate Trustee Not Liable for Certificates or
Mortgage Loans . . . . . . . . . . . . . . . . . . . 60
Section 9.04. Certificate Trustee May Own Certificates . . . . . . . 61
Section 9.05. Certificate Trustee's Fees and Expenses . . . . . . . . 61
Section 9.06. Eligibility Requirements for Certificate Trustee . . . 61
Section 9.07. Insurance . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.08. Resignation and Removal of the Certificate Trustee . . 62
Section 9.09. Successor Certificate Trustee . . . . . . . . . . . . . 63
Section 9.10. Merger or Consolidation of Certificate Trustee . . . . 63
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Section 9.11. Appointment of Co-Certificate Trustee or Separate
Certificate Trustee . . . . . . . . . . . . . . . 63
Section 9.12. Master Servicers Shall Provide Information as
Reasonably Required . . . . . . . . . . . . . . . 65
ARTICLE X - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.01. Termination of a Series Upon Repurchase by
BSMCC or its Designee or the Depositor or
Liquidation of the Mortgage Loans . . . . . . . . 65
ARTICLE XI - MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . 67
Section 11.01. Amendment . . . . . . . . . . . . . . . . . . . . . 67
Section 11.02. Recordation of Agreement . . . . . . . . . . . . . . 68
Section 11.03. Limitation on Rights of Certificateholders . . . . . 68
Section 11.04. Acts of Certificateholders . . . . . . . . . . . . . 69
Section 11.05. Governing Law . . . . . . . . . . . . . . . . . . . 70
Section 11.06. Notices . . . . . . . . . . . . . . . . . . . . . . 70
Section 11.07. Severability of Provisions . . . . . . . . . . . . . 71
Section 11.08. Successors and Assigns . . . . . . . . . . . . . . . 71
Section 11.09. Article and Section Headings . . . . . . . . . . . . 71
Section 11.10. Counterparts . . . . . . . . . . . . . . . . . . . . 72
Section 11.11. Notice to Rating Agencies . . . . . . . . . . . . . 72
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SCHEDULES
Schedule I - Schedule of Group 1 Loans
Schedule II - Schedule of Group 2 Loans
Schedule III - Schedule of Group 3 Loans
EXHIBITS
Exhibit A - Form of Certificate
Exhibit B-1 - Group 1 Mortgage Loan Schedule
Exhibit B-2 - Group 2 Mortgage Loan Schedule
Exhibit B-3 - Group 3 Mortgage Loan Schedule
Exhibit C - Representations and Warranties of BSMCC Covering the
Mortgaged Loans
Exhibit D - Request for Release of Documents
Exhibit E - Form of Purchaser Representation Letter
Exhibit F - [Reserved]
Exhibit G - Form of Initial Certification
Exhibit H - Form of Final Certification
Exhibit I-1 - Master Servicer's Report (Cendant)
Exhibit I-2 - Master Servicer's Report (BAFSB)
Exhibit J - List of Mortgage Loans for Which Mortgage Notes are
Lost
iv
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POOLING AND SERVICING AGREEMENT
This Pooling and Servicing Agreement dated as of March 1, 1998, is
executed by and between CMC Securities Corporation III, a Delaware corporation,
as the depositor (the "Depositor"), Bank of America, FSB ("BAFSB"), and Cendant
Mortgage Corporation ("Cendant" and, together with BAFSB, the "Master
Servicers"), as master servicers, First Chicago National Processing
Corporation, as custodian (the "Custodian"), The First National Bank of
Chicago, a national banking association, not in its individual capacity but
solely as certificate trustee (the "Certificate Trustee") and, solely as to
Sections 2.02, 2.04 and 2.05 and Article X, Bear Stearns Mortgage Capital
Corporation ("BSMCC").
PRELIMINARY STATEMENT
On or prior to the Closing Date, the Depositor has acquired the Mortgage
Loans from Capstead Capital Corporation ("CCC"), which, in turn, has acquired
the Mortgage Loans from Bear Stearns Mortgage Capital Corporation ("BSMCC").
On the Closing Date, the Depositor will sell the Mortgage Loans and certain
other property to the Certificate Trustee and receive in consideration therefor
Certificates evidencing the entire beneficial ownership interest in the Trusts.
The Certificates will be issued pursuant to this Agreement in three Series,
each of which shall evidence the entire beneficial ownership interest in a
Mortgage Loan Group consisting of Mortgage Loans.
The Mortgage Loans will have an Outstanding Principal Balance as of the
Cut-off Date, after deducting all Scheduled Principal due on or before the
Cut-off Date, of $593,796,661. The initial principal amount of the
Certificates will not exceed such Outstanding Principal Balance.
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
Whenever used in this Agreement, the following words and phrases, unless
otherwise expressly provided or unless the context otherwise requires, shall
have the meanings specified in this Article.
Account: The Buydown Fund Accounts, the Certificate Account (including
each subaccount thereof), the Protected Accounts or the Servicing Accounts as
the context may require.
Adjustment Amount: As defined in the Series Supplement.
Affiliate: As to any Person, any other Person controlling, controlled
by or under common control with such Person. "Control" means the power to
direct the management and policies of a Person, directly or indirectly, whether
through ownership of voting securities, by contract or otherwise. "Controlled"
and "Controlling" have meanings correlative to the foregoing. The
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Certificate Trustee may conclusively presume that a Person is not an Affiliate
of another Person unless a Responsible Officer of the Certificate Trustee has
actual knowledge to the contrary.
Agreement: This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
Applicable Credit Rating: A credit rating of "Aaa", in the case of
Moody's or a rating of "AAA", in the case of DCR, for any long-term deposit or
security or a rating of "Prime-1" in the case of Moody's or "D-1+" in the case
of DCR, for any short-term deposit or security.
Appraised Value: For any Mortgaged Property, the amount set forth as
the appraised value of such Mortgaged Property in an appraisal made for the
mortgage originator in connection with its origination of the related Mortgage
Loan.
Available Funds: With respect to any Distribution Date, the sum of the
Group 1 Available Funds, the Group 2 Available Funds and the Group 3 Available
Funds for such Distribution Date.
Assignment Agreement: The Assignment, Assumption and Recognition
Agreement dated as of March 31, 1998 by and among CCC, the Depositor and BSMCC.
Authorized Denominations: With respect to the Certificates, an initial
Certificate Principal Balance equal to $25,000 and integral multiples of $1 in
excess thereof, except that one Certificate of each Series may be issued in a
different amount.
BA Loan Sale Agreement: The Purchase, Warranties and Servicing
Agreement among BAFSB, BANTSA and BSMCC, dated as of February 26, 1998, and the
related Term Sheet dated March 25, 1998, as each may be amended or
supplemented from time to time, with respect to the BA Mortgage Loans.
BA Mortgage Loans: The Mortgage Loans that were originated or acquired
by BAFSB or BANTSA, as indicated on the Mortgage Loan Schedule relating to the
Group 1 Mortgage Loans, and sold to BSMCC pursuant to the BA Loan Sale
Agreement.
BAFSB: Bank of America, FSB, or its successors in interest.
Bankruptcy Code: The United States Bankruptcy Code, as amended as
codified in 11 U.S.C. Sections 101-1330.
BANTSA: Bank of America National Trust and Savings Association, or its
successors in interest.
Bonds: The bonds issued pursuant to the Indenture.
BSMCC: Bear Stearns Mortgage Capital Corporation.
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Business Day: Any day other than (i) a Saturday or a Sunday, or (ii) a
day on which the New York Stock Exchange is closed or on which banking
institutions in New York City or in the States of California, New Jersey or
Virginia are authorized or obligated by law or executive order to be closed.
Buydown Fund: A fund provided by the originator of a Mortgage Loan or
another Person with respect to a Buydown Loan which provides an amount
sufficient to subsidize regularly scheduled principal and interest payments due
on such Buydown Loan for a period. Buydown Funds are funded at the par values
of future payment subsidies. Buydown Funds may be held in a separate Buydown
Fund Account or may be held in a Protected Account.
Buydown Fund Account: A separate account or accounts created and
maintained pursuant to Section 4.04 with the corporate trust department of the
Certificate Trustee or another financial institution approved by the related
Master Servicer. Each Buydown Fund Account shall be a Rating Agency Eligible
Account.
Buydown Loan: A Mortgage Loan for which the Mortgage Interest Rate has
been subsidized through a Buydown Fund provided at the time of origination of
such Mortgage Loan.
CCC: Capstead Capital Corporation.
Cendant: Cendant Mortgage Corporation, or its successors in interest.
Cendant Loan Sale Agreement: The Seller's Warranties and Servicing
Agreements between Cendant and BSMCC, each dated as of March 1, 1998, as
amended or supplemented from time to time, with respect to the Cendant Mortgage
Loans.
Cendant Mortgage Loans: The Mortgage Loans that were originated or
acquired by Cendant, as indicated on the Mortgage Loan Schedule relating to the
Mortgage Loans, and sold to BSMCC pursuant to the Cendant Loan Sale Agreements.
Certificate: Any of the Certificates issued pursuant to this Agreement,
executed by the Certificate Trustee and authenticated by or on behalf of the
Certificate Trustee hereunder in substantially the form set forth in Exhibit A.
Certificate Account: The trust account or accounts created and
maintained pursuant to Section 4.02, which shall be denominated "The First
National Bank of Chicago, as Certificate Trustee f/b/o holders of CMC
Securities Corporation III Mortgage Pass-Through Certificates, Series 1998-1,
Certificate Account".
Certificate Account Advance: As of any Distribution Date, the amount on
deposit in a Protected Account which is not required to be transferred to the
Certificate Account for payment during the calendar month in which such
Distribution Date occurs but which is deposited in a subaccount of the
Certificate Account and used to make a distribution to Certificateholders
during such calendar month on account of Scheduled Payments on the Mortgage
Loans due on the Due Date
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for such month not being paid on or before such Determination Date except
insofar as such unpaid amounts are the result of application of the Relief Act.
Certificate Principal Balance: With respect to a Series of
Certificates, the Initial Certificate Principal Balance of such Series of
Certificates, reduced by all amounts of principal distributed in respect of
such Series of Certificates pursuant to the terms of this Agreement, and
further reduced by the principal portion of any Realized Losses allocated in
respect of such Series of Certificates pursuant to the terms of this Agreement.
Certificate Register: The register maintained pursuant to Section 5.03.
Certificate Trustee: The First National Bank of Chicago, or its
successor in interest, or any successor Certificate Trustee appointed as herein
provided.
Certificate Trustee's Fees: The amount to be paid to the Certificate
Trustee for performing its services hereunder. The Certificate Trustee's Fee
shall, as to any Distribution Date, be an amount equal to the investment
earnings, net of losses, on the amounts on deposit from time to time in the
Certificate Account maintained by the Certificate Trustee.
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purposes of
giving any consent pursuant to this Agreement, any Certificate registered in
the name of the Depositor, any Master Servicer or any Affiliate thereof shall
be deemed not to be outstanding and the Fractional Undivided Interest evidenced
thereby shall not be taken into account in determining whether the requisite
percentage of Fractional Undivided Interests necessary to effect any such
consent has been obtained; provided, however, that the Certificate Trustee may
conclusively rely upon an Officer's Certificate to determine whether any Person
is an Affiliate of the Depositor or any Master Servicer.
Closing Date: March 31, 1998.
Code: The Internal Revenue Code of 1986, as amended.
Compensating Interest Payments: As defined in Section 6.04.
Corporate Trust Office: The office of the Certificate Trustee at which
at any particular time its corporate trust business is administered, which
office, at the date of the execution of this Agreement, is located at 1
National Plaza, Suite 0126, Chicago, Illinois 60670-0126 Attention: Corporate
Trust Department.
Custodial Agreement: Any agreement between the Certificate Trustee and
the entity named therein pursuant to which such entity agrees to act as
custodian of some or all of the Mortgage Files.
Custodian: First Chicago National Processing Corporation, or any
successor custodian appointed in accordance with this Agreement and any
applicable Custodial Agreement that has accepted such appointment in connection
therewith.
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Cut-off Date: March 1, 1998.
Cut-off Date Balance: (1) With respect to the Group 1 Mortgage Loans,
$415,921,869, (2) with respect to the Group 2 Mortgage Loans, $88,317,906 and
with respect to the Group 3 Mortgage Loans, $89,556,886.
DCR: Duff & Phelps Credit Rating Co.
Debt Service Reduction: Any reduction of the Scheduled Payments which a
Mortgagor is obligated to pay with respect to a Mortgage Loan as a result of
any proceeding under the Bankruptcy Code or any other similar state law or
other proceeding.
Debtor Relief Laws: Any applicable liquidation, conservatorship,
receivership, bankruptcy, insolvency, rearrangement, moratorium,
reorganization, or similar debtor relief laws affecting the rights of creditors
generally from time to time in effect.
Defaulted Mortgage Loan: Any Mortgage Loan as to which the Mortgagor
has failed to make unexcused payment in full of three or more consecutive
Scheduled Payments.
Deficient Valuation: With respect to any Mortgage Loan, a valuation of
the Mortgaged Property by a court of competent jurisdiction in an amount less
than the then outstanding indebtedness under the Mortgage Loan, which valuation
results from a proceeding initiated under the Bankruptcy Code or any other
similar state law or other proceeding.
Depositor: CMC Securities Corporation III, a Delaware corporation, or
its successors in interest.
Designated Depository Institution: A depository institution, commercial
bank, federal savings bank, mutual savings bank or savings and loan association
(which may include BANTSA and BAFSB) or trust company (which may include the
Certificate Trustee), the deposits of which are fully insured by the FDIC to
the extent provided by law.
Determination Date: The 18th day of the month of the Distribution Date,
or if such day is not a Business Day, the preceding Business Day.
Discount Mortgage Loan: Any Group 1 Mortgage Loan with a Net Rate less
than 6.75% per annum and any Group 2 Mortgage Loan with a Net Rate less than
6.50% per annum.
Distribution Date: The 25th day of any month, beginning in the month
immediately following the month of the Closing Date, or, if such 25th day is
not a Business Day, the immediately following Business Day.
Due Date: With respect to each Mortgage Loan, the first day of each
calendar month.
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<PAGE> 10
Due Period: With respect to any Distribution Date, the period
commencing on the second day of the month preceding the month in which the
Distribution Date occurs and ending at the close of business on the first day
of the month in which the Distribution Date occurs.
Event of Default: An event described in Section 8.01.
Excess Liquidation Proceeds: To the extent that such amount is not
required by law to be paid to the related Mortgagor, the amount, if any, by
which Liquidation Proceeds with respect to a Liquidated Mortgage Loan exceed
the sum of (i) the Outstanding Principal Balance of such Mortgage Loan and
accrued but unpaid interest at the related Mortgage Interest Rate through the
last day of the month in which the related Liquidation Date occurs, plus (ii)
related Liquidation Expenses.
FDIC: Federal Deposit Insurance Corporation or any successor thereto.
FNMA: Federal National Mortgage Association or any successor thereto.
Fractional Undivided Interest: With respect to any Certificate of a
Series, the fractional undivided interest in the related Trust Fund for such
Series as evidenced by such Certificate.
Freddie Mac: Freddie Mac, formerly the Federal Home Loan Mortgage
Corporation, or any successor thereto.
Group Available Funds: Reference to any one of the Group 1 Available
Funds, Group 2 Available Funds or Group 3 Available Funds.
Group 1 Available Funds, Group 2 Available Funds, Group 3 Available
Funds: With respect to any Distribution Date, an amount equal to the aggregate
of the following amounts with respect to the Mortgage Loans in Mortgage Loan
Groups 1, 2 and 3, respectively: (a) all previously undistributed payments on
account of principal (including the principal portion of Scheduled Payments,
Principal Prepayments and the principal portion of Net Liquidation Proceeds)
and all previously undistributed payments on account of interest received after
the Cut-off Date and on or prior to the related Determination Date, (b) any
Monthly Advances (including Certificate Account Advances) and Compensating
Interest Payments by the Master Servicer with respect to such Distribution Date
and (c) any amount reimbursed by the Master Servicer pursuant to 4.01(a) in
connection with losses on Permitted Investments, except:
(i) all payments that were due on or before the Cut-off Date;
(ii) all Principal Prepayments and Liquidation Proceeds received
after the applicable Prepayment Period;
(iii) all payments, other than Principal Prepayments, that
represent early receipt of Scheduled Payments due on a date or dates
subsequent to the related Due Date;
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<PAGE> 11
(iv) amounts received on particular Mortgage Loans as late
payments of principal or interest and respecting which, and to the
extent that, there are any unreimbursed Monthly Advances (including
Certificate Account Advances);
(v) amounts of Monthly Advances (including Certificate Account
Advances) determined to be Nonrecoverable Advances; and
(vi) amounts permitted to be withdrawn from the Certificate
Account pursuant to Section 4.03(a).
Group 1 Mortgage Loan Schedule: The schedule attached hereto as Exhibit
B-1 with respect to the Group 1 Mortgage Loans, as amended from time to time to
reflect the repurchase or substitution of Group 1 Mortgage Loans pursuant to
this Agreement.
Group 1 Mortgage Loans: The Mortgage Loans identified in the Group 1
Mortgage Loan Schedule.
Group 2 Mortgage Loan Schedule: The schedule attached hereto as Exhibit
B-2 with respect to the Group 2 Mortgage Loans, as amended from time to time to
reflect the repurchase or substitution of Group 2 Mortgage Loans pursuant to
this Agreement.
Group 2 Mortgage Loans: The Mortgage Loans identified in the Group 2
Mortgage Loan Schedule.
Group 3 Mortgage Loan Schedule: The schedule attached hereto as Exhibit
B-3 with respect to the Group 3 Mortgage Loans, as amended from time to time to
reflect the repurchase or substitution of Group 3 Mortgage Loans pursuant to
this Agreement.
Group 3 Mortgage Loans: The Mortgage Loans identified in the Group 3
Mortgage Loan Schedule.
Indemnified Persons: The Certificate Trustee, its officers, directors,
agents and employees and any separate Co-Certificate Trustee and its officers,
directors, agents and employees.
Indenture: The Indenture, dated as of March 1, 1998, by and between the
Depositor and the Indenture Trustee, as supplemented by the Series Supplement.
Indenture Trustee: The First National Bank of Chicago, or its
successors and assigns, as indenture trustee under the Indenture.
Independent: When used with respect to any specified Person, this term
means that such Person (a) is in fact independent of the Depositor, or the
applicable Master Servicer and of any Affiliate of the Depositor or the
applicable Master Servicer, (b) does not have any direct financial interest or
any material indirect financial interest in the Depositor or such Master
Servicer, or any Affiliate of the Depositor or such Master Servicer, and (c) is
not connected with the Depositor or
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such Master Servicer, or any Affiliate of the Depositor or such Master Servicer
as an officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions.
Initial Certificate Principal Balance: With respect to the Series 1998-
1A Certificates, $415,921,869, with respect to the Series 1998-1B Certificates,
$88,317,906, and with respect to the Series 1998-1C Certificates, $89,556,886.
Insurance Policy: With respect to any Mortgage Loan, any Primary
Mortgage Insurance Policy, standard hazard insurance policy, flood insurance
policy or title insurance policy.
Insurance Proceeds: Amounts paid by the insurer under any Insurance
Policy covering any Mortgage Loan or Mortgaged Property other than amounts
required to be paid over to the Mortgagor pursuant to law or the related
Mortgage Note or Security Instrument and other than amounts used to repair or
restore the Mortgaged Property or to reimburse Insured Expenses.
Insured Expenses: Expenses covered by any Insurance Policy.
Insurer: Any issuer of an Insurance Policy.
Interest Shortfall: With respect to any Distribution Date and each
Mortgage Loan that during the related Prepayment Period was the subject of a
Voluntary Principal Prepayment, or constitutes a Relief Act Mortgage Loan, an
amount determined as follows:
(a) partial principal prepayments received during the relevant
Prepayment Period: The difference between (i) one month's interest at
the applicable Net Rate on the amount of such prepayment and (ii) the
amount of interest for the calendar month of such prepayment (adjusted
to the applicable Net Rate) received at the time of such prepayment;
(b) principal prepayments in full received during the relevant
Prepayment Period: The difference between (i) one month's interest at
the applicable Net Rate on the Scheduled Principal Balance of such
Mortgage Loan immediately prior to such prepayment and (ii) the amount
of interest for the calendar month of such prepayment (adjusted to the
applicable Net Rate) received at the time of such prepayment;
(c) Relief Act Mortgage Loans: As to any Relief Act Mortgage
Loan, the excess of (i) one month's interest at the applicable Net Rate
on the Scheduled Principal Balance thereof, over (ii) one month's
interest on such Scheduled Principal Balance at the Net Rate required to
be paid by the Mortgagor as limited by application of the Relief Act.
Liquidated Mortgage Loan: Any Defaulted Mortgage Loan as to which the
related Master Servicer has determined that all amounts it expects to recover
from or on account of such Mortgage Loan have been recovered.
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Liquidation Date: With respect to any Liquidated Mortgage Loan, the
date on which the related Master Servicer has certified that such Mortgage Loan
has become a Liquidated Mortgage Loan.
Liquidation Expenses: With respect to a Mortgage Loan in liquidation,
unreimbursed expenses paid or incurred by or for the account of the related
Master Servicer and not recovered by the Master Servicer under any Primary
Mortgage Insurance Policy for reasons other than the Master Servicer's failure
to ensure the maintenance of or compliance with a Primary Mortgage Insurance
Policy, such expenses including (a) property protection expenses, (b) property
sales expenses, (c) foreclosure and sale costs, including court costs and
reasonable attorneys' fees, and (d) similar expenses reasonably paid or
incurred in connection with liquidation.
Liquidation Proceeds: Cash received in connection with the liquidation
of a Defaulted Mortgage Loan, whether through trustee's sale, foreclosure sale,
Insurance Proceeds, condemnation proceeds or otherwise.
Loan-to-Value Ratio: The fraction, expressed as a percentage, the
numerator of which is the original principal balance of the related Mortgage
Loan and the denominator of which is the Original Value of the related
Mortgaged Property.
Lost Notes: The original Mortgage Notes that have been lost, as
indicated on Exhibit J hereto.
Master Servicer: With respect to the BA Mortgage Loans, BAFSB, or its
successor in interest, or any successor master servicer with respect to the BA
Mortgage Loans appointed as herein provided, and with respect to the Cendant
Mortgage Loans, Cendant, or its successor in interest, or any successor master
servicer with respect to the Cendant Mortgage Loans appointed as herein
provided.
Master Servicer Remittance Date: The 18th day of any month, beginning
in the month immediately following the month of the Closing Date, or, if such
18th day is not a Business Day, the immediately following Business Day.
Master Servicer Report: With respect to the Cendant Mortgage Loans, a
report delivered by Cendant, and with respect to the BA Mortgage Loans, a
report delivered by BAFSB, in each case pursuant to Section 3.16 hereof.
Master Servicing Fee: As to any Mortgage Loan and any Distribution Date,
an amount equal to 1/12 of the product of (1) the related Master Servicing Fee
Rate and (2) the Scheduled Principal Balance as of the related Due Date, before
reduction by payments due on such date.
Master Servicing Fee Rate: With respect to any BA Mortgage Loan, 0.25%,
and with respect to any Cendant Mortgage Loan the per annum rate set forth for
such Cendant Mortgage Loan in the applicable Mortgage Loan Schedule.
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Monthly Advance: The advance required to be made by a Master Servicer
on the related Master Servicer Remittance Date pursuant to Section 6.03.
Monthly Payment: With respect to any Mortgage Loan and any month, the
scheduled payment or payments of principal and interest due during such month
on such Mortgage Loan which either is payable by a Mortgagor in such month
under the related Mortgage Note or, in the case of REO Property, would
otherwise have been payable under the related Mortgage Note.
Moody's: Moody's Investors Service, Inc.
Mortgage File: The mortgage documents listed in Section 2.01(c)
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
Mortgage Interest Rate: The annual rate at which interest accrues from
time to time on any Mortgage Loan pursuant to the related Mortgage Note, which
rate is equal to the "Mortgage Interest Rate" set forth with respect thereto on
the Mortgage Loan Schedule.
Mortgage Loan: A mortgage loan transferred and assigned to the
Certificate Trustee pursuant to Section 2.01 or Section 2.05 and held as a part
of the related Trust Fund, as identified in the related Mortgage Loan Schedule,
including a mortgage loan, the Mortgaged Property securing which has become an
REO Property.
Mortgage Loan Group: The Group 1 Mortgage Loans, the Group 2 Mortgage
Loans or the Group 3 Mortgage Loans, as applicable.
Mortgage Loan Group 1: The Group 1 Mortgage Loans.
Mortgage Loan Group 2: The Group 2 Mortgage Loans.
Mortgage Loan Group 3: The Group 3 Mortgage Loans.
Mortgage Loan Purchase Agreement: The Mortgage Loan Purchase Agreement
dated as of March 31, 1998, between BSMCC, as seller, and CCC, as purchaser.
Mortgage Loan Schedule(s): One or more of the Group 1 Mortgage Loan
Schedule, the Group 2 Mortgage Loan Schedule or the Group 3 Mortgage Loan
Schedule.
Mortgage Note: The originally executed note or other evidence of the
indebtedness of a Mortgagor under the related Mortgage Loan.
Mortgaged Property: Land and improvements securing the indebtedness of
a Mortgagor under the related Mortgage Loan or, in the case of REO Property,
such REO Property.
Mortgagor: The obligor or obligors on a Mortgage Note.
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Net Interest Shortfall: With respect to any Distribution Date, the
Interest Shortfall, if any, for such Distribution Date net of Compensating
Interest Payments made with respect to such Distribution Date.
Net Liquidation Proceeds: As to any Liquidated Mortgage Loan,
Liquidation Proceeds net of (i) Liquidation Expenses which are payable
therefrom to the related Master Servicer in accordance with this Agreement and
(ii) unreimbursed advances by the related Master Servicer and Monthly Advances
and Certificate Account Advances.
Net Rate: With respect to each Mortgage Loan, the Mortgage Interest
Rate in effect from time to time less the applicable Master Servicing Fee Rate.
Non-Discount Mortgage Loan: Any Group 1 Mortgage Loan with a Net Rate
equal to or greater than 6.75%, any Group 2 Mortgage Loans with a Net Rate
equal to or greater than 6.50% or any Group 3 Mortgage Loan.
Nonrecoverable Advance: Any advance (i) which was previously made or is
proposed to be made by a Master Servicer and (ii) which, in the good faith
judgment of such Master Servicer, as evidenced by an Officer's Certificate,
will not or, in the case of a proposed advance, would not, be ultimately
recoverable by such Master Servicer from Liquidation Proceeds, Insurance
Proceeds or future payments on the Mortgage Loan for which such advance was
made.
Officer's Certificate: A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President or a Vice President or
Assistant Vice President or other authorized officer of a Master Servicer or,
if applicable, BSMCC and delivered to the Certificate Trustee or the Custodian,
as required by this Agreement.
Opinion of Counsel: A written opinion of counsel who is or are
acceptable to the Certificate Trustee and who, unless required to be
Independent (an "Opinion of Independent Counsel"), may be internal counsel for
a Master Servicer.
Original Value: The lesser of (i) the Appraised Value or (ii) sales
price of a Mortgaged Property at the time of origination of a purchase money
Mortgage Loan, except that in instances where either (i) or (ii) is
unavailable, the other may be used to determine Original Value, or if both (i)
and (ii) are unavailable, Original Value may be determined from other sources
reasonably acceptable to the Certificate Trustee.
Outstanding Mortgage Loan: With respect to any Due Date, a Mortgage Loan
which, prior to such Due Date, was not the subject of a Principal Prepayment in
full, did not become a Liquidated Mortgage Loan and was not purchased pursuant
to Sections 2.02 or 2.04.
Outstanding Principal Balance: As of the time of any determination, the
principal balance of a Mortgage Loan remaining to be paid by the Mortgagor, or,
in the case of an REO Property, the principal balance of the related Mortgage
Loan remaining to be paid by the Mortgagor at the time
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such property was acquired by the related Trust less any Insurance Proceeds
with respect thereto to the extent applied to principal.
Permitted Investments: Any one or more of the following obligations or
securities held in the name of the Certificate Trustee for the benefit of the
Certificateholders:
(i) direct obligations of, and obligations the timely payment of
which are fully guaranteed by the United States of America or any agency
or instrumentality of the United States of America the obligations of
which are backed by the full faith and credit of the United States of
America;
(ii) (a) demand or time deposits, federal funds or bankers'
acceptances issued by any depository institution or trust company
incorporated under the laws of the United States of America or any state
thereof or the District of Columbia (including the Certificate Trustee
acting in its commercial banking capacity) and subject to supervision
and examination by federal and/or state banking authorities, provided
that the commercial paper and/or the short-term debt rating and/or the
long-term unsecured debt obligations of such depository institution or
trust company at the time of such investment or contractual commitment
providing for such investment have the Applicable Credit Rating or
better from each Rating Agency and (b) any other demand or time deposit
or certificate of deposit that is fully insured by the FDIC;
(iii) repurchase obligations with respect to (a) any security
described in clause (i) above or (b) any other security issued or
guaranteed by an agency or instrumentality of the United States of
America, the obligations of which are backed by the full faith and
credit of the United States of America, in either case entered into with
a depository institution or trust company (acting as principal)
described in clause (ii)(a) above where the Certificate Trustee holds
the security therefor;
(iv) securities bearing interest or sold at a discount issued by
any corporation (including the Certificate Trustee) incorporated under
the laws of the United States of America or any state thereof that have
the Applicable Credit Rating or better from each Rating Agency at the
time of such investment or contractual commitment providing for such
investment; provided, however, that securities issued by any particular
corporation will not be Permitted Investments to the extent that
investments therein will cause the then outstanding principal amount of
securities issued by such corporation and held as part of the Trust Fund
to exceed 10% of the aggregate Outstanding Principal Balances and
amounts of all the Mortgage Loans and Permitted Investments,
respectively, held as part of the Trust Fund;
(v) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand
or on a specified date not more than one year after the date of issuance
thereof) having the Applicable Credit Rating or better from each Rating
Agency at the time of such investment;
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(vi) a Reinvestment Agreement;
(vii) any other demand, money market or time deposit,
obligation, security or investment as may be acceptable to each Rating
Agency as evidenced in writing by each Rating Agency to the Certificate
Trustee; and
(viii) any money market or common trust fund having the
Applicable Credit Rating or better from each Rating Agency, including
any such fund for which either Master Servicer, the Certificate Trustee
or any affiliate of any of them acts as a manager or an advisor;
provided, however, that no instrument or security shall be a Permitted
Investment if such instrument or security evidences a right to receive only
interest payments with respect to the obligations underlying such instrument or
if such security provides for payment of both principal and interest with a
yield to maturity in excess of 120% of the yield to maturity at par or if such
instrument or security is purchased at a price greater than par.
Person: Any individual, corporation, partnership, joint venture,
association, limited liability company, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
Prepayment Period: With respect to any Mortgage Loan and any
Distribution Date, the calendar month preceding the month of such Distribution
Date.
Primary Mortgage Insurance Policy: Any primary mortgage guaranty
insurance policy issued in connection with a Mortgage Loan which provides
compensation to a Mortgage Note holder in the event of default by the related
Mortgagor under such Mortgage Note or the related Security Instrument, or any
replacement policy therefor.
Principal Prepayment: Any payment (whether partial or full) or other
recovery of principal on a Mortgage Loan which is received in advance of its
scheduled Due Date to the extent that it is not intended by the Mortgagor to be
Scheduled Principal and is not accompanied by an amount as to interest
representing scheduled interest due on any date or dates in any month or months
subsequent to the month of prepayment, including Insurance Proceeds and the
purchase price in connection with any purchase of a Mortgage Loan, any cash
deposit in connection with the substitution of a Mortgage Loan, and the
principal portion of Net Liquidation Proceeds.
Protected Account: An account established and maintained in the name of
the Certificate Trustee for the benefit of Certificateholders by either Master
Servicer with respect to the Mortgage Loans and with respect to REO Property in
a Designated Depository Institution for receipt of principal and interest and
other amounts as described in Section 4.01.
Qualified Insurer: Any insurance company duly qualified as such under
the laws of the state or states in which the related Mortgaged Property or
Mortgaged Properties is or are located, duly authorized and licensed in such
state or states to transact the type of insurance business in which it
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is engaged and approved as an insurer by the applicable Master Servicer, so
long as the claims paying ability of which is acceptable to the Rating Agencies
for collateralized mortgage obligations having the same rating as the highest
rating given to any Bonds rated by the Rating Agencies as of the Closing Date.
Rating Agencies: Moody's and DCR.
Rating Agency Eligible Account: An account, including one maintained
with the Certificate Trustee, which either (i) is a trust account maintained
with the corporate trust department of a depository institution or trust
company (including, without limitation, the Certificate Trustee) organized
under the laws of the United States of America or any one of the states thereof
or the District of Columbia which is not affiliated with either Master Servicer
or any other master servicer other than the Certificate Trustee or (ii) is
maintained with an entity which is an institution whose deposits are insured by
the FDIC, the unsecured and uncollateralized long-term debt obligations of
which shall be rated "A" or higher by Moody's and "A" or higher by DCR, or one
of the two highest short-term ratings by each Rating Agency, and which is
either (a) a federal savings association duly organized, validly existing and
in good standing under the federal banking laws, (b) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state or the District of Columbia, (c) a national banking
association under the federal banking laws, or (d) a principal subsidiary of a
bank holding company.
Realized Loss: Any (i) Deficient Valuation or (ii) as to any Liquidated
Mortgage Loan, (x) the Outstanding Principal Balance of such Liquidated
Mortgage Loan plus accrued and unpaid interest thereon at the Mortgage Interest
Rate through the last day of the month of such liquidation less (y) the related
Net Liquidation Proceeds with respect to such Mortgage Loan.
Record Date: With respect to any Distribution Date, the close of
business on the last Business Day of the month immediately preceding the month
of such Distribution Date.
Reinvestment Agreement: One or more reinvestment agreements, acceptable
to the Certificate Trustee and the Rating Agencies, from a bank, insurance
company or other corporation or entity (including the Certificate Trustee).
Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
Relief Act Mortgage Loan: Any Mortgage Loan as to which the Scheduled
Payment thereof has been reduced due to the application of the Relief Act.
REMIC: A real estate mortgage investment conduit, as defined in the
Code.
REMIC I: As defined in the Series Supplement.
REMIC II: As defined in the Series Supplement.
REMIC III: As defined in the Series Supplement.
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REMIC Opinion: An Opinion of Independent Counsel, to the effect that
the proposed action described therein would not, under the REMIC Provisions,
(i) cause a Series REMIC to fail to qualify as a REMIC while any regular
interest in any Series REMIC is outstanding, (ii) result in a tax on prohibited
transactions with respect to any Series REMIC or (iii) constitute a taxable
contribution to any Series REMIC after the Startup Day.
REMIC Provisions: The provisions of the federal income tax law relating
to REMICs, which appear at Sections 860A through 860G of the Code, and related
provisions and regulations promulgated thereunder, as the foregoing may be in
effect from time to time.
REO Property: A Mortgaged Property acquired in the name of the
Certificate Trustee, for the benefit of the Certificateholders, by foreclosure
or deed-in-lieu of foreclosure in connection with a defaulted Mortgage Loan.
Repurchase Price: With respect to any Mortgage Loan (or any property
acquired with respect thereto) required to be repurchased pursuant to Section
2.02 or 2.04, an amount equal to the sum of (i) 100% of the Outstanding
Principal Balance of such Mortgage Loan as of the date of repurchase (or if the
related Mortgaged Property was acquired with respect thereto, 100% of the
Outstanding Principal Balance at the date of the acquisition) plus (ii) accrued
but unpaid interest on the Outstanding Principal Balance at the related
Mortgage Interest Rate, through and including the last day of the month of
repurchase reduced by (ii) any portion of the Master Servicing Fee or advances
payable to the purchaser of the Mortgage Loan.
Request for Release: A request for release in the form attached hereto
as Exhibit D.
Required Insurance Policy: With respect to any Mortgage Loan, any
insurance policy which is required to be maintained from time to time under
this Agreement with respect to such Mortgage Loan.
Residual Bonds: The Class R-1, Class R-2 and R-3 Bonds.
Responsible Officer: Any officer assigned to the Corporate Trust
Division (or any successor thereto), including any Vice President, Assistant
Vice President, Trust Officer, any Assistant Secretary, any trust officer or
any other officer of the Certificate Trustee customarily performing functions
similar to those performed by any of the above designated officers and having
direct responsibility for the administration of this Agreement.
Scheduled Payment: With respect to any Mortgage Loan and any month, the
scheduled payment or payments of principal and interest due during such month
on such Mortgage Loan which either is payable by a Mortgagor (or payable from
Buydown Funds, in the case of a Buydown Loan) in such month under the related
Mortgage Note or, in the case of REO Property, would otherwise have been
payable under the related Mortgage Note.
Scheduled Principal: The principal portion of any Scheduled Payment.
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Scheduled Principal Balance: With respect to any Mortgage Loan on any
Distribution Date, (i) the unpaid principal balance of such Mortgage Loan as of
the close of business on the related Due Date (i.e., taking account of the
Scheduled Principal to be made on such Due Date and irrespective of any
delinquency in its payment), as specified in the amortization schedule at the
time relating thereto (before any adjustment to such amortization schedule by
reason of any Debt Service Reduction occurring after the Cut-off Date (other
than a Deficient Valuation) or any moratorium or similar waiver or grace
period) less (ii) any Principal Prepayments (including the principal portion of
Net Liquidation Proceeds) received during or prior to the related Prepayment
Period; provided that the Scheduled Principal Balance of a Liquidated Mortgage
Loan is zero.
Securities Act: The Securities Act of 1933, as amended.
Security Instrument: A written instrument creating a valid first lien
on a Mortgaged Property securing a Mortgage Note, which may be any applicable
form of mortgage, deed of trust, deed to secure debt or security deed,
including any riders or addenda thereto.
Series: A Series of Certificates (which may consist of a single
Certificate) evidencing a beneficial interest in the Trust for such Series.
The Series is indicated on the face of a Certificate. The Series issued
pursuant to this Agreement are designated as Series 1998-1A, Series 1998-1B and
Series 1998-1C.
Series REMIC: Any of REMIC I, REMIC II or REMIC III.
Series Supplement: The Series 1998-1 Supplement, dated as of March 31,
1998, to the Indenture, by and between the Depositor and the Indenture
Trustee.
Servicing Account: The separate trust account(s) created and maintained
by each Master Servicer pursuant to this Agreement with respect to the related
Mortgage Loans or REO Property in a Designated Depository Institution for
collection of taxes, assessments, insurance premiums and comparable items as
described in Section 3.04.
Servicing Advances: All reasonable and customary "out of pocket" costs
and expenses incurred in the performance by a Master Servicer of its servicing
obligations, including, but not limited to, the cost of (i) the preservation,
restoration and protection of the Mortgaged Property, (ii) any enforcement or
judicial proceedings, including foreclosures, (iii) the management and
liquidation of the REO Property, including reasonable fees paid to any
independent contractor in connection therewith, (iv) compliance with the
obligations under Section 3.04 or 3.07, and (v) in connection with the
liquidation of a Mortgage Loan, expenditures relating to the purchase or
maintenance of the first lien on the Mortgaged Property pursuant to Section
3.09, all of which reasonable and customary out-of-pocket costs and expenses
are reimbursable to such Master Servicer to the extent provided in Sections
4.02 and 4.03(a).
Servicing Officer: Any officer of a Master Servicer or of an agent or
independent contractor through which all or part of such Master Servicer's
servicing responsibilities are carried out, involved in, or responsible for,
the administration and servicing of the Mortgage Loans whose name
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and specimen signature appear on a list of servicing officers furnished to the
Certificate Trustee by such Master Servicer as such list may from time to time
be amended in accordance with the foregoing.
Special Hazard Loss: (i) A Realized Loss suffered by a Mortgaged
Property on account of direct physical loss, exclusive of (a) any loss covered
by a hazard policy or a flood insurance policy required to be maintained in
respect of such Mortgaged Property under Section 3.07 and (b) any loss caused
by or resulting from:
(1) normal wear and tear;
(2) conversion or other dishonest act on the part of the Certificate
Trustee, a Master Servicer or any of their agents or employees;
or
(3) errors in design, faulty workmanship or faulty materials, unless
the collapse of the property or a part thereof ensues;
or (ii) any Realized Loss suffered by the related Trust arising from or related
to the presence or suspected presence of hazardous wastes or hazardous
substances on a Mortgage Property as reported by a Master Servicer to the
Certificate Trustee unless such loss to a Mortgaged Property is covered by a
hazard policy or a flood insurance policy required to be maintained in respect
of such Mortgage Property under Section 3.07.
Startup Day: March 31, 1998.
Substitute Mortgage Loan: A mortgage loan tendered to the Custodian on
behalf of the Certificate Trustee pursuant to Section 2.05, in each case, (i)
which has an Outstanding Principal Balance not materially greater nor
materially less than the Mortgage Loan for which it is to be substituted; (ii)
which has a Mortgage Interest Rate and Net Rate not less than, and not
materially greater than, such Mortgage Loan; (iii) which has a maturity date
not materially earlier or later than such Mortgage Loan and not later than the
latest maturity date of any Mortgage Loan in the related Mortgage Loan Group;
(iv) which is of the same property type and occupancy type as such Mortgage
Loan; (v) which has a Loan-to-Value Ratio not greater than the Loan-to-Value
Ratio of such Mortgage Loan; (vi) which is current in payment of principal and
interest as of the date of substitution; and (vii) as to which the payment
terms do not vary in any material respect from the payment terms of the
Mortgage Loan for which it is to be substituted.
Trust: As defined in Section 2.01(a).
Trust Estate: As defined in the Indenture.
Trust Fund: With respect to a Series, the pool of assets subject hereto
in which the Certificates of such Series represent a beneficial interest,
constituting the related Trust created hereby and to be administered hereunder
with respect to such Series, consisting of: (i) the related Mortgage Loans and
all rights pertaining thereto including all interest and principal due with
respect to such
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Mortgage Loans after the Cut-off Date, but excluding any payments of principal
or interest due on or prior to the Cut-off Date; (ii) such assets as from time
to time shall be credited or are required by the terms of this Agreement to be
credited to the Certificate Account with respect to such Series; (iii) such
assets as from time to time may be held by a Master Servicer in Protected
Accounts (excluding any income to such Master Servicer from Permitted
Investments under Section 4.01(a)) or in Buydown Fund Accounts with respect to
such Series; (iv) any Servicing Accounts with respect to such Series (to the
extent the mortgagee has a claim thereto and excluding any income to the
applicable Master Servicer or interest payable to Mortgagors pursuant to
applicable law); (v) any REO Property with respect to such Series; (vi) the
Required Insurance Policies and any amounts paid or payable by the insurer
under any Insurance Policy (to the extent the mortgagee has a claim thereto)
with respect to such Series; (vii) the Mortgage Loan Purchase Agreement and the
Assignment Agreement to the extent provided in Section 2.04(a); and (viii) any
and all proceeds of the foregoing. The Trust Fund relating to Series 1998-1A
shall include the Mortgage Loans identified on the Group 1 Mortgage Loan
Schedule, the Trust Fund relating to Series 1998-1B shall include the Mortgage
Loans identified the Group 2 Mortgage Loan Schedule, and the Trust Fund
relating to Series 1998-1C shall include the Mortgage Loans identified the
Group 3 Mortgage Loan Schedule. Reference to holders of Certificates
evidencing Fractional Undivided Interests aggregating not less than a certain
percentage of the Trust of a particular Series means holders of Certificates
the aggregate Fractional Undivided Interests of such Series of which, as
indicated on the face thereof, is not less than such percentage.
Uninsured Cause: Any cause of damage to a Mortgaged Property or REO
Property such that the complete restoration of such Mortgaged Property or REO
Property is not fully reimbursable by the hazard insurance policies required to
be maintained pursuant to Section 3.07, without regard to whether or not such
policy is maintained.
Voluntary Principal Prepayment: With respect to any Prepayment Period,
any Principal Prepayment received from the related Mortgagor on a Mortgage
Loan.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS
Section 2.01. Conveyance of Mortgage Loans to Certificate Trustee.
(a) Three trusts (each, a "Trust") of which the Certificate Trustee
is the trustee are hereby created under the laws of the State of New York for
the benefit of the Holders of the related Series of Certificates. The purpose
of each Trust is to hold the related Trust Fund and provide for the issuance,
execution, authentication and delivery of the related Certificates. The assets
of each Trust shall consist of the related Trust Fund. Each Trust shall be
irrevocable.
The assets of each Trust shall remain in the custody of the Custodian on
behalf of the Certificate Trustee, on behalf of the related Trust, and shall be
kept in the related Trust. Moneys to the credit of each Trust shall be held by
the Certificate Trustee and invested as provided herein. All assets received
and held in each Trust will not be subject to any right, charge, security
interest, lien
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or claim of any kind in favor of The First National Bank of Chicago in its own
right, or any Person claiming through it. The Certificate Trustee, on behalf
of each Trust, shall not have the power or authority to transfer, assign,
hypothecate, pledge or otherwise dispose of any of the assets of such Trust to
any Person, except as permitted herein. No creditor of a beneficiary of a
Trust, of the Certificate Trustee, of a Master Servicer, or of the Depositor
shall have any right to obtain possession of, or otherwise exercise legal or
equitable remedies with respect to, the property of a Trust, except in
accordance with the terms of this Agreement.
(b) The Depositor concurrently with the execution and delivery of
this Agreement, sells, transfers and assigns to the Certificate Trustee,
without recourse, all its right, title and interest in and to the Trust Funds,
including but not limited to:
(i) the related Mortgage Loans and all rights pertaining
thereto including all interest and principal due with respect to such
Mortgage Loans after the Cut-off Date, but excluding any payments of
principal or interest due on or prior to the Cut-off Date;
(ii) such assets as shall from time to time be credited, or are
required by the terms of this Agreement to be credited, to the
Certificate Account,
(iii) such assets relating to the Mortgage Loans as from time to
time may be held by a Master Servicer in Protected Accounts (excluding
any income to such Master Servicer from Permitted Investments under
Section 4.01(a)) or in Buydown Fund Accounts;
(iv) any Servicing Accounts (to the extent the mortgagee has a
claim thereto and excluding any income to the applicable Master Servicer
or interest payable to Mortgagors pursuant to applicable law);
(v) any REO Property;
(vi) the Required Insurance Policies and any amounts paid or
payable by the insurer under any Insurance Policy (to the extent the
mortgagee has a claim thereto);
(vii) the Mortgage Loan Purchase Agreement to the extent
provided in Section 2.04(a); and
(viii) any proceeds of the foregoing.
Although it is the intent of the parties to this Agreement that the conveyance
of the Depositor's right, title and interest in and to the Mortgage Loans and
other assets in the Trust Funds pursuant to this Agreement shall constitute a
purchase and sale and not a loan, in the event that such conveyance is deemed
to be a loan, it is the intent of the parties to this Agreement that the
Depositor shall be deemed to have granted to the Certificate Trustee a first
priority perfected security interest in all of the Depositor's right, title and
interest in, to and under the Mortgage Loans and other assets in the Trust
Funds, and that this Agreement shall constitute a security agreement under
applicable law.
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(c) In connection with the above transfer and assignment, the
Depositor hereby deposits with the Custodian on behalf of the Certificate
Trustee, with respect to each Mortgage Loan (i) the original Mortgage Note,
endorsed without recourse to the order of the Certificate Trustee and showing
an unbroken chain of endorsements from the original payee thereof to the Person
endorsing it to the Certificate Trustee, (ii) the original Security Instrument,
which shall have been recorded, with evidence of such recording indicated
thereon, (iii) a certified copy of the assignment (which may be in the form of
a blanket assignment if permitted in the jurisdiction in which the Mortgaged
Property is located) to the Certificate Trustee of the Security Instrument,
with evidence of recording with respect to each Mortgage Loan in the name of
the Certificate Trustee thereon (or if (vii) below applies, shall be in
recordable form), (iv) all intervening assignments of the Security Instrument,
if applicable and only to the extent available to the Depositor with evidence
of recording thereon, (v) the original or a copy of the policy or certificate
of primary mortgage guaranty insurance, to the extent available, if any, (vi)
the original policy of title insurance or mortgagee's certificate of title
insurance or commitment or binder for title insurance, (vii) the originals of
each assumption, modification or substitution agreement, if any, relating to
the Mortgage Loan, and (viii) the certificate of primary mortgage insurance, if
applicable; provided, however, that in lieu of the foregoing, the Depositor may
deliver the following documents, under the circumstances set forth below:
(A) in lieu of the original Security Instrument, assignments
to the Certificate Trustee or intervening assignments thereof which have
been delivered, are being delivered or will, upon receipt of recording
information relating to the Security Instrument required to be included
thereon, be delivered to recording offices for recording and have not
been returned to the Depositor in time to permit their delivery as
specified above, the Depositor may deliver a true copy thereof with a
certification by BSMCC or the applicable Master Servicer, on the face of
such copy, substantially as follows: "Certified to be a true and
correct copy of the original, which has been transmitted for recording";
(B) in lieu of the Security Instrument, assignment to the
Certificate Trustee or intervening assignments thereof, if the
applicable jurisdiction retains the originals of such documents (as
evidenced by a certification from BSMCC or the applicable Master
Servicer to such effect) the Depositor may deliver photocopies of such
documents containing an original certification by the judicial or other
governmental authority of the jurisdiction where such documents were
recorded; and
(C) in lieu of the original Mortgage Notes relating to five BA
Mortgage Loans and six Cendant Mortgage Loans, with an aggregate
Scheduled Principal Balance as of the Cut-off Date of $3,953,828.96,
each as identified in the list delivered by the Depositor to the
Certificate Trustee on the Closing Date and set forth in Exhibit J
hereto, the Depositor may deliver a lost note affidavit and, if
available, a copy of the original Mortgage Note;
and provided further, however, that in the case of Mortgage Loans which have
been prepaid in full after the Cut-off Date and prior to the Closing Date, the
Depositor, in lieu of delivering the above documents, may deliver to the
Custodian and to the Certificate Trustee a certification of a Servicing Officer
to such effect and shall deposit all amounts paid in respect of such Mortgage
Loans in the
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Certificate Account on the Closing Date. The Depositor shall deliver such
original documents (including any original documents as to which certified
copies had previously been delivered) to the Custodian on behalf of the
Certificate Trustee promptly after they are received. As to each Mortgage Loan
master serviced by it, the applicable Master Servicer shall cause, at its
expense, the Security Instrument and intervening assignments, if any, and the
assignment of the Security Instrument to the Certificate Trustee to be recorded
not later than one year after the Closing Date.
Section 2.02. Acceptance of Mortgage Loans by Certificate Trustee.
(a) The Certificate Trustee acknowledges receipt of, subject to
further review and the exceptions which may be noted pursuant to the procedures
described below, and declares that the Custodian holds on behalf of the
Certificate Trustee the documents (or certified copies thereof) delivered to it
pursuant to Section 2.01 and declares that the Custodian on behalf of the
Certificate Trustee will continue to hold those documents and any amendments,
replacements or supplements thereto and all other assets of each Trust Fund
delivered to it as Certificate Trustee or to the Custodian in trust for the use
and benefit of all present and future Holders of the Certificates. No later
than 45 days after the Closing Date (or, with respect to any Substitute
Mortgage Loan, within five Business Days after the receipt thereof by the
Custodian on behalf of the Certificate Trustee), the Certificate Trustee
agrees, for the benefit of the Certificateholders, to cause the Custodian to
review each Mortgage File delivered to it and to execute and deliver, or cause
to be executed and delivered, to the Depositor and the applicable Master
Servicer an Initial Certification substantially in the form annexed hereto as
Exhibit G. In conducting such review, the Certificate Trustee will cause the
Custodian to ascertain whether all required documents have been executed and
received and whether those documents relate, determined on the basis of the
Mortgagor name, original principal balance and loan number, to the Mortgage
Loans it has received, as identified in the related Mortgage Loan Schedule
(provided, however, that with respect to those documents described in
subclauses (c)(iv), (c)(v) and (c)(vi) of Section 2.01, the Custodian's
obligations shall extend only to documents actually delivered pursuant to such
subsections). In performing any such review, the Custodian may conclusively
rely on the purported due execution and genuineness of any such document and on
the purported genuineness of any signature thereon. If the Custodian finds any
document constituting part of the Mortgage File not to have been executed or
received, or to be unrelated to the Mortgage Loans identified in the related
Mortgage Loan Schedule or to appear to be defective on its face, the Custodian
shall promptly notify BSMCC. BSMCC shall correct or cure any such defect
within 90 days from the date of notice from the Custodian of the defect and if
BSMCC fails to correct or cure the defect within such period, and such defect
materially and adversely affects the interests of the Certificateholders in the
related Mortgage Loan, BSMCC will, subject to Section 2.05, within 120 days
from the Certificate Trustee's notification purchase such Mortgage Loan at the
Repurchase Price; provided, however, that if such defect relates solely to the
inability of BSMCC to deliver the original Security Instrument or intervening
assignments thereof, or a certified copy, because the originals of such
documents, or a certified copy, have not been returned by the applicable
jurisdiction, BSMCC shall not be required to purchase such Mortgage Loan if
BSMCC delivers such original documents or certified copy promptly upon receipt,
but in no event later than 360 days after the Closing Date. The foregoing
repurchase obligation shall not apply in the event that BSMCC cannot deliver
such original or copy of any document submitted for recording to the
appropriate recording office in the applicable jurisdiction because such
document
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has not been returned by such office; provided further, however, that BSMCC
shall instead deliver a recording receipt of such recording office or, if such
receipt is not available, a certificate of a Servicing Officer confirming that
such documents have been accepted for recording, and delivery to the Custodian
shall be effected by BSMCC within 30 days after its receipt of the original
recorded document.
(b) No later than one year after the Closing Date, the Certificate
Trustee will cause the Custodian to review, for the benefit of the
Certificateholders, the Mortgage Files delivered to it and will execute and
deliver or cause to be executed and delivered to the Depositor and each Master
Servicer, a Final Certification substantially in the form annexed hereto as
Exhibit H. In conducting such review, the Certificate Trustee will cause the
Custodian to ascertain whether an original of each document required to be
recorded has been returned from the recording office with evidence of recording
thereon or a certified copy has been obtained from the recording office. If
the Custodian finds that any document constituting part of the Mortgage File
has not been received, or is unrelated, determined on the basis of the
Mortgagor name, original principal balance and loan number, to the Mortgage
Loans identified in the related Mortgage Loan Schedule or appears defective on
its face, the Custodian shall promptly notify BSMCC (provided, however, that
with respect to those documents described in subsection (c)(iv), (c)(v) and
(c)(vi) of Section 2.01, the Custodian's obligations shall extend only to the
documents actually delivered pursuant to such subsections). BSMCC shall
correct or cure any such defect or shall deliver to the Certificate Trustee and
the Custodian an Opinion of Counsel to the effect that such defect does not
materially or adversely affect the interests of Certificateholders in such
Mortgage Loan within 90 days after the date of notice from the Certificate
Trustee of the defect, and if BSMCC is unable to cure such defect or deliver
such Opinion of Counsel within such period, and if such defect materially and
adversely affects the interests of the Certificateholders in the related
Mortgage Loan, BSMCC shall, subject to Section 2.05, within 120 days after the
Certificate Trustee's notification purchase such Mortgage Loan at the
Repurchase Price; provided, however, that if such defect relates solely to the
inability of BSMCC to deliver the original Security Instrument or intervening
assignments thereof, or a certified copy, because the originals of such
documents, or a certified copy, have not been returned by the applicable
jurisdiction, BSMCC shall not be required to purchase such Mortgage Loan, if
BSMCC delivers such original documents or certified copy promptly upon receipt,
but in no event later than 360 days after the Closing Date.
(c) Notwithstanding the foregoing and the provisions of Section 2.04,
if a Mortgage Loan is discovered to have a defect which, had such defect been
discovered before the Startup Day, would have prevented the Mortgage Loan from
being a "qualified mortgage" within the meaning of Section 860G(a)(3) of the
Code, BSMCC shall, within 90 days after the date such defect is discovered,
purchase such Mortgage Loan at the applicable Repurchase Price, unless BSMCC
delivers to the Certificate Trustee an Opinion of Counsel to the effect that
continuing to hold such Mortgage Loan will not adversely affect the status of
each of REMIC I, REMIC II and REMIC III as a REMIC for federal income tax
purposes.
(d) In the event that a Mortgage Loan is purchased by BSMCC in
accordance with Subsections 2.02(a), (b) or (c) above, BSMCC shall provide the
Repurchase Price to the Certificate Trustee for deposit in the Certificate
Account and shall provide to the Certificate Trustee written
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notification detailing the components of the Repurchase Price. Upon deposit of
the Repurchase Price in the Certificate Account, the Certificate Trustee shall
cause the Custodian to release to BSMCC the related Mortgage File and shall
execute and deliver all instruments of transfer or assignment, without
recourse, furnished to it by BSMCC as are necessary to vest in BSMCC title to
and rights under the Mortgage Loan. Such purchase shall be deemed to have
occurred on the date on which the Repurchase Price in available funds is
received by the Certificate Trustee. The Certificate Trustee shall amend the
applicable Mortgage Loan Schedule, which was previously delivered to it by the
Depositor in a form agreed to between the Depositor and the Certificate
Trustee, to reflect such repurchase and shall promptly notify the applicable
Master Servicer and the Rating Agencies of such amendment. The obligation of
BSMCC to repurchase (or substitute a Substitute Mortgage Loan, pursuant to
Section 2.04, for) any Mortgage Loan as to which such a defect in a constituent
document exists shall be the sole remedy respecting such defect available to
the Certificateholders or to the Certificate Trustee on their behalf.
Section 2.03. Representations, Warranties and Covenants of the Master
Servicers.
(a) Each Master Servicer hereby represents and warrants to the
Certificate Trustee as of the Closing Date that:
(i) (A) in the case of BAFSB, it is a federal savings bank duly
organized, validly existing and in good standing under the laws of the
United States of America and throughout the term of this Agreement will
remain a federal savings bank duly organized, validly existing and in
good standing under the laws of the United States of America, and (B) in
the case of Cendant, it is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey
and is in compliance with the laws of each State in which a Mortgaged
Property related to a Cendant Mortgage Loan is located to the extent
necessary to enable it to perform its obligations hereunder and is in
good standing as a foreign corporation in each jurisdiction in which the
nature of its business or the properties owned or leased by it make such
qualification necessary, except where any failure to qualify would not
have a material adverse effect on Cendant, the Trusts, the Certificates
or the Certificateholders, and throughout the term of this Agreement
will remain a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey and in compliance
with the laws of such states and in good standing as a foreign
corporation in each such jurisdiction; and in the case of each Master
Servicer, it has the corporate power and authority to perform its
obligations under this Agreement;
(ii) The execution and delivery of this Agreement have been duly
authorized by all requisite corporate action;
(iii) This Agreement, assuming due authorization, execution, and
delivery by the other parties hereto, will constitute its legal, valid
and binding obligation, enforceable in accordance with its terms, except
only as such enforcement may be limited by applicable Debtor Relief Laws
and that certain equitable remedies may not be available regardless of
whether enforcement is sought in equity or at law;
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(iv) Its execution and delivery of this Agreement and its
performance and compliance with the terms of this Agreement will not (A)
violate its charter or articles of incorporation, as applicable, or
bylaws (B) to its knowledge, violate any law or regulation, or any
administrative or judicial decree or order to which it is subject or (C)
constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, or result in the breach of,
any material contract, agreement or other instrument to which it is a
party or which may be applicable to it or any of its assets;
(v) To its best knowledge, after reasonable investigation, it is
not in default with respect to any order or decree of any court or any
order, regulation or demand of any federal, state, municipal or
governmental agency, which default would reasonably be expected to have
consequences that would materially and adversely affect its financial
condition or operations or its performance hereunder;
(vi) It does not believe, nor does it have any reason or cause
to believe, that it cannot perform each and every covenant contained in
this Agreement to be performed by it;
(vii) The consummation of the transactions contemplated by this
Agreement is in the ordinary course of its business; and
(viii) No litigation is pending or, to its best knowledge,
threatened against it, which could be reasonably expected to materially
and adversely affect its entering into this Agreement or performing its
obligations under this Agreement or which would have a material adverse
effect on its financial condition.
Section 2.04 Assignment of Interest in the Mortgage Loan Purchase
Agreement.
(a) The Depositor hereby assigns to the Certificate Trustee all of
its right, title and interest in the Mortgage Loan Purchase Agreement and the
Assignment Agreement, provided that the Depositor retains a joint and several
right in the event of breach of the representations, warranties and covenants
of BSMCC under the Mortgage Loan Purchase Agreement, to enforce the provisions
thereof and to seek all or any available remedies; and provided further that
this shall not be deemed an agreement or requirement on the part of the
Depositor to pursue any such remedies; provided, further, that the obligations
of BSMCC to substitute or repurchase a Mortgage Loan shall be the Certificate
Trustee's and the Certificateholders' sole remedy for any breach thereof. At
the request of the Certificate Trustee, the Depositor shall take such actions
as may be necessary to enforce the above right, title and interest on behalf of
the Certificate Trustee and the Certificateholders or shall execute such
further documents as the Certificate Trustee may reasonably require in order to
enable the Certificate Trustee to carry out such enforcement.
(b) If the Depositor, a Master Servicer, the Custodian or the
Certificate Trustee discovers a breach of any of the representations and
warranties set forth in Exhibit C and such breach existed on the date the
representation and warranty was made, which breach materially and adversely
affects the value of the interests of Certificateholders or the Certificate
Trustee in the related Mortgage Loan, the party discovering the breach shall
give prompt written notice of the breach to BSMCC and
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the other parties. Within 90 days after its discovery or receipt of notice
that such breach has occurred (whichever occurs earlier), BSMCC will cure the
breach in all material respects or, subject to Section 2.05, will purchase the
Mortgage Loan or any property acquired with respect thereto from the
Certificate Trustee; provided, however, that if there is a breach of any
representation set forth in Exhibit C and the Mortgage Loan or the related
property acquired with respect thereto has been sold, then BSMCC will pay, in
lieu of the Repurchase Price, any excess of the Repurchase Price over the Net
Liquidation Proceeds received upon such sale. (If the Net Liquidation Proceeds
exceed the Repurchase Price, any excess shall be paid to BSMCC to the extent
not required by law to be paid to the borrower.) Any such purchase by BSMCC
shall be made by providing an amount equal to the Repurchase Price to the
Certificate Trustee for deposit in the Certificate Account and the Certificate
Trustee, upon deposit of the Repurchase Price in the Certificate Account and of
written notification detailing the components of such Repurchase Price, shall
cause the Custodian to release to BSMCC the related Mortgage File and shall
execute and deliver all instruments of transfer or assignment furnished to it
by BSMCC, without recourse, as are necessary to vest in BSMCC title to and
rights under the Mortgage Loan or any property acquired with respect thereto.
Such purchase shall be deemed to have occurred on the date on which the
Repurchase Price in available funds is received by the Certificate Trustee.
The Certificate Trustee shall amend the applicable Mortgage Loan Schedule to
reflect such repurchase and shall promptly notify the applicable Master
Servicer, the Custodian and the Rating Agencies of such amendment. Enforcement
of the obligation of BSMCC, to purchase (or substitute a Substitute Mortgage
Loan, pursuant to Section 2.05, for) any Mortgage Loan or any property acquired
with respect thereto (or pay the Repurchase Price as set forth in the above
proviso) as to which a breach has occurred and is continuing shall constitute
the sole remedy respecting such breach available to the Certificateholders or
the Certificate Trustee on their behalf.
Section 2.05. Substitution of Mortgage Loans. Notwithstanding anything
to the contrary in this Agreement, in lieu of purchasing a Mortgage Loan
pursuant to Sections 2.02 or 2.04, BSMCC may, no later than the date by which
such purchase by BSMCC would otherwise be required, tender to the Custodian on
behalf of the Certificate Trustee a Substitute Mortgage Loan accompanied by an
Officer's Certificate of BSMCC that such Substitute Mortgage Loan conforms to
the requirements set forth in the definition of "Substitute Mortgage Loan";
provided, however, that substitution pursuant to this Section 2.05 in lieu of
purchase shall not be permitted after the termination of the two-year period
beginning on the Startup Day. The Certificate Trustee shall cause the
Custodian to examine the Mortgage File for any Substitute Mortgage Loan in the
manner set forth in Section 2.02(a) and shall notify the related Master
Servicer in writing, within five Business Days after receipt, whether or not
the documents relating to the Substitute Mortgage Loan satisfy the requirements
set forth in Section 2.02(a). Within two Business Days after such
notification, BSMCC is required to provide to the Certificate Trustee for
deposit in the Certificate Account the amount, if any, by which the Outstanding
Principal Balance as of the next preceding Due Date of the Mortgage Loan for
which substitution is being made, after giving effect to Scheduled Principal
due on such date, exceeds the Outstanding Principal Balance as of such date of
the Substitute Mortgage Loan, after giving effect to Scheduled Principal due on
such date, which amount shall be treated for the purposes of this Agreement as
if it were the payment by BSMCC of the Repurchase Price for the purchase of a
Mortgage Loan by BSMCC. After such notification to BSMCC and, if any such
excess exists, upon receipt of such deposit, the Certificate Trustee shall
accept such
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Substitute Mortgage Loan, which shall thereafter be deemed to be a Mortgage
Loan, hereunder. In the event of such a substitution, accrued interest on the
Substitute Mortgage Loan for the month in which the substitution occurs and any
Principal Prepayments made thereon during such month shall be the property of
the related Trust and accrued interest for such month on the Mortgage Loan for
which the substitution is made and any Principal Prepayments made thereon
during such month shall be the property of BSMCC. The Scheduled Principal on a
Substitute Mortgage Loan due on the Due Date in the month of substitution shall
be the property of BSMCC and the Scheduled Principal on the Mortgage Loan for
which the substitution is made due on such Due Date shall be the property of
the related Trust. Upon acceptance of the Substitute Mortgage Loan, the
Certificate Trustee shall cause the Custodian to release to BSMCC the Mortgage
File related to any Mortgage Loan released pursuant to this Section 2.05 and
shall execute and deliver all instruments of transfer or assignment, without
recourse, in form as provided to it as are necessary to vest in BSMCC title to
and rights under any Mortgage Loan released pursuant to this Section 2.05.
BSMCC shall deliver the documents related to the Substitute Mortgage Loan in
accordance with the provisions of Sections 2.01(c) and 2.02(b), with the date
of acceptance of the Substitute Mortgage Loan deemed to be the Closing Date for
purposes of the time periods set forth in those Subsections. The
representations and warranties set forth in Exhibit C shall be deemed to have
been made by BSMCC with respect to each Substitute Mortgage Loan as of the date
of acceptance of such Mortgage Loan by the Custodian on behalf of the
Certificate Trustee. The Certificate Trustee shall amend the Mortgage Loan
Schedule to reflect such substitution and shall provide a copy of such amended
Mortgage Loan Schedule to each Master Servicer, the Custodian and the Rating
Agencies.
Section 2.06. Representations and Warranties Concerning the Depositor.
The Depositor hereby represents and warrants to the Certificate Trustee and
each Master Servicer as follows:
(i) the Depositor (a) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and (b) is qualified and in good standing as a foreign corporation to do
business in each jurisdiction where such qualification is necessary,
except where the failure so to qualify would not reasonably be expected
to have a material adverse effect on the Depositor's business as
currently conducted or on the Depositor's ability to enter into this
Agreement and to consummate the transactions contemplated hereby;
(ii) the Depositor has full corporate power to own its property,
to carry on its business as presently conducted and to enter into and
perform its obligations under this Agreement;
(iii) the execution and delivery by the Depositor of this
Agreement have been duly authorized by all necessary corporate action on
the part of the Depositor; and neither the execution and delivery of
this Agreement, nor the consummation of the transactions herein
contemplated, nor compliance with the provisions hereof, will conflict
with or result in a breach of, or constitute a default under, any of the
provisions of any law, governmental rule, regulation, judgment, decree
or order binding on the Depositor or its properties or the certificate
of incorporation or by-laws of the Depositor, except those conflicts,
breaches or defaults which would not reasonably be expected to have a
material adverse effect on the
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Depositor's ability to enter into this Agreement and to consummate the
transactions contemplated hereby;
(iv) the execution, delivery and performance by the Depositor of
this Agreement and the consummation of the transactions contemplated
hereby do not require the consent or approval of, the giving of notice
to, the registration with, or the taking of any other action in respect
of, any state, federal or other governmental authority or agency, except
those consents, approvals, notices, registrations or other actions as
have already been obtained, given or made;
(v) this Agreement has been duly executed and delivered by the
Depositor and, assuming due authorization, execution and delivery by the
other parties hereto, constitutes a valid and binding obligation of the
Depositor enforceable against it in accordance with its terms, except
only as such enforcement may be limited by applicable Debtor Relief Laws
and that certain equitable remedies may not be available regardless of
whether enforcement is sought in equity or at law;
(vi) there are no actions, suits or proceedings pending or, to
the knowledge of the Depositor, threatened against the Depositor, before
or by any court, administrative agency, arbitrator or governmental body
(i) with respect to any of the transactions contemplated by this
Agreement or (ii) with respect to any other matter which in the
reasonable judgment of the Depositor will be determined adversely to the
Depositor and would, if determined adversely to the Depositor,
materially and adversely affect the Depositor's ability to enter into
this Agreement or perform its obligations under this Agreement; and the
Depositor is not in default with respect to any order of any court,
administrative agency, arbitrator or governmental body so as to
materially and adversely affect the transactions contemplated by this
Agreement; and
(vii) immediately prior to the transfer and assignment to the
Certificate Trustee, each Mortgage Note and each Mortgage were not
subject to an assignment or pledge, and the Depositor had good and
marketable title to and was the sole owner thereof and had full right to
transfer and sell such Mortgage Loan to the Certificate Trustee free and
clear of any encumbrance, equity, lien, pledge, charge, claim or
security interest.
Section 2.07. The Custodian. Notwithstanding anything to the contrary
in this Agreement, the parties hereto acknowledge that the functions of the
Certificate Trustee with respect to the acceptance, inspection, custody and
release of the Mortgage Files pursuant to Article II shall be performed by the
Custodian. The Custodian shall receive no separate fee for performing such
services. The Certificate Trustee shall not be liable for any acts or
omissions of the Custodian. The parties hereto hereby appoint First Chicago
National Processing Corporation, and First Chicago National Processing
Corporation hereby accepts such appointment, to serve as Custodian hereunder.
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ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.01. Master Servicers to Master Service.
(a) Notwithstanding anything contained herein to the contrary, the
parties hereto agree that BAFSB shall be the Master Servicer of the BA Mortgage
Loans and Cendant shall be the Master Servicer of the Cendant Mortgage Loans.
Each Master Servicer shall supervise the servicing and administration of the
Mortgage Loans for which it is the Master Servicer and any related REO Property
in accordance with the terms of this Agreement and its normal servicing
practices, which shall generally conform to the standards of FNMA and shall
have full authority to do anything it reasonably deems appropriate or desirable
in connection with the supervision of such servicing and administration. Each
Master Servicer may perform its servicing responsibilities hereunder through
other agents or independent contractors, but shall not thereby be released from
any of its responsibilities as hereinafter set forth. The authority of a
Master Servicer, in its capacity as master servicer, shall include, without
limitation, the power to consult with and advise any sub-servicer regarding
administration of a related Mortgage Loan. The authority of a Master Servicer
shall include, in addition, the power on behalf of the Certificateholders, the
Certificate Trustee or any of them to (i) execute and deliver customary
consents or waivers and other instruments and documents, (ii) consent to
transfers of any related Mortgaged Property and assumptions of the related
Mortgage Notes and Security Instruments (in the manner provided in this
Agreement) and (iii) collect any Insurance Proceeds and Liquidation Proceeds
with respect to the related Mortgage Loans. Without limiting the generality of
the foregoing, each Master Servicer may, and is hereby authorized, and
empowered by the Certificate Trustee to, execute and deliver, on behalf of
itself, the Certificateholders, the Certificate Trustee, or any of them, any
instruments of satisfaction, cancellation, partial or full release, discharge
and all other comparable instruments, with respect to the Mortgage Loans for
which such Master Servicer is the master servicer, the related Insurance
Policies and the accounts related thereto, and the related Mortgaged
Properties. Each Master Servicer may exercise this power in its own name or in
the name of the Certificate Trustee.
(b) Notwithstanding the provisions of Subsection 3.01(a), no Master
Servicer shall take any action which, in such Master Servicer's reasonable
business judgment, would be inconsistent with procedures and practices required
by FNMA, with the interest of the Certificate Trustee or the Certificateholders
in the related Mortgage Loans or with the rights and interests of the
Certificate Trustee or the Certificateholders under this Agreement.
(c) The Certificate Trustee shall furnish each Master Servicer with
any powers of attorney and other documents in form as provided to it necessary
or appropriate to enable such Master Servicer to service and administer the
related Mortgage Loans and REO Property.
Section 3.02. Delivery of Documents to Successor Master Servicers. In
the event that the Certificate Trustee or its designee as a successor master
servicer for the Certificate Trustee assumes the servicing obligations of a
Master Servicer under Section 8.02, upon the reasonable request of the
Certificate Trustee or such designee as a successor master servicer, such
Master Servicer shall at its own expense deliver to the Certificate Trustee, or
at its written request to such designee, all
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documents and records, electronic or otherwise in such Master Servicer's
possession, relating to the related Mortgage Loans or REO Property and an
accounting of amounts collected and held by it, if any, and will otherwise
cooperate and use its reasonable best efforts to effect the orderly and
efficient transfer of the master servicing responsibilities hereunder to the
Certificate Trustee, or at its written request to such designee as a successor
master servicer.
Section 3.03. Collection of Mortgage Loan Payments.
(a) Each Master Servicer shall make its reasonable best efforts to
collect all payments required under the terms and provisions of the related
Mortgage Loans and will follow collection procedures comparable to the
collection procedures of FNMA-approved servicers. Consistent with the
foregoing, a Master Servicer may in its discretion (i) waive or permit to be
waived any late payment charge or assumption fee and (ii) suspend or
temporarily reduce or permit to be suspended or temporarily reduced Scheduled
Payments for a period of up to six months, or arrange or permit an arrangement
with a Mortgagor for a scheduled liquidation of delinquencies. In the event a
Master Servicer shall consent to the deferment of the due dates for Scheduled
Payments due on a related Mortgage Note, the related Master Servicer shall make
a Monthly Advance to the same extent as if such installment were due, owing and
delinquent and had not been deferred through liquidation of the Mortgaged
Property; provided, however, that the obligation of the Master Servicer to make
a Monthly Advance shall apply only to the extent that the Master Servicer
believes, in good faith, that such Monthly Advance is not a Nonrecoverable
Advance.
(b) A Master Servicer may not make any advances of amounts due in the
future with respect to a Mortgage Loan that it master services and shall not
permit, except as permitted in Section 3.08(a), (i) any modification with
respect to such Mortgage Loan that would change the Mortgage Interest Rate,
reduce or increase the principal balance (except for reductions resulting from
actual payments of principal) or change the final maturity date on such
Mortgage Loan or (ii) any modification, waiver or amendment of any term of such
Mortgage Loan that would both (A) effect an exchange or reissuance of such
Mortgage Loan under Section 1001 of the Code (or final, temporary or proposed
Treasury regulations promulgated thereunder) and (B) cause any Series REMIC to
fail to qualify as a REMIC under the Code or the imposition of any tax on
"prohibited transactions" or "contributions after the startup date" under the
REMIC Provisions.
(c) Within five Business Days after a Master Servicer has determined
that all amounts which it expects to recover from or on account of a Mortgage
Loan that it master services have been recovered and that no further
Liquidation Proceeds will be received in connection therewith, such Master
Servicer shall provide to the Certificate Trustee a certificate of a Servicing
Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the
date of such determination.
Section 3.04. Collection of Taxes, Assessments and Similar Items;
Servicing Accounts.
(a) Each Master Servicer will establish and maintain, in addition to
the Protected Accounts, one or more Servicing Accounts. Each Master Servicer
will deposit and retain therein all otherwise unapplied collections from the
Mortgagors under the Mortgage Loans that it master
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services, including amounts collected for the payment of taxes, assessments,
insurance premiums, or comparable items, as agent of such Mortgagors.
(b) The deposits in the Servicing Accounts shall be held in a
Designated Depository Institution in an account designated as a "Mortgage Loan
Servicing Account," held in trust by the applicable Master Servicer as Trustee
of Taxes and Insurance Custodial Account for Mortgagors and for the applicable
Master Servicer (and its successors and assigns) acting on its own behalf and
for such Master Servicer, as agent for holders of various pass-through
securities and other interests in mortgage loans sold by it, and agent for
various mortgagors, as their interests may appear, or under such other
designation as may be permitted by the Certificate Trustee. The amount at any
time credited to a Servicing Account must be fully insured by the FDIC, or, to
the extent that such deposits exceed the limits of such insurance, such excess
must be (i) transferred to another fully insured account in another Designated
Depository Institution or (ii) if permitted by applicable law, invested in
Permitted Investments held in trust by the Master Servicer as described above
and maturing, or subject to redemption or withdrawal, no later than the date on
which such funds are required to be withdrawn, and in no event later than 45
days after the date of investment. The Master Servicers may establish
Servicing Accounts not conforming to the foregoing requirements to the extent
that such Servicing Accounts are Rating Agency Eligible Accounts. Withdrawals
of amounts from the Servicing Accounts may be made only to effect timely
payment of taxes, assessments, insurance premiums, or comparable items, to
transfer previously unapplied collections to a Protected Account, to reimburse
the applicable Master Servicer for any advances made with respect to such
items, to refund to any Mortgagors any sums as may be determined to be
overages, to pay interest, if required, to Mortgagors on balances in the
Servicing Accounts or to clear and terminate the Servicing Accounts at or any
time after the termination of this Agreement in accordance with Section 10.01.
Section 3.05. Access to Certain Documentation and Information Regarding
the Mortgage Loans. Each Master Servicer shall provide to the Certificate
Trustee and the Depositor access to the records and documentation regarding the
related Mortgage Loans and REO Property and the servicing thereof and to the
Certificateholders, the FDIC, and the supervisory agents and examiners of the
FDIC (to which the Certificate Trustee shall also provide) access to the
documentation regarding the related Mortgage Loans required by applicable
regulations, such access being afforded without charge but only upon reasonable
prior written request and during normal business hours at the offices of such
Master Servicer, the Custodian or the Certificate Trustee that are designated
by these entities; provided, however, that, unless otherwise required by law,
the Certificate Trustee, the Custodian or a Master Servicer shall not be
required to provide access to such records and documentation if the provision
thereof would violate the legal right to privacy of any Mortgagor; provided
further, however, that the Certificate Trustee and the Depositor shall
coordinate their requests for such access so as not to impose an unreasonable
burden on, or cause an interruption of, the business of a Master Servicer. The
Master Servicers, the Custodian and the Certificate Trustee shall allow
representatives of the above entities to photocopy any of the records and
documentation and shall provide equipment for that purpose at a charge that
covers their own actual out-of-pocket costs.
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Section 3.06. Maintenance of Primary Mortgage Insurance Policies;
Collection Thereunder. Each Master Servicer shall exercise its best reasonable
efforts to maintain and keep in full force and effect each Primary Mortgage
Insurance Policy by a Qualified Insurer, or other insurer satisfactory to the
Rating Agencies, with respect to each related conventional Mortgage Loan as to
which as of the Cut-off Date such Primary Mortgage Insurance Policy was in
effect (or, in the case of a Substitute Mortgage Loan, the date of
substitution) and the original principal amount of the related Mortgage Note
exceeded 80% of the Original Value of the related Mortgaged Property in an
amount at least equal to the excess of such original principal amount over 75%
of such Original Value until the principal amount of any such Mortgage Loan is
reduced below 80% of the Original Value or, based upon a new appraisal, the
principal amount of such Mortgage Loan represents less than 80% of the new
appraised value. The related Master Servicer shall effect the timely payment
of the premium on each Primary Mortgage Insurance Policy. The related Master
Servicer shall have the power to substitute for any Primary Mortgage Insurance
Policy another substantially equivalent policy issued by another Qualified
Insurer.
Section 3.07. Maintenance of Hazard Insurance and Fidelity Coverage.
(a) Each Master Servicer shall maintain and keep, with respect to
each related Mortgage Loan and each REO Property, in full force and effect
hazard insurance (fire insurance with extended coverage) equal to at least the
lesser of the Outstanding Principal Balance of the Mortgage Loan or the current
replacement cost of the Mortgaged Property, and containing a standard mortgagee
clause; provided, however, that the amount of hazard insurance may not be less
than the amount necessary to prevent loss due to the application of any
co-insurance provision of the related policy. Unless applicable state law
requires a higher deductible, the deductible on such hazard insurance policy
may be $1000 or 1% of the applicable amount of coverage, whichever is less. In
the case of a condominium unit or a unit in a planned unit development, the
required hazard insurance shall take the form of a multiperil policy covering
the entire condominium project or planned unit development, in an amount equal
to at least 100% of the insurable value based on replacement cost.
(b) Any amounts collected by a Master Servicer under any such hazard
insurance policy (other than amounts to be applied to the restoration or repair
of the related Mortgaged Property or amounts released to the related Mortgagor
in accordance with the Master Servicer's normal servicing procedures, the terms
of the related Mortgage Note, the related Security Instrument or applicable
law) shall be deposited initially in a Protected Account, for transmittal to
the Certificate Account, subject to withdrawal pursuant to Section 4.03.
(c) Any cost incurred by a Master Servicer in maintaining any such
hazard insurance policy shall not be added to the amount owing under the
related Mortgage Loan for the purpose of calculating monthly distributions to
Certificateholders, notwithstanding that the terms of such Mortgage Loan so
permit. Such costs shall be recoverable by such Master Servicer as a Servicing
Advance.
(d) No earthquake or other additional insurance is to be required of
any Mortgagor or maintained on REO Property other than pursuant to such
applicable laws and regulations as shall at any time be in force and shall
require such additional insurance. Each year, in accordance with
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standards and procedures required by Freddie Mac, each Master Servicer shall
perform a review of the Mortgage Loans master serviced by it to determine
which, if any, of the related Mortgaged Properties are located in a federally
designated special flood hazard area and for each Mortgaged Property found to
be located in a federally designated special flood hazard area, the related
Master Servicer shall use its best reasonable efforts to cause with respect to
the related Mortgage Loans and each REO Property, flood insurance (to the
extent available and in accordance with mortgage servicing industry practice)
to be maintained. Such flood insurance shall cover the related Mortgaged
Property, including all items taken into account in arriving at the Appraised
Value on which the Mortgage Loan was based, and shall be in an amount equal to
the lesser of (i) the Outstanding Principal Balance of the related Mortgage
Loan and (ii) the minimum amount required under the terms of coverage to
compensate for any damage or loss on a replacement cost basis, but not more
than the maximum amount of such insurance available for the related Mortgaged
Property under either the regular or emergency programs of the National Flood
Insurance Program (assuming that the area in which such Mortgaged Property is
located is participating in such program). Unless applicable state law
requires a higher deductible, the deductible on such flood insurance may not
exceed $1,000 or 1% of the applicable amount of coverage, whichever is less.
(e) If insurance on each REO Property has not been maintained
complying with Sections 3.07(a) and (d) and there shall have been a loss which
would have been covered by such insurance had it been maintained, the related
Master Servicer shall pay for any necessary repairs of such REO Property.
(f) The related Master Servicer shall present, if it is a permitted
claimant, claims under the related hazard insurance or flood insurance policy.
(g) Each Master Servicer shall obtain and maintain an errors and
omissions insurance policy covering such Master Servicer's officers, employees
and other persons acting on its behalf in connection with its activities under
this Agreement. The amount of coverage shall be at least equal to the coverage
acceptable to FNMA or Freddie Mac to service loans for it or otherwise in an
amount as is commercially available at a cost that is generally not regarded as
excessive by industry standards. Each Master Servicer shall maintain at its
own expense and for the duration of this Agreement a fidelity bond in such
amount as is customary for master servicers of mortgage loans. Each Master
Servicer shall promptly notify the Certificate Trustee of any material change
in the terms of its bond or policy. If any such bond of a Master Servicer
ceases to be in effect, such Master Servicer shall use its best efforts to
obtain a comparable replacement bond or policy, as the case may be. Any
amounts relating to the Mortgage Loans collected under such bond or policy
shall be remitted to the Certificate Account to the extent that such amounts
have not previously been paid to such account.
Section 3.08. Due-on-Sale Clauses; Assumption Agreements.
(a) In any case in which a Master Servicer is notified that a
Mortgaged Property relating to a Mortgage Loan that it master services has been
or is about to be conveyed by the Mortgagor, such Master Servicer shall enforce
any due-on-sale clause contained in the related Security Instrument to the
extent permitted under the terms of the related Mortgage Note and by applicable
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law unless such Master Servicer reasonably believes such enforcement is likely
to result in legal action by the Mortgagor. If such Master Servicer reasonably
believes that such due-on-sale clause cannot be enforced under applicable law
or if the related Mortgage Loan does not contain a due-on-sale clause, such
Master Servicer may consent to a conveyance subject to the lien of the Security
Instrument, and to take or enter into an assumption agreement from or with the
Person to whom such Mortgaged Property has been or is about to be conveyed,
pursuant to which such Person becomes liable under the related Mortgage Note
and unless prohibited by applicable state law, such Mortgagor remains liable
thereon, on condition, however, that the related Mortgage Loan shall continue
to be covered (if so covered before such Master Servicer enters into such
agreement) by any Primary Mortgage Insurance Policy. Such Master Servicer
shall notify the Certificate Trustee, whenever possible, before the completion
of such assumption agreement, and shall forward to the Custodian on behalf of
the Certificate Trustee the original copy of such assumption agreement, which
copy shall be added by the Custodian to the related Mortgage File and which
shall, for all purposes, be considered a part of such Mortgage File to the same
extent as all other documents and instruments constituting a part thereof. In
connection with any such assumption agreement, the interest rate on the related
Mortgage Loan shall not be changed and no other material alterations in the
Mortgage Loan shall be made. Any fee or additional interest collected by a
Master Servicer for consenting to any such conveyance or entering into any such
assumption agreement may be retained by such Master Servicer as additional
master servicing compensation.
(b) Notwithstanding the foregoing paragraph or any other provision of
this Agreement, a Master Servicer shall not be deemed to be in default, breach
or any other violation of its obligations under this Agreement by reason of any
assumption by operation of law of a Mortgage Loan that it master services or
any conveyance by the Mortgagor of the related Mortgaged Property or assumption
of a Mortgage Loan which such Master Servicer reasonably believes, based on
prudent servicing standards, it may be restricted by law from preventing for
any reason whatsoever or if the exercise of such right would impair or threaten
to impair any recovery under any applicable Insurance Policy, or, in such
Master Servicer's judgment, be reasonably likely to result in legal action by
the Mortgagor or would otherwise adversely affect the Certificateholders.
Section 3.09. Realization upon Defaulted Mortgage Loans. (a) Each
Master Servicer shall foreclose upon or otherwise comparably convert the
ownership of properties securing any Mortgage Loans that it master services
that come into and continue in default and as to which no satisfactory
arrangements can be made for collection of delinquent payments pursuant to
Section 3.03; provided, however, that a Master Servicer shall not foreclose
upon or otherwise comparably convert a Mortgaged Property if there is evidence
of environmental hazards or toxic waste thereon and such Master Servicer
determines it would be imprudent to do so or not in accordance with appropriate
servicing standards. A Master Servicer can conclusively rely on results of
third party inspections from parties it reasonably believes are qualified to
conduct such inspections. In connection with such foreclosure or other
conversion, the related Master Servicer shall use its best reasonable efforts
to preserve REO Property and to realize upon related defaulted Mortgage Loans
in such manner as to maximize the receipt of principal and interest by the
Certificateholders, taking into account, among other things, the timing of
foreclosure and the considerations set forth in Section 3.08(b). The foregoing
is subject to the proviso that a Master Servicer shall not be required to
expend its own funds in connection with any foreclosure or towards the
restoration of any property unless it
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determines in good faith (i) that such restoration or foreclosure will increase
the proceeds of liquidation of the related Mortgage Loan to Certificateholders
after reimbursement to itself for such expenses and (ii) that such expenses
will be recoverable to it either through Liquidation Proceeds (respecting which
it shall have priority for purposes of reimbursements from the Certificate
Account pursuant to Section 4.03) or through Insurance Proceeds (respecting
which it shall have similar priority). A Master Servicer shall be responsible
for all other costs and expenses incurred by it in any such proceedings;
provided, however, that it shall be entitled to reimbursement thereof (as well
as its normal servicing compensation), and to receive Excess Liquidation
Proceeds as additional servicing compensation, to the extent that transfers or
withdrawals from the Certificate Account with respect thereto are permitted
under Section 4.03. Any income from or other funds (net of any income taxes)
generated by REO Property shall be deemed for purposes of this Agreement to be
Insurance Proceeds.
(b) No Trust shall acquire any real property (or any personal
property incident to such real property) except in connection with a default or
imminent default of a Mortgage Loan. In the event that a Trust acquires any
real property (or personal property incident to such real property) in
connection with a default or imminent default of a Mortgage Loan, such property
shall be disposed of by such Trust before the close of the third taxable year
following the taxable year in which such Trust acquired such property (the
"grace period") unless the Certificate Trustee shall have received a REMIC
Opinion with respect to such longer retention or the applicable Master Servicer
applies for and receives an extension of the grace period under Section
856(e)(3) of the Code, in which case such grace period described above will be
extended by the period set forth in such REMIC Opinion or approved application,
as the case may be. The cost of any such REMIC Opinion shall be borne by the
related Trust.
Section 3.10. Certificate Trustee to Cooperate; Release of Mortgage
Files.
(a) Upon payment in full of any Mortgage Loan or the receipt by the
related Master Servicer of a notification that payment in full will be escrowed
in a manner customary for such purposes, the related Master Servicer will
immediately notify the Custodian by a certification signed by a Servicing
Officer in the Form of Exhibit D (which certification shall include a statement
to the effect that all amounts received or to be received in connection with
such payment which are required to be deposited in the Certificate Account have
been or will be so deposited in such account) and shall request delivery to the
applicable Master Servicer of the Mortgage File. Upon receipt of such
certification and request, the Certificate Trustee shall cause the Custodian to
within five Business Days release the related Mortgage File to the applicable
Master Servicer and execute and deliver to the applicable Master Servicer,
without recourse, the request for reconveyance, deed of reconveyance or release
or satisfaction of mortgage or such instrument releasing the lien of the
Security Instrument (furnished by the related Master Servicer), together with
the Mortgage Note with written evidence of cancellation thereon. No expenses
incurred in connection with any instrument of satisfaction or deed of
reconveyance shall be chargeable to the Certificate Account. If upon receipt
of a properly executed request for release the Custodian fails to release the
Mortgage File to the applicable Master Servicer within the time limits required
under this Agreement, the Custodian shall indemnify such Master Servicer for
any penalties, charges, costs or damages payable as a result of such failure.
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(b) From time to time as is appropriate for the servicing or
foreclosure of any Mortgage Loan or collection under a Required Insurance
Policy, the Master Servicer with respect to such Mortgage Loan shall deliver to
the Certificate Trustee and the Custodian a Request for Release signed by a
Servicing Officer on behalf of such Master Servicer in substantially the form
attached as Exhibit D hereto. Upon receipt of the Request for Release, the
Certificate Trustee shall cause the Custodian to deliver the Mortgage File to
such Master Servicer.
(c) The applicable Master Servicer shall cause each Mortgage File
released to it pursuant to Section 3.10(b) to be returned to the Custodian when
the need therefor no longer exists, unless the related Mortgage Loan has become
a Liquidated Mortgage Loan and the Liquidation Proceeds relating to the
Mortgage Loan have been deposited in the Certificate Account or such Mortgage
File is being used to pursue foreclosure or other legal proceedings. Prior to
return of a Mortgage File to the Custodian, the Master Servicer to whom such
file was delivered shall retain such file in its control unless the Mortgage
File has been delivered to an attorney, or to a public trustee or other public
official as required by law, to initiate or pursue legal action or other
proceedings for the foreclosure of the related Mortgaged Property either
judicially or non-judicially, and such Master Servicer has delivered to the
Custodian a certificate of a Servicing Officer certifying as to the name and
address of the Person to which such Mortgage File was delivered and the purpose
or purposes of such delivery. If a Mortgage Loan becomes a Liquidated Mortgage
Loan, the applicable Master Servicer shall deliver the Request for Release with
respect thereto to the Custodian upon deposit of the related Liquidation
Proceeds in the Certificate Account.
(d) The Certificate Trustee shall execute and deliver to the related
Master Servicer any court pleadings, requests for trustee's sale or other
documents necessary or desirable to (i) the foreclosure or trustee's sale with
respect to a Mortgaged Property; (ii) any legal action brought to obtain
judgment against any Mortgagor on the related Mortgage Note or Security
Instrument; (iii) obtain a deficiency judgment against the related Mortgagor;
or (iv) enforce any other rights or remedies provided by such Mortgage Note or
Security Instrument or otherwise available at law or in equity. Together with
such documents or pleadings, such Master Servicer shall deliver to the
Certificate Trustee a certificate of a Servicing Officer in which it requests
the Certificate Trustee to execute the pleadings or documents. The certificate
shall certify and explain the reasons for which the pleadings or documents are
required. It shall further certify that the Certificate Trustee's execution
and delivery of the pleadings or documents will not invalidate any insurance
coverage under the Required Insurance Policies or invalidate or otherwise
affect the lien of the related Security Instrument, except for the termination
of such a lien upon completion of the foreclosure or trustee's sale.
Section 3.11. Master Servicing Compensation.
(a) As compensation for its activities hereunder, each Master
Servicer shall be entitled to receive the applicable Master Servicing Fee from
full payments of accrued interest on each Mortgage Loan for which it is acting
as a Master Servicer, subject to its Master Servicer's obligation to pay
Compensating Interest Payments pursuant to Section 6.04.
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(b) Each Master Servicer may retain additional servicing compensation
in the form of assumption fees, tax service fees, fees for statement of account
or payoff, late payment charges, interest on amounts deposited in any Accounts
maintained by it or Permitted Investments of such amounts, or otherwise. Each
Master Servicer is also entitled to receive as additional servicing
compensation any Excess Liquidation Proceeds with respect to Mortgage Loans
that it master services. Each Master Servicer shall be required to pay all
expenses it incurs in connection with its activities under this Agreement, and
shall not be entitled to reimbursement therefor except as provided in this
Agreement. Expenses to be paid by each Master Servicer under this Subsection
3.11(b) shall include payment of the expenses of the accountants retained by it
pursuant to Section 3.13.
Section 3.12. Annual Statement of Compliance. Within 120 days after
December 31st of each year, commencing December 1998, each Master Servicer, at
its own expense, shall deliver to the Certificate Trustee, with a copy to the
Rating Agencies, a Servicing Officer's certificate stating, as to the signer
thereof, that (i) a review of the activities of such Master Servicer during the
preceding fiscal year or applicable portion thereof and of performance under
this Agreement has been made under such officer's supervision, (ii) to the best
of such officer's knowledge, based on such review, such Master Servicer has
fulfilled all its obligations under this Agreement for such year, or, if there
has been a default in the fulfillment of any such obligation, specifying each
such default known to such officer and the nature and status thereof including
the steps being taken by such Master Servicer to remedy such default; (iii) a
review of the reports required to be furnished by such Master Servicer pursuant
to this Agreement during such Master Servicer's most recently ended fiscal year
on or prior to such December 31st has been made under such Servicing Officer's
supervision; and (iv) to the best of the Servicing Officer's knowledge, based
on his review of such reports (unless the Servicing Officer has reason to
believe that reliance on such reports is not justified), either nothing has
come to the attention of such Servicing Officer that would cause such Servicing
Officer to believe that such Master Servicer has failed to perform and fulfill
its duties, responsibilities and obligations under this Agreement in all
material respects throughout the year, or, if there has been a default in
performance or fulfillment of any such duties, responsibilities or obligations,
specifying the nature and status of each such default known to the Servicing
Officer.
Section 3.13. Annual Independent Public Accountants' Servicing Report.
(a) Within 120 days after December 31st of each year, commencing
December 1998, each Master Servicer, at its expense, shall furnish to the
Certificate Trustee and the Depositor a copy of such Master Servicer's audited
financial statements for the year most recently ended.
(b) Promptly after its receipt, each Master Servicer, at its expense,
shall furnish to the Certificate Trustee a copy of the most recently available
letter or letters from one or more firms of Independent certified public
accountants who are members of the American Institute of Certified Public
Accountants reporting the results of such firm's examination of the servicing
procedures of such Master Servicer in accordance with the requirements of the
Uniform Single Attestation Program for Mortgage Bankers, or such other program
as may be set forth in any such letter.
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Section 3.14. REMIC-Related Covenants. For as long as any Series REMIC
shall exist, each Master Servicer with respect to the Mortgage Loans included
in such Series REMIC and the Certificate Trustee shall act in accordance
herewith to assure continuing treatment of each such Series REMIC as a REMIC,
and the Certificate Trustee shall comply with any directions of the applicable
Master Servicer to assure such continuing treatment. In particular, the
Certificate Trustee shall not (a) sell or permit the sale of all or any portion
of the Mortgage Loans or of any Permitted Investment unless such sale is as a
result of a repurchase of the Mortgage Loans pursuant to this Agreement or the
Certificate Trustee has received a REMIC Opinion prepared at the expense of the
related Trust; and (b) other than with respect to a substitution pursuant to
Section 2.05, accept any contribution to any Series REMIC after the Startup Day
without receipt of a REMIC Opinion.
Section 3.15. Additional Information. Each Master Servicer agrees to
furnish the Depositor, at no expense to such Master Servicer, from time to time
upon reasonable request, such further information, reports and financial
statements as the Depositor deems appropriate to prepare and file all necessary
reports with the Securities and Exchange Commission.
Section 3.16. Master Servicer Reports.
(a) On or before the Determination Date, each Master Servicer shall
provide to the Certificate Trustee, with respect to the Mortgage Loans such
Master Servicer services and the Mortgage Loans in each Mortgage Loan Group and
the related REO Property, respectively, a Master Servicer Report in such
electronic format as the Certificate Trustee may reasonably request and in such
hardcopy format as each Master Servicer and the Certificate Trustee shall agree
which, if there are sub-servicers, shall be based upon reports from sub-
servicers, if any, received by a Master Servicer on or before the seventh
Business Day of such month with respect to the related Mortgage Loans and
related REO Property in each Mortgage Loan Group and containing the following
information (in respect of the REO Property, only such information which is
applicable) (provided that the information marked with an "*" below may be
provided by a Master Servicer solely in a hardcopy format):
*(i) Aggregate deposits to each subaccount of the Certificate
Account since the date of the proper statement, stated separately for
each category of deposit specified in Section 4.02 and each category of
withdrawal specified in Section 4.03;
(ii) Amount of each Group Available Funds expected for the
related Distribution Date and attributable to each of the following
categories:
(A) Scheduled Principal;
(B) Principal Prepayments (stated separately for (u) partial
prepayments, (v) full prepayments, (w) Net Liquidation
Proceeds, stating Liquidation Proceeds and Liquidation
Expenses separately), *(x) Insurance Proceeds, *(y) the
Repurchase Price in connection with the purchase of a
Mortgage Loan, and *(z) any cash deposit in connection
with the substitution of a Mortgage Loan;
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(C) regularly scheduled interest on the Mortgage Loans;
*(D) Monthly Advances made by such Master Servicer;
*(E) Certificate Account Advances;
(F) Compensating Interest Payments; and
*(G) reimbursements in connection with losses on Permitted
Investments.
(iii) aggregate Outstanding Principal Balances of the related
Mortgage Loans in such Mortgage Loan Group as of the related Due Date,
without giving effect to payments due on such date;
(iv) Realized Losses with respect to each Mortgage Loan Group
for the prior calendar month;
(v) Aggregate Scheduled Principal Balance of the related
Mortgage Loans in such Mortgage Loan Group as of the related Due Date;
*(vi) book value of any collateral acquired by means of
foreclosure, grant of deed in lieu of foreclosure or otherwise in
respect of any related Mortgage Loan in such Mortgage Loan Group;
*(vii) number and aggregate principal balance of related Mortgage
Loans in each Mortgage Loan Group which are 30, 60, 90 and 120 days
delinquent as calculated by such Master Servicer, those which are in
foreclosure, those with respect to which the related Mortgagor is
bankrupt, and those which are REO Property;
(viii) Interest Shortfall with respect to the related
Distribution Date and portion thereof resulting from Voluntary Principal
Prepayments in full or the provisions of the Relief Act;
(ix) amount if any, by which the aggregate of payments of
Scheduled Principal and interest on the related Mortgage Loans in such
Mortgage Loan Group that were due on the related Due Date and
delinquent, other than as a result of the Relief Act, as of the 18th day
of such month exceeds the sum of the Monthly Advances with respect to
such Mortgage Loans to be made by such Master Servicer and Certificate
Account Advances for such Distribution Date;
*(x) applicable aggregate Master Servicing Fee with respect to
such Mortgage Loans for the related Due Period; and
(xi) such other information regarding each Mortgage Loan in
such Mortgage Loan Group, including, but not limited to, an updated
schedule of the Scheduled Principal
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Balances of such Mortgage Loans as of the related Due Date, in such
electronic format as may be reasonably requested by the Certificate
Trustee and, if requested, in such hardcopy format as such Master
Servicer and the Certificate Trustee shall agree.
In addition to the information listed above, each Master Servicer shall supply
to the Certificate Trustee in a timely manner any and all information necessary
for the Certificate Trustee to calculate the statements it is required to make
pursuant to the Series Supplement.
(b) Not later than three Business Days after each Distribution Date,
the Certificate Trustee shall provide written confirmation to each Master
Servicer that the Certificate Trustee's books and records are in accordance
with the updated schedule of the Scheduled Principal Balances of the related
Mortgage Loans provided that month by such Master Servicer, and if
discrepancies exist, the Certificate Trustee shall list such discrepancies on a
schedule thereto.
ARTICLE IV
ACCOUNTS
Section 4.01. Protected Accounts.
(a) Each Master Servicer shall establish and maintain one or more
Protected Accounts complying with the requirements set forth in this Section
4.01, with records to be kept with respect thereto on a Mortgage Loan by
Mortgage Loan basis, into which accounts shall be deposited within two Business
Days after receipt all collections of principal and interest with respect to
any Mortgage Loan and with respect to any REO Property received by such Master
Servicer, or a sub-servicer engaged by such Master Servicer, including
Principal Prepayments, Insurance Proceeds, Liquidation Proceeds and advances
made from the Master Servicer's own funds (less servicing compensation as
permitted by Subsection 3.11(a)) together with all other amounts to be
deposited in the Protected Accounts. Each Master Servicer is hereby authorized
to make withdrawals from and deposits to the Protected Accounts maintained by
it for purposes required or permitted by this Agreement. All Protected
Accounts shall be held in a Designated Depository Institution and segregated on
the books of such institution. The amount at any time credited to a Protected
Account shall be fully insured by the FDIC or, to the extent that such balance
exceeds the lesser of $100,000 or the limits of such insurance, such excess
must be transferred to the Certificate Account or invested in Permitted
Investments or may be deposited in a Rating Agency Eligible Account in the name
of the Certificate Trustee for the benefit of Certificateholders and, except as
provided in the next sentence, not commingled with any other funds. Each
Master Servicer may transfer funds to other accounts (which shall for purposes
hereof be deemed to be Protected Accounts), commingle accounts or establish
Protected Accounts not conforming to the foregoing requirements, to the extent
that such other accounts or Protected Accounts meet the requirements of each of
the Rating Agencies for the maintenance of the ratings on the Bonds.
The Protected Accounts established by BAFSB may contain funds that
belong to one or more trust funds created for mortgage pass-through
certificates of other series and may contain other funds respecting payments on
mortgage loans owned or serviced by BAFSB on behalf of others; provided,
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however, that if the long term deposit rating of BAFSB falls below "A1" by
Moody's, then either (a) BAFSB shall establish a separate Protected Account,
and shall segregate and hold funds collected and received pursuant to each BA
Mortgage Loan separate and apart from any such funds collected and received by
BAFSB with respect to any mortgage loans other than the BA Mortgage Loans,
which shall at all times be insured by the FDIC up to the FDIC insurance
limits, or must be invested in Permitted Investments for the benefit of the
Purchaser or (b) BAFSB must obtain written consent of Moody's to continue to
maintain the Protected Accounts in accordance with this Section.
Notwithstanding such commingling of funds, BAFSB shall keep records that
accurately reflect the funds on deposit in a Protected Account that have been
identified by it as being attributable to the BA Mortgage Loans.
Amounts on deposit in a Protected Account may be invested in Permitted
Investments in the name of the applicable Master Servicer for the benefit of
Certificateholders and, except as provided in the preceding two paragraphs, not
commingled with any other funds, such Permitted Investments to mature, or to be
subject to redemption or withdrawal, no later than the date on which such funds
are required to be withdrawn for deposit in the Certificate Account, and shall
be held until required for such deposit. The income earned from Permitted
Investments made pursuant to this Section 4.01 shall be paid to the related
Master Servicer as additional compensation for its obligations under this
Agreement, and the risk of loss of moneys required to be distributed to the
Certificateholders resulting from such investments shall be borne by and be the
risk of such Master Servicer. Such Master Servicer shall deposit the amount of
any such loss in the related Protected Account within two Business Days of
receipt of notification of such loss but not later than the second Business Day
prior to the Remittance Date.
(b) On or before each Master Servicer Remittance Date, each Master
Servicer shall withdraw from the applicable Protected Accounts and shall
immediately remit to the Certificate Account amounts representing the following
collections and payments (other than with respect to principal of or interest
on the Mortgage Loans with respect to which it is Master Servicer due on or
before the Cut-off Date):
(i) Scheduled Payments on such Mortgage Loans received by it
or by any sub-servicer engaged by it or any related portion thereof
advanced by such Master Servicer or such sub-servicer which were due on
or before the related Due Date, net of the amount thereof comprising the
applicable Master Servicing Fee and less any amounts to be withdrawn
later by the applicable Master Servicer from the applicable Buydown Fund
Accounts;
(ii) Full Principal Prepayments and any Liquidation Proceeds
with respect to such Mortgage Loans received by such Master Servicer or
by its sub-servicer with respect to such Mortgage Loans in the related
Prepayment Period, with interest to the date of prepayment or
liquidation, net of the amount thereof comprising the applicable Master
Servicing Fee due such Master Servicer, to the extent such amounts
exceed the related Compensating Interest Payments;
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(iii) Partial prepayments of principal with respect to such
Mortgage Loans received by such Master Servicer or by its sub-servicer
in the related Prepayment Period;
(iv) Any amount to be used as a Certificate Account Advance;
and
(v) Any amount withdrawn from a Buydown Fund Account in
respect of a Buydown Loan as provided in Section 4.04.
(c) Withdrawals may be made from a Protected Account only to (i) make
remittances as provided in Section 4.01(b); (ii) reimburse the applicable
Master Servicer for advances of principal and interest which have been
recovered by subsequent collection from the related Mortgagor; (iii) remove
amounts deposited in error; (iv) remove fees, charges or other such amounts
deposited on a temporary basis; or (v) clear and terminate the account at the
termination of this Agreement in accordance with Section 10.01. As provided in
Section 4.02(b) certain amounts otherwise due to the Master Servicer may be
retained by it and need not be deposited in the Certificate Account.
Section 4.02. Certificate Account.
(a) The Certificate Trustee shall establish and maintain in the name
of the Certificate Trustee, for the benefit of the Certificateholders, the
Certificate Account as a segregated non-interest bearing trust account or
accounts. The Certificate Trustee shall maintain detailed transaction entries
with respect to each Series (therein called "subaccounts") reflecting the funds
held for each such Series in the Certificate Account. The Certificate Trustee
will deposit in the Certificate Account, as identified by the applicable Master
Servicer, as received, the following amounts and shall account for such amounts
by way of subaccounts with respect to each Series:
(i) Any amounts withdrawn from the Protected Accounts pursuant
to Section 4.01(b) or from a Servicing Account pursuant to Section
3.04(b);
(ii) Any Monthly Advance and any Compensating Interest
Payments;
(iii) Any Insurance Proceeds or Liquidation Proceeds received by
or on behalf of the applicable Master Servicer which were not deposited
in a Protected Account less any amounts to be withdrawn later by the
applicable Master Servicer from the applicable Buydown Fund Accounts;
(iv) The Repurchase Price with respect to any Mortgage Loans or
REO Property purchased by BSMCC pursuant to Sections 2.02 or 2.04, any
amounts which are to be treated pursuant to Section 2.04 as the payment
of such a Repurchase Price, and all proceeds of any Mortgage Loans or
property acquired with respect thereto repurchased by BSMCC or its
designee or the Depositor pursuant to Section 10.01;
(v) Any amounts required to be deposited with respect to
losses on Permitted Investments; and
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(vi) Any other amounts received by or on behalf of a Master
Servicer or the Certificate Trustee and required to be deposited in the
Certificate Account pursuant to this Agreement.
(b) All amounts deposited to the Certificate Account shall be held by
the Certificate Trustee in the name of the Certificate Trustee in trust for the
benefit of the Certificateholders in accordance with the terms and provisions
of this Agreement, subject to the right of each Master Servicer to require the
Certificate Trustee to make withdrawals therefrom as provided herein. The
foregoing requirements for crediting the Certificate Account shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments in the nature of (i) late payment charges or
assumption, tax service, statement account or payoff, substitution,
satisfaction, release and other like fees and charges and (ii) the items
enumerated in Section 4.03(a)(i) through (xi) need not be credited by the
related Master Servicer to the Certificate Account and may be retained by such
Master Servicer as servicing compensation. In the event that a Master Servicer
shall deposit or cause to be deposited to the Certificate Account any amount
not required to be credited thereto, the Certificate Trustee, upon receipt of a
written request therefor signed by a Servicing Officer of such Master Servicer,
shall promptly transfer such amount to such Master Servicer, any provision
herein to the contrary notwithstanding.
(c) The Certificate Account shall constitute a trust account of the
Trusts segregated on the books of the Certificate Trustee and held by the
Certificate Trustee in trust in its Corporate Trust Office , and the
Certificate Account and the funds deposited therein shall not be subject to,
and shall be protected from, all claims, liens, and encumbrances of any
creditors or depositors of the Certificate Trustee and each Master Servicer
(whether made directly, or indirectly through a liquidator or receiver of the
Certificate Trustee or any Master Servicer). The amount at any time credited
to the Certificate Account shall be (i) fully insured by the FDIC to the
maximum coverage provided thereby, or (ii) invested in such Permitted
Investments as the Certificate Trustee may select. All Permitted Investments
shall mature or be subject to redemption or withdrawal on or before, and shall
be held until, the next succeeding Distribution Date if the obligor for such
Permitted Investment is the Certificate Trustee or, if such obligor is any
other Person, the Business Day preceding such Distribution Date. With respect
to the Certificate Account and the funds deposited therein, the Certificate
Trustee shall take such action as may be necessary to ensure that the
Certificateholders shall be entitled to the priorities afforded to such a trust
account (in addition to a claim against the estate of the Certificate Trustee)
as provided by 12 U.S.C. Section 92a(e), if applicable, or any applicable
comparable state statute applicable to state chartered banking corporations.
Section 4.03. Permitted Withdrawals and Transfers from the Certificate
Account.
(a) The Certificate Trustee will, from time to time on demand of a
Master Servicer, make or cause to be made such withdrawals or transfers from
the Certificate Account as such Master Servicer has designated for such
transfer or withdrawal as specified in a certificate signed by a Servicing
Officer (upon which the Certificate Trustee may conclusively rely) for the
following purposes (limited in the case of amounts due such Master Servicer to
those not withdrawn from the related Protected Accounts in accordance with the
terms of this Agreement):
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(i) to reimburse such Master Servicer for any Monthly Advance
or Servicing Advance of its own funds or any advance of such Master
Servicer's own funds, the right of a Master Servicer to reimbursement
pursuant to this subclause (i) being limited to amounts received on a
particular Mortgage Loan with respect to which it is Master Servicer
(including, for this purpose, the Repurchase Price therefor, Insurance
Proceeds and Liquidation Proceeds) which represent late payments or
recoveries of the principal of or interest on such Mortgage Loan
respecting which such Monthly Advance or Servicing Advance was made;
(ii) to reimburse such Master Servicer from Insurance Proceeds
or Liquidation Proceeds relating to a particular related Mortgage Loan
for amounts expended by such Master Servicer in good faith in connection
with the restoration of the related Mortgaged Property which was damaged
by an Uninsured Cause or in connection with the liquidation of such
Mortgage Loan;
(iii) to reimburse such Master Servicer from Insurance Proceeds
relating to a particular related Mortgage Loan for Insured Expenses
incurred with respect to such Mortgage Loan and to reimburse such Master
Servicer from Liquidation Proceeds from a particular related Mortgage
Loan for Liquidation Expenses incurred with respect to such Mortgage
Loan; provided, however, that the related Master Servicer shall not be
entitled to reimbursement for Liquidation Expenses with respect to a
Mortgage Loan to the extent that (i) any amounts with respect to such
Mortgage Loan were paid as Excess Liquidation Proceeds pursuant to
clause (xi) of this Section 4.03(a) to the related Master Servicer; and
(ii) such Liquidation Expenses were not included in the computation of
such Excess Liquidation Proceeds;
(iv) to pay such Master Servicer, from Liquidation Proceeds or
Insurance Proceeds received in connection with the liquidation of any
Mortgage Loan, the amount which such Master Servicer would have been
entitled to receive under clause (ix) of this Section 4.03(a) as
servicing compensation on account of each defaulted Scheduled Payment on
such Mortgage Loan if paid in a timely manner by the related Mortgagor,
but only to the extent that the aggregate of Liquidation Proceeds and
Insurance Proceeds with respect to such Mortgage Loan, after any
reimbursement to any Master Servicer, pursuant to subclauses (i), (ii),
(iii) and (v) of this Section 4.03(a), exceeds the Outstanding Principal
Balance of such Mortgage Loan plus accrued and unpaid interest thereon
at the related Mortgage Interest Rate less the applicable Master
Servicing Fee Rate to but not including the date of payment;
(v) to pay such Master Servicer from the Repurchase Price for
any related Mortgage Loan, the amount which such Master Servicer would
have been entitled to receive under clause (ix) of this Section 4.03(a)
as servicing compensation, but only to the extent that the Repurchase
Price with respect to such Mortgage Loan after any reimbursement to such
Master Servicer pursuant to subclauses (i) and (vi) of this Section
4.03(a) exceeds the Outstanding Principal Balance of such Mortgage Loan
plus accrued and unpaid interest thereon at the related Mortgage
Interest Rate less the applicable Master Servicing Fee Rate through the
last day of the month of repurchase;
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(vi) to reimburse such Master Servicer for advances of funds
hereunder, the right to reimbursement pursuant to this clause (vi) being
limited to amounts received on the related Mortgage Loan (including, for
this purpose, the Repurchase Price therefor, Insurance Proceeds and
Liquidation Proceeds) which represent late recoveries of the payments
for which such advances were made;
(vii) to pay such Master Servicer with respect to each related
Mortgage Loan that has been purchased pursuant to Section 2.02, 2.04,
2.05 or 10.01, all amounts received thereon, representing recoveries of
principal that reduce the Outstanding Principal Balance of such Mortgage
Loan below the Outstanding Principal Balance used in calculating the
Repurchase Price or representing interest included in the calculation of
the Repurchase Price or accrued after the end of the month during which
such repurchase occurs;
(viii) to reimburse such Master Servicer for any Monthly Advance
or a Servicing Advance, after a Realized Loss has been allocated with
respect to the related Mortgage Loan if the Monthly Advance or Servicing
Advance has not been reimbursed pursuant to clauses (i) and (vi);
(ix) to pay such Master Servicer servicing compensation as set
forth in Section 3.11(b);
(x) to reimburse such Master Servicer or the Certificate
Trustee for expenses, costs and liabilities incurred by and reimbursable
to it pursuant to Sections 7.03, 7.04(d) or 11.02;
(xi) to pay to such Master Servicer, as additional servicing
compensation, any Excess Liquidation Proceeds;
(xii) to reimburse such Master Servicer for any amounts to which
it is entitled to reimbursement under the terms of this Agreement;
(xiii) to clear and terminate the Certificate Account pursuant to
Section 10.01; and
(xiv) to remove amounts deposited in error.
Each Master Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of accounting for any
reimbursement from the Certificate Account pursuant to clauses (i) through
(vi), inclusive, and (viii) or with respect to any such amounts which would
have been covered by such clauses had the amounts not been retained by such
Master Servicer without being deposited in the Certificate Account under
Section 4.02(b).
(b) On each Distribution Date, the Certificate Trustee shall make the
following payments in the priority set forth from the funds in the Certificate
Account:
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(i) First, the amount of investment earnings, net of losses,
to the Certificate Trustee; and
(ii) Second, the amount distributable to the Holders of the
Certificates shall be payable in accordance with Section 6.01.
Section 4.04 Buydown Fund Accounts. (a) If applicable, each Master
Servicer shall establish and maintain for the benefit of the Certificateholders
a Buydown Fund Account as a segregated non-interest bearing trust account in
the corporate trust department of either a Designated Depository Institution or
the Certificate Trustee. Each Buydown Fund Account shall constitute a trust
account of the applicable Trust segregated on the books of the Designated
Depository Institution or the Certificate Trustee, as applicable, and held by
the Designated Depository Institution or the Certificate Trustee, as applicable
in trust, and such Account and the funds deposited therein shall not be subject
to, and shall be protected from, all claims, liens, and encumbrances of any
creditors or depositors of the Designated Depository Institution, the
Certificate Trustee and each Master Servicer (whether made directly, or
indirectly through a liquidator or receiver of the Designated Depository
Institution, the Certificate Trustee or a Master Servicer). If the Buydown
Fund Account is maintained with the Certificate Trustee, the Certificate
Trustee shall take such action as may be necessary to ensure that the
Certificateholders shall be entitled to the priorities afforded to such a trust
account (in addition to a claim against the estate of the Certificate Trustee)
as provided by 12 U.S.C. Section 92a(e), if applicable, or any applicable
comparable state statute applicable to state chartered banking corporations.
(b) Each Master Servicer may make withdrawals from its Buydown Fund
Account for the following purposes: (i) to deposit in its Protected Account or
the Certificate Account the amount necessary to supplement payments received on
Buydown Loans, (ii) in the event of a Principal Prepayment of any Buydown Loan,
to apply amounts remaining in the Buydown Fund Account to reduce the required
amount of such Principal Prepayment (or, if the Mortgagor has made a Principal
Prepayment, to refund such remaining Buydown Fund amounts to the person
entitled thereto); and (iii) in the event of foreclosure or liquidation of any
Buydown Loan, to deposit remaining Buydown Fund amounts in the Protected
Account or the Certificate Account as Liquidation Proceeds.
(c) Funds in a Buydown Fund Account may be invested at the written
direction of the applicable Master Servicer in Permitted Investments held in
trust in the name of the Certificate Trustee for the benefit of the
Certificateholders and in the absence of such directions, funds in a Buydown
Fund Account shall be invested in Permitted Investments described in clause
(iii) or clause (viii) of the definition thereof. Such Permitted Investments
must mature, or be subject to redemption or withdrawal, no later than the date
on which such funds are required to be withdrawn for deposit in the Certificate
Account pursuant to Section 4.01(b) and shall be held in such Account until
required for such deposit. The income earned from Permitted Investments made
pursuant to this Section 4.04 shall be paid to the applicable Master Servicer
as additional compensation for its obligations hereunder, and the risk of loss
of moneys required to be distributed to the Certificateholders resulting from
such investments shall be borne by and be the risk of the related Master
Servicer. The amount of any such loss shall be deposited by the related Master
Servicer in
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the applicable Buydown Fund Account within two Business Days of receipt of
notification of such loss but not later than the immediately following Master
Servicer Remittance Date.
ARTICLE V
CERTIFICATES
Section 5.01. The Certificates.
(a) The Certificates shall be substantially in the form set forth in
Exhibit A attached hereto and shall be executed by the Depositor, authenticated
by the Certificate Trustee and delivered to or upon the order of the Depositor
upon receipt by the Certificate Trustee of the documents specified in Section
2.02. The Certificates shall be issuable in Authorized Denominations
evidencing Fractional Undivided Interests. Certificates shall be executed by
manual or facsimile signature on behalf of the Depositor and the Certificate
Trustee by authorized officers of the Depositor and the Certificate Trustee,
respectively. Certificates bearing the manual or facsimile signatures of
individuals who were at the time of execution the proper officers of the
Depositor and the Certificate Trustee shall bind the Depositor and the
Certificate Trustee, respectively, notwithstanding that such individuals or any
of them have ceased to hold such offices prior to the authentication and
delivery of such Certificates or did not hold such offices at the date of such
Certificates. No Certificate shall be entitled to any benefit under this
Agreement, or be valid for any purpose, unless there appears on such
Certificate a certificate of authentication substantially in the form provided
for in Exhibit A hereto executed by the Depositor and the Certificate Trustee
by manual signature, and such certificate upon any Certificate shall be
conclusive evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the
date of their authentication.
(b) No transfer of a Certificate shall be deemed to be made in
accordance with this Section 5.01(b) unless such transfer is made pursuant to
an effective registration statement under the Securities Act or unless the
Certificate Trustee is provided with the certificates and an Opinion of
Counsel, if required, on which the Certificate Trustee may conclusively rely,
which establishes or establish to the Certificate Trustee's satisfaction that
such transfer is exempt from the registration requirements under the Securities
Act, as follows: In the event that a transfer is to be made in reliance upon
an exemption from the Securities Act, the Certificate Trustee shall require, in
order to assure compliance with the Securities Act, that the Certificateholder
desiring to effect such transfer certify to the Certificate Trustee in writing,
by causing the execution of a Purchaser Representation Letter in substantially
the form attached hereto as Exhibit E, with such modifications to such Exhibit
E as may be appropriate to reflect the actual facts of the proposed transfer.
Section 5.02. Certificates Issuable in Series; Authorized Denominations.
The aggregate principal amount of Certificates of a Series that may be
authenticated and delivered under this Agreement is limited to the aggregate
Scheduled Principal Balance of the Mortgage Loans in the related Mortgage Loan
Group as of the Cut-off Date. The aggregate Fractional Undivided Interest of
each Certificate of a Series that may be authenticated and delivered under this
Agreement is limited to 100%. Certificates shall be issued in Authorized
Denominations.
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Section 5.03. Registration of Transfer and Exchange of Certificates. The
Certificate Trustee shall cause to be maintained at one of its offices or at
its designated agent, a Certificate Register in which there shall be recorded
the name and address of each Certificateholder. Subject to such reasonable
rules and regulations as the Certificate Trustee may prescribe, the Certificate
Register shall be amended from time to time by the Certificate Trustee or its
agent to reflect notice of any changes received by the Certificate Trustee or
its agent pursuant to Section 11.06. The Certificate Trustee hereby appoints
itself as the initial Certificate Registrar.
Upon surrender for registration of transfer of any Certificate of a
Series to the Certificate Trustee at the office of The First National Bank of
Chicago, 1 National Plaza, Suite 0122, Chicago, Illinois 60670, Attention:
Registered Securities, or such other address or agency as may hereafter be
provided to each Master Servicer in writing by the Certificate Trustee, the
Certificate Trustee shall execute, and the Certificate Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of such Series of Authorized
Denominations of like Fractional Undivided Interest. At the option of the
Certificateholders, Certificates of a Series may be exchanged for other
Certificates of such Series in Authorized Denominations of like Fractional
Undivided Interest, upon surrender of the Certificates to be exchanged at any
such office or agency. Whenever any Certificates are so surrendered for
exchange, the Certificate Trustee shall execute, and authenticate and deliver,
the Certificates which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for transfer shall (if so
required by the Certificate Trustee) be duly endorsed by, or be accompanied by
a written instrument of transfer in form satisfactory to the Certificate
Trustee and duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing.
A reasonable service charge may be made for any such exchange or
transfer of Certificates, and the Certificate Trustee may require payment of a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any exchange or transfer of Certificates.
All Certificates surrendered for exchange or transfer shall be canceled
by the Certificate Trustee.
Section 5.04. Mutilated, Destroyed, Lost or Stolen Certificates. If (i)
any mutilated Certificate of a Series is surrendered to the Certificate
Trustee, or (ii) the Certificate Trustee receives evidence to their
satisfaction of the destruction, loss or theft of any Certificate of a Series,
and there is delivered to the Certificate Trustee such security or indemnity as
it may be required to save it harmless, then, in the absence of notice to the
Certificate Trustee that such Certificate has been acquired by a bona fide
purchaser, the Certificate Trustee shall execute, authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of such Series of like Fractional Undivided
Interest. Upon the issuance of any new Certificate under this Section 5.04,
the Certificate Trustee may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto
and any other expenses (including the fees and expenses of the Certificate
Trustee) connected therewith. Any replacement Certificate of a Series issued
pursuant to this Section 5.04 shall constitute complete and indefeasible
evidence of ownership in the related Trust, as if originally issued, whether or
not the lost or stolen Certificate shall be found at any time.
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Section 5.05. Persons Deemed Owners. The Depositor, each Master
Servicer, the Certificate Trustee and any agent of any of them may treat the
Person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Section 6.01
and for all other purposes whatsoever, and none of the Depositor, the Master
Servicers, the Certificate Trustee, the Certificate Registrar or any agent of
the Depositor, the Master Servicers or the Certificate Trustee shall be
affected by notice to the contrary.
Section 5.06. Office for Transfer of Certificates. The Certificate
Trustee shall maintain in New York, New York, an office or agency where
Certificates may be surrendered for registration of transfer or exchange. The
Certificate Trustee's office at 14 Wall Street, 8th Floor, New York, New York
10005, Attention: Corporate Trust, is initially designated for said purposes.
ARTICLE VI
PAYMENTS TO CERTIFICATEHOLDERS
Section 6.01. Distributions to Certificateholders.
(a) On each Distribution Date, the Certificate Trustee shall
distribute the Available Funds with respect to each Series to the
Certificateholders of such Series, by wire transfer in immediately available
funds for the account of each Certificateholder, or by any other means of
payment acceptable to each Certificateholder of record on the immediately
preceding Record Date (other than as provided in Section 10.01 respecting the
final distribution), as specified by each such Certificateholder and at the
address of such Holder appearing in the Certificate Register.
(b) All reductions in the Certificate Principal Balance of a
Certificate effected by distributions of principal with respect to Mortgage
Loans made on any Distribution Date shall be binding upon all Holders of such
Certificate and of any Certificate issued upon the registration of transfer or
exchange therefor or in lieu thereof, whether or not such distribution is noted
on such Certificate. The final distribution of principal of each Certificate
shall be payable in the manner provided above only upon presentation and
surrender thereof on or after the Distribution Date therefor at the office or
agency of the Certificate Registrar specified in the notice delivered pursuant
to Section 10.01(d).
Section 6.02. Statements to Certificateholders. Not later than each
Master Servicer Remittance Date, each Master Servicer shall forward to the
Certificate Trustee a Master Servicer Report setting forth certain information
with respect to the Mortgage Loans serviced by such Master Servicer. With each
distribution from the Certificate Account on a Distribution Date with respect
to a Series, the Certificate Trustee shall, based on the information set forth
in such Master Servicers' Reports, prepare and forward to each
Certificateholder, a statement setting forth, to the extent applicable: the
amount of the distribution payable to the Certificateholders that represents
principal and the amount that represents interest, and the applicable
Certificate Principal Balance after giving effect to such distribution.
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Upon request by any Certificateholder, the Certificate Trustee shall
forward to such Certificateholder and the Depositor an additional report which
sets forth with respect to the Mortgage Loans:
(a) the number and aggregate Scheduled Principal Balance of
(i) the Group 1 Mortgage Loans, (ii) the Group 2 Mortgage Loans and
(iii) the Group 3 Mortgage Loans;
(b) the number and aggregate Scheduled Principal Balance of
(i) Group 1 Mortgage Loans, (ii) the Group 2 Mortgage Loans and (ii)
Group 3 Mortgage Loans, in each case delinquent one, two and three
months or more;
(c) the (i) number and aggregate Scheduled Principal Balance
of Group 1 Mortgage Loans with respect to which foreclosure proceedings
have been initiated, and (ii) the number and aggregate book value of
related Mortgaged Properties acquired through foreclosure, deed in lieu
of foreclosure or other exercise of rights respecting the Certificate
Trustee's security interest in the Group 1 Mortgage Loans;
(d) the (i) number and aggregate Scheduled Principal Balance
of Group 2 Mortgage Loans with respect to which foreclosure proceedings
have been initiated, and (ii) the number and aggregate book value of
related Mortgaged Properties acquired through foreclosure, deed in lieu
of foreclosure or other exercise of rights respecting the Certificate
Trustee's security interest in the Group 2 Mortgage Loans;
(e) the (i) number and aggregate Scheduled Principal Balance
of Group 3 Mortgage Loans with respect to which foreclosure proceedings
have been initiated, and (ii) the number and aggregate book value of
related Mortgaged Properties acquired through foreclosure, deed in lieu
of foreclosure or other exercise of rights respecting the Certificate
Trustee's security interest in the Group 3 Mortgage Loans;
(f) The amount of Special Hazard Losses incurred in respect of
the Group 1 Mortgage Loans since the immediately preceding Distribution
Date, the cumulative amount of Special Hazard Losses incurred in respect
of the Group 1 Mortgage Loans since the Cut-off Date, and the Special
Hazard Loss Amount with respect to the Group 1 Mortgage Loans remaining
as of the close of business on the applicable Determination Date;
(g) The amount of Special Hazard Losses incurred in respect of
the Group 2 Mortgage Loans since the immediately preceding Distribution
Date, the cumulative amount of Special Hazard Losses incurred in respect
of the Group 2 Mortgage Loans since the Cut-off Date, and the Special
Hazard Loss Amount with respect to the Group 2 Mortgage Loans remaining
as of the close of business on the applicable Determination Date;
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(h) The amount of Special Hazard Losses incurred in respect of
the Group 3 Mortgage Loans since the immediately preceding Distribution
Date, the cumulative amount of Special Hazard Losses incurred in respect
of the Group 3 Mortgage Loans since the Cut-off Date, and the Special
Hazard Loss Amount with respect to the Group 3 Mortgage Loans remaining
as of the close of business on the applicable Determination Date;
(i) The amount of Realized Losses incurred in respect of the
Group 1 Mortgage Loans since the immediately preceding Distribution Date
and the cumulative amount of Realized Losses incurred in respect of the
Group 1 Mortgage Loans since the Cut-off Date;
(j) The amount of Realized Losses incurred in respect of the
Group 2 Mortgage Loans since the immediately preceding Distribution Date
and the cumulative amount of Realized Losses incurred in respect of the
Group 2 Mortgage Loans since the Cut-off Date;
(k) The amount of Realized Losses incurred in respect of the
Group 3 Mortgage Loans since the immediately preceding Distribution Date
and the cumulative amount of Realized Losses incurred in respect of the
Group 3 Mortgage Loans since the Cut-off Date;
(l) The amount of Interest Shortfalls incurred in respect of
the Group 1 Mortgage Loans since the immediately preceding Distribution
Date and the cumulative amount of Interest Shortfalls incurred in
respect of the Group 1 Mortgage Loans since the Cut-off Date;
(m) The amount of Interest Shortfalls incurred in respect of
the Group 2 Mortgage Loans since the immediately preceding Distribution
Date and the cumulative amount of Interest Shortfalls incurred in
respect of the Group 2 Mortgage Loans since the Cut-off Date; and
(n) The amount of Interest Shortfalls incurred in respect of
the Group 3 Mortgage Loans since the immediately preceding Distribution
Date and the cumulative amount of Interest Shortfalls incurred in
respect of the Group 3 Mortgage Loans since the Cut-off Date.
Section 6.03. Monthly Advances. If the Scheduled Payment on a Mortgage
Loan that was due on a related Due Date is delinquent other than as a result of
application of the Relief Act, each Master Servicer shall deposit in the
Certificate Account on the applicable Master Servicer Remittance Date an amount
equal to such deficiency, net the applicable Master Servicing Fee, except to
the extent such Master Servicer determines any such advance to be
nonrecoverable from Liquidation Proceeds, Insurance Proceeds or future payments
on the Mortgage Loan for which such Monthly Advance was made. Any amount used
as a Certificate Account Advance shall be replaced by the related Master
Servicer by deposit in the Certificate Account on or before any future date on
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which and to the extent that funds in the Certificate Account on such date are
less than the amount required to be transferred to the Certificate Account. If
applicable, on the Business Day preceding each Distribution Date, each Master
Servicer shall present an Officer's Certificate to the Certificate Trustee (i)
stating that such Master Servicer elects not to make a Monthly Advance in a
stated amount and (ii) detailing the reason it deems the advance to be
nonrecoverable.
Section 6.04. Compensating Interest Payments. Each Master Servicer
shall deposit in the Certificate Account not later than the Master Servicer
Remittance Date immediately preceding the related Distribution Date an amount
equal to the lesser of (i) the aggregate amounts determined pursuant to clauses
(a) and (b) of the definition of Interest Shortfall as calculated with respect
to Mortgage Loans serviced by such Master Servicer for the related Distribution
Date and (ii) the applicable Master Servicing Fee for such Distribution Date;
provided, however, that for this purpose the Master Servicing Fee Rate for each
Cendant Mortgage Loan shall be capped at 0.20% per annum (such amount, the
"Compensating Interest Payment"). No Master Servicer shall be entitled to any
reimbursement of any Compensating Interest Payment.
Section 6.05. Reports of Foreclosures and Abandonment of Mortgaged
Property. Each year each Master Servicer shall report or cause to be reported
to the Internal Revenue Service foreclosures and abandonments of any Mortgaged
Property with respect to Mortgage Loans serviced by such Master Servicer as
required by Section 6050J of the Code.
ARTICLE VII
THE MASTER SERVICERS
Section 7.01. Liabilities of the Master Servicers. Each Master
Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically imposed upon and undertaken by such Master Servicer
herein. The parties agree that each Master Servicer shall service the Mortgage
Loans which it services in accordance with the terms of this Agreement, in
accordance with this Agreement and applicable laws and regulations, giving due
consideration to customary and usual standards of practice of prudent mortgage
lenders and master servicers.
Section 7.02. Merger or Consolidation of a Master Servicer. Any Person
into which a Master Servicer may be merged or consolidated, or any corporation
resulting from any merger or consolidation to which a Master Servicer shall be
a party, or any Person succeeding to the business of a Master Servicer, shall
be the successor of such Master Servicer hereunder, without the execution or
filing of any paper or further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
Section 7.03. Indemnification of the Certificate Trustee. The Trusts
shall indemnify the Indemnified Persons for, and to hold them harmless against,
any loss, liability or expense incurred on their part, arising out of, or in
connection with, this Agreement, including the costs and expenses (including
reasonable legal fees and expenses) of defending themselves against any such
claim other than (i) any loss, liability or expense related to any such
Indemnified Person's failure to perform such Indemnified Person's duties in
strict compliance with this Agreement (except as any such loss,
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liability or expense shall be otherwise reimbursable pursuant to this
Agreement) and (ii) any loss, liability or expense incurred by reason of any
such Indemnified Person's willful misfeasance, bad faith or negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. In addition, each Master Servicer,
individually and not jointly, shall indemnify the Indemnified Persons for, and
hold them harmless against, any loss, liability or expense incurred on its
part, arising out of, or in connection with, this Agreement, including the
costs and expenses (including reasonable legal fees and expenses) of defending
themselves against any such claim, but only to the extent any such loss,
liability or expense results solely from such Master Servicer's failure to
perform its duties in strict compliance with this Agreement. This indemnity
shall survive the resignation or removal of the Certificate Trustee and the
termination of this Agreement.
Section 7.04. Limitation on Liability of the Master Servicer and
Others.
(a) Neither Master Servicer nor any of its directors, officers,
employees or agents shall be under any liability to the Indemnified Persons,
the Depositor, the Trusts or the Certificateholders for taking any action or
for refraining from taking any action in good faith pursuant to this Agreement,
or for errors in judgment; provided, however, that this provision shall not
protect a Master Servicer or any such Person against any breach of warranties
or representations made herein by it or any liability which would otherwise be
imposed on it by reason of such Person's willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder.
(b) Each Master Servicer and any of its directors, officers,
employees or agents may rely in good faith on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder.
(c) Each Master Servicer and any of its directors, officers,
employees or agents shall be indemnified by the Trusts and held harmless
thereby against any loss, liability or expense incurred in connection with any
legal proceedings relating to this Agreement or the Certificates (including
reasonable legal fees and disbursements of counsel), other than (i) any loss,
liability or expense related to its failure to perform its duties in strict
compliance with this Agreement (except as any such loss, liability or expense
shall be otherwise reimbursable pursuant to this Agreement) and (ii) any loss,
liability or expense incurred by reason of such Person's willful misfeasance,
bad faith or negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder.
(d) Neither Master Servicer shall be under any obligation to appear
in, prosecute or defend any legal action that is not incidental to its duties
under this Agreement and that in its opinion may involve it in any expense or
liability; provided, however, that either Master Servicer may in its
discretion, with the consent of the Certificate Trustee, undertake any such
action which it may deem necessary or desirable with respect to this Agreement
and the rights and duties of the parties hereto and the interests of the
Certificateholders hereunder. In such event, the legal expenses and costs of
such action and any liability resulting therefrom shall be expenses, costs and
liabilities of the related Trusts, and such Master Servicer shall be entitled
to be reimbursed therefor out of the related
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Protected Accounts or the Certificate Account as provided by Section 4.03(a).
Nothing in this Section 7.04(d) shall affect a Master Servicer's obligation to
supervise the servicing and administration of the Mortgage Loans pursuant to
Section 3.01(a).
(e) In taking or recommending any course of action pursuant to this
Agreement, unless specifically required to do so pursuant to this Agreement, no
Master Servicer shall be required to investigate or make recommendations
concerning potential liabilities which the Trusts might incur as a result of
such course of action by reason of the condition of the Mortgaged Properties
but each Master Servicer shall give notice to the Certificate Trustee if it has
notice of such potential liabilities.
Section 7.05. No Master Servicer to Resign. Except as provided in
Section 7.06, no Master Servicer shall resign from the obligations and duties
hereby imposed on it except upon a determination that any such duties hereunder
are no longer permissible under applicable law. Any such determination
permitting the resignation of a Master Servicer shall be evidenced by an
Opinion of Independent Counsel to such effect delivered to the Certificate
Trustee. No such resignation by a Master Servicer shall become effective until
the Certificate Trustee or a successor to such Master Servicer reasonably
satisfactory to the Certificate Trustee shall have assumed the responsibilities
and obligations of such Master Servicer in accordance with Section 8.02 hereof.
The Certificate Trustee shall notify the Rating Agencies of the resignation of
any Master Servicer.
Section 7.06. Sale and Assignment of Master Servicing. Each Master
Servicer may sell and assign its rights and delegate its duties and obligations
in their entirety as a Master Servicer under this Agreement; provided, however,
that:
(i) the purchaser or transferee accepting such assignment and
delegation (a) shall be a Person which shall be qualified to service
mortgage loans for FNMA or Freddie Mac; (b) shall have a net worth of
not less than $10,000,000 (unless otherwise approved by each Rating
Agency pursuant to clause (ii) below); (c) shall be reasonably
satisfactory to the Certificate Trustee (as evidenced in a writing
signed by the Certificate Trustee); (d) shall execute and deliver to the
Certificate Trustee an agreement, in form and substance reasonably
satisfactory to the Certificate Trustee, which contains an assumption by
such Person of the due and punctual performance and observance of each
covenant and condition to be performed or observed by it as master
servicer under this Agreement from and after the effective date of such
agreement;
(ii) each Rating Agency shall be given prior written notice of
the identity of the proposed successor to such Master Servicer and each
Rating Agency's rating of the Certificates in effect immediately prior
to such assignment, sale and delegation will not be downgraded,
qualified or withdrawn as a result of such assignment, sale and
delegation, as evidenced by a letter to such effect delivered to such
Master Servicer and the Certificate Trustee; and
(iii) the Master Servicer assigning and selling the master
servicing shall deliver to the Certificate Trustee an Officer's
Certificate and an Opinion of Independent Counsel,
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each stating that all conditions precedent to such action under this
Agreement have been completed and such action is permitted by and
complies with the terms of this Agreement.
No such assignment or delegation shall affect any liability of the related
Master Servicer arising prior to the effective date thereof.
ARTICLE VIII
DEFAULT
Section 8.01. Events of Default. The term "Event of Default", wherever
used herein, means any one of the following events (whatever the reason for
such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(i) A Master Servicer fails to cause to be deposited in the
Certificate Account any amount so required to be deposited pursuant to
this Agreement, and such failure continues unremedied for a period of
two Business Days after the date such deposit was required to be made;
or
(ii) A Master Servicer fails to observe or perform in any
material respect any other covenants and agreements set forth in this
Agreement to be performed by it, which covenants and agreements
materially affect the rights of Certificateholders, and such failure
continues unremedied for a period of 60 days after the date on which
written notice of such failure, properly requiring the same to be
remedied, shall have been given to such Master Servicer by the
Certificate Trustee or to such Master Servicer and the Certificate
Trustee by the Holders of Certificates evidencing Fractional Undivided
Interests aggregating not less than 25% of the Trust Fund for a Series;
or
(iii) There is entered against a Master Servicer a decree or
order by a court or agency or supervisory authority having jurisdiction
in the premises for the appointment of a conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets
and liabilities or similar proceedings, or for the winding up or
liquidation of its affairs, and the continuance of any such decree or
order is unstayed and in effect for a period of 60 consecutive days, or
an involuntary case is commenced against a Master Servicer under any
applicable insolvency or reorganization statute and the petition is not
dismissed within 60 days after the commencement of the case; or
(iv) A Master Servicer consents to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshaling of assets and liabilities or similar proceedings of or
relating to such Master Servicer or substantially all of its property;
or a Master Servicer admits in writing its inability to pay its debts
generally as they become due, files a petition to take advantage of any
applicable insolvency or reorganization statute, makes an assignment for
the benefit of its creditors, or voluntarily suspends payment of its
obligations; or
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(v) A Master Servicer assigns or delegates its duties or
rights under this Agreement in contravention of the provisions
permitting such assignment or delegation under Sections 7.05 or 7.06.
In each and every such case, so long as such Event of Default with respect to
such Master Servicer shall not have been remedied, either the Certificate
Trustee or the Holders of Certificates evidencing Fractional Undivided
Interests aggregating not less than 51% of the principal of the Trust Fund for
an affected Series, by notice in writing to such Master Servicer (and to the
Certificate Trustee if given by such Certificateholders), with a copy to the
Rating Agencies, may terminate all of the rights and obligations (but not the
liabilities) of such Master Servicer under this Agreement and in and to the
Mortgage Loans and/or the REO Property serviced by such Master Servicer and the
proceeds thereof. Upon the receipt by a Master Servicer of such written
notice, all authority and power of such Master Servicer under this Agreement,
whether with respect to the Certificates, the applicable Mortgage Loans, REO
Property or under any other related agreements, shall, subject to Section 8.02,
automatically and without further action pass to and be vested in the
Certificate Trustee pursuant to this Section 8.01; and, without limitation, the
Certificate Trustee is hereby authorized and empowered to execute and deliver,
on behalf of the defaulting Master Servicer as attorney-in-fact or otherwise,
any and all documents and other instruments and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice
of termination, whether to complete the transfer and endorsement or assignment
of the applicable Mortgage Loans and related documents, or otherwise. Each
Master Servicer agrees to cooperate with the Certificate Trustee in effecting
the termination of the defaulting Master Servicer's rights and obligations
hereunder, including, without limitation, the transfer to the Certificate
Trustee of (i) the property and amounts which are then or should be part of the
Trust or which thereafter become part of the Trust; (ii) originals or copies of
all documents of such Master Servicer reasonably requested by the Certificate
Trustee to enable it to assume such Master Servicer's duties thereunder; and
(iii) the rights and obligations of such Master Servicer under this Agreement
with respect to the applicable Mortgage Loans. In addition to any other
amounts which are then, or, notwithstanding the termination of its activities
under this Agreement, may become payable to a terminated Master Servicer under
this Agreement, such Master Servicer shall be entitled to receive, out of any
amount received on account of any applicable Mortgage Loan or REO Property,
that portion of such payments which it would have received as reimbursement
pursuant to Section 3.11 if notice of termination had not been given. The
termination of the rights and obligations of a Master Servicer shall not affect
any obligations incurred by such Master Servicer prior to such termination nor
the right of such Master Servicer to its accrued fees and expenses.
Section 8.02. Certificate Trustee to Act; Appointment of Successor.
(a) Upon the receipt by a Master Servicer of a notice of termination pursuant
to Section 8.01 or an Opinion of Independent Counsel pursuant to Section 7.05
to the effect that such Master Servicer is legally unable to act or to delegate
its duties to a Person which is legally able to act, the Certificate Trustee
shall automatically become the successor in all respects to such Master
Servicer in its capacity under this Agreement and the transactions set forth or
provided for herein and shall thereafter be subject to all the
responsibilities, duties, liabilities and limitations on liabilities relating
thereto placed on such Master Servicer by the terms and provisions hereof;
provided, however, that the Certificate Trustee (i) shall be under no
obligation to purchase any related Mortgage Loan pursuant to Section
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10.01; and (ii) shall have no obligation whatsoever with respect to any
liability (other than advances deemed recoverable and not previously made)
incurred by such Master Servicer at or prior to the time of receipt by such
Master Servicer of such notice or by the Certificate Trustee of such Opinion of
Independent Counsel. As compensation therefor, the Certificate Trustee shall
be entitled to all funds relating to the Mortgage Loans which such Master
Servicer would have been entitled to retain if such Master Servicer had
continued to act hereunder, except for those amounts due such Master Servicer
as reimbursement for advances previously made or expenses previously incurred.
Notwithstanding the above, the Certificate Trustee may, if it shall be
unwilling so to act, or shall, if it is legally unable so to act, appoint or
petition a court of competent jurisdiction to appoint, any established housing
and home finance institution which is a FNMA- or Freddie Mac-approved servicer,
and with respect to a successor to a Master Servicer only, having a net worth
of not less than $10,000,000, as the successor to such Master Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of such Master Servicer hereunder. Pending appointment of a
successor to a Master Servicer hereunder, the Certificate Trustee shall act in
such capacity as hereinabove provided. In connection with such appointment and
assumption, the Certificate Trustee may make such arrangements for the
compensation of such successor out of payments on the Mortgage Loans as it and
such successor shall agree; provided, however, that no such compensation shall
be in excess of that permitted the Certificate Trustee under this Subsection
8.02(a), and that such successor shall undertake and assume the obligations of
the Certificate Trustee to pay compensation to any third Person acting as an
agent or independent contractor in the performance of master servicing
responsibilities hereunder. The Certificate Trustee and such successor shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
(b) If the Certificate Trustee shall succeed to any duties of a
Master Servicer respecting the Mortgage Loans master serviced by such Master
Servicer as provided herein, it shall do so in a separate capacity and not in
its capacity as Certificate Trustee and, accordingly, the provisions of Article
IX shall be inapplicable to the Certificate Trustee in its duties as the
successor to such Master Servicer in the servicing of such Mortgage Loans
(although such provisions shall continue to apply to the Certificate Trustee in
its capacity as Certificate Trustee); the provisions of Article VII, however,
shall apply to it in its capacity as successor master servicer.
Section 8.03. Notification to Certificateholders. Upon any termination
or appointment of a successor to a Master Servicer, the Certificate Trustee
shall give prompt written notice thereof to Certificateholders at their
respective addresses appearing in the Certificate Register and to the Rating
Agencies.
Section 8.04. Waiver of Defaults. The Certificate Trustee shall
transmit by mail to all Certificateholders, within 60 days after the occurrence
of any Event of Default known to the Certificate Trustee, unless such Event of
Default shall have been cured, notice of each such Event of Default hereunder
known to the Certificate Trustee. The Holders of Certificates evidencing
Fractional Undivided Interests aggregating not less than 51% of the Trust Fund
for an affected Series may, on behalf of all Certificateholders, waive any
default by a Master Servicer in the performance of its obligations hereunder
and the consequences thereof, except a default in the making of or the causing
to be made any required distribution on the Certificates of such Series. Upon
any such
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waiver of a past default, such default shall be deemed to cease to exist, and
any Event of Default arising therefrom shall be deemed to have been timely
remedied for every purpose of this Agreement. No such waiver shall extend to
any subsequent or other default or impair any right consequent thereon except
to the extent expressly so waived. The Certificate Trustee shall give notice
of any such waiver to the Rating Agencies.
Section 8.05. List of Certificateholders. Upon written request of two
or more Certificateholders of record, for purposes of communicating with other
Certificateholders with respect to their rights under this Agreement, the
Certificate Trustee will afford such Certificateholders access during business
hours to the most recent list of Certificateholders held by the Certificate
Trustee.
ARTICLE IX
CONCERNING THE CERTIFICATE TRUSTEE
Section 9.01. Duties of Certificate Trustee.
(a) The Certificate Trustee, prior to the occurrence of an Event of
Default and after the curing or waiver of all Events of Default which may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement as duties of the Certificate Trustee.
If an Event of Default has occurred and has not been cured or waived, the
Certificate Trustee shall exercise such of the rights and powers vested in it
by this Agreement, and subject to Section 8.02(b) use the same degree of care
and skill in their exercise, as a prudent person would exercise under the
circumstances in the conduct of his own affairs.
(b) Upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments which are
specifically required to be furnished to the Certificate Trustee pursuant to
any provision of this Agreement, the Certificate Trustee shall examine them to
determine whether they are in the form required by this Agreement; provided,
however, that the Certificate Trustee shall not be responsible for the accuracy
or content of any resolution, certificate, statement, opinion, report,
document, order or other instrument furnished by a Master Servicer hereunder;
and provided, further, that the Certificate Trustee shall not be responsible
for the accuracy or verification of any calculation provided to it pursuant to
this Agreement.
(c) The Certificate Trustee shall make monthly distributions and the
final distribution to the Certificateholders as provided in Sections 6.01 and
10.01 herein.
(d) No provision of this Agreement shall be construed to relieve the
Certificate Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct; provided, however,
that:
(i) Prior to the occurrence of an Event of Default, and after
the curing or waiver of all such Events of Default which may have
occurred, the duties and obligations of the Certificate Trustee shall be
determined solely by the express provisions of this Agreement,
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the Certificate Trustee shall not be liable except for the performance
of such duties and obligations as are specifically set forth in this
Agreement, no implied covenants or obligations shall be read into this
Agreement against the Certificate Trustee and, in the absence of bad
faith on the part of the Certificate Trustee, the Certificate Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Certificate Trustee and conforming to the
requirements of this Agreement.
(ii) The Certificate Trustee shall not be liable in its
individual capacity for an error of judgment made in good faith by a
Responsible Officer or Responsible Officers of the Certificate Trustee,
unless it shall be proved that the Certificate Trustee was negligent in
ascertaining the pertinent facts.
(iii) The Certificate Trustee shall not be liable with respect
to any action taken, suffered or omitted to be taken by it in good faith
in accordance with the directions of the Holders of Certificates
evidencing Fractional Undivided Interests aggregating not less than 25%
of the Trust Fund for a Series, if such action or non-action relates to
the time, method and place of conducting any proceeding for any remedy
available to the Certificate Trustee, or exercising any trust or other
power conferred upon the Certificate Trustee, under this Agreement.
(iv) The Certificate Trustee shall not be required to take
notice or be deemed to have notice or knowledge of any default or Event
of Default unless a Responsible Officer of the Certificate Trustee's
Corporate Trust Office shall have actual knowledge thereof. In the
absence of such notice, the Certificate Trustee may conclusively assume
there is no such default or Event of Default.
(v) The Certificate Trustee shall not in any way be liable by
reason of any insufficiency in any Account held by or in the name of
Certificate Trustee unless it is determined by a court of competent
jurisdiction that the Certificate Trustee's gross negligence or willful
misconduct was the primary cause of such insufficiency. Notwithstanding
the preceding sentence, the Certificate Trustee shall not in any way be
liable by reason of any insufficiency in any Account (except the
Certificate Account) held by, or in the name of the Certificate Trustee
resulting from any loss on any Permitted Investment invested pursuant to
Article IV of this Agreement.
(vi) Anything in this Agreement to the contrary
notwithstanding, in no event shall the Certificate Trustee be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Certificate
Trustee has been advised of the likelihood of such loss or damage and
regardless of the form of action.
The Certificate Trustee shall not be required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if there
is reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the
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provisions contained in this Agreement shall in any event require the
Certificate Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of a Master Servicer under this Agreement, except
during such time, if any, as the Certificate Trustee shall be the successor to,
and be vested with the rights, duties, powers and privileges of, such Master
Servicer in accordance with the terms of this Agreement.
(e) All funds received by the Certificate Trustee and required to be
deposited in the Certificate Account pursuant to this Agreement will be
promptly so deposited by the Certificate Trustee.
(f) Except for those actions that the Certificate Trustee is required
to take hereunder, the Certificate Trustee shall have no obligation or
liability to take any action or to refrain from taking any action hereunder in
the absence of written direction as provided hereunder.
Section 9.02. Certain Matters Affecting the Certificate Trustee.
Except as otherwise provided in Section 9.01:
(i) The Certificate Trustee may rely and shall be protected in
acting or refraining from acting in reliance on any resolution,
Officer's Certificate, certificate of a Servicing Officer, certificate
of auditors or any other certificate, statement, instrument, opinion,
report, notice, request, consent, order, appraisal, bond or other paper
or document believed by it to be genuine and to have been signed or
presented by the proper party or parties.
(ii) The Certificate Trustee may consult with counsel and any
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection with respect to any action taken
or suffered or omitted by it hereunder in good faith and in accordance
with such advice or Opinion of Counsel.
(iii) The Certificate Trustee shall be under no obligation to
exercise any of the trusts or powers vested in it by this Agreement,
other than its obligation to give notices pursuant to this Agreement, or
to institute, conduct or defend any litigation hereunder or in relation
hereto at the request, order or direction of any of the
Certificateholders pursuant to the provisions of this Agreement, unless
such Certificateholders shall have offered to the Certificate Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby. Nothing contained
herein shall, however, relieve the Certificate Trustee of the
obligation, upon the occurrence of an Event of Default of which a
Responsible Officer of the Certificate Trustee's Corporate Trust Office
has actual knowledge (which has not been cured or waived), to exercise
such of the rights and powers vested in it by this Agreement, and to use
the same degree of care and skill in their exercise, as a prudent person
would exercise under the circumstances in the conduct of his own
affairs.
(iv) The Certificate Trustee shall not be liable in its
individual capacity for any action taken, suffered or omitted by it in
good faith and believed by it to be authorized or within the discretion
or rights or powers conferred upon it by this Agreement.
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(v) The Certificate 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,
consent, order, approval, bond or other paper or document, unless
requested in writing to do so by Holders of Certificates evidencing
Fractional Undivided Interests aggregating not less than 25% of the
Trust Fund for a Series and provided that the payment within a
reasonable time to the Certificate Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Certificate Trustee, reasonably
assured to the Certificate Trustee by the security afforded to it by the
terms of this Agreement. The Certificate Trustee may require reasonable
indemnity against such expense or liability as a condition to taking any
such action. The reasonable expense of every such examination shall be
paid by the Certificateholders requesting the investigation.
(vi) The Certificate Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or
through agents or attorneys; provided, however, that the Certificate
Trustee may not appoint any agent to perform its custodial functions
with respect to the Mortgage Files, other than the Custodian, or paying
agent functions under this Agreement without the express written consent
of each Master Servicer. The Certificate Trustee shall not be liable or
responsible for the misconduct or negligence of any of the Certificate
Trustee's agents or attorneys or a custodian or paying agent appointed
hereunder by the Certificate Trustee with due care and, when required,
with the consent of each Master Servicer.
(vii) Should the Certificate Trustee deem the nature of any
action required on its part, other than a payment or transfer under
Section 4.02(b) or Section 4.03, to be unclear, the Certificate Trustee
may require prior to such action that it be provided by a Master
Servicer with reasonable further instructions.
(viii) The right of the Certificate Trustee to perform any
discretionary act enumerated in this Agreement shall not be construed as
a duty, and the Certificate Trustee shall not be accountable for other
than its negligence or willful misconduct in the performance of any such
act.
(ix) The Certificate Trustee shall not be required to give any
bond or surety with respect to the execution of the trust created hereby
or the powers granted hereunder.
(x) The Certificate Trustee shall have no duty to conduct any
affirmative investigation as to the occurrence of any condition
requiring the repurchase of any Mortgage Loan by BSMCC pursuant to this
Agreement and/or the Mortgage Loan Purchase Agreement or the eligibility
of any Mortgage Loan for purposes of this Agreement.
Section 9.03. Certificate Trustee Not Liable for Certificates or
Mortgage Loans. The recitals contained herein and in the Certificates shall be
taken as the statements of the Depositor, and the Certificate Trustee shall
have no responsibility for their correctness. The Certificate Trustee makes no
representation as to the validity or sufficiency of the Certificates (other
than the signature and
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countersignature of the Certificate Trustee on the Certificates) or of any
Mortgage Loan except as expressly provided in Sections 2.02 and 2.05 hereof;
provided, however, that the foregoing shall not relieve the Certificate Trustee
of its obligation to cause the Custodian to review the Mortgage Files pursuant
to Sections 2.02 and 2.05. The Certificate Trustee's signature and
countersignature (or countersignature of its agent) on the Certificates shall
be solely in its capacity as Certificate Trustee and shall not constitute an
obligation of the Certificate Trustee in any other capacity. The Certificate
Trustee shall not be accountable for the use or application by the Depositor of
any of the Certificates or of the proceeds of such Certificates, or for the use
or application of any funds paid to the Depositor with respect to the Mortgage
Loans. Subject to the provisions of Section 2.05, the Certificate Trustee
shall not be responsible for the legality or validity of this Agreement or any
document or instrument relating to this Agreement, the validity of the
execution of this Agreement or of any supplement hereto or instrument of
further assurance, or the validity, priority, perfection or sufficiency of the
security for the Certificates issued hereunder or intended to be issued
hereunder. The Certificate Trustee shall at no time have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any Mortgage Loan, or the perfection and priority of any Security Agreement or
the maintenance of any such perfection and priority, or for or with respect to
the sufficiency of the related Trust Fund or its ability to generate the
payments to be distributed to Certificateholders, under this Agreement. The
Certificate Trustee shall have no responsibility for filing any financing or
continuation statement in any public office at any time or to otherwise perfect
or maintain the perfection of any security interest or lien granted to it
hereunder or to record this Agreement.
Section 9.04. Certificate Trustee May Own Certificates. The
Certificate Trustee in its individual capacity or in any capacity other than as
Certificate Trustee hereunder may become the owner or pledgee of any
Certificates with the same rights it would have if it were not Certificate
Trustee, and may otherwise deal with the parties hereto.
Section 9.05. Certificate Trustee's Fees and Expenses. The Certificate
Trustee shall not be entitled to any fee except that it shall be entitled to
retain as compensation all investment income, net of any investment losses,
with respect to Permitted Investments in the Certificate Account. Such
compensation obligation shall not be limited by any provision of law in regard
to the compensation of a Certificate Trustee of an express trust.
Section 9.06. Eligibility Requirements for Certificate Trustee. The
Certificate Trustee and any successor Certificate Trustee shall during the
entire duration of this Agreement be a state bank or trust company or a
national banking association organized and doing business under the laws of
such state or the United States of America, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus and
undivided profits of at least $40,000,000 or, in the case of a successor
Certificate Trustee, $50,000,000, subject to supervision or examination by
federal or state authority and, in the case of a successor Certificate Trustee
other than pursuant to Section 9.10, rated in one of the two highest long-term
debt categories of, or otherwise acceptable to, each of the Rating Agencies.
The Certificate Trustee shall not be an Affiliate of any Master Servicer,
unless the Certificate Trustee acts as successor Master Servicer hereunder. If
the Certificate Trustee publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this
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Section 9.06 the combined capital and surplus of such entity shall be deemed to
be its total equity capital (combined capital and surplus) as set forth in its
most recent report of condition so published. In case at any time the
Certificate Trustee shall cease to be eligible in accordance with the
provisions of this Section 9.06, the Certificate Trustee shall resign
immediately in the manner and with the effect specified in Section 9.08.
Section 9.07. Insurance. The Certificate Trustee, at its own expense,
shall at all times maintain and keep in full force and effect: (i) fidelity
insurance, (ii) theft of documents insurance and (iii) forgery insurance (which
may be collectively satisfied by a "Financial Institution Bond" and/or a
"Bankers' Blanket Bond"). All such insurance shall be in amounts, with
standard coverage and subject to deductibles, as are customary for insurance
typically maintained by banks which act as custodians for investor-owned
mortgage pools. A certificate of an officer of the Certificate Trustee as to
the Certificate Trustee's compliance with this Section 9.07 shall be furnished
to any Master Servicer or Certificateholder upon reasonable written request.
Section 9.08. Resignation and Removal of the Certificate Trustee.
(a) The Certificate Trustee may at any time resign and be discharged
from the Trusts hereby created by giving written notice thereof to each Master
Servicer, with a copy to the Rating Agencies. Upon receiving such notice of
resignation, the Master Servicers shall promptly appoint a successor
Certificate Trustee by written instrument, in triplicate, one copy of which
instrument shall be delivered to each of the resigning Certificate Trustee and
the successor Certificate Trustee. If no successor Certificate Trustee shall
have been so appointed and have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Certificate Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Certificate Trustee.
(b) If at any time the Certificate Trustee shall cease to be eligible
in accordance with the provisions of Section 9.06 and shall fail to resign
after written request therefor by the Master Servicers or if at any time the
Certificate Trustee shall become incapable of acting, or shall be adjudged a
bankrupt or insolvent, or a receiver of the Certificate Trustee or of its
property shall be appointed, or any public officer shall take charge or control
of the Certificate Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Master Servicers shall be
entitled to remove the Certificate Trustee and appoint a successor Certificate
Trustee by written instrument, in triplicate, one copy of which instrument
shall be delivered to each of the Certificate Trustee so removed and the
successor Certificate Trustee.
(c) The Holders of Certificates evidencing Fractional Undivided
Interests aggregating not less than 51% of the Trust Fund for each Series may
at any time remove the Certificate Trustee and appoint a successor Certificate
Trustee by written instrument or instruments, in quadruplicate, signed by such
Holders or their attorneys-in-fact duly authorized, one complete set of which
instruments shall be delivered to each Master Servicer, the Certificate Trustee
so removed and the successor so appointed.
(d) No resignation or removal of the Certificate Trustee and
appointment of a successor Certificate Trustee pursuant to any of the
provisions of this Section 9.08 shall become effective
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except upon appointment of and acceptance of such appointment by the successor
Certificate Trustee as provided in Section 9.09. All costs and expenses
incurred in connection with the resignation or removal of the Certificate
Trustee shall be paid by such Certificate Trustee.
Section 9.09. Successor Certificate Trustee.
(a) Any successor Certificate Trustee appointed as provided in
Section 9.08 shall execute, acknowledge and deliver to each Master Servicer and
to its predecessor Certificate Trustee an instrument accepting such appointment
hereunder. The resignation or removal of the predecessor Certificate Trustee
shall then become effective and such successor Certificate Trustee, without any
further act, deed or conveyance, shall become fully vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect
as if originally named as Certificate Trustee herein. The predecessor
Certificate Trustee shall after payment of its outstanding fees and expenses
promptly deliver to the successor Certificate Trustee all assets and records of
the Trust held by it hereunder, and each Master Servicer and the predecessor
Certificate Trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for more fully and certainly vesting
and confirming in the successor Certificate Trustee all such rights, powers,
duties and obligations.
(b) No successor Certificate Trustee shall accept appointment as
provided in this Section 9.09 unless at the time of such acceptance such
successor Certificate Trustee shall be eligible under the provisions of Section
9.06.
(c) Upon acceptance of appointment by a successor Certificate Trustee
as provided in this Section 9.09, the successor Certificate Trustee shall mail
notice of the succession of such Certificate Trustee hereunder to all
Certificateholders at their addresses as shown in the Certificate Register and
to the Rating Agencies.
Section 9.10. Merger or Consolidation of Certificate Trustee. Any
state bank or trust company or national banking association into which the
Certificate Trustee may be merged or converted or with which it may be
consolidated or any state bank or trust company or national banking association
resulting from any merger, conversion or consolidation to which the Certificate
Trustee shall be a party, or any state bank or trust company or national
banking association succeeding to all or substantially all of the corporate
trust business of the Certificate Trustee, shall be the successor of the
Certificate Trustee hereunder, provided such state bank or trust company or
national banking association shall be eligible under the provisions of Section
9.06. Such succession shall be valid without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
Section 9.11. Appointment of Co-Certificate Trustee or Separate
Certificate Trustee.
(a) Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trusts or property constituting the same may at the time be located, the
Master Servicers and the Certificate Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons
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approved by the Certificate Trustee and the Master Servicers to act as
co-Certificate Trustee or co-Certificate Trustees, jointly with the Certificate
Trustee, or separate Certificate Trustee or separate Certificate Trustees, of
all or any part of the Trust, and to vest in such Person or Persons, in such
capacity, such title to the Trusts, or any part thereof, and, subject to the
other provisions of this Section 9.11, such powers, duties, obligations, rights
and trusts as the Master Servicers and the Certificate Trustee may consider
necessary or desirable.
(b) If the Master Servicers shall not have joined in such appointment
within 15 days after the receipt by it of a written request so to do, or in
case an Event of Default with respect to a Master Servicer shall have occurred
and be continuing, the Certificate Trustee shall have the power to make such
appointment without such Master Servicer or Master Servicers.
(c) No co-Certificate Trustee or separate Certificate Trustee
hereunder shall be required to meet the terms of eligibility as a successor
Certificate Trustee under Section 9.06 hereunder and no notice to
Certificateholders of the appointment of co-Certificate Trustee(s) or separate
Certificate Trustee(s) shall be required under Section 9.08 hereof.
(d) In the case of any appointment of a co-Certificate Trustee or
separate Certificate Trustee pursuant to this Section 9.11, all rights, powers,
duties and obligations conferred or imposed upon the Certificate Trustee and
required to be conferred on such co-Certificate Trustee shall be conferred or
imposed upon and exercised or performed by the Certificate Trustee and such
separate Certificate Trustee or co-Certificate Trustee jointly, except to the
extent that under any law of any jurisdiction in which any particular act or
acts are to be performed (whether as Certificate Trustee hereunder or as
successor to a Master Servicer hereunder), the Certificate Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trusts or any portion thereof in any such jurisdiction) shall be exercised and
performed by such separate Certificate Trustee or co-Certificate Trustee at the
direction of the Certificate Trustee.
(e) Any notice, request or other writing given to the Certificate
Trustee shall be deemed to have been given to each of the then separate
Certificate Trustees and co-Certificate Trustees, as effectively as if given to
each of them. Every instrument appointing any separate Certificate Trustee or
co-Certificate Trustee shall refer to this Agreement and the conditions of this
Article IX. Each separate Certificate Trustee and co-Certificate Trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Certificate Trustee or separately, as may be provided therein, subject to all
the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Certificate Trustee. Every such instrument shall
be filed with the Certificate Trustee.
(f) To the extent not prohibited by law, any separate Certificate
Trustee or co-Certificate Trustee may, at any time, request the Certificate
Trustee, its agent or attorney-in-fact, with full power and authority, to do
any lawful act under or with respect to this Agreement on its behalf and in its
name. If any separate Certificate Trustee or co-Certificate Trustee shall die,
become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and
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be exercised by the Certificate Trustee, to the extent permitted by law,
without the appointment of a new or successor Certificate Trustee.
(g) No Certificate Trustee under this Agreement shall be personally
liable by reason of any act or omission of another Certificate Trustee under
this Agreement. The Master Servicers and the Certificate Trustee acting
jointly may at any time accept the resignation of or remove any separate
Certificate Trustee or co-Certificate Trustee, except that following the
occurrence of any Event of Default which has not been cured, the Certificate
Trustee acting alone may accept the resignation of or remove any separate
Certificate Trustee or co-Certificate Trustee.
Section 9.12. Master Servicers Shall Provide Information as Reasonably
Required. Each Master Servicer shall furnish to the Certificate Trustee,
during the term of this Agreement, such periodic, special, or other reports or
information (and in such electronic format or other means acceptable to the
Certificate Trustee) as such Master Servicer may have in its possession and as
may reasonably be requested by the Certificate Trustee in order to fulfill its
duties and obligations under this Agreement.
ARTICLE X
TERMINATION
Section 10.01. Termination of a Series Upon Repurchase by BSMCC or its
Designee or the Depositor or Liquidation of the Mortgage Loans.
(a) Subject to Section 10.02, the respective obligations and
responsibilities of the Depositor, the Master Servicers, the Custodian and the
Certificate Trustee created hereby, other than the obligation of the
Certificate Trustee or the Master Servicers to make payments to
Certificateholders of a Series as hereinafter set forth and to the Certificate
Trustee, shall terminate with respect to a Series upon:
(i) the repurchase by or at the direction of BSMCC or its
designee (or if BSMCC or its designee does not exercise such option, the
Depositor) of all Mortgage Loans in the Mortgage Loan Group of such
Series and all REO Property remaining in the Trust Fund relating to such
Mortgage Loan Group at a price equal to the aggregate Class Current
Principal Balances of the Outstanding Bonds of the related Bond Group,
plus accrued and unpaid interest thereof through the end of the month
preceding the month in which such purchase occurs; or
(ii) the later of the making of the final payment or other
liquidation, or any advance with respect thereto, of the last Mortgage
Loan remaining in the Trust Fund of such Series or the disposition of
all property acquired with respect to any Mortgage Loan of such Series;
provided, however, that in the event that an advance has been made, but
not yet recovered, at the time of such termination, the Person having
made such advance shall be entitled to receive, notwithstanding such
termination, any payments received subsequent thereto with respect to
which such advance was made.
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(b) In no event, however, shall any Trust created hereby continue
beyond the expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the Court of St. James's, living on the date of this Agreement.
(c) The right of BSMCC or its designee or the Depositor, as the case
may be, to repurchase all Mortgage Loans in a Mortgage Loan Group pursuant to
Section 10.01(a)(i) above shall be exercisable only if (i) in the case of BSMCC
or its designee or the Depositor, the aggregate unpaid principal balance of the
Mortgage Loans in such Mortgage Loan Group at the time of any such repurchase
is less than 5% of the portion of the Cut-off Date Balance allocable to such
Mortgage Loan Group or (ii) in the case of the Depositor, the Depositor, based
upon an Opinion of Counsel, has determined that the REMIC status of any Series
REMIC has been lost or that a substantial risk exists that such REMIC status
will be lost for the then-current taxable year. At any time thereafter, in the
case of (i) above, BSMCC or its designee, or the Depositor, and in the case of
(ii) above, the Depositor may elect to terminate the related Trust at any time,
and upon such election, BSMCC or its designee or the Depositor, as the case may
be, shall repurchase all the Mortgage Loans and REO Property of the related
Mortgage Loan Group.
(d) The Certificate Trustee shall give notice of any termination to
the Certificateholders of an affected Series, with a copy to the Rating
Agencies, upon which the Certificateholders shall surrender their Certificates
to the Certificate Trustee for payment of the final distribution and
cancellation. Such notice shall be given by letter, mailed not earlier than
the 15th day and not later than the 25th day of the month next preceding the
month of such final distribution, and shall specify (i) the Distribution Date
upon which final payment of the Certificates of such Series will be made upon
presentation and surrender of such Certificates at the office of the
Certificate Trustee therein designated, (ii) the amount of any such final
payment and (iii) that the Record Date otherwise applicable to such
Distribution Date is not applicable, payments being made only upon presentation
and surrender of the Certificates at the office of such Certificate Trustee
therein specified.
(e) If the option of BSMCC or its designee or the Depositor, as the
case may be, to repurchase or cause the repurchase of all Mortgage Loans in a
Mortgage Loan Group under Section 10.01(a)(i) above is exercised, BSMCC, its
designee or the Depositor, as the case may be, shall deliver to the Certificate
Trustee for deposit in the Certificate Account, by the Business Day prior to
the applicable Distribution Date, an amount equal to the repurchase price for
the Mortgage Loans being purchased by it and all property acquired with respect
to such Mortgage Loans remaining in the applicable Trust Fund. Upon the
presentation and surrender of the related Certificates, the Certificate Trustee
shall distribute all amounts in the Certificate Account related to such
Mortgage Loan Group to the related Certificateholders. Upon deposit of the
required repurchase price and following such final Distribution Date, the
Certificate Trustee shall cause the Custodian to release promptly to BSMCC or
its designee or the Depositor, as the case may be, the Mortgage Files for the
remaining Mortgage Loans for such Mortgage Loan Group, and upon the termination
of the final Trust created hereunder the Accounts shall terminate, subject to
the Certificate Trustee's obligation to hold any amounts payable to
Certificateholders in trust without interest pending final distributions
pursuant to this Section 10.01.
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(f) In the event that this Agreement is terminated by reason of the
payment or liquidation of all Mortgage Loans or the disposition of all property
acquired with respect to all Mortgage Loans under Section 10.01(a)(ii) above,
each Master Servicer shall deliver to the Certificate Trustee for deposit in
the Certificate Account all distributable amounts remaining in its Protected
Accounts. Upon the presentation and surrender of the Certificates of the
outstanding Series, the Certificate Trustee shall distribute to the related
Certificateholders, in accordance with their respective interests, all
distributable amounts remaining in the Certificate Account. Upon deposit by
each Master Servicer of such distributable amounts and delivery to the
Certificate Trustee of an Officer's Certificate from such Master Servicer
certifying that such deposit has been made, and following such final
Distribution Date, the Certificate Trustee shall cause the Custodian to release
promptly to BSMCC or its designee or the Depositor, as the case may be, the
Mortgage Files for the remaining Mortgage Loans, and the Accounts shall
terminate, subject to the Certificate Trustee's obligation to hold any amounts
payable to the Certificateholders in trust without interest pending final
distributions pursuant to this Section 10.01.
(g) If not all of the Certificateholders of an affected Series shall
surrender their Certificates for cancellation within six months after the time
specified in the above-mentioned written notice, the Certificate Trustee shall
give a second written notice to the remaining Certificateholders of such Series
to surrender their Certificates for cancellation and receive the final
distribution with respect thereto. If within six months after the second
notice, not all such Certificates shall have been surrendered for cancellation,
the Certificate Trustee may take appropriate steps, or appoint any agent to
take appropriate steps, to contact the remaining affected Certificateholders
concerning surrender of their Certificates, and the cost thereof shall be paid
out of the funds and other assets which remain subject to this Agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment. (a) This Agreement may be amended from time
to time by the Depositor, the Certificate Trustee and the Master Servicers,
without notice to or the consent of any of the Certificateholders, to cure any
ambiguity, to correct or supplement any provisions herein that may be defective
or inconsistent with any other provisions herein, to comply with any changes in
the Code or to make any other provisions with respect to matters or questions
arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement; provided, however, that such action shall not, as
evidenced by an Opinion of Independent Counsel, adversely affect in any
material respect the interests of any Certificateholder.
(b) This Agreement may also be amended from time to time by the
Depositor, the Certificate Trustee and the Master Servicers, with the consent
of BSMCC and the Holders of Certificates of a Series evidencing Fractional
Undivided Interests aggregating not less than 51% of the Trust Fund for each
affected Series for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying
in any manner the rights of the Certificateholders of such Series; provided,
however, that no such amendment shall (i) reduce in any manner the amount of,
or delay the timing of, payments received on Mortgage
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Loans which are required to be distributed on any Certificate of such Series
without the consent of the Holder of such Certificate, (ii) reduce the
aforesaid percentage of Certificates of a Series the Holders of which are
required to consent to any such amendment, without the consent of the Holders
of all Certificates of such Series then outstanding, or (iii) cause any of the
Series REMICs to fail to qualify as a REMIC for federal income tax purposes, as
evidenced by an Opinion of Independent Counsel which shall be provided to the
Certificate Trustee other than at the Certificate Trustee's expense.
Notwithstanding any other provision of this Agreement, for purposes of the
giving or withholding of consents pursuant to this Section 11.02(b),
Certificates registered in the name of or held for the benefit of the
Depositor, the Master Servicers or the Certificate Trustee or any Affiliate
thereof shall be entitled to vote their Undivided Fractional Interests with
respect to matters affecting such Certificates.
(c) Promptly after the execution of any such amendment, the
Certificate Trustee shall furnish a copy of such amendment or written
notification of the substance of such amendment to each Certificateholder, with
a copy to the Rating Agencies.
(d) In the case of an amendment under Section 11.02(b) above, it
shall not be necessary for the Certificateholders of the affected Series to
approve the particular form of such an amendment. Rather, it shall be
sufficient if the Certificateholders approve the substance of the amendment.
The manner of obtaining such consents and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Certificate Trustee may prescribe.
(e) Prior to the execution of any amendment to this Agreement, the
Certificate Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement. The Certificate Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Certificate Trustee's own
rights, duties or immunities under this Agreement.
Section 11.02. Recordation of Agreement. To the extent permitted by
applicable law, this Agreement is subject to recordation in all appropriate
public offices for real property records in all the counties or other
comparable jurisdictions in which any or all of the Mortgaged Properties are
situated, and in any other appropriate public recording office or elsewhere.
The Certificate Trustee shall effect such recordation, at the expense of the
Trusts upon the request in writing of a Certificateholder, but only if such
direction is accompanied by an Opinion of Counsel (provided at the expense of
the Certificateholder requesting recordation) to the effect that such
recordation would materially and beneficially affect the interests of the
Certificateholders or is required by law.
Section 11.03. Limitation on Rights of Certificateholders.
(a) The death or incapacity of any Certificateholder shall not
terminate this Agreement or any Trust, nor entitle such Certificateholder's
legal representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of any Trust, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
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(b) Except as expressly provided in this Agreement, no
Certificateholders shall have any right to vote or in any manner otherwise
control the operation and management of any Trust, or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Certificates, be construed so as to establish the Certificateholders
from time to time as partners or members of an association; nor shall any
Certificateholders be under any liability to any third Person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon, under or with respect to this Agreement against the
Depositor, the Master Servicers or any successor to any such parties unless (i)
such Certificateholder previously shall have given to the Certificate Trustee a
written notice of a continuing default, as herein provided, (ii) the Holders of
Certificates of a Series evidencing Fractional Undivided Interests aggregating
not less than 51% of the Trust Fund for such Series shall have made written
request upon the Certificate Trustee to institute such action, suit or
proceeding in its own name as Certificate Trustee hereunder and shall have
offered to the Certificate Trustee such reasonable indemnity as it may require
against the costs and expenses and liabilities to be incurred therein or
thereby, and (iii) the Certificate Trustee, for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding.
(d) No one or more Certificateholders shall have any right by virtue
of any provision of this Agreement to affect the rights of any other
Certificateholders or to obtain or seek to obtain priority or preference over
any other such Certificateholder, or to enforce any right under this Agreement,
except in the manner herein provided and for the equal, ratable and common
benefit of all Certificateholders. For the protection and enforcement of the
provisions of this Section 11.03, each and every Certificateholder and the
Certificate Trustee shall be entitled to such relief as can be given either at
law or in equity.
Section 11.04. Acts of Certificateholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or
by an agent duly appointed in writing. Except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Certificate Trustee and, where it is expressly
required, to the Depositor. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this
Agreement and conclusive in favor of the Certificate Trustee and the Depositor,
if made in the manner provided in this Section 11.04.
(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 his or her
individual capacity, such certificate
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or affidavit shall also constitute sufficient proof of his or her authority.
The fact and date of the execution of any such instrument or writing, or the
authority of the individual executing the same, may also be proved in any other
manner which the Certificate Trustee deems sufficient.
(c) The ownership of Certificates (notwithstanding any notation of
ownership or other writing on such Certificates, except an endorsement in
accordance with Section 5.03 made on a Certificate presented in accordance with
Section 5.04) shall be proved by the Certificate Register, and none of the
Certificate Trustee, the Depositor, any Master Servicer or any successor to any
such parties shall be affected by any notice to the contrary.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action of the Holder of any Certificate shall bind every future
holder of the same Certificate and the Holder of every Certificate issued upon
the registration of transfer or exchange thereof, if applicable, or in lieu
thereof with respect to anything done, omitted or suffered to be done by the
Certificate Trustee, the Depositor, the Master Servicer, the Custodian, or any
of them, or any successor to any such party in reliance thereon, whether or not
notation of such action is made upon such Certificates.
(e) In determining whether the Holders of the requisite percentage of
Certificates evidencing Fractional Undivided Interests have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, unless
all Certificates are owned by the Certificate Trustee, Certificates owned by
the Certificate Trustee, the Depositor, the Master Servicers or any sub-
servicer engaged by a Master Servicer or any Affiliate thereof shall be
disregarded, except as otherwise provided in Section 11.01(b) and except that,
in determining whether the Certificate Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Certificates which the Certificate Trustee knows to be so owned
shall be so disregarded. Certificates which have been pledged in good faith to
the Certificate Trustee, the Depositor, a Master Servicer or any Affiliate
thereof may be regarded as outstanding if the pledgor establishes to the
satisfaction of the Certificate Trustee the pledgor's right to act with respect
to such Certificates and that the pledgor is not an Affiliate of the
Certificate Trustee, the Depositor or a Master Servicer, as the case may be.
SECTION 11.05. GOVERNING LAW. THIS AGREEMENT AND THE CERTIFICATES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO ITS CONFLICT OF LAWS RULES AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
Section 11.06. Notices. All demands and notices hereunder shall be in
writing and shall be deemed given when delivered at or mailed by registered
mail, return receipt requested, postage prepaid, or by recognized overnight
courier, to:
(i) in the case of the Depositor, 2711 N. Haskell Avenue,
Suite 900, Dallas, Texas 75204, Attention: Mr. Wade Walker, or to such
other address as may hereafter be furnished to the other parties hereto
in writing;
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(ii) in the case of BAFSB, 555 California Street, San
Francisco, California 94104, Attention: Mr. David M. Grout, Vice
President, or such other address as may hereafter be furnished to the
other parties in writing;
(iii) in the case of Cendant, 6000 Atrium Way, Mt. Laurel, New
Jersey 08054, Attention: Ms. Elaine Monahan or such other address as
may hereafter be furnished to the other parties in writing;
(iv) in the case of the Certificate Trustee, at its Corporate
Trust Office, or such other address as may hereafter be furnished to the
other parties hereto in writing;
(v) in the case of the Custodian, 330 Electronic Drive, Suite
140, Pasadena, California 91107, Attention: Catherine Nelms, or such
other address as may hereafter be furnished to the other parties hereto
in writing;
(vi) in the case of the Rating Agencies, Moody's Investors
Service, Inc., 99 Church Street, New York New York 10007, Attention: MBS
Monitoring Department and Duff & Phelps Credit Rating Co., 17 State
Street, 17th Floor, New York, New York 10004, Attention: Structured
Finance Group; or
(vii) in the case of BSMCC, 245 Park Avenue, New York, New York
10167, Attention: Ms. Mary Haggerty, or such other address as may
hereafter be furnished to the other parties hereto in writing.
Any notice delivered to the Depositor, the Master Servicers, the Certificate
Trustee, the Custodian or BSMCC under this Agreement shall be effective only
upon receipt. Any notice required or permitted to be mailed to a
Certificateholder, unless otherwise provided herein, shall be given by
first-class mail, postage prepaid, at the address of such Certificateholder as
shown in the Certificate Register. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Certificateholder receives such notice.
Section 11.07. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severed from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the
Certificates or the rights of the holders thereof.
Section 11.08. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties hereto.
Section 11.09. Article and Section Headings. The article and section
headings herein are for convenience of reference only, and shall not limit or
otherwise affect the meaning hereof.
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Section 11.10. Counterparts. This Agreement may be executed in two or
more counterparts each of which when so executed and delivered shall be an
original but all of which together shall constitute one and the same
instrument.
Section 11.11 Notice to Rating Agencies. The Certificate Trustee shall
use its best efforts to promptly provide notice to each Rating Agency with
respect to each of the following of which it has actual knowledge:
1. any material change or amendment to this Agreement;
2. the occurrence of any Event of Default that has not been cured;
3. the resignation or termination of a Master Servicer or the
Certificate Trustee;
4. the repurchase or substitution of Mortgage Loans;
5. the final payment to Certificateholders; and
6. any change in the location of the Certificate Account.
In addition, in accordance with Section 6.02, Section 3.12 and Section
3.13, the Certificate Trustee and the Master Servicer, respectively, shall
promptly furnish to each Rating Agency copies of the following:
1. Each report to Certificateholders described in Section 6.02;
2. Each annual statement of compliance as described in Section 3.12;
and
3. Each annual Independent public accountants' servicing report
received as described in Section 3.13.
72
<PAGE> 77
IN WITNESS WHEREOF, the Depositor, BAFSB, Cendant, the Certificate
Trustee and the Custodian have caused their names to be signed hereto by their
respective officers thereunto duly authorized as of the day and year first
above written.
CMC SECURITIES CORPORATION III,
as Depositor
By: /s/ Andrew F.Jacobs
----------------------------------
Name: Andrew F. Jacobs
Title: Senior Vice President -
Asset and Liability Management
BANK OF AMERICA, FSB, as Master
Servicer
By: /s/ David M. Grout
----------------------------------
Name: David Grout
--------------------------------
Title: Vice President
-------------------------------
CENDANT MORTGAGE CORPORATION, as
Master Servicer
By: /s/ Joseph Suter
----------------------------------
Name: Joseph Suter
--------------------------------
Title: Senior Vice President
-------------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
as Certificate Trustee
By: /s/ R. Tarnas
----------------------------------
Name: R. Tarnas
--------------------------------
Title: Vice President
-------------------------------
FIRST CHICAGO NATIONAL PROCESSING
CORPORATION, as Custodian
By: /s/ Catherine Nelms
----------------------------------
Name: Catherine Nelms
--------------------------------
Title: Staff Officer
-------------------------------
Pooling and Servicing Agreement - Signature Page
<PAGE> 78
Accepted and Agreed as to
Sections 2.02, 2.04 and 2.05 and Article X
BEAR STEARNS MORTGAGE CAPITAL
CORPORATION
By: /s/ Mary Haggerty
--------------------------------
Name: Mary Haggerty
------------------------------
Title: Vice President
-----------------------------
Pooling and Servicing Agreement - Signature Page
<PAGE> 79
STATE OF TEXAS )
) ss.:
COUNTY OF DALLAS )
On the 31st day of March, 1998 before me, a notary public in and for
said State, personally appeared Andrew F. Jacobs, known to me to be a Senior
Vice President of CMC Securities Corporation III, the corporation that executed
the within instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Chris T. Krecek
-------------------------------------
Notary Public
[Notarial Seal]
Pooling and Servicing Agreement - Signature Page
<PAGE> 80
STATE OF CALIFORNIA )
) ss.:
COUNTY OF SAN FRANCISCO )
On the 30th day of March, 1998 before me, a notary public in and for
said State, personally appeared David M. Grout, known to me to be a Vice
President of Bank of America, FSB, the corporation that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said corporation, and acknowledged to me that such corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Frances S. Kawasaki
-------------------------------------
Notary Public
[Notarial Seal]
Pooling and Servicing Agreement - Signature Page
<PAGE> 81
STATE OF NEW JERSEY )
) ss.:
COUNTY OF BURLINGTON )
On the 27th day of March, 1998 before me, a notary public in and for
said State, personally appeared Joseph Suter, known to me to be a Senior Vice
President of Cendant Mortgage Corporation, the corporation that executed the
within instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Michelle L. Krauss
-------------------------------------
Notary Public
[Notarial Seal]
Pooling and Servicing Agreement - Signature Page
<PAGE> 82
STATE OF ILL )
) ss.:
COUNTY OF COOK )
On the 30th day of March, 1998 before me, a notary public in and for
said State, personally appeared R. Tarnas, known to me to be a Vice President
of the First National Bank of Chicago, the corporation that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said corporation, and acknowledged to me that such corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Nilda Sierra
-------------------------------------
Notary Public
[Notarial Seal]
Pooling and Servicing Agreement - Signature Page
<PAGE> 83
STATE OF CALIFORNIA )
) ss.:
COUNTY OF LOS ANGELES )
On the 31 day of March, 1998 before me, a notary public in and for said
State, personally appeared Catherine Nelms, known to me to be a Staff
Officer of First Chicago National Processing Corporation, the corporation that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ C. Hau
-------------------------------------
Notary Public
[Notarial Seal]
Pooling and Servicing Agreement - Signature Page
<PAGE> 84
EXHIBIT A
FORM OF CERTIFICATE
<PAGE> 85
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE WITHOUT
REGISTRATION THEREOF UNDER THE ACT MAY ONLY BE MADE IN A TRANSACTION EXEMPTED
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 5.01(b) OF THE POOLING AND SERVICING AGREEMENT REFERRED
TO HEREIN.
CMO MORTGAGE PASS-THROUGH
CERTIFICATE, SERIES 1998-_________
evidencing a beneficial interest in a pool of conventional
single-family loans transferred to the Certificate Trustee
referred to below by
CMC SECURITIES CORPORATION III
serviced by
Bank of America, FSB and Cendant Mortgage Corporation
as Master Servicers
(This Certificate does not represent an interest in
or obligation of CMC Securities Corporation III,
Bank of America, FSB, Cendant Mortgage Corporation
or The First National Bank of Chicago)
No. 0001 100/100th Undivided Interest
This certifies that THE FIRST NATIONAL BANK OF CHICAGO, is the
registered owner of a 100/100th fractional undivided interest in a pool of
conventional one- to four-family residences and individual condominium unit
mortgage loans (the "Mortgage Loans") in the loan group (the "Mortgage Loan
Group") assigned to the series (the "Series") of mortgage pass-through
certificates (the "Certificates") referred to above and transferred to the
Certificate Trustee referred to below by CMC Securities Corporation III ("CMCSC
III"). The Mortgage Loan Group was created pursuant to a Pooling and Servicing
Agreement dated as of March 1, 1998 (the "Agreement") among CMCSC III, Bank of
America, FSB and Cendant Mortgage Corporation, as master servicers
(collectively, the Master Servicers"), and The First National Bank of Chicago,
as certificate trustee (the "Certificate Trustee"), a summary of certain of the
pertinent provisions of which is set forth hereinbelow. Mortgage Loans having
an aggregate principal amount of $________ as of March 1, 1998 (the "Cut-Off
Date"), after deducting all payments due on or before the Cut-Off Date, were
transferred and assigned to the Mortgage Loan Group for this Series. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the holder of this Certificate
by virtue of the acceptance hereof assents and by
<PAGE> 86
which such holder is bound. Capitalized terms not defined herein shall have
the meanings set forth in the Agreement.
Pursuant to the Agreement, the Certificate Trustee will distribute on
the 25th day of the month, or if such day is not a Business Day, then the next
succeeding Business Day, beginning in April 1998 (each, a "Distribution Date"),
to the Person in whose name this Certificate is registered on the last Business
Day of the month immediately preceding the month of such Distribution Date,
such Person's pro rata share (based on the aggregate fractional undivided
interest evidenced by this Certificate) of the aggregate amount required to be
distributed to the Holders of the Series 1998-1 Certificates pursuant to
Section 6.01 of the Agreement. For the purposes hereof, amounts received in
connection with the liquidation of defaulted Mortgage Loans in the Mortgage
Loan Group through Insurance Proceeds, foreclosure or trustee's sales proceeds
or otherwise, shall be deemed to be amounts received on Mortgage Loans in the
Mortgage Loan Group.
Distributions on this Certificate will be made by the Certificate
Trustee by wire transfer in immediately available funds for the account of the
Person entitled thereto as specified by such Person in accordance with the
terms of the Agreement or by such other method as shall be acceptable to both
the Certificate Trustee and such Person. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the
Certificate Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency
maintained for that purpose by the Certificate Trustee in the City of Chicago,
in the State of Illinois.
Unless the certificate of authentication hereon has been executed by the
Certificate Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
This Certificate is one of a duly authorized issue of Certificates
designated as set forth above (herein called the "Certificates") and
representing the fractional undivided interest in the Trust Fund created
pursuant to the Agreement.
The Certificates do not represent an obligation of, or an interest in,
CMCSC III, the Master Servicers, or the Certificate Trustee and are not insured
or guaranteed by any governmental agency or other entity. The Certificates are
limited in right of payment to certain collections and recoveries respecting
the Mortgage Loans in the Mortgage Loan Group, all as more specifically set
forth hereinabove and in the Agreement.
As provided in the Agreement, withdrawals from the Certificate Account
may be made by the Certificate Trustee from time to time for purposes other
than distributions to Certificateholders, such purposes including reimbursement
to the related Master Servicers of certain expenses incurred, by them in
connection with the Mortgage Loans in the Mortgage Loan Group.
The Agreement permits, with respect to this Series and with certain
exceptions therein provided, the amendment thereof and the modification of the
rights and obligations of the Master Servicers and the rights of the
Certificateholders of this Series under the Agreement at any time by CMCSC III,
the Master Servicers and the Certificate Trustee with the consent of BSMCC and
the
-2-
<PAGE> 87
holders of Certificates of this Series evidencing fractional undivided
interests aggregating not less than 51% of the Trust Fund. Any such amendment
or modification shall be effective only as to this Series. Any consent to such
an amendment or modification by the holder of this Certificate shall be
conclusive and binding on such holder and upon all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange therefore or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof,
in certain limited circumstances, without the consent of the holders of any of
the Certificates of this Series.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registerable in the Certificate
Register of the Certificate Registrar, which initially is The First National
Bank of Chicago, upon surrender of this Certificate for registration of
transfer at the office or agency maintained by the Certificate Registrar, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Certificate Registrar, duly executed by the holder hereof
or such holder as attorney duly authorized in writing, and thereupon one or
more new Certificates of this Series of authorized denominations evidencing the
same aggregate fractional undivided interest in the Trust Fund will be issued
to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons. As provided in the Agreement and subject to certain limitations
therein set forth, Certificates in this Series are exchangeable for new
Certificates of this Series of authorized denominations evidencing the same
aggregate fractional undivided interest in the Trust Fund, as requested by the
holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Certificate Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
CMCSC III, the Master Servicers, the Certificate Trustee, the
Certificate Registrar and any agent of the Master Servicer, the Certificate
Trustee or the Certificate Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and neither
CMCSC III, the Master Servicers, the Certificate Trustee, the Certificate
Registrar nor any such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and each Trust Fund shall
terminate upon (i) the repurchase by or at the direction of BSMCC or its
designee (or if BSMCC or its designee does not exercise such option, the
Depositor), but only at the time specified below of all Mortgage Loans in the
Mortgage Loan Group of such Series and all REO Property remaining in the Trust
relating to such Mortgage Loan Group at a price equal to the aggregate Class
Current Principal Balances of the Outstanding Bonds of the related Bond Group,
plus accrued and unpaid interest thereof through the end of the month preceding
the month in which such purchase occurs; or (ii) the later of the making of the
final payment or other liquidation, or any advance with respect thereto, of the
last Mortgage Loan remaining in the Trust Fund of such Series or the
disposition of all property acquired with respect to any Mortgage Loan of such
Series.
-3-
<PAGE> 88
The right of BSMCC or its designee or the Depositor, as the case may be,
to repurchase all Mortgage Loans in a Mortgage Loan Group as described in item
(i) above shall be exercisable only if the aggregate unpaid principal balance
of the Mortgage Loans in such Mortgage Loan Group at the time of any such
repurchase is less than 5% of the portion of the Cut-off Date Balance allocable
to such Mortgage Loan Group.
The Certificate Trustee's signature shall be for authentication purposes
only and neither the Certificate Trustee nor any person signing on its behalf
shall have liability on this Certificate (other than for the certificate of
authentication).
[Remainder of Page Intentionally Left Blank]
-4-
<PAGE> 89
IN WITNESS WHEREOF, CMCSC III has caused this Certificate to be duly
executed.
CMC SECURITIES CORPORATION III
By:
----------------------------------
Wade Walker
Vice President
Attest
- ----------------------------
Assistant Secretary
CERTIFICATE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to
in the within-mentioned Agreement.
THE FIRST NATIONAL BANK OF CHICAGO,
as Certificate Trustee
By:
------------------------------------------
Name:
------------------------------
Title:
------------------------------
Dated: March 31, 1998
<PAGE> 90
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto
_______________________________________________________________ (Please print
or typewrite name and address including postal zip code of assignee)
a fractional undivided interest equal to ______________________ of the
Fractional Undivided Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such interest to assignee on the
Certificate Register.
I (we) further direct the Certificate Registrar to issue a new
Certificate of like Series of a fractional undivided interest equal to
_____________________________________________, to the above named assignee and
deliver such Certificate to the following address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated:
--------------------
---------------------------------------------
tax identification Signature by or on behalf of assignor
no. of assignee: (signature must be signed as registered)
- ------------------- ---------------------------------------------
(signature must be guaranteed by a
commercial bank or trust company or
a member firm of a major stock exchange)
The assignee should include the following for the information of the
Certificate Trustee:
Distributions shall be made by wire transfer in immediately available
funds to
__________________________________________________________________________ for
the account
of__________________________________________________________________ account
number ______________________________________________________, or, if mailed by
check, to __________________________________________. Applicable statements
should be mailed to__________________________________________________
________________________________________________________________________________
________________________________________.
This information is provided by _____________________________ the
assignee named above, or _____________________________________ as its agent.
-6-
<PAGE> 91
EXHIBIT B-1
GROUP 1 MORTGAGE LOAN SCHEDULE
(Intentionally Omitted)
<PAGE> 92
EXHIBIT B-2
GROUP 2 MORTGAGE LOAN SCHEDULE
(Intentionally Omitted)
<PAGE> 93
EXHIBIT B-3
GROUP 3 MORTGAGE LOAN SCHEDULE
(Intentionally Omitted)
<PAGE> 94
EXHIBIT C
REPRESENTATIONS AND WARRANTIES OF BSMCC
CONCERNING THE MORTGAGE LOANS
The Seller hereby represents and warrants to the Purchaser as of the
Closing Date or such other date as may be specified below with respect to the
Mortgage Loans being sold by it that:
(a) the Mortgage creates a first lien or a first priority ownership
interest in the estate in fee simple in real property securing the related
Mortgage Note, free and clear of all adverse claims, liens and encumbrances
having priority over the first lien of the Mortgage subject only to (1) the
lien of non-delinquent current real property taxes and assessments not yet due
and payable, (2) covenants, conditions and restrictions, rights of way,
easements and other matters of public record as of the date of recording which
are acceptable to mortgage lending institutions generally and either (A) which
are referred to or otherwise considered in the appraisal made for the
originator of the Mortgage Loan, or (B) which do not adversely affect the
appraised value of the Mortgaged Property as set forth in such appraisal, and
(3) other matters to which like properties are commonly subject which do not
materially interfere with the benefits of the security intended to be provided
by the Mortgage or the use, enjoyment, value or marketability of the related
Mortgaged Property;
(b) the terms of the Mortgage Note and the Mortgage have not been
impaired, waived, altered or modified in any respect, except by written
instruments which have been recorded to the extent any such recordation is
required by applicable law, and copies of which written instruments are
included in the Mortgage File; and no other instrument of waiver, alteration or
modification has been executed, and no Mortgagor has been released, in whole or
in part, from the terms thereof in connection with an assumption agreement,
which assumption agreement is part of the Mortgage File and the terms of which
are reflected in the Mortgage Loan Schedule;
(c) all buildings upon the Mortgaged Property are insured by a
generally acceptable insurer pursuant to standard hazard insurance policies and
all such standard hazard policies are in effect and on the date of origination
contained a standard mortgagee clause naming BAFSB, BANTSA or Cendant, as
applicable, and its respective successors in interest as loss payee, and such
policies are still in effect and all premiums due thereon have been paid; if
the Mortgaged Property is located in an area identified by the Federal
Emergency Management Agency is having special flood hazards under the Flood
Disaster Protection Act of 1973, as amended, such Mortgaged Property is covered
by flood insurance in an amount not less than that set forth in Section
3.10(d); the Mortgage
C-1
<PAGE> 95
obligates the Mortgagor thereunder to maintain all such insurance at the
Mortgagor's cost and expense, and on the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to maintain such insurance at the
Mortgagor's cost and expense and to seek reimbursement therefor from the
Mortgagor;
(d) any and all requirements of any federal, state or local law
including, without limitation, usury, truth-in-lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity or disclosure
laws applicable to the Mortgage Loan have been complied with in all material
respects;
(e) subject to permitted exceptions set forth in (a), the Mortgage is
a valid, subsisting and enforceable first lien on the related Mortgaged
Property, including all buildings on such Mortgaged Property and all
installations and mechanical, electrical, plumbing, heating and air
conditioning systems affixed to such buildings, and all additions, alterations
and replacements made at any time with respect to the foregoing securing the
Mortgage Note's original principal balance; the Mortgage and the Mortgage Note
do not contain any evidence of any other security interest or other interest or
right thereto; such lien is free and clear of all adverse claims, liens and
encumbrances having priority over the first lien of the Mortgage subject only
to permitted encumbrances set forth in clause (a)(1), (2) and (3) herein; any
security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
subsisting and enforceable first lien and first priority security interest on
the property described therein;
(f) the Mortgage Note and the related Mortgage are original and
genuine and each is the legal, valid and binding obligation of the maker
thereof, enforceable in all respects in accordance with its terms subject to
bankruptcy, insolvency and other laws of general application affecting the
rights of creditors, and the Seller has taken all action necessary to transfer
such rights of enforceability to the Purchaser; all parties to the Mortgage
Note and the Mortgage had the legal capacity to enter into the Mortgage Loan
and to execute and deliver the Mortgage Note and the Mortgage; and the Mortgage
Note and the Mortgage have been duly and properly executed by such parties; the
proceeds of the Mortgage Loan have been fully disbursed and there is no
requirement for future advances thereunder, and any and all requirements as to
completion of any on-site improvements and as to disbursements of any escrow
funds therefor have been complied with;
(g) the Mortgage Loan is covered by an ALTA lender's title insurance
policy or other generally acceptable form of policy of title insurance, issued
by a title insurer qualified to do business in the jurisdiction where the
Mortgaged Property is located, insuring (subject to the exceptions contained in
(a) (1), (2) and (3) above) BAFSB, BANTSA or Cendant, as applicable, its
C-2
<PAGE> 96
respective successors and assigns, as to the first priority lien of the
Mortgage in the original principal amount of the Mortgage Loan; BAFSB, BANTSA
or Cendant, as applicable, is the sole insured of its respective lender's title
insurance policy, such respective lender's title insurance policy is in full
force and effect and will be in full force and effect upon the consummation of
the transactions contemplated by this Agreement and the Pooling and Servicing
Agreement and will inure to the benefit of the Purchaser and its assigns
without any further act; and no claims have been made under such lender's title
insurance policy, and no prior holder of the related Mortgage has done, by act
or omission, anything which would impair the coverage of such lender's title
insurance policy;
(h) the Mortgage Loan was originated or acquired by BAFSB or BANTSA,
in the case of a BA Mortgage Loan, or Cendant, in the case of a Cendant
Mortgage Loan; the Mortgage Loan complies in all material respects with all the
terms, conditions and requirements of the underwriting standards of BAFSB,
BANTSA or Cendant, as applicable, in effect at the time of origination of such
Mortgage Loan; provided, however, that certain Mortgage Loan may have
characteristics outside of such underwriting guidelines where compensating
factors are present such as are acceptable to the mortgage banking industry;
the Mortgage Notes and Mortgage are on uniform Fannie Mae/Freddie Mac
instruments or are on forms acceptable to Fannie Mac or Freddie Mac; the
Mortgage Loan bears interest at a fixed rate as set forth in the Mortgage Loan
Schedule, and Monthly Payments under the Mortgage Note are due and payable on
the first day of each month; and the Mortgage Loan contains the usual and
enforceable provisions of the originator at the time of origination for the
acceleration of the payment of the unpaid principal amount if the related
Mortgaged Property is sold without the prior consent of the mortgagee
thereunder;
(i) the related Mortgage contains enforceable provisions such as to
render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the security
provided thereby, including (1) in the case of a Mortgage designated as a deed
of trust, by trustee's sale, and (2) otherwise by judicial foreclosure; and
there is no homestead or other exemption available to the Mortgagor which would
interfere with the right to sell the Mortgaged Property at a trustee's sale or
the right to foreclose the Mortgage;
(j) if the Mortgage constitutes a deed of trust, a trustee, duly
qualified if required under applicable law to act as such, has been properly
designated and currently so serves and is named in the Mortgage, and no fees or
expenses are or will become payable by the Purchaser to the trustee under the
deed of trust, except in connection with a trustee's sale or attempted sale
after default by the Mortgagor;
(k) the Mortgage File contains an appraisal of the related Mortgaged
Property made and signed prior to the final approval of the mortgage loan
application by a Qualified Appraiser (as defined
C-3
<PAGE> 97
in the BA Agreement and the Cendant Agreement), approved by BAFSB, BANTSA or
Cendant, as applicable; and the appraisal is in a form generally acceptable to
Fannie Mae or Freddie Mac;
(l) the related Mortgage Note is not and has not been secured by any
collateral except the lien of the corresponding Mortgage and the security
interest of any applicable security agreement or chattel mortgage referred to
above and such collateral does not serve as security for any other obligation;
(m) the Mortgagor has received all disclosure materials required by
applicable law with respect to the making of mortgage loans similar to the
related Mortgage Loan;
(n) the Mortgage Loan has an original term to maturity of not more
than thirty years, with interest payable in arrears on the first day of each
month; and the Mortgage Loan does not contain terms or provisions which would
result in negative amortization;
(o) each of the Mortgaged Properties consists of a single parcel of
real property with a single-family residence erected thereon, or a two- to
four-family dwelling, or an individual condominium unit in a condominium
project or an individual unit in a planned unit development; no Mortgaged
Property consists of a single parcel of real property with a cooperative
housing development erected thereon; no Mortgaged Property is a a mobile home
or manufactured dwelling; and to the best of the Seller's knowledge each
Mortgaged Property is lawfully occupied under applicable law;
(p) [RESERVED]
(q) the assignment of Mortgage from the Seller to the Certificate
Trustee is in recordable form and is acceptable for recording under the laws of
the jurisdiction in which the related Mortgaged Property is located;
(r) Each of BAFSB, BANTSA and Cendant is, and each Mortgage Loan was
originated by, a savings and loan association, savings bank, commercial bank,
credit union, insurance company or similar institution which is supervised and
examined by a federal or State authority, or by a mortgagee approved by the
Secretary of Housing and Urban Development pursuant to Section 203 and 211 of
the National Housing Act;
(s) the information set forth in the Final Mortgage Loan Schedule is
true, complete and correct in all material respects as of the Cut-off Date;
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<PAGE> 98
(t) the Mortgage Loan has not been delinquent thirty (30) days or
more on more than one occasion during the twelve months preceding the Cut-off
Date; and as of the Closing Date, the Mortgage Loan is not delinquent in
payment more than 30 days and has not been dishonored; there are no defaults
under the terms of the Mortgage Loan; and, except in the case of a Buydown
Loan, none of the Seller, BAFSB, BANTSA or Cendant has advanced funds, or
induced, solicited or knowingly received any advance of funds from a party
other than the owner of the Mortgaged Party subject to the related Mortgage,
directly or indirectly, for the payment of any amount required by the Mortgage
Loan;
(u) there are no delinquent taxes or other outstanding charges
affecting the related Mortgaged Property, and there are no liens against the
Mortgaged Property resulting from any delinquent assessments;
(v) the Mortgage Note and the Mortgage are not subject to any right
of rescission, set-off, counterclaim or defense, including the defense of
usury, nor will the operation of any of the terms of the Mortgage Note and the
Mortgage, or the exercise of any right thereunder, render the Mortgage Note or
Mortgage unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto;
(w) the Mortgage has not been satisfied, canceled or subordinated, in
whole or in part, or rescinded, and the Mortgaged Property has not been
released from the lien of such Mortgage, in whole or in part, except with
respect to certain releases in part that do not materially affect the value of
the Mortgaged Property, nor has any instrument been executed that would effect
any such satisfaction, release, cancellation, subordination or rescission;
(x) immediately prior to the transfer and assignment to the
Purchaser, the Mortgage Note and the Mortgage were not subject to an assignment
or pledge, and the Seller had good and marketable title to and was the sole
owner thereof and had full right to transfer and sell the Mortgage Loan to the
Purchaser free and clear of any encumbrance, equity, lien, pledge, charge,
claim or security interest;
(y) there is no default, breach, violation or event of acceleration
existing under the Mortgage or the related Mortgage Note and no event which,
with the passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event permitting
acceleration; and neither the Seller nor any prior mortgagee has waived any
default, breach, violation or event permitting acceleration;
C-5
<PAGE> 99
(z) there are no mechanics', or similar liens or claims which have
been filed for work, labor or material affecting the related Mortgaged Property
which are or may be liens to or equal to the lien of the related Mortgage;
(aa) all improvements subject to the Mortgage lie wholly within the
boundaries and building restriction lines of the Mortgaged Property (and wholly
within the project with respect to a condominium unit) except for de minimis
encroachments permitted by the Fannie Mae Guide (MBS Special Servicing Option)
and noted on the appraisal, and no improvements on adjoining properties
encroach upon the Mortgaged Property except those which are insured against by
the title insurance policy referred to in clause (g) above and, all
improvements on such Mortgaged Property comply with all applicable zoning and
subdivision laws and ordinances;
(bb) the Mortgaged Property at origination of the Mortgage Loan was
and currently is free of damage and waste or any such damage and waste is
adequately covered by an insurance policy, and at origination of the Mortgage
Loan there was, and there currently is, no proceeding pending for the total or
partial condemnation thereof;
(cc) no Mortgage Loan has a Loan-to-Value Ratio in excess of 95.00%.
The original Loan-to-Value Ratio of each Mortgage Loan either was not more than
95.00% or the excess over 80.00% is insured as to payment defaults by a Primary
Mortgage Insurance Policy issued by a primary mortgage insurer acceptable to
Fannie Mae and Freddie Mac until the Loan-to-Value Ratio of such Mortgage Loan
is reduced to 80.00%;
(dd) All parties which have had any interest in the Mortgage, whether
as mortgagee, assignee, pledgee or otherwise, are (or, during the period in
which they held and disposed of such interest, were) (A) in substantial
compliance with any and all applicable licensing requirements of the laws of
the state wherein the related Mortgaged Property is located, and (B) (1)
organized under the laws of such state, or (2) qualified to do business in such
state, or (3) federal savings and loan associations, national banks, a Federal
Home Loan Bank or the Federal Reserve Bank, or (4) not doing business in such
state;
(ee) The Mortgage Loan does not contain "graduated payment" features;
and
(ff) The Mortgagor is not in bankruptcy.
It is understood and agreed that the representations and warranties set
forth herein will inure to the benefit of the Purchaser, its successors and
assigns, notwithstanding any restrictive or qualified
C-6
<PAGE> 100
endorsement on any Mortgage Note or assignment of Mortgage or the examination
of any Mortgage File. Upon any substitution for a Mortgage Loan, the
representations and warranties set forth above shall be deemed to be made by
the Seller as to any Substitute Mortgage Loan as of the date of substitution.
Upon discovery or receipt of notice by the Seller, the Purchaser or the
Certificate Trustee of a breach of any representation or warranty of the Seller
set forth herein which materially and adversely affects the value of the
interests of the Purchaser, the Certificateholder or the Certificate Trustee in
any of the Mortgage Loans delivered to the Purchaser pursuant to this
Agreement, the party discovering or receiving notice of such breach shall give
prompt written notice to the others. In the case of any such breach of a
representation or warranty set forth herein, within 90 days from the date of
discovery by the Seller, or the date the Seller is notified by the party
discovering or receiving notice of such breach (whichever occurs earlier), the
Seller will (i) cure or cause to be cured such breach in all material respects,
(ii) purchase or cause to be purchased the affected Mortgage Loan at the
applicable Purchase Price or (iii) if within two years of the Closing Date,
substitute or cause to be substituted a qualifying Substitute Mortgage Loan in
exchange for such Mortgage Loan. The obligations of the Seller to cure,
purchase or substitute (or to cause the cure, purchase or substitution of) a
qualifying Substitute Mortgage Loan shall constitute the Purchaser's, the
Certificate Trustee's and the Certificateholder's sole and exclusive remedy
under this Agreement or otherwise respecting a breach of representations or
warranties hereunder with respect to the Mortgage Loans, except for the
obligation of the Seller to indemnify the Purchaser for such breach as set
forth in and limited by Section 14 of the Mortgage Loan Purchase Agreement.
Any cause of action against the Seller or relating to or arising out of
a breach by the Seller of any representations and warranties made herein shall
accrue as to any Mortgage Loan upon (i) discovery of such breach by the Seller
or notice thereof by the party discovering such Breach and (ii) failure by the
Seller to cure such breach, purchase such Mortgage Loan or substitute a
qualifying Substitute Mortgage Loan pursuant to the terms hereof.
C-7
<PAGE> 101
EXHIBIT D
FORM OF REQUEST FOR RELEASE OF DOCUMENTS
To: [Custodian]
RE: Pooling and Servicing Agreement dated as of
March 1, 1998, among CMC Securities Corporation III, as
Depositor, Cendant Mortgage Corporation and
Bank of America, FSB, as Master Servicers, First Chicago National
Processing Corporation, as Custodian, and The First National Bank of
Chicago, as Certificate Trustee
In connection with the administration of the Mortgage Loans held by you,
as Custodian, pursuant to the above-captioned Pooling and Servicing Agreement,
we request the release, and hereby acknowledge receipt, of the Mortgage File
for the Mortgage Loan described below, for the reason indicated.
Mortgage Loan Number:
Mortgagor Name, Address & Zip Code:
Reason for Requesting Documents (check one):
______ 1. Mortgage Paid in Full and proceeds have been deposited into the
Custodial Account
______ 2. Foreclosure
______ 3. Substitution
______ 4. Other Liquidation
______ 5. Nonliquidation Reason:
---------------------
By:
-------------------------
(authorized signer)
Issuer:
---------------------
Address:
--------------------
Date:
-----------------------
D-1
<PAGE> 102
Custodian
First Chicago National Processing Corporation
Please acknowledge the execution of the above request by your signature and
date below:
- ---------------------------- ----------------------------
Signature Date
Documents returned to Custodian:
- ---------------------------- ----------------------------
Custodian Date
Date: , 19
---------------------- --
FIRST CHICAGO NATIONAL PROCESSING
CORPORATION
By:
------------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
D-2
<PAGE> 103
EXHIBIT E
FORM OF PURCHASER REPRESENTATION LETTER
[Purchaser Letterhead]
[Date]
[Issuer]
[Certificate Registrar]
and
[Seller #1]
Ladies and Gentlemen:
In connection with the purchase by [Purchaser] from [Seller #1] of
approximately $________________ aggregate principal amount of Pass-Through
Certificates, CMC Securities Corporation III Collateralized Mortgage
Obligations, Series 1998-1 ("the Certificates"), administered by CMC Securities
Corporation III, we hereby represent and covenant to you the following:
i. [Purchaser] is acquiring the Certificates for itself and not for
any other persons or entity.
ii. [Purchaser] is an "accredited investor" as defined in Rule 501(a)
under the Securities Act of 1933 and is experienced in making
investments in securities comparable to the Certificates.
iii. [Purchaser] has been furnished with all information regarding the
Certificates which it has requested from [Seller #1] or [Issuer].
iv. [Purchaser] has not offered or sold any of the Certificates to,
solicited offers to buy any Certificates from, or otherwise
approached or negotiated with respect to the Certificates with,
any prospective purchaser, or taken any other action which would
result in a violation of Section 5 of the Securities Act of 1933
or any applicable state securities laws.
v. [Purchaser] is acquiring the Certificates for investment purposes
and not with a view to resale.
E-1
<PAGE> 104
vi. [Purchaser] will not transfer, sell, pledge, encumber or
otherwise dispose of the Certificates in any manner which would
result in a violation of Section 5 of the Securities Act of 1933
or any applicable state securities laws.[Purchaser] (i) is not an
employee benefit plan, trust or account, including an individual
retirement account, that is subject to the Employee Retirement
Income Security Act of 1974, as amended, or that is described in
Section 4975(e)(1) of the Internal Revenue Code of 1986, as
amended, (any such plan, trust or account being referred to as a
"Plan") and (ii) has not acquired and is not acquiring the
Certificates with plan assets, within the meaning of 29 CFR
2510.3-101, of a Plan.
Very truly yours,
[Purchaser]
By:
----------------------------------
Name:
------------------------
Title:
-----------------------
E-2
<PAGE> 105
EXHIBIT F
[RESERVED]
<PAGE> 106
EXHIBIT G
FORM OF INITIAL CERTIFICATION
CMC Securities Corporation III
2711 N. Haskell, Suite 900
Dallas, Texas 75204
Cendant Mortgage Corporation
600 Atrium Way
Mt. Laurel, NJ 08054
Bank of America, FSB
50 California Street, 11th Floor
San Francisco, CA 94111
The First National Bank of Chicago
1 National Plaza, Suite 0126
Chicago, Illinois 60670
Re: Pooling and Servicing Agreement dated as of March 1, 1998,
among CMC Securities Corporation III, as depositor,
Cendant Mortgage Corporation, Bank of America, FSB, as
Master Servicers, First Chicago National Processing
Corporation, as Custodian, and The First National Bank of
Chicago, as Certificate Trustee Mortgage Pass-Through
Certificates, Series 1998-1
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, hereby certifies that, except as
otherwise noted on the attached exception report, that as to each Mortgage Loan
listed on the Mortgage Loan Schedule (other than any Mortgage Loan paid in full
or listed on the attachment hereto) it has reviewed the Mortgage File and the
Mortgage Loan Schedule and has determined that: (i) all documents required to
be included in the Mortgage File pursuant to the Pooling and Servicing
Agreement are in its possession; (ii) such documents have been reviewed by it
and appear regular on their face, have, where applicable, been executed and
relate to such Mortgage Loan; and (iii) based on examination by it, and only as
to such documents, the information set forth in the Mortgage Loan Schedule as
to Mortgagor Name, original principal
G-1
<PAGE> 107
balance and loan number respecting such Mortgage Loan is correct and accurately
reflects the information in the Mortgage Loan File.
The undersigned has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The undersigned makes no
representation that any documents specified in subclauses (iv), (v) and (vii)
of Section 2.01(c) should be included in any Mortgage File. The undersigned
makes no representations as to: (i) the validity, legality, enforceability or
genuineness of any of the documents contained in each Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedule or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Pooling and Servicing Agreement.
By:
-----------------------------------
Name:
--------------------------------
Title:
-------------------------------
G-2
<PAGE> 108
EXHIBIT H
FORM OF FINAL CERTIFICATION
CMC Securities Corporation III
2711 N. Haskell, Suite 900
Dallas, Texas 75204
Cendant Mortgage Corporation
600 Atrium Way
Mt. Laurel, NJ 08054
The First National Bank of Chicago
1 National Plaza, Suite 0126
Chicago, Illinois 60670
Re: Pooling and Servicing Agreement dated as of March 1, 1998, among
CMC Securities Corporation III, as depositor, Bank of America,
FSB and Cendant Mortgage Corporation, as master servicers, First
Chicago National Corporation, as custodian and The First National
Bank of Chicago, as Certificate Trustee Mortgage Pass-Through
Certificates, Series 1998-1
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, hereby certifies that, except as
otherwise noted on the attached exception report, that as to each Mortgage Loan
listed on the Mortgage Loan Schedule (other than any Mortgage Loan paid in full
or listed on the attachment hereto) it has received the documents set forth in
Section 2.01 and has determined that (i) all documents required to be included
in the Mortgage File pursuant to the Pooling and Servicing Agreement are in its
possession; (ii) such documents have been reviewed by it and appear regular on
their face, have, where applicable, been executed and relate to such Mortgage
Loan; and (iii) based on examination by it, and only as to such documents, the
information set forth in the Mortgage Loan Schedule as to Mortgagor name,
original principal balance and loan number respecting such Mortgage Loan is
correct and accurately reflects the information in the Mortgage Loan File.
The undersigned has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing
H-1
<PAGE> 109
Agreement. The undersigned makes no representation that any documents
specified in subclauses (iv), (v) and (vii) of Section 2.01(c) should be
included in any Mortgage File. The undersigned makes no representations as to:
(i) the validity, legality, enforceability or genuineness of any of the
documents contained in each Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
By:
-----------------------------------
Name:
--------------------------------
Title:
-------------------------------
H-2
<PAGE> 110
EXHIBIT I-1
MASTER SERVICER'S REPORT (CENDANT)
(Intentionally Omitted)
<PAGE> 111
EXHIBIT I-2
MASTER SERVICER'S REPORT (BAFSB)
(Intentionally Omitted)
<PAGE> 112
EXHIBIT J
LIST OF MORTGAGE LOANS FOR WHICH MORTGAGE NOTES ARE LOST
(Intentionally Omitted)
