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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 12 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 28, 1998
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MERIT Securities Corporation
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(Exact name of registrant as specified in charter)
Virginia 03992 54-1736551
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
10900 Nuckols Road, 3rd Floor, Glen Allen, Virginia 23060
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (804) 217-5800
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<PAGE>
<TABLE>
Item 1. Changes in Control of Registrant.
Not Applicable.
Item 2. Acquisition or Disposition of Assets.
Not Applicable.
Item 3. Bankruptcy or Receivership.
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant.
Not Applicable.
Item 5. Other Events.
On May 28, 1998, the Registrant issued $1,538,833,000 principal amount
of Class 1-A1, Class 1-A2, Class 2-A1, Class 2-A2, Class 2-A3, Class 3-A1, Class
B-1 and Class B-2 Bonds (the "Underwritten Bonds") and $20,000,000 initial
principal balance of its Collateralized Bonds, Series 11, Class B-3 Bonds (the
"Placed Bonds" and collectively with the Underwritten Bonds, the "Registered
Bonds") pursuant to the Series 11 Supplement dated as of May 1, 1998 (the
"Series 11 Supplement"), to the Indenture dated as of May 1, 1998 (the "Original
Indenture" and, collectively with the Series 11 Supplement, the "Indenture"),
between the Registrant and Chase Bank of Texas, National Association, as trustee
(the "Trustee"). Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Indenture. The initial principal amounts, Class
Interest Rates and the Stated Maturities of the Registered Bonds are as follows:
<CAPTION>
Original Class Interest Stated
Designation Principal Amount Rate Maturity
<S> <C>
Class 1-A1 $262,000,000 (1) July 28, 2022
Class 1-A2 238,000,000 (1) December 28, 2028
Class 2-A1 300,000,000 (1) March 28, 2018
Class 2-A2 200,000,000 (1) November 28, 2022
Class 2-A3 166,560,000 (1) September 28, 2025
Class 3-A1 258,173,000 (1) April 28, 2027
Class B-1 59,600,000 (1) September 28, 2032
Class B-2 34,500,000 (1) September 28, 2032
Class B-3 20,000,000 (1) September 28, 2032
</TABLE>
(1) Variable as described in Exhibit 4.1.
As security for the Registered Bonds, the Registrant pledged
certificates representing substantially the entire interest in a pool of
conventional, one- to four-family, fully amortizing first lien mortgage loans
and manufactured housing installment sales contracts to the Trustee pursuant to
the Indenture. The certificates were purchased by the Registrant in a
privately-negotiated transaction with Issuer Holding Corp. ("IHC") pursuant to a
Sales Agreement dated May 22, 1998, between the Registrant and IHC
The Underwritten Bonds have been sold by the Registrant to Lehman
Brothers Inc., Greenwich Capital Markets, Inc., and First Union Capital Markets,
A Division of Wheat First Securities, Inc. (the "Underwriters") pursuant to an
Underwriting Agreement dated as of May 22, 1998, between the Underwriters, and
the Registrant and IHC. The Placed Bonds have been sold, together with other
bonds of the Registrant issued under the Indenture, by the Registrant to an
affiliate.
The description of the assets underlying the certificates pledged to
secure the Registered Bonds pursuant to the Indenture begins on the following
page. The amounts contained in the following tables have been rounded to the
nearest dollar amount or percentage, as applicable. Asterisks (*) in the
following tables indicate values between 0.0% and 0.5%.
<PAGE>
Item 6. Signations of Registrant's Directors.
Not Applicable.
Item 7. Financial Statements, Pro Forma, Financial Information and Exhibits
(a) Not Applicable.
(b) Not Applicable.
(c) Exhibits
4.1 Series 11 Supplement dated May 1, 1998, between the
Registrant and Chase Bank of Texas, National
Association, as Trustee.
<PAGE>
INDEX TO EXHIBITS
Exhibit
4.1 Series 11 Supplement dated May 1, 1998, between the Registrant and
Chase Bank of Texas, National Association, as Trustee.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 28, 1998
MERIT SECURITIES CORPORATION
By: /s/ Lisa R. Cooke
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Lisa R. Cooke, Vice President
MERIT SECURITIES CORPORATION,
as Issuer,
AND
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Trustee
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SERIES 11 SUPPLEMENT
Dated as of May 1, 1998,
TO
INDENTURE
Dated as of November 1, 1994,
as amended,
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COLLATERALIZED BONDS
Series 11
<PAGE>
<TABLE>
TABLE OF CONTENTS
Page
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<S> <C>
SERIES 11 SUPPLEMENT..............................................................................................3
PRELIMINARY STATEMENT.............................................................................................3
GRANTING CLAUSES..................................................................................................3
Section 1. Certain Defined Terms..............................................................................4
Section 2. Designation; Principal Amount; Maturity...........................................................11
Section 3. Date of the Bonds.................................................................................11
Section 4. Book-Entry and Certificated Bonds.................................................................12
Section 5. Denominations.....................................................................................13
Section 6. Determination of Interest Payments................................................................13
Section 7. Application of Funds..............................................................................14
Section 8. Places for Payment................................................................................17
Section 9. Redemption........................................................................................17
Section 10. Modification of Mortgage Certificates.............................................................17
Section 11. Subordinated Bonds................................................................................18
Section 12. Default...........................................................................................18
Section 13. Repurchase of Trust Certificate or Mortgage Certificate...........................................20
Section 14. Additional Obligations and Covenants of and Protection for the Trustee............................20
Section 15. Notice to the Rating Agencies.....................................................................20
Section 16. Monthly Remittance Report.........................................................................21
Section 17. Amendments to Indenture...........................................................................21
Section 18. Additional Covenants of the Issuer................................................................22
Section 19. Ratification of Indenture.........................................................................22
Section 20. Form of Bonds.....................................................................................22
Section 21. Schedules.........................................................................................22
Section 22. Counterparts......................................................................................22
Section 23. Governing Law.....................................................................................23
</TABLE>
SCHEDULE I A. TRUST CERTIFICATES
B. MORTGAGE CERTIFICATES
ANNEX A FORM OF INSTITUTIONAL ACCREDITED INVESTORS REPRESENTATION LETTER
ANNEX B FORM OF QUALIFIED INSTITUTIONAL BUYER REPRESENTATION LETTER
ANNEX C QIB REPRESENTATIONS
EXHIBIT 1 FORM OF Class 1-A1 BONDS
EXHIBIT 2 FORM OF Class 1-A2 BONDS
EXHIBIT 3 FORM OF Class 2-A1 BONDS
EXHIBIT 4 FORM OF Class 2-A2 BONDS
EXHIBIT 5 FORM OF Class 2-A3 BONDS
EXHIBIT 6 FORM OF Class 3-A1 BONDS
EXHIBIT 7 FORM OF Class B-1 BONDS
EXHIBIT 8 FORM OF Class B-2 BONDS
EXHIBIT 9 FORM OF Class B-3 BONDS
EXHIBIT 10 FORM OF Class B-A-1 BONDS
EXHIBIT 11 FORM OF Class B-A-2 BONDS
EXHIBIT 12 FORM OF Class B-B BONDS
EXHIBIT 13 FORM OF Class B-C BONDS
EXHIBIT 14 FORM OF Class B-D BONDS
2
<PAGE>
SERIES 11 SUPPLEMENT
THIS SERIES 11 SUPPLEMENT (this "Series Supplement"), dated as of May
1, 1998, by and between MERIT SECURITIES CORPORATION, a Virginia corporation
(the "Issuer"), and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, a national
banking association, as trustee (the "Trustee"), under an Indenture dated as of
November 1, 1994, as amended by a First Supplemental Indenture dated as of
December 1, 1997 (the "Original Indenture" and, as supplemented by this Series
Supplement, the "Indenture"), recites and provides as follows:
PRELIMINARY STATEMENT
Sections 4.01, 4.02 and 10.01 of the Original Indenture provide, among
other things, that the Issuer, when authorized by its Board of Directors, and
the Trustee may at any time and from time to time enter into an indenture
supplemental to the Original Indenture for the purpose of authorizing a Series
of Bonds and to specify certain terms of each Series of Bonds. The Board of
Directors of the Issuer has duly authorized the creation of Series of Bonds to
be known as the Collateralized Bonds, Series 11 (the "Bonds"). Nine Classes of
Bonds designated as provided herein with an aggregate principal balance of
$1,538,833,000 will constitute a Series known as the Public Bonds to be secured
by Trust Certificates and Mortgage Certificates representing Assets with an
Aggregate Collateral Value of $1,591,150,814.62 (including the Class F
Certificate to be deposited in the Collateralization Fund). Five Classes of
Bonds designated as provided herein with an aggregate principal balance of
$102,392,000 will constitute a Series known as the Private Bonds to be secured
by Trust Certificates representing Assets with an Aggregate Collateral Value of
$119,063,257.71.
GRANTING CLAUSES
(a) To secure the payment of the principal of and interest on the
Bonds in accordance with their terms, all the sums payable under the Original
Indenture and this Series Supplement with respect to the Bonds and the
performance of the covenants with respect to the Bonds contained in the Original
Indenture and this Series Supplement, the Issuer hereby Grants to the Trustee,
in trust and as collateral security as provided in the Original Indenture and
this Series Supplement, for the benefit of:
(i) the Holders of the Public Bonds, all the Issuer's right,
title and interest in and to any and all benefits accruing to the Issuer from
the Class A Certificate, the Mortgage Certificates, the Class B Certificate and
the Class F Certificate and all payments and distributions with respect thereto
for which the record date therefor is after the Delivery Date, the Public Bonds
Collateral Proceeds Account (with respect to proceeds of the Class A
Certificate, the Mortgage Certificates and the Class B Certificate) and the
Collateralization Fund;
(ii) the Holders of the Private Bonds, all the Issuer's right,
title and interest in and to any and all benefits accruing to the Issuer from
the Class C Certificate, Class D Certificate and Class E Certificate and all
payments and distributions with respect thereto for which the record date
therefor is after the Delivery Date, the Private Bonds Collateral Proceeds
Account (with respect to proceeds of the Class C Certificate, Class D
Certificate and Class E Certificate) and the Surplus Account; and
(iii) the Holders of the Bonds, as their interests may appear
as set forth in clauses (i) and (ii) above, (a) the Sales Agreement, except that
the Issuer shall retain its right to fees under Section 9 thereof and shall
retain and not assign its right to indemnification under Section 13 thereof,
respectively, (b) the Master Servicing Agreement and (c) the proceeds of all the
foregoing (including, but not by way of limitation, all cash, proceeds,
accounts, accounts receivable, notes, drafts, acceptances, chattel paper,
checks, deposit accounts, rights to payment of any and every kind and other
forms of obligations and receivables that at any time constitute all, or part
of, or are included in the proceeds of, any of the foregoing) (item (i) and the
related part of item (iii) collectively, the "Public Bonds Trust Estate" and
item (i) and the related part of item (iii) the "Private Bonds Trust Estate"
and, collectively, the "Trust Estates").
The Trustee acknowledges such Grant, accepts the trusts hereunder in
accordance with the provisions hereof and of the Original Indenture and agrees
to perform the duties herein or therein required in accordance with Article
Seven of the Original Indenture to the end that the interests of the Holders of
the Public Bonds and the Holders of the Private Bonds (treating the Public Bonds
and the Private Bonds as two separate Series of Bonds for all purposes of the
Indenture) may be adequately and effectively protected.
3
<PAGE>
Section 1 Certain Defined Terms
With respect to the Bonds and in addition to the definitions set forth
in Section 1.01 of the Original Indenture, the following provisions shall govern
the defined terms set forth below. Capitalized words and phrases used herein but
not defined herein or in the Original Indenture shall have the meanings set
forth in the Standard Provisions.
"Accrual Period": With respect to the Class 1-A1 Bonds and the Private
Bonds and each Payment Date, the calendar month immediately preceding the
calendar month in which such Payment Date is deemed to occur. With respect to
all other Classes of Bonds and each Payment Date, the period commencing on the
28th day of the preceding month through the 27th day of the month in which such
Payment Date is deemed to occur (except that the first Accrual Period will be
the period from the Delivery Date through June 27, 1998).
"Administrative Cost Rate": For each Loan, the sum of (i) the related
Servicing Fee Rate (except with respect to the Loans evidenced by the Class B
Certificate), (ii) the related Master Servicing Fee Rate, (iii) the rate used to
calculate premiums, if any, on mortgage pool and other insurance policies and
certain other administrative expenses, if any, applicable to such Asset, (iv)
the Bond Administration Fee Rate and (v) the fees of any Special Servicer, in
each case attributable to that Asset.
"Advance": As to any Asset, any advance of principal, interest, taxes,
insurance or expenses made by a Servicer, a Master Servicer, the Bond
Administrator or the Trustee.
"Aggregate Principal Balance of the Public Bonds Collateral": On any
Payment Date, the sum of the Scheduled Principal Balance of each Loan (aggregate
Unpaid Principal Balance of each Loan that is a Manufactured Home Loan (as
defined in the Trust Agreement)) underlying the Class A Certificate, the
Mortgage Certificates and the Class B Certificate.
"Asset": Any Asset evidenced by the Trust Certificates or the Mortgage
Certificates.
"Available Funds": On each Payment Date: (i) with respect to Public
Bonds, the sum of all payments or distributions received in respect of the Class
A Certificate, the Mortgage Certificates and Class B Certificate and deposited
in the Public Bonds Collateral Proceeds Account less the Bond Administration Fee
and any Advances by the Bond Administrator or the Trustee with respect thereto
(the "Public Bonds Available Funds"); and (ii) with respect to the Private
Bonds, the sum of all payments or distributions received in respect of the Class
C, Class D and Class E Certificates and deposited in the Private Bonds
Collateral Proceeds Account less the Bond Administration Fee and any
reimbursement for Advances by the Bond Administrator or the Trustee with respect
thereto (the "Private Bonds Available Funds").
"Bond Administrator": Dynex which is, for purposes of the Original
Indenture, the "Master Servicer".
"Bond Administration Fee Rate": 0.02% per annum, which shall include
the Trustee Fee Rate, of the aggregate principal balance of the Class A
Certificate, the Mortgage Certificates, the Class B Certificate, the Class C
Certificate, the Class D Certificate and the Class E Certificate.
"Bond Payment Percentage": On each Payment Date, 100%; except that,
upon the approval of the Issuer, if on any Payment Date (a) the
Overcollateralization Amount for Public Bonds is greater than or equal to the
Target Public Overcollateralization Amount but only to the extent that the
Overcollateralization Amount for Public Bonds continues to equal or exceed the
Target Public Overcollateralization Amount and (b) over the prior six months,
the average Unpaid Principal Balance of the Loans evidenced by the Class A
Certificate and the Loans evidenced by the Class B Certificate delinquent 60
days or more (including for this purpose any such Loans in foreclosure and REO)
has not exceeded 6% and 8%, respectively, of the average aggregate Unpaid
Principal Balance of all the Loans evidenced by the Class A Certificate and all
the Loans evidenced by the Class B Certificate, respectively, then the Bond
Payment Percentage for such Payment Date will be the Bond Percentage for such
Payment Date.
"Bond Percentage": On each Payment Date, the aggregate principal
balance of the Public Bonds divided by the then Aggregate Principal Balance of
the Public Bonds Collateral, in each case as of such Payment Date (but not more
than 100%).
"Bonds": The MERIT Securities Corporation, Series 11, Class 1-A1, Class
1-A2, Class 2-A1, Class 2-A2, Class 2-A3, Class 3-A1, Class B-1, Class B-2,
Class B-3, Class B-A-1, Class B-A-2, Class B-B, Class B-C and Class B-D Bonds.
4
<PAGE>
"Class A Certificate": The Trust Certificate identified as the Class A
Certificate in the Trust Agreement representing the entire ownership interest in
single family loans and manufactured home loans identified on Exhibit A to the
Trust Agreement.
"Class B Certificate": The Trust Certificate identified as the Class B
Certificate in the Trust Agreement representing the entire ownership interest in
manufactured home loans identified on Exhibit B to the Trust Agreement and a
Group B Pre-Funding Account established under the Trust Agreement for the
purchase of additional manufactured home loans provided for in the Trust
Agreement.
"Class C Certificate": The Trust Certificate identified as the Class C
Certificate in the Trust Agreement representing the entire ownership interest in
consumer finance loans identified on Exhibit C to the Trust Agreement.
"Class D Certificate": The Trust Certificate identified as the Class D
Certificate in the Trust Agreement representing the entire ownership interest in
a Group D Pre-Funding Account established under the Trust Agreement for the
purchase of tax lien secured notes provided for in the Trust Agreement.
"Class E Certificate": The Trust Certificate identified as the Class E
Certificate in the Trust Agreement representing the entire ownership interest in
Residential Assets identified on Exhibit E to the Trust Agreement.
"Class F Certificate": The Trust Certificate identified as the Class F
Certificate in the Trust Agreement representing the entire ownership interest in
manufactured home loans (Belgravia) identified on Exhibit F to the Trust
Agreement.
"Class 1-A1 Interest Rate": With respect to each Payment Date, the
Class 1-A1 Interest Rate per annum is 6.58%.
"Class 1-A2 Interest Rate": With respect to each Payment Date, the
Class 1-A2 Interest Rate per annum is One-Month LIBOR, as determined on the
applicable Floating Rate Determination Date, plus 0.40%, subject to a cap of
9.50%, except that (i) for the initial Payment Date, the Class 1-A2 Interest
Rate is 6.05% per annum; and (ii) the Class 1-A2 Interest Rate per annum for any
Payment Date following the first Payment Date on which the Issuer has the option
to redeem the Class 1-A2 Bonds is One-Month LIBOR, as determined on the
applicable Floating Rate Determination Date, plus 0.80%, subject to a cap of
9.90%; provided that, if the Issuer redeems the Class 1-A2 Bonds through an
Affiliate and the Class 1-A2 Bonds remain Outstanding following such purchase,
the Class 1-A2 Interest Rate shall not be increased as provided in this clause
(ii).
"Class 2-A1 Interest Rate": With respect to each Payment Date, the
Class 2-A1 Interest Rate per annum is the Fed Funds Average Rate for the
applicable Fed Funds Calculation Period, plus 0.33%, subject to a cap of 9.50%,
except that (i) for the initial Payment Date, the Class 2-A1 Interest Rate is
5.83% per annum; and (ii) the Class 2-A1 Interest Rate per annum for any Payment
Date following the first Payment Date on which the Issuer has the option to
redeem the Class 2-A1 Bonds is the Fed Funds Average Rate for the applicable Fed
Funds Calculation Period, plus 0.66%, subject to a cap of 9.83%; provided that,
if the Issuer redeems the Class 2-A1 Bonds through an Affiliate and the Class
2-A1 Bonds remain Outstanding following such purchase, the Class 2-A1 Interest
Rate shall not be increased as provided in this clause (ii).
"Class 2-A2 Interest Rate": With respect to each Payment Date, the
Class 2-A2 Interest Rate per annum is One-Month LIBOR, as determined on the
applicable Floating Rate Determination Date, plus 0.30%, subject to a cap of
9.50%, except that (i) for the initial Payment Date, the Class 2-A2 Interest
Rate is 5.95% per annum; and (ii) the Class 2-A2 Interest Rate per annum for any
Payment Date following the first Payment Date on which the Issuer has the option
to redeem the Class 2-A2 Bonds is One-Month LIBOR, as determined on the
applicable Floating Rate Determination Date, plus 0.60%, subject to a cap of
9.80%; provided that, if the Issuer redeems the Class 2-A2 Bonds through an
Affiliate and the Class 2-A2 Bonds remain Outstanding following such purchase,
the Class 2-A2 Interest Rate shall not be increased as provided in this clause
(ii).
"Class 2-A3 Interest Rate": With respect to each Payment Date, the
Class 2-A3 Interest Rate per annum is One-Month LIBOR, as determined on the
applicable Floating Rate Determination Date, plus 0.45%, subject to a cap of
9.50%, except that (i) for the initial Payment Date, the Class 2-A3 Interest
Rate is 6.10% per annum; and (ii) the Class 2-A3 Interest Rate per annum for any
Payment Date following the first Payment Date on which the Issuer has the option
to redeem the Class 2-A3 Bonds is One-Month LIBOR, as determined on the
applicable Floating Rate Determination Date, plus 0.90%, subject to a cap of
9.95%; provided that, if the Issuer redeems the Class 2-A3 Bonds through an
Affiliate and the Class 2-A3 Bonds remain Outstanding following such purchase,
the Class 2-A3 Interest Rate shall not be increased as provided in this clause
(ii).
5
<PAGE>
"Class 3-A1 Interest Rate": With respect to each Payment Date, the
Class 3-A1 Interest Rate per annum is One-Month LIBOR, as determined on the
applicable Floating Rate Determination Date, plus 0.31%, subject to a cap of
11.00%, except that (i) for the initial Payment Date, the Class 3-A1 Interest
Rate is 5.96% per annum; and (ii) the Class 3-A1 Interest Rate per annum for any
Payment Date following the first Payment Date on which the Issuer has the option
to redeem the Class 3-A1 Bonds is One-Month LIBOR, as determined on the
applicable Floating Rate Determination Date, plus 0.62%, subject to a cap of
11.31%; provided that, if the Issuer redeems the Class 3-A1 Bonds through an
Affiliate and the Class 3-A1 Bonds remain Outstanding following such purchase,
the Class 3-A1 Interest Rate shall not be increased as provided in this clause
(ii).
"Class B-1 Interest Rate": With respect to each Payment Date, the Class
B-1 Interest Rate per annum is One-Month LIBOR, as determined on the applicable
Floating Rate Determination Date, plus 0.70%, subject to a cap of 10.20%, except
that (i) for the initial Payment Date, the Class B-1 Interest Rate is 6.35% per
annum; and (ii) the Class B-1 Interest Rate per annum for any Payment Date
following the first Payment Date on which the Issuer has the option to redeem
the Class B-1 Bonds is One-Month LIBOR, as determined on the applicable Floating
Rate Determination Date, plus 1.20%, subject to a cap of 10.70%; provided that,
if the Issuer redeems the Class B-1 Bonds through an Affiliate and the Class B-1
Bonds remain Outstanding following such purchase, the Class B-1 Interest Rate
shall not be increased as provided in this clause (ii).
"Class B-2 Interest Rate": With respect to each Payment Date, the Class
B-2 Interest Rate per annum is One-Month LIBOR, as determined on the applicable
Floating Rate Determination Date, plus 1.00%, subject to a cap of 10.50%, except
that (i) for the initial Payment Date, the Class B-2 Interest Rate is 6.65% per
annum; and (ii) the Class B-2 Interest Rate per annum for any Payment Date
following the first Payment Date on which the Issuer has the option to redeem
the Class B-2 Bonds is One-Month LIBOR, as determined on the applicable Floating
Rate Determination Date, plus 1.50%, subject to a cap of 11.00%; provided that,
if the Issuer redeems the Class B-2 Bonds through an Affiliate and the Class B-2
Bonds remain Outstanding following such purchase, the Class B-2 Interest Rate
shall not be increased as provided in this clause (ii).
"Class B-3 Interest Rate": With respect to each Payment Date, the Class
B-3 Interest Rate per annum is One-Month LIBOR, as determined on the applicable
Floating Rate Determination Date, plus 1.75%, subject to a cap of 11.00%, except
that (i) for the initial Payment Date, the Class B-3 Interest Rate is 7.40% per
annum; and (ii) the Class B-3 Interest Rate per annum for any Payment Date
following the first Payment Date on which the Issuer has the option to redeem
the Class B-3 Bonds is One-Month LIBOR, as determined on the applicable Floating
Rate Determination Date, plus 2.25%, subject to a cap of 11.50%; provided that,
if the Issuer redeems the Class B-3 Bonds through an Affiliate and the Class B-3
Bonds remain Outstanding following such purchase, such Class B-3 Interest Rate
shall not be increased as provided in this clause (ii).
"Class B-A-1 Interest Rate": With respect to each Payment Date, the
Class B-A-1 Interest Rate is 6.50% per annum.
"Class B-A-2 Interest Rate": With respect to each Payment Date, the
Class B-A-2 Interest Rate is 6.50% per annum.
"Class B-B Interest Rate": With respect to each Payment Date, the Class
B-B Interest Rate is 6.70% per annum.
"Class B-C Interest Rate": With respect to each Payment Date, the Class
B-C Interest Rate is 7.00% per annum.
"Class B-D Interest Rate": With respect to each Payment Date, the Class
B-D Interest Rate is 8.00% per annum.
"Class Interest Rate": With respect to a Payment Date, the Class 1-A1,
Class 1-A2, Class 2-A1, Class 2-A2, Class 2-A3, Class 3-A1, Class B-1, Class
B-2, Class B-3, Class B-A-1, Class B-A-2, Class B-B, Class B-C and Class B-D
Interest Rate, as applicable.
"Clearing Agency": The Depository Trust Company or any successor
depository selected by the Issuer.
6
<PAGE>
"Collateral": The Trust Certificates and the Mortgage Certificates.
"Collateralization Fund": The account established pursuant to Section
7(h) hereof.
"Current Interest": With respect to each Class of Bonds and each
Payment Date, the interest accrued at the applicable Class Interest Rate for the
applicable Accrual Period on the principal balance of such Class and, in the
case of each Class of Public Bonds only, plus (i) the excess of (A) interest
accrued at the applicable Class Interest Rate with respect to prior Payment
Dates over (B) the amount actually paid to such Class with respect to interest
on such prior Payment Dates plus (ii) interest on such excess at the applicable
Class Interest Rate for such Accrual Period less (iii) any Interest Carryover
Amount for such Class.
"Delivery Date": May 28, 1998.
"Dynex": Dynex Capital, Inc., a Virginia corporation.
"Dynex Master Servicing Agreement": The master servicing agreement
dated as of May 1, 1998, by and between the Issuer and Dynex, which incorporates
therein the Standard Terms to the Master Servicing Agreement, June 1995 Edition.
"Dynex Services": Dynex Financial, Inc., a Virginia corporation, doing
business as Dynex Services.
"Eligible Investments": For purposes of the definition of Eligible
Investments in the Indenture, references to long-term debt ratings in one of the
two highest applicable categories from each Rating Agency shall be deemed to be
ratings of "Aaa" or higher by Moody's Investors Service, Inc., and "AAA" or
higher by Fitch IBCA, Inc. and references to commercial paper or short-term debt
ratings in the highest applicable category from each Rating Agency shall be
deemed to be "P-1" by Moody's Investors Service, Inc. and "F-1" by Fitch IBCA,
Inc.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"Fed Funds Average Rate": With respect to each Accrual Period other
than the initial Accrual Period, the fraction, expressed as a percentage
(rounded to five decimal places), the numerator of which is equal to the sum of
Fed Funds Rate for each day during the applicable Fed Funds Calculation Period
and the denominator of which is equal to the number of days in such Fed Funds
Calculation Period.
"Fed Funds Calculation Period"" With respect to each Accrual Period,
the period commencing on the 19th day of the calendar month immediately
preceding the month in which the related Payment Date is deemed to occur and
ending on the 18th day of the month in which the related Payment Date is deemed
to occur. The Fed Funds Rate will reset on each Fed Funds Business Day. The Fed
Funds Rate in effect on each day of each Fed Funds Calculation Period is: (a) if
such day is a Fed Funds Business Day, the Fed Funds Rate determined as of such
Fed Funds Business Day or (b) if such day is not a Fed Funds Business Day, the
Fed Funds Rate in effect on the immediately preceding Fed Funds Business Day.
"Fed Funds Business Day": Any day other than a Saturday or Sunday or a
day on which banking institutions in New York City are closed.
"Fed Funds Rate": For each Fed Funds Business Day, the per annum rate
established in accordance with the provisions of Section 6(c) hereof.
"Floating Rate Determination Date": For each Accrual Period, the second
London Banking Day prior to the commencement of such Accrual Period.
"Group I Principal Payment Amount": On each Payment Date, the sum of
(i) the product of the Bond Payment Percentage and the portion of the Public
Bonds Available Funds attributable to principal received with respect to the
Class A Certificates and (ii) if required to be used to pay principal of the
Public Bonds (a) the Interest Payment Amount for the Public Bonds to the extent
provided in clause Sixth of Section 7(a) hereof and (b) any amount in the
Collateralization Fund to the extent of Realized Losses with respect to the
Class A Certificate.
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<PAGE>
"Group II Principal Payment Amount": On each Payment Date, the sum of
(i) the product of the Bond Payment Percentage and the portion of the Public
Bonds Available Funds attributable to principal received with respect to the
Mortgage Certificates and (ii) if required to be used to pay principal of the
Public Bonds, (a) the Interest Payment Amount for the Public Bonds to the extent
provided in clause Sixth of Section 7(a) hereof and (b) any amount in the
Collateralization Fund to the extent of Realized Losses with respect to the
Mortgage Certificates.
"Group III Principal Payment Amount": On each Payment Date, the sum of
(i) the product of the Bond Payment Percentage and the portion of the Public
Bonds Available Funds attributable to principal received with respect to the
Class B Certificates and (ii) if required to be used to pay principal of the
Public Bonds (a) the Interest Payment Amount for the Public Bonds to the extent
provided in clause Sixth of Section 7(a) hereof and (b) any amount in the
Collateralization Fund to the extent of Realized Losses with respect to the
Class B Certificates.
"IHC": Issuer Holding Corp., a Virginia corporation.
"Initial Purchaser": MSC I, L.P., a Virginia limited partnership, as
initial purchaser of the Class B-3 Bonds and the Private Bonds.
"Institutional Accredited Investor": An institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act that is not a QIB.
"Interest Carryover Amount": With respect to each Class of Public Bonds
and each Payment Date, the sum of (i) the product of (x) the principal balance
of such Class and (y) one twelfth of the excess of (A) the Class Interest Rate
for such Class over (B) the Net Rate on the Loans, in each case with respect to
such Payment Date, and (ii) any such product remaining outstanding with respect
to prior Payment Dates, together with interest thereon at the applicable Class
Interest Rate.
"Interest Payment Amount for the Private Bonds": On each Payment Date,
the sum of (a) the Private Bonds Available Funds and (b) the amount in the
Surplus Account immediately prior to making all payments then required to be
made on the Private Bonds.
"Interest Payment Amount for the Public Bonds": On each Payment Date,
the sum of (i) the portion of the Public Bonds Available Funds attributable to
interest and (ii) any interest earnings on the Collateralization Fund to the
extent required to be used to pay Current Interest and any Interest Carryover
Amount on the Public Bonds.
"Loans": The Loans underlying the Class A Certificate, the Mortgage
Certificates, the Class B Certificate and the Class F Certificate.
"London Banking Day": Any day on which commercial banks and foreign
exchange markets settle payments in London and New York City.
"Mortgage Certificates": The mortgage certificates listed in Schedule
IB to this Series Supplement.
"Net Rate on the Loans": The weighted average (by principal balance) of
the interest rate with respect to each Loan less the Administrative Cost Rate
for such Loan.
"One-Month LIBOR": For each applicable Accrual Period, the per annum
rate established in accordance with the provisions of Section 6(b) hereof.
"Overcollateralization Amount for Public Bonds": On each Payment Date,
before giving effect to any payments to be made on such Payment Date, the
excess, if any, of (i) the sum of (a) the Aggregate Principal Balance of the
Public Bonds Collateral and (b) the balance in the Collateralization Fund over
(ii) the aggregate principal balance of the Public Bonds.
"Private Bonds": The Class B-A-1, Class B-A-2, Class B-B, Class B-C and
Class B-D Bonds.
"Principal Payment Amount for Private Bonds": On each Payment Date, the
greater of:
(i) the excess of:
(a) the Private Bonds Available Funds over
(b) the amount applied to pay interest on the Private
Bonds pursuant to Section 7(b) hereof; and
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<PAGE>
(ii) the lesser of
(a) the excess of
(I) the sum of:
(A) the Private Bonds Available Funds and
(B) the amount in the Surplus Account
immediately after paying interest on the
Private Bonds over
(II) the amount applied to pay interest on the
Private Bonds pursuant to Section 7(b) hereof;
and
(b) the excess of:
(I) the Principal Balance of the Private Bonds over
(II) the Target Principal Balance for Private Bonds.
"Principal Payment Amount for Public Bonds": The sum of the Group I
Principal Payment Amount, the Group II Principal Payment Amount and the Group
III Principal Payment Amount.
"Public Bonds": The Class 1-A1, Class 1-A2, Class 2-A1, Class 2-A2,
Class 2-A3, Class 3-A1, Class B-1, Class B-2 and Class B-3 Bonds.
"Purchase Price": With respect to a Trust Certificate or a Mortgage
Certificate purchased from the Trust Estate in accordance with Section 7(b) of
the Sales Agreement, an amount equal to the principal balance thereof plus
accrued and unpaid interest thereon.
"QIB": A "qualified institutional buyer" as defined by Rule 144A(a)(1)
under the Securities Act of 1933.
"Rating Agency": Each of Moody's Investors Service, Inc., and Fitch
IBCA, Inc.
"Redemption Price": An amount equal to 100% of the aggregate principal
balance of the Class of Bonds redeemed plus accrued and unpaid interest
(including any Interest Carryover Amount) through the applicable Accrual Period.
"Sales Agreement": The Sales Agreement dated as of May 22, 1998,
between the Issuer and IHC relating to the Mortgage Certificates and the Trust
Certificates.
"Senior Private Bonds": The Class B-A-1 and Class B-A-2 Bonds;
provided, however, that, for purposes of Section 12(b) hereof, after all such
Senior Private Bonds have been paid in full, the Senior Private Bonds shall be
as provided in the definition of Subordinated Private Bonds.
"Senior Public Bonds": The Class 1-A1 and Class 1-A2 (the "Group I
Senior Public Bonds"), the Class 2-A1, Class 2-A2 and Class 2-A3 (the "Group II
Senior Public Bonds") and the Class 3-A1 Bonds (the "Group III Senior Public
Bonds"); provided, however, that, for purposes of Section 12(a) hereof, after
all such Senior Public Bonds have been paid in full, the Senior Public Bonds
shall be as provided in the definition of Subordinated Public Bonds
"Senior Public Overcollateralization Percentage": On the Delivery Date
or any Payment Date, (i) the excess of (a) the sum of (I) the Aggregate
Principal Balance of the Public Bonds Collateral and (II) the balance in the
Collateralization Fund over (b) the aggregate principal balance of the Senior
Public Bonds divided by (ii) the aggregate principal balance of the Senior
Public Bonds.
"Senior Public Overcollateralization Test": The Senior
Overcollateralization Test is met on any Payment Date if the Senior Public
Overcollateralization Percentage on such Payment Date is at least twice the
Senior Overcollateralization Percentage on the Delivery Date.
"Series Year Reporting Date": May 1 of each year, commencing May 1,
1999.
"Subordinated Private Bonds": The Class B-B, Class B-C and Class B-D
Bonds; provided, however, that, for purposes of Section 12 hereof, 91 days after
the Senior Private Bonds are paid in full, the Class B-B Bonds shall be Senior
Private Bonds; 91 days after the Class B-B Bonds are paid in full, the Class B-C
Bonds shall be Senior Private Bonds; and 91 days after the Class B-C Bonds are
paid in full, the Class B-D Bonds shall be Senior Private Bonds.
9
<PAGE>
"Subordinated Public Bonds": The Class B-1, Class B-2 and Class B-3
Bonds; provided, however, for purposes of Section 12 hereof, that 91 days after
the Senior Public Bonds are paid in full, the Class B-1 Bonds shall be Senior
Public Bonds; 91 days after the Class B-1 Bonds are paid in full, the Class B-2
Bonds shall be Senior Public Bonds; and 91 days after the Class B-2 Bonds are
paid in full, the Class B-3 Bonds shall be Senior Public Bonds.
"Target Principal Balance for Private Bonds": On each Payment Date, the
sum of:
(i) the excess of:
(a) the Adjusted Principal Balance of the Class C
Certificate (after giving effect to any payments
received during the preceding Collection Period) over
(b) the Target Class C Certificate Overcollateralization
Amount:
(ii) the sum of:
(a) the product of:
(I) 83%,
(II) the Aggregate Class D Certificate Collateral
Value (after giving effect to any payments
received during the preceding Collection Period);
and
(III) the following number:
(x) for the period through May 28, 2000: 1; and
(y) after May 28, 2000, a fraction the
numerator of which is 48 minus the number
of months subsequent to May 28, 1998, and
the denominator of which is 48; and
(b) the principal balance in the Group D Pre-Funding
Account under the Trust Agreement; and
(iii) the excess of:
(a) the Principal Balance of the Class E Certificate over
(b) the Target Class E Certificate Overcollateralization
Amount.
For the purpose of the foregoing:
"Adjusted Principal Balance of the Class C Certificate": On each
Payment Date, the excess of (i) the aggregate principal balance of the Consumer
Finance Loans (as defined in the Trust Agreement) over (ii) the aggregate
principal balance of the Consumer Finance Loans that are delinquent four or more
payments.
"Aggregate Class D Certificate Collateral Value": On each Payment Date,
the sum of the Collateral Values of the Tax Liens represented by the Class D
Certificate. The Collateral Value of a group of Tax Liens secured by a property
shall be calculated on an aggregated basis. The Collateral Value of a Tax Lien
or a group of the Tax Liens secured by a property is the least of (i) the sum of
the Redemptive Values of such Tax Liens (as defined in the Trust Agreement),
(ii) the product of (a) 60% and (b) the Value (as defined in the Trust
Agreement) of the property securing such Tax Lien or group of Tax Liens and
(iii) $50,000.
"Principal Balance of the Class E Certificate": The Unpaid Principal
Balance of the delinquent or defaulted loans represented by the Class E
Certificate (or, in the case of loans foreclosed, the Unpaid Principal Balance
of such loans immediately prior to foreclosure).
"Target Class C Certificate Overcollateralization Amount": On each
Payment Date, the lesser of (i) $2,817,354 and (ii) the greater of (a) the
product of (I) 17.25% and (II) the Adjusted Principal Balance of the Class C
Certificate and (b) $100,000.
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<PAGE>
"Target Class E Certificate Overcollateralization Amount": On each
Payment Date, the lesser of (i) $708,084 and (ii) the greater of (a) the product
of (I) 2.75% and (II) the Principal Balance of the Class E Certificate and (b)
$100,000.
"Target Public Overcollateralization Amount": On any Payment Date, an
amount equal to the greater of (i) the product of (a) twice the percentage
represented by the initial Overcollateralization Amount for Public Bonds and (b)
the sum of (I) the Aggregate Principal Balance of the Public Bonds Collateral
and (II) the balance in the Collateralization Fund and (ii) $100,000.
"Reuters Screen NYAA" means the display designated as page "Reuters
Screen NYAA" on the Reuters Money Market Rates Service (or such other page
selected by the Bond Administrator as may replace the Reuters Screen NYAA on
that service for the purpose of displaying Federal Funds rates).
"Telerate Page 120" means the display designated as "Telerate Page 120"
on the Dow Jones Telerate Service (or such other page selected by the Bond
Administrator as may replace Telerate Page 120 on that service for the purpose
of displaying daily Federal Funds rates).
"Trust Agreement": Trust Agreement dated as of May 1, 1998, among the
IHC, as depositor, Dynex Capital, Inc., as Master Servicer, and Chase Bank of
Texas, National Association, as trustee.
"Trust Certificates": The Trust Certificates issued pursuant to the
Trust Agreement. For the purposes of the Original Indenture, the Trust
Certificates shall be "Mortgage Certificates" as defined in the Original
Indenture.
"Trustee Fee Rate": 0.002% per annum of the aggregate principal
balances of the Class A Certificate, the Mortgage Certificates, the Class B
Certificate, the Class C Certificate, the Class D Certificate and the Class E
Certificate.
Section 2 Designation; Principal Amount; Maturity
The aggregate principal amount of Public Bonds that may be
authenticated and delivered under this Series Supplement is limited to
$1,538,833,000, and the aggregate principal amount of Private Bonds that may be
authenticated and delivered under this Series Supplement is limited to
$102,392,000 except, in each case, for Bonds authenticated and delivered upon
registration of, transfer of or in exchange for, or in lieu of, other Bonds
pursuant to Sections 3.04, 3.05 or 3.06 of the Original Indenture. The aggregate
principal amount of Bonds shall be divided among fourteen Classes, having
designations, initial principal amounts, designations as Senior Public Bonds,
Subordinated Public Bonds, Senior Private Bonds or Subordinated Private Bonds,
Bond Interest Rates and Stated Maturities as follows:
<TABLE>
<CAPTION>
Initial Principal Private/ Bond Interest Stated
Designation Amount Subordinated Rate Maturity
<S> <C>
Public Bonds
Class 1-A1 $262,000,000 Senior Public (1) July 28, 2022
Class 1-A2 238,000,000 Senior Public (2) December 28, 2028
Class 2-A1 300,000,000 Senior Public (3) March 28, 2018
Class 2-A2 200,000,000 Senior Public (4) November 28, 2022
Class 2-A3 166,560,000 Senior Public (5) September 28, 2025
Class 3-A1 258,173,000 Senior Public (6) April 28, 2027
Class B-1 61,000,000 Subordinated Public (7) September 28, 2032
Class B-2 35,000,000 Subordinated Public (8) September 28, 2032
Class B-3 20,000,000 Subordinated Public (9) September 28, 2032
Private Bonds
Class B-A-1 55,007,000 Senior Private (10) January 28, 2027
Class B-A-2 23,574,000 Senior Private (11) January 28, 2027
Class B-B 10,715,000 Subordinated Private (12) January 28, 2027
Class B-C 6,548,000 Subordinated Private (13) January 28, 2027
Class B-D 6,548,000 Subordinated Private (14) January 28, 2027
</TABLE>
11
<PAGE>
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(1) The Class 1-A1 Interest Rate.
(2) The Class 1-A2 Interest Rate.
(3) The Class 2-A1 Interest Rate.
(4) The Class 2-A2 Interest Rate.
(5) The Class 2-A3 Interest Rate.
(6) The Class 3-A1 Interest Rate.
(7) The Class B-1 Interest Rate.
(8) The Class B-2 Interest Rate.
(9) The Class B-3 Interest Rate.
(10) The Class B-A-1 Interest Rate.
(11) The Class B-A-2 Interest Rate.
(12) The Class B-B Interest Rate.
(13) The Class B-C Interest Rate.
(14) The Class B-D Interest Rate.
Section 3 Date of the Bonds
The Bonds that are authenticated and delivered by the Trustee to or
upon the order of the Issuer on the Delivery Date shall be dated the Delivery
Date. All other Bonds that are authenticated after the Delivery Date for any
other purpose under the Indenture shall be dated the date of their
authentication.
Section 4 Book-Entry and Certificated Bonds
(a) The Bonds shall be issuable initially as Book-Entry Bonds as
one or more certificates in the name of the Clearing Agency or its nominee. For
all purposes, the Trustee shall deal with the Clearing Agency as the owner of
such Book-Entry Bonds in accordance with Section 3.08 of the Original Indenture.
The rights of Beneficial Owners of the Book-Entry Bonds shall be limited to
those established by law and agreements between such Beneficial Owners and the
Clearing Agency and Clearing Agency Participants. The Beneficial Owners of the
Book-Entry Bonds shall not be entitled to certificated securities for the
Book-Entry Bonds as to which they are the Beneficial Owners, except as provided
below. Requests and directions from, and votes of, the Clearing Agency, as
Holder, shall not be deemed to be inconsistent if they are made with respect to
different Beneficial Owners. Without the consent of the Issuer and the Trustee,
a Book-Entry Bond may not be transferred by the Clearing Agency except to
another Clearing Agency that agrees to hold the Book-Entry Bond for the account
of the respective Clearing Agency Participants and Beneficial Owners.
None of the Issuer, the Bond Administrator, any Master Servicer or the
Trustee will have any liability for any aspect of the records relating to or
payment made on account of Beneficial Owners of the Book-Entry Bonds held by the
Clearing Agency, or for maintaining, supervising or reviewing any records
relating to such Beneficial Owners.
The Book-Entry Bonds will be issued in fully registered, certificated
form to Beneficial Owners of Book-Entry Bonds or their nominees, rather than to
the Clearing Agency or its nominee, only if (i) the Issuer advises the Trustee
in writing that the Clearing Agency is no longer willing or able to discharge
properly its responsibilities as depository with respect to the Book-Entry Bonds
and the Issuer is unable to locate a qualified successor within 30 days, (ii)
the Issuer, at its option, elects to terminate the book-entry system operating
through the Clearing Agency or (iii) a Private Bond is transferred to an
Institutional Accredited Investor.
Upon the occurrence of either event described in Clause (i) or Clause
(ii) of the immediately preceding paragraph, the Trustee is required to notify
the Clearing Agency, which in turn will notify all Beneficial Owners of
Book-Entry Bonds through Clearing Agency Participants, of the availability of
Certificated Bonds. Upon surrender by the Clearing Agency of the certificates
representing the Book-Entry Bonds and receipt of instructions for
re-registration, the Trustee will reissue the Book-Entry Bonds as Certificated
Bonds to the Beneficial Owners identified in writing by the Clearing Agency.
Such Certificated Bonds shall not constitute Book-Entry Bonds.
(b) (i) The Private Bonds have not been registered under the
Securities Act of 1933, as amended (the "Securities Act") or any state
securities or "blue sky" laws, and neither the Issuer nor any other person is
under any obligation to register or qualify the Private Bonds under the
Securities Act or any state securities or "blue sky" laws or to provide
registration rights to any purchaser. No sale, pledge or other transfer of any
Private Bond or any beneficial interest therein may be made by any person unless
such sale, pledge or other transfer is made (i) to the Issuer or the Initial
Purchaser (or a designee of the Initial Purchaser), (ii) pursuant to an
effective registration statement under the Securities Act and effective
registration or qualification under applicable state securities laws or (iii)
(A) to QIBs in transactions complying with the requirements of Rule 144A or (B)
to Institutional Accredited Investors who sign a representation letter
substantially in the form of Annex A hereto.
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<PAGE>
(ii) No transfer of a Private Bond that is a Certificated Bond
("Certificated Private Bond") may be made to any person unless such person
delivers to the Trustee a representation letter in the form attached as Annex A
or Annex B hereto as applicable. Each person who becomes a Beneficial Owner of
Private Bonds that are Book-Entry Bonds ("Book-Entry Private Bonds") will be
deemed to make the representations set forth in Annex C hereto with respect to
such acquisition. A QIB may request that Book-Entry Private Bonds of which it is
the Beneficial Owner be exchanged for Certificated Private Bonds. Such request
must be accompanied with a completed representation letter in the form attached
hereto as Annex B.
(c) If a Beneficial Owner of a Book-Entry Private Bond proposes to
transfer its beneficial interest in such Bond and the proposed transferee is an
Institutional Accredited Investor, then the proposed transferee shall deliver an
executed representation letter in the form of Exhibit B hereto to the Trustee no
later than 30 days prior to the date on which the transfer is to be effectuated
and reflected in the Bond Register. The Issuer will cause a Private Certificated
Bond to be prepared for execution and delivery, and the Trustee shall
authenticate such Private Bond in accordance with the Indenture. Subject to the
Clearing Agency's customary procedures, the Beneficial Owner's interest in such
Bond held by its Clearing Agency Participant and by the Clearing Agency will be
reduced in an amount equal to the aggregate principal amount of the Private Bond
being transferred (and the Book-Entry Bond held on behalf of the Clearing Agency
will be modified or substituted for accordingly) and a Private Certificated Bond
in an equal aggregate principal amount registered in the name of such
Institutional Accredited Investor shall be delivered to such Institution
Accredited Investor. Thereafter, such Institution Accredited Investor shall be
recognized as a Bondholder under the Indenture. In all cases, Private
Certificated Bonds delivered in exchange for any beneficial interest in
Book-Entry Private Bonds will be registered in the names, and issued in any
approved denominations requested by the Beneficial Owner of a Book-Entry Private
Bond.
(d) If a Holder of a Private Certificated Bond wishes to transfer
such Private Bond and the proposed transferee is a QIB that wishes to hold such
Bond through the Clearing Agency, then, upon written request of such Bondholder
30 days in advance, subject to the rules and procedures of the Clearing Agency,
the Trustee shall arrange for such Private Bond to be represented by a
Book-Entry Private Bond registered in the name of the nominee of the Clearing
Agency subject to the Clearing Agency recognizing that the Clearing Agency
Participant designated by the QIB is the Beneficial Owner of such Book-Entry
Bond.
Section 5 Denominations
The Bonds will be issuable in minimum denominations of $100,000 and
increments of $1,000 in excess thereof, except that one Bond of each Class may
be issued in a different denomination.
Section 6 Determination of Interest Payments
(a) Each Class of Bonds will be entitled to receive on each Payment
Date an amount equal to the Current Interest and, in the case of the Public
Bonds, the Interest Carryover Amount for such Class for such Payment Date.
(b) One-Month LIBOR shall be determined as follows:
On each Floating Rate Determination Date, the Bond Administrator will
determine the arithmetic mean of the London Interbank Offered Rate ("LIBOR")
quotations for one-month Eurodollar deposits ("One-Month LIBOR") for the
succeeding Accrual Period on the basis of the offered LIBOR quotations provided
to the Bond Administrator as of 11:00 a.m. (London time) on such Floating Rate
Determination Date. As used herein with respect to a Floating Rate Determination
Date, "Reference Banks" means four leading banks engaged in transactions in
Eurodollar deposits in the International Eurocurrency market (i) with an
established place of business in London, (ii) whose quotations appear on the
Bloomberg Screen LIUS01M Index Page on the Floating Rate Determination Date in
question and (iii) which have been designated as such by the Bond Administrator
and are able and willing to provide such quotations to the Bond Administrator on
each Floating Rate Determination Date; and "Bloomberg Screen LIUS01M Index Page"
means the display designated as page "LIUS01M" on the Bloomberg Financial
Markets Commodities News (or such other pages as may replace such page on that
service for the purpose of displaying LIBOR quotations of major banks). If any
Reference Bank should be removed from the Bloomberg Screen LIUS01M Index Page or
in any other way fails to meet the qualifications of a Reference Bank, the Bond
Administrator may, in its sole discretion, designate an alternative Reference
Bank.
On each Floating Rate Determination Date, One-Month LIBOR for the next
succeeding Accrual Period will be established by the Bond Administrator as
follows:
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<PAGE>
(i) If on any Floating Rate Determination Date two or more of
the Reference Banks provide offered One-Month LIBOR quotations on the
Bloomberg Screen LIUS01M Index Page, One-Month LIBOR for the next
Accrual Period will be the arithmetic mean of such offered quotations
(rounding such arithmetic mean if necessary to the nearest five
decimal places).
(ii) If on any Floating Rate Determination Date only one or
none of the Reference Banks provides such offered quotations,
One-Month LIBOR for the next Accrual Period will be the higher of (x)
One-Month LIBOR as determined on the previous Floating Rate
Determination Date and (y) the Reserve Interest Rate. The "Reserve
Interest Rate" will be the rate per annum that the Bond Administrator
determines to be either (A) the arithmetic mean (rounding such
arithmetic mean if necessary to the nearest five decimal places) of
the one-month Eurodollar lending rate that New York City banks
selected by the Bond Administrator are quoting, on the relevant
Floating Rate Determination Date, to the principal London offices of
at least two leading banks in the London interbank market or (B) in
the event that the Bond Administrator can determine no such
arithmetic mean, the lowest one-month Eurodollar lending rate that
the New York City banks selected by the Bond Administrator are
quoting on such Floating Rate Determination Date to leading European
banks.
(iii) If on any Floating Rate Determination Date the Bond
Administrator is required but is unable to determine the Reserve
Interest Rate in the manner provided in paragraph (ii) above,
One-Month LIBOR for the next applicable Accrual Period will be
One-Month LIBOR as determined on the previous Floating Rate
Determination Date.
Notwithstanding the foregoing, One-Month LIBOR for the next succeeding
Accrual Period shall not be based on One-Month LIBOR for the previous Accrual
Period for two consecutive Floating Rate Determination Dates. If, under the
priorities described above, One-Month LIBOR for the next succeeding Accrual
Period would be based on One-Month LIBOR for the previous Floating Rate
Determination Date for the second consecutive Floating Rate Determination Date,
the Bond Administrator shall select an alternative index (over which the Bond
Administrator has no control) used for determining one-month Eurodollar lending
rates that is calculated and published (or otherwise made available) by an
independent third party.
The establishment of One-Month LIBOR (or an alternative index) by the
Bond Administrator and the Bond Administrator's subsequent calculation of the
applicable Class Interest Rates for the relevant Accrual Period, in the absence
of manifest error, will be final and binding.
(c) The "Fed Funds Rate" with respect to a Fed Funds Business Day
means (in the following order of priority):
(i) the rate (expressed as a percentage per annum rounded to
five decimal places) that appears opposite the caption "Federal Funds Effective
Rate" on Telerate Page 120 as of 11:00 a.m., New York City time, on such Fed
Funds Business Day;
(ii) if such rate does not appear on Telerate Page 120 as of
11:00 a.m., New York City time, on such Fed Funds Business Day, then the Fed
Funds Rate with respect to such Fed Funds Business Day will be the rate
(expressed as a percentage per annum rounded to five decimal places) that
appears on the Reuters Screen NYAA as of 11:00 a.m., New York City time, on such
Fed Funds Business Day;
(iii) if such rate does not appear on Reuters Screen NYAA as
of 11:00 a.m., New York City time, on such Fed Funds Business Day, the Bond
Administrator will request three leading brokers of Federal Funds transactions
in New York City to provide the rate (expressed as a percentage per annum) for
the last transaction in overnight Federal Funds arranged by such broker on such
Fed Funds Business Day. If rates are provided by such three brokers, then the
Fed Funds Rate with respect to such Fed Funds Business Day will be the
arithmetic mean (rounded to the nearest one hundred-thousandth of one percentage
point) of such rates; and
(iv) if fewer than three such rates are provided, then the Fed
Funds rare with respect to such Fed Funds Business Day will be the Fed Funds
Rate for the preceding Fed Funds Business Day (or, in the case of the first Fed
Funds Business Day, the immediately preceding Fed Business Day on which a rate
appeared on Telerate Page 120 as described in (a) above).
14
<PAGE>
If a rate that initially appears on Telerate Page 120 or the Reuters
Screen NYAA, as the case may be, as of 11:00 a.m., New York City time, on the
applicable Fed Funds Business Day is superseded on Telerate Page 120 or the
Reuters Screen NYAA, as the case may be, by a corrected rate before 12:00 noon,
New York City time, on such Fed Funds Business Day, such corrected rate as so
superseded on the applicable page shall be the applicable rate for calculating
the applicable Fed Funds Rate for such Fed Funds Business Day.
The establishment of the Fed Funds Average Rate by the Bond
Administrator and the Bond Administrator's subsequent calculation of the Class
Interest Rate for the relevant Accrual Period, in the absence of manifest error,
will be final and binding.
Section 7 Application of Funds
(a) On each Payment Date, the Interest Payment Amount for the Public
Bonds will be applied in the following order of priority:
First, to pay Current Interest and any Interest Carryover Amount with
respect to the Senior Public Bonds; provided, however, that, if the
Interest Payment Amount for the Public Bonds is not sufficient to pay
the full amount of Current Interest and any Interest Carryover Amount
on the Senior Public Bonds, the Interest Payment Amount for the Public
Bonds will be applied pro rata based on Current Interest and any
Interest Carryover Amount otherwise payable with respect to the Senior
Public Bonds;
Second, to pay Current Interest and any Interest Carryover Amount with
respect to the Class B-1 Bonds;
Third, to pay Current Interest and any Interest Carryover Amount with
respect to the Class B-2 Bonds;
Fourth, to pay Current Interest and any Interest Carryover Amount with
respect to the Class B-3 Bonds;
Fifth, to pay any unpaid Servicing Fee with respect to the Loans
represented by the Class B Certificate;
Sixth, to be included in the Group I Principal Payment Amount, Group II
Principal Payment Amount and Group III Principal Payment Amount, pro
rata, to the extent necessary to cause the Overcollateralization Amount
for the Public Bonds to be not less than the product of 3.25% and the
Principal Amount of the Public Bonds; and Seventh, any remainder to be
deposited in the Surplus Account;
(b) On each Payment Date, the Interest Payment Amount for the Private
Bonds will be applied in the following order of priority:
First, to pay Current Interest with respect to the Senior Private
Bonds; provided, however, if the Interest Payment Amount for the
Private Bonds is not sufficient to pay the full amount of Current
Interest on the Senior Private Bonds, the Interest Payment Amount for
the Private Bonds will be applied, pro rata, based on Current Interest
payable with respect to the Senior Private Bonds;
Second, to pay Current Interest with respect to the Class B-B Bonds;
Third, to pay Current Interest with respect to the Class B-C Bonds;
Fourth, to pay Current Interest with respect to the Class B-D Bonds;
and
Fifth, any remainder to be applied in accordance with Section 7(f)
hereof.
(c) On each Payment Date, the Group I Principal Payment Amount
will be applied in the following order of priority:
First, to pay principal of the Class 1-A1 and Class 1-A2 Bonds until
paid in full, such principal to be paid sequentially in that order such
that no such payment will be made to the Class 1-A2 Bonds until the
Class 1-A1 Bonds are paid in full; provided, however, that, on any
Payment Date on which the aggregate principal balance of the Senior
Public Bonds is equal to or greater than the sum of (i) the Aggregate
Principal Balance of the Public Bonds Collateral and (ii) the amount in
the Collateralization Fund, the Group I Principal Payment Amount will
be paid, pro rata, to all the Senior Public Bonds (based on principal
balances) and not sequentially;
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Second, to pay principal of the Class 2-A1, Class 2-A2 and Class 2-A3
Bonds (on the same basis as the Group II Principal Payment Amount is
applied to pay such Bonds) and the Class 3-A1 Bonds, pro rata, to the
extent required to cause the Senior Public Overcollateralization Test
to be met;
Third, to pay principal of the Class B-1 Bonds until paid in full;
Fourth, to pay principal of the Class B-2 Bonds until paid in full;
Fifth, to pay principal of the Class B-3 Bonds until paid in full; and
Sixth, any remainder to be deposited in the Surplus Account.
(d) On each Payment Date, the Group II Principal Payment Amount
will be applied in the following order or priority:
First, to pay principal of the Class 2-A1, Class 2-A2 and Class 2-A3
Bonds until paid in full, such principal to be paid sequentially in
that order so that no such payment will be made to the Class 2-A2 Bonds
until the Class 2-A1 Bonds are paid in full and no such payment will be
made to the Class 2-A3 Bonds until the Class 2-A2 Bonds are paid in
full; provided, however, that, on any Payment Date on which the
aggregate principal balance of the Senior Public Bonds is equal to or
greater than the sum of (i) the Aggregate Principal Balance of the
Public Bonds Collateral and (ii) the amount in the Collateralization
Fund, the Group II Principal Payment Amount will be paid, pro rata, to
all the Senior Public Bonds (based on principal balances) and not
sequentially;
Second, to pay principal of the Class 1-A1 and Class 1-A2 (on the same
basis as the Group I Principal Payment Amount is applied to pay such
Bonds) and the Class 3-A1 Bonds, pro rata, to the extent required to
cause the Senior Public Overcollateralization Test to be met;
Third, to pay principal of the Class B-1 Bonds until paid in full;
Fourth, to pay principal of the Class B-2 Bonds until paid in full;
Fifth, to pay principal of the Class B-3 Bonds until paid in full; and
Sixth, any remainder to be deposited in the Surplus Account.
(e) On each Payment Date, the product of the Group III Principal
Payment Amount will be applied in the following order or priority:
First, to pay principal of the Class 3-A1 Bonds until paid in full;
provided, however, that, on any Payment Date on which the aggregate
principal balance of the Senior Public Bonds is equal to or greater
than the sum of (i) the Aggregate Principal Balance of the Public Bonds
Collateral and (ii) the amount in the Collateralization Fund, the Group
II Principal Payment Amount will be paid, pro rata, to all the Senior
Public Bonds (based on principal balances) and not sequentially;
Second, to pay principal of the Class 1-A1 and Class 1-A2 Bonds (on the
same basis as the Group I Principal Payment Amount is applied to pay
such Bonds) and the Class 2-A1, Class 2-A2 and Class 2-A3 Bonds (on the
same basis as the Group II Principal Payment Amount is applied to pay
such Bonds), pro rata, to the extent required to cause the Senior
Public Overcollateralization Test to be met;
Third, to pay principal of the Class B-1 Bonds until paid in full;
Fourth, to pay principal of the Class B-2 Bonds until paid in full;
Fifth, to pay principal of the Class B-3 Bonds until paid in full; and
Sixth, any remainder to be deposited in the Surplus Account.
(f) On each Payment Date, the Principal Payment Amount for the Private
Bonds will be applied in the following order of priority:
First, to pay principal of the Class B-A1 Bonds until paid in full;
Second, to pay principal of the Class B-A-2 Bonds until paid in full;
Third, to pay principal of the Class B-B Bonds until paid in full;
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Fourth, to pay principal of the Class B-C Bonds until paid in full; and
Fifth, to pay principal of the Class B-D Bonds until paid in full.
(g) All payments made with respect to each Class of Bonds on each
Payment Date shall be allocated, pro rata, among the Bonds of such Class in the
proportion that the principal balance of each Bond of such Class bears to the
aggregate principal balance of all Bonds of such Class. All payments or
allocations of amounts in a Collateral Proceeds Account, the Collateralization
Fund and the Surplus Account and all payments made by the Trustee under any
section hereof or under the Original Indenture shall be made in accordance with
written instructions of the Bond Administrator.
(h) On the Delivery Date, the Issuer will establish a fund (the
"Collateralization Fund") with the Trustee and deposit therein the Class F
Certificate and any payments thereon for the benefit of the Public Bonds. On
each Payment Date, the Trustee is required, based on written information
provided to the Trustee by the Bond Administrator at least two Business Days
prior to such Payment Date: (a) to apply interest earnings on the Class F
Certificate and other amounts in the Collateralization Fund to pay interest on
the Public Bonds if the portion of the Public Bonds Available Funds attributable
to interest is less than the sum of the Current Interest and any Interest
Carryover Amounts on all Classes of the Public Bonds; (b) to apply amounts in
the Collateralization Fund to pay principal of the Public Bonds in an amount
equal to any Realized Losses with respect to the Class A Certificate, the
Mortgage Certificates and the Class B Certificate not theretofore covered by
such principal payments (so long as the related Senior Public Bonds are
Outstanding, any such principal payment with respect to the Class A Certificate
shall be applied on the same basis as the Group I Principal Payment Amount, any
such principal payment with respect to a Mortgage Certificate shall be applied
on the same basis as the Group II Principal Payment Amount and any such
principal payment with respect to a Class B Certificate shall be applied on the
same basis as the Group III Principal Payment Amount); and (c) to release from
the Collateralization Fund to the Surplus Account: (i) any interest earnings not
required to be applied as set forth in clause (a) above and (ii) the amount, if
any, by which the excess of (x) the sum of (A) the Aggregate Principal Balance
of the Public Bonds Collateral and (B) the balance in the Collateralization Fund
over (y) the principal balance of the Public Bonds exceeds the Target Public
Overcollateralization Amount (calculated after all payments have been made on
the Public Bonds for such Payment Date).
(i) Any portion of the Public Bonds Available Amount not required to be
applied on a Payment Date to pay interest on or principal of the Public Bonds
will be deposited in the Surplus Account to be applied in accordance with
Sections 7(b) and 7(f) hereof. Any amount in the Surplus Account not required to
be applied on a Payment Date to pay interest on or principal of the Private
Bonds will be released to the Issuer and will no longer be subject to the lien
of the Indenture.
Section 8 Places for Payment
Payments to the Holders of each Class of Bonds on any Payment Date will
be made to the Holders of record of the respective Class on the related Record
Date. Payments on the Book-Entry Bonds shall be made to the Clearing Agency by
wire transfer. Payments on Certificated Bonds shall be made in accordance with
Section 3.07 of the Original Indenture; provided that, at the request of the
registered Holder of a Certificated Bond with an original principal balance of
$1,000,000 or more, the Trustee shall make payments by wire transfer of
immediately available funds if such request is received in writing prior to the
Record Date for the related Payment Date. The Trustee may charge any Holder of a
Certificated Bond its standard wire transfer fee for any payments made by wire
transfer.
Section 9 Redemption
(a) The Issuer may, at its option, redeem any Class of Public
Bonds, in whole, but not in part, on any Payment Date on or after the earlier of
(i) May 28, 2005, and (ii) the Payment Date on which, after taking into account
payments of principal to be made on such Payment Date, the aggregate principal
balance of the Public Bonds is less than 35% of the aggregate principal balance
of the Public Bonds issued on the Delivery Date; provided, however, the
Collateral securing the Public Bonds shall be pledged to secure the Private
Bonds upon the redemption of all the Public Bonds (except that the foregoing
shall not apply if the Issuer causes an Affiliate to redeem Public Bonds so that
one or more Classes of Public Bonds remain Outstanding for purposes of the
Indenture).
(b) The Issuer may, at its option, redeem any Class of Private
Bonds (other than the Class B-A-1 Bonds), in whole, but not in part, on any
Payment Date on or after the earlier of (i) May 28, 2000, (ii) the Payment Date
on which, after taking into account payments of principal to be made on such
Payment Date, the aggregate principal balance of the Private Bonds is less than
35% of the aggregate principal balance of the Private Bonds issued on the
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Delivery Date and (iii) the date on which the Public Bonds are redeemed in full.
The Issuer may, at its option, redeem the Class B-A-1 Bonds, in whole, but not
in part, on any Payment Date on which, after taking into account payments of
principal to be made on such Payment Date, the aggregate principal balance of
the Class B-A-1 Bonds is less than 10% of the aggregate principal balance of the
Class B-A-1 Bonds issued on the Delivery Date.
(c) In addition, the Issuer may redeem a Class or Classes of Bonds
in whole, but not in part, at any time upon a determination by the Issuer, based
upon an Opinion of Counsel, which Opinion of Counsel shall not be an expense of
the Trust Estate, that a substantial risk exists that Bonds of the Class to be
redeemed will not be treated for federal income tax purposes as evidences of
indebtedness. Until each Class of Bonds is retired, any optional redemption of a
Class of Bonds shall be treated as a purchase of such Bonds, with the result
that there will be no acceleration of principal payments on any Class of Bonds
not redeemed. Any redemption of a Class of Bonds shall be made at the Redemption
Price for such Class.
(d) Any such redemption will be paid in cash at the Redemption Price.
At the option of the Issuer, an optional redemption of a Class of Bonds may be
effected without retiring such Class of Bonds so that the Issuer or a designee
has the ability to own or resell such Class of Bonds.
Section 10 Modification of Mortgage Certificates
(a) The Issuer may direct the Trustee to take any action the
Issuer deems appropriate to cause the "REMICs" with respect to which the
Mortgage Certificates constitute the "regular" and "residual" interests to
effect a "qualified liquidation" (as defined in section 860F of the Internal
Revenue Code of 1986) provided that the Issuer shall have furnished to the
Trustee:
(i) an Opinion of Counsel to the effect that the action
to be taken at the direction of the Issuer
constitutes a qualified liquidation; and
(ii) an Officer's Certificate to the effect that such
action will not materially impair the security
provided by the Mortgage Certificates.
(b) Neither the Trustee nor the Issuer shall take any action to
redeem the Mortgage Certificates or Trust Certificates prior to the earliest
date on which the Issuer is permitted to redeem the Bonds (without giving effect
to any redemption of the Mortgage Certificates or Trust Certificates); provided,
however, that the Trustee, at the direction of the Issuer, shall dissolve or
otherwise eliminate the trust agreements pursuant to which any of the Mortgage
Certificates or Trust Certificates were issued and hold the collateral therefor
directly if (i) the Trustee receives an Officer's Certificate to the effect that
the Trustee will continue to be the beneficiary of all credit enhancement for
such collateral to the same extent as it was as the holder of any such Mortgage
Certificates or Trust Certificates or (ii) the Rating Agencies confirm that
dissolving or eliminating the trust agreements will not adversely affect the
ratings on the Bonds.
(c) The Trustee as the registered holder or beneficial owner of
the Mortgage Certificates or the Trust Certificates may not give any consents or
instructions with respect thereto without the prior written direction of the
Issuer.
Section 11 Subordinated Bonds
(a) The Issuer may issue one or more classes of additional bonds
secured by the Trust Estate that are fully subordinated ("Subordinated Bonds")
to the Bonds originally issued on the Delivery Date; provided, however, that the
issuance thereof will be subject to satisfaction of the following conditions:
(i) confirmation by each Rating Agency that the issuance of the Subordinated
Bonds will not result in the downgrading of the credit rating of any Outstanding
Bonds and (ii) either (x) delivery to the Trustee of an Opinion of Counsel to
the effect that: (A) such Subordinated Bonds will be treated as indebtedness for
federal income and franchise tax purposes, (B) such issuance will not adversely
affect the characterization of any Outstanding Bonds for federal income or
franchise tax purposes and (C) such issuance will not cause a taxable event to
the Holders of any Outstanding Bonds or (y) restrictions on the transfer thereof
to any Person other than the Issuer or the direct or indirect owner of all stock
of the Issuer without the delivery of an opinion described in (x) above.
(b) The issuance of Subordinated Bonds shall be evidenced by a
supplement to this Indenture Supplement. The Trustee shall be authorized to
issue such Subordinated Bonds upon (i) receipt of an Issuer Order accompanied by
a form of supplement and the written consent of each Rating Agency; (ii) receipt
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of an Opinion of Counsel to the general effect set forth in Section 4.01(3) of
the Original Indenture; and (iii) satisfaction of the conditions described in
Section 11(a) hereof.
Section 12 Default
(a) An Event of Default with respect to the Public Bonds means any
one of the following events (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(i) on any Payment Date, Default in the payment of Current
Interest on any Senior Public Bond when the same shall become
due and payable, which Default shall continue for a period of
five days; or
(ii) on the applicable Stated Maturity Date, Default in the payment
in full of the principal balance of any Senior Public Bond; or
(iii) on any Payment Date, the sum of (A) the Aggregate Principal
Balance of the Public Bonds Collateral and (B) the balance in
the Collateralization Fund is less than the principal balance
of the Senior Public Bonds; or
(iv) Default in the performance, or breach, of any covenant or
warranty of the Issuer in the Indenture (other than a Default
in the performance of or breach of any covenant or warranty
referred to in the preceding paragraph) or in Article Nine of
the Original Indenture, and continuance of such Default or
breach for a period of 60 days after there shall have been
given, by registered or certified mail, to the Issuer by the
Trustee or by the Holders of at least 66 2/3% of the then
principal balance of the Senior Public Bonds, a written notice
specifying such Default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default"
under the Indenture; or
(v) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Issuer bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or
in respect of the Issuer under the Federal Bankruptcy Code or
any other applicable federal or state law, or appointing a
receiver, liquidator, assignee, or sequestrator (or other
similar official) of the Issuer or of any substantial part of
its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 90 consecutive days; or
(vi) the institution by the Issuer of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to
the institution of bankruptcy or insolvency proceedings
against it, or the filing by it of a petition or answer or
consent seeking reorganization or relief under the Federal
Bankruptcy Code or any other similar applicable federal or
state law, or the consent by it to the filing of any such
petition or to the appointment of a receiver, liquidator,
assignee, trustee or sequestrator (or other similar official)
of the Issuer or of any substantial part of its property, or
the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability
to pay its debts generally as they become due, or the taking
of corporate action by the Issuer in furtherance of any such
action.
(b) An Event of Default with respect to the Private Bonds means
any one of the following events (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):
(i) on any Payment Date, Default in the payment of Current
Interest on any Senior Private Bond when the same shall become
due and payable, which Default shall continue for a period of
five days; or
(ii) on the applicable Stated Maturity Date, Default in the payment
in full of the principal balance of any Private Bond; or
(iii) on any Payment Date, the sum of the principal balances of the
Class C, Class D and Class E Certificates is less than the
principal balance of the Senior Private Bonds; or
(iv) Default in the performance, or breach, of any covenant or
warranty of the Issuer in the Indenture (other than a Default
in the performance of or breach of any covenant or warranty
referred to in the preceding paragraph) or in Article Nine of
the Original Indenture, and continuance of such Default or
breach for a period of 60 days after there shall have been
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given, by registered or certified mail, to the Issuer by the
Trustee or by the Holders of at least 66 2/3% of the then
principal balance of the Senior Private Bonds, a written
notice specifying such Default or breach and requiring it to
be remedied and stating that such notice is a "Notice of
Default" under the Indenture; or
(v) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Issuer bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or
in respect of the Issuer under the Federal Bankruptcy Code or
any other applicable federal or state law, or appointing a
receiver, liquidator, assignee, or sequestrator (or other
similar official) of the Issuer or of any substantial part of
its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 90 consecutive days; or
(vi) the institution by the Issuer of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to
the institution of bankruptcy or insolvency proceedings
against it, or the filing by it of a petition or answer or
consent seeking reorganization or relief under the Federal
Bankruptcy Code or any other similar applicable federal or
state law, or the consent by it to the filing of any such
petition or to the appointment of a receiver, liquidator,
assignee, trustee or sequestrator (or other similar official)
of the Issuer or of any substantial part of its property, or
the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability
to pay its debts generally as they become due, or the taking
of corporate action by the Issuer in furtherance of any such
action.
(c) Upon the occurrence of a Default with respect to any Class of
Bonds (without regard to the passage of time or giving of notice, or both) and
the continuance of such Default for 60 days, the Trustee is required to resign
as trustee for the Subordinated Public Bonds and the Private Bonds. The Issuer
is required in such circumstances to appoint one or more separate trustees for
the Holders of the Subordinated Public Bonds and the Private Bonds; provided,
however, that if the Issuer fails to appoint such separate trustees within 15
days thereafter, the Trustee shall immediately petition a court of competent
jurisdiction to appoint such separate trustees.
(d) Each Bondholder shall be deemed to have agreed, by its
acceptance of its Bond, not to file, or join in filing, any petition in
bankruptcy or commence any similar proceeding in respect of the Issuer for a
period of one year and one day following the payment in full of the Bonds and
any other bonds of the Issuer and to treat its Bonds as debt instruments for
purposes of federal and state income tax, franchise tax and any other tax
measured in whole or in part by income.
(e) For all purposes of Article Six of the Original Indenture, an
Event of Default with respect to the Public Bonds shall be enforced solely with
respect to the Public Bonds Trust Estate and an Event of Default with respect to
the Private Bonds shall be enforced solely with respect to the Private Bonds
Trust Estate and there shall be no right on the part of the Holders of the
Private Bonds to any remedies with respect to the Public Bonds Trust Estate
(except insofar as amounts may, from time to time, be deposited in the Surplus
Account) or on the part of the Holders of the Public Bonds to any remedies with
respect to the Private Bonds Trust Estate; it being the intention that, for all
purposes of the Indenture, the Public Bonds and the Private Bonds are to be
treated as two separate Series of Bonds.
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Section 13 Repurchase of Trust Certificate or Mortgage Certificate
The Trustee shall release from the lien of the Indenture any Mortgage
Certificate or Trust Certificate that has been repurchased in accordance with
the terms of the Sales Agreement. In order to obtain such release, the Issuer
must remit, or cause to be remitted, to the Trustee the amount of the Purchase
Price therefor, which the Trustee shall treat as a prepayment in full thereof.
Section 14 Additional Obligations and Covenants of and Protection for the
Trustee
(a) The Trustee shall be obligated to demand payments or
distributions due in respect of the Mortgage Certificates and to make Advances
with respect to the Assets if the Bond Administrator fails to make a required
Advance pursuant to the Master Servicing Agreement; provided, however, that the
Trustee shall not be obligated to make an Advance that it deems unrecoverable.
The Trustee is entitled to rely upon any determination by the Bond Administrator
that an Advance is unrecoverable.
(b) The Trustee shall exercise all rights and remedies available to it
as third-party beneficiary of the Sales Agreement, including but not limited to,
enforcing the obligation of IHC to repurchase Trust Certificates or Mortgage
Certificates in accordance with Section 7 thereof.
(c) The Trustee acknowledges that the Bond Administrator, and not the
Issuer, is obligated to pay its compensation and reimbursement pursuant to
Section 7.07 of the Original Indenture.
(d) So long as any debt instrument issued by the Issuer is
outstanding and for 91 days thereafter, the Trustee will not file any
involuntary petition or otherwise institute any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding or other proceedings under any
federal or state bankruptcy or similar law against the Issuer.
Section 15 Notice to the Rating Agencies
The Issuer shall use its best efforts promptly to provide notice to the
Rating Agencies of any of the following events of which it has actual knowledge:
(a) any material change to or amendment of this Series Supplement or
the Original Indenture;
(b) the occurrence of any Default or Event of Default that has not been
cured;
(c) the resignation or termination of the Trustee;
(d) the substitution of Collateral; and
(e) the final payment to Bondholders.
In addition, the Issuer shall provide to the Rating Agencies (i) each
month a copy of the Monthly Remittance Report and (ii) within 90 days after the
end of each calendar year a report on delinquencies and foreclosures occurring
with respect to the Loans evidenced by the Class A Certificate or the Class B
Certificate during such calendar year.
Section 16 Monthly Remittance Report
The Monthly Remittance Report required pursuant to Section 12.09 of the
Original Indenture shall also contain the following information with respect to
each Payment Date separately with respect to the Public Bonds and the Private
Bonds:
(a) Public Bonds Available Funds and Private Bonds Available Funds;
(b) the Interest Payment Amount for the Public Bonds, the Interest
Payment Amount for the Private Bonds, the Principal Payment Amount for Public
Bonds and the Principal Payment Amount for the Private Bonds;
(c) the Aggregate Principal Balance of the Public Bonds Collateral, the
balance in the Collateralization Fund, the Senior Public Overcollateralization
Percentage and the Overcollateralization Amount for the Public Bonds;
(d) the extent to which the Principal Payment Amount for Public Bonds
is derived from a transfer from the Collateralization Fund; and
(e) the extent to which the principal balance of the Private Bonds
exceeds the Target Principal Balance for Private Bonds.
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Section 17 Amendments to Indenture
Only for the purposes of this Series Supplement and only with respect
to the Bonds, the following amendments to the Original Indenture are hereby
made:
(a) Section 1.01 of the Original Indenture is amended by
deleting the definition of "Corporate Trust Office" and inserting in
lieu thereof the following:
"Corporate Trust Office": The principal
corporate trust office of the Trustee currently located at 600
Travis, 10th Floor, Houston, Texas 77002, Attention: Global
Trust Services MERIT 11 for purposes of Section 9.02, the
office of Texas Commerce Trust Company of New York, 55 Water
Street, North Building, Room 234, Windows 20 and 21, New York,
New York 10041, or at such other address as the Trustee may
designate from time to time by notice to the Bondholders and
the Issuer or the principal corporate trust office of any
successor Trustee.
(b) Section 1.01 of the Original Indenture is amended by
inserting at the end of the definition of "Realized Loss" the
following:
With respect to any Trust Certificate or Mortgage
Certificate, the amount by which, under the documents relating
thereto, the equivalent of Realized Losses with respect to the
Assets represented thereby are allocated to the Trust
Certificate or Mortgage Certificates so as to reduce the
certificate principal balances thereof without distributing an
equivalent amount allocated to principal in respect of the
Trust Certificate or Mortgage Certificates.
(c) Section 1.01 of the Original Indenture is amended by
deleting the definition of "Record Date" and substituting therefor the
following:
"Record Date": With respect to any Payment Date, the
last Business Day of the month preceding the month in which
such Payment Date is deemed to occur.
(d) Section 1.01 of the Original Indenture is amended by
inserting before the period at the end of the definition of "Eligible
Investments":
; Eligible Investment may include, without
limitation, those investments for which the Trustee or an
affiliate thereof provides services but which otherwise meets
the requirements for an "Eligible Investment"; (e) Section
1.01 of the Original Indenture is amended by adding the
following additional definition:
"Loan Rate": With respect to an item of
Collateral, the interest rate payable by the Borrower or other
obligor according to the terms of the related Loan, as reduced
by the application of any Soldiers' and Sailors' Shortfall.
(f) Section 6.17 of the Original Indenture is amended by
deleting the first paragraph thereof and substituting therefor the
following:
Each Holder of a Bond shall be deemed, by
its acceptance of such Bond, to have agreed (to the extent
that such Holder may legally do so) not to file, join in the
filing, or cause a filing against the Issuer of an involuntary
petition under any bankruptcy or receivership law for a period
of one year and one day following the payment of the Bonds and
any other bonds of the Issuer.
(g) Section 6.08 of the Original Indenture is amended by
deleting clause THIRD thereof and substituting the following:
(i) the Senior Public Bonds or the Senior
Private Bonds, as appropriate; and
(ii) the Subordinated Public Bonds or the
Senior Private Bonds, as appropriate, provided that, if there
shall be more than one Class of Subordinated Public Bonds or
Subordinated Private Bonds, as the case may be, payment of the
unpaid principal of and interest on the Senior Public Bonds
shall be made before any payment is made to the Subordinated
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Public Bonds and payment of the unpaid principal of and
interest on the Senior Private Bonds shall be made before any
payment is made to the Subordinated Private Bonds, payment
shall be made in order of subordination so that payment of the
unpaid principal of and interest on a more senior Class of the
Subordinated Public Bonds or Subordinated Private Bonds, as
the case may be, shall be made before any payment is made to a
Class of Subordinated Public Bonds or Subordinated Private
Bonds, as the case may be, which is subordinated to such more
senior Class; and, provided, further, with respect to the
Public Bonds Trust Estate, payment of the unpaid principal of
and interest on the Public Bonds shall be made before any
payment is made to the Private Bonds.
(h) Notwithstanding the provisions of Section 13.01(d) of the
Original Indenture, the Issuer's obligation to deliver to the Trustee a
Yearly Accountants' Certificate may be modified, eliminated or limited
to the extent permitted by the Rating Agencies.
(i) All references in the Original Indenture to "Master
Servicer" shall be deemed to refer to and mean Dynex as Bond
Administrator.
Section 18 Additional Covenants of the Issuer
(a) The Issuer shall not suffer to exist any claim against it on a
recourse basis, which in its reasonable judgment giving due regard to the
likelihood of success on the merits of such claim as well as any reserves or
other arrangements which have been made to assure the payment of any such
claims, creates a risk of insolvency proceedings against the Issuer.
(b) The Issuer shall maintain its status as a "qualified REIT
subsidiary" under Section 856(i)(2) of the Code unless it shall have received
the prior written consent of the Rating Agencies to change or terminate such
status
Section 19 Ratification of Indenture
As supplemented by this Series Supplement, the Original Indenture is in
all respects ratified and confirmed, and the Original Indenture as so
supplemented by this Series Supplement shall be read, taken and construed as one
and the same instrument.
Section 20 Form of Bonds
The Bonds of each Class shall be substantially in the form of the
appropriate Exhibit indicated in the Table of Contents.
Section 21 Schedules
Schedule IA and Schedule IB are attached hereto as contemplated by the
Indenture.
Section 22 Counterparts
This Series Supplement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original, but all of
such counterparts shall together constitute but one and the same instrument.
Section 23 Governing Law
THIS SERIES SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED THEREIN.
23
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Series
Supplement to be duly executed by their respective officers thereunto duly
authorized and, in the case of the Issuer, its respective signature duly
attested all as of May 1, 1998.
MERIT SECURITIES CORPORATION
By:
--------------------------------------------
Lisa R. Cooke, Vice President
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Trustee
By:
--------------------------------------------
Rafael Herrera, Vice President
24
<PAGE>
ANNEX A
______________, 199_
Chase Bank of Texas, National Association, as Trustee
601 Travis, 8th Floor
Houston, Texas 77002
Attention: Global Trust Services
MERIT Securities Corporation
10900 Nuckols Road, Third Floor
Glen Allen, Virginia 23060
Re: MERIT Securities Corporation (the "Issuer")
Collateralized Bonds, Series 11, Class ___
having an original principal amount of $__________
Dear Sir:
In connection with our proposed purchase of the Bonds referred to above
(the "Bonds"), we confirm that:
1. We have received a copy of the Institutional Placement Memorandum
dated May 27, 1998 (the "Memorandum"), relating to the Bonds and such other
information and documents as we deem necessary in order to make our investment
decision. We acknowledge that we have read and agreed to the matters stated in
the section entitled "Notice to Investors" and the restrictions on duplication
and circulation of the Memorandum.
2. We understand that any subsequent transfer of the Bonds is subject
to certain restrictions and conditions set forth in the Series 11 Supplement
dated as of May 1, 1998 (the "Indenture Supplement"), and we agree to be bound
by, and not to resell, pledge or otherwise transfer the Bonds except in
compliance with such restrictions and conditions and the Securities Act of 1933,
as amended (the "Securities Act"), and our failure to comply with the foregoing
agreement shall render any purported transfer to be null and void.
3. We understand that the offer and sale of the Bonds has not been
registered under the Securities Act and that the Bonds may not be offered, sold
or otherwise transferred in the absence of such registration or an applicable
exemption thereof. We agree, on our own behalf and on behalf of any accounts for
which we are acting as hereinafter stated, that we will not offer, sell, pledge
or otherwise transfer any Bond except (A) in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined therein), (B) to
an institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes to the Trustee a signed letter containing representations
and agreements relating to the restrictions on transfer of the Bonds (the form
of which letter can be obtained from the Trustee), (C) pursuant to the exemption
from registration provided by Rule 144 under the Securities Act or (D) pursuant
to an effective registration statement under the Securities Act, and we further
agree to provide to any person purchasing any of the Bonds from us a notice
advising such person that resales of the Bonds are restricted as stated herein.
4. We understand that, on any proposed resale of any Bonds, we will be
required to furnish to the Issuer and to the Trustee of such certificates, legal
opinions and other information as the Issuer or the Trustee may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Bonds purchased by us will bear a
legend to the foregoing effect.
A-1
<PAGE>
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the Bonds, and we and any
accounts for which we are acting are each able to bear the economic risks of our
or their investment.
6. We are acquiring the Bonds purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
7. We are acquiring the Required Minimum principal amount of the Bonds
for each account for which we are purchasing Bonds and will not offer, sell,
pledge or otherwise transfer any such Bonds or any interest therein at any time
except in the Required Minimum denomination. The "Required Minimum" means
$100,000 principal amount or any integral multiple of $1,000 in excess thereof.
8. We acknowledge that neither the Issuer nor the Trustee nor any
person acting on the Issuer's or the Trustee's behalf has made any
representations concerning the Issuer or the offer and sale of the Bonds, except
as set forth in the Memorandum.
9. We acknowledge that the Issuer, the Trustee and others will rely on
the trust and accuracy of the foregoing acknowledgments, representations and
agreements, and agree that if any of the foregoing acknowledgments,
representations and agreements are no longer accurate we shall promptly notify
the Issuer and the Trustee.
The Issuer and the Trustee are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
Sincerely,
[Name of Transferee]
By:
------------------------
Name:
----------------------
Title:
---------------------
A-2
<PAGE>
ANNEX B
__________, 199__
Chase Bank of Texas, National Association, as Trustee
601 Travis, 8th Floor
Houston, Texas 77002
Attention: Global Trust Services
MERIT Securities Corporation
10900 Nuckols Road, Third Floor
Glen Allen, VA 23060
Re: MERIT Securities Corporation (the "Issuer")
Collateralized Bonds, Series 11, Class __
having an original principal amount of $
Dear Sir:
In connection with our proposed purchase of the Bonds referred to above
(the "Bonds"), we confirm that:
1. We have received a copy of the Institutional Placement Memorandum,
dated May 27, 1998 (the "Memorandum"), relating to the Bonds and such other
information and documents as we deem necessary in order to make our investment
decision. We acknowledge that we have read and agreed to the matters stated in
the section entitled "Notice to Investors" and the restrictions on duplication
and circulation of the Memorandum.
2. We understand that any subsequent transfer of the Bonds is subject
to certain restrictions and conditions set forth in the Series 11 Supplement
dated as of May 1, 1998 (the "Indenture Supplement"), and we agree to be bound
by, and not to resell, pledge or otherwise transfer the Bonds except in
compliance with such restrictions and conditions and the Securities Act of 1933,
as amended (the "Securities Act") and our failure to comply with the foregoing
agreement shall render any purported transfer to be null and void.
3. We understand that the offer and sale of the Bonds has not been
registered under the Securities Act and that the Bonds may not be offered, sold
or otherwise transferred in the absence of such registration or an applicable
exemption therefrom. We agree, on our own behalf and on behalf of any accounts
for which we are acting as hereinafter stated, that we will not offer, sell,
pledge or otherwise transfer any Bond (A) except in accordance with Rule 144A
under the Securities Act to a "qualified institutional buyer" (as defined
therein), (B) to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) that, prior
to such transfer, furnishes to the Trustee a signed letter containing
representations and agreements relating to the restrictions on transfer of the
Bonds (the form of which letter can be obtained from the Trustee), (C) pursuant
to the exemption from registration provided by Rule 144 under the Securities Act
or (D) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing any of the Bonds from
us a notice advising such person that resales of the Bonds are restricted as
stated herein.
4. We understand that, on any proposed resale of any Bonds, we will be
required to furnish to the Issuer and to the Trustee of such certificates, legal
opinions and other information as the Issuer or the Trustee may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Bonds purchased by us will bear a
legend to the foregoing effect.
B-1
<PAGE>
5. We are a "qualified institutional buyer" (as that term is defined in
Rule 144A under the Securities Act). We are aware that the sale of the Bonds to
us is being made in reliance on Rule 144A under the Securities Act. We are
acquiring the Bonds for our own account or for the account of a qualified
institutional buyer.
6. We are acquiring the Required Minimum principal amount of Bonds for
each account for which we are purchasing Bonds and will not offer, sell, pledge
or otherwise transfer any such Bonds or any interest therein at any time except
in the Required Minimum denomination. The "Required Minimum" means $100,000
principal amount or any integral multiple of $1,000 in excess thereof.
7. We acknowledge that neither the Issuer nor the Trustee nor any
person acting on the Issuer's or the Trustee's behalf has made any
representations concerning the Issuer or the offer and sale of the Bonds, except
as set forth in the Memorandum.
8. We acknowledge that the Issuer, the Trustee and others will rely on
the trust and accuracy of the foregoing acknowledgments, representations and
agreements, and agree that if any of the foregoing acknowledgments,
representations and agreements are no longer accurate we shall promptly notify
the Issuer and the Trustee.
The Issuer and the Trustee are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
Sincerely,
[Name of Transferee]
By:
------------------------
Name:
----------------------
Title:
---------------------
B-2
<PAGE>
ANNEX C
Each QIB purchasing Private Bonds will be deemed to have represented
and agreed as follows (terms used below that are defined in Rule 144A under the
Securities Act ("Rule 144A") or in Regulation D under the Securities Act
("Regulation D") are used herein as defined therein):
(a) It understands that the Private Bonds have not been registered
under the Securities Act of 1933 and that, if in the future it decides to
offer, resell, pledge or otherwise transfer such Bonds, it will do so only
(I) to a person that the seller reasonably believes is a qualified
institutional buyer ("QIB") in a transaction meeting the requirements of
Rule 144A, (ii) pursuant to an exemption from registration under the
Securities Act provided by Rule 144 thereunder (if available), (iii)
pursuant to an effective registration statement under the Securities Act or
(iv) to an institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act and who
is not a QIB (such an investor, an "Institutional Accredited Investor")
that delivers to the Trustee a representation letter in the form attached
to the Indenture as Annex A and such certifications, legal opinions and
other information as it may reasonably require to confirm that the proposed
transfer is being made pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act of
1933, in each case in accordance with any applicable securities laws of any
state of the United States or any other applicable jurisdiction.
(b) It understands that the Private Bonds are being initially sold to
QIBs and will be issued in the form of Book-Entry Bonds. Purchasers of
Private Bonds will acquire beneficial interests in the Book-Entry Private
Bonds, which interests will be held directly or indirectly through Clearing
Agency Participants. Interests in Book-Entry Bonds transferred to
Institutional Accredited Investors will be issued as Definitive Private
Bonds. In that connection the Institutional Accredited Investor to which a
Private Bond is being transferred must deliver to the Trustee a
representation letter in the form attached to the Indenture as Annex A.
(c) It understands that Bonds will bear a legend to the following
effect unless the Issuer and the Trustee determine otherwise consistent
with applicable law:
"THE BONDS EVIDENCED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED OR
QUALIFIED UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR THE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A BUYER THAT THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A UNDER THE SECURITIES ACT OF 1933 PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE), (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OR (4) TO A BUYER
WHOM THE SELLER REASONABLY BELIEVES IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT OF 1933 AND (B) IN ACCORDANCE WITH
ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION. BONDS OWNED BY AN INVESTOR THAT IS NOT A
QUALIFIED INSTITUTIONAL BUYER MAY NOT BE HELD IN BOOK-ENTRY FORM AND MAY
NOT BE TRANSFERRED WITHOUT CERTIFICATION THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS."
(d) It is a QIB purchasing for its own account or for the account of
another QIB and it and such other person are aware that the sale to it is
being made in reliance on Rule 144A.
C-1
<PAGE>
(e) It understands that the Bonds offered in reliance on Rule 144A will
be represented by the Book-Entry Private Bonds. Before any interest in the
Book-Entry Private Bonds may be offered, sold, pledged or otherwise
transferred to an Institutional Accredited Investor, it must be issued as a
Certificated Private Bond and the transferee will be required to provide
the Trustee with a written certification as to compliance with the transfer
restrictions referred to above.
(f) It agrees that it will deliver to each Institutional Accredited
Investor to whom it transfers Bonds notice of any restrictions on transfer
of such Private Bonds.
(g) If it is acquiring any Private Bond as a fiduciary or agent for one
or more investor accounts, it represents that it has sole investment
discretion with respect to such account and that it has full power to make
the acknowledgments, representations and agreements contained herein on
behalf of each such account.
(h) It acknowledges that the Issuer, the Trustee and others will rely
on the truth and accuracy of the foregoing acknowledgments, representations
and agreements, and agrees that if any of the foregoing acknowledgments,
representations and agreements deemed to have been made by it are no longer
accurate, it shall promptly notify the Issuer and the Trustee.
C-2
