As filed with the Securities and Exchange Commission on January __, 1997
Registration No. 33-82040
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
Main Place Real Estate Investment Trust
(Exact name of registrant as specified in its charter)
Maryland 56-1996001
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) (Identification Number)
100 North Tryon Street
23rd Floor, NC1-007-23-01
Charlotte, North Carolina 28255
(704) 388-7436
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------------
John Mack, President
Main Place Real Estate Investment Trust
Legal Department
100 North Tryon Street
23rd Floor, NC1-007-23-01
Charlotte, North Carolina 28255
(704) 386-6829
(Name address, including zip code, and telephone number, including
area code, of agent for service)
---------------------
Copies to:
James R. Tanenbaum, Esq.
STROOCK & STROOCK & LAVAN
7 Hanover Square
New York, New York 10004
(212) 806-5400
--------------------
Approximate date of commencement of proposed sale to the public: From
time to time on or after the effective date of this Registration Statement, as
determined by market conditions, and pursuant to Rule 415.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check following
box. / /
If any of the securities being registered on this form are to be
offered on a delayed or continuos basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If the delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. / /
---------------------
This post-effective amendment to the registration statement shall
become effective upon order of the Commission pursuant to Section 8(c) of the
Securities Act.
<PAGE>
INTRODUCTORY STATEMENT NOT FORMING PART OF PROSPECTUS
On November 1, 1996, following a series of transactions, NationsBank,
N.A., a national banking association ("NationsBank, N.A."), became the sole
shareholder of Main Place Funding Corporation, a Delaware corporation ("Main
Place") and the registrant's predecessor. NationsBank, N.A. contributed its
shares of Main Place to its wholly-owned subsidiary, Main Place Holdings
Corporation ("MP Holdings"). MP Holdings approved the merger (the "Merger")
of Main Place with and into a newly formed, wholly-owned subsidiary, Main Place
Real Estate Investment Trust, a Maryland business trust and the successor
issuer (the "Issuer"), with the Issuer as the sole surviving entity.
The Merger was effected on November 1, 1996 pursuant to Section 254 of
the Delaware General Corporation Law and Section 3-109 of the Corporations and
Associations Article of the Annotated Code of Maryland, as amended. By this
Post-Effective Amendment No. 2, the Issuer, as successor to Main Place, hereby
adopts this Registration Statement No. 33-82040 on Form S-3 as its own for all
purposes of the Securities Act of 1933, as amended (the "Securities Act") and
the Securities Exchange Act of 1934, as amended. This adoption is made pursuant
to Rule 414(d) promulgated under the Securities Act. The Prospectus contained in
this Post-Effective Amendment No. 2 sets forth the additional information
necessary to reflect any material changes made in connection with or resulting
from the succession, or necessary to keep the Registration Statement from being
misleading in any material respect. This Registration Statement also contains a
form of Prospectus Supplement to be used in connection with an offering.
The Issuer filed a Declaration of Trust with the Secretary of State of
the State of Maryland on October 29, 1996. The Issuer is a Maryland business
trust and an indirect subsidiary of NationsBank, N.A., which is itself a
wholly-owned, indirect subsidiary of NationsBank Corporation.
<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus Dated ____________, 1997)
$________________
MAIN PLACE REAL ESTATE INVESTMENT TRUST
Mortgage-Backed Bonds, Series [1997-1]
Due ________
Main Place Real Estate Investment Trust (the "Issuer") is offering $____________
aggregate principal amount of Mortgage-Backed Bonds, Series [1997-1] due _____
(the "Bonds"). Terms used but not otherwise defined herein shall have the
respective meanings ascribed to such terms in the Prospectus dated
__________________, 1997 attached hereto (the "Prospectus").
Interest on the Bonds is payable on the [25th day] of [each month]
[each of --,--,--- and ---] (or, if such day is not a Business Day (as defined
herein), on the next Business Day), commencing _______________, 1997. The
principal amount of each Bond is due and payable on ______________ (the "Stated
Maturity"). The Bonds are not redeemable at the option of the Issuer prior to
their Stated Maturity, but are subject to mandatory redemption in part if
certain collateral maintenance requirements are not met. The Bonds will be
issued in minimum denominations of $100,000 and in integral multiples of $1,000
in excess thereof.
There currently is no secondary market for the Bonds. The Underwriters
intend to make a secondary market in the Bonds, but none of the Underwriters has
any obligation to do so. There is no assurance that a secondary market in the
Bonds will develop or, if one does develop, that it will continue until the
Bonds are paid in full.
The Issuer expects to qualify as a real estate investment trust for
federal income tax purposes, commencing with the taxable year ending December
31, 1996. No person or persons acting as a group, except NationsBank
Corporation and its affiliates or subsidiaries, is permitted to beneficially
own more than 9.9% of the equity of the Issuer.
Prospective investors in the Bonds should consider the factors
discussed in the accompanying Prospectus beginning on page 3 under "Special
Considerations."
THE BONDS REPRESENT LIMITED RECOURSE OBLIGATIONS SOLELY OF THE ISSUER AND ARE
NOT INSURED OR GUARANTEED BY NATIONSBANK, N.A. OR ITS AFFILIATES. THE
BONDS ARE NOT DEPOSITS AND ARE NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
---------------------
THE BONDS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Public(1) Underwriting Discount(2) Proceeds to Issuer (3)
<S> <C> <C> <C>
Per Bond............. % % %
Total................ $____________ $_____________ $_______________
(1) Plus accrued interest, if any, from ________________, 1997
(2) The Issuer has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting" herein.
(3) Before deduction of expenses payable by the Issuer estimated at
$____________.
</TABLE>
The Bonds are offered by the Underwriters listed below (the
"Underwriters"), subject to prior sale, when, as and if issued to and accepted
by the Underwriters and subject to their rights to reject orders in whole or in
part and certain other conditions. It is expected that delivery of the Bonds
will be made in book-entry form through the facilities of The Depository Trust
Company ("DTC"), Cedel Bank, societe anonyme, and the Euroclear System on or
about _______________ (the "Closing Date").
[NAMES OF UNDERWRITERS]
The date of this Prospectus Supplement is ______________, 1997.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
---------------------
Until 90 days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Bonds, whether or not participating in this
distribution, may be required to deliver a Prospectus Supplement and the
Prospectus relating thereto. This is in addition to the obligation of dealers to
deliver a Prospectus Supplement and Prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
---------------------
This Prospectus Supplement does not contain complete information about
the offering of the Bonds. Additional information is contained in the Prospectus
dated ________________, 1997 attached hereto and purchasers are urged to read
both this Prospectus Supplement and the Prospectus in full. Sales of the Bonds
may not be consummated unless the purchaser has received both this Prospectus
Supplement and the Prospectus.
<PAGE>
SUMMARY OF TERMS
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement. Certain
capitalized terms are defined elsewhere in this Prospectus Supplement.
Capitalized terms used but not defined in this Prospectus Supplement are defined
in the accompanying Prospectus.
The Issuer...................... Main Place Real Estate Investment Trust, a
Maryland business trust (the Issuer").
Securities Offered............... $[ ] principal amount of Mortgage-Backed
Bonds, Series [1997-1] due [ ] (the "Bonds").
The Bonds will be issued pursuant to an
indenture of trust (the "Indenture") dated as
of ________________ between the Issuer and [
], as trustee (the "Trustee").
Denominations and Form............ The Bonds will be issued in book-entry form
in minimum denominations of $100,000 and
integral multiples of $1,000 in excess
thereof. See "Description of the Bonds --
General" and "-- Book-Entry Registration" in
the Prospectus.
Interest Payments................ [ ]% per annum, payable on the [ ]th day of
[each month] [each of --,--,-- and --]
(or, if such day is not a Business
Day (as defined herein), on the next Business
Day), commencing [ ], 1997 (each an "Interest
Payment Date").
[Redemption...................... The Bonds are [not] subject to redemption at
the option of the Issuer prior to their
Stated Maturity, but may be purchased by the
Issuer in open market transactions. The Bonds
are subject to mandatory redemption in part
at 100% of the principal amount of the Bonds
redeemed plus accrued interest if certain
collateral maintenance requirements are not
met as described in this summary under "--
Collateral Valuation and Maintenance" and
under "Description of the Bonds -- Basic
Maintenance Amount" herein.]
Security for the Bonds; Pledged
Property; Eligible Collateral
and Deposit Securities.......... The Bonds will be secured by "Pledged
Property," which will include Eligible
Collateral and Deposit Securities (each as
defined below). The "Eligible Collateral"
securing the Bonds may include Eligible
Mortgage Notes (as defined herein under
"Description of the Bonds--Eligible Mortgage
Notes"), Eligible Mortgage Pass-Through
Certificates (as defined under "Description
of the Bonds -- Eligible Mortgage
Pass-Through Certificates" in the
Prospectus), guaranteed mortgage
participation certificates ("FHLMC
Certificates") issued by the Federal Home
Loan Mortgage Corporation ("FHLMC"),
guaranteed mortgage pass-through certificates
("FNMA Certificates") issued by the Federal
National Mortgage Association ("FNMA"), fully
modified pass-through mortgage-backed
certificates ("GNMA Certificates") issued by
the Government National Mortgage Association
("GNMA"), other Government Securities (as
defined under "Description of the Bonds --
Government Securities" in the Prospectus),
Short-Term Money Market Instruments (as
defined under "Description of the Bonds --
Short-Term Money Market Instruments" in the
Prospectus) and cash, including cash on
deposit in the Collection Account, the
Distribution Account and the Reserve Fund, to
the extent described herein. Notwithstanding
the foregoing definitions, Eligible
Collateral will not include (i) any classes
of multi-class FNMA Certificates, GNMA
Certificates or FHLMC Certificates or (ii)
any multi-class mortgage security issued by
an entity other than FNMA, GNMA or FHLMC
(such securities, "Private Label Mortgage
Pass-Through Certificates"), other than the
most senior class of a series of Private
Label Mortgage Pass-Through Certificates, the
only other classes which are subordinate to
such senior class, provided that such senior
class is not divided into subclasses. See
"Description of the Bonds -- Security for the
Bonds" herein. The types, characteristics and
permitted amounts of Eligible Collateral are
subject to change from time to time without
the consent of the Holders of the Bonds if
such changes would not adversely affect the
ratings then assigned to the Bonds. In
addition, in order to fund the return of
principal at the Stated Maturity, the Issuer
will be obligated, no later than 15 days (or,
in the circumstances described herein, 30
days) in advance of the date of such payment,
to (i) pledge to the Trustee cash, Government
Securities (other than FHLMC Certificates,
FNMA Certificates and GNMA Certificates) or
Short-Term Money Market Instruments which
have a remaining term to maturity of 30 days
or less and actually mature on or before the
date in respect of which they are delivered
("Deposit Securities") or (ii) make other
arrangements acceptable to each Rating Agency
(as defined herein) to provide liquidity for
such payment. See "Description of the Bonds
-- Liquidity" herein
Initial Collateral............... As of ___________________ (the "Cut-Off
Date"), the Eligible Collateral initially
pledged to secure the Bonds (the "Initial
Collateral") consisted of [ ] Eligible
Mortgage Notes as described herein having an
aggregate unpaid principal balance of $[ ].
See "Description of the Bonds--Eligible
Mortgage Notes" herein. [ ] (the "Custodian")
will be appointed by the Trustee under the
Indenture to hold the Initial Collateral, as
well as any other portion of the Pledged
Property consisting of Eligible Mortgage
Notes.
Collateral Valuation and
Maintenance...................... The Issuer is required to maintain Eligible
Collateral pledged to secure the Bonds having
a Discounted Value (as defined herein) at
least equal to the Basic Maintenance Amount.
The Discounted Value of the Eligible
Collateral will be determined as set forth
herein under "Description of the Bonds --
Basic Maintenance Amount." The Trustee is
required to value the collateral on the [ ]
and [ ] day of each month (or, if such day is
not a Business Day, on the next Business
Day), commencing in the month following the
Closing Date (each, a "Valuation Date"), and
to deliver a report concerning its valuation
to the Issuer and to each Rating Agency
within two Business Days after a Valuation
Date.
In the event that on any Valuation Date the
Discounted Value of the Eligible Collateral
pledged to secure the Bonds is less than the
Basic Maintenance Amount, the Issuer is
required, within 10 days after receipt of
such report, either (i) to deliver to the
Trustee or the Custodian additional Eligible
Collateral and/or substitute Eligible
Collateral and/or (ii) to the extent it
elects to do so, to repurchase Bonds
Outstanding (as defined herein) such that,
after such actions are taken, the Discounted
Value of the Eligible Collateral is at least
equal to the Basic Maintenance Amount. See
"Description of the Bonds--Basic Maintenance
Amount" herein. However, if the Issuer does
not effect such a purchase, [and if a
Collateral Replacement Limit (as defined
herein under "Description of the Bonds--
Redemption") applicable to NationsBank, N.A.
("NationsBank, N.A."), the indirect parent
of the Issuer and a wholly-owned banking
subsidiary of NationsBank Corporation, has
the effect of preventing the Issuer from
pledging additional Eligible Collateral to
the Trustee,] then the Issuer must redeem an
amount of the Bonds Outstanding sufficient to
render the Discounted Value of the Eligible
Collateral at least equal to the Basic
Maintenance Amount. In certain instances,
Pledged Property will be liquidated to
provide funds for such redemptions. [Even in
the absence of a Collateral Replacement
Limit, NationsBank, N.A. will have no
obligation to contribute additional Eligible
Collateral to the Issuer.] The failure by the
Issuer on or before the Cure Date (as defined
herein) to pledge and deliver additional
Eligible Collateral and/or to substitute
Eligible Collateral and/or to deliver to the
Trustee for cancellation Bonds in the amount
sufficient to cause the Discounted Value of
the Eligible Collateral to be at least equal
to the Basic Maintenance Amount will, [in the
absence of a Collateral Replacement Limit],
constitute an Event of Default under the
Indenture. See "Description of the
Bonds--Redemption" herein and "Special
Considerations--Limited Recourse Obligation"
and "Description of the Bonds--Events of
Default Under the Indenture" in the
Prospectus.
The Issuer may withdraw or substitute
collateral at any time if, after giving
effect to any such withdrawal and any
proposed additions of substitute collateral,
the Discounted Value of the Eligible
Collateral pledged to secure the Bonds is at
least equal to the Basic Maintenance Amount
and no Event of Default shall have occurred
and be continuing. See "Description of the
Bonds--Withdrawals and Substitutions of
Collateral" herein.
Collection Account................ All payments in respect of the Initial
Collateral and any other Eligible Mortgage
Notes pledged to secure the Bonds will be
remitted directly to a collection account
(the "Collection Account") to be established
by [ ] (the "Servicer") on the Closing Date
in the name of the Trustee for the benefit of
the Holders. On each Servicer Remittance Date
(as defined herein), the Servicer will
withdraw amounts on deposit in the Collection
Account as of the end of the preceding
Collection Period (as defined herein) and
remit such amounts to the Trustee (i) for
deposit into the Distribution Account for
payment to Bondholders on the following
Interest Payment Date, (ii) for deposit into
the Reserve Fund and (iii) for release to the
Issuer, all as described herein. See
"Description of the Bonds-- Distribution
Account" and " --Reserve Fund" herein. The
Servicer will not be required to make
advances in respect of delinquent monthly
payments on Eligible Mortgage Notes. Amounts
on deposit in the Collection Account from
time to time will constitute a portion of the
Pledged Property securing the Bonds and
Eligible Collateral for purposes of
satisfying the Basic Maintenance Amount. See
"Description of the Bonds--Servicing of
Eligible Mortgage Notes--Collection Account"
herein.
Distribution Account............. All payments in respect of any other Eligible
Collateral securing the Bonds from time to
time will be made directly to the Trustee for
deposit in a distribution account (the
"Distribution Account") to be established by
the Trustee on the Closing Date for the
benefit of the Holders. In addition, if an
Event of Default under the Indenture should
occur and be continuing, all payments in
respect of Eligible Mortgage Notes will be
remitted directly to the Trustee for deposit
into the Distribution Account. All payments
of interest and principal on the Bonds will
be made with amounts on deposit in the
Distribution Account. Amounts held in the
Distribution Account from time to time will
constitute a portion of the Pledged Property
securing the Bonds and Eligible Collateral
for purposes of satisfying the Basic
Maintenance Amount. See "Description of the
Bonds -- Distribution Account" herein.
Reserve Fund..................... On the Closing Date, the Trustee will
establish a reserve fund (the "Reserve Fund")
for the benefit of the Holders. On the first
Servicer Remittance Date, the Issuer will
instruct the Trustee to retain in the Reserve
Fund from funds that would otherwise be
released to the Issuer an amount equal to $[
], representing [three] months of the
Issuer's estimated operating expenses,
including the fees payable to the Trustee
with respect to such period (the "Expense
Reserve Amount"). Funds equal to the Expense
Reserve Amount will be maintained in the
Reserve Fund and will be available to pay
operating expenses of the Issuer to the
extent not paid by the Issuer directly until
the Bonds have been paid in full at the
Stated Maturity. Amounts held in the Reserve
Fund from time to time will constitute a
portion of the Pledged Property securing the
Bonds and (net of the Expense Reserve Amount)
Eligible Collateral for purposes of
satisfying the Basic Maintenance Amount. At
the request of the Issuer, amounts on deposit
in the Reserve Fund in excess of an amount
equal to the Expense Reserve Amount will be
withdrawn by the Trustee and released to the
Issuer free of the lien of the Indenture if,
as of the Valuation Date immediately
preceding such release, the Discounted Value
of the remaining Eligible Collateral is at
least equal to the Basic Maintenance Amount
and no Event of Default has occurred and is
continuing. See "Description of the
Bonds--Reserve Fund."
Servicer.......................... [ ]. See "Description of the Bonds--Servicing
of Eligible Mortgage Notes--The Servicer"
herein.
Use of Proceeds.................. The Issuer intends to use all or
substantially all of the net proceeds from
the sale of the Bonds offered hereby to
reduce certain subordinated indebtedness of
the Issuer and/or to effect distributions to
[NationsBank, N.A.] See "The Issuer" herein.
Rating........................... It is a condition of closing that the Bonds
be rated ["[ ]" by Standard & Poor's Ratings
Group, a division of The McGraw-Hill
Companies, Inc. ("S&P"), "[ ]" by Fitch
Investors Service, L.P. ("Fitch") and "[ ]"
by Moody's Investors Service, Inc.
("Moodys")] (each, a "Rating Agency"). See
"Bond Ratings" herein.
Federal Income Tax Consequences... See "United States Federal Income Tax
Consequences" in the Prospectus for a
discussion of the United States federal
income tax consequences of the acquisition of
the Bonds at a market discount or premium, by
foreign investors and certain other matters.
Special Considerations............ See "Special Considerations" beginning on
page 3 of the Prospectus for important
information relating to an investment in the
Bonds.
<PAGE>
THE ISSUER
GENERAL
The Issuer is a Maryland business trust and an indirect subsidiary of
NationsBank, N.A., which is itself an indirect, wholly-owned subsidiary of
NationsBank Corporation. The Issuer has no subsidiaries.
CAPITALIZATION
The following table sets forth the capitalization of the Issuer as of
December 31, 1996 and a pro forma capitalization table of the Issuer as of the
same date. There have been no material adverse changes in the capitalization of
the Issuer since December 31, 1996. The pro forma capitalization table gives
effect to the issuance of the Bonds, [prepayment of a portion of a subordinated
note issued by the Issuer in favor of NationsBank Texas and NationsBank South
and the distribution of previously paid-in capital and earnings to NationsBank
Texas] Paid?]
As of December 31, 1996
Actual Pro Forma
Indebtedness....................................... $ $
Mortgage-Backed Bonds, Series 1995-1...............
Mortgage-Backed Bonds, Series 1995-2...............
Mortgage-Backed Bonds, Series 1997-1...............
Subordinated indebtedness..........................
Total indebtedness.................................
Shareholder's equity ............................
Shares of Beneficial Interest:...................
Class A Trust Shares, $1.00 par value,
200,200 shares issued and outstanding..........
Class B Trust Shares, $10,000 par value,
110 shares issued and outstanding..............
Additional paid-in capital.........................
Retained earnings..................................
Total shareholders' equity.......................
Total indebtedness and shareholders' equity....
<PAGE>
SUMMARY FINANCIAL DATA
The following summary financial data of the Issuer has been taken from
and should be read in conjunction with the financial statements of the Issuer
contained in its [Annual Report on Form 10-K for the year ended December 31,
1996] which have been incorporated herein.
Year ended Year ended
December 31, 1996 December 31, 1995
Income statement
Interest and fees on mortgage
loans.............................. $ $
Interest expense....................
Income before income taxes..........
Net income..........................
Balance Sheet Data As of December 31, 1996
Total assets........................ $ $
Mortgage loans, net of unearned
income.............................
Long-term debt......................
Total shareholder's equity..........
DESCRIPTION OF THE BONDS
GENERAL
The Bonds will be issued under the Indenture. As of any date, all Bonds
so issued, except Bonds (i) previously cancelled or to be cancelled by the
Trustee, (ii) held by the Issuer or its affiliates (other than NCMI) and (iii)
for whose payment Deposit Securities in the necessary amount have been delivered
to the Trustee or other arrangements satisfactory to each Rating Agency have
been made as described herein under " -- Liquidity," will be deemed to be
"Outstanding."
The following summaries of certain provisions of the Indenture do not
purport to be complete, and, where particular provisions of the Indenture are
referred to, the actual provisions are incorporated by reference as a part of
such summaries, which are qualified in their entirety by such reference. Copies
of the Indenture may be obtained by writing to the principal corporate trust
office of the Trustee, [ ], Attention: [ ], and will also be available for
inspection during normal business hours at the principal executive offices of
the Issuer, and at the principal corporate trust office of the Trustee.
The Bonds will be limited to $_________________ aggregate principal
amount, all of which is being offered hereby and will be direct obligations of
the Issuer. The principal amount of each Bond is due and payable on the Stated
Maturity. The Bonds will bear interest on the unpaid principal balance thereof
at a [fixed/floating] rate [calculated] as set forth below under " --Interest
Payments," payable in arrears on each Interest Payment Date commencing on
________________, 1997, to the persons in whose names the Bonds are registered
(each, a "Bondholder" or "Holder") at the close of business on the Record Date
(as defined herein) next preceding such Interest Payment Date (except in the
case of Defaulted Interest, as provided in the Indenture). A "Business Day" is
any day other than (i) a Saturday, (ii) a Sunday or (iii) a day that is either a
legal holiday or a day on which banking institutions are authorized or obligated
by law or regulation to close in the States of [New York] or North Carolina or
the state in which the principal office of the Trustee is located (or, for
purposes of remittances by the Servicer, any state in which functions relating
to the Collection Account are performed). A "Record Date" is the third Business
Day immediately preceding each Interest Payment Date and the date any payment of
principal or redemption price of any Bond is due.
The Bonds will be secured by collateral (the "Pledged Property") as
described herein under " --Security for the Bonds." Pursuant to the Indenture,
the Issuer is required to maintain Pledged Property of the type permitted under
the Indenture ("Eligible Collateral") having a Discounted Value sufficient to
meet certain levels of collateralization required from time to time as described
herein under " --Basic Maintenance Amount." The Eligible Collateral will be
valued by the Trustee on the 5th and 20th day of each month (or, if such day is
not a Business Day, on the next Business Day), commencing in the month following
the Closing Date (each such date, a "Valuation Date"), using Market Values (as
defined in the Prospectus under "Description of the Bonds -- Basic Maintenance
Amount") for such property obtained no more than three Business Days prior to
the applicable Valuation Date. The Trustee will deliver reports to the Issuer
and to each Rating Agency with respect to each such Valuation Date within two
Business Days thereafter. See " --Reports on Pledged Property."
The Bonds and Indenture will be governed by the laws of the State of
New York.
The Indenture will provide that if any payment of interest or principal
on the Bonds remains unclaimed by Holders for two years after such payment has
become due, whether at the Stated Maturity or otherwise, the Trustee will remit
the amount of such payment to the Issuer, upon Issuer request. Thereafter, such
payment will constitute a general unsecured obligation of the Issuer only, and
Holders may look only to the Issuer for payment. Prior to making such
remittance, the Trustee may, at the expense of the Issuer, cause notice to be
given to the Holders that such payment remains unclaimed and that, after a
specified date, any remaining portion of such payment will be remitted to the
Issuer.
INTEREST PAYMENTS
Interest will be payable in arrears on each Interest Payment Date
commencing on --------------, 1997. Interest will be calculated on the basis of
the actual number of days in each Interest Period and a 360-day year.
Interest will accrue on the unpaid principal balance of the Bonds
during each interest accrual period at a [fixed rate of --% per annum] [floating
rate of [LIBOR] (determined as described below) plus --% per annum].
[CALCULATION OF LIBOR]
REDEMPTION
The Bonds will mature and will be paid at 100% of their respective
principal amounts plus accrued interest at the Stated Maturity. See " --
Liquidity." The Bonds are not subject to redemption at the option of the Issuer.
The Bonds are subject to mandatory partial redemption upon not more
than 10 nor less than 5 days' notice, in the event that (i) on any semi-monthly
Valuation Date, the Discounted Value of the Eligible Collateral is less than the
Basic Maintenance Amount (as defined below under " -- Basic Maintenance
Amount"), [(ii) any law, statute, order or regulation then in effect restricts
the ability of NationsBank, N.A. to contribute additional Eligible Collateral to
the Issuer (a "Collateral Replacement Limit")] and (iii) the Issuer is unable
within a maximum of 10 days after receipt of the Trustee's valuation report
following such Valuation Date (the "Cure Date") to pledge and deliver additional
Eligible Collateral and/or to substitute Eligible Collateral in an amount such
that, after such pledge, the Discounted Value of the Eligible Collateral is at
least equal to the Basic Maintenance Amount, and the Issuer does not deliver to
the Trustee prior to the Cure Date for cancellation Bonds theretofore issued and
reacquired by it in a principal amount sufficient to cause the Discounted Value
of the Eligible Collateral to be at least equal to the Basic Maintenance Amount.
Notwithstanding the foregoing, if the report prepared by the Trustee with
respect to any Valuation Date following the Cure Date and prior to the date on
which the Trustee gives notice of redemption to the Holders shows that the
Discounted Value of the Eligible Collateral is at least equal to the Basic
Maintenance Amount as of such Valuation Date, the Issuer will no longer be
required to make a mandatory redemption of the Bonds. [Even in the absence of a
Collateral Replacement Limit, NationsBank, N.A. will have no obligation to
contribute additional Eligible Collateral to the Issuer.] The failure by the
Issuer on or before the Cure Date to pledge and deliver additional Eligible
Collateral and/or to substitute Eligible Collateral and/or to deliver to the
Trustee for cancellation Bonds in the amount sufficient to cause the Discounted
Value of the Eligible Collateral to be at least equal to the Basic Maintenance
Amount will, in the absence of a Collateral Replacement Limit, constitute an
Event of Default under the Indenture. See "Special Considerations - Limited
Recourse Obligation" and "Description of the Bonds -- Events of Default Under
the Indenture" in the Prospectus.
Any such mandatory redemption shall require the redemption of Bonds in
an aggregate principal amount that is the smallest principal amount (rounded to
the next higher integral multiple of $1,000) necessary to make the Discounted
Value of the Eligible Collateral at least equal to the Basic Maintenance Amount
(calculated in each case as of the Valuation Date immediately preceding the date
on which the Trustee gives notice of redemption to the Holders), after giving
effect to (i) the pledge of any additional Eligible Collateral and/or
substitution of Eligible Collateral by the Issuer, (ii) the delivery to the
Trustee for cancellation of any Bonds repurchased by or on behalf of the Issuer
and (iii) such redemption. Any such mandatory redemption shall be made within 30
days after the Cure Date at a redemption price equal to 100% of the principal
amount (or portion thereof) of the Bonds to be redeemed together with accrued
interest to the date fixed for redemption. Any partial redemption may be made on
a pro rata basis or by any method deemed fair and appropriate by the Trustee,
provided, that such method shall not result in a Bond Outstanding in a
denomination of less than $100,000.
After notice of any redemption has been given to the Holders of the
Bonds, the principal amount (or portion thereof) of the Bonds to be redeemed
shall be due and payable on the date fixed for such redemption at the place set
forth in such notice. From and after the date fixed for such redemption, the
Bonds chosen to be redeemed shall cease to bear interest thereon (unless the
Issuer shall default in the payment of the redemption price, in which case the
principal amount of such Bonds shall continue to bear interest at the rate borne
by the Bonds until paid), and the only right of the Holders of such Bonds shall
be to receive the redemption price; except that, in the case of any redemption
date on which Bonds are redeemed in part, new Bonds representing the principal
amounts of such Bonds that have not been redeemed will be issued to the Holders
of such Bonds. The Holders of such new Bonds shall continue to have the right to
receive the principal amount thereof and interest payments on such principal
amount. Bonds that are redeemed will be cancelled by the Trustee.
The Issuer must give the Trustee an officers' certificate notifying the
Trustee that mandatory redemption is required on any Cure Date on which the
Issuer fails to cure a collateral shortfall. Immediately after receiving notice
of the requirement for such a redemption, the Trustee must liquidate Pledged
Property to the extent required to pay the redemption price; provided, that the
Trustee will not do so if concurrently with such notice the Issuer delivers
Deposit Securities to the Trustee, as described under " --Liquidity," in an
amount sufficient to provide for full payment of the redemption price of the
Bonds required to be redeemed.
SECURITY FOR THE BONDS
The Bonds will be secured by the Pledged Property, which will include
the Initial Collateral and may include any of the types of Eligible Collateral
described in the Prospectus as modified herein. See "Summary of Terms--Security
for the Bonds; Pledged Property; Eligible Collateral and Deposit Securities"
herein and "Description of the Bonds--Security for the Bonds" in the Prospectus.
In addition, the Pledged Property will include, and the Bonds will be secured
from time to time by, (i) cash held in the Collection Account from time to time,
representing scheduled monthly interest and principal payments, principal
prepayments and various other amounts with respect to the Eligible Mortgage
Notes received during each Collection Period, as described below under "
- --Collection Account," [(ii) cash held in the Reserve Fund as described below
under " --Reserve Fund,"] (iii) cash held in the Distribution Account
representing payments on all types of Pledged Property other than Eligible
Mortgage Notes and any amounts that are transferred from the Collection Account
for payment on the Bonds, as described below under " --Distribution Account" and
(iv) the Deposit Securities described below under " --Liquidity."
Notwithstanding the foregoing, Eligible Collateral will not include (i) any
classes of multi-class FNMA Certificates, GNMA Certificates or FHLMC
Certificates or (ii) any multi-class Private Label Mortgage Pass-Through
Certificates, other than the most senior class of a series of Private Label
Mortgage Pass-Through Certificates, the only other classes in which are
subordinate to such senior class, provided that such senior class is not divided
into subclasses. The Initial Collateral will consist of the Eligible Mortgage
Notes described more fully below
The types and characteristics of Eligible Collateral, the percentage
limitations on certain types of Eligible Collateral as described in the
Prospectus, the frequency of the Valuation Dates, the Discount Factors used in
valuing the Eligible Collateral, the methodology used in calculating the Market
Value of the Eligible Collateral and the definition of "Basic Maintenance
Amount" are subject to change from time to time without the consent of the
Holders of the Bonds if such changes (i) are permitted by applicable law and
(ii) will not impair the rating then assigned to the Bonds by each Rating
Agency, as confirmed in writing by such Rating Agencies. The Rating Agencies
have no obligation to review or approve any proposed changes in the types,
characteristics, permitted amounts or Discount Factors of Eligible Collateral or
in the definition of Basic Maintenance Amount and may, at any time, change or
withdraw any rating on the Bonds.
ELIGIBLE MORTGAGE NOTES
General
The Mortgage Notes constituting the Initial Collateral or pledged from
time to time to secure the Bonds will be "Eligible Mortgage Notes," having the
characteristics set forth in the Prospectus under "Description of the Bonds --
Eligible Mortgage Notes," subject to permitted changes in such characteristics
as described above
Initial Collateral
All of the Eligible Mortgage Notes constituting the Initial Collateral
were contributed to the Issuer by affiliates of NationsBank, N.A. or by
NationsBank, N.A. as of _____________, 19____. Such Eligible Mortgage Notes were
either originated or purchased by the Servicer on behalf of, and in accordance
with underwriting standards approved by, [NationsBank, N.A.]. All of such
Eligible Mortgage Notes are either Eligible Fixed-Rate Mortgage Notes or
Eligible Adjustable-Rate Mortgage Notes. Each such Eligible Fixed-Rate Mortgage
Note has an original term to maturity of not more than 30 years and provides for
fixed, level payments that will amortize the principal amount of such Mortgage
Note over its remaining term to maturity. Each such Eligible Adjustable-Rate
Mortgage Note has an original term to maturity of not more than 30 years and
provides for a fixed rate of interest for an initial period of approximately
either 1, 3, 5, 7 or 10 years. All of such Eligible Adjustable-Rate Mortgage
Notes provide for level, amortizing payments over such initial periods.
Thereafter, the interest rate on each such Eligible Adjustable-Rate Mortgage
Note will adjust annually based on the level of [insert relevant index].
[The interest rate for each Eligible Adjustable--Rate Mortgage Note
included in the Initial Collateral will generally adjust on the first day of the
month in which the initial fixed-rate period ends and annually thereafter (each,
an "ARM Interest Adjustment Date"). Effective with the first payment due on each
such Eligible Adjustable-Rate Mortgage Note after each related ARM Interest
Adjustment Date, the monthly principal and interest payment will be adjusted to
an amount that will fully amortize the then-outstanding principal balance of
such Eligible Adjustable-Rate Mortgage Note over its remaining term to maturity
and that will be sufficient to pay interest at the adjusted interest rate for
such Eligible Adjustable-Rate Mortgage Note. The "Constant Maturity Treasury
Index" is the weekly average yield on U.S. Treasury securities adjusted to a
constant maturity of one year as published by the Federal Reserve Board in
Statistical Release H.15 (519) or any similar publication or, if not so
published, as reported by any Federal Reserve Bank or by any U.S. Government
department or agency and made available to the Servicer as of a date 45 days
prior to each ARM Interest Adjustment Date for such Eligible Adjustable-Rate
Mortgage Note. Should the Constant Maturity Treasury Index not be published or
become otherwise unavailable, the Servicer will select a comparable alternative
index over which it has no control and which is readily verifiable.]
Set forth below is a description of certain additional characteristics
of the Initial Collateral as of the Cut-Off Date (except as otherwise
indicated). The Issuer believes that the information set forth below with
respect to the Initial Collateral is representative of the characteristics of
the Initial Collateral as it will be constituted on the Closing Date. The Issuer
will file a Current Report on Form 8-K with the Securities and Exchange
Commission in accordance with the rules thereof which will set forth information
with respect to the Mortgage Notes ultimately pledged to the Trustee on the
Closing Date. For purposes of the following tables, the Initial Collateral has
been divided into [specify homogenous collateral types]. The sums of the
percentage columns set forth in the following tables may not equal 100% due to
rounding.
Mortgage Note Interest Rates
<TABLE>
<CAPTION>
Type 1 Type 2
---------------------------------------------- -----------------------------------------------
Percentage of Percentage of
Cut-Off Date Cut-Off Date Cut-Off Date Cut-Off Date
Aggregate Unpaid Aggregate Unpaid Aggregate Unpaid Aggregate Unpaid
Principal Balance Principal Balance Principal Balance Principal Balance
Interest Rate
<S> <C> <C> <C> <C>
[insert ranges]
</TABLE>
<PAGE>
Mortgage Note Net Interest Rates
<TABLE>
<CAPTION>
Type 1 Type 2
-------------------- ------------------ -------- --------------------------------------
Percentage of Percentage of
Cut-Off Date Cut-Off Date Cut-Off Date Cut-Off Date
Aggregate Unpaid Aggregate Unpaid Aggregate Unpaid Aggregate Unpaid
Principal Balance Principal Balance Principal Balance Principal Balance
Interest Rate
<S> <C> <C> <C> <C>
[insert ranges]
Total ================ ============== =============== ================
Weighted Average Weighted Average
Interest Rate Interest Rate
is ------ is ------.
</TABLE>
Remaining Terms To Stated Maturity
<TABLE>
<CAPTION>
Type 1 Type 2
---------------------------------------------- -----------------------------------------------
Percentage of Percentage of
Remaining Term Cut-Off Date Cut-Off Date Cut-Off Date Cut-Off Date
to Stated Maturity Aggregate Unpaid Aggregate Unpaid Aggregate Unpaid Aggregate Unpaid
(Months) Principal Balance Principal Balance Principal Balance Principal Balance
<S> <C> <C> <C> <C>
[insert ranges]
Total ================= =================== ================= =================
Weighted Average Weighted Average
Remaining Term to Remaining Term to
Stated Maturity is Stated Maturity is
---------months -------- months
</TABLE>
Years of Origination
<TABLE>
<CAPTION>
Type 1 Type 2
---------------------------------------------- -----------------------------------------------
Percentage of Percentage of
Cut-Off Date Cut-Off Date Cut-Off Date Cut-Off Date
Aggregate Unpaid Aggregate Unpaid Aggregate Unpaid Aggregate Unpaid
Years of Origination Principal Balance Principal Balance Principal Balance Principal Balance
<S> <C> <C> <C> <C>
1992
1993
1994
1995
1996
- ------------------------ ----------------------- ---------------------- ----------------------- -----------------------
Total
- ------------------------ ----------------------- ---------------------- ----------------------- -----------------------
</TABLE>
The earliest month and year of origination of any Eligible Mortgage
Note is expected to be ____________________ and the latest month and year of
origination is expected to be __________________.
<PAGE>
Original Loan-To-Value Ratios*
<TABLE>
<CAPTION>
Type 1 Type 2
---------------------------------------------- -----------------------------------------------
Percentage of Percentage of
Cut-Off Date Cut-Off Date Cut-Off Date Cut-Off Date
Aggregate Unpaid Aggregate Unpaid Aggregate Unpaid Aggregate Unpaid
Original Loan-To-Value Principal Balance Principal Balance Principal Balance Principal Balance
Ratio
<S> <C> <C> <C> <C>
50.00% or less
50.01%-55.00%
55.01%-60.00%
60.01%-65.00%
65.01%-70.00%
70.01%-75.00%
75.01%-80.00%
80.01%-85.00%
85.01%-90.00%
90.01%-95.00%
====================================================================================================================
Total $ % $
Weighted Average Weighted Average
Original Loan-to-Value Original Loan-to-Value
Ratio is ----- Ratio is-------.
- -------------------
* The loan-to-value ratio of an Eligible Mortgage Note is calculated using the
lesser of (i) the appraised value of the related mortgaged property, as
established by an appraisal obtained by the originator from an appraiser in
connection with the origination of such Eligible Mortgage Note, and (ii) the
sale price for such property. For the purpose of calculating the loan-to-value
ratio of any Eligible Mortgage Note that is the result of the refinancing
(including a refinancing for "equity take-out" purposes) of an existing mortgage
loan, the appraised value of the related mortgaged property is generally
determined by reference to an appraisal obtained in connection with the
origination of the replacement loan.
</TABLE>
<PAGE>
Original Mortgage Note Principal Balances
<TABLE>
<CAPTION>
Type 1 Type 2
Percentage of Percentage of
Cut-Off Date Cut-Off Date Cut-Off Date Cut-Off Date
Aggregate Unpaid Aggregate Unpaid Aggregate Unpaid Aggregate Unpaid
Original Principal Balance Principal Balance Principal Balance Principal Balance
Principal Balance
<S> <C> <C> <C> <C>
Under $200,000....... $ % $ %
200,001-250,000......
250,001-300,000......
300,001-350,000......
350,001-400,000......
400,001-450,000......
450,001-500,000......
500,001-550,000......
550,001-600,000......
600,001-650,000......
700,001-750,000......
Total............ $ % $ %
============= ================
Average Original Average Original
Principal Principal
Balance is $ Balance is $
</TABLE>
Current Mortgage Note Principal Balances
<TABLE>
<CAPTION>
Type 1 Type 2
- -----------------------------------------------------------------------------------------------------
Percentage of Percentage of
Cut-Off Date Cut-Off Date
Aggregate Aggregate
Current Cut-Off Date Unpaid Cut-Off Date Unpaid
Principal Aggregate Unpaid Principal Aggregate Unpaid Principal
Balance Principal Balance Balance Principal Balance Balance
<S> <C> <C> <C> <C>
Under $200,000....... $ % $ %
200,001-250,000......
250,001-300,000......
300,001-350,000......
350,001-400,000......
400,001-450,000......
450,001-500,000......
500,001-550,000......
550,001-600,000......
Total............
=============== ===============
Average Current Average Current
Principal Principal
Balance is $ Balance is $
</TABLE>
<PAGE>
Types of Mortgaged Properties
<TABLE>
<CAPTION>
Type 1 Type 2
Percentage of Percentage of
Cut-Off Date Cut-Off Date
Aggregate Aggregate
Cut-Off Date Unpaid Cut-Off Date Unpaid
Property Aggregate Unpaid Principal Aggregate Unpaid Principal
Type Principal Balance Balance Principal Balance Balance
<S> <C> <C> <C> <C>
1- to 4 -Family
Detached........
Planned Unit....
Development.....
Condominium.....
Town House .....
Total
</TABLE>
<PAGE>
Geographic Distribution of Mortgaged Properties
<TABLE>
<CAPTION>
Type 1 Type 2
Percentage of Percentage of
Cut-Off Date Cut-Off Date
Aggregate Aggregate
Cut-Off Date Unpaid Cut-Off Date Unpaid
Aggregate Unpaid Principal Aggregate Unpaid Principal
State Principal Balance Balance Principal Balance Balance
<S> <C> <C> <C> <C>
[States to be
listed]
Total...........
</TABLE>
No more than approximately ____% of the aggregate unpaid principal
balance of the Type 1 Eligible Fixed-Rate Mortgage Notes, approximately ____% of
the aggregate unpaid principal balance of the Type 2 Eligible Adjustable-Rate
Mortgage Notes are secured by Mortgaged Properties located in any five-digit zip
code region.
<TABLE>
<CAPTION>
Purposes of Eligible Mortgage Notes
Type 1 Type 2
Percentage of Percentage of
Cut-Off Date Cut-Off Date
Aggregate Aggregate
Cut-Off Date Unpaid Cut-Off Date Unpaid
Aggregate Unpaid Principal Aggregate Unpaid Principal
Loan Purpose Principal Balance Balance Principal Balance Balance
<S> <C> <C> <C> <C>
Purchase....................
Refinance - No Cashout......
Refinance - Cashout.........
Other.......................
Total...................
</TABLE>
In the case of an Eligible Mortgage Note made for "No Cashout"
refinance purposes, substantially all of the proceeds are used to pay in full
the principal balance of a previous mortgage loan of the mortgagor with respect
to a mortgaged property and to pay origination and closing costs associated with
such refinancing. However, in the case of an Eligible Mortgage Note made for
"Cashout" refinance purposes, all or a portion of the proceeds are generally
retained by the mortgagor for uses unrelated to the mortgaged property. The
amount of such proceeds retained by the mortgagor may be substantial.
Underwriting Standards for Eligible Mortgage Notes
Except as described below, each Eligible Mortgage Note has satisfied
the credit, appraisal and underwriting guidelines established by the Servicer
and reviewed and approved by [NationsBank, N.A.], which may be varied in cases
deemed appropriate by the Servicer.
The Servicer's underwriting guidelines are intended to evaluate the
mortgagor's credit standing and repayment ability and the value and adequacy of
the mortgaged property as collateral. The Servicer's underwriting guidelines are
applied in a standard procedure which is intended to comply with applicable
federal and state laws and regulations. Initially, a prospective mortgagor is
required to fill out a detailed application designed to provide pertinent credit
information. As part of the description of the mortgagor's financial condition,
the mortgagor is required to provide a current balance sheet describing assets
and liabilities and a statement of income and expenses, as well as an
authorization to apply for a credit report which summarizes the mortgagor's
credit history with local merchants and lenders and any record of bankruptcy. In
addition, an employment verification is obtained from the mortgagor's employer
wherein the employer reports the length of employment with that organization,
the current salary and an indication as to whether it is expected that the
mortgagor will continue such employment in the future. If a prospective
mortgagor is self-employed, the mortgagor is required to submit copies of signed
tax returns. The mortgagor also authorizes deposit verification at all financial
institutions where the mortgagor has demand or savings accounts. In lieu of
employment and deposit verifications, the Servicer will accept copies of federal
withholding (W-2) forms, pay stubs and account statements.
Once the employment and deposit documentation and the credit report are
received, a determination is made as to whether the prospective mortgagor has
sufficient monthly income available (i) to meet the mortgagor's monthly
obligations on the proposed mortgage loan and other expenses related to the
mortgaged property (such as property taxes, hazard insurance and maintenance and
utility costs) and (ii) to meet other financial obligations and monthly living
expenses.
In determining the adequacy of the property as collateral, an
independent appraisal is made of each property considered for financing. The
appraiser is required to inspect fully the property and verify that it is in
good condition and that construction, if new, has been completed. The appraisal
is based on the appraiser's judgment of values, giving appropriate weight to
both the market value of comparable homes and the cost of replacing the
property.
Certain states where the properties securing the Eligible Mortgage
Notes are located are "anti-deficiency" states where, in general, lenders
providing credit on one- to four-family properties must look solely to the
property for repayment in the event of foreclosure. The Servicer's underwriting
guidelines in all states (including anti-deficiency states) require that the
underwriting officers be satisfied that the value of the property being
financed, as indicated by the independent appraisal, currently supports and is
anticipated to support in the future the outstanding loan balance and provides
sufficient value to mitigate the effects of adverse shifts in real estate
values.
The Servicer has employed different underwriting guidelines for certain
qualifying mortgage loans underwritten by the Servicer through an underwriting
program ("Reduced Documentation Guidelines") designed to streamline the loan
review process by eliminating the requirement for income verification. The
objective of the use of limited documentation has been to shift the emphasis of
the underwriting process from the credit standing of the mortgagor to the value
and adequacy of the mortgaged property as collateral. The maximum loan to value
ratio of any mortgage loan originated under the Reduced Documentation Guidelines
was 70% at the time of origination. The Reduced Documentation Guidelines were
substantially eliminated for any mortgage loans originated after December 31,
1992. Certain of the Eligible Mortgage Notes may have been originated under the
Reduced Documentation Guidelines.
SERVICING OF ELIGIBLE MORTGAGE NOTES
The Servicer
The Servicer is a wholly-owned subsidiary of [NationsBank Texas], which
is an indirect, wholly-owned subsidiary of NationsBank Corporation. The Servicer
is primarily engaged in the origination, purchase and sale of mortgage loans,
the performance of servicing functions and the underwriting of mortgage loans.
The Servicer's principal executive offices are located at 101 South Tryon
Street, Charlotte, North Carolina 28255 and the telephone number is (704)
388-4545], and the Servicer's operations offices are located at 101 East Main
Street, Suite 400, Louisville, Kentucky 40202 and the telephone number is (502)
566-5100.
Servicing Procedures
On or before the Closing Date, the Issuer and the Servicer will enter
into a servicing agreement (the "Servicing Agreement"). Pursuant to the
Servicing Agreement, the Servicer will be responsible for servicing and
administering the Eligible Mortgage Notes. The Servicer will at all times remain
responsible for the performance of its duties under the Servicing Agreement. On
the Closing Date, the Issuer will assign its rights under the Servicing
Agreement to the Trustee for the benefit of the Holders.
The Servicer will agree to perform diligently all services and duties
customary to the servicing by prudent mortgage lending institutions of mortgages
of the same type as the Eligible Mortgage Notes in those jurisdictions where the
related mortgaged properties are located. The duties to be performed by a
servicer include collection and remittance of principal and interest payments,
administration of mortgage escrow accounts (as to which the Servicer will be
expected to make advances when a deficiency exists therein, as described more
fully in the Servicing Agreement), collection of insurance claims and, if
necessary, foreclosure. The Servicer will not be required to make advances in
respect of delinquent monthly payments of principal and interest on Eligible
Mortgage Notes
The Servicer will be entitled to a monthly servicing fee for each
Eligible Mortgage Note, payable only from the interest portion of any monthly
payment collected on an Eligible Mortgage Note, ranging from 0.25% to 0.50% of
the unpaid principal balance of such Eligible Mortgage Note, based on, among
other things, its date of origination, the size of its original principal
balance and whether it is a fixed or adjustable rate mortgage note. The Servicer
will be entitled to retain its servicing fee from interest payments collected
prior to depositing such payments into the Collection Account. In addition, the
Servicer will be entitled to investment income from amounts on deposit in the
Collection Account as described below and to retain late payment charges and
other fees and expenses related to loan assumptions, delinquencies,
modifications, partial releases of security and releases for payment in full, if
any, to the extent collected from mortgagors.
For a more detailed description of the servicing procedures applicable
to the Servicer with respect to the Eligible Mortgage Notes, see "Servicing of
Eligible Mortgage Notes" in the Prospectus.
Collection Account
The Servicer will establish the Collection Account and collect and
deposit therein payments on the Eligible Mortgage Notes in accordance with the
procedures described in the Prospectus under "Servicing of Eligible Mortgage
Notes." Amounts on deposit from time to time in the Collection Account will be
invested by the Servicer in Eligible Investments. "Eligible Investments" include
Deposit Securities and any other investments that are acceptable to each Rating
Agency. Amounts on deposit in the Collection Account from time to time will
constitute a portion of the Pledged Property securing the Bonds and Eligible
Collateral for purposes of satisfying the Basic Maintenance Amount
On the [ ]th day of each month (or, if such day is not a Business Day,
the preceding Business Day), the Servicer will deliver a report to the Trustee
detailing collections on the Eligible Mortgage Notes during the preceding
calendar month (each, a "Collection Period") and stating the total amount of
funds on deposit in the Collection Account and the aggregate principal balance
of the Eligible Mortgage Notes, in each case, as of the end of the preceding
day. On the [ ] day of each month (or, if such day is not a Business Day, the
preceding Business Day) (each, a "Servicer Remittance Date"), the Servicer will
withdraw and remit to the Trustee the amount of cash on deposit in the
Collection Account that was collected during the preceding Collection Period
after deducting amounts permitted to be withdrawn by the Servicer, including its
fee, as described under "Servicing of Eligible Mortgage Notes--Payments on
Eligible Mortgage Notes" in the Prospectus (the "Available Amount"). In
addition, on the [ ] day of each month (or, if such day is not a Business Day,
the preceding Business Day), the Servicer will deliver a similar report to the
Trustee stating the total amount of funds on deposit in the Collection Account
and the aggregate principal balance of the Eligible Mortgage Notes, in each
case, as of the end of the preceding day.
The Servicer's Foreclosure and Delinquency Experience
Historically, a variety of factors including the appreciation of real
estate values have limited the Servicer's loss and delinquency experience on its
portfolio of mortgage loans. There can be no assurance that factors beyond the
Servicer's control, such as national or local economic conditions or downturns
in the real estate markets in its lending areas, will not result in increased
rates of delinquencies and foreclosure losses in the future.
The information in the table below has not been adjusted to eliminate
the effect of the significant growth in the size of the portfolio of mortgage
loans serviced by the Servicer during the periods shown. Accordingly,
foreclosures and delinquencies as percentages of aggregate principal balance of
mortgage loans serviced for each period may be higher than those that would be
shown if a group of mortgage loans were artificially isolated at a point in time
and the information disclosed the activity only in that isolated group. However,
since most of the mortgage loans in the portfolio of mortgage loans serviced by
the Servicer during the periods shown are not fully seasoned, the foreclosure
and delinquency information for such an isolated group would also be distorted
to some degree.
The following table summarizes the delinquency and foreclosure
experience, respectively, on the dates indicated on conventional first trust
deed or mortgage loans serviced by the Servicer and which were originated in a
manner consistent with the underwriting criteria of the Servicer described above
under " --Underwriting Standards." The Servicer's portfolio of first trust deed
and mortgage loans contains fixed and adjustable rate mortgage loans having a
variety of original terms to maturity and payment characteristics and may
therefore differ significantly from the Eligible Mortgage Notes constituting a
portion of the Pledged Property at any time in terms of interest rates,
principal balances, geographic distribution, loan-to-value ratios and other
possibly relevant characteristics. There can be no assurance, and no
representation is made, that the delinquency and foreclosure experience with
respect to the Eligible Mortgage Notes included in the Pledged Property will be
similar to that reflected in the table below, nor is any representation made as
to the rate at which losses may be experienced on liquidation of defaulted
Mortgage Notes. The actual delinquency and foreclosure experience on the
Eligible Mortgage Notes included in the Pledged Property will depend, among
other things, upon the value of the real estate securing such Mortgage Notes and
the ability of borrowers to make required payments
<PAGE>
Delinquency and Foreclosure Experience
<TABLE>
<CAPTION>
At December 31, 1996 At December 31, 1995 At December 31, 1994
Number/% Number/% Number/%
of Outstanding of Outstanding-------- of Outstanding
Mortgage Principal Mortgage Principal Mortgage Principal
Notes Amount Notes Amount Notes Amount
<S> <C> <C> <C> <C> <C> <C>
Total Portfolio...
Delinquencies*
One installment
delinquent....
Percent
Delinquent....
Two installments
delinquent....
Percent
Delinquent....
Three or more
installments
delinquent....
Percent
Delinquent....
In Foreclosure....
Percent in
Foreclosure...
Delinquent and in
Foreclosure.....
Percent
Delinquent and
in Foreclosure
* A mortgage loan is deemed to have "one installment delinquent" if any
scheduled payment of principal or interest is delinquent past the end of the
month in which such payment was due, "two installments delinquent" if such
delinquency persists past the end of the month following the month in which such
payment was due, and so forth.
</TABLE>
DISTRIBUTION ACCOUNT
On the Closing Date, the Trustee will establish the Distribution
Account for the benefit of the Holders. All payments in respect of any Eligible
Collateral securing the Bonds from time to time other than Eligible Mortgage
Notes will be made directly to the Trustee for deposit into the Distribution
Account. In addition, if an Event of Default under the Indenture should occur
and be continuing, all payments in respect of Eligible Mortgage Notes will be
remitted directly to the Trustee for deposit into the Distribution Account.
On each Servicer Remittance Date, upon receipt of the Available Amount
from the Servicer, the Trustee will apply such funds in the following order of
priority:
(i) first, for deposit into the Distribution Account, an amount (first
from the interest portion of the Available Amount and then from the principal
portion of the Available Amount) equal to the amount of accrued interest on the
Bonds payable on the next Interest Payment Date, less any amounts then on
deposit in the Distribution Account and available for payments on the Bonds; and
(ii) second, for deposit into the Reserve Fund, the remaining portion
of the Available Amount.
On each Interest Payment Date, the Trustee will withdraw from the
Distribution Account an amount equal to the amount of interest accrued on the
principal amount of the Bonds during the related Interest Period and distribute
such amount to the Holders of the Bonds as of the immediately preceding Record
Date. In addition, on any mandatory redemption date and at the Stated Maturity
of the Bonds, the Trustee will withdraw sufficient amounts from the Distribution
Account to make required interest and principal payments on the Bonds on such
date and distribute such amounts to the Holders of the Bonds as of the
immediately preceding Record Date.
If, on any Interest Payment Date or mandatory redemption date or at the
Stated Maturity of the Bonds, the amount on deposit in the Distribution Account
(including any amount drawn under the Liquidity Facility (as defined herein)) is
less than the amount necessary to make required interest and principal payments
on the Bonds on such date, the Trustee will withdraw from the Reserve Fund and
deposit into the Distribution Account, to the extent of amounts available in the
Reserve Fund, an amount equal to the difference between such required amount and
the amount then on deposit in the Distribution Account
Amounts on deposit from time to time in the Distribution Account will
be invested by the Trustee at the direction of the Issuer in Eligible
Investments. Investment earnings from Eligible Investments will be credited to
the Distribution Account. Amounts held in the Distribution Account from time to
time will constitute a portion of the Pledged Property securing the Bonds and
Eligible Collateral for purposes of satisfying the Basic Maintenance Amount.
RESERVE FUND
On the Closing Date, the Trustee will establish the Reserve Fund for
the benefit of the Holders. On each Servicer Remittance Date, the Trustee will
deposit into the Reserve Fund the portion of the Available Amount remaining
after making the required deposit into the Distribution Account described above.
On the first Servicer Remittance Date, the Issuer will instruct the
Trustee to retain the Expense Reserve Amount in the Reserve Fund. Funds equal to
the Expense Reserve Amount will be maintained in the Reserve Fund and will be
available to pay operating expenses of the Issuer to the extent not paid by the
Issuer directly until the Bonds have been paid in full at the Stated Maturity
Amounts on deposit from time to time in the Reserve Fund will be
invested by the Trustee at the direction of the Issuer in Eligible Investments.
Investment earnings from Eligible Investments will be credited to the Reserve
Fund. Amounts held in the Reserve Fund from time to time will constitute a
portion of the Pledged Property securing the Bonds and (net of the Expense
Reserve Amount) Eligible Collateral for purposes of satisfying the Basic
Maintenance Amount.
At the request of the Issuer, amounts on deposit in the Reserve Fund
in excess of the Expense Reserve Amount will be withdrawn by the Trustee and
released to the Issuer free of the lien of the Indenture if, as of the Valuation
Date immediately preceding such release, the Discounted Value of the Eligible
Collateral, after giving effect to such release, is at least equal to the Basic
Maintenance Amount and no Event of Default has occurred and is continuing. [It
is the present intention of the Issuer to cause the Trustee to release to the
Issuer on each Servicer Remittance Date, subject to the limitations described in
the preceding sentence, any portion of the related Available Amount deposited
therein on such date representing interest payments on the Eligible Mortgage
Notes.] In addition, as more fully described above under " -- Distribution
Account," the Trustee will withdraw amounts from the Reserve Fund and deposit
such amounts into the Distribution Account to the extent amounts on deposit in
the Distribution Account are insufficient to make required payments of interest
and principal on the Bonds on any date.
BASIC MAINTENANCE AMOUNT
The Issuer will be required under the terms of the Indenture to
maintain Eligible Collateral with an aggregate Discounted Value at least equal
to the Basic Maintenance Amount, which means that such Eligible Collateral would
have a Market Value (as defined under "Description of the Bonds--Basic
Maintenance Amount" in the Prospectus) of as much as [ ]% to [ ]% of the Basic
Maintenance Amount to the extent that the Eligible Collateral consists of
collateral other than cash and would have a Market Value of [ ]% of the Basic
Maintenance Amount if the Eligible Collateral consisted solely of cash or
certain cash equivalents. For purposes of such calculation, Eligible Collateral
will include amounts on deposit in the Collection Account, the Distribution
Account and the Reserve Fund (net of the Expense Reserve Amount). In determining
the Market Value of Eligible Mortgage Notes as to which there is currently a
Late Payment, such Market Value will be reduced by [ ]% if such Mortgage Note is
one installment delinquent, by [ ]% if such Mortgage Note is two installments
delinquent and by [ ]% if such Mortgage Note is three installments delinquent.
An Eligible Mortgage Note that is more than three installments delinquent will
have a Market Value of zero.
The "Basic Maintenance Amount" as of each Valuation Date (or any other
date of valuation) means an amount equal to the sum of (i) the aggregate
principal amount of Bonds Outstanding plus (ii) an amount equal to [90] days'
accrued interest on the Bonds Outstanding at the maximum interest rate on the
Bonds of [ ]% per annum.
The "Discounted Value" of the Eligible Collateral as of any date will
be the sum of the Market Values of the Eligible Collateral included in the
Pledged Property multiplied by the Discount Factors appearing below for such
Eligible Collateral.
Discount Factors
Cash, demand deposits and next business day's repurchase agreements..........
Repurchase agreements (other than next business day's repurchase
agreements and other Short-Term Money......................................
Market Instruments (other than demand deposits)..............................
Direct obligations of the United States Government..........................(a)
Eligible Fixed-Rate Mortgage Notes...........................................
Eligible Adjustable-Rate Mortgage Notes......................................
GNMA Certificates............................................................
FHLMC Certificates or FNMA Certificates......................................
Eligible Mortgage Pass-Through Certificates which are rated at least
"AAA" by [ ] or "AAA" by [ ] which are:
Backed by Fixed-Rate Mortgage Notes..........................................
Backed by Adjustable-Rate Mortgage Notes.....................................
Eligible Mortgage Pass-Through Certificates which have been approved
for inclusion in the Eligible Collateral by [ ] or [ ] which are:
Backed by Fixed-Rate Mortgage Notes..........................................
Backed by Adjustable-Rate Mortgage Notes.....................................
(a) The Discount Factor applied within the range shown depends upon the
particular Rating Agencyas well as the period to maturity of each
obligation, which varies from 30 days to 30 years.
The Trustee is required to deliver a report containing the information
described below under " --Reports on Pledged Property" to the Issuer within two
Business Days after each Valuation Date with respect to the status of the
Pledged Property as of the Valuation Date using Market Values determined as of a
date not more than three Business Days prior to such Valuation Date (a
"Determination Date"). Scheduled reductions in the principal amounts of the
Eligible Collateral included in the Pledged Property or possible prepayments or
decreases in the Market Value thereof may cause the Discounted Value of the
Eligible Collateral to be less than the Basic Maintenance Amount. In such event,
the Indenture requires the Issuer, no later than the Cure Date, either (i) to
deliver additional Eligible Collateral to the Trustee or if Eligible Mortgage
Notes are delivered, to the Custodian, and/or substitute Eligible Collateral
and/or (ii) to the extent it elects to do so, to repurchase a number of Bonds
Outstanding so that the Trustee can, no later than the Cure Date, deliver a new
report showing that, as of the date of such report, the Discounted Value of the
Eligible Collateral (determined as of the date that the Basic Maintenance Amount
was not met, or, at the option of the Issuer, as of a later date of valuation,
but no later than the Cure Date) is at least equal to the Basic Maintenance
Amount. If the Issuer elects to satisfy the foregoing obligation to restore the
Discounted Value of the Eligible Collateral to the Basic Maintenance Amount by
delivering Mortgage Notes to the Custodian, the Mortgage Notes included in the
Pledged Property after the delivery of such Mortgage Notes must meet the
requirements relating to the limits on the types and characteristics of such
Mortgage Notes in order to ensure that all Mortgage Notes delivered to the
Custodian are Eligible Mortgage Notes. In the event that, due to any Collateral
Replacement Limit applicable to NationsBank, N.A., the Issuer is unable by the
Cure Date to cause the Discounted Value of the Eligible Collateral to be at
least equal to the Basic Maintenance Amount by pledging additional Eligible
Collateral or substituting Eligible Collateral, and the Issuer does not elect
to repurchase Bonds Outstanding to the extent necessary to cause the Discounted
Value of the Eligible Collateral to be at least equal to the Basic Maintenance
Amount, then the Issuer must no more than 30 days after the Cure Date, redeem
Bonds as described above under " -- Redemption."
WITHDRAWALS AND SUBSTITUTIONS OF COLLATERAL
The Issuer may, at its option, at any time and from time to time,
withdraw or substitute Pledged Property; provided, that either (i) the
Discounted Value of the Eligible Collateral (based upon the then most recent
report of the Trustee valuing the Eligible Collateral) remaining in the Pledged
Property following the proposed withdrawal or substitution (after giving effect
to withdrawals from and substitutions of Pledged Property during the period
following such report) would at least equal the Basic Maintenance Amount as of
the then most recent report of the Trustee valuing the Eligible Collateral or
(ii) the Issuer causes the Trustee to prepare a new report, containing
information as of the date thereof, showing that the Discounted Value of the
Eligible Collateral (calculated as of a date no more than three Business Days
prior to the date of such report) included in the Pledged Property following the
proposed withdrawal, and after giving effect to any proposed substitution, will
at least equal the Basic Maintenance Amount as calculated in such new report.
Pledged Property which was not included in the Discounted Value of the
Eligible Collateral as of the most recent Valuation Date may be withdrawn at any
time so long as the Discounted Value of the Eligible Collateral was at least
equal to the Basic Maintenance Amount as of such Valuation Date, and no
withdrawals of Eligible Collateral were made after such Valuation Date. During
the continuance of any Event of Default, the Issuer may not withdraw or
substitute Pledged Property.
The Issuer may pledge additional Eligible Collateral at any time.
The Indenture permits the Issuer to consent to certain modifications or
waivers with respect to the Eligible Collateral, including, for example,
assumptions of Mortgage Notes and related mortgages.
LIQUIDITY
No later than 15 days before the Stated Maturity, the Issuer must
either (i) pledge Deposit Securities to the Trustee or (ii) make other
arrangements acceptable to each Rating Agency to deposit cash on the Business
Day preceding the Stated Maturity, in each case in an amount sufficient,
together with the amount of cash that will otherwise be available in the
Distribution Account and the Reserve Fund on the Stated Maturity, to pay all of
the interest and principal payable on the Bonds on the Stated Maturity. If, as
of the 45th day preceding the Stated Maturity, the rating by either of the
Rating Agencies of the long-term unsecured debt of NationsBank Corporation has
fallen below [BBB/Baa2] then no later than 30 days before the Stated Maturity,
the Issuer must pledge Deposit Securities to the Trustee as described in the
preceding sentence. In order to satisfy the foregoing obligations, the Issuer
may, for example, sell all or a portion of the Pledged Property at fair market
value to one or more purchasers (which may include affiliates of the Issuer,
although no such affiliate or any other entity has any obligation to make any
purchase of Pledged Property) and deposit the proceeds of such sale with the
Trustee. If the Issuer fails to effect any of the options described above within
the prescribed period, then the Trustee must immediately liquidate Pledged
Property in an amount sufficient to pay all of the interest and principal
payable on the Bonds on the Stated Maturity. Upon delivery of such Deposit
Securities or cash, the Bonds will no longer be deemed to be Outstanding, and
the Trustee will be obligated to release all other Pledged Property held by the
Trustee from the lien of the Indenture.
In addition, if the Issuer elects to deliver Deposit Securities to the
Trustee to provide for payment of the redemption price pursuant to a mandatory
partial redemption of the Bonds in lieu of having the Trustee liquidate Pledged
Property, then, on the Cure Date on which it is required to notify the Trustee
of such redemption, the Issuer must deliver Deposit Securities in the full
amount of the redemption price of the Bonds to be redeemed.
Deposit Securities delivered in accordance with the preceding
paragraphs must mature prior to the date in respect of which such Deposit
Securities were delivered. Deposit Securities include (i) cash, (ii) Government
Securities (other than FHLMC Certificates, FNMA Certificates and GNMA
Certificates) and (iii) Short-Term Money Market Instruments.
LIQUIDITY FACILITY
[In addition, in order to maintain liquidity for the payment of
interest on the Bonds on each Interest Payment Date, the Issuer will enter into
a liquidity agreement (or other liquidity arrangement acceptable to each Rating
Agency) with NationsBank, N.A. (which agreement may be replaced from time to
time with a liquidity agreement or other such liquidity arrangement from such
other bank as may be acceptable to each Rating Agency) in the amount of one
month's interest on the Bonds at an interest rate on the Bonds of [ ]% per annum
(the "Liquidity Facility"). Such Liquidity Facility may be drawn upon by the
Trustee only if on any Servicer Remittance Date the Trustee shall fail to
receive the Available Amount from the Servicer.]
PURCHASE AND RESALE OF BONDS
The Issuer may at any time and from time to time purchase Bonds
Outstanding on the open market or by private sale. Bonds held by the Issuer or
its affiliates (other than NCMI) shall not be deemed to be Outstanding for
purposes of determining the Basic Maintenance Amount or for other purposes under
the Indenture. The Indenture provides that the Issuer shall not, and it shall
not permit any affiliate (other than NCMI) to, sell any Bonds acquired by the
Issuer or any such affiliate unless the Trustee is able to prepare a report
dated no more than five days prior to the date of sale, showing that, after
giving effect to such sale, the Discounted Value of the Eligible Collateral
(determined at the option of the Issuer, as of the then most recent Valuation
Date or as of any date subsequent thereto but no later than the date of such
report) would not be less than the Basic Maintenance Amount.
REPORTS ON PLEDGED PROPERTY
Upon issuance of the Bonds, the Issuer is required to deliver to the
Trustee, and, within two Business Days after each Valuation Date commencing with
the [----- --, 19--] Valuation Date, the Trustee is required to deliver to the
Issuer, reports with respect to the status of the Pledged Property (with Market
Values having been determined as of the related Determination Date), which set
forth the Discounted Value of the Eligible Collateral. Copies of such reports
will also be delivered to each Rating Agency. The Issuer may also cause the
Trustee to deliver similar reports in connection with the withdrawal or
substitution of Pledged Property, as described above under " --Withdrawals and
Substitutions of Collateral." In preparing such reports, the Trustee will use
information provided by the Servicer in its semi-monthly reports preceding the
related Valuation Dates as to the amounts on deposit in the Collection Account,
the aggregate principal balance of the Eligible Mortgage Notes and the weighted
average interest rate, weighted average maturity and principal balance of
specified groups of Eligible Mortgage Notes. Such reports will also contain
information obtained from the Servicer concerning the occurrence of Late
Payments with respect to the Eligible Mortgage Notes and, if Eligible Mortgage
Pass-Through Certificates are included in the Pledged Property securing the
Bonds and if such information is available, with respect to the Mortgage Notes
underlying such Eligible Mortgage Pass-Through Certificates. In addition, the
report to be delivered by the Issuer upon issuance of the Bonds, each report
delivered by the Trustee in connection with the withdrawal or substitution of
Pledged Property and each report delivered by the Trustee in connection with the
Valuation Date following the pledge by the Issuer of additional Eligible
Collateral (other than in connection with a substitution) will also contain
information on specified characteristics of the Mortgage Notes (as described in
the Prospectus under "Description of the Bonds--Eligible Mortgage Notes") and
the percentages of the Mortgage Notes having such characteristics.
The Issuer's initial report upon the issuance of the Bonds, the
Trustee's report delivered in connection with each Cure Date and certain of the
Trustee's semi-monthly Valuation Date reports will be accompanied by letters
from a firm of independent accountants selected by the Issuer regarding the
calculations made by the Issuer and the Trustee, as applicable, in the
applicable reports. With respect to the Trustee's reports, such letter will be
delivered quarterly, commencing with the report delivered in connection with the
[----- --, 19--] Valuation Date, and will relate to (i) the Trustee's report
delivered with respect to such quarterly Valuation Date and (ii) one of the
Trustee's reports delivered during the three-month period ending on the last day
of the preceding month, which report will be selected at random by such firm of
accountants.
Example of Collection and Distribution of Payments
The following chart sets forth an example of (i) the application of
collections on the Eligible Collateral received during a Collection Period to
the payment of the Bonds and other amounts on the following Interest Payment
Date and (ii) a one-month cycle of collateral valuations and reports. For
purposes of the following chart, each day shown is assumed to be a Business Day.
[August] [ ]-[August] [ ].... Collection Period. The Servicer receives
scheduled monthly payments, prepayments,
and other payments in respect of the
Eligible Mortgage Notes and deposits
them in the Collection Account, net of
its servicing fee. The Trustee receives
payments on all other Eligible
Collateral and deposits them in the
Distribution Account.
[September] [ ]................... Determination Date for the September [ ]
Valuation Date.
September [ ]..................... The Servicer delivers a report to the
Trustee stating the total amount of
funds on deposit in the Collection
Account and the aggregate principal
balance of the Eligible Mortgage Notes,
in each case, as of the end of the
preceding day.
September [ ]..................... Valuation Date. The Trustee prepares a
valuation report showing the Discounted
Value of the Eligible Collateral as of a
date no earlier than the preceding
Determination Date.
September [ ]...................... The Trustee delivers the valuation
report to the Issuer. If the Discounted
Value of the Eligible Collateral is less
than the Basic Maintenance Amount as of
the September [5] Valuation Date, the
Issuer has until the next Cure Date (10
days following receipt of the report) to
pledge additional Eligible Collateral
and/or substitute Eligible Collateral
and/or repurchase Bonds so as to make
them no longer Outstanding in order to
remove the collateral shortfall.
September [ ]..................... Cure Date. If the Issuer has not
remedied the collateral shortfall
described above by this date (and a
Collateral Replacement Limit exists),
the Trustee will be required to cause a
mandatory redemption of the Bonds within
30 days of the Cure Date in an amount
such that, after giving effect to such
redemption, the Discounted Value of the
Eligible Collateral is at least equal to
the Basic Maintenance amount, unless the
collateral value test is met on a
subsequent Valuation Date and no notice
of redemption has yet been sent to the
Holders.
September [ ]...................... Determination Date for the September [ ]
Valuation Date.
September [ ]..................... The Servicer delivers a report to the
Trustee detailing collections on the
Eligible Mortgage Notes during the
preceding Collection Period and stating
the total amount of funds on deposit in
the Collection Account and the aggregate
principal balance of the Eligible
Mortgage Notes, in each case, as of the
end of the preceding day.
September [ ]...................... Valuation Date. The Trustee prepares a
valuation report similar to that
described above.
September [ ]...................... The Trustee delivers the valuation
report to the Issuer. The Issuer again
has 10 days to remedy any collateral
shortfall evidenced by such report.
September [ ]...................... Record Date for the September [ ]
Interest Payment Date.
September [ ]...................... Servicer Remittance Date. The Servicer
remits the Available Amount to the
Trustee. The Trustee (i) deposits into
the Distribution Account and the Reserve
Fund, as applicable, the required
portions of the Available Amount and
(ii) upon request of the Issuer and
subject to the limitations discussed
above under " -- Reserve Fund," releases
amounts on deposit in the Reserve Fund
in excess of the Expense Reserve Amount
to the Issuer, free of the lien of the
Indenture, if the Discounted Value of
the Eligible Collateral as of the most
recent Valuation Date, after giving
effect to such release, is at least
equal to the Basic Maintenance Amount.
September [ ]...................... [If applicable] LIBOR Determination
Date. The Trustee determines LIBOR and
the applicable interest rate on the
Bonds for the next Interest Period
(September [ ] through October [ ]).
September [ ]...................... Interest Payment Date. The Trustee
distributes to the Holder ("DTC")
interest payable on the Bonds on such
date.
RATIO OF EARNINGS TO FIXED CHARGES
The Issuer has provided no historical or pro forma ratio of earnings to
fixed charges because it is a limited purpose entity having no operations
unrelated to the issuance of the Bonds and other series of mortgage-backed bonds
which may subsequently be issued as described in the Prospectus.
<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions contained in an
underwriting agreement dated , 19 between the Issuer and the Underwriters (the
"Underwriting Agreement"), the Underwriters named below have severally agreed to
purchase, and the Issuer has agreed to sell to them, severally, the respective
principal amounts of the Bonds set forth opposite their names below.
Principal
Underwriter Amount
[Name]................................................. $
Total........................................... $
In the Underwriting Agreement, the Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the Bonds offered
hereby if any of the Bonds are purchased.
The Underwriters propose initially to offer the Bonds in part to the
public at the price set forth on the cover page of this Prospectus Supplement
and in part to certain dealers at such price less concessions not in excess of [
]% of the principal amount of the Bonds. The Underwriters may allow, and such
dealers may reallow, concessions not in excess of [ ]% of the principal amount
of the Bonds to certain brokers and dealers. After the initial public offering,
the public offering price and other selling terms may be changed by the
Underwriters.
The Bonds will be offered simultaneously in the United States and
Europe.
Each Underwriter has represented and agreed that (a) it has not offered
or sold and will not offer or sell in the United Kingdom any Bonds to persons in
the United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulation 1995 or the
Financial Services Act 1986 (the "Act") and (b) it has only issued or passed on,
and will only issue or pass on, in the United Kingdom any document received by
it in connection with the issue of the Bonds, other than any document which
consists of or any part of listing particulars, supplementary listing
particulars or any other document required or permitted to be published by
listing rules under Part IV of the Act, to a person who is of a kind described
in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 or is a person to whom the document may otherwise
lawfully be issued or passed on.
The Issuer has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
There currently is no secondary market for the Bonds. The Underwriters
intend to make a secondary market in the Bonds, but none of the Underwriters has
any obligation to do so. There is no assurance that a secondary market in the
Bonds will develop or, if one does develop, that it will continue until the
Bonds are paid in full.
LEGAL MATTERS
The legality of the Bonds will be passed upon for the Issuer by Stroock
& Stroock & Lavan, New York, New York. Certain other legal matters with respect
to the issuance of the Bonds will be passed upon by Robert Long, Jr. of
NationsBank Corporation, Charlotte, North Carolina.
EXPERTS
The financial statements of Main Place Funding Corporation
incorporated in this Prospectus Supplement by reference to the Main Place
Funding Corporation Annual Report on form 10-K for the year ended December 31,
1995, have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
BOND RATINGS
It is a condition of the issuance of the Bonds that they be rated "[ ]"
by [ ], "[ ]" by [ ] and "[ ]" by [ ]. A security rating is not a recommendation
to buy, sell or hold securities and may be subject to revision or withdrawal at
any time by the assigning rating organization.
The Issuer has not requested a rating of the Bonds by any rating agency
other than the Rating Agencies. However, there can be no assurance as to whether
any other rating agency will rate the Bonds or, in such event, what rating would
be assigned to the Bonds by such other rating agency. The rating assigned by
such other rating agency to the Bonds may be lower than the ratings assigned by
the Rating Agencies.
<PAGE>
INDEX OF PRINCIPAL TERMS IN THE PROSPECTUS SUPPLEMENT
Act..................................................S-2
ARM Interest Adjustment Date.........................S-12
Available Amount.....................................S-21
Basic Maintenance Amount.............................S-24
Bondholder...........................................S-6
Bonds................................................S-21
Closing Date.........................................S-2
Collateral Replacement Limit.........................S-5
Collection Account...................................S-4
Collection Period....................................S-6
Constant Maturity Treasury Index.....................S-12
Cure Date............................................S-25
Custodian............................................S-4
Cut-Off Date.........................................S-4
Deposit Securities...................................S-3
DTC..................................................S-2
Determination Date...................................S-25
Discounted Value.....................................S-4
Distribution Account.................................S-4
Eligible Collateral..................................S-3
Eligible Investments.................................S-21
Eligible Mortgage Notes..............................S-3
Eligible Mortgage Pass-Through Certificates..........S-3
Expense Reserve Amount...............................S-6
FHLMC................................................S-3
FHLMC Certificates...................................S-3
[ ]-Year Eligible Fixed-Rate Mortgage Notes......S-12
Fitch................................................S-7
FNMA.................................................S-3
FNMA Certificates....................................S-3
GNMA.................................................S-3
GNMA Certificates....................................S-4
Holder...............................................S-4
Indenture............................................S-3
Initial Collateral...................................S-4
Interest Payment Date................................S-3
Interest Period......................................S-10
Issuer...............................................S-2
LIBOR................................................S-29
Business Day.........................................S-2
LIBOR Business Day...................................S-29
LIBOR Determination Date.............................S-29
Liquidity Facility...................................S-24
NationsBank, N.A.....................................S-5
NCMI.................................................S-9
[ ] Eligible Adjustable-Rate Mortgage Notes......S-12
Outstanding..........................................S-5
Pledged Property.....................................S-3
Private Label Mortgage Pass-Through Certificates.....S-4
Prospectus...........................................S-2
Rating Agency........................................S-4
Record Date..........................................S-9
Reduced Documentation Guidelines.....................S-20
Reserve Fund.........................................S-4
S&P..................................................S-7
Servicer.............................................S-6
Servicer Remittance Date.............................S-6
Servicing Agreement..................................S-20
Stated Maturity......................................S-2
[ ] Eligible Adjustable-Rate Mortgage Notes......S-12
[ ] Eligible Adjustable-Rate Mortgage Notes......S-12
Trustee..............................................S-3
Underwriters.........................................S-2
Underwriting Agreement...............................S-30
Valuation Date.......................................S-5
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS
DATED JANUARY __, 1997
PROSPECTUS
MAIN PLACE REAL ESTATE INVESTMENT TRUST
MORTGAGE-BACKED BONDS
(ISSUABLE IN SERIES)
Main Place Real Estate Investment Trust (the "Issuer") may sell from
time to time by means of this Prospectus and a separate Prospectus Supplement (a
"Prospectus Supplement") up to $4,000,000,000 aggregate principal amount of its
Mortgage-Backed Bonds (the "Bonds") issuable in Series (each, a "Series"). In
addition, if the Issuer intends to sell some or all of the Bonds of a Series to
foreign investors, the Issuer may prepare and provide to foreign investors a
separate global prospectus supplement (a "Global Prospectus Supplement") that
will contain certain limited information about the Bonds of such Series relevant
to foreign investors.
Each Series of Bonds will consist of a single class of Bonds. Interest
on the Bonds will be payable on each Interest Payment Date specified in the
related Prospectus Supplement.
The Bonds of each Series will be secured by Pledged Property, which
will include Eligible Collateral and may include Deposit Securities, one or more
Collection Accounts and Distribution Accounts and one or more Reserve Funds
(each as defined herein). In addition, in order to fund the return of principal
at the Stated Maturity (as defined herein) of each such Series, the Issuer will
be required, prior to the applicable Stated Maturity, to deliver additional
collateral to the Trustee (as defined herein) for such Series in the form of
Deposit Securities or to take other actions as described more fully herein to
provide liquidity for such payments.
Each Series of Bonds may be redeemable at the option of the Issuer, if
so provided in the related Prospectus Supplement. In addition, each Series of
Bonds will be subject to mandatory partial redemption under the circumstances
described herein and in the related Prospectus Supplement.
The Issuer expects to qualify as a real estate investment trust for
federal income tax purposes, commencing with the taxable year ending December
31, 1996. No person or persons acting as a group is permitted to beneficially
own more than 9.9% of the equity of the Issuer, except NationsBank Corporation
and its affiliates or subsidiaries.
THE BONDS REPRESENT LIMITED RECOURSE OBLIGATIONS SOLELY OF THE ISSUER AND ARE
NOT INSURED OR GUARANTEED BY NATIONSBANK, N.A. OR ANY AFFILIATES THEREOF. THE
BONDS ARE NOT DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THE BONDS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Offers of each Series of Bonds may be made through one or more
different methods, as more fully described under "Plan of Distribution" herein
and "Underwriting" in the related Prospectus Supplement.
RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THIS PROSPECTUS MAY NOT BE
USED TO CONSUMMATE SALES OF BONDS UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT
AND, IF APPLICABLE TO FOREIGN INVESTORS IN A SERIES OF BONDS, A GLOBAL
PROSPECTUS SUPPLEMENT.
The date of this Prospectus is ________ __, 1997.
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS OR ANY
ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUER
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE ISSUER SINCE THE DATE HEREOF. THIS PROSPECTUS OR ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN
ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE
TO WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Bonds to be offered
hereunder will, among other things, set forth with respect to such Series of
Bonds: (i) the aggregate principal amount, interest rate or method of
calculating the interest rate and authorized denominations of such Bonds; (ii)
certain information concerning the Pledged Property (as defined herein) securing
such Bonds; (iii) the Stated Maturity of such Bonds; (iv) the Interest Payment
Dates for such Series of Bonds; and (v) additional information with respect to
the plan of distribution of such Bonds. In addition, if a Series of Bonds is to
be offered in whole or in part to foreign investors, such Prospectus Supplement
or a separate Global Prospectus Supplement (which will accompany such Prospectus
Supplement and the Prospectus and be provided to foreign investors) will contain
information about such Series relevant to such investors, including any
information with respect to the listing of such Series of Bonds on a foreign
stock exchange.
AVAILABLE INFORMATION
Copies of the Registration Statement of which this Prospectus forms a
part and the exhibits thereto are on file at the offices of the Securities and
Exchange Commission (the "Commission") in Washington, D.C. Copies may be
obtained at rates prescribed by the Commission upon request to the Commission,
and may be inspected, without charge, at the offices of the Commission, 450
Fifth Street, NW, Washington, D.C. 20549.
The Issuer will be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and in accordance
therewith will file (in reduced format) reports and other information with the
Commission. Such reports and other information filed by the Issuer can be
inspected and copied at the public reference facilities maintained by the
Commission at its Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at its Regional Offices located as follows: Northeast Regional
Office, 7 World Trade Center, Suite 1300, New York, New York 10048 and Midwest
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material can also be obtained by mail from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of prescribed rates. The Commission
maintains an Internet web site that contains reports, proxy and information
statements and other information regarding Issuers who file electronically with
the Commission. The address of that site is http://www.sec.gov. The Issuer does
not intend to send any financial reports to Holders (as defined herein) of the
Bonds.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed by Main Place Funding
Corporation with the Commission pursuant to Section 15(d) of the 1934 Act are
incorporated herein by reference:
(a) The Annual Report on Form 10-K for the year ended December 31,
1995;
(b) The Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996 and June 30, 1996;
(c) The Current Report on Form 8-K filed May 20, 1996.
The following documents, previously filed by the Issuer with the
Commission pursuant to Section 15(d) of the 1934 Act are incorporated herein
by reference:
(a) The Quarterly Reports on Form 10-Q for the quarter ended
September 30, 1996.
There are incorporated herein by reference all documents filed by the
Issuer with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
1934 Act, on or subsequent to the date of this Prospectus and prior to the
termination of the offering of Bonds made hereby and by the related Prospectus
Supplements. The Issuer will provide without charge to each person to whom this
Prospectus is delivered, on request of any such person, a copy of any or all of
the documents incorporated herein by reference other than the exhibits to such
documents (unless such exhibits are specifically incorporated by reference in
such documents). Requests should be directed to the Issuer in writing at 100
North Tryon Street, 23rd Floor, Charlotte, North Carolina 28255 or by telephone
at (704) 388-7436.
SPECIAL CONSIDERATIONS
Potential investors should consider, among other things, the following
factors in connection with the purchase of the Bonds.
LIMITED LIQUIDITY. There is currently no secondary market for any Series of
Bonds. It is anticipated that, to the extent permitted, the Underwriters of each
Series of Bonds offered hereby will make a secondary market in such Bonds, but
in no event will any such Underwriter be under an obligation to do so. There is
no assurance that a secondary market will develop with respect to the Bonds of
any Series offered hereby, or if it does develop, that it will provide Holders
with liquidity of investment or that it will continue for the life of such
Bonds.
LIMITED RECOURSE OBLIGATION. The Bonds of each Series will represent obligations
solely of the Issuer. If certain collateral maintenance requirements, described
more fully below under "Description of the Bonds--Redemption," are not met with
respect to a Series of Bonds, the Issuer must pledge additional collateral to
secure such Series, substitute new collateral for collateral previously pledged
and/or repurchase Bonds in order to remedy such collateral shortfall. If the
Issuer is unable to pledge additional collateral to the Trustee (as defined
herein) for a Series, Holders may receive mandatory unscheduled redemptions of
principal in an amount sufficient to remedy such collateral shortfall. In
addition, the Issuer will be required a certain number of days prior to the
Stated Maturity of a Series of Bonds to pledge Deposit Securities to the Trustee
or to make other arrangements acceptable to each Rating Agency (as defined
herein) rating such Series sufficient to pay all of the interest and principal
payable on the Bonds of such Series at their Stated Maturity. If the Issuer is
unable to take such action, the Trustee will be obligated immediately to
liquidate Pledged Property securing such Series in an amount sufficient to pay
all of the interest and principal payable on the Bonds of such Series at their
Stated Maturity. See "Description of the Bonds--Liquidity."
INSOLVENCY RELATED MATTERS. The Issuer has been established as a limited purpose
indirect subsidiary of NationsBank, N.A. ("NationsBank, N.A.") to reduce the
risk of bankruptcy of the Issuer and its resulting effect on the Bonds of each
Series. In addition, the Issuer, Main Place Holdings Corporation, the Issuer's
parent ("MP Holdings"), and NationsBank, N.A., the Issuer's indirect parent and
a subsidiary of NationsBank Corporation (the "Corporation"), have undertaken
to follow certain procedures to preserve the corporate separateness of the
Issuer, with a view to maintaining the assets of the Issuer separate from the
assets of NationsBank, N.A. and MP Holdings, with the result that the assets of
the Issuer would not be available directly to creditors of NationsBank, N.A. or
MP Holdings or to any receiver or conservator which may be appointed with
respect to NationsBank, N.A. or MP Holdings. There can be no assurance,
however, that, despite the bankruptcy remote nature of the Issuer and the
procedures described above, the Federal Deposit Insurance Corporation ("FDIC"
would not seek to consolidate the assets and liabilities of the Issuer with
those of NationsBank, N.A. or NationsBank Corporation, or that the appointment
of the FDIC as receiver or conservator of NationsBank, N.A. would not have an
impact on one or more Series of Bonds. Although the position runs contrary to
traditional notions of corporate law and to the statutory language of the
Federal Institutions Reform, Recovery and Enforcement Act of 1989, the FDIC
has, on limited occasions, taken the position that it can "repudiate," at least
in limited circumstances, the contracts of subsidiaries of banks for which it
has been appointed receiver or conservator. The Issuer is not aware of an
instance in which the FDIC has attempted to repudiate an indenture with respect
to the publicly-held indebtedness of a subsidiary of a failed bank, and there
is no case law directly on point. A repudiation of the Indenture governing a
Series of Bonds by the FDIC would cause an acceleration of the maturity of such
Bonds, but would not impair the validity or ultimate enforceability of the lien
of the Indenture with respect to the collateral securing such Bonds. The Issuer
does not believe that the FDIC has the authority to assert such a position,
but whether any such effort by the FDIC would be successful cannot be
determined with certainty.
BOOK-ENTRY REGISTRATION. Unless fully registered, certificated Bonds are
initially issued to Holders as specified in the related Prospectus Supplement
relating to a Series, the Bonds of each Series initially will be represented by
one or more certificates registered in the name of Cede, the nominee for DTC
(each as defined herein), and will not be registered in the names of the Bond
Owners (as defined herein) or their nominees. Unless and until Definitive Bonds
(as defined herein) are issued for a Series, Bond Owners relating to such Series
will not be recognized by the Trustee as Holders, as that term will be used in
the Indenture. Hence, until such time, Bond Owners will only be able to exercise
the rights of Holders indirectly through DTC, and, in the case of certain
investors outside of the United States, further indirectly through CEDEL or
Euroclear (each as defined herein) and their participating organizations.
Because DTC can only act on behalf of individuals who are Participants (as
defined herein) in DTC's system (or participate indirectly through a
Participant), the ability of a Bond Owner to pledge its Bonds to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of such Bonds, may be limited due to the lack of a physical certificate
representing such Bonds. See "Description of the Bonds--Book-entry Registration"
and "--Definitive Bonds."
THE ISSUER
The Issuer was formed in the State of Maryland on October 29, 1996 as a
business trust for the purpose of consolidating the acquisition, holding and
management of certain closed-end residential mortgage loans of NationsBank,
N.A. and its affiliate banks, including those of NationsBank, N.A. (South)
("NationsBank South"), formerly the corporate parent of Main Place Funding
Corporation ("Main Place"), and NationsBank of Texas, N.A. ("NationsBank
Texas"). NationsBank South and NationsBank Texas contributed certain of their
residential mortgage loans to the Issuer in exchange for common shares of
beneficial interest of the Issuer which were, in turn, sold to NationsBank, N.A.
NationsBank, N.A. contributed certain of its residential mortgage loans to the
Issuer in exchange for common shares of beneficial interest in the Issuer.
NationsBank, N.A. contributed all of its interest in the Issuer to its directly
wholly-owned subsidiary, MP Holdings, which was incorporated in Delaware on
September 23, 1996. NationsBank South sold its shares in Main Place for cash to
NationsBank, N.A. which contributed them to MP Holdings. MP Holdings caused Main
Place to merge with and into the Issuer, pursuant to Section 254 of the Delaware
Code and Section 3-109 of the Corporations and Associations Article of the
Annotated Code of Maryland, as amended, with the Issuer as the surviving entity.
All of the issued shares of the Issuer's Class A Common Shares, $1.00
par value per share, are held by MP Holdings. The Issuer has authorized for
issuance 200 Class B Common Shares, $10,000 par value per share (the Class A
Common Shares and the Class B Common Shares collectively the "Common Shares").
Of the 200 authorized Class B Common Shares, 110 were sold to NationsBank, N.A.
and will be contributed to various organizations. The Class B Common Shares
have no voting rights.
The Issuer assumed the obligations of Main Place under the Indenture
dated as of October 31, 1995 between Main Place and First Trust National
Association ("First Trust"), as Trustee, and the Indenture dated as of July 18,
1995 between Main Place and First Trust, as Trustee, relating to the
Mortgage-Backed Bonds, Series 1995-2 due 2000 and the Mortgage-Backed Bonds,
Series 1995-1 due 1998, respectively, pursuant to supplemental indentures
between the Issuer and First Trust, both dated November 1, 1996 relating to the
two outstanding Series of Bonds.
The Issuer will not engage in any business other than (i) consolidating
the acquisition, holding and management of certain closed-end residential
mortgage assets of NationsBank, N.A. and its affiliate banks; (ii) issuing and
selling the Bonds of each Series under a separate Indenture (as defined herein)
and acquiring, owning, holding and pledging the related Pledged Property in
connection therewith; (iii) issuing certain subordinated indebtedness; and (iv)
engaging in other activities which are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected therewith. The
Indenture related to each Series will limit the Issuer's purpose to the
foregoing activities.
ADVISORY AGREEMENT. The Issuer entered into an advisory agreement dated as of
November 1, 1996 (the "Advisory Agreement") with NationsBank, N.A. pursuant to
which NationsBank, N.A. will administer the day-to-day operations of the Issuer.
NationsBank, N.A., in its role as advisor under the terms of the Advisory
Agreement, is hereinafter referred to as the "Advisor." The Advisor will be
responsible for (i) administering the day-to-day operations and affairs of the
Issuer, (ii) monitoring the credit quality of the mortgage assets held by the
Issuer and (iii) advising the Issuer with respect to the acquisition,
management, financing and disposition of the Issuer's mortgage assets. The
Advisory Agreement has an initial term of five years (the "Initial Term"), and
will be renewed automatically for additional five-year periods unless notice of
nonrenewal is delivered to the Advisor by the Issuer. The Advisory Agreement may
be terminated by the Issuer at any time after the Initial Term upon 90 days'
prior notice. The Advisor will be entitled to receive an annual advisory fee
equal to $500,000 per year with respect to the advisory and management services
provided to the Issuer.
TAX STATUS OF THE ISSUER. The Issuer will elect to be taxed as a real estate
investment trust ("REIT") under Sections 856 through 860 of the Code, commencing
with its taxable year ending December 31, 1996. As a REIT, the Issuer generally
will not be subject to federal income tax on net income and capital gains that
it distributes to the holders of the Common Shares.
A REIT is subject to a number of organizational and operational
requirements, including the requirement that it currently distribute to
beneficial holders at least 95% of its "REIT taxable income." Notwithstanding
qualification for taxation as a REIT, the Issuer may be subject to federal,
state and/or local tax.
USE OF PROCEEDS
The Issuer intends to use all or substantially all of the net proceeds
from the sale of a Series of Bonds offered hereby and by the related Prospectus
Supplement to reduce certain subordinated indebtedness of the Issuer and/or to
purchase the Pledged Property that will secure such Series from an affiliate
[and/or to effect distributions to NationsBank, N.A., if such Series is secured
by Pledged Property contributed to the Issuer by NationsBank, N.A.]
DESCRIPTION OF THE BONDS GENERAL
The Bonds of each Series will be issued under a separate indenture
(each, an "Indenture") relating to each such Series of Bonds to be entered into
between the Issuer and an independent trustee (the "Trustee"). As of any date,
all Bonds so issued, except Bonds (i) previously canceled or to be canceled by
the Trustee, (ii) held by the Issuer or its affiliates (other than NationsBanc
Capital Markets, Inc. ("NCMI")) and (iii) for whose payment Deposit Securities
in the necessary amount have been delivered to the Trustee or other arrangements
satisfactory to each Rating Agency have been made as described herein under
"--Liquidity," will be deemed to be "Outstanding."
The following summaries of certain provisions of the Indenture for a
Series do not purport to be complete, and, where particular provisions of the
Indenture are referred to, the actual provisions are incorporated by reference
as a part of such summaries, which are qualified in their entirety by such
reference.
The Bonds of each Series will be direct obligations of the Issuer. The
Bonds of each Series will mature at the date specified in the related Prospectus
Supplement (the "Stated Maturity") and will bear interest on the unpaid
principal balance thereof from the date of issuance, at the rate stated or
calculated as provided on the cover page of the related Prospectus Supplement,
payable in arrears on the dates specified in the related Prospectus Supplement
(the "Interest Payment Dates"), to the persons in whose names the Bonds are
registered (each, a "Holder") at the close of business on the record date
applicable to such Series. Accrued interest on the Bonds of each Series will be
computed as provided in the related Prospectus Supplement. If so provided in the
Prospectus Supplement for a Series, principal payments may be made on the Bonds
of such Series prior to their Stated Maturity.
The Bonds of each Series will be secured by collateral (the "Pledged
Property") as described herein and in the related Prospectus Supplement under
"--Security for the Bonds." Pursuant to the Indenture, the Issuer is required to
maintain Pledged Property of the type permitted under the Indenture ("Eligible
Collateral") having a Discounted Value (as defined herein under "--Basic
Maintenance Amount") sufficient to meet certain levels of collateralization
required from time to time as described herein under "--Basic Maintenance
Amount." The Eligible Collateral will be valued by the Trustee periodically on
the dates specified in the related Prospectus Supplement (each such date, a
"Valuation Date"), using Market Values (as defined under "--Basic Maintenance
Amount") for such property obtained no more than three business days prior to
the applicable Valuation Date. The Trustee will deliver reports to the Issuer
with respect to each such Valuation Date within the period of time thereafter
set forth in the related Prospectus Supplement. See "--Reports on Pledged
Property" herein.
Unless the Bonds of a Series are initially issued in fully registered,
certificated form to Holders as specified in the related Prospectus Supplement,
the Bonds of each Series initially will be represented by certificates
registered in the name of the nominee of The Depository Trust Company ("DTC"),
and beneficial interests in the Bonds will be available for purchase in the
minimum denominations and integral multiples thereof specified in the related
Prospectus Supplement in book-entry form only. The Issuer has been informed by
DTC that DTC's nominee will be Cede & Co. ("Cede"). Accordingly, Cede is
expected to be the holder of record of each Series of the Bonds. Unless and
until Definitive Bonds are issued for any Series under the limited circumstances
described herein, (i) no person acquiring a beneficial interest in the Bonds
(each, a "Bond Owner") will be entitled to receive a certificate representing
such person's interest in the Bonds, (ii) all references herein to actions by
Holders shall refer to actions taken by DTC upon instructions from its
Participants (as defined herein) and (iii) all references herein to
distributions, notices, reports and statements to Holders shall refer to
distributions, notices, reports and statements to DTC or Cede, as the registered
Holder of the Bonds, as the case may be, for distribution to Bond Owners in
accordance with DTC procedures. See " - Book-Entry Registration" and
"--Definitive Bonds" herein.
If so specified in the Prospectus Supplement or, if applicable, the
Global Prospectus Supplement relating to a Series, application will be made to
list all or any portion of the Series of the Bonds on the Luxembourg Stock
Exchange and/or another specified exchange.
BOOK-ENTRY REGISTRATION
Unless another form of book-entry registration is specified in the
related Prospectus Supplement, with respect to each Series of the Bonds, Bond
Owners may hold their Bonds through DTC (in the United States) or CEDEL or
Euroclear (in Europe) (each as defined herein), which in turn hold through DTC,
if they are participants of such systems, or indirectly through organizations
that are participants in such systems.
Cede, as nominee for DTC, will hold the certificates for the Bonds.
CEDEL and Euroclear will hold omnibus positions on behalf of the CEDEL
Participants and the Euroclear Participants (each as defined herein),
respectively, through customers' securities accounts in CEDEL's and Euroclear's
names on the books of their respective depositories (collectively, the
"Depositories"), which in turn will hold such positions in customers' securities
accounts in the Depositories' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
1934 Act. DTC was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
accounts of its Participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers (who may
include the underwriters of any Series), banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (the "Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between CEDEL Participants and Euroclear Participants will
occur in the ordinary way in accordance with their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through CEDEL Participants or Euroclear Participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its Depository; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
Depository to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC. CEDEL
Participants and Euroclear Participants may not deliver instructions directly to
the Depositories.
Because of time-zone differences, credits or securities in CEDEL or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant CEDEL
Participant or Euroclear Participant on such business day. Cash received in
CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
CEDEL or Euroclear cash account only as of the business day following settlement
in DTC.
Bond Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interest
in, the Bonds may do so only through Participants and Indirect Participants. In
addition, Bond Owners will receive all distributions of principal of and
interest on the Bonds from the Trustee through the Participants who in turn will
receive them from DTC. Under a book-entry format, Bond Owners may experience
some delay in their receipt of payments, since such payments will be forwarded
by the Trustee to Cede, as nominee for DTC. DTC will forward such payments to
its Participants which thereafter will forward them to Indirect Participants or
Bond Owners. It is anticipated that the only "Holder" will be Cede, as nominee
of DTC. Bond Owners will not be recognized by the Trustee as Holders, as such
term is used in the Indenture, and Bond Owners will only be permitted to
exercise the rights of Holders indirectly through the Participants who in turn
will exercise the rights of Holders through DTC.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Bonds and is required
to receive and transmit distributions of principal and interest on the Bonds.
Participants and Indirect Participants with which Bond Owners have accounts with
respect to the Bonds similarly are required to make book-entry transfers and
receive and transmit such payments on behalf of their respective Bond Owners.
Accordingly, although Bond Owners will not possess Bonds, Bond Owners will
receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Bond Owner
to pledge the Bonds to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such Bonds, may be limited due
to the lack of a physical certificate for such Bonds.
DTC has advised the Issuer that it will take any action permitted to be
taken by a Holder under any related Indenture only at the direction of one or
more Participants to whose account with DTC the Bonds are credited.
Additionally, DTC has advised the Issuer that it will take such actions with
respect to specified percentages of the Bonds only at the direction of and on
behalf of Participants whose holdings include undivided interests that satisfy
such specified percentages. DTC may take conflicting actions with respect to
other undivided interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interests.
Cedel Bank, societe anonyme ("CEDEL"), is incorporated under
the laws of Luxembourg as a professional depository. CEDEL holds securities for
its participating organizations ("CEDEL Participants") and facilitates the
clearance and settlement of securities transactions between CEDEL Participants
through electronic book-entry changes in accounts of CEDEL Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled by CEDEL in any of 28 currencies, including United States dollars. CEDEL
provides to its CEDEL Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. CEDEL interfaces with domestic
markets in several countries. As a professional depository, CEDEL is subject to
regulation by the Luxembourg Monetary Institute. CEDEL Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the underwriters of any Series
of the Bonds. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL Participant, either directly or indirectly.
The Euroclear System (the "Euroclear System") was created in 1968 to
hold securities for participants of the Euroclear System ("Euroclear
Participants") and to clear and settle transactions between Euroclear
Participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 32 currencies, including United States
dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC described above. The Euroclear System is operated by Morgan Guaranty Trust
Company of New York, Brussels, Belgium office (the "Euroclear Operator" or
"Euroclear"), under contract with Euroclear Clearance System, S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for the Euroclear System on
behalf of Euroclear Participants. Euroclear Participants include banks
(including central banks), securities brokers and dealers and other professional
financial intermediaries and may include the underwriters of any Series of the
Bonds. Indirect access to the Euroclear System is also available to other firms
that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly. The Euroclear Operator is the
Belgian branch of a New York banking corporation which is a member bank of the
Federal Reserve System. As such, it is regulated and examined by the Board of
Governors of the Federal Reserve System and the New York State Banking
Department, as well as the Belgian Banking Commission. Securities clearance
accounts and cash accounts with the Euroclear Operator are governed by the Terms
and Conditions Governing Use of Euroclear and the related Operating Procedures
of the Euroclear System and applicable Belgian law (collectively, the "Terms and
Conditions"). The Terms and Conditions govern transfers of securities and cash
within the Euroclear System, withdrawal of securities and cash from the
Euroclear System, and receipts of payments with respect to securities in the
Euroclear System. All securities in the Euroclear System are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms and Conditions
only on behalf of Euroclear Participants and has no record of or relationship
with persons holding through Euroclear Participants.
Distributions with respect to the Bonds held through CEDEL or Euroclear
will be credited to the cash accounts of CEDEL Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depository. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "United States Federal Income Tax Consequences--Tax Treatment of Foreign
Investors" herein. CEDEL or the Euroclear Operator, as the case may be, will
take any other action permitted to be taken by a Holder under the related
Indenture on behalf of a CEDEL Participant or a Euroclear Participant only in
accordance with its relevant rules and procedures and subject to its
Depository's ability to effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of the Bonds among participants of
DTC, CEDEL and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
DEFINITIVE BONDS
Unless otherwise specified in the related Prospectus Supplement, the
Bonds of each Series will be issued in fully registered, certificated form to
the Bond Owners or their nominees ("Definitive Bonds"), rather than to DTC or
its nominee, only if (i) the Issuer advises the Trustee in writing that DTC is
no longer willing or able to discharge properly its responsibilities as
Depository with respect to such Series of the Bonds, and the Trustee or the
Issuer is unable to locate a qualified successor or (ii) the Issuer, at its
option, advises the Trustee in writing that it elects to terminate the
book-entry system through DTC.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Bonds. Upon surrender by DTC of the
Definitive Bond representing the Bonds and instructions for re-registration, the
Trustee will issue the Bonds as Definitive Bonds, and thereafter the Trustee
will recognize the holders of such Definitive Bonds as Holders under the
Indenture.
Distribution of principal and interest on the Bonds will be made by the
Trustee directly to Holders of Definitive Bonds in accordance with the
procedures set forth herein and in the Indenture. Interest payments and any
principal payments on each Interest Payment Date will be made to Holders in
whose names the Definitive Bonds were registered at the close of business on the
related Record Date. Distributions will be made by check mailed to the address
of such Holder as it appears on the register maintained by the Trustee or by
wire transfer to an account maintained by the Holder, if such Holder holds the
minimum aggregate principal amount of Bonds specified in the related Prospectus
Supplement. The final payment on any Bond (whether Definitive Bonds or the
certificates registered in the name of Cede representing the Bonds), however,
will be made only upon presentation and surrender of such certificate at the
office or agency specified in the notice of final distribution to Holders. The
Trustee will provide such notice to registered Holders not later than the fifth
day of the month of such final distribution.
Definitive Bonds will be transferable and exchangeable at the offices
of the Authenticating Agent, which shall initially be the Trustee. No service
charge will be imposed for any registration of transfer or exchange, but the
Authenticating Agent may require payment of a sum sufficient to cover any tax or
other governmental charge imposed in connection therewith.
REDEMPTION
The Bonds of each Series will mature and will be paid at 100% of their
respective principal amounts plus accrued interest at the Stated Maturity set
forth in the related Prospectus Supplement. The Bonds of a Series may be subject
to redemption at the option of the Issuer, if so provided in the related
Prospectus Supplement.
If specified in the Prospectus Supplement relating to a Series, the
Bonds of each Series will be subject to mandatory partial redemption upon such
number of days' notice specified in such Prospectus Supplement, in the event
that (i) on any applicable Valuation Date, the Discounted Value of the Eligible
Collateral is less than the Basic Maintenance Amount, (ii) any law, statute,
order or regulation then in effect restricts the ability of NationsBank, N.A. to
contribute additional Eligible Collateral to the Issuer (a "Collateral
Replacement Limit") and (iii) the Issuer is unable within the number of days
after such Valuation Date specified in such Prospectus Supplement (the "Cure
Date") to pledge and deliver additional Eligible Collateral and/or to substitute
Eligible Collateral in an amount such that, after such pledge and/or
substitution, the Discounted Value of the Eligible Collateral is at least equal
to the Basic Maintenance Amount, and the Issuer does not deliver to the Trustee
prior to the Cure Date for cancellation thereof Bonds theretofore issued and
reacquired by it in a principal amount sufficient to cause the Discounted Value
of the Eligible Collateral to be at least equal to the Basic Maintenance Amount.
Notwithstanding the foregoing, if the report prepared by the Trustee with
respect to any Valuation Date following the Cure Date and prior to the date on
which the Trustee gives notice of redemption to the Holders shows that the
Discounted Value of the Eligible Collateral is at least equal to the Basic
Maintenance Amount as of such Valuation Date, the Issuer will no longer be
required to make a mandatory redemption of the Bonds. Even in the absence of a
Collateral Replacement Limit, NationsBank, N.A. will have no obligation to
contribute additional Eligible Collateral to the Issuer.
Any such mandatory redemption shall require the redemption of Bonds in
an aggregate principal amount that is the smallest principal amount (rounded to
the next higher integral multiple of $1,000) necessary to make the Discounted
Value of the Eligible Collateral at least equal to the Basic Maintenance Amount
(calculated in each case as of the Valuation Date immediately preceding the date
on which the Trustee gives notice of redemption to the Holders) after giving
effect to (i) the pledge of additional Eligible Collateral, (ii) the delivery to
the Trustee for cancellation of any Bonds repurchased by the Issuer and (iii)
such redemption. Any such mandatory redemption shall be made within the number
of days after the Cure Date provided in the applicable Prospectus Supplement at
a redemption price equal to 100% of the principal amount (or portion thereof) of
the Bonds to be redeemed together with accrued interest to the date fixed for
redemption. Any partial redemption may be made on a pro rata basis or by any
method deemed fair and appropriate by the Trustee, provided, that such method
shall not result in a Bond Outstanding in a denomination of less than the
minimum permitted denomination of the applicable Series of Bonds.
After notice of any redemption has been given to the Holders of the
Bonds, the principal amount (or portion thereof) of the Bonds to be redeemed
shall be due and payable on the date fixed for such redemption at the place set
forth in such notice. From and after the date fixed for such redemption, the
Bonds chosen to be redeemed thereon shall cease to bear interest (unless the
Issuer shall default in the payment of the redemption price, in which case the
principal amount of such Bonds shall continue to bear interest at the rate borne
by the Bonds until paid), and the only right of the Holders of such Bonds shall
be to receive the redemption price; except that, in the case of any redemption
date on which Bonds are redeemed in part, new Bonds representing the principal
amounts of such Bonds that have not been redeemed will be issued to the Holders
of such Bonds. The Holders of such new Bonds shall continue to have the right to
receive the principal amount thereof and interest payments on such principal
amount.
The Issuer must give the Trustee an officers' certificate notifying the
Trustee that mandatory redemption is required on any Cure Date on which the
Issuer fails to cure a collateral shortfall. Immediately after receiving notice
of the requirement for such a redemption, the Trustee must liquidate Pledged
Property to the extent required to pay the redemption price; provided, that the
Trustee will not be required to do so if concurrently with such notice the
Issuer delivers Deposit Securities (as defined herein) to the Trustee, as
described below under "--Liquidity," in an amount sufficient to provide for full
payment of the redemption price of the Bonds required to be redeemed.
SECURITY FOR THE BONDS
The Bonds of each Series will be secured by the Pledged Property, which
may include any of the types of Eligible Collateral described below and in the
related Prospectus Supplement. In addition, the Bonds of each Series may be
secured from time to time by (i) cash held in a "Collection Account"
representing payments on the Eligible Mortgage Notes included in the Pledged
Property for a Series (ii) cash held in a "Distribution Account," representing
distributions to be made to Bond Owners and/or payments on Eligible Collateral
other than Eligible Mortgage Notes, (iii) cash held in a "Reserve Fund" as
described in the related Prospectus Supplement and (iv) the Deposit Securities
described below under "--Liquidity" and in the related Prospectus Supplement.
Eligible Collateral for a Series of Bonds may consist of Eligible Mortgage
Notes, Eligible Mortgage Pass-Through Certificates, Government Securities,
including FHLMC Certificates, FNMA Certificates and GNMA Certificates,
Short-Term Money Market Instruments (all as described below) and cash.
The types and characteristics of Eligible Collateral, as described
below, the percentage limitations on certain types of Eligible Collateral, the
frequency of the Valuation Dates, the Discount Factors (as defined herein) used
in valuing the Eligible Collateral, the methodology used in calculating the
Market Value of the Eligible Collateral and the definition of "Basic Maintenance
Amount" (as described under "--Basic Maintenance Amount") are subject to change
from time to time without the consent of the Holders of the Bonds of the related
Series if such changes (i) are permitted by applicable law and (ii) will not
impair the rating then assigned to the Bonds by each of the nationally
recognized statistical rating organizations rating such Series (each, a "Rating
Agency") as confirmed in writing by such Rating Agencies. Such Rating Agencies
have no obligation to review or approve any proposed changes in the types,
characteristics, permitted amounts or Discount Factors of Eligible Collateral or
in the definition of Basic Maintenance Amount and may, at any time, change or
withdraw any rating on the Bonds. In addition, such items may be changed prior
to the issuance of a Series of Bonds with respect to such Series and will be set
forth in the related Prospectus Supplement.
Subject to the foregoing, Eligible Collateral includes the following
types of collateral:
ELIGIBLE MORTGAGE NOTES
"Eligible Mortgage Notes" are promissory notes ("Mortgage Notes") that
are secured by first liens on real estate ("Mortgages") which are either insured
by the FHA ("FHA Insured Mortgage Notes") or partially guaranteed by the VA ("VA
Guaranteed Mortgage Notes") or which are not so insured or guaranteed
("Conventional Mortgage Notes"). The Mortgage Notes will be secured by one or
more of the following types of property (the "Mortgaged Properties"): (i) one-
to four-family detached residences, (ii) townhouses, (iii) condominium units and
(iv) units within planned unit developments. Such Mortgage Notes bear either a
fixed rate of interest ("Eligible Fixed-Rate Mortgage Notes") or an adjustable
rate of interest ("Eligible Adjustable-Rate Mortgage Notes") and have the
additional characteristics described below.
Whenever Eligible Mortgage Notes are included in the Pledged Property
for a Series of Bonds, the Issuer will enter into a servicing agreement with an
eligible servicer to provide for the servicing of the Eligible Mortgage Notes.
See "Servicing of Eligible Mortgage Notes" herein for a description of the
servicing procedures applicable to a Series of Bonds secured in whole or in part
by Eligible Mortgage Notes. In addition, the Indenture for such Series will
permit the Issuer to deliver such Eligible Mortgage Notes to a custodian (the
"Custodian") appointed by the Trustee, with the consent of the Issuer, to hold
such Mortgage Notes.
Eligible Fixed-Rate Mortgage Notes
Eligible Fixed-Rate Mortgage Notes evidence whole loans serviced or
master serviced by an affiliate of the Issuer, or by an approved GNMA, FNMA or
FHLMC seller-servicer of Mortgage Notes which meets servicing standards similar
to those met by affiliates of the Issuer, provide for monthly payments of
principal and interest in substantially equal installments for the contractual
term of the Mortgage Notes, are fully amortizing, have an original term to
maturity of not more than 30 years and, as of the time of pledge: (i) have a
remaining term to maturity of at least one year; (ii) have an unpaid principal
balance of at least $1,000 and not in excess of $1,000,000; (iii) have an
original loan-to-value ratio not greater than 95%; (iv) are secured by Mortgages
which create a valid first lien on Mortgaged Properties, are duly recorded and
are covered by title insurance policies (such mortgages, "Eligible Mortgages");
(v) are accompanied by appropriate documentation as more fully described herein
under "Servicing of Eligible Mortgage Notes--Pledge of Eligible Mortgage Notes;"
(vi) are not Mortgage Notes as to which any scheduled payment of principal or
interest is delinquent past the end of the month in which such payment was due
(a "Late Payment"); and (vii) as to FHA Insured and VA Guaranteed Mortgage
Notes, are secured by a Mortgage on a one- to four-family dwelling
The characteristics of Eligible Fixed-Rate Mortgage Notes described
above are required to be met by the Issuer, with respect to each Eligible
Fixed-Rate Mortgage Note initially pledged to the Trustee for the related Series
of Bonds, as of the date of issuance of such Series and, with respect to each
additional Eligible Fixed-Rate Mortgage Note pledged to the Trustee for such
Series, as of the date of such pledge.
Eligible Adjustable-Rate Mortgage Notes
Eligible Adjustable-Rate Mortgage Notes are Conventional Mortgage Notes
evidencing whole loans serviced or master serviced by an affiliate of the
Issuer, or by an approved GNMA, FNMA or FHLMC seller-servicer of Mortgage Notes
which meets servicing standards similar to those met by affiliates of the
Issuer, are fully amortizing, have an original term to maturity of not more than
30 years and, as of the time of pledge:
(i) bear a rate of interest, adjustable periodically, but no more
frequently than annually, equal to a margin of between 1% and 5% above one of
the following indices: (a) the average yields for U.S. Treasury Securities,
adjusted to a constant maturity of one year as published by the Federal Reserve
Board, (b) the "cost of funds" index published by the Eleventh District Federal
Home Loan Bank, (c) the London interbank offered rates for Eurodollar deposits
of various maturities, (d) the prime lending rate of NationsBank, N.A. or (e)
any other index acceptable to the Rating Agencies;
(ii) have a remaining term to maturity of at least one year;
(iii) have an unpaid principal balance of at least $1,000 and no
in excess of $1,000,000;
(iv) have an original loan-to-value ratio not greater than 95%;
(v) are secured by Eligible Mortgages;
(vi) are accompanied by appropriate documentation, as more fully
described herein under "Servicing of Eligible Mortgage Notes--Pledge of Eligible
Mortgage Notes;" and
(vii) are not Mortgage Notes as to which there is currently a Late
Payment.
Eligible Adjustable-Rate Mortgage Notes may be convertible into
Fixed-Rate Mortgage Notes, provided that if such Mortgage Notes are so
converted, they may not be included in the Eligible Collateral unless they are
re-pledged as Eligible Fixed-Rate Mortgage Notes.
The characteristics of Eligible Adjustable-Rate Mortgage Notes
described above are required to be met by the Issuer, with respect to each
Eligible Adjustable-Rate Mortgage Note initially pledged to the Trustee for the
related Series of Bonds, as of the date of issuance of such Series and, with
respect to each additional Eligible Adjustable-Rate Mortgage Note pledged to the
Trustee for such Series, as of the date of such pledge.
Additional Limitations on Eligible Mortgage Notes
The following limitations apply to both Eligible Fixed-Rate Mortgage
Notes and Eligible Adjustable-Rate Mortgage Notes: (i) in selecting Eligible
Fixed-Rate Mortgage Notes and Eligible Adjustable-Rate Mortgage Notes for
inclusion in the Pledged Property, the Issuer will use its best efforts to
include Mortgage Notes of each type secured by Eligible Mortgages with a
geographical dispersion representative, to the extent possible, of the entire
portfolio of Mortgage Notes of such type serviced by [NationsBanc Mortgage
Corporation], an affiliate of the Issuer, for NationsBank, N.A. or any of its
bank affiliates; (ii) the Pledged Property will consist of at least 100 Eligible
Mortgage Notes; (iii) no Eligible Mortgage Note may be secured by a mortgage on
a mobile home; (iv) no more than 25% of the aggregate unpaid principal balance
of all Eligible Mortgage Notes included in the Eligible Collateral may be
composed of Mortgage Notes having unpaid principal balances in excess of
$500,000 ("High Balance Notes"); (v) Eligible Mortgage Notes with original
loan-to-value ratios in excess of 80% ("Over 80% Notes") must be insured by
private mortgage insurance issued by an insurer having a rating in one of the
two highest rating categories from at least one Rating Agency rating the
applicable Series (such insurance, "Private Mortgage Insurance") as to that
portion of the principal amount thereof exceeding 80% (unless, by the terms of
the applicable Private Mortgage Insurance policy and Mortgage Note, such policy
has been discharged due to principal amortization), and no more than 25% of the
aggregate unpaid principal balance of all Eligible Mortgage Notes included in
the Eligible Collateral may be composed of Over 80% Notes; (vi) no more than 10%
of the aggregate unpaid principal balance of all Eligible Mortgage Notes
included in the Eligible Collateral may be Mortgage Notes secured by condominium
units which condominium may have no more than four stories ("Condominium
Notes"); and (vii) the sum of the aggregate unpaid principal balances of
Eligible Mortgage Notes that are (1) High Balance Notes, (2) Over 80% Notes or
(3) Condominium Notes may not exceed 35% of the aggregate unpaid principal
balance of all Eligible Mortgage Notes included in the Eligible Collateral, and
no Mortgage Note that has more than one of the attributes described in clauses
(1), (2) and (3) above may be an Eligible Mortgage Note.
The additional limitations on Eligible Mortgage Notes described above
are required to be met by the Issuer as of the date of issuance of the related
Series of Bonds and as of the date of each pledge of additional Eligible
Mortgage Notes to the Trustee for such Series and each withdrawal of Eligible
Mortgage Notes from the lien of the Indenture for such Series.
Eligible Mortgage Pass-Through Certificates
Eligible Mortgage Pass-Through Certificates are certificates or other
instruments (a) evidencing a proportional undivided interest in specified pools
of fixed or adjustable-rate mortgage loans that are secured by a valid first
lien on residential real property and the improvements thereon consisting of
one- to four-family dwelling units (including attached, town or rowhouses and
condominiums), with respect to which the requisite mortgage documentation is
held by a trustee or independent custodian, which pools of mortgage loans are
serviced by servicers that have agreed to advance funds to meet deficiencies
("Advances") (to the extent such servicers reasonably believe such Advances are
recoverable) and have been approved by GNMA, FNMA or FHLMC, (b) which
certificates have either (i) been rated by each Rating Agency rating the Bonds
of the applicable Series in a rating category at least as high as the rating of
the Bonds of such Series or (ii) have been so rated by one of such Rating
Agencies, if the other such Rating Agency shall consent in writing to their
inclusion in the Eligible Collateral for a Series, or (iii) have been otherwise
approved for inclusion in the Eligible Collateral by such Rating Agencies, as
confirmed in writing by each of such Rating Agencies and (c) the inclusion of
which in the Eligible Collateral for a Series will not affect the ratings of the
Bonds of such Series, as confirmed in writing by each of the Rating Agencies
rating such Series.
GOVERNMENT SECURITIES
Government Securities are (a) direct obligations of the United States,
provided that such direct obligations are entitled to the full faith and credit
of the United States; (b) FHLMC Certificates; (c) FNMA Certificates; and (d)
GNMA Certificates; provided that no Government Security may, by its terms, be a
non-interest bearing security unless it matures in less than one year.
FHLMC Certificates
FHLMC Certificates are issued by FHLMC, which is a publicly held
government-sponsored enterprise created pursuant to Title III of the Emergency
Home Finance Act of 1970, as amended. FHLMC's statutory mission is to provide
stability in the secondary market for home mortgages, to respond appropriately
to the private capital market and to provide ongoing assistance to the home
mortgage secondary market and promote nationwide access to residential mortgage
credit by increasing the liquidity of mortgage investments and improving the
distribution of investment capital available for home mortgage financing. The
principal activity of FHLMC consists of the purchase of first lien,
conventional, residential mortgages and participation interests in such
mortgages from mortgage lending institutions and the resale of the whole loans
and participations so purchased in the form of guaranteed mortgage securities.
Each FHLMC Certificate represents an undivided interest in a specified
pool of mortgage loans that may consist of fixed or adjustable-rate Mortgage
Notes or participation interests therein, including Conventional Mortgage Notes,
FHA Insured Mortgage Notes or VA Guaranteed Mortgage Notes, substantially all of
which are secured by first liens on one- to four-family residential property.
FHLMC guarantees to each registered holder of a FHLMC Certificate the
timely payment of interest by each mortgagor to the extent of the applicable
rate provided for by such FHLMC Certificate on the registered holder's pro rata
share of the unpaid principal balance outstanding on the underlying mortgage
loans represented by such FHLMC Certificate, whether or not received. FHLMC also
guarantees to each registered holder of a FHLMC Certificate ultimate collection
by such holder of all principal on the underlying mortgage loans, to the extent
of such holder's pro rata share thereof, and, in the case of certain FHLMC
Certificates, the timely payment of scheduled principal. The obligations of
FHLMC under its guarantee are obligations solely of FHLMC and are not backed by,
nor entitled to, the full faith and credit of the United States. There is
currently an active secondary market for FHLMC Certificates, but there is no
assurance that this market will continue.
FNMA Certificates
FNMA Certificates are mortgage pass-through certificates issued by
FNMA, which is a federally chartered and privately owned corporation organized
and existing under the Federal National Mortgage Association Charter Act. FNMA
was originally established in 1938 as a United States government agency and was
transformed into a stockholder-owned and privately managed corporation by
legislation enacted in 1968.
FNMA provides funds to the mortgage market primarily by purchasing
mortgage loans from lenders, thereby replenishing the lenders' funds for
additional lending. FNMA acquires funds to purchase mortgage loans from many
capital market investors that may not ordinarily invest in mortgages, thereby
expanding the total amount of funds available for housing. In addition, FNMA
issues mortgage-backed securities primarily in exchange for pools of mortgage
loans from lenders.
Each FNMA Certificate represents a fractional undivided interest in a
pool of mortgage loans which may consist of FHA Mortgage Notes, VA Mortgage
Notes or conventional mortgage loans. FNMA guarantees the full and timely
payment of scheduled principal and interest (at the applicable certificate
rate), and full collection of principal on the mortgage loans in the pool
represented by each FNMA Certificate. The obligations of FNMA under its
guarantees are obligations solely of FNMA and are not backed by, nor entitled
to, the full faith and credit of the United States. There is currently an active
secondary market for FNMA Certificates, but there is no assurance that this
market will continue.
GNMA Certificates
GNMA Certificates are issued by GNMA, which is a wholly-owned corporate
instrumentality of the United States within the Department of Housing and Urban
Development. Section 306(g) of Title III of the National Housing Act of 1934, as
amended (the "Housing Act"), authorizes GNMA to guarantee the timely payments of
the principal of, and interest on, certificates that are based on and backed by
a pool of mortgage loans issued by the VA under the Housing Act or Title V of
the Housing Act of 1949, or guaranteed by the VA under the Servicemen's
Readjustment Act of 1944, as amended, or Chapter 37 of Title 38, United States
Code, or by pools of other eligible mortgage loans.
Section 306(g) of the Housing Act provides that "the full faith and
credit of the United States is pledged to the payment of all amounts which may
be required to be paid under any guaranty under this subsection." In order to
meet its obligations under such guaranty, GNMA may, under Section 306(d) of the
Housing Act, issue its general obligations to the United States Treasury
Department in an amount which is at any time sufficient to enable GNMA to
perform its obligations under its guaranty.
Each GNMA Certificate is a "fully-modified pass-through"
mortgage-backed certificate issued and serviced by a mortgage banking company or
other financial concern approved by GNMA or FNMA as a seller-servicer of FHA
Insured or VA Guaranteed Mortgage Notes. Each GNMA Certificate evidences a
proportional undivided interest in a pool of FHA Insured or VA Guaranteed
Mortgage Notes secured by single family residences. GNMA guarantees the timely
payment of principal and interest (at the applicable certificate rate) on, and
the full collection of the principal of, the mortgage loans underlying each GNMA
Certificate, which guarantee is backed by the full faith and credit of the
United States. There is currently an active secondary market in GNMA
Certificates, but there is no assurance that this market will continue.
SHORT-TERM MONEY MARKET INSTRUMENTS
Short-Term Money Market Instruments include (a) cash and (b) any of the
following instruments, but only if on the date on which such instrument is
pledged to the Trustee, the instrument has a remaining term to maturity not in
excess of 90 days from such date: (i) demand deposits in, certificates of
deposit of, or bankers' acceptances issued by, any depository institution or
trust company organized under the laws of the United States or any State and
subject to the supervision of and examination by Federal and/or State banking or
depository institution authorities, so long as the commercial paper, if any, of
such depository institution or trust company (or, in the case of the principal
depository institution in a holding company system, the commercial paper, if
any, of such holding company) at the time of such investment or contractual
commitment providing for such investment has the highest commercial paper credit
rating from each Rating Agency (or which meets such other criteria as will not
result in a downgrading or removal of the rating of the Bonds by either Rating
Agency); (ii) repurchase obligations with respect to Government Securities
entered into either (a) pursuant to a written agreement with an entity which has
received the highest short-term credit rating from each Rating Agency, where the
Trustee has taken delivery of any such security or (b) with a depository
institution or trust company described in clause (i) above; and (iii) commercial
paper rated by each Rating Agency in its highest short-term rating category (or
which meets such other criteria as will not result in a downgrading or removal
of the rating of the Bonds by either Rating Agency).
BASIC MAINTENANCE AMOUNT
The Issuer will be required under the terms of the Indenture for a
Series to maintain Eligible Collateral with an aggregate Discounted Value at
least equal to the Basic Maintenance Amount, which means that such Eligible
Collateral would have a Market Value (as defined below) significantly higher
than the Basic Maintenance Amount to the extent that the Eligible Collateral
consists of collateral other than cash and would have a Market Value of 100% of
the Basic Maintenance Amount if the Eligible Collateral consisted solely of cash
or certain cash equivalents. The "Basic Maintenance Amount" as of each Valuation
Date (or any other date of valuation) means an amount equal to the sum of (i)
the aggregate principal amount of Bonds Outstanding plus (ii) an amount equal to
interest accrued on the Bonds Outstanding for the number of days specified in
the related Prospectus Supplement. Notwithstanding the foregoing, the Basic
Maintenance Amount for a particular Series of Bonds may be changed in accordance
with the requirements of the Rating Agencies rating such Series.
Each Rating Agency for a Series of Bonds will determine the Discount
Factors which it deems appropriate for each type of Eligible Collateral. Such
Discount Factors will be set forth in the related Prospectus Supplement. The
"Discounted Value" of the Eligible Collateral for a Series as of any date will
be the lesser of the sum of the Market Values of the Eligible Collateral
included in the Pledged Property multiplied by the applicable Discount Factors
determined by each Rating Agency.
"Market Value" as of any date means the amount determined with respect
to specific Eligible Collateral included in Pledged Property in the manner set
forth below as of a date not more than three business days (or such other number
of days as is specified in the Prospectus Supplement relating to a Series) prior
to the relevant Valuation Date (a "Determination Date"); provided, however, that
the Market Value of any security or instrument may not in any event exceed the
unpaid principal balance thereof: (a) As to cash, demand deposits, and next
business day's repurchase agreements, the face value thereof; (b) as to FHLMC
Certificates, FNMA Certificates, GNMA Certificates and other Government
Securities (other than those Government Securities having a remaining term to
maturity of 90 days or less), the aggregate principal amount of the mortgage
loans evidenced by each FHLMC, FNMA or GNMA Certificate (as shown by the most
recent report related to each such certificate received by the Trustee prior to
an applicable Determination Date) or the aggregate principal amount of such
other Government Securities, multiplied by the lower bid price for the same kind
of certificate or security having as nearly as practicable the same interest
rate and maturity, as quoted to the Trustee by two nationally recognized
securities dealers selected by the Trustee and making a market in such
certificates or securities as of an applicable Determination Date, or, if only
one such bid price is available, such aggregate principal amount multiplied by
such bid price or, if no such bid prices are available, such aggregate principal
amount multiplied by the bid price that would result in the yield for the same
type of certificate or security having as nearly as practicable the same
interest rate and maturity, as published on an applicable Determination Date in
The Wall Street Journal or The New York Times (if such yield is so published);
(c) as to Short-Term Money Market Instruments (other than those described in (a)
above) or any Government Security (other than FNMA, FHLMC or GNMA Certificates)
having a remaining term to maturity less than or equal to 90 days, the face
amount thereof multiplied by the lower of the bid prices therefor obtained by
the Trustee as of the close of business on an applicable Determination Date from
two nationally recognized securities dealers making a market therein; (d) as to
Eligible Mortgage Pass-Through Certificates, the lesser of (i) the outstanding
aggregate principal balance of such Eligible Mortgage Pass-Through Certificates
and (ii) the outstanding aggregate principal balance of the mortgage loans
underlying such Eligible Mortgage Pass-Through Certificates (each as shown by
the most recent report related to each such certificate received by the Trustee
prior to an applicable Determination Date) multiplied by the dollar value of the
lower of the bid prices per dollar of outstanding principal amount on such
Determination Date for such Eligible Mortgage Pass-Through Certificates, as
quoted to the Trustee as of such Determination Date by two nationally recognized
securities dealers making a market in such Mortgage Pass-Through Certificates,
or, if only one such bid price is available, multiplied by the dollar value of
such bid price, or, if no such bid price is available, multiplied by the dollar
value of the lower of the bid prices per dollar of outstanding principal amount
for conventional mortgage pass-through certificates with comparable pass-through
rates and with underlying mortgage loans of comparable terms, as quoted to the
Trustee as of such Determination Date by two nationally recognized securities
dealers selected by the Trustee and making a market in conventional mortgage
pass-through certificates, or, if only one such bid price is available,
multiplied by the dollar value of such bid price. In the event bid prices cannot
be obtained as described in the preceding sentence, the lesser of (i) the
outstanding aggregate principal balance of such Eligible Mortgage Pass-Through
Certificates and (ii) the outstanding aggregate principal balance of the
mortgage loans underlying such Eligible Mortgage Pass-Through Certificates (each
as shown by the most recent report related to each such certificate received by
the Trustee prior to an applicable Determination Date) shall be multiplied by a
price per dollar of outstanding principal amount that would result in a yield,
computed on the basis of the same prepayment assumptions then accepted in the
market for use in calculating yields on GNMA Certificates, 0.10% greater than
the yield on such Determination Date (as published on a regular basis by The
Wall Street Journal or The New York Times) for GNMA Certificates with the same
(or, if there are none with the same, then the next higher) pass-through rate as
such Eligible Mortgage Pass-Through Certificates; and (e) as to Eligible
Mortgage Notes (grouped according to weighted average interest rate and weighted
average maturity, based on group criteria provided for in the Indenture), the
lower of the market quotations for such Eligible Mortgage Notes obtained from
any two nationally recognized dealers in mortgage instruments selected by the
Trustee or, if only one such quotation is available, then such quotation,
determined as of an applicable Determination Date based upon unpaid principal
balances shown in the most recent report prepared by or for the Trustee prior to
such Determination Date (which report shall contain information as of a date no
more than 30 days prior to such Determination Date), provided, that, if such
market quotations are not available, the Market Value of Eligible Mortgage Notes
shall be determined by discounting, at the Market Value Rate (as defined below),
the remaining scheduled payments of principal of and interest on such Eligible
Mortgage Notes shown in the above-referenced report, and provided further, that
the Market Value of Eligible Mortgage Notes on which there is currently a Late
Payment shall be discounted by the applicable amount, if any, required by each
Rating Agency rating such Series and described in the related Prospectus
Supplement.
The methodology for determining the Market Value of any item of
Eligible Collateral may be changed by the Issuer and the Trustee without the
consent of the Holders of the Bonds of the related Series if such changes will
not impair the rating then assigned to the Bonds by each Rating Agency rating
such Series, as confirmed in writing by such Rating Agencies. "Market Value
Rate" means: (a)(i) as to Conventional Mortgage Notes (other than such Mortgage
Notes whose principal balances at origination exceeded the applicable maximum
amounts established by FNMA and FHLMC for mortgage loan purchases ("Jumbo
Mortgage Notes")), a rate (rounded to the nearest one-hundredth of one percent)
equivalent to the yields at which either FNMA or FHLMC, at the election of the
Trustee, committed itself to purchase Conventional Mortgage Notes of such type
for the shortest available delivery period, determined as of the applicable
Determination Date; and (ii) as to FHA Insured or VA Guaranteed Mortgage Notes,
a rate (rounded to the nearest one-hundredth of one percent) equivalent to the
yields at which FNMA committed itself to purchase FHA Insured and VA Guaranteed
Mortgage Notes, as the case may be (or either, if commitments for both were not
made), for the shortest available delivery period, determined as of the
applicable Determination Date; in the case of (i) or (ii) above, as such FHLMC
or FNMA yields are reported by The Wall Street Journal or The New York Times or
directly by FNMA or FHLMC, and in each case less any servicing fee then allowed
sellers and included in gross yield quotations; or (b) in the event that such
rates are not available as of the applicable Determination Date, or, with
respect to Conventional Mortgage Notes (including Jumbo Mortgage Notes), in the
event that, as of such date, FNMA or FHLMC have ceased to conduct auctions or
post rates with respect to such Mortgage Notes, and with respect to FHA Insured
or VA Guaranteed Mortgage Notes, in the event that, as of such date FNMA has
ceased to post FHA-VA commitment rates, then a rate 0.50% greater than the yield
as of the applicable Determination Date (as quoted directly by FNMA) for a FNMA
Certificate with the same (or, if there are none with the same, then the next
higher) coupon interest rate as the weighted average coupon interest rate of the
Eligible Mortgage Notes included in the Pledged Property. The Trustee is
required to deliver a report containing the information described below under
"--Reports on Pledged Property" to the Issuer within two business days after
each Valuation Date with respect to the status of the Pledged Property as of the
Valuation Date using Market Values determined as of the applicable Determination
Date. Scheduled reductions in the principal amounts of the Eligible Collateral
included in the Pledged Property or possible prepayments or decreases in the
Market Value thereof may cause the Discounted Value of the Eligible Collateral
to be less than the Basic Maintenance Amount. In such event, the Indenture
requires that the Issuer, no later than the Cure Date, deliver additional
Eligible Collateral to the Trustee or, if Eligible Mortgage Notes are delivered
and if applicable to the related Series, to the Custodian and/or substitute
Eligible Collateral and/or, if it elects to do so, repurchase a number of Bonds
Outstanding so that the Trustee can, no later than the Cure Date, deliver a new
report showing that, as of the date of such report, the Discounted Value of the
Eligible Collateral (determined as of the date that the Basic Maintenance Amount
was not met, or, at the option of the Issuer, as of a later date of valuation,
but no later than the Cure Date) is at least equal to the Basic Maintenance
Amount. If the Issuer elects to satisfy the foregoing obligation to restore the
Discounted Value of the Eligible Collateral to the Basic Maintenance Amount by
delivering Mortgage Notes to the Custodian, the Mortgage Notes included in the
Pledged Property after the delivery of such Mortgage Notes must meet the
requirements relating to the limits on the types and characteristics of such
Mortgage Notes in order to ensure that all Mortgage Notes delivered to the
Trustee or Custodian, as applicable, are Eligible Mortgage Notes. [In the event
that, due to any Collateral Replacement Limit applicable to NationsBank, N.A.,
the Issuer is unable by the Cure Date to cause the Discounted Value of the
Eligible Collateral to be at least equal to the Basic Maintenance Amount by
pledging additional Eligible Collateral or substituting Eligible Collateral, and
the Issuer does not elect to repurchase Bonds Outstanding to the extent
necessary to cause the Discounted Value of the Eligible Collateral to be at
least equal to the Basic Maintenance Amount, then the Issuer must no later than
a number of days after the Cure Date specified in the related Prospectus
Supplement redeem Bonds as described above under "--Redemption."]
WITHDRAWALS AND SUBSTITUTIONS OF COLLATERAL
The Issuer may, at its option, at any time and from time to time,
withdraw or substitute Pledged Property; provided, that either (i) the
Discounted Value of the Eligible Collateral (based upon the then most recent
report of the Trustee valuing the Eligible Collateral) remaining in the Pledged
Property following the proposed withdrawal or substitution (after giving effect
to withdrawals from and substitutions of Pledged Property during the period
following such report) would at least equal the Basic Maintenance Amount as of
the then most recent report of the Trustee valuing the Eligible Collateral or
(ii) the Issuer causes the Trustee to prepare a new report, containing
information as of the date thereof, showing that the Discounted Value of the
Eligible Collateral (calculated as of a date no more than three business days
(or such other number of days as is specified in the Prospectus Supplement
relating to a Series) prior to the date of such report) included in the Pledged
Property following the proposed withdrawal or substitution, in any case, will at
least equal the Basic Maintenance Amount, as calculated in such new report.
Pledged Property which was not included in the Discounted Value of the
Eligible Collateral as of the most recent Valuation Date may be withdrawn at any
time so long as the Discounted Value of the Eligible Collateral was at least
equal to the Basic Maintenance Amount as of such Valuation Date, and no
withdrawals of Eligible Collateral were made after such Valuation Date. During
the continuance of any Event of Default, the Issuer may not withdraw or
substitute Pledged Property.
The Issuer may pledge additional Eligible Collateral at any time.
The Indenture relating to a Series will permit the Issuer to grant
certain modifications or waivers with respect to the Eligible Collateral,
including, for example, assumptions of Mortgage Notes and related Mortgages.
LIQUIDITY
As specified in the Prospectus Supplement relating to a Series, the
Issuer will be obligated, a certain number of days before the Stated Maturity
for a Series of Bonds provided in the related Prospectus Supplement, to pledge
Deposit Securities to the Trustee or to make other arrangements acceptable to
each Rating Agency rating such Series, in either case that are sufficient (in
the case of Deposit Securities, through principal and interest payments in
respect thereof), together with the amount of cash that will otherwise be
available in the Distribution Account and the Reserve Fund on the Stated
Maturity, to pay all of the interest and principal payable on the Bonds on such
maturity date. If the Issuer fails to effect any of the options described above
within the prescribed period, then the Trustee will be obligated immediately to
liquidate Pledged Property in an amount sufficient to pay all of the interest
and principal payable on the Bonds on the Stated Maturity. Upon delivery of such
Deposit Securities or the completion of such other arrangements, the Bonds of
such Series will no longer be deemed Outstanding and the Trustee will be
obligated to release all other Pledged Property held by the Trustee from the
lien of the Indenture.
In addition, if the Issuer elects to deliver Deposit Securities to the
Trustee to provide for payment of the redemption price pursuant to a mandatory
partial redemption of the Bonds of a Series in lieu of having the Trustee
liquidate Pledged Property, then, on the Cure Date on which it is required to
notify the Trustee of such redemption, the Issuer must deliver Deposit
Securities in the full amount of the redemption price of the Bonds of such
Series to be redeemed.
Securities delivered in accordance with the preceding paragraphs must
mature prior to the date in respect of which such Deposit Securities were
delivered. "Deposit Securities" include (i) cash, (ii) Government Securities
(other than FHLMC Certificates, FNMA Certificates and GNMA Certificates), (iii)
Short-Term Money Market Instruments and (iv) such other instruments as may be
specified in the Prospectus Supplement relating to a Series.
PURCHASE AND RESALE OF BONDS
The Issuer may at any time and from time to time purchase Bonds of a
Series that are Outstanding either on the open market or by private sale. Bonds
held by the Issuer or its affiliates (other than NCMI) shall not be deemed to be
Outstanding for purposes of determining the Basic Maintenance Amount or for
other purposes under the Indenture relating to such Series. The Indenture will
provide that the Issuer shall not, and shall not permit any affiliate (other
than NCMI) to, sell any Bonds acquired by the Issuer or any such affiliate
unless the Trustee is able to prepare a report dated no more than five days
prior to the date of sale, showing that, after giving effect to such sale, the
Discounted Value of the Eligible Collateral (determined at the option of the
Issuer, as of the then most recent Valuation Date or as of any date subsequent
thereto but no later than the date of such report) would not be less than the
Basic Maintenance Amount.
REPORTS ON PLEDGED PROPERTY
Upon issuance of a Series of Bonds, the Issuer will be required to
deliver to the Trustee, and, within a specified number of business days after
each Valuation Date, the Trustee will be required to deliver to the Issuer,
reports with respect to the status of the Pledged Property securing such Series
(with Market Values having been determined as of the applicable Determination
Dates), which set forth the Discounted Value of the Eligible Collateral for such
Series. Such reports will contain information concerning the occurrence of Late
Payments with respect to Eligible Mortgage Notes and with respect to Mortgage
Notes underlying Eligible Mortgage Pass-Through Certificates if included in the
Pledged Property for such Series. Such reports may also contain information on
specified characteristics of the Mortgage Notes (as described under "--Eligible
Mortgage Notes") and the percentages of the Mortgage Notes having such
characteristics.
The Issuer's initial report upon the issuance of a Series of Bonds and
certain of the Trustee's periodic Valuation Date reports with respect to such
Series will be accompanied by letters from a firm of independent accountants
selected by the Issuer regarding the calculations made by the Issuer and the
Trustee, as applicable, in the applicable reports.
PAYMENTS ON PLEDGED PROPERTY
The Indenture for each Series will provide that the Trustee will be
entitled to receive payments (including prepayments and payments as a result of
default) on the Pledged Property securing such Series except for payments on
Eligible Mortgage Notes, as to which payments will be made directly to the
Servicer for deposit in the Collection Account, unless an Event of Default shall
have occurred and be continuing. In such event, all such payments will be made
directly to the Trustee. Payments with respect to all other types of Pledged
Property will be made directly to the Trustee for deposit into the Distribution
Account. Certain funds received by the Trustee, as described in the applicable
Prospectus Supplement, will be deposited into the Reserve Fund for such Series.
If specified in the Prospectus Supplement applicable to a Series of Bonds, the
Trustee will remit to the Issuer, upon the Issuer's request, any excess funds in
the Distribution Account and the Reserve Fund after required payments of
interest and principal, if any, on the Bonds of such Series have been made or
provided for, so long as the Discounted Value of the Eligible Collateral, after
giving effect to such request, would be equal to the Basic Maintenance Amount
and no Event of Default shall have occurred and be continuing. The Prospectus
Supplement for a Series of Bonds may provide for certain funds to be retained in
the Reserve Fund for such Series to be used to pay certain expenses of the
Issuer, if they are not otherwise paid by the Issuer.
MODIFICATIONS AND WAIVER
The Indenture for each Series (including the terms and conditions of
the related Bonds) may be modified or amended by the Issuer and the Trustee
without the consent of the Holder of any Bond of such Series for the following
purposes: (a) evidencing the succession of another entity to the Issuer; (b)
adding to the covenants of the Issuer for the benefit of the Holders of the
Bonds of such Series or surrendering any right or power conferred upon the
Issuer; (c) securing the Bonds of such Series in any manner which is in addition
to the manner in which the Bonds are secured by the Indenture and the Pledged
Property; (d) correcting any ambiguity or defective or inconsistent provisions
contained in the Indenture or making any other provisions with respect to
matters or questions arising under the Indenture which will not adversely affect
the interests of the Holders of the Bonds of such Series in any material
respect; or (e) modifying, eliminating or adding to the provisions of the
Indenture as necessary to continue compliance of the Indenture under the Trust
Indenture Act of 1939, if necessary. In addition, the Indenture may be modified
or amended by the Issuer and the Trustee, without the consent of the Holder of
any Bond, for the purpose of providing for the addition of new types of Eligible
Collateral to the types of Eligible Collateral currently allowed under the terms
of the Indenture, changing the characteristics of, or percentage limitations
applicable to, certain types of Eligible Collateral, providing for reductions in
the Discount Factors used in valuing the Eligible Collateral, providing for an
increase in the frequency of Valuation Dates or providing for a change in the
definition of "Basic Maintenance Amount" or the methodology used in calculating
Market Value if such additions, changes, reductions or increases are approved of
by each Rating Agency rating such Series and will not impair the rating then
assigned to the Bonds of such Series by each of such Rating Agencies, as
confirmed in writing by such Rating Agencies.
Modifications and amendments to the Indenture relating to a Series may
also be made, and future compliance therewith or past default thereunder by the
Issuer may be waived, either with the written consent of the Holders of at least
66 2/3% in aggregate principal amount of the Bonds of such Series at the time
Outstanding or by the adoption of a resolution, at a meeting of the Holders of
the Bonds of such Series at which a quorum (as defined below) is present, by at
least 66 2/3% in aggregate principal amount of the Bonds Outstanding represented
at such meeting. However, no such modification or amendment to the Indenture
may, without the written consent or the affirmative vote of the Holder of each
Bond of such Series so affected, change the time of payment of the principal of
such Bond from the time when such principal is due, whether at Stated Maturity,
upon call for redemption, acceleration or otherwise; change the time of payment
of any installment of interest on any such Bond from the time when such payment
is due, whether on any Interest Payment Date, at the Stated Maturity, on any
redemption date, upon acceleration of the principal of the Bonds, or otherwise;
reduce the principal of or interest on any such Bond; make the principal of or
interest on such Bond payable in any coin or currency other than that provided
in the Bonds; impair the right to institute suit for the enforcement of any
payment on or with respect to such Bond; permit the creation of any lien other
than the lien of the Indenture with respect to the Pledged Property or terminate
the lien of the Indenture with respect to any Pledged Property (except in such
cases as permitted by, and pursuant to, the Indenture) or deprive the Bonds of
the security afforded by the lien of the Indenture and the Pledged Property;
reduce the percentage of the principal amount of the Bonds Outstanding necessary
to modify or amend the Indenture or to waive any future compliance therewith or
past default thereunder; reduce the percentage of votes required for the
adoption of a resolution or the quorum required at any meeting of the Holders of
the Bonds at which a resolution is adopted or remove the obligation of the
Issuer to maintain an office or agency in the place described in the Indenture
to make payments on the Bonds. The quorum at any meeting called to adopt a
resolution will be persons holding or representing a majority in aggregate
principal amount of the Bonds at the time Outstanding and, at any reconvened
meeting adjourned for lack of a quorum, 25% of such aggregate principal amount.
EVENTS OF DEFAULT UNDER THE INDENTURE
An "Event of Default" with respect to a Series of Bonds will be defined
in the Indenture relating to such Series as (i) failure by the Issuer to deliver
to the Trustee Deposit Securities or to make other arrangements satisfactory to
each Rating Agency to provide for the payment of the principal of, and accrued
interest on, the Bonds, when such principal becomes due and payable at the
Stated Maturity; (ii) default in the payment of any interest on the Bonds when
such interest becomes due and payable, whether on any Interest Payment Date, at
Stated Maturity on any redemption date, upon acceleration of the principal of
the Bonds, or otherwise and continuation of such default for a period of five
days; (iii) default in the payment of the principal of the Bonds when such
principal becomes due and payable, whether at Stated Maturity, upon call for
redemption, or by acceleration or otherwise; (iv) failure by the Issuer to have
pledged to the Trustee an amount of Eligible Collateral, the Discounted Value of
which is at least equal to the Basic Maintenance Amount on or before each
applicable Cure Date; provided, that failure to deliver additional Eligible
Collateral because of a Collateral Replacement Limit shall not constitute an
Event of Default so long as the Issuer shall have delivered to the Trustee an
Officers' Certificate notifying the Trustee that mandatory redemption of the
Bonds is required; (v) material breach or inaccuracy of any representation or
warranty of the Issuer made in or pursuant to the Indenture as of the date as of
which failure to remedy such breach or inaccuracy within 30 days after notice
thereof, which shall state that it is a notice of default under the Indenture,
has been given to the Issuer by the Trustee or to the Issuer and the Trustee by
the Holders of at least 10% in aggregate principal amount of the Bonds then
Outstanding; (vi) material default in the performance or observance by the
Issuer of any other covenant or condition to be performed or observed by it in
the Indenture and continuance of such default for a period of 30 days after
notice thereof, which shall state that it is a notice of default under the
Indenture, to the Issuer by the Trustee or to the Issuer and the Trustee by the
Holders of at least 10% in aggregate principal amount of the Bonds then
Outstanding; (vii) the entry of a decree or order by a court having jurisdiction
in the premises adjudging the Issuer a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Issuer under any bankruptcy, insolvency or
any other applicable law, or appointing a receiver, liquidator, assignee,
trustee, conservator, sequestrator (or other similar official) of the Issuer or
of any substantial part of the Issuer's property, or ordering the winding up or
liquidation of the Issuer's affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days; (viii) the
institution by the Issuer of proceedings to be adjudicated a bankrupt or
insolvent, or the Issuer's consent to the institution of bankruptcy or
insolvency proceedings against it, or the filing by the Issuer of a petition or
answer or consent seeking reorganization or relief under any bankruptcy,
insolvency or any other applicable law or the consent by the Issuer to the
filing of any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, conservator, sequestrator (or other similar official) of the
Issuer, or of any substantial part of the Issuer's property, or the making by
the Issuer of an assignment for the benefit of creditors, or the admission by
the Issuer in writing of its inability to pay its debts generally as they become
due, or the taking of corporate action by the Issuer in furtherance of any such
action; or (ix) failure by the Issuer to issue an officers' certificate
notifying the Trustee that mandatory redemption of the Bonds is required at the
time required by the Indenture.
In the case of an Event of Default of the type described in clauses
(i), (ii), (iii), (iv) or (ix) of the preceding paragraph, the entire principal
amount of the Bonds shall automatically become due and payable immediately. If
an Event of Default of the type described in clauses (v), (vi), (vii) or (viii)
of the preceding paragraph shall have occurred and be continuing, the Trustee or
the Holders of not less than 25% in aggregate principal amount of the Bonds then
Outstanding may declare the entire principal amount of the Bonds to be due and
payable immediately.
In realizing upon the Pledged Property upon the occurrence of an Event
of Default with respect to a Series of Bonds, unless such Event of Default has
been annulled or waived by the Holders of at least 66 2/3% in aggregate
principal amount of the Bonds then Outstanding (or such lesser amount as shall
have acted at a meeting pursuant to the provisions of the Indenture), the
Trustee will be permitted to register and/or record in its name any of the
Pledged Property not theretofore registered and/or recorded and to sell the
Pledged Property in one lot or several lots as it may be deemed appropriate and
otherwise to exercise the remedies of a secured party under the Uniform
Commercial Code. The Trustee also will be authorized to institute suits against
the Issuer for the collection of all unpaid principal of and interest on the
Bonds, to collect the deficiency, if any, after the sale of the Pledged
Property, and to file proofs of claim in any bankruptcy, insolvency or similar
proceedings involving the Issuer. The Trustee may also take other appropriate
action to enforce payment of the Bonds or to enforce any of the above-described
rights or powers under the Indenture, but shall not be required to take any
action that would involve the Trustee in personal liability or expense.
In addition, following an acceleration of the Bonds of a Series
arising out of an Event of Default, the Trustee will be required to use its best
efforts to arrange for the sale of the Pledged Property and the repayment of the
Bonds on a date not later than 15 days (or 30 days if Eligible Mortgage Notes or
Eligible Mortgage Pass-Through Certificates are included in the Eligible
Collateral) following the date on which payment of principal of the Bonds has
been accelerated.
The Indenture with respect to a Series of Bonds will provide the
Trustee with a lien on the Pledged Property superior to that of the Holders of
the Bonds to secure the payment of all expenses, liabilities and advances
incurred or made by the Trustee in connection with the collection or other
realization upon the Pledged Property upon the occurrence of an Event of Default
(including reasonable compensation for any required servicing of Eligible
Mortgages and for extraordinary time spent by the officers, employees, agents or
attorneys of the Trustee directly in connection with the collection or other
realization upon the Pledged Property upon the occurrence of an Event of
Default).
PRIORITY
If, following an Event of Default with respect to a Series of Bonds,
the proceeds of liquidation of the related Pledged Property are not sufficient
to pay the entire amount remaining payable on the Bonds of such Series, the
Holders thereof would as to the deficiency, be general creditors of the Issuer,
and upon any liquidation of the Issuer, the Holders of such Bonds would rank on
a parity with the general creditors of the Issuer.
SERVICING OF ELIGIBLE MORTGAGE NOTES
GENERAL
With respect to each Series of Bonds for which the Pledged Property
includes Eligible Mortgage Notes, the Issuer will enter into a servicing
agreement (the "Servicing Agreement") with a servicer (the "Servicer"), which
may be an affiliate of the Issuer. The Servicer will be responsible for
servicing and administering the Eligible Mortgage Notes pursuant to the
Servicing Agreement. The Issuer's rights under the Servicing Agreement for a
Series will be pledged to the Trustee as additional security for the Bonds of
such Series. The Servicer may enter into a subservicing agreement with a
subservicer to perform, as an independent contractor, certain servicing
functions for the Servicer subject to its supervision. A subservicing agreement
will not contain any terms or conditions that are inconsistent with the related
Servicing Agreement and shall have been approved by the Issuer. The subservicer
will receive a fee for such services which will be paid by the Servicer out of
the fee paid to the Servicer (the "Servicing Fee"). The Servicer will have the
right to remove the subservicer of any Eligible Mortgage Note at any time for
cause and at any other time upon the giving of the required notice and the
payment of any required fee. In such event, the Servicer would continue to be
responsible for servicing such Eligible Mortgage Note and would designate a
replacement subservicer (which may include an affiliate of the Issuer or the
Servicer).
PLEDGE OF ELIGIBLE MORTGAGE NOTES
At the time of issuance of each Series of Bonds secured in whole or in
part by Eligible Mortgage Notes, the Issuer will cause the Eligible Mortgage
Notes, together with all principal and interest received on or with respect to
the Eligible Mortgage Notes after the cut-off date for the related Series (the
"Cut-Off Date"), except for principal and interest due on or before the Cut-Off
Date for such Series, to be pledged to the Trustee and the Eligible Mortgage
Notes to be delivered to the Trustee or, if applicable, a Custodian. Each
Eligible Mortgage Note included in the initial Pledged Property will be
identified in a schedule appearing as an exhibit to the Servicing Agreement
which will be amended from time to time to reflect the addition or deletion of
Eligible Mortgage Notes. Such schedule will include information as to the
principal balance of each Eligible Mortgage Note, the address of the property,
the interest rate and the maturity of each Mortgage Note.
In addition, the Issuer will, as to each Eligible Mortgage Note,
deliver to the Trustee (or the Custodian) (i) the Mortgage Note endorsed in
blank and (ii) an assignment of the related Mortgage in blank in a form for
recording or filing as may be appropriate in the state where the Mortgaged
Property is located. In lieu of delivering an individual mortgage assignment,
the Issuer may instead deliver a blanket assignment by county, which will also
be in recordable form. In addition, with respect to each Eligible Mortgage Note
secured by Mortgaged Property located in the State of California or Oregon, the
Issuer will also deliver to the Trustee (or the Custodian) the original recorded
Mortgage with evidence of recording or filing indicated thereon, or a copy of
such Mortgage certified by the recording office in those jurisdictions where the
original is retained by the recording office. Notwithstanding the foregoing, in
the event that recorded documents cannot be delivered due to delays in
connection with recording, the Indenture permits the Issuer to deliver to the
Trustee copies thereof, certified by the Issuer to be true and complete copies
of such documents sent for recording. In such event, the Indenture requires the
Issuer to deliver the original recorded documents to the Trustee promptly upon
receipt by the Issuer.
The Custodian will review the mortgage documents within a specified
number of days of receipt thereof to ascertain that all required documents have
been executed and received and are in proper form on their face. The Custodian
will hold mortgage documents for each Series in trust for the benefit of Holders
of the Bonds of such Series. If any document is found by the Custodian not to
have been properly executed or received or to be unrelated to the Eligible
Mortgage Notes identified in the Servicing Agreement, and such defect cannot be
cured within the permitted time period, the Issuer will pledge and deliver
additional Eligible Mortgage Notes or other Eligible Collateral and/or
substitute Eligible Mortgage Notes or other Eligible Collateral in an amount
such that, after the pledge, the Discounted Value of the Eligible Collateral is
at least equal to the Basic Maintenance Amount.
The Indenture for a Series of Bonds secured in whole or in part by
Eligible Mortgage Notes will provide that the Trustee will, upon receipt from
any Holder or from the Issuer of proper notification that the rating by any of [
], [ ] or [ ] of NationsBank, N.A. long-term deposits has fallen below [ ] or
of its short-term deposits has fallen below [ ] or [ ], respectively, demand
that the Issuer cause the recordation of the assignments of the Mortgages
securing the Eligible Mortgage Notes pledged to the Trustee. The Issuer will use
its best efforts to record such assignments at its own expense promptly
following such demand by the Trustee. If such assignments are not recorded after
demand therefor by the Trustee, the Trustee will itself record the assignments
of the Mortgages, at the expense of the Issuer. The Issuer will not be required
to record any assignment prior to its receipt of such demand from the Trustee.
Such recordation is not necessary to make the assignment of the Eligible
Mortgage Notes to the Trustee effective as between the Issuer and the Trustee.
However, if the Issuer were to make a sale, assignment, satisfaction or
discharge of any Eligible Mortgage Notes prior to recording the assignments to
the Trustee, the other parties to such sales, assignments, satisfactions or
discharges might have rights superior to those of the Trustee. If the Issuer
were to do so without authority given to it pursuant to the Indenture, it would
be liable to the Trustee and the Holders of the related Series of Bonds.
Moreover, if insolvency proceedings relating to the Issuer were commenced prior
to such recording, creditors of the Issuer may be able to assert rights in the
affected Eligible Mortgage Notes superior to those of the Trustee.
SERVICING
The Servicer will agree to perform diligently all services and duties
customary to the servicing by prudent mortgage lending institutions of mortgages
of the same type as the Eligible Mortgage Notes in those jurisdictions where the
related Mortgaged Properties are located. The Servicer may perform these duties
directly or, pursuant to subservicing contracts, through subservicers. The
Servicer will monitor each subservicer's performance and will have the right to
remove a subservicer at any time if it considers such removal to be in the best
interest of Holders. The duties of the Servicer include collection and
remittance of principal and interest payments received, administration of
mortgage escrow accounts, collection of insurance claims and, if necessary,
foreclosure. Unless otherwise specified in the Prospectus Supplement relating to
a Series, the Servicer will not be obligated to make any Advances with respect
to delinquent payments on Eligible Mortgage Notes.
PAYMENTS ON ELIGIBLE MORTGAGE NOTES
Pursuant to the Servicing Agreement relating to a Series, the Servicer
will establish and maintain a collection account (the "Collection Account") in
the name of the Trustee for the benefit of the Holders. The Servicer will remit
directly to the Collection Account for the related Series payments on the
related Eligible Mortgage Notes as they are received. The Collection Account may
be maintained as an interest-bearing account, or the funds held therein may be
invested from time to time in Eligible Investments (as defined in the related
Prospectus Supplement). The Servicer or its designee will be entitled to receive
any such interest or other income earned on funds in the Collection Account as
additional compensation and will be obligated to deposit in or credit to the
Collection Account the amount of any loss immediately as realized. The
Collection Account for a Series must be maintained as a trust account or with a
depository institution, which may be an affiliate of the Servicer or the Issuer,
whose short-term debt is rated in at least one of the two highest rating
categories by each Rating Agency. [In particular, if NationsBanc Mortgage
Corporation is the Servicer for a Series, such account may be a money market
savings account maintained with NationsBank, N.A., or an affiliated bank.]
The Servicer will deposit in or credit to the Collection Account on a
daily basis, to the extent applicable, the following payments and collections
received by or on behalf of it subsequent to the date of pledge to the Trustee
for the related Series (other than payments due on or before the date of
pledge);
(i) All payments on account of principal and interest received by the
Servicer on the Eligible Mortgage Notes (which, at its option, may be net of the
Servicing Fee), including principal prepayments (in whole or in part);
(ii) All amounts received by foreclosure or otherwise in connection
with the liquidation of defaulted Eligible Mortgage Notes, net of expenses
incurred in connection with such liquidation;
(iii) All proceeds received under any Private Mortgage Insurance policy
or title, hazard or other insurance policy covering any Eligible Mortgage Note,
other than proceeds to be applied to the restoration or repair of the related
Mortgaged Property;
(iv) Any amounts required to be deposited or credited by the Servicer
in connection with losses realized on investments for the benefit of the
Servicer of funds held in the Collection Account; and
(v) All other amounts required to be deposited in or credited to the
Collection Account under the Servicing Agreement. Under the Servicing Agreement
for each Series, the Servicer will be authorized to make the following
withdrawals from the Collection Account (i) to reimburse the Servicer from
related insurance or liquidation proceeds for amounts expended by the Servicer
in connection with the restoration of property damaged by an uninsured cause or
the liquidation of an Eligible Mortgage Note; (ii) to pay to the Servicer its
Servicing Fee from interest payments received, if not previously retained, and
any earnings from the investment of funds in the Collection Account in Eligible
Investments (as defined in the related Prospectus Supplement); (iii) to pay any
expenses which were incurred and are reimbursable pursuant to the Servicing
Agreement; (iv) to pay to the Servicer any amounts deposited in or credited to
the Collection Account in error or any amounts in respect of which a mortgagor's
check has been returned and not honored by the mortgagor's bank for any reason;
(v) to remit funds to the Trustee for deposit into the applicable Distribution
Account or Reserve Fund; and
(vi) to clear and terminate the Collection Account upon the Stated
Maturity of the related Series of Bonds.
COLLECTION AND OTHER SERVICING PROCEDURES
The Servicer will agree to proceed diligently to collect all payments
called for under the Eligible Mortgage Notes securing such Series. Consistent
with the above, the Servicer may, in its discretion, (i) waive any prepayment
charge, assumption fee, late payment charge or any other charge in connection
with the prepayment of an Eligible Mortgage Note and (ii) arrange with a
mortgagor a plan of relief, including a modification or extension of the
Mortgage Note, when appropriate, rather than recommending liquidation. In
addition, the Servicer may permit the modification of an Eligible Mortgage Note
which the related mortgagor has indicated a desire to refinance provided that
any such Mortgage Note would continue to be an Eligible Mortgage Note following
such modification. Any such arrangement will be made only upon determining that
the coverage of such Eligible Mortgage Note by any Private Mortgage Insurance
policy will not be affected.
Under the Servicing Agreement relating to a Series of Bonds, the
Servicer will be required to enforce "due-on-sale" clauses with respect to the
Eligible Mortgage Notes to the extent contemplated by the terms of the Eligible
Mortgage Notes and permitted by applicable law. Where an assumption of, or
substitution of liability with respect to, an Eligible Mortgage Note is required
by law, upon receipt of assurance that the Private Mortgage Insurance policy
covering such Eligible Mortgage Note will not be affected, the Servicer may
permit the assumption of an Eligible Mortgage Note, pursuant to which the
mortgagor would remain liable on the Mortgage Note, or a substitution of
liability with respect to such Eligible Mortgage Note, pursuant to which the new
mortgagor would be substituted for the original mortgagor as being liable on the
Mortgage Note.
The Servicing Agreement may require the Servicer to establish and
maintain one or more escrow accounts into which mortgagors deposit amounts
sufficient to pay taxes, assessments, hazard insurance premiums or comparable
items. Withdrawals from the escrow accounts maintained for mortgagors may, among
other things, be made to effect timely payment of taxes, assessments and hazard
insurance premiums or comparable items, to reimburse the Servicer out of related
assessments for maintaining hazard insurance, to refund to mortgagors amounts
determined to be overages, to remit to mortgagors, if required, interest earned,
if any, on balances in any of the escrow accounts, to repair or otherwise
protect the Mortgaged Property and to clear and terminate any of the escrow
accounts. The Servicer will be solely responsible for administration of the
escrow accounts and will be expected to make advances to such accounts when a
deficiency exists therein.
HAZARD INSURANCE
Under the Servicing Agreement relating to a Series of Bonds, the
Servicer will be required to maintain for each Eligible Mortgage Note a hazard
insurance policy providing coverage against loss by fire and other hazards which
are covered under the standard extended coverage endorsement customary in the
state in which the Mortgaged Property is located. Such coverage will be in an
amount at least equal to the lesser of the outstanding principal balance of such
Eligible Mortgage Note and the replacement cost of the related Mortgaged
Property. As set forth above, all amounts collected by the Servicer under any
hazard policy (except for amounts to be applied to the restoration or repair of
the Mortgaged Property or released to the mortgagor in accordance with the
Servicer's normal servicing procedures) will be deposited in the Collection
Account. In the event that the Servicer maintains a blanket policy insuring
against hazard losses on certain of the Eligible Mortgage Notes, it shall
conclusively be deemed to have satisfied its obligation relating to the
maintenance of hazard insurance. The Servicer is required to maintain a fidelity
bond and errors and omissions policy or their equivalent with respect to
officers and employees which provides coverage against losses which may be
sustained as a result of an officer's or employee's misappropriation of funds or
errors and omissions in failing to maintain insurance, subject to certain
limitations as to amount of coverage, deductible amounts, conditions, exclusions
and exceptions in the form and amount specified in the Servicing Agreement.
In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements on the property by
fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and
civil commotion, subject to the conditions and exclusions particularized in each
policy. Although the policies relating to the Eligible Mortgage Notes will be
underwritten by different insurers under different state laws in accordance with
different applicable state forms and therefore will not contain identical terms
and conditions, the basic terms thereof are dictated by respective state laws,
and most such policies typically do not cover (among other things) any physical
damage resulting from the following: war, revolution, governmental actions,
floods and other water-related causes, earth movement (including earthquakes,
landslides and mud flows), nuclear reactions, wet or dry rot, vermin, rodents,
insects or domestic animals, theft and, in certain cases, vandalism. If,
however, any Mortgaged Property is located in an area identified by the Federal
Emergency Management Agency as having special flood hazards and flood insurance
has been made available, the Servicer will cause to be maintained with a
generally acceptable insurance carrier a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration.
Such flood insurance policy will provide coverage in an amount not less than the
least of (i) the unpaid principal balance of the Eligible Mortgage Note, (ii)
the insurable value of the Mortgaged Property or (iii) the maximum amount of
insurance available under the Flood Disaster Protection Act of 1973, as amended.
The hazard insurance policies covering the Mortgaged Properties
typically contain a clause which, in effect, requires the insured at all times
to carry insurance of a specified percentage (generally 80% to 90%) of the full
replacement value of the improvements on the property in order to recover the
full amount of any partial loss. If the insured's coverage falls below this
specified percentage, such clause provides that the insurer's liability in the
event of partial loss does not exceed the larger of (i) the replacement cost of
the improvements less physical depreciation, and (ii) such proportion of the
loss as the amount of insurance carried bears to the specified percentage of the
full replacement cost of such improvements. To the extent residential properties
appreciate in value over time, in the event of partial loss, hazard insurance
proceeds may be insufficient to restore fully the damaged property.
PRIVATE MORTGAGE INSURANCE
An Eligible Mortgage Note secured by a Mortgaged Property having an
original loan-to-value ratio in excess of 80% must have a Private Mortgage
Insurance policy insuring against default of all or a specified portion of the
principal amount thereof in excess of such percentage of the value of the
Mortgaged Property. Evidence of each Private Mortgage Insurance policy will be
provided to the Trustee simultaneously with the pledge to the Trustee of the
related Eligible Mortgage Note.
MAINTENANCE OF INSURANCE POLICIES; CLAIMS THEREUNDER AND OTHER REALIZATION UPON
DEFAULTED ELIGIBLE MORTGAGE NOTES
The Servicer will exercise its best reasonable efforts to keep each
Private Mortgage Insurance policy (if any) in full force and effect at least
until the outstanding principal balance of the related Mortgage Note is equal to
the percentage of the appraised value of the Mortgaged Property specified in the
related Supplement. The Servicer has agreed (or will agree) to pay the premium
for each Private Mortgage Insurance policy on a timely basis in the event that
the mortgagor does not make such payments.
The Servicer, on behalf of the Trustee and Holders, will present claims
to the insurer under any applicable Private Mortgage Insurance policy and will
take such reasonable steps as are necessary to permit recovery under such
insurance policies respecting defaulted Eligible Mortgage Notes. All collections
by the Servicer under such policies that are not applied to the restoration of
the related Mortgaged Property are to be deposited in the Collection Account
subject to withdrawals as described in the Servicing Agreement for each Series.
If any property securing a defaulted Eligible Mortgage Note is damaged
and proceeds, if any, from the related hazard insurance policy are insufficient
to restore the damaged property to a condition sufficient to permit recovery
under any applicable Private Mortgage Insurance policy, the Servicer will not be
required to expend its own funds to restore the damaged property unless the
Servicer determines (i) that such restoration will increase the proceeds to
Holders upon liquidation of the Eligible Mortgage Note after reimbursement of
the Servicer for its expenses and (ii) that such expenses will be recoverable to
it through liquidation proceeds.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's primary compensation for its activities as Servicer will
come from the payment to it, with respect to each interest payment on an
Eligible Mortgage Note, of an amount equal to the Servicing Fee. As principal
payments are made on the Eligible Mortgage Notes, the portion of each monthly
payment which represents interest will decline, and thus servicing compensation
to the Servicer will decrease as the Eligible Mortgage Notes amortize.
Prepayments and liquidations of Eligible Mortgage Notes prior to maturity will
also cause servicing compensation to the Servicer to decrease.
In addition, the Servicer will be entitled to retain late payment
charges and other fees and expenses related to loan assumptions, delinquencies,
modifications, partial releases of security and releases for payment in full, if
any, to the extent collected from mortgagors and investment income earned on
funds in the Collection Account.
Servicer will pay all expenses incurred in connection with its
activities as Servicer (subject to limited reimbursement as described above),
including payment of expenses incurred in connection with distributions and
reports to the Trustee for each Series.
EVIDENCE AS TO COMPLIANCE
The Servicing Agreement relating to a Series of Bonds secured in whole
or in part by Eligible Mortgage Notes will provide that the Servicer at its
expense shall cause a firm of independent public accountants to furnish a report
annually to the Trustee to the effect that such firm has examined certain
documents relating to the servicing of the Eligible Mortgage Notes and that such
review has disclosed no items of material noncompliance with the provisions of
such Servicing Agreement, except for such items of material noncompliance as
shall be set forth in such report.
The Servicing Agreement will provide for delivery to the Trustee of an
annual statement signed by an officer of the Servicer to the effect that the
Servicer has fulfilled its obligations under the Servicing Agreement throughout
the preceding year.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicing Agreement for each Series of Bonds secured in whole or in
part by Eligible Mortgage Notes will provide that the Servicer may not resign
from its obligations and duties as Servicer thereunder, except upon (a) the
appointment of a successor servicer and receipt by the Trustee of a letter from
each Rating Agency that such resignation and appointment will not result in the
withdrawal, qualification or downgrading of the ratings then assigned to the
Bonds of such Series or (b) the determination that its duties thereunder are no
longer permissible under applicable law and such incapacity cannot be cured by
the Servicer. No such resignation under (b) above will become effective until
the Trustee or a successor has assumed the Servicer's obligations and duties
under such Servicing Agreement. The Servicing Agreement for each such Series
will provide that, subject to the conditions set forth in such Servicing
Agreement, any entity (a) into which the Servicer may be merged or consolidated,
(b) which may result from any merger or consolidation to which the Servicer
shall be a party, or (c) which may succeed to the properties and assets of the
Servicer substantially as a whole, which entity in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the Servicer
hereunder, will be the successor to the Servicer under the Servicing Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties to the Servicing Agreement.
EVENTS OF DEFAULT UNDER THE SERVICING AGREEMENT
Events of default by the Servicer under the Servicing Agreement for
each Series of Bonds secured in whole or in part by Eligible Mortgage Notes will
consist of (i) any failure by the Servicer to distribute to the Trustee on
behalf of Holders any required payment which continues unremedied for five days;
(ii) any failure by the Servicer duly to observe or perform in any material
respects any other of its covenants or agreements in such Servicing Agreement
which continues unremedied for 60 days after the giving of written notice of
such failure to the Servicer by the Trustee, or to the Servicer by the Holders
of not less than 25% in aggregate principal amount of the Bonds then
Outstanding; and (iii) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings and certain actions
by the Servicer indicating insolvency, reorganization or inability to pay its
obligations.
RIGHTS UPON EVENT OF DEFAULT
As long as an event of default under the Servicing Agreement for a
Series of Bonds secured in whole or in part by Eligible Mortgage Notes remains
unremedied, the Trustee or Holders of not less than 50% in aggregate principal
amount of the Bonds then Outstanding may terminate all of the rights and
obligations of the Servicer under such Servicing Agreement, whereupon the
Trustee will succeed to all the responsibilities, duties and liabilities of the
Servicer under such Servicing Agreement and will be entitled to similar
compensation arrangements and limitations on liability. In the event that the
Trustee is unwilling or unable so to act, it may appoint or petition a court of
competent jurisdiction for the appointment of a housing and home finance
institution with a net worth of at least $10,000,000 and which is an approved
seller-servicer of conventional residential mortgage loans for FNMA or FHLMC, an
FHA approved mortgagee and a VA approved lender to act as successor Servicer
under such Servicing Agreement. Pending any such appointment, the Trustee is
obligated to act in such capacity. The Trustee and such successor may agree upon
the servicing compensation to be paid, which in no event may be greater than the
compensation to the Servicer under such Servicing Agreement.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Stroock & Stroock & Lavan, the following discussion
addresses all the material United States federal income tax consequences of the
acquisition, ownership and disposition of the Bonds of each such Series, except
as otherwise set forth in an applicable Prospectus Supplement. The opinion is
based on laws, Treasury regulations (including proposed and temporary
regulations) promulgated thereunder, rulings, and judicial decisions, all as in
effect as of the date of this offering, all of which are subject to change
(possibly with retroactive effect) or different interpretations. The opinion
does not, however, purport to address all federal income tax consequences
applicable to particular categories of investors, some of which may be subject
to special rules. Investors should consult their own tax advisors in determining
the federal, state, local and any other tax consequences to them of the
purchase, ownership and disposition of the Bonds.
INTEREST, PREMIUM AND DISCOUNT
In the opinion of Stroock & Stroock & Lavan, the Bonds will be treated
as indebtedness of the Issuer for federal income tax purposes. Consequently,
interest thereon will be treated as ordinary income to Bond Owners as it is paid
or accrues, depending on the Bond Owner's method of accounting. It is
anticipated that initial Bond Owners of each Series will acquire the Bonds at
par or at a statutory de minimis discount and therefore will have neither
original issue discount, market discount, nor premium amortization with respect
to the Bonds.
A Bond Owner acquiring a Bond subsequent to issuance will be treated as
purchasing an interest in such Bond at a price determined by allocating the
purchase price paid for such Bond, first, to accrued interest from the preceding
Interest Payment Date to the day prior to the date of purchase, and second, to
the principal amount of the Bond. To the extent that the portion of purchase
price of a Bond (other than to a right to receive any accrued interest thereon)
is less than or greater than the principal balance of the Bond, the Bond will be
deemed to have been acquired at a discount or premium, respectively.
Premium. A Bond Owner that holds a Bond as a capital asset under
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"), may
elect under Code Section 171 to amortize premium on the Bond (generally, the
excess of the purchaser's tax basis over the unpaid principal balance of the
Bond) under a constant interest method, based on the applicable compounding
period. Such election applies to all debt instruments acquired by the Bond Owner
at a premium in that taxable year or thereafter, and may be revoked only with
the consent of the Internal Revenue Service. Premium amortization under Section
171 will be treated as an offset to interest income on the Bond, rather than as
a separate deduction item.
Market Discount. A Bond Owner also will be subject to the market
discount rules of Code Sections 1276-1278 to the extent that the conditions for
application of those sections are met. A Bond Owner that acquires a Bond with
"market discount" (generally, the excess of the principal balance of the Bond
over the purchaser's tax basis therein), other than statutory de minimis
discount, will be required under Code Section 1276 to include as ordinary income
the previously unrecognized accrued market discount at the maturity of the Bond
(or in an amount not exceeding any partial principal payment prior to maturity)
or in an amount not exceeding the gain realized upon a sale or other disposition
of the Bond, unless the Bond Owner elects to accrue such market discount on a
constant yield method as described below. Unless an election to accrue the
market discount under a constant yield method is made, such market discount
would accrue ratably over the life of the Bond. Code Section 1277 provides that
the excess of interest paid or accrued to purchase or carry a Bond acquired with
market discount over interest received on such Bond is allowed as a current
deduction only to the extent such excess is greater than the market discount
that accrued during the taxable year in which such interest expense was
incurred. The deferred interest expense is, in general, allowed as a deduction
not later than the date a corresponding amount of the market discount income is
recognized or the date on which the Bond is disposed of. Alternatively, a Bond
Owner may also elect to include market discount in income currently as it
accrues on the Bond and other obligations acquired by such holder at a market
discount during the taxable year such election is made and thereafter, in which
event the interest deferral rule described above will not apply. Market discount
that is less than the statutory de minimis amount is not subject to the
foregoing rules, and generally must be reported as capital gain at maturity.
Bond Owners should consult their own tax advisors as to the application of these
rules to Bond Owners.
ELECTION TO TREAT ALL INCOME UNDER THE CONSTANT YIELD METHOD
A Bond Owner may elect to treat all income that accrues on the Bond
using the constant yield method, including stated interest, de minimis original
issue discount, market discount, de minimis market discount, or premium. The
Bond is then treated as if the Bond were issued on the holder's acquisition date
in the amount of the holder's adjusted basis immediately after acquisition. A
Bond Owner generally may make such an election as to any debt instrument of a
class or group of debt instruments. However, if the Bond Owner makes such an
election with respect to a debt instrument with market discount or premium, the
Bond Owner is deemed to have made an election to report market discount income
currently as it accrues under the constant yield method, or to amortize premium,
respectively, for all debt instruments acquired by the holder in the same
taxable year or thereafter. The election is made on the Bond Owner's federal
income tax return for the year in which the debt instrument is acquired and is
irrevocable except with the approval of the Internal Revenue Service. Investors
should consult their own tax advisors regarding the advisability of making such
an election.
SALE OR EXCHANGE OF BONDS
Upon sale or exchange of a Bond, a Bond Owner will recognize gain or
loss equal to the difference between the amount realized on the sale and its
aggregate adjusted basis in the Bond. In general, the aggregate adjusted basis
will equal the Bond Owner's cost for the Bond, increased by the amount of any
income previously reported with respect to the Bond and decreased by the amount
of any distributions received thereon. Except as provided above with respect to
market discount on the Bond, and except for certain financial institutions
subject to the provisions of Code Section 582(c), any such gain or loss
generally would be capital gain or loss if the Bond was held as a capital asset.
However, gain on the sale of a Bond will be treated as ordinary income (i) if a
Bond is held as part of a "conversion transaction" as defined in Code Section
1258(c), up to the amount of interest that would have accrued on the Bond
Owner's net investment in the conversion transaction at 120% of the appropriate
applicable Federal rate (under Code Section 1274(d)) in effect at the time the
taxpayer entered into the transaction minus any amount previously treated as
ordinary income with respect to any prior disposition of property that was held
as a part of such transaction (and minus such other amounts to be set forth in
regulations) or (ii) in the case of a non-corporate taxpayer, to the extent such
taxpayer has made an election under Code Section 163(d)(4) to have net capital
gains taxed as investment income at ordinary income rates. Pursuant to the
Revenue Reconciliation Act of 1993, capital gains of certain non-corporate
taxpayers are subject to a lower maximum tax rate than ordinary income of such
taxpayers. The maximum tax rate for corporations is the same with respect to
both ordinary income and capital gains.
BACKUP WITHHOLDING
Distributions made on the Bonds, and proceeds from the sale of the
Bonds to or through certain brokers, may be subject to a "backup" withholding
tax under Code Section 3406 of 31% on "reportable payments" (including interest
distributions, original issue discount, if any, and, under certain
circumstances, principal distributions) unless the Bond Owner complies with
certain reporting and/or certification procedures, including the provision of
its taxpayer identification number to the Trustee, its agent or the broker who
effected the sale of the Bond, or such Bond Owner is otherwise an exempt
recipient under applicable provisions of the Code. Any amounts to be withheld
from distribution on the Bonds would be refunded by the Internal Revenue Service
or allowed as a credit against the Bond Owner's federal income tax liability.
TAX TREATMENT OF FOREIGN INVESTORS
Bond Owners who are not U.S. Persons (as defined herein) must comply
with applicable certification requirements in order to receive payments of
interest and original issue discount free of applicable withholding taxes. In no
event will any payments by the Issuer be increased as a result of any such
withholding or other taxes. A Bond Owner that is not a U.S. Person will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such Bond Owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such Bond Owner takes one of the following steps to obtain an exemption or
reduced tax rate:
Exemption for Non-U.S. Persons (Form W-8). Bond Owners for which the
interest income is not effectively connected with a United States trade or
business, that do not own more than 10% of the stock of the Issuer or the
Servicer and that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new form W-8 must be filed within
30 days of such change.
Exemption for Non-U.S. Persons with Effectively Connected Income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or Reduced Rate for Non-U.S. Persons Resident in Treaty
Countries (Form 1001). Non-U.S. Persons that are Bond Owners and reside in a
country that has a tax treaty with the United States can obtain an exemption or
reduced tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Bond Owner or its
agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's Request
for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. A Bond Owner or, in the
case of a Form 1001 or a Form 4224 filer, its agent, files by submitting the
appropriate form to the person through whom it holds (the clearing agency, in
the case of persons holding directly on the books of the clearing agency) prior
to the first Interest Payment Date occurring after its acquisition of a Bond.
Form W-8 and Form 1001 are effective for three calendar years and Form 4224 is
effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof, (iii) an estate the income
of which is includible in gross income for United States tax purposes,
regardless of its source or (iv) a trust other than a "Foreign Trust", as
defined in the Code. This summary does not deal with all aspects of U.S. Federal
income tax withholding that may be relevant to foreign Bond Owners. Investors
are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the Bonds
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code impose certain requirements on employee benefit plans
subject to ERISA and on certain other retirement plans and arrangements,
including individual retirement accounts and Keogh plans (all of which are
hereinafter referred to as "Plans"), collective investment funds in which such
Plans are invested, and insurance companies using the assets of separate
accounts or general accounts which include assets of Plans (or which are deemed
pursuant to ERISA to include assets of Plans). In accordance with ERISA's
general fiduciary standards, before investing in a Bond of any Series, a Plan
fiduciary should determine whether to do so is permitted under the governing
Plan instruments and is appropriate for the Plan in view of its overall
investment policy and the composition and diversification of its portfolio. A
Plan fiduciary should especially consider the ERISA requirement of investment
prudence.
Certain provisions of ERISA (and corresponding provisions of the Code)
prohibit certain transactions involving the assets of a Plan and persons who
have certain specified relationships to the Plan (so-called "parties in
interest" within the meaning of ERISA or "disqualified persons" within the
meaning of the Code). The Issuer or certain of its affiliates might be
considered or might become "parties in interest" or "disqualified persons" with
respect to a Plan. Also, other persons who are "parties in interest" or
"disqualified persons" might acquire ownership rights in the collateral securing
a Series of Bonds. In either case, the acquisition or holding of Bonds by or on
behalf of such a Plan could be considered to give rise to an indirect
"prohibited transaction" within the meaning of ERISA and the Code, in the nature
of an indirect extension of credit. Conversely, the acquisition or holding of
Bonds by or on behalf of a "party in interest" or a "disqualified person" with
respect to a Plan which owns or later acquires ownership rights in the
collateral securing a Bond, also could be considered to give rise to such an
indirect "prohibited transaction".
However, there are at least three prohibited transaction class
exemptions issued by the Department of Labor (the "DOL") that might apply,
depending in part on who decided to purchase the Bonds for the Plan: DOL
Prohibited Transaction Exemption ("PTE") 84-14 (Class Exemption for Plan Asset
Transactions Determined by Independent Qualified Professional Asset Managers);
PTE 91-38 (Class Exemption for Certain Transactions Involving Bank Collective
Investment Funds); and PTE 90-1 (Class Exemption for Certain Transactions
Involving Insurance Company Pooled Separate Accounts).
Due to the complexity of these rules and the penalties imposed upon
persons involved in prohibited transactions, fiduciaries of a Plan considering
the purchase of Bonds of any Series should consult their own counsel regarding
the application of ERISA and the Code to the purchase. Employee benefit plans
which are governmental plans (as defined in Section 3(32) of ERISA) and certain
church plans (as defined in Section 3(33) of ERISA) are not subject to the
foregoing ERISA requirements.
PLAN OF DISTRIBUTION
The Issuer may sell each Series of Bonds to or through NationsBanc
Capital Markets, Inc., an affiliate of the Issuer ("NCMI"), or underwriting
syndicates represented by NCMI (collectively, the "Underwriters"). NCMI's
participation in any such offering will comply with the requirements of National
Association of Securities Dealers, Inc. The Prospectus Supplement with respect
to each Series of Bonds will set forth the terms of the offering of such Series
of Bonds, including the name or names of the Underwriters, the proceeds to and
their use by the Issuer, and either the initial public offering price, the
discounts and commissions to the Underwriters and any discounts or concessions
allowed or reallowed to certain dealers, or the method by which the price at
which the Underwriters will sell the Bonds will be determined. The Underwriters
will be obligated to purchase all of the Bonds described in the Prospectus
Supplement with respect to a Series if any such Bonds are purchased. The Bonds
of each Series may be acquired by the Underwriters for their own account and may
be resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale.
The place and time of delivery for each Series of Bonds in respect of
which this Prospectus is delivered will be set forth in the Prospectus
Supplement with respect to each such Series.
If and to the extent required by applicable law or regulation, this
Prospectus will be used by NCMI in connection with offers and sales related to
market-making transactions in the Bonds previously offered hereunder in
transactions in which NCMI acts as principal. NCMI may also act as agent in such
transactions. Sales may be made at negotiated prices determined at the time of
sale.
LEGAL MATTERS
The legality of the Bonds will be passed upon for the Issuer by Stroock
& Stroock & Lavan, New York, New York. Certain other legal matters with respect
to the issuance of the Bonds will be passed upon by Robert Long, Jr. of
NationsBank Corporation, Charlotte, North carolina
EXPERTS
The financial statements of Main Place Funding Corporation
incorporated in this Prospectus Supplement by reference to the Main Place
Funding Corporation Annual Report on Form 10-K for the year ended December 31,
1995, have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
The Issuer's ratio of earnings to fixed charges, to the extent
relevant, will be set forth in the Prospectus Supplement with respect to each
Series.
<PAGE>
INDEX OF TERMS IN THE PROSPECTUS
Advances Holder
Basic Maintenance Amount Housing Act
Bond Owner Indenture
Bonds Indirect Participants
CEDEL Interest Payment Dates
CEDEL Participants Issuer
Cede Jumbo Mortgage Notes
Code Late Payment
Collateral Replacement Limit MP Holdings
Collection Account Main Place REIT
Commission Market Discount
Condominium Notes Market Value
Conventional Mortgage Notes Market Value Rate
Cooperative Mortgage Notes
Cure Date Mortgaged Properties
Custodian Mortgages
Cut-Off Date NationsBank, N.A.
Definitive Bonds NationsBank Texas
Deposit Securities NCMI
Depositories 1934 Act
Determination Date Outstanding
Discounted Value Over 80% Notes
Distribution Account Participants
DOL Plans
DTC Pledged Property
Eligible Adjustable-Rate Mortgage Notes Premium
Eligible Collateral Private Mortgage Insurance
Eligible Fixed-Rate Mortgage Notes Prospectus Supplement
Eligible Mortgage Notes PTE
Eligible Mortgage Pass-Through Certificates Rating Agency
Eligible Mortgages Reserve Fund
ERISA Series
Euroclear Servicer
Euroclear Operator Servicing Agreement
Euroclear Participants Servicing Fee
Euroclear System Short-Term Money Market Instruments
Event of Default Stated Maturity
FDIC Terms and Conditions
FHA Insured Mortgage Notes Trustee
Global Prospectus Supplement Underwriters
High Balance Notes U.S. Person
VA Guaranteed Mortgage Notes
Valuation Date
<PAGE>
PART II
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article XII of the Bylaws of the Trust provide that to the maximum
extent permitted by Maryland law in effect from time to time, the Trust, without
requiring a preliminary determination of the ultimate entitlement to
indemnification, shall indemnify (a) any Trustee, officer or shareholder or any
former Trustee, officer or shareholder (including among the foregoing, for all
purposes of this Article XII and without limitation, any individual who, while a
Trustee and at the request of the Trust, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise as a director, officer, partner or trustee of such corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise),
who has been successful, on the merits or otherwise, in the defense of a
proceeding to which he was made a party by reason of such status, against
reasonable expenses incurred by him in connection with the proceeding, (b) any
Trustee or officer or any former trustee or officer against any claim or
liability to which he may become subject by reason of such status unless it is
established that (i) his act or omission was committed in bad faith or was the
result of active and deliberate dishonesty, (ii) he actually received an
improper personal benefit in money, property or services or (iii) in the case of
a criminal proceeding, he had reasonable cause to believe that his act or
omission was unlawful and (c) each shareholder or former shareholder against any
claim or liability to which he may become subject by reason of his status as a
shareholder or former shareholder. In addition, the Trust shall pay or
reimburse, in advance of final disposition of a proceeding, reasonable expenses
incurred by a Trustee, officer or shareholder or former Trustee, officer or
shareholder made a party to a proceeding by reason of his status as a Trustee,
officer or shareholder provided that, in the case of a Trustee or officer, the
Trust shall have received (i) a written affirmation by the Trustee or officer of
his good faith belief that he has met the applicable standard of conduct
necessary for indemnification by the Trust as authorized by these Bylaws and
(ii) a written undertaking by or on his behalf to repay the amount paid or
reimbursed by the Trust if it shall ultimately be determined that the applicable
standard of conduct was not met. The Trust may, with the approval of its
Trustees, provide such indemnification and payment or reimbursement of expenses
to any Trustee, officer or shareholder or any former Trustee, officer or
shareholder who served a predecessor of the Trust and to any employee or agent
of the Trust or a predecessor of the Trust. Neither the amendment nor repeal of
this Section, nor the adoption or amendment of any other provision of the
Declaration of Trust or these Bylaws inconsistent with this Section, shall apply
to or affect in any respect the applicability of this paragraph with respect to
any act or failure to act which occurred prior to such amendment, repeal or
adoption. Any indemnification or payment or reimbursement of the expenses
permitted by these Bylaws shall be furnished in accordance with the procedures
provided for indemnification and payment or reimbursement of expenses under
Section 2-418 of the Maryland General Corporation Law (the "MGCL") for directors
of Maryland corporations. The Trust may provide to Trustees, officers and
shareholders such other and further indemnification or payment or reimbursement
of expenses as may be permitted by MGCL as in effect from time to time for
directors of Maryland corporations.
Section VII.4 of the Declaration of Trust states that the Bylaws of the
Trust shall require that, to the maximum extent permitted by Maryland law, the
Trust shall indemnify, and pay reasonable expenses to, as such expenses are
incurred by, each Shareholder, Trustee, officer, employee or agent (including
any person who, while a Trustee of the Trust, is or was serving at the request
of the Trust as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan) from all claims and liabilities to
which such person may become subject by reason of his being or having been a
Shareholder, Trustee, officer, employee or agent.
ITEM 16. EXHIBITS
* 1 Form of Underwriting Agreement.
+ 3.1 Declaration of Trust of Main Place Real Estate Investment Trust.
+ 3.2 By-Laws of Main Place Real Estate Investment Trust.
* 4.1 Indenture dated as of July 18, 1995 between Main Place
Funding Corporation and First Trust National Association, as
Trustee and filed as an Exhibit to the Form S-3 of Main Place
Funding Corporation filed on August 10, 1994.
* 4.2 Indenture dated as of October 31, 1995 between Main Place
Funding Corporation and First Trust National Association, as
Trustee and filed as an Exhibit to the Form S-3 of Main Place
Funding Corporation filed on August 10, 1994.
* 4.3 Form of Indenture.
+ 4.4 First Supplemental Indenture dated as of November 1, 1996
between Main Place Funding Corporation and First Trust
National Association, as Trustee, in connection with the
Indenture dated July 18, 1995.
+ 4.4 First Supplemental Indenture dated as of November 1, 1996
between Main Place Funding Corporation and First Trust
National Association, as Trustee, in connection with the
Indenture dated October 31, 1995.
+ 4.5 Servicing Agreement, dated November 1, 1996, between Main
Place Real Estate Investment Trust and NationsBanc Mortgage
Corporation.
+ 4.6 Servicing Agreement, dated November 1, 1996, between Main Place Real
Estate Investment Trust
and NationsBank, N. A.
* 5.1 Opinion of Stroock & Stroock & Lavan with respect to legality of the
Bonds.
* 8 Opinion of Stroock & Stroock & Lavan with respect to tax matters.
+ 10.1 Mortgage Loan Contribution Agreement dated as of October 30, 1996,
between NationsBank of
Texas, N.A. and Main Place Real Estate Investment Trust.
+ 10.2 Mortgage Loan Assignment dated as of November 1, 1996, by
and among NationsBank of Texas, N.A. Main Place Real Estate
Investment Trust and NationsBanc Mortgage Corporation.
+ 10.3 Mortgage Loan Contribution Agreement dated as of October 30, 1996,
between NationsBank, N.A.
(South) and Main Place Real Estate Investment Trust.
+ 10.4 Mortgage Loan Assignment dated as of November 1, 1996, by
and among NationsBank, N.A. (South), Main Place Real Estate
Investment Trust and NationsBanc Mortgage Corporation.
+ 10.5 Mortgage Loan Contribution Agreement dated as of October 30, 1996,
between NationsBank, N.A.
and Main Place Real Estate Investment Trust.
+ 10.6 Mortgage Loan Assignment dated as of November 1, 1996,
between NationsBank, N.A., Main Place Real Estate Investment
Trust and NationsBanc Mortgage Corporation.
+ 10.7 Stock Purchase Agreement dated November 1, 1996, between
NationsBank, N.A. and NationsBank
Texas.
+ 10.8 Stock Purchase Agreement dated November 1, 1996, between
NationsBank, N.A. and NationsBank
South.
+ 10.9 Stock Purchase Agreement dated November 1, 1996, between
NationsBank South and NationsBank, N.A. transferring Main
Place Funding Corporation to NationsBank, N.A.
+ 10.10 Stock Contribution Agreement dated November 1, 1996,
between Main Place Holdings Corporation and NationsBank, N.A
transferring Main Place Real Estate Investment Trust from
NationsBank, N.A., to Main Place Holdings Corporation.
+ 10.11 Stock Contribution Agreement dated November 1, 1996,
between Main Place Holdings Corporation and NationsBank N.A
transferring Main Place Funding Corporation from NationsBank,
N.A. to Main Place Holdings Corporation.
+ 10.12 Mortgage Loan Purchase and Sale Agreement dated October
31, 1996, between NationsBank Holdings Corporation and
NationsBank South.
+ 10.13 Agreement of Merger, dated November 1, 1996, by and
between MP Holdings Corporation, Main Place Funding
Corporation and Main Place Real Estate Investment Trust.
+ 10.14 Advisory Agreement, dated November 1, 1996, between Main
Place Real Estate Investment Trust and NationsBank, N.A.
+ 10.15 Assignment, as of November 1, 1996, by Main Place
Funding Corporation to Main Place Real Estate Investment Trust
of Amended and Restated Credit Agreement dated as of October
31, 1995.
+ 10.16 Consent of NationsBank of Texas, N.A. dated November 1, 1996, to
assignment of Amended and
Restated Credit Agreement dated as of October 31, 1995.
+ 10.17 Assignment, as of November 1, 1996, by Main Place
Funding Corporation to Main Place Real Estate Investment Trust
of Credit Agreement dated as of October 31, 1995.
+ 10.18 Consent of NationsBank of Texas, N.A. dated November 1, 1996, to
assignment of Credit
Agreement dated as of October 31, 1995.
* 23 Consent of Stroock & Stroock & Lavan.
23.1 Consent of Price Waterhouse LLP.
24.1 Powers of Attorney of Trustees of Main Place Real Estate Investment
Trust.
* 25 Statement on Form T-1 of eligibility and qualification under the
Trust Indenture Act of 1939 of
First Trust National Association, as Trustee.
- ---------------
*Previously filed.
+Previously filed as an Exhibit to the Main Place Real Estate Investment Trust
Quarterly Report on Form 10-Q (File No. 33-82040) for the period ended
September 30, 1996.
ITEM 17. UNDERTAKINGS
(a) As to Rule 415
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement; (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed with
the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement; provided, however, that (a)(1)(i) and
(a)(1)(ii) will not apply if the information required to be included in a
post-effective amendment thereby is contained in periodic reports filed pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) As to documents subsequently filed that are incorporated by
reference:
That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) As to indemnification:
That, insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 15
above, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d) In addition, the undersigned registrant undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(i) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below on this Post-Effective
Amendment to Registration Statement hereby constitutes and appoints John E. Mack
and Gary S. Williams, and each of them, with full power to act without the
other, his/her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him/her and in his/her name, place and
stead, in any and all capacities (until revoked in writing) to sign any and all
amendments to this Registration Statement (including post-effective amendments
and amendments thereto), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his/her substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Charlotte,
North Carolina, on December 31, 1996.
MAIN PLACE REAL ESTATE INVESTMENT TRUST
as successor to the registrant
By: /s/ John E. Mack
John E. Mack
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on December , 1996 by the following
persons in the capacities indicated.
Signature Title Date
Board of Trustees:
By:/s/ John E. Mack Trustee, President December 31, 1996
---------------------- and Treasurer
John E. Mack
By:/s/ G. Patrick Phillips Trustee December 31, 1996
----------------------
G. Patrick Phillips
By:/s/ William L. Maxwell Trustee December 31, 1996
----------------------
William L. Maxwell
By:/s/ James H. Luther Outside Trustee December 31, 1996
----------------------
James H. Luther
CONSENT OF PRICE WATERHOUSE LLP
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of Main Place Real
Estate Investment Trust of our report dated March 20, 1996 appearing on page F-2
of Main Place Funding Corporation's Annual Report on Form 10-K for the year
ended December 31, 1995. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Charlotte, North Carolina
January 9, 1997
POWER OF ATTORNEY
Each person whose signature appears below on this Post-Effective
Amendment to Registration Statement hereby constitutes and appoints John E. Mack
and Gary S. Williams, and each of them, with full power to act without the
other, his/her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him/her and in his/her name, place and
stead, in any and all capacities (until revoked in writing) to sign any and all
amendments to this Registration Statement (including post-effective amendments
and amendments thereto), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his/her substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Charlotte,
North Carolina, on December 31, 1996.
MAIN PLACE REAL ESTATE INVESTMENT TRUST
as successor to the registrant
By: /s/ John E. Mack
John E. Mack
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on December , 1996 by the following
persons in the capacities indicated.
Signature Title Date
Board of Trustees:
By:/s/ John E. Mack Trustee, President December 31, 1996
---------------------- and Treasurer
John E. Mack
By:/s/ G. Patrick Phillips Trustee December 31, 1996
----------------------
G. Patrick Phillips
By:/s/ William L. Maxwell Trustee December 31, 1996
----------------------
William L. Maxwell
By:/s/ James H. Luther Outside Trustee December 31, 1996
----------------------
James H. Luther
