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EXHIBIT 4.2
EXECUTION
CAPSTEAD SECURITIES CORPORATION IV,
Issuer
and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
Trustee
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Series 1998-3 Supplement
Dated as of September 1, 1998
to
INDENTURE
Dated as of September 1, 1998
------------------------------------
$345,831,963
COLLATERALIZED MORTGAGE OBLIGATIONS
Series 1998-3
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TABLE OF CONTENTS
PAGE
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PRELIMINARY STATEMENT.............................................................................................1
GRANTING CLAUSES..................................................................................................1
Section (1) Certain Defined Terms..........................................................................2
Section (2) Designation....................................................................................8
Section (3) Dating of Series 1998-3 Bonds; Calculation of Interest Accrued.................................8
Section (4) Transfer of ERISA Restricted Bonds.............................................................8
Section (5) Aggregate Principal Amount; Classes............................................................8
Section (6) Denominations of Series 1998-3 Bonds...........................................................9
Section (7) Authentication of Series 1998-3 Bonds..........................................................9
Section (8) Payment Dates.................................................................................10
Section (9) Places for Payment of Principal of Series 1998-3 Bonds; Payments on Book Entry Bonds..........10
Section (10) Payment on the Bonds Before Acceleration; Reports to Bondholders..............................10
Section (11) Payment of the Bonds on and after Acceleration................................................13
Section (12) Reserve Fund..................................................................................13
Section (13) Transfer of Certificates to Trustee; Deposits to Collection Account; Pledged Accounts.........14
Section (14) Requirements for Issuance of Series 1998-3 Bonds..............................................14
Section (15) Calculations with Respect to Underlying Mortgage Loans........................................14
Section (16) Redemption....................................................................................15
Section (17) Actions by Trustee as Holder of Conventional Certificates.....................................15
Section (18) REMIC Administration..........................................................................16
Section (19) Form of Series 1998-3 Bonds; Matters Relating to Book Entry Bonds.............................19
Section (20) The Administrators and the Trustee............................................................20
Section (21) Supplements, Modifications and Ratifications of Indenture.....................................20
Section (22) Certain Matters Regarding Registration of Transfer and Exchange of Bonds......................21
Section (23) Bond Manager on Behalf or Issuer..............................................................21
Section (24) Investment of Funds in the Collection Account; Inapplicability of Section 6.10(f).............22
Section (25) Counterparts..................................................................................22
Section (26) Governing Law.................................................................................22
Section (27) Notices.......................................................................................22
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EXHIBITS
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Exhibit A-1 - Form of Class A Bond
Exhibit A-2 - Form of Class AX Bond
Exhibit A-3 - Form of Class R Bond
Exhibit B - Form of Transferee Affidavit and Agreement (Residual Bonds)
Exhibit C - Form of Transferor Certificate (Residual Bonds)
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Series 1998-3 Supplement dated as of September 1, 1998, between
CAPSTEAD SECURITIES CORPORATION IV, a Delaware corporation (together with its
successors and assigns as provided in the Indenture referred to below, the
"Issuer") and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, a national banking
association (together with its successors in trust thereunder as provided in the
Indenture, the "Trustee"), as trustee under an Indenture, as amended and
restated as of September 1, 1998 (such Indenture, as thereafter amended and
supplemented, is referred to herein as the "Indenture").
PRELIMINARY STATEMENT
Section 2.3 of the Indenture provides, among other things, that the
Issuer, when authorized by its Board of Directors, and the Trustee may enter
into an indenture supplemental to the Indenture for the purpose of authorizing a
Series of Bonds and to specify certain terms of such Series of Bonds. The Board
of Directors of the Issuer has duly authorized the creation of a Series of Bonds
in an aggregate principal amount of $345,831,963 to be known as its
Collateralized Mortgage Obligations, Series 1998-3 (the "Series 1998-3 Bonds",
with references herein to "Bonds" being references solely to the Series 1998-3
Bonds)), and the Issuer and the Trustee are executing and delivering this Series
1998-3 Supplement in order to provide for the Series 1998-3 Bonds. All terms
used in this Series 1998-3 Supplement that are defined in the Indenture, either
directly or by reference therein, have the meanings assigned to them therein as
supplemented by Section 1 hereof, if applicable, except to the extent the
context clearly requires otherwise. Any such defined term that is defined in the
Indenture as relating to a particular Series rather than to all Bonds generally
shall, when used in this Series 1998-3 Supplement, relate to the Series 1998-3
Bonds, whether or not expressly so stated herein.
GRANTING CLAUSES
The Issuer hereby Grants to the Trustee, for the exclusive benefit of
the Holders of the Series 1998-3 Bonds, all of the Issuer's right, title and
interest in and to (a) the mortgage pass-through certificates listed in Schedule
A to this Series 1998-3 Supplement, which the Issuer has caused to be delivered
to the Trustee herewith and which Conventional Certificates evidence interests
in pools of mortgage loans on one- to four-family residential properties and
individual condominium units, and all Distributions with respect thereto payable
at any time on or after the first Distribution Date, (b) each Pledged Account
for the Series 1998-3 Bonds, including the Reserve Fund and all income from the
investment of funds in each such Pledged Account, (c) the Initial Deposit and
(c) all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or other liquid property. Such Grants are made, however, in
trust, to secure the Series 1998-3 Bonds, equally and ratably, without prejudice
or distinction between any Series 1998-3 Bond and any other Series 1998-3 Bond
by reason of difference in time of issuance or otherwise, and to secure (i) the
payment of all amounts due on the Series 1998-3 Bonds as such amounts become due
in accordance with their terms, (ii) the payment of all other sums payable under
the Indenture or this Series 1998-3 Supplement with respect to the Series 1998-3
Bonds, and (iii) compliance with the provisions of the Indenture and this Series
1998-3 Supplement with respect to the Series 1998-3 Bonds, all as provided in
the Indenture and this Series 1998-3 Supplement.
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The Trustee acknowledges such Grants, accepts the trusts hereunder in
accordance with the provisions hereof and of the Indenture, and agrees to
perform the duties herein or therein required in accordance with Article VI of
the Indenture.
SECTION (1) CERTAIN DEFINED TERMS.
Sections 1.1 and 2.3 of the Indenture provide that the meaning of
certain defined terms used in the Indenture shall, when applied to the Bonds of
a particular Series, be as defined in said Section 1.1 but with such additional
provisions as are specified in the related Series Supplement. With respect to
the Series 1998-3 Bonds, the following provisions shall govern the defined terms
set forth below:
"Accrual Date": With respect to any Class of Bonds, September 29, 1998.
"Accrued Bond Interest": As to each Class of Bonds and any Payment
Date, the interest accrued during the related Interest Accrual Period at the
applicable Bond Interest Rate on the Class Current Principal Balance (or in the
case of the Class AX Bonds, the Class Notional Balance) of such Class
immediately prior to such Payment Date, calculated on the basis of the actual
number of days in the related Interest Accrual Period and a 360-day year, less
any Net Interest Shortfall allocated thereto on such date. No Accrued Bond
Interest will be payable with respect to any Class of Bonds after the Payment
Date on which the Class Current Principal Balance or Class Notional Balance of
such Class has been reduced to zero.
"Administrator": With respect to the each series of Conventional
Certificates, as defined in the related Pooling and Administration Agreement.
"Available Funds": As to any Payment Date, the aggregate amount of
distributions received on or with respect to the Conventional Certificates on
the Certificate Distribution Date immediately preceding such Payment Date.
"Basis Risk Shortfall": As to any Payment Date, the sum of (i) the
excess of (x) interest accrued on the Class A Bonds for the preceding Interest
Accrual Period at a per annum interest rate equal to the lesser of 8.50% and
LIBOR plus the Margin for such date, over (y) interest accrued on the Class A
Bonds for the preceding Interest Accrual Period at the Net WAC for such date and
(ii) the amount of Basis Risk Shortfalls from prior Payment Dates remaining
unpaid on the Class A Bonds.
"Bond Interest Rate": With respect to the Class A Bonds, the Class A
Bond Interest Rate. With respect to the Class AX Bonds, the Class AX Bond
Interest Rate. With respect to the Class R Bonds, the same as the Class A Bond
Interest Rate. Any monthly calculation of interest at a stated rate shall be
based upon annual interest at such rate divided by twelve.
"Bond Manager": Capstead Mortgage Corporation, or its successors and
assigns.
"Bond Management Agreement": The Agreement dated as of September 1,
1998 between the Issuer and Capstead Mortgage Corporation, as Bond Manager.
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"Bond Redemption Date": Each of the dates identified in Section 16(a)
and (b) hereof on which the Series 1998-3 Bonds may be called for redemption.
"Book Entry Bonds: The Class A Bonds.
"Cap Agreement": The requirement of the Trustee to make payments to the
Class A Bonds pursuant to Section 12.
"Certificate Distribution Date": The date specified in each Pooling and
Administration Agreement for monthly distributions on the related Conventional
Certificates.
"Certificate Trustee": The institution identified as such in the
applicable Pooling and Administration Agreement.
"Class": Each class subdivision of the Bonds created hereunder pursuant
to Section 5.
"Class A Bond Interest Rate": As to the Class A Bonds and any Payment
Date, a per annum rate equal to LIBOR plus the Margin for such date, but in no
event greater than the lesser of (x) the Net WAC for such date, and (y) 8.50%
per annum.
"Class A Regular Interest": The regular interest, within the meaning of
Code Section 860G(a)(1), represented by the Class A Bonds, other than the right
to receive amounts under the Cap Agreement.
"Class AX Bond Interest Rate": As to the Class AX Bonds and any Payment
Date, a per annum rate equal to the excess of (x) the Net WAC for such date,
over (y) the Class A Bond Interest Rate for such date.
"Class AX Regular Interest": The regular interest, within the meaning
of Code Section 860G(a)(1), represented by the Class AX Bond, other than (i) the
right to receive the Initial Deposit and the investment earnings on the Reserve
Fund and (ii) the obligation to make payments under the Cap Agreement.
"Class Current Principal Balance": With respect to the Class A Bonds
and Class R Bonds and any Payment Date, the sum of the Current Principal
Balances of all Class A Bonds or Class R Bonds as the case may be, on said date.
"Class Notional Balance": As to the Class AX Bonds and any Payment
Date, the sum of the Class Current Principal Balances of the Class A Bonds and
the Class R Bonds for such date.
"Clearing Agency": The registered Holder of the single Bond evidencing
the Book Entry Bonds. The initial Clearing Agency with respect to the Book Entry
Bonds shall be The Depository Trust Company of New York, the nominee for which
is Cede & Co. The Clearing Agency shall at all times be a "clearing corporation"
as defined in Article 8 of the Uniform Commercial Code of the State of New York.
"Closing Date": September 29, 1998.
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"Compensating Payment": As to any Payment Date, the amount paid to the
Class A Bonds on such date pursuant to Section 10(b) hereof.
"Conventional Certificates": The certificates pledged to secure the
Series 1998-3 Bonds, as set forth on Schedule A hereto.
"Corporate Trust Office": The principal office of the Trustee at which
at any particular time its corporate trust business shall be administered, which
office at the date of this Agreement is located at 000 Xxxxxx, Xxxxxxx, Xxxxx
00000; Attention 10 CTH 382 Corporate Trust Department, or at such other address
as the Trustee may designate from time to time with notice to the Issuer and
Bondholders, or the principal corporate trust office of any successor Trustee at
the address designated by such successor Trustee by notice to the Issuer and
Bondholders.
"CPR": A model designed to measure the rate of prepayment of a pool of
mortgage loans assuming a specified constant prepayment percentage for the life
of such pool.
"Current Principal Balance": With respect to any Bond (other than a
Class AX Bond) as of any Payment Date, the initial principal amount of such Bond
as of the Closing Date, as reduced by all amounts paid on previous Payment Dates
on such Bond with respect to principal.
"Cut-off Date": September 1, 1998.
"ERISA Restricted Bonds": The Class AX Bonds.
"ERISA Prohibited Bonds": The Class R Bonds.
"Global Bond Certificate": Any Bond registered in the name of the
Clearing Agency or its nominee, beneficial interests in which are reflected on
the books of the Person maintaining an account with such Clearing Agency
(directly or as an indirect participant in accordance with rules of such
Clearing Agency).
"Individual Bond": As defined in Section 10(f) hereof.
"Individual Bond Certificate": Any Bond registered in the name of a
Holder other than the Clearing Agency or its nominee.
"Initial Call Date": The Payment Date occurring in March 2001.
"Initial Deposit": $5,000.00.
"Interest Accrual Period": With respect to each Payment Date, the
period beginning on the previous Payment Date (or, in the case of the first
Payment Date, the Closing Date) and ending on the day preceding such Payment
Date.
"Interest Only Bonds": The Class AX Bonds.
"Letter Agreements": The Letter of Representations to The Depository
Trust Company from the Trustee and the Issuer dated September 29, 1998 with
respect to the Book Entry Bonds.
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"LIBOR": With respect to each Interest Accrual Period for the Class A
Bonds, the London Interbank Offered Rate for one-month United States
dollar-denominated deposits determined in accordance with the following
provisions:
(i) On the second business day prior to the first day of the related
Interest Accrual Period (each, a "LIBOR Determination Date"), until the
Class Current Principal Balances of the Class A Bonds have been reduced
to zero, the Trustee will request each of the designated reference
banks meeting the criteria set forth herein (the "Reference Banks") to
inform the Trustee of the quotation offered by its principal London
office for making one-month United States dollar deposits in leading
banks in the London interbank market, as of 11:00 a.m. (London time) on
such LIBOR Determination Date. (For purposes of calculating LIBOR,
"business day" means a day on which banks are open for dealing in
foreign currency and exchange in London and New York City.) In lieu of
making a request of the Reference Banks, the Trustee may rely on the
quotations for those Reference Banks that appear at such time on the
Reuters Screen LIBO Page (as defined in the International Swap Dealers
Association Inc. Code of Standard Wording, Assumptions and Provisions
for Swaps, 1986 Edition), to the extent available.
(ii) LIBOR will be established by the Trustee on each LIBOR
Determination Date as follows:
(a) If on any LIBOR Determination Date two or more Reference Banks
provide such offered quotations, LIBOR for the next Interest Accrual Period
shall be the arithmetic mean of such offered quotations (rounded upwards if
necessary to the nearest whole multiple of 1/32%).
(b) If on any LIBOR Determination Date only one or none of the
Reference Banks provides such offered quotations, LIBOR for the next Interest
Accrual Period shall be whichever is the higher of (i) LIBOR as determined on
the previous LIBOR Determination Date or (ii) the Reserve Interest Rate. The
"Reserve Interest Rate" shall be the rate per annum which the Trustee determines
to be either (i) the arithmetic mean (rounded upwards if necessary to the
nearest whole multiple of 1/32%) of the one-month United States dollar lending
rates that New York City banks selected by the Trustee are quoting, on the
relevant LIBOR Determination Date, to the principal London offices of at least
two of the Reference Banks to which such quotations are, in the opinion of the
Trustee, being so made, or (ii) in the event that the Trustee can determine no
such arithmetic mean, the lowest one-month United States dollar lending rate
which New York City banks selected by the Trustee are quoting on such LIBOR
Determination Date to leading European banks.
(c) If on the first LIBOR Determination Date, the Trustee is required
but is unable to determine the Reserve Interest Rate in the manner provided in
paragraph (b) above, LIBOR shall be 5.387%. If on any subsequent LIBOR
Determination Date, the Trustee is required but is unable to determine the
Reserve Interest Rate in the manner provided in paragraph (b) above, LIBOR shall
be LIBOR for the immediately preceding LIBOR Determination Date.
(iii) Each Reference Bank shall (i) be a leading bank engaged in
transactions in Eurodollar deposits in the international Eurocurrency
market, (ii) not control, be controlled by, or be under common control
with the Trustee, and (iii) have an established
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place of business in London. If any such Reference Bank should be
unwilling or unable to act as such or if the Trustee should terminate
the appointment of any such Reference Bank, the Trustee will promptly
appoint another leading bank meeting the criteria specified above.
(iv) The establishment of LIBOR on each LIBOR Determination Date by the
Trustee and the Trustee's calculation of the rate of interest
applicable to the Class A Bonds for the related Interest Accrual Period
shall (in the absence of manifest error) be final and binding.
"Margin": As to each Payment Date through and including the Initial
Call Date, 0.18%; as to each Payment Date thereafter, 0.36%.
"Maximum Bond Interest Rate Assumption": The lesser of (i) the Net WAC
and (ii) 8.50%.
"Mortgage Loan": As defined in the applicable Pooling and
Administration Agreement.
"Net Interest Shortfall": As to any Payment Date, the aggregate of
interest shortfalls (net of any compensating payment made in respect thereof by
the related Servicer) on the Conventional Certificates resulting from
prepayments on the related Mortgage Loans or the application of the Soldiers and
Sailors' Civil Relief Act of 1940, as amended. The aggregate of Net Interest
Shortfalls for any Payment Date shall be allocated between the Class A and Class
AX Bonds in proportion to the amount of such Accrued Bond Interest that would
have accrued on such Bonds in absence of such Net Interest Shortfalls.
"Net WAC": As to any Payment Date, the weighted average (by principal
balance) of the interest rates of the Conventional Certificates for such date
less the Trustee's Fee Rate.
"Non-U.S. Person": A Person other than a United States Person.
"Offered Bond": Any Class A Bond.
"Payment Date": The twenty-fifth day of each month, or if such day is
not a Business Day, the next succeeding Business Day, commencing in October
1998.
"Permitted Transferee": As to a Residual Bond, a transferee of such
Residual Bond that is not a Disqualified Organization and not a Non-U.S. Person
and satisfies the requirements for a transferee of a Residual Bond under Section
2.15 of the Indenture.
"Pledged Account": The Collection Account and the Reserve Fund.
"Pooling and Administration Agreement": Each Pooling and Administration
Agreement pursuant to which a Conventional Certificate was issued.
"Prepayment Assumption": 40% CPR.
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"Rating Agencies": As of the Closing Date, Standard & Poor's Rating
Services, a division of the XxXxxx-Xxxx Companies, Inc. and Duff & Xxxxxx Rating
Co.
"Record Date": With respect to any Payment Date, the close of business
on the last Business Day of the month immediately preceding the month of such
Payment Date.
"REMIC": A "real estate mortgage investment conduit" as defined in
Section 860D of the Code.
"Reserve Fund": The Eligible Account established and monitored pursuant
to Section 12 hereof. The Reserve Fund shall in no event become an asset of the
REMIC.
"Reserve Fund Deficiency": As to any Payment Date the excess of (x) the
Reserve Fund Requirement for such date over (y) the amount on deposit in the
Reserve Fund on such date.
"Reserve Fund Deposit": With respect to any Payment Date, an amount
equal to the lesser of (x) the sum of the Reserve Fund Deficiency and Basis Risk
Shortfall applicable to such Payment Date and (y) either, in the event that a
Basis Risk Shortfall exists on such Payment Date, Accrued Bond Interest on the
Class AX Bonds for such Payment Date or, in the event that a Reserve Fund
Deficiency exists but a Basis Risk Shortfall does not exist on such Payment
Date, 50% of the Accrued Bond Interest on the Class AX Bonds for such Payment
Date.
"Reserve Fund Requirement": As to any Payment Date, $5,000; provided,
however, that if on any Payment Date the Net WAC for such date exceeds LIBOR
plus the applicable Margin by less than 0.25%, the Reserve Fund Requirement for
such date shall equal the product of 0.50% and the Class Current Principal
Balance of the Class A Bonds for such date.
"Residual Bonds": Any of the Class R Bonds.
"Residual Interest": The Class R Bonds.
"Restricted Bonds": None.
"Series 1998-3 Bonds": Each Class of Bonds set forth in Section 5
hereof.
"Series 1998-3 REMIC": The REMIC established hereby.
"Special Payment Date": As specified by Section 8 hereof.
"Stated Maturity": With respect to a Class of Bonds, as specified in
Section 5.
"Startup Day": As defined in Section 18.
"Substitute Mortgage Loan": As defined in the Pooling and
Administration Agreement.
"Transferor": A transferor of a Residual Bond.
"Trust Fund": As defined in applicable Pooling and Administration
Agreement.
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"Trustee's Fee": As to any Payment Date, an amount equal to the product
of (i) the aggregate Certificate Principal Balance and (ii) 1/12 the Trustee Fee
Rate.
"Trustee Fee Rate": 0.00385% per annum.
"Underwriter": Greenwich Capital Markets, Inc.
"United States Person": (i) a citizen or resident of the United States;
(ii) a corporation (or entity treated as a corporation for tax purposes) created
or organized in the United States or under the laws of the United States or of
any state thereof, including, for this purpose, the District of Columbia; (iii)
a partnership (or entity treated as a partnership for tax purposes) organized in
the United States or under the laws of the United States or of any state
thereof, including, for this purpose, the District of Columbia (unless provided
otherwise by future Treasury regulations); (iv) an estate whose income is
includible in gross income for United States income tax purposes regardless of
its source; or (v) a trust, if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more U.S. Persons have authority to control all substantial decisions of the
trust. Notwithstanding the last clause of the preceding sentence, to the extent
provided in Treasury regulations, certain trusts in existence on August 20,
1996, and treated as U.S.
Persons prior to such date, may elect to continue to be U.S. Persons.
SECTION (2) DESIGNATION.
The Series 1998-3 Bonds shall be designated generally as the Issuer's
Collateralized Mortgage Obligations, Series 1998-3.
SECTION (3) DATING OF SERIES 1998-3 BONDS; CALCULATION OF INTEREST
ACCRUED.
The Series 1998-3 Bonds that are authenticated and delivered by the
Trustee to or upon the order of the Issuer on the Closing Date shall be dated
the Closing Date. All other Series 1998-3 Bonds that are authenticated after the
Closing Date for any other purpose under the Indenture shall be dated the date
of their authentication.
The Class A Bonds shall constitute the only Class of Book Entry Bonds.
SECTION (4) TRANSFER OF ERISA RESTRICTED BONDS.
No transfer of an ERISA Restricted Bond in definitive form may be made
except as provided in Section 2.15 of the Indenture.
SECTION (5) AGGREGATE PRINCIPAL AMOUNT; CLASSES.
The aggregate principal amount of Series 1998-3 Bonds that may be
authenticated and delivered under this Series 1998-3 Supplement shall be
$345,831,963 except for Series 1998-3 Bonds authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Series
1998-3 Bonds pursuant to Sections 2.6, 2.7, 2.8 or 9.6 of the Indenture. Such
aggregate principal amount shall be divided among the three Classes having the
designations,
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original Class Current Principal Balances (or Class Notional Balances), Bond
Interest Rates and Stated Maturities of their final installment of principal as
follows:
Approximate Initial Stated Maturity
Class Bond Current (Payment Date
Designation Interest Rate Principal Balance Occurring In)
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Class A Bonds (1) $345,831,863 February, 2025
Class AX Bonds (2) (4) February, 2025
Class R Bonds (3) $100.00 February, 2025
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(1) Interest shall accrue on the Class A Bonds at the Class A Bond Interest
Rate.
(2) Interest shall accrue on the Class AX Bonds at the Class AX Bond Interest
Rate.
(3) Interest shall accrue on the Class R Bonds at the Class A Bond Interest
Rate.
(4) The Class AX Bonds are interest only bonds and are issued with an initial
Class Notional Balance of $345,831,963.
SECTION (6) DENOMINATIONS OF SERIES 1998-3 BONDS.
The Book Entry Bonds shall initially be evidenced by a single Bond
representing the initial Class Current Principal as of the Closing Date. The
Class A Bonds shall be issued in minimum denominations of $25,000 in principal
balance in increments of $1 in excess thereof, and the Class AX Bonds shall be
issued in certificated fully-registered form in minimum denominations of
$100,000 in Class Notional Balance and, in each case, integral multiples of
$1,000 in excess thereof. The Class R Bonds shall be issued as a single
certificate in certificated fully-registered form, representing the entire
interest Original Principal Amount thereof. Notwithstanding the foregoing, one
Bond of each Class of Bonds, other than the Residual Bonds, may be issued in a
different principal or notional balance. All of the Book Entry Bonds shall
initially be registered on the Bond Register in the name of Cede & Co., the
nominee of the Clearing Agency, and no Beneficial Owner thereof will receive a
Definitive Bond representing such Beneficial Owner's interest in the Book Entry
Bonds, except in the case of Individual Bond Certificates, and except in the
event of Book Entry Termination.
SECTION (7) AUTHENTICATION OF SERIES 1998-3 BONDS.
The Series 1998-3 Bonds may be authenticated by the Trustee at the
Corporate Trust Office. There shall be no Authenticating Agent for the Series
1998-3 Bonds unless the appointment of an Authenticating Agent is required as a
condition to the listing of the Series 1998-3 Bonds on any stock exchange.
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SECTION (8) PAYMENT DATES.
For purposes of the Indenture, the Interest Payment Dates and Principal
Payment Dates for the Series 1998-3 Bonds are each a Payment Date. For purposes
of the Indenture, the Special Payment Dates for the Series 1998-3 Bonds are the
25th day of any calendar month in which any Outstanding Series 1998-3 Bonds are
Overdue Bonds.
SECTION (9) PLACES FOR PAYMENT OF PRINCIPAL OF SERIES 1998-3 BONDS;
PAYMENTS ON BOOK ENTRY BONDS.
(a) The final payment of principal in retirement of each Class A or
Class R Bond, the final payment of interest in respect of a Class AX Bond, or
the final payment of contingent interest, if any, in respect of a Class R Bond
(or the Redemption Price of any such Series 1998-3 Bond called for redemption in
full), shall be payable upon presentation and surrender thereof only at the
office of the Trustee in the Borough of Manhattan, City and State of New York.
(b) Each payment of principal of and interest on a Book Entry Bond
shall be paid to the Clearing Agency, which shall credit the amount of such
payments to the accounts of its Clearing Agency Participants in accordance with
its normal procedures. Each Clearing Agency Participant shall be responsible for
disbursing such payments to the Beneficial Owners of the Book Entry Bonds that
it represents and to each indirect participating brokerage firm (a "brokerage
firm" or "indirect participating firm") for which it acts as agent. Each
brokerage firm shall be responsible for disbursing funds to the Beneficial
Owners of the Book Entry Bonds that it represents. All such credits and
disbursements are to be made by the Clearing Agency and the Clearing Agency
Participants in accordance with the provisions of the Bonds. Neither the
Trustee, the Bond Registrar nor the Issuer shall have any responsibility
therefor except as otherwise provided by applicable law.
SECTION (10) PAYMENT ON THE BONDS BEFORE ACCELERATION; REPORTS TO
BONDHOLDERS.
(a) Before acceleration, if any, of the Bonds pursuant to Section 5.2
of the Indenture, the Trustee shall apply Available Funds on each Payment Date
(after deducting the applicable Trustee's Fee for such Payment Date) to pay
interest on and principal of the Bonds in the following priority and amounts:
first, to each Class of Bonds, the Accrued Bond Interest thereon for
such Payment Date; provided, however, that if on such Payment Date a
Basis Risk Shortfall or Reserve Fund Deficiency exists, the amount
otherwise payable to the Class AX Bonds pursuant to this clause shall
be reduced by the Reserve Fund Deposit applicable to such Payment Date
and such amount shall be deposited in the Reserve Fund pursuant to
Section 12 hereof; and provided further that any shortfall in available
amounts (other than as described in the preceding proviso) shall be
allocated among such Classes in proportion to the amount of Accrued
Bond Interest otherwise payable thereon; and provided further that
amounts payable pursuant to this clause first shall be subject to
Section 10 (c) hereof;
second, to each Class of Bonds, any Accrued Bond Interest thereon
remaining unpaid from previous Payment Dates, with any shortfall in
available amounts
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being allocated among such Classes in proportion to the amount of such
Accrued Bond Interest remaining unpaid for each such Class for such
Payment Date; provided, however, that any such unpaid amounts with
respect to the Class AX Bonds to the extent they represent amounts that
would have been deposited in the Reserve Fund in respect of Basis Risk
Shortfalls or Reserve Fund Deficiencies on previous Payment Dates shall
not be payable to the Class AX Bonds but shall instead be deposited in
the Reserve Fund; and provided further that amounts payable pursuant to
this clause second shall be subject to Section 10(c) hereof;
third, to the extent of distributions received on the Conventional
Certificates attributable to principal, to the Class R Bonds in
reduction of the Class Current Principal Balance thereof, until the
Class Current Principal Balance thereof has been reduced to zero;
fourth, to the extent of distributions received on the Conventional
Certificates attributable to principal less amounts payable pursuant to
clause third, to the Class A Bonds in reduction of the Class Current
Principal Balance thereof, until the Class Current Principal Balance
thereof has been reduced to zero, and
fifth, any remaining amounts shall be distributed to the Class R Bonds.
(b) As provided in Section 12 hereof, the Class A Bonds are subject to
additional payments from the Reserve Fund on any Payment Date as to which a
Basis Risk Shortfall exists for such Class of Bonds.
(c) No Accrued Bond Interest shall be payable with respect to any Class
of Bonds after the Payment Date on which the Current Class Principal Balance or
Class Notional Balance thereof has been reduced to zero.
(d) Payment of the above amounts to each Bondholder shall be made (i)
by check mailed to each Bondholder entitled thereto at the address appearing in
the Bond Register or (ii) upon receipt by the Trustee on or before the fifth
Business Day preceding the Record Date of written instructions from a Bondholder
holding Bonds representing an initial aggregate Current Principal Balance or
Class Notional Balance of not less than $1,000,000 by wire transfer to a United
States dollar account maintained by the payee at any United States depository
institution with appropriate facilities for receiving such a wire transfer;
provided, however, that the final payment in respect of each Class of Bonds
shall be made as provided in Section 9(a).
(e) Concurrently with each payment to Bondholders, the Trustee shall
forward by first-class mail to each Bondholder, with a copy to the Issuer, the
Underwriter and the Rating Agencies, a statement setting forth the following
information, expressed with respect to clauses (i) and (v) of this Section 10(e)
in the aggregate and with respect to an individual Bond representing an initial
Current Principal Balance of $1,000, or in the case of a Class of Interest Only
Bonds, a Class Notional Balance of $1,000 (in each case, an "Individual Bond"
with respect to the applicable Class):
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(i) the Class Current Principal Balance (or Class Notional Balance
in the case of a Class of Interest Only Bonds) of each Class of Bonds
immediately prior to such Payment Date;
(ii) the amount of the payment allocable to principal on the Class
A and Class R Bonds;
(iii) the aggregate amount of interest accrued at the related Bond
Interest Rate with respect to each Class of interest-bearing Bonds
during the related Interest Accrual Period;
(iv) the Net Interest Shortfall and any other adjustments to
interest at the related Bond Interest Rate necessary to account for any
difference between interest accrued and aggregate interest paid with
respect to each Class of interest-bearing Bonds;
(v) the amount of the payment allocable to interest on each Class
of Bonds;
(vi) the Bond Interest Rate for each Class of interest-bearing
Bonds with respect to such Payment Date;
(vii) the Class Current Principal Balance (or Class Notional Balance
in the case of a Class of Interest Only Bonds) of each Class of Bonds
after such Payment Date;
(viii) the amount of Scheduled Principal and Principal Prepayments,
including but separately identifying the principal amount of Principal
Prepayments, Insurance Proceeds, the purchase price in connection with
the purchase of Mortgage Loans, cash deposits in connection with the
substitutions of Mortgage Loans and Net Liquidation Proceeds) and the
number and principal balance of Mortgage Loans purchased or substituted
for during the relevant period and cumulatively since the Cut-off Date;
(ix) the number of Mortgage Loans (excluding REO Property (as
defined in the related Pooling and Administration Agreement)) remaining
in all of the Trust Funds as of the end of the related Due Period;
(x) information regarding any Mortgage Loan delinquencies as of
the end of the related Due Period (as defined in the related Pooling
and Administration Agreement), including the aggregate number,
aggregate outstanding principal balance and aggregate Scheduled
Principal Balance of Mortgage Loans delinquent one month, two months
and three months or more;
(xi) the number of Mortgage Loans in the foreclosure process as of
the end of the related Due Period (as defined in the related Pooling
and Administration Agreement) and the aggregate Outstanding Principal
Balance of such Mortgage Loans;
(xii) the number and aggregate Outstanding Principal Balance of all
Mortgage Loans as to which the Mortgaged Properties were REO Properties
as of the end of the related Due Period; and
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(xiii) the book value (the sum of (A) the outstanding principal
balance of the Mortgage Loan, (B) accrued interest through the date of
foreclosure and (C) foreclosure expenses) of any REO Property;
provided, however, that in the event that such information is not
available to the applicable Administrator and the Trustee on the
Payment Date, such information shall be furnished promptly after it
becomes available.
The information set forth above shall be calculated, or reported, as the case
may be, by the Trustee based on data provided by the Administrators pursuant to
Section 6.02 of each Pooling and Administration Agreement upon which the Trustee
may conclusively rely. The information furnished by the Administrators shall be
sufficient for the Trustee to calculate any statement it is required to make. In
addition to the information set forth in clauses (i) through (xiii) above, the
statement to the Rating Agencies shall also include with respect to each Trust
Fund underlying the Conventional Certificates, the aggregate outstanding
principal balances of the Mortgage Loans in the related Mortgage Pool; the
Mortgage Pool insurance policy and special hazard insurance policy coverage
remaining for such Mortgage Pool; and cumulative losses. In addition, if so
requested by a Rating Agency, the Trustee shall provide such Rating Agency with
copies of the remittance reports with respect to each Trust Fund underlying the
Conventional Certificates. Capitalized terms used in this Section 10(e) and not
otherwise defined herein shall have the meaning ascribed to them in the
applicable Pooling and Administration Agreement.
(g) By April 30 of each year beginning in 1999, the Trustee will, if
required by the Internal Revenue Code, furnish a report to each Holder of the
Bonds of record at any time during the prior calendar year as to the aggregate
of amounts reported pursuant to subclauses (e)(ii) and (e)(v) above with respect
to the Bonds, plus information with respect to the amount of servicing
compensation and such other customary information as the Administrators may
determine to be necessary and/or to be required by the Internal Revenue Service
or by a federal or state law or rules or regulations to enable such Holders to
prepare their tax returns for such calendar year. Such obligations shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Trustee pursuant to the requirements of the
Code.
SECTION (11) PAYMENT OF THE BONDS ON AND AFTER ACCELERATION.
On each Payment Date, if the Bonds are declared due and payable
pursuant to Section 5.2 of the Indenture, (i) Accrued Bond Interest on each
Class of Bonds shall be paid pro rata in accordance with the amount of unpaid
Accrued Bond Interest on each such Class of Bonds from Available Funds, and (ii)
payments of principal on each outstanding Class A or Class R Bond shall be paid
pro rata out of remaining Available Funds until the Class Current Principal
Balance thereof has been reduced to zero.
SECTION (12) RESERVE FUND.
On or prior to the Closing Date, the Trustee shall establish and
thereafter maintain a segregated account held in trust for the benefit of
Bondholders as herein provided. On or prior to the Closing Date, the Issuer
shall make the Initial Deposit to the Reserve Fund. The Reserve Fund shall at
all times be maintained as an Eligible Account. The Reserve Fund shall in no
event constitute an asset of the REMIC and shall at all times (i) be maintained
as an "outside reserve
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fund" pursuant to U.S. Treasury Regulation 1.860G-2(h); (ii) be owned for
federal income tax purposes by the beneficial owners of the Class AX Bonds;
(iii) all amounts deposited in the Reserve Fund pursuant to Section 10 hereof
shall be treated as a distribution to the Class AX Bondholders; and (iv) not
elect to be treated as an association taxable as a corporation under Treasury
Regulations Section 301.7701-3(a). Funds on deposit in the Reserve Fund shall be
invested by the Trustee at the direction of the Issuer in Eligible Investments.
Any investment earnings on such Eligible Investments on deposit in the Reserve
Fund shall be released to the Bond Manager on each Payment Date as compensation
for its services rendered under the Bond Management Agreement.
On each Payment Date, the Trustee shall transfer for deposit to the
Reserve Fund all amounts required to be so transferred pursuant to clauses first
and second of Section10(a)(i). To the extent that a Basis Risk Shortfall exists
on any Payment Date the Trustee shall withdraw from the Reserve Fund and pay
such amount to the Class A Bonds on such Payment Date along with amounts
otherwise payable pursuant to Section 10. In addition, if on any Payment Date
amounts on deposit in the Reserve Fund exceed the Reserve Fund Requirement for
such date, such excess shall be payable to the Class AX Bonds on such Payment
Date along with amounts otherwise payable thereto pursuant to Section 10. Upon
retirement of the Class A Bonds, any amounts on deposit to the Reserve Fund
shall be paid to the Class AX Bonds.
SECTION (13) TRANSFER OF CERTIFICATES TO TRUSTEE; DEPOSITS TO
COLLECTION ACCOUNT; PLEDGED ACCOUNTS.
(a) The Conventional Certificates shall have been registered in the
name of the Trustee or its Qualified Nominee by no later than the Closing Date
pursuant to Section 2.12(f)(iii) of the Indenture. The Trustee shall have
confirmed in writing on or prior to the Closing Date that it is holding such
Conventional Certificates as Trustee.
(b) A Qualified GIC shall not be granted to the Trustee with respect to
the investment of funds in any Pledged Account for the Series 1998-3 Bonds.
SECTION (14) REQUIREMENTS FOR ISSUANCE OF SERIES 1998-3 BONDS.
Except as to an executed counterpart of each Pooling and Administration
Agreement, no additional items shall be required to be delivered to the Trustee
pursuant to Sections 2.12(l) of the Indenture in connection with the issuance of
the Series 1998-3 Bonds.
SECTION (15) CALCULATIONS WITH RESPECT TO UNDERLYING MORTGAGE LOANS.
Calculations with respect to the Mortgage Loans underlying the
Conventional Certificates granted as security for the Series 1998-3 Bonds shall
be made on a mortgage loan-by-mortgage loan basis to the extent required to
determine the amounts to be paid on the Bonds on each Payment Date.
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SECTION (16) REDEMPTION.
(a) The Series 1998-3 Bonds shall be subject to redemption in whole,
but not in part, on any Payment Date on or after the Initial Call Date. Any such
redemption of a Series 1998-3 Bond shall be effected at the Redemption Price
therefor.
(b) The Series 1998-3 Bonds shall also be subject to redemption in
whole, but not in part, on each Payment Date on or after the date the Class
Current Principal Balance of the Class A Bonds is less than 25% of the Original
Principal Amount thereof. Any such redemption of a Series 1998-3 Bond shall be
effected at the Redemption Price therefor.
SECTION (17) ACTIONS BY TRUSTEE AS HOLDER OF CONVENTIONAL
CERTIFICATES.
(a) With the consent of the Holders of Series 1998-3 Bonds representing
not less than 66-2/3% of the aggregate principal balance of all Outstanding
Series 1998-3 Bonds, by Act of said Holders delivered to the Issuer and the
Trustee, the Issuer, when authorized by an Issuer Resolution, and the Trustee
may take any action that by the terms of the applicable Pooling and
Administration Agreement requires the consent of the holder of the Conventional
Certificates, including but not limited to: (1) entering into any amendments to
a Pooling and Administration Agreement; (2) removing or consenting to the
removal of, and appointing or consenting to the appointment of, a successor
Administrator; and (3) removing or consenting to the removal of, and appointing
or consenting to the appointment of, the Person acting as trustee under such
Pooling and Administration Agreement; provided, however, that no such action
shall, without the consent of the Holder of each Outstanding Bond affected
thereby:
(1) reduce the amount of, or delay the timing of, payments
received on its related Trust Fund that are required to be
distributed on any Conventional Certificate or change the
repurchase price with respect thereto, change any place of
payment where, or the coin or currency in which, any
Conventional Certificate or any interest thereon is payable,
or impair the right to institute suit for the enforcement of
the payment of any installment of interest or principal due on
any Conventional Certificate or adversely affect the tax
consequences to any holder of a Conventional Certificate;
(2) change the requirement of the consent of the holders of
the Conventional Certificate for any such action pursuant to
such Pooling and Administration Agreement;
(3) modify any of the provisions of this Section, except to
increase any percentage specified herein; or
(4) permit the creation of any lien ranking prior to or on a
parity with the related Trust created by such Pooling and
Administration Agreement with respect to any part of its
related Trust Fund or terminate the related Trust created by
such Pooling and Administration Agreement on any property at
any time subject thereto or deprive the Holder of any Bond of
the security afforded by the Conventional Certificate;
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provided, however, that notwithstanding the foregoing provisions of this
Section, Issuer and the Trustee may, without the consent of any Holder of any
Series 1998-3 Bonds, consent to the release from or termination of a trust
created by such Pooling and Administration Agreement with respect to any
Mortgage Loan when such action by the Issuer and the Trustee is specifically
authorized by any other provision of the Indenture, this Series 1998-3
Supplement or the Pooling and Servicing Agreement.
The Trustee may in its discretion determine whether or not any Series
1998-3 Bonds would be affected by any proposed action and any such determination
shall be conclusive upon the Holders of all Series 1998-3 Bonds, whether
theretofore or thereafter authenticated and delivered hereunder. The Trustee
shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Bondholders under this Section
to approve the particular form of any written instrument proposed to effect such
action, but it shall be sufficient if such Act shall approve the substance
thereof.
Promptly after the execution by the Issuer and the Trustee of any
written instrument proposed to effect such action pursuant to this Section, the
Issuer shall mail to the Holders of the Series 1998-3 Bonds to which such action
relates a notice setting forth in general terms the substance of such action.
Any failure of the Issuer to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such action.
(b) The Issuer hereby acknowledges and agrees that should the Person
acting as trustee under a Pooling and Administration Agreement demand indemnity
satisfactory to it as a condition precedent to taking any action requested by
the Trustee, as holder of the Conventional Certificates, the Trustee hereunder
shall have no duty or obligation to advance its own funds in fulfillment of such
indemnity, but rather may request such indemnity from the Issuer or from the
Holders of the Series 1998-3 Bonds.
SECTION (18) REMIC ADMINISTRATION.
(a) The Issuer shall make an election to treat the Trust Estate, other
than the Reserve Fund, the Initial Deposit and the Cap Agreement as a REMIC
under the Code and, if necessary, under applicable state law. Such elections
will be made on Forms 1066 or other appropriate federal tax or information
return or any appropriate state return for the taxable year ending on the last
day of the calendar year in which the Bonds are issued. The Class A Regular
Interest and the Class AX Regular Interest shall be designated as the "regular
interests" and the Class R Bonds shall be designated as the sole class of
"residual interest". The Issuer shall not permit the creation of any "interests"
in the Series 1998-3 REMIC (within the meaning of Section 860G of the Code)
other than the interests described in the previous sentence. The Trustee and the
Issuer shall account for payments made to the Class A Bonds under the Cap
Agreement separately from the other distributions on the Class A Bonds. Each
Holder of a Class A Bond shall be deemed to own an undivided beneficial
ownership interest in two assets: (i) the Class A Regular Interest and (ii) the
Cap Agreement. The Cap Agreement is not included as part of the Series 1998-3
REMIC. Each Holder of a Class AX Bond shall be deemed to own an undivided
beneficial ownership in the Reserve Account for purposes of the REMIC
Provisions. Notwithstanding the
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foregoing, if the aggregate initial schedule principal balance of the Mortgage
Loans exceeds the initial Class Current Principal Balance of the Bonds, the
Trustee shall issue to Capstead Mortgage Corporation an additional "regular
interest" having such excess as its principal balance and having an interest
rate equal to the Net WAC. Such regular interest shall be paid interest and
principal after clause fourth in Section 10(a).
(b) The Closing Date is hereby designated as the "startup day" of the
Series 1998-3 REMIC within the meaning of Section 860G(a)(9) of the Code.
(c) The Issuer shall pay out of its own funds, without any right of
reimbursement from the Trust Estate, any and all expenses relating to any tax
audit of the Series 1998-3 REMIC (including, but not limited to, any
professional fees or any administrative or judicial proceedings with respect
thereto that involved the Internal Revenue Service or state tax authorities),
other than the expense of obtaining any tax related Opinion of Counsel not
obtained in connection with such an audit and other than taxes. The Holder of
the Class R Bonds shall be the tax matters person of the Series 1998-3 REMIC, in
the manner provided under Treasury Regulations Section 1.860F-4(d) and Treasury
Regulations Section 301.6231(a)(7)-1 and the Issuer is hereby irrevocably
designated and shall serve as attorney-in-fact and agent for any such Persons
that are tax matters persons. The Issuer, as designated by the tax matters
person, shall (i) act on behalf of the Series 1998-3 REMIC in relation to any
tax matter or controversy involving such Series 1998-3 REMIC and (ii) represent
the REMIC in any administrative or judicial proceeding relating to an
examination or audit by any governmental taxing authority with respect thereto.
(d) The Issuer shall prepare or cause to be prepared, sign and file all
of the tax returns in respect of the Series 1998-3 REMIC, other than tax returns
required to be filed by a Administrator pursuant to a Pooling and Administration
Agreement. The expenses of preparing and filing such returns shall be borne by
the Issuer without any right of reimbursement therefor. The Issuer shall cause
the first federal income tax return of the Series 1998-3 REMIC to include the
information required by Treasury Regulation Section 1.860D-1(d)(2) and Treasury
Regulation Section 1.860F-4(b)(2).
(e) The Issuer shall perform on behalf of the Trust Estate all
reporting and other tax compliance duties that are the responsibility of the
Trust Estate under the Code, REMIC Provisions or other compliance guidance
issued by the Internal Revenue Service or any state or local taxing authority,
except as provided in Section 10(g). Among its other duties, as required by the
Code, the REMIC Provisions or other such compliance guidance, the Issuer shall
provide (i) to any Transferor of a Residual Bond such information as is
necessary for the application of any tax relating to the transfer of a Class R
Bond to any Person who is not a Permitted Transferee, (ii) to Bondholders such
information or reports as are required by the Code or the REMIC Provisions
including reports relating to interest, original issue discount and market
discount or premium (using the Prepayment Assumption) and (iii) to the Internal
Revenue Service the name, title, address and telephone number of the person who
will serve as the representative of the Series 1998-3 REMIC. The Prepayment
Assumption for the purposes of Section 4.3(b)(iv) of the Indenture is the
Prepayment Assumption as defined in Section 1 hereof.
(f) The Issuer shall take such action and shall cause the Series 1998-3
REMIC created hereunder to take such action as shall be necessary to create or
maintain the status of the
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Series 1998-3 REMIC as a REMIC under the REMIC Provisions. The Issuer shall not
take any action, cause the Series 1998-3 REMIC to take any action or fail to
take (or fail to cause to be taken) any action that, under the REMIC Provisions,
if taken or not taken, as the case may be, could (i) endanger the status of the
Series 1998-3 REMIC as a REMIC or (ii) result in the imposition of a tax upon
the Series 1998-3 REMIC (including but not limited to the tax on prohibited
transactions as defined in Section 860F(a)(2) of the Code and the tax on
contributions to a REMIC set forth in Section 860G(d) of the Code) (either such
event, an "Adverse REMIC Event") unless the Issuer has received an Opinion of
Counsel (at the expense of the party seeking to take such action but in no event
shall such Opinion of Counsel be an expense of the Issuer) to the effect that
the contemplated action will not, with respect to the Series 1998-3 REMIC
created hereunder, endanger such status or result in the imposition of such a
tax. The Issuer shall cause the Administrators not to take or fail to take any
action (whether or not authorized hereunder) as to which the Issuer has received
an Opinion of Counsel (which such Opinion of Counsel shall not be an expense of
the Issuer) to the effect that an Adverse REMIC Event could occur with respect
to such action. At all times as may be required by the Code, the Issuer will
take no action, nor permit any such action, that it knows will cause
substantially all of the assets of the Series 1998-3 REMIC to not consist of
"qualified mortgages" as defined in Section 860G(a)(3) of the Code or "permitted
investments" as defined in Section 860G(a)(5) of the Code.
(g) In the event that any tax is imposed on a "prohibited transaction"
of the Series 1998-3 REMIC created hereunder as defined in Section 860F(a)(2) of
the Code, on "net income from foreclosure property" of the Series 1998-3 REMIC
as defined in Section 860G(c) of the Code, on any contributions to the REMIC
after the Startup Day therefor pursuant to Section 860G(d) of the Code, or any
other tax is imposed by the Code or any applicable provisions of state or local
tax laws, such tax shall be charged (i) to the Issuer pursuant to Section 18(m)
hereof, if such tax arises out of or results from a breach by the Issuer of any
of its obligations hereunder, (ii) to the applicable Administrator pursuant to
the Pooling and Administration Agreement, if such tax arises out of or results
from a breach by such Administrator of any of its obligations under the
applicable Pooling and Administration Agreements, (iii) to the Trustee, if such
tax arises out of the malfeasance or gross negligence of the Trustee, or
otherwise (iv) from Available Funds.
(h) On or before April 15 of each calendar year, commencing April 15,
1999, the Issuer shall deliver to each Administrator and each Rating Agency a
certificate from an officer of the Issuer stating the Issuer's compliance with
this Section 18.
(i) The Issuer shall, for federal income tax purposes, maintain books
and records with respect to the Series 1998-3 REMIC on a calendar year and on an
accrual basis.
(j) The Issuer shall not permit the acquisition of any assets by the
Series 1998-3 REMIC unless it shall have received an Opinion of Counsel (which
such Opinion of Counsel shall not be an expense of the Issuer) to the effect
that the inclusion of such assets in such Series 1998-3 REMIC will not cause the
Series 1998-3 REMIC to fail to qualify as a REMIC at any time that any Bonds are
outstanding or subject the Series 1998-3 REMIC to any tax under the REMIC
Provisions or other applicable provisions of federal, state and local law or
ordinances.
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(k) The Issuer shall not enter into any arrangement by which the Series
1998-3 REMIC will receive a fee or other compensation for services nor permit
such Series 1998-3 REMIC to receive any income from assets other than "qualified
mortgages" as defined in Section 860G(a)(3) of the Code or "permitted
investments" as defined in Section 860G(a)(5) of the Code.
(l) Solely for purposes of satisfying Section 1.860G-1(a)(4)(iii) of
the Treasury Regulations, the "latest possible maturity date" of each regular
interest in the Series 1998-3 REMIC would be reduced to zero is the Payment Date
occurring in April 25, 2027.
(m) The obligations of the Issuer under this Section 18 may be
performed for the Issuer by the Bond Manager in accordance with the provisions
of the Bond Management Agreement.
SECTION (19) FORM OF SERIES 1998-3 BONDS; MATTERS RELATING TO BOOK
ENTRY BONDS.
(a) The Series 1998-3 Bonds shall be in the respective forms attached
hereto as Exhibits A-1 through A-3. If the Series 1998-3 Bonds are listed on any
stock exchange at any time after the Closing Date, then the Issuer shall, if
required as a condition to such listing, prepare and deliver to the Trustee
Series 1998-3 Bonds in substantially the same form as the Series 1998-3 Bonds
issued on the Closing Date, but with such other additional features and such
modifications, if any, as shall be deemed by the Issuer to be necessary or
appropriate in order to comply with the requirements of such stock exchange for
the listing of the Series 1998-3 Bonds on such exchange. Series 1998-3 Bonds in
the form issued on the Closing Date shall thereafter be exchangeable for Series
1998-3 Bonds in such revised form to the same extent as temporary Bonds are
exchangeable for definitive Bonds pursuant to Section 2.6 of the Indenture. The
Issuer shall also include in the Series 1998-3 Bonds of any Class any
information required to be set forth therein pursuant to the Code and applicable
regulations thereunder.
(b) The Clearing Agency, the Issuer and the Trustee have entered or
will enter into the Letter Agreements. The Book Entry Bonds will be issued and
registered in the form of a single typewritten bond certificate to be delivered
to the Clearing Agency by the Issuer substantially in the respective forms for
each such Class of Bonds attached as exhibits hereto. Such Bond certificates
shall be initially registered on the Bond Register in the name of the nominee of
such Clearing Agency and no Beneficial Owner will receive a certificate
representing its interests in any Class A Bond except in the case of Individual
Bond Certificates as provided herein and except in the event that the Trustee
issues Definitive Bonds, as provided in Section 2.14 of the Indenture.
(c) Prior to Book Entry Termination, except for Individual Bond
Certificates, each Class A Bond will remain registered in the name of the
Clearing Agency or its nominee and at all times: (i) registration of such Bonds
may not be transferred by the Trustee or the Bond Registrar except to another
Clearing Agency; (ii) ownership and transfers of registration of such Bonds on
the books of the Clearing Agency shall be governed by applicable rules
established by the Clearing Agency; (iii) the Clearing Agency may collect its
usual and customary fees, charges and expenses from its Clearing Agency
Participants; (iv) the Trustee shall deal with the Clearing Agency, Clearing
Agency Participants and indirect participating firms as representatives of the
Beneficial Owners of the Class A Bonds for purposes of exercising the rights of
Holders under
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the Indenture, and requests and directions for and votes of such representatives
shall not be deemed to be inconsistent if they are made with respect to
different Beneficial Owners; and (v) the Trustee may rely and shall be fully
protected in relying upon information furnished by the Clearing Agency with
respect to its Clearing Agency Participants and furnished by the Clearing Agency
Participants with respect to indirect participating firms and their direct or
indirect Beneficial Owners.
(d) After Book Entry Termination, Definitive Bonds shall, after
execution and delivery of a supplemental indenture containing any provisions,
which in the opinion of the Issuer are necessary for such purpose, be issued to
the Beneficial Owners of the Class A Bonds outstanding at the time of such Book
Entry Termination and such Bonds shall no longer be "Book Entry Bonds."
SECTION (20) THE ADMINISTRATORS AND THE TRUSTEE.
The Administrators, pursuant to each Pooling and Administration
Agreement, will provide the Certificate Trustee who will provide the Trustee
with certain information concerning the Mortgage Loans underlying the
Conventional Certificates. The Trustee shall not be required to recompute,
verify or recalculate the information supplied to it by the Issuer or any
Administrator and may conclusively rely and shall be protected in relying on the
accuracy of all such information in performing its duties and responsibilities
hereunder.
SECTION (21) SUPPLEMENTS, MODIFICATIONS AND RATIFICATIONS OF
INDENTURE.
(a) The Trustee will be required to mail, in each year when required by
the TIA, to all Bondholders a brief report relating to its eligibility and
qualifications to continue as the Trustee under the Indenture, any amounts
advanced by it under the Indenture, the amount, interest rate and maturity date
of certain indebtedness owing by the Issuer to it in the Trustee's commercial
capacity, the property and funds physically held by the Trustee as such, any
release or substitution of property subject to the lien of the Indenture which
has not been previously reported, any additional Series of Bonds not previously
reported and any action taken by the Trustee which materially affects the Series
1998-3 Bonds and which has not been previously reported.
(b) Section 1.1 of the Indenture is hereby amended to restate
subsection (x) of the definition of "Eligible Investments" as follows:
(x) any other demand, money market or time deposit obligation,
security or investment which is acceptable to each of the Rating
Agencies as confirmed in writing by each such Rating Agency.
(c) For purposes hereof, references in the Indenture to the "Imputed
Principal Balance" of a Bond shall refer to its Current Principal Amount or
Notional Amount, as applicable.
(d) The Indenture as modified and supplemented by this Series 1998-3
Supplement with respect to the Series 1998-3 Bonds (but which modification and
supplement shall not apply to any other Series of Bonds unless otherwise
specified in the related Series Supplement) is in all
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respects ratified and confirmed, and the Indenture as so modified and
supplemented by this Series 1998-3 Supplement shall be read, taken and construed
as one and the same instrument.
(e) For purposes of determining whether an "Event of Default" under the
Indenture has occurred, the Stated Maturity Date of each Class of Bonds shall be
deemed to be the Payment Date occurring in February, 2025.
(f) In lieu of delivering reports to Bondholders pursuant to Section
8.7 of the Indenture, the Trustee shall deliver the reports pursuant to Section
10(g) hereof.
Notwithstanding any provisions of the Indenture, an Event of Default
shall not occur in respect of the Class AX Bonds to the extent that amounts in
respect of interest otherwise payable thereto have been reduced pursuant to
Section 10(b) hereof or as a result of the occurrence of a Basis Risk Shortfall.
SECTION (22) CERTAIN MATTERS REGARDING REGISTRATION OF TRANSFER AND
EXCHANGE OF BONDS.
(a) Subject to Section 19(b) and upon the satisfaction of the
applicable conditions set forth below, upon surrender for registration of
transfer of any Bond at any office or agency of the Trustee maintained for such
purpose, the Trustee shall sign, countersign and shall deliver, in the name of
the designated transferee or transferees, a new Bond of a like Class and
aggregate Current Principal Balance or Class Notional Balance, as applicable,
but bearing a different number.
(b) By acceptance of an Individual Bond Certificate, each holder of
such an Individual Bond Certificate acknowledges the restrictions on the
transfer of such Bond set forth in the applicable legends on the face thereof
and agrees that it will transfer such a Bond only as provided herein.
(c) Any Person acquiring a ERISA Restricted Bond (i) shall be required
to provide written certification to the Trustee that such Person is not a Plan,
a Person acting on behalf of a Plan or a Person using the assets of a Plan
(each, a "Plan Investor"), or, in the case of an insurance company, is either
not a Plan Investor or is eligible for an exemption from the applicable
prohibited transaction provisions of ERISA and the Code, or (ii) shall have
delivered to the Trustee an opinion of counsel satisfactory to the Trustee and
the Issuer to the effect that the purchase and holding of such Bonds will not
constitute or result in a prohibited transaction under ERISA or the Code and
will not (a) cause the assets of the Trust Estate to be treated as "plan assets"
within the meaning of Department of Labor regulations set forth in 29 C.F.R. ss.
2510.3-101, (b) give rise to any fiduciary duty under ERISA on the part of the
Issuer, the Administrators, the Certificate Trustee, the Trustee or their
respective affiliates or (c) be treated as, or result in, a prohibited
transaction under Sections 406 or 407 of ERISA or Section 4975 of the Code.
SECTION (23) BOND MANAGER ON BEHALF OR ISSUER.
Any payment required to be made or any action required to be taken by
the Issuer under the Indenture may be undertaken by the Bond Manager, on behalf
of the Issuer, to the extent
21
25
permitted under the Bond Management Agreement. The Trustee may rely on
instructions from the Bond Manager as being so permitted under the Bond
Management Agreement.
SECTION (24) INVESTMENT OF FUNDS IN THE COLLECTION ACCOUNT;
INAPPLICABILITY OF SECTION 6.10(f).
(a) Notwithstanding anything to the contrary in Section 8.2 of the
Indenture any investment earnings derived from the investment of amounts on
deposit in the Collection Account in Eligible Investments shall be released by
the Trustee and paid to the Bond Manager on each Payment Date as compensation
for its services rendered under the Bond Management Agreement.
(b) Section 6.10(f) of the Indenture shall not apply to this Series
1998-3 Supplement.
SECTION (25) COUNTERPARTS.
This Series 1998-3 Supplement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all of such counterparts shall together constitute but one and the same
instrument.
SECTION (26) GOVERNING LAW.
AS PROVIDED IN SECTION 11.13 OF THE INDENTURE, THIS SERIES SUPPLEMENT
AND EACH SERIES 1998-3 BOND ISSUED HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED THEREIN.
SECTION (27) NOTICES.
(a) All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally or
by telecopy or mailed by registered mail, postage prepaid, to (a) in the case of
the Issuer, 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000,
Attention: Xxxxxx X. Xxxxxx, Telecopy No. (000) 000-0000, Confirmation No. (214)
874-2501, and (b) in the case of the Trustee, 000 Xxxxxx, Xxxxxxx, Xxxxx 00000,
Attention 10 CTH 382 Corporate Trust Department or such other address or
telecopy number as may hereafter be furnished by any of the parties hereto, in
writing, to the other parties hereto. Unless otherwise specified herein, any
notice required or permitted to be mailed to a Bondholder shall be given by
registered mail, postage prepaid, at the address of such Holder as shown. Any
notice so mailed within the time prescribed herein shall be conclusively
presumed to have been duly given, whether or not the Bondholder receives such
notice.
(b) The Trustee shall as soon as practicable notify the Rating Agencies
in writing of the following circumstances:
(i) any amendment to the Indenture or this supplement pursuant to
Section 9.1 or 9.2 of the Indenture, in which case the Trustee shall
accompany such notice with a copy of the executed supplemental
indenture effecting such amendment;
22
26
(ii) the occurrence of an Event of Default and the action, if any,
taken as a consequence thereof;
(iii) the resignation or removal of the Trustee and the appointment of
any successor Trustee;
(iv) the final Payment Date on the Bonds; and
(v) each Payment Date Statement.
23
27
The Issuer shall, as soon as practicable, notify the Rating Agencies of the
appointment of any successor Trustee pursuant to Section 6.10 of the Indenture
in the event that the resigning or removed Trustee is unable so to do. All
notices to the Rating Agencies under this Section 25 shall be deemed to have
been duly given if mailed by registered mail, postage prepaid, or express
courier service, to (a) in the case of Standard & Poor's Rating Services, 00
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Mortgage Surveillance Group, and
(b) in the case of DCR, Duff & Xxxxxx Credit Rating Co., 00 Xxxx Xxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxx 00000, Attention: RMBS: Capstead 0000-0, x/x Xxxxxxxx-Xxx
Xxxxxxx. Failure to give any notice as required by this clause (b) of Section 25
shall not constitute a breach hereof by any party hereto.
* * * * *
24
28
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Series
1998-3 Supplement to be duly executed by their respective officers thereunto
duly authorized and duly attested in the case of the Issuer to be hereunto
affixed all as of the day and year first above written.
CAPSTEAD SECURITIES CORPORATION IV
By: /s/ XXXX XXXXXX
-----------------------------------------
Xxxx Xxxxxx
Vice President - Asset and
Liability Management
Attest: /s/ XXXXX XXXXXXX
-------------------------
Xxxxx Xxxxxxx
Assistant Secretary
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Trustee
By: /s/ XXXXX XXXXX
-----------------------------------------
Xxxxx Xxxxx
Vice President
[SIGNATURE PAGE FOR SERIES 1998-3 SUPPLEMENT]
00
XXXXX XX XXXXX )
) :ss.:
COUNTY OF DALLAS )
On the 29th day of September, 1998, before me personally came XXXX
XXXXXX, to me known, who, being by me duly sworn, did depose and say that he
resides at Dallas, Texas; that he is the Vice President--Asset and Liability
Management of CAPSTEAD SECURITIES CORPORATION IV, the corporation that executed
the above instrument as Issuer; and that he signed his name thereto by order of
the Board of Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
[NOTARY SEAL] /s/ XXXX XXXXX
--------------------------------------------
Notary Public
STATE OF TEXAS )
) :ss.:
COUNTY OF XXXXXX )
On the 29th day of September, 1998, before me personally came Xxxxx
Xxxxx, to me known, who, being by me duly sworn did depose and say that he/she
resides at Houston, Tx; that he/she is Vice President of CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, the national bank described in and that executed the above
instrument as Trustee; and that he/she signed his/her name thereto by order of
the Board of Directors of said national bank.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
[NOTARY SEAL] /s/ XXXXX XXXXXXXX
--------------------------------------------
Notary Public
30
SCHEDULE A
List of Certificates by Series Designation
Series 1991-VI Series 1994UA-10
Series 1991-VII Series 1994UA-12
Series 1992-V Series 1994UA-14
Series 1992-VI Series 1994UA-15
Series 1992-VII Series 1994UA-16
Series 1992-VIII Series 1994GA-1
Series 1992-IX Series 1994GA-4
Series 1992-X Series 1994GA-7
Series 1992-XIV Series 1994GA-10
Series 1991B-10 Series 1994GA-11
Series 1991E-4 Series 1994GA-12
Series 1992PA-1
Series 1992PA-6
Series 1992PA-7
Series 1992PA-10
Series 1992PA-11
Series 1992PA-12
Series 1992PA-13
Series 1992PA-14
Series 1992PA-15
Series 1992GA-2
Series 1992GA-7
Series 1992GA-12
Series 1992GA-18
Series 1992GA-19
Series 1992GA-27
Series 1992GA-28
Series 1992GA-32
Series 1992GA-36
Series 1992GA-37
Series 1992GA-41
Series 1993PA-2
Series 1993PA-7
Series 1993PA-13
Series 1993PA-14
Series 1993PA-22
Series 1993PA-23
Series 1994UA-1
Series 1994UA-3
Series 1994UA-5
Series 1994UA-6
Series 1994UA-8
31
Series 1998-3, Class A/Face Page 1
EXHIBIT A-1
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUIRED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS BOND IS A REGULAR INTEREST IN A REMIC. PRINCIPAL OF THIS BOND
IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING PRINCIPAL OF THIS BOND AT ANY TIME MAY BE LESS THAN THE
AMOUNT SHOWN ON THE FACE HEREOF.
THIS BOND IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN
RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF, AND THE ISSUER IS NOT OTHERWISE
LIABLE FOR PAYMENTS ON THIS BOND.
REGISTRATION OF ANY TRANSFER OF OWNERSHIP OF THIS BOND MAY BE MADE ONLY
IN WHOLE AND ONLY TO AN ENTITY THAT IS A "CLEARING CORPORATION" AS DEFINED IN
SECTION 8-102(3) OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN THE STATE OF NEW
YORK.
CAPSTEAD SECURITIES CORPORATION IV
COLLATERALIZED MORTGAGE OBLIGATIONS, SERIES 1998-3
CLASS A
DUE: February 25, 2025
ACCRUAL DATE: September 1, 1998
ISSUE DATE: September 29, 1998
$_________________ CUSIP NO. 14067L GD0
CERTIFICATE NUMBER _____
CAPSTEAD SECURITIES CORPORATION IV, a corporation duly organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received hereby promises to pay to CEDE & CO. or registered
assigns, the principal sum of _________________
32
Series 1998-3, Class A/Face Page 2
_______________________________ ($________________) in monthly installments on
the twenty-fifth day of each month (each a "Payment Date"), commencing in
October 1998 and ending on or before February 25, 2025 (the "Stated Maturity" of
such final installment of principal), each such installment to be in the amount
of this Bond's entitlement from amounts payable to the Class A Bonds on the
related Payment Date, and (subject as provided below) to pay interest (computed
on the basis of a 360-day year of twelve 30-day months) on each Payment Date in
an amount equal to this Bond's share of the interest payable to the Class A
Bonds on the Class Current Principal Balance thereof immediately prior to such
Payment Date, calculated over the related Interest Accrual Period at a per annum
rate equal to one month LIBOR (determined in respect of such Payment Date
pursuant to the Series 1998-3 Series Supplement) plus a Margin of 0.18 per cent
on each Payment Date prior to and on the Initial Call Date, and 0.36 per cent on
each subsequent Payment Date, but in no event greater than the lesser of (x) the
weighted average (by principal balance) of the interest rates of the
Conventional Certificates for such Payment Date less the Trustee's Fee Rate and
(y) 8.50 per cent, plus this Bond's share of any Basis Risk Shortfalls deducted
from interest otherwise payable on the Class AX Bonds on such Payment Date in
accordance with the terms of the Series 1998-3 Supplement.
Capitalized terms used in this Bond shall bear the same meaning as
ascribed thereto in the Series 1998-3 Supplement referred to on the reverse
hereof.
This Bond is a non-recourse obligation of the Issuer. Principal of and
interest on this Bond are due and payable out of Available Funds on each Payment
Date as described in the Series 1998-3 Supplement. No amounts shall be due or
payable from the Issuer on any Payment Date except out of Available Funds, as
described more fully on the reverse hereof.
The principal of, and interest on, this Bond are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Bond shall be applied as set forth in the Series 1998-3
Supplement. No interest shall accrue or be payable on any installment of
principal or interest which is not paid when and as due, except as provided in
the Series 1998-3 Supplement and the Indenture referred to on the reverse
hereof.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Bond shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
33
Series 1998-3, Class A/Face Page 3
IN WITNESS WHEREOF, Capstead Securities Corporation IV has caused this
instrument to be duly executed under its corporate seal.
Dated: CAPSTEAD SECURITIES CORPORATION IV
------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Attest:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
CERTIFICATE OF AUTHENTICATION
This is one of the Bonds referred to in the within-mentioned Indenture.
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Trustee
By:
-----------------------------------------------------------------------------
Authorized Signatory
34
Series 1998-3 Reverse Page 1
This Bond is one of a duly authorized issue of non-recourse Bonds of
the Issuer, designated as its Collateralized Mortgage Obligations (herein called
the "Bonds"), issued and to be issued in one or more Series, each of which
Series is issuable in one or more Classes, and this Bond is one of the Series of
Bonds designated as the Issuer's Collateralized Mortgage Obligations, Series
1998-3 (herein called the "Series 1998-3 Bonds"). The Series 1998-3 Bonds
comprise the following Classes: the Class A, Class AX and Class R Bonds, all
issued or to be issued under the Issuer's Indenture dated as of September 1,
1998, as amended (herein called the "Indenture"), to which Indenture and all
indentures supplemental thereto, including the Series 1998-3 Supplement dated as
of September 1, 1998 (the "Series 1998-3 Supplement"), between the Issuer and
Chase Bank of Texas, National Association (the "Trustee", which term includes
any successor Trustee under the Indenture), which authorized the Series 1998-3
Bonds, reference is hereby made for a statement of the respective rights
thereunder of the Issuer, the Trustee and the Holders of the Bonds of each
particular Series and Class thereof and the terms upon which the Bonds of each
Series and Class are, and are to be, authenticated and delivered.
All terms used in this Bond which are defined in the Indenture or the
Series 1998-3 Supplement shall have the meanings assigned to them in the
Indenture or the Series 1998-3 Supplement, as applicable.
This Bond does not purport to summarize the Indenture or the Series
1998-3 Supplement and reference should be made to the Indenture and the Series
1998-3 Supplement for the interests, rights and limitations of rights, benefits,
obligations and duties of the Holders of the Series 1998-3 Bonds thereunder, and
the rights, duties and immunities of the Trustee.
As provided in the Indenture, the Bonds are issuable in Series and
Classes within each such Series which may vary as provided or permitted in the
Indenture. Bonds of a Series and each Class within such Series are equally and
ratably secured by the collateral pledged as security therefor to the extent
provided by the Series Supplement authorizing such Series, and the Holders of
Bonds of one Series have no rights with respect to any of the collateral pledged
as security for any other Series.
Payments of principal or interest, if any, on the Bonds will be made on
each Payment Date, commencing in October 1998, out of Available Funds on such
Payment Date in the manner and in accordance with the priorities for the Series
1998-3 Bonds provided in the Series 1998-3 Supplement.
Subject to the provision for allocation of losses as provided in the
Indenture and the sufficiency of Available Funds on such date, the entire unpaid
principal amount of each Class of Series 1998-3 Bonds, other than the Class AX
Bonds, which are interest-only Bonds on which no principal will be payable,
shall be due and payable, if not then previously paid, on the Stated Maturity of
such Class.
35
Series 1998-3 Reverse Page 2
The Bonds are non-recourse obligations of the Issuer, as described in
the Indenture. The Issuer shall not be liable upon the indebtedness evidenced by
the Bonds except to the extent of all of the Trust Estate which constitutes
security for the payment of the Bonds. All payments of principal of and interest
on the Bonds shall be made only from Available Funds on each Payment Date and
the Trust Estate Granted as security for the Bonds. Each Holder hereof, by its
acceptance of this Bond, agrees that it will have recourse solely against such
Trust Estate for payments on the Bonds and that (i) the Issuer shall not
otherwise be liable for any amounts payable under the Bonds and (ii) neither the
Issuer nor any of its agents, officers, directors, employees or successors or
assigns shall be liable for any amounts payable, or performance due, under this
Bond or the Indenture (except for amounts payable solely from such Trust
Estate).
If an Event of Default shall occur and be continuing with respect to
the Series 1998-3 Bonds, the Series 1998-3 Bonds may become or be declared due
and payable in the manner and with the effect provided in the Indenture and the
Series 1998-3 Supplement. Following the acceleration of the maturity of the
Series 1998-3 Bonds, all amounts collected as proceeds of the collateral
securing the Series 1998-3 Bonds or otherwise will be applied as described in
the Series 1998-3 Supplement and the Indenture. Neither (a) the allocation of
any Net Interest Shortfall or Basis Risk Shortfall to any Class of Bonds, nor
(b) the failure to pay the full amount of any principal entitlement or Accrued
Bond Interest or any unpaid Accrued Bond Interest on any Payment Date by reason
of the insufficiency of Available Funds on such Payment Date, shall constitute
an Event of Default on any Class of the Bonds.
An Event of Default with respect to the Bonds of any other Series
issued under the Indenture, including any failure to make any payment of
principal or interest with respect thereto when and as due, will not be an Event
of Default with respect to Series 1998-3 Bonds.
The Series 1998-3 Bonds are not prepayable or redeemable at the option
or direction of the Issuer except that the Series 1998-3 Bonds are subject to
redemption in whole, but not in part, at the option of the Issuer on any Payment
Date on or after the earlier of: (i) the Payment Date occurring in March 2001 or
(ii) each Payment Date on or after the date on which the Class Current Principal
Balance of the Class A Bonds is less than 25% of the Original Principal Amount
thereof. Any such redemption at the option of the Issuer shall be at a price
equal to 100% of the unpaid aggregate Class Current Principal Balance of the
Series 1998-3 Bonds so redeemed, plus accrued and unpaid interest through the
last day of the month preceding the month in which such optional redemption
occurs.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Bond may be registered on the Bond Register of
the Issuer, upon surrender of this Bond for registration of transfer at the
office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Series 1998-3 Bonds of
the same Class, of authorized denominations and in the same aggregate initial
principal amount, will be issued to the designated transferee or transferees.
36
Series 1998-3 Reverse Page 3
Prior to the due presentment for registration of transfer of this Bond,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
Person in whose name this Bond is registered (i) on any Record Date, for
purposes of making payments, and (ii) on any other date for any other purpose,
as the owner hereof, whether or not this Bond be overdue, and neither the
Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Holders of Bonds representing
two-thirds of the Aggregate Current Principal Amount of all Bonds at the time
Outstanding, in case Outstanding Bonds of all Series are to be affected, or with
the consent of the Holders of two-thirds of the Aggregate Class Current
Principal Balance of all the Bonds at the time Outstanding of each Series to be
affected, in case one or more, but less than all, of the Series of Bonds then
Outstanding are to be affected. The Indenture also contains provisions
permitting the Holders of Bonds representing specified percentages of the
Aggregate Current Principal Amount of the Bonds of a Series at the time
Outstanding on behalf of the Holders of all the Bonds of such Series, to waive
compliance by the Issuer with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder, at the time of the giving thereof, of this Bond (or any
one or more Predecessor Bonds) shall be conclusive and binding upon such Holder
and upon all future holders of this Bond and of any Bond issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent or waiver is made upon this Bond. The Indenture
also permits the Trustee to amend or waive certain terms and conditions set
forth in the Indenture without the consent of the Holders of the Bonds of any
Series issued thereunder.
The Class A Bonds are "Book Entry Bonds" which will be available to
investors only through the book entry facilities of The Depository Trust
Company, and bond certificates for such Class of Bonds will be available only
under certain limited circumstances as described in the Indenture.
AS PROVIDED IN THE INDENTURE, THIS BOND, THE INDENTURE AND THE SERIES
1998-3 SUPPLEMENT CREATING THE SERIES 1998-3 BONDS 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.
37
Series 1998-3 Reverse Page 4
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants in
common
UNIF GIFT MIN ACT - __________ Custodian __________
(Cust) (Minor)
under Uniform Gifts to Minors Act
______________________________________
(State)
Additional abbreviations may also be used
though not in the above list.
________________
FOR VALUE RECEIVED, the undersigned hereby
sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE _______________________________
__________________________________________________
__________________________________________________
__________________________________________________
Please print or typewrite name and address
including postal zip code of assignee
________________________________________________________________________________
the within Bond and all rights thereunder, hereby irrevocably constituting and
appointing _____________________________________ attorney to transfer said Bond
on the books of the Issuer, with full power of substitution in the premises.
Dated: __________________ ________________________________________
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the within instrument
in every particular, without alteration
or enlargement or any change whatsoever.
38
Series 1998-3, Class AX/Face Page 1
EXHIBIT A-2
THIS BOND IS A REGULAR INTEREST IN A REMIC.
THIS BOND IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN
RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF, AND THE ISSUER IS NOT OTHERWISE
LIABLE FOR PAYMENTS ON THIS BOND.
THIS BOND SHALL NOT BE ENTITLED TO ANY PAYMENTS WITH RESPECT TO
PRINCIPAL.
CAPSTEAD SECURITIES CORPORATION IV
COLLATERALIZED MORTGAGE OBLIGATIONS, SERIES 1998-3
CLASS AX
DUE: February 25,2025
ACCRUAL DATE: September 1, 1998
ISSUE DATE: September 30, 1998
Initial Class AX Notional CUSIP NO. 14067L GE8
Balance: ______________ (_____%) CERTIFICATE NUMBER _____
NEITHER THIS CLASS AX BOND NOR ANY BENEFICIAL INTEREST HEREIN MAY BE
TRANSFERRED UNLESS THE TRUSTEE HAS RECEIVED EITHER (A) A CERTIFICATE FROM SUCH
TRANSFEREE TO THE EFFECT THAT (i) SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT
PLAN, TRUST OR ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SUBJECT TO SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR A GOVERNMENTAL PLAN
DEFINED IN SECTION 3(32) OF ERISA SUBJECT TO ANY FEDERAL STATE OR LOCAL LAW
WHICH IS, TO MATERIAL EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR
THE CODE ("SIMILAR LAW") (EACH, A "BENEFIT PLAN") AND IS NOT AN ENTITY,
INCLUDING AN INSURANCE COMPANY SEPARATE ACCOUNT OR INSURANCE COMPANY GENERAL
ACCOUNT, WHOSE UNDERLYING ASSETS INCLUDE BENEFIT PLAN ASSETS BY REASON OF A
BENEFIT PLAN'S INVESTMENT IN THE ENTITY (SUCH BENEFIT PLAN OR ENTITY, A "BENEFIT
PLAN INVESTOR") OR (ii) IF SUCH TRANSFEREE IS AN INSURANCE COMPANY, TO THE
EFFECT THAT SUCH COMPANY IS NOT A BENEFIT PLAN INVESTOR OR IS ELIGIBLE FOR AN
EXEMPTION TO THE APPLICABLE PROHIBITED TRANSACTION PROVISIONS OF ERISA, THE CODE
AND SIMILAR LAW OR (iii) IN SUCH OTHER FORM AND SUBSTANCE AS SHALL BE
SATISFACTORY TO THE TRUSTEE AND THE ISSUER, OR (B) AN OPINION OF COUNSEL
SATISFACTORY TO THE TRUSTEE AND THE ISSUER TO THE EFFECT THAT THE PURCHASE AND
HOLDING OF SUCH BOND (i) WILL NOT CONSTITUTE OR RESULT IN THE ASSETS OF THE
TRUST ESTATE BEING DEEMED TO BE "PLAN ASSETS" SUBJECT TO THE FIDUCIARY
39
Series 1998-3, Class AX/Face Page 2
RESPONSIBILITY PROVISIONS OF ERISA OR PROHIBITED TRANSACTIONS PROVISIONS OF
SECTION 4975 OF THE CODE OR SIMILAR LAW OR (ii) WILL NOT CONSTITUTE OR RESULT IN
A PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR SECTION 407 OF
ERISA OR SECTION 4975 OF THE CODE OR SIMILAR LAW, AND WILL NOT SUBJECT THE
TRUSTEE, THE CERTIFICATE TRUSTEE, THE ISSUER, THE ADMINISTRATOR OR ANY SERVICER
TO ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER
ERISA, SECTION 4975 OF THE CODE OR SIMILAR LAW) IN ADDITION TO THOSE UNDERTAKEN
IN THE INDENTURE AND THE POOLING AND ADMINISTRATION AGREEMENT.
CAPSTEAD SECURITIES CORPORATION IV, a corporation duly organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received hereby promises to pay (subject as provided below)
to CAPSTEAD MORTGAGE CORPORATION, or registered assigns, interest (computed on
the basis of a 360-day year of twelve 30-day months) on the Class Notional
Balance of the Class AX Bonds during the period starting on September 1, 1998
(the "Accrual Date") and ending on or before February 25, 2025 Interest will
accrue on the Class Notional Balance of this Class AX Bond during each Interest
Accrual Period on the 25th day of each month (each, a "Payment Date") at a per
annum rate equal to the excess of (x) the weighted average (by principal
balance) of the interest rates of the Conventional Certificates for the related
Payment Date less the Trustee's Fee Rate, over (y) the Class A Bond Interest
Rate for such Payment Date. The Class A Bond Interest Rate is a rate per annum
equal to one month LIBOR (determined pursuant to the Series 1998-3 Supplement)
plus a Margin equal to 0.18 per cent per annum on each Payment Date prior to and
on the Initial Call Date and 0.36 per cent per annum on each Payment Date
thereafter, but in no event greater than the lesser of (x) the weighted average
(by principal balance) of the interest rates of the Conventional Certificates
for such Payment Date less the Trustee's Fee Rate and (y) 8.50% per annum LESS
this Bond's share of any Basis Risk Shortfalls deducted from interest otherwise
payable on the Class AX Bonds on such Payment Date in accordance with the terms
of the Series 1998-3 Supplement.
Capitalized terms used in this Bond shall bear the same meanings as
ascribed thereto in the Series 1998-3 Supplement.
No installments of principal are payable on this Bond. This Bond is a
non-recourse obligation of the Issuer. No amount is due or payable from the
Issuer on any Payment Date except out of Available Funds, as described more
fully on the reverse hereof.
The interest on this Bond is payable in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts. No interest shall accrue or be payable on any
installment of interest which is not paid when and as due, except as provided in
the Series 1998-3 Supplement and the Indenture referred to on the reverse
hereof.
The following information is provided solely for the purposes of
applying the federal income tax original issue discount ("OID") rules to this
Bond. This Bond was issued on September 29, 1998 with an initial Bond Interest
Rate of approximately 3.075736%. Assuming that the Bonds pay in accordance with
projected cash flows based on the prepayment assumption equal to 40% of the
40
Series 1998-3, Class AX/Face Page 3
Prepayment Model as described in the Prospectus Supplement dated as of September
28, 1998 relating to the Series 1998-3 Bonds, this Bond is issued with
approximately $11.1393677 of OID per $1,000 of initial Class Notional Amount for
the Class AX Bonds, the annual yield to maturity of the Bond for purposes of
computing the OID would be approximately 20%, and the amount of OID attributable
to the initial short accrual period is approximately $.4450912 per $1,000 of
initial Class AX Notional Amount for the Class AX Bond computed using
compounding of interest in the short period. The actual yield to maturity on the
Bond may differ from the projected yield.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Bond shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
41
Series 1998-3, Class AX/Face Page 4
IN WITNESS WHEREOF, Capstead Securities Corporation IV has caused this
instrument to be duly executed under its corporate seal.
Dated: CAPSTEAD SECURITIES CORPORATION IV
---------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Attest:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
CERTIFICATE OF AUTHENTICATION
This is one of the Bonds referred to in the within-mentioned Indenture.
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Trustee
By:
-----------------------------------------------------------------------------
Authorized Signatory
42
Series 1998-3 Reverse Page 1
This Bond is one of a duly authorized issue of non-recourse Bonds of
the Issuer, designated as its Collateralized Mortgage Obligations (herein called
the "Bonds"), issued and to be issued in one or more Series, each of which
Series is issuable in one or more Classes, and this Bond is one of the Series of
Bonds designated as the Issuer's Collateralized Mortgage Obligations, Series
1998-3 (herein called the "Series 1998-3 Bonds"). The Series 1998-3 Bonds
comprise the following Classes: the Class A, Class AX and Class R Bonds, all
issued or to be issued under the Issuer's Indenture dated as of September 1,
1998, as amended (herein called the "Indenture"), to which Indenture and all
indentures supplemental thereto, including the Series 1998-3 Supplement dated as
of September 1, 1998 (the "Series 1998-3 Supplement"), between the Issuer and
Chase Bank of Texas, National Association (the "Trustee", which term includes
any successor Trustee under the Indenture), which authorized the Series 1998-3
Bonds, reference is hereby made for a statement of the respective rights
thereunder of the Issuer, the Trustee and the Holders of the Bonds of each
particular Series and Class thereof and the terms upon which the Bonds of each
Series and Class are, and are to be, authenticated and delivered.
All terms used in this Bond which are defined in the Indenture or the
Series 1998-3 Supplement shall have the meanings assigned to them in the
Indenture or the Series 1998-3 Supplement, as applicable.
This Bond does not purport to summarize the Indenture or the Series
1998-3 Supplement and reference should be made to the Indenture and the Series
1998-3 Supplement for the interests, rights and limitations of rights, benefits,
obligations and duties of the Holders of the Series 1998-3 Bonds thereunder, and
the rights, duties and immunities of the Trustee.
As provided in the Indenture, the Bonds are issuable in Series and
Classes within each such Series which may vary as provided or permitted in the
Indenture. Bonds of a Series and each Class within such Series are equally and
ratably secured by the collateral pledged as security therefor to the extent
provided by the Series Supplement authorizing such Series, and the Holders of
Bonds of one Series have no rights with respect to any of the collateral pledged
as security for any other Series.
Payments of principal or interest, if any, on the Bonds will be made on
each Payment Date, commencing in October 1998, out of Available Funds on such
Payment Date in the manner and in accordance with the priorities for the Series
1998-3 Bonds provided in the Series 1998-3 Supplement.
Subject to the provision for allocation of losses as provided in the
Indenture and the sufficiency of Available Funds on such date, the entire unpaid
principal amount of each Class of Series 1998-3 Bonds, other than the Class AX
Bonds, which are interest-only Bonds on which no principal will be payable,
shall be due and payable, if not then previously paid, on the Stated Maturity of
such Class.
43
Series 1998-3 Reverse Page 2
The Bonds are non-recourse obligations of the Issuer, as described in
the Indenture. The Issuer shall not be liable upon the indebtedness evidenced by
the Bonds except to the extent of all of the Trust Estate which constitutes
security for the payment of the Bonds. All payments of principal of and interest
on the Bonds shall be made only from Available Funds on each Payment Date and
the Trust Estate Granted as security for the Bonds. Each Holder hereof, by its
acceptance of this Bond, agrees that it will have recourse solely against such
Trust Estate for payments on the Bonds and that (i) the Issuer shall not
otherwise be liable for any amounts payable under the Bonds and (ii) neither the
Issuer nor any of its agents, officers, directors, employees or successors or
assigns shall be liable for any amounts payable, or performance due, under this
Bond or the Indenture (except for amounts payable solely from such Trust
Estate).
If an Event of Default shall occur and be continuing with respect to
the Series 1998-3 Bonds, the Series 1998-3 Bonds may become or be declared due
and payable in the manner and with the effect provided in the Indenture and the
Series 1998-3 Supplement. Following the acceleration of the maturity of the
Series 1998-3 Bonds, all amounts collected as proceeds of the collateral
securing the Series 1998-3 Bonds or otherwise will be applied as described in
the Series 1998-3 Supplement and the Indenture. Neither (a) the allocation of
any Net Interest Shortfall or Basis Risk Shortfall to any Class of Bonds, nor
(b) the failure to pay the full amount of any principal entitlement or Accrued
Bond Interest or any unpaid Accrued Bond Interest on any Payment Date by reason
of the insufficiency of Available Funds on such Payment Date, shall constitute
an Event of Default on any Class of the Bonds.
An Event of Default with respect to the Bonds of any other Series
issued under the Indenture, including any failure to make any payment of
principal or interest with respect thereto when and as due, will not be an Event
of Default with respect to Series 1998-3 Bonds.
The Series 1998-3 Bonds are not prepayable or redeemable at the option
or direction of the Issuer except that the Series 1998-3 Bonds are subject to
redemption in whole, but not in part, at the option of the Issuer on any Payment
Date on or after the earlier of: (i) the Payment Date occurring in March 2001 or
(ii) each Payment Date on or after the date on which the Class Current Principal
Balance of the Class A Bonds is less than 25% of the Original Principal Amount
thereof. Any such redemption at the option of the Issuer shall be at a price
equal to 100% of the unpaid aggregate Class Current Principal Balance of the
Series 1998-3 Bonds so redeemed, plus accrued and unpaid interest through the
last day of the month preceding the month in which such optional redemption
occurs.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Bond may be registered on the Bond Register of
the Issuer, upon surrender of this Bond for registration of transfer at the
office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Series 1998-3 Bonds of
the same Class, of authorized denominations and in the same aggregate initial
principal amount, will be issued to the designated transferee or transferees.
44
Series 1998-3 Reverse Page 3
Prior to the due presentment for registration of transfer of this Bond,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
Person in whose name this Bond is registered (i) on any Record Date, for
purposes of making payments, and (ii) on any other date for any other purpose,
as the owner hereof, whether or not this Bond be overdue, and neither the
Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Holders of Bonds representing
two-thirds of the Aggregate Current Principal Amount of all Bonds at the time
Outstanding, in case Outstanding Bonds of all Series are to be affected, or with
the consent of the Holders of two-thirds of the Aggregate Class Current
Principal Balance of all the Bonds at the time Outstanding of each Series to be
affected, in case one or more, but less than all, of the Series of Bonds then
Outstanding are to be affected. The Indenture also contains provisions
permitting the Holders of Bonds representing specified percentages of the
Aggregate Current Principal Amount of the Bonds of a Series at the time
Outstanding on behalf of the Holders of all the Bonds of such Series, to waive
compliance by the Issuer with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder, at the time of the giving thereof, of this Bond (or any
one or more Predecessor Bonds) shall be conclusive and binding upon such Holder
and upon all future holders of this Bond and of any Bond issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent or waiver is made upon this Bond. The Indenture
also permits the Trustee to amend or waive certain terms and conditions set
forth in the Indenture without the consent of the Holders of the Bonds of any
Series issued thereunder.
The Class A Bonds are "Book Entry Bonds" which will be available to
investors only through the book entry facilities of The Depository Trust
Company, and bond certificates for such Class of Bonds will be available only
under certain limited circumstances as described in the Indenture.
AS PROVIDED IN THE INDENTURE, THIS BOND, THE INDENTURE AND THE SERIES
1998-3 SUPPLEMENT CREATING THE SERIES 1998-3 BONDS 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.
45
Series 1998-3 Reverse Page 4
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants in
common
UNIF GIFT MIN ACT - __________ Custodian __________
(Cust) (Minor)
under Uniform Gifts to Minors Act
___________________________________
(State)
Additional abbreviations may also be used
though not in the above list.
________________
FOR VALUE RECEIVED, the undersigned hereby
sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE _______________________________
__________________________________________________
__________________________________________________
__________________________________________________
Please print or typewrite name and address
including postal zip code of assignee
________________________________________________________________________________
the within Bond and all rights thereunder, hereby irrevocably constituting and
appointing _____________________________________ attorney to transfer said Bond
on the books of the Issuer, with full power of substitution in the premises.
Dated: __________________ ----------------------------------------
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the within instrument
in every particular, without alteration
or enlargement or any change whatsoever.
46
Series 1998-3, Class R/Face Page 1
EXHIBIT A-3
THIS BOND IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY,
THE OUTSTANDING PRINCIPAL AMOUNT OF THIS BOND AT ANY TIME MAY BE LESS THAN THE
AMOUNT SHOWN ON THE FACE HEREOF.
THIS BOND IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN
RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF, AND THE ISSUER IS NOT OTHERWISE
LIABLE FOR PAYMENTS ON THIS BOND.
THIS SECURITY IS SUBJECT TO RESTRICTIONS ON TRANSFER AS
DESCRIBED HEREIN.
CAPSTEAD SECURITIES CORPORATION IV
COLLATERALIZED MORTGAGE OBLIGATIONS, SERIES 1998-3
CLASS R
DUE: February 25, 2025
ACCRUAL DATE: September 1, 1998
ISSUE DATE: September 29, 1998
$_______ CUSIP NO. 14067L GF5
CERTIFICATE NUMBER _____
THIS BOND IS A RESIDUAL INTEREST IN A REMIC. SO LONG AS ANY CLASS R BOND SHALL
BE OUTSTANDING, THE HOLDER HEREOF SHALL HAVE THE RIGHT TO RECEIVE CERTAIN SUMS,
AS SET FORTH HEREIN. BECAUSE THIS CLASS R BOND CONSTITUTES A REMIC RESIDUAL
INTEREST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), SUCH
HOLDER SHALL BE REQUIRED TO REPORT, FOR FEDERAL INCOME TAX PURPOSES, THE TAXABLE
INCOME OF THE REMIC.
THIS CLASS R BOND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS,
PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE TRUSTEE AN
AFFIDAVIT STATING THAT SUCH TRANSFEREE (A) IS NOT A DISQUALIFIED ORGANIZATION
(AS DEFINED IN SECTION 860E(E)(5) OF THE CODE) AND IS NOT ACQUIRING THIS CLASS R
BOND AS AN AGENT, TRUSTEE OR NOMINEE ACTING ON BEHALF OF A PERSON WHO IS A
DISQUALIFIED ORGANIZATION; (B) AGREES TO BE BOUND BY AND TO ABIDE BY THE
TRANSFER RESTRICTIONS APPLICABLE TO A CLASS R BOND; (C) IS NOT AN ENTITY THAT
WILL HOLD THE CLASS R BOND AS NOMINEE TO FACILITATE
47
Series 1998-3, Class R/Face Page 2
THE CLEARANCE AND SETTLEMENT OF SUCH SECURITY THROUGH ELECTRONIC BOOK-ENTRY
CHANGES IN ACCOUNTS OF PARTICIPATING ORGANIZATIONS; (D) UNDERSTANDS THAT IT MUST
TAKE INTO ACCOUNT THE TAXABLE INCOME RELATING TO THE CLASS R BOND; (E) HAS NO
INTENTION TO IMPEDE THE ASSESSMENT OR COLLECTION OF ANY FEDERAL, STATE OR LOCAL
INCOME TAXES LEGALLY REQUIRED TO BE PAID WITH RESPECT TO THE CLASS R BOND; (F)
WILL NOT TRANSFER THE CLASS R BOND TO ANY PERSON OR ENTITY THAT IT HAS REASON TO
BELIEVE HAS THE INTENTION TO IMPEDE THE ASSESSMENT OR COLLECTION OF SUCH TAXES;
(G) HAS HISTORICALLY PAID ITS DEBTS AS THEY COME DUE; (H) INTENDS TO CONTINUE TO
PAY ITS DEBTS AS THEY COME DUE IN THE FUTURE; (I) UNDERSTANDS THAT, AS THE
HOLDER OF A NON-ECONOMIC RESIDUAL BOND, IT MAY INCUR LIABILITIES IN EXCESS OF
ANY CASH FLOWS GENERATED BY THE CLASS R BOND; AND (J) INTENDS TO PAY ANY AND ALL
TAXES ASSOCIATED WITH HOLDING THE CLASS R BOND AS THEY BECOME DUE.
THIS CLASS R BOND MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON THAT IS A
"FOREIGN PERSON,"UNLESS (I) SUCH PERSON HOLDS THE CLASS R BOND IN CONNECTION
WITH THE CONDUCT OF A TRADE OR BUSINESS WITHIN THE UNITED STATES AND FURNISHES
THE TRANSFEROR AND THE TRUSTEE WITH AN EFFECTIVE INTERNAL REVENUE SERVICE FORM
4224 OR (II) THE TRANSFEREE DELIVERS TO BOTH THE TRANSFEROR AND THE TRUSTEE AN
OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN ACCORDANCE WITH THE
REQUIREMENTS OF THE CODE AND THE REGULATIONS PROMULGATED THEREUNDER AND THAT
SUCH TRANSFER OF THE CLASS R BOND WILL NOT BE DISREGARDED FOR FEDERAL INCOME TAX
PURPOSES. THE TERM "FOREIGN PERSON" MEANS A PERSON WHO IS NOT ONE OF THE
FOLLOWING: (A) A CITIZEN OR RESIDENT OF THE UNITED STATES, (B), A CORPORATION OR
PARTNERSHIP, INCLUDING AN ENTITY TREATED AS A CORPORATION OR PARTNERSHIP FOR
U.S. FEDERAL INCOME TAX PURPOSES CREATED IN THE UNITED STATES OR ORGANIZED UNDER
THE LAWS OF THE UNITED STATES OR ANY STATE THEREOF OR THE DISTRICT OF COLUMBIA
(EXCEPT, IN THE CASE OF A PARTNERSHIP, AS OTHERWISE PROVIDED BY TREASURY
REGULATIONS), (C) AN ESTATE THE INCOME OF WHICH IS INCLUDABLE IN GROSS INCOME
FOR UNITED STATES FEDERAL INCOME TAX PURPOSES REGARDLESS OF ITS SOURCE, OR (D) A
TRUST WHOSE ADMINISTRATION IS SUBJECT TO THE PRIMARY SUPERVISION OF A UNITED
STATES COURT AND WHICH HAS ONE OR MORE UNITED STATES PERSONS WHO HAVE THE
AUTHORITY TO CONTROL ALL SUBSTANTIAL DECISIONS OF THE TRUST.
NEITHER THIS CLASS R BOND NOR ANY BENEFICIAL INTEREST HEREIN MAY BE
TRANSFERRED UNLESS THE TRUSTEE HAS RECEIVED A CERTIFICATE FROM
SUCH TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE IS NOT AN
48
Series 1998-3, Class R/Face Page 3
EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SUBJECT TO
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR A
GOVERNMENTAL PLAN DEFINED IN SECTION 3(32) OF ERISA SUBJECT TO ANY FEDERAL STATE
OR LOCAL LAW WHICH IS, TO MATERIAL EXTENT, SIMILAR TO THE FOREGOING PROVISIONS
OF ERISA OR THE CODE (EACH, A "BENEFIT PLAN") AND IS NOT AN ENTITY, INCLUDING AN
INSURANCE COMPANY SEPARATE ACCOUNT OR GENERAL ACCOUNT, WHOSE UNDERLYING ASSETS
INCLUDE BENEFIT PLAN ASSETS BY REASON OF A BENEFIT PLAN'S INVESTMENT IN THE
ENTITY.
49
Series 1998-3, Class R/Face Page 4
CAPSTEAD SECURITIES CORPORATION IV, a corporation duly organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received hereby promises to pay to CAPSTEAD MORTGAGE
CORPORATION or registered assigns, the principal sum of ________________________
($______) in monthly installments on the twenty-fifth day of each month (each a
"Payment Date") commencing in October 1998 and ending on or before February 25,
2025 (the "Stated Maturity" of such final installment of principal), each such
installment to be in the amount equal to this Bond's entitlement from the
amounts payable to the Class R Bonds on the related Payment Date, and (subject
as provided below) to pay interest (computed on the basis of a 360-day year of
twelve 30-day months) on each Payment Date calculated over the related Interest
Accrual Period in an amount equal to this Bond's share of the interest payable
to the Class R Bonds on the Class Current Principal Balance thereof immediately
prior to such Payment Date, calculated over the related Interest Accrual Period
at a per annum rate equal to one month LIBOR (determined in respect of such
Payment Date pursuant to the Series 1998-3 Series Supplement) plus a Margin of
0.18 per cent on each Payment Date prior to and on the Initial Call Date, and
0.36 per cent on each subsequent Payment Date, but in no event greater than the
lesser of (x) the weighted average (by principal balance) of the interest rates
of the Conventional Certificates for such Payment Date less the Trustee's Fee
Rate and (y) 8.50 per cent
Capitalized terms used in this Bond shall bear the same meaning as
ascribed thereto in the Series 1998-3 Supplement referred to on the reverse
hereof.
This Bond is a non-recourse obligation of the Issuer. Principal of and
interest on this Bond are due and payable out of Available Funds on each Payment
Date as described in the Series 1998-3 Supplement. No amounts shall be due or
payable from the Issuer on any Payment Date except out of Available Funds, as
described more fully on the reverse hereof.
The principal of, and interest on, this Bond is payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Bond shall be applied as set forth in the Series 1998-3
Supplement and the Indenture referred to on the reverse hereof.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Bond shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
50
Series 1998-3, Class R/Face Page 5
IN WITNESS WHEREOF, Capstead Securities Corporation IV has caused this
instrument to be duly executed under its corporate seal.
Dated: CAPSTEAD SECURITIES CORPORATION IV
--------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Attest:
-------------------------------
Name:
--------------------------
Title:
-------------------------
CERTIFICATE OF AUTHENTICATION
This is one of the Bonds referred to in the within-mentioned Indenture.
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Trustee
By:
-----------------------------------------------------------------------------
Authorized Signatory
51
Series 1998-3 Reverse Page 1
This Bond is one of a duly authorized issue of non-recourse Bonds of
the Issuer, designated as its Collateralized Mortgage Obligations (herein called
the "Bonds"), issued and to be issued in one or more Series, each of which
Series is issuable in one or more Classes, and this Bond is one of the Series of
Bonds designated as the Issuer's Collateralized Mortgage Obligations, Series
1998-3 (herein called the "Series 1998-3 Bonds"). The Series 1998-3 Bonds
comprise the following Classes: the Class A, Class AX and Class R Bonds, all
issued or to be issued under the Issuer's Indenture dated as of September 1,
1998, as amended (herein called the "Indenture"), to which Indenture and all
indentures supplemental thereto, including the Series 1998-3 Supplement dated as
of September 1, 1998 (the "Series 1998-3 Supplement"), between the Issuer and
Chase Bank of Texas, National Association (the "Trustee", which term includes
any successor Trustee under the Indenture), which authorized the Series 1998-3
Bonds, reference is hereby made for a statement of the respective rights
thereunder of the Issuer, the Trustee and the Holders of the Bonds of each
particular Series and Class thereof and the terms upon which the Bonds of each
Series and Class are, and are to be, authenticated and delivered.
All terms used in this Bond which are defined in the Indenture or the
Series 1998-3 Supplement shall have the meanings assigned to them in the
Indenture or the Series 1998-3 Supplement, as applicable.
This Bond does not purport to summarize the Indenture or the Series
1998-3 Supplement and reference should be made to the Indenture and the Series
1998-3 Supplement for the interests, rights and limitations of rights, benefits,
obligations and duties of the Holders of the Series 1998-3 Bonds thereunder, and
the rights, duties and immunities of the Trustee.
As provided in the Indenture, the Bonds are issuable in Series and
Classes within each such Series which may vary as provided or permitted in the
Indenture. Bonds of a Series and each Class within such Series are equally and
ratably secured by the collateral pledged as security therefor to the extent
provided by the Series Supplement authorizing such Series, and the Holders of
Bonds of one Series have no rights with respect to any of the collateral pledged
as security for any other Series.
Payments of principal or interest, if any, on the Bonds will be made on
each Payment Date, commencing in October 1998, out of Available Funds on such
Payment Date in the manner and in accordance with the priorities for the Series
1998-3 Bonds provided in the Series 1998-3 Supplement.
Subject to the provision for allocation of losses as provided in the
Indenture and the sufficiency of Available Funds on such date, the entire unpaid
principal amount of each Class of Series 1998-3 Bonds, other than the Class AX
Bonds, which are interest-only Bonds on which no principal will be payable,
shall be due and payable, if not then previously paid, on the Stated Maturity of
such Class.
52
Series 1998-3 Reverse Page 2
The Bonds are non-recourse obligations of the Issuer, as described in
the Indenture. The Issuer shall not be liable upon the indebtedness evidenced by
the Bonds except to the extent of all of the Trust Estate which constitutes
security for the payment of the Bonds. All payments of principal of and interest
on the Bonds shall be made only from Available Funds on each Payment Date and
the Trust Estate Granted as security for the Bonds. Each Holder hereof, by its
acceptance of this Bond, agrees that it will have recourse solely against such
Trust Estate for payments on the Bonds and that (i) the Issuer shall not
otherwise be liable for any amounts payable under the Bonds and (ii) neither the
Issuer nor any of its agents, officers, directors, employees or successors or
assigns shall be liable for any amounts payable, or performance due, under this
Bond or the Indenture (except for amounts payable solely from such Trust
Estate).
If an Event of Default shall occur and be continuing with respect to
the Series 1998-3 Bonds, the Series 1998-3 Bonds may become or be declared due
and payable in the manner and with the effect provided in the Indenture and the
Series 1998-3 Supplement. Following the acceleration of the maturity of the
Series 1998-3 Bonds, all amounts collected as proceeds of the collateral
securing the Series 1998-3 Bonds or otherwise will be applied as described in
the Series 1998-3 Supplement and the Indenture. Neither (a) the allocation of
any Net Interest Shortfall or Basis Risk Shortfall to any Class of Bonds, nor
(b) the failure to pay the full amount of any principal entitlement or Accrued
Bond Interest or any unpaid Accrued Bond Interest on any Payment Date by reason
of the insufficiency of Available Funds on such Payment Date, shall constitute
an Event of Default on any Class of the Bonds.
An Event of Default with respect to the Bonds of any other Series
issued under the Indenture, including any failure to make any payment of
principal or interest with respect thereto when and as due, will not be an Event
of Default with respect to Series 1998-3 Bonds.
The Series 1998-3 Bonds are not prepayable or redeemable at the option
or direction of the Issuer except that the Series 1998-3 Bonds are subject to
redemption in whole, but not in part, at the option of the Issuer on any Payment
Date on or after the earlier of: (i) the Payment Date occurring in March 2001 or
(ii) each Payment Date on or after the date on which the Class Current Principal
Balance of the Class A Bonds is less than 25% of the Original Principal Amount
thereof. Any such redemption at the option of the Issuer shall be at a price
equal to 100% of the unpaid aggregate Class Current Principal Balance of the
Series 1998-3 Bonds so redeemed, plus accrued and unpaid interest through the
last day of the month preceding the month in which such optional redemption
occurs.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Bond may be registered on the Bond Register of
the Issuer, upon surrender of this Bond for registration of transfer at the
office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Series 1998-3 Bonds of
the same Class, of authorized denominations and in the same aggregate initial
principal amount, will be issued to the designated transferee or transferees.
53
Series 1998-3 Reverse Page 3
Prior to the due presentment for registration of transfer of this Bond,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
Person in whose name this Bond is registered (i) on any Record Date, for
purposes of making payments, and (ii) on any other date for any other purpose,
as the owner hereof, whether or not this Bond be overdue, and neither the
Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Holders of Bonds representing
two-thirds of the Aggregate Current Principal Amount of all Bonds at the time
Outstanding, in case Outstanding Bonds of all Series are to be affected, or with
the consent of the Holders of two-thirds of the Aggregate Class Current
Principal Balance of all the Bonds at the time Outstanding of each Series to be
affected, in case one or more, but less than all, of the Series of Bonds then
Outstanding are to be affected. The Indenture also contains provisions
permitting the Holders of Bonds representing specified percentages of the
Aggregate Current Principal Amount of the Bonds of a Series at the time
Outstanding on behalf of the Holders of all the Bonds of such Series, to waive
compliance by the Issuer with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder, at the time of the giving thereof, of this Bond (or any
one or more Predecessor Bonds) shall be conclusive and binding upon such Holder
and upon all future holders of this Bond and of any Bond issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent or waiver is made upon this Bond. The Indenture
also permits the Trustee to amend or waive certain terms and conditions set
forth in the Indenture without the consent of the Holders of the Bonds of any
Series issued thereunder.
The Class A Bonds are "Book Entry Bonds" which will be available to
investors only through the book entry facilities of The Depository Trust
Company, and bond certificates for such Class of Bonds will be available only
under certain limited circumstances as described in the Indenture.
AS PROVIDED IN THE INDENTURE, THIS BOND, THE INDENTURE AND THE SERIES
1998-3 SUPPLEMENT CREATING THE SERIES 1998-3 BONDS 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.
54
Series 1998-3 Reverse Page 4
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants in
common
UNIF GIFT MIN ACT - __________ Custodian __________
(Cust) (Minor)
under Uniform Gifts to Minors Act
__________________________________
(State)
Additional abbreviations may also be used
though not in the above list.
________________
FOR VALUE RECEIVED, the undersigned hereby
sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE _______________________________
__________________________________________________
__________________________________________________
__________________________________________________
Please print or typewrite name and address
including postal zip code of assignee
________________________________________________________________________________
the within Bond and all rights thereunder, hereby irrevocably constituting and
appointing _____________________________________ attorney to transfer said Bond
on the books of the Issuer, with full power of substitution in the premises.
Dated: __________________ ________________________________________
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the within instrument
in every particular, without alteration
or enlargement or any change whatsoever.
55
EXHIBIT B
FORM OF TRANSFEREE AFFIDAVIT AND AGREEMENT
FOR CLASS R BONDS
[DATE]
STATE OF TEXAS )
) ss.:
COUNTY OF DALLAS )
The undersigned, _____________________, being first duly sworn,
deposes, represents and warrants:
1. That I am a _______________________ of ___________________________, a
corporation duly organized and existing under the laws of the State of
____________ (the "Owner"), record or beneficial owner of Capstead
Securities Corporation IV Collateralized Mortgage Obligations, Series
1998-3, Class R Bonds (the "Residual Bonds") having an Initial Principal
Balance of $100, on behalf of which I make this affidavit and agreement.
The Bonds were issued pursuant to the Indenture (the "Indenture") dated as
of September 1, 1998 and the Series 1998-1 Supplement thereto (the "Series
Supplement") dated as of September 1, 1998, each between Capstead
Securities Corporation IV and Chase Bank of New York, National Association,
as Trustee (the "Trustee").
2. That the Owner (i) is and will be a "Permitted Transferee" as of
_____________________ and (ii) is acquiring the Bonds for its own account
or for the account of another Owner from which it has received an affidavit
in substantially the same form as this affidavit. A "Permitted Transferee"
is any person other than a "disqualified organization" or a Non-U.S.
Person. For this purpose, a "disqualified organization" means any of the
following: (i) the United States, any State or political subdivision
thereof, any foreign government, any international organization, or any
agency or instrumentality of any of the foregoing, (ii) any organization
(other than a farmers' cooperative described in Section 521 of the Internal
Revenue Code of 1986 (the "Code)) that is exempt from the tax imposed by
Chapter 1 of the Code and not subject to the tax imposed by Section 511 of
the Code, (iii) rural electric or telephone cooperatives described in
Section 1381(a)(2)(C) of the Code or (iv) any other Person whose holding of
an ownership interest in a Residual Bond may cause the related REMIC to
incur a liability for any tax imposed under the Code that would not
otherwise be imposed but for the transfer of an ownership interest in a
Residual Bond to such Person. For purposes of clause (i) of the previous
sentence, a corporation shall not be treated as an instrumentality of the
United States or of any State or political subdivision thereof, if (i) all
of the activities of such corporation are subject to the tax imposed by
Chapter 1 of the Code, and (ii) a majority of the board of directors of
such corporation is not selected by the United States or any State or
political subdivision thereof (except that this clause (ii) shall not apply
to the Federal Home Loan Mortgage Corporation). The terms "United States,"
"State" and
56
"international organization" shall have the meanings set forth in Section
7701 of the Code or successor provisions.
3. That the Owner is aware (i) of the tax that would be imposed on the Trust
Estate if a Residual Bond is transferred to a disqualified organization
under Section 860E(e) of the Code and that any Owner that is a disqualified
organization will be obligated to reimburse the Trust Estate for any such
tax; (ii) that such tax would be on the transferor, or, if such transfer is
through an agent (which person includes a broker, nominee or middleman) for
a disqualified organization, on the agent; (iii) that the person otherwise
liable for the tax shall be relieved of liability for the tax if the
transferee furnishes to such person an affidavit that the transferee is not
a disqualified organization and, at the time of transfer, such person does
not have actual knowledge that the affidavit is false; and (iv) that the
Residual Bonds may be "noneconomic residual interests" within the meaning
of Treasury regulation section 1.860E-1(c)(2) and that the transferor of an
ownership interest in a "noneconomic residual interest" will remain liable
for any taxes due with respect to the income on such residual interest,
unless no significant purpose of the transfer is to enable the transferor
to impede the assessment or collection of tax.
4. That the Owner is aware of the tax imposed on a "pass-through entity"
holding the Residual Bonds if at any time during the taxable year of the
pass-through entity a disqualified organization is the record holder of an
interest in such entity. For this purpose, a "pass-through entity" includes
a regulated investment company, a real estate investment trust or common
trust fund, a partnership, trust or estate, and certain cooperatives.
5. That the Owner is aware that the Trustee will not register the transfer of
any Residual Bonds unless the transferee, or the transferee's agent,
delivers to the Trustee, among other things, an affidavit in substantially
the same form as this affidavit. The Owner expressly agrees that it will
not consummate any such transfer if it knows or believes that any of the
representations contained in such affidavit and agreement are false.
6. That the Owner consents to any additional restrictions or arrangements that
shall be deemed necessary upon advice of counsel to constitute a reasonable
arrangement to ensure that the Residual Bonds will only be owned, directly
or indirectly, by Owners that are Permitted Transferees.
7. That the Owner's taxpayer identification number is _________________.
8. That the Owner has reviewed the restrictions set forth on the face of the
Residual Bonds and the provisions of Section 2.15 of the Indenture under
which the Residual Bonds were issued (and, in particular, the Owner is
aware that such Section authorizes the Trustee to deliver payments to a
person other than the Owner and negotiate a mandatory sale by the Trustee
in the event that the Owner holds such Residual Bonds in violation of
Section 3); and that the Owner expressly agrees to be bound by and to
comply with such restrictions and provisions.
9. That the Owner is not acquiring and will not transfer the Residual Bonds in
order to impede the assessment or collection of any tax.
-2-
57
10. That the Owner anticipates that it will, so long as it holds the Residual
Bonds, have sufficient assets to pay any taxes owed by the holder of such
Residual Bonds.
11. That the Owner has no present knowledge that it may become insolvent or
subject to a bankruptcy proceeding for so long as it holds the Residual
Bonds.
12. That the Owner has no present knowledge or expectation that it will be
unable to pay any United States taxes owed by it so long as any of the
Residual Bonds remain outstanding. In this regard, the Owner hereby
represents to and for the benefit of the Person from whom it acquired the
Residual Bonds that the Owner intends to pay taxes associated with holding
the Residual Bonds as they become due, fully understanding that it may
incur tax liabilities in excess of any cash flows generated by the Residual
Bonds.
13. That the Owner is not acquiring the Residual Bonds with the intent to
transfer such Bonds to any person or entity that will not have sufficient
assets to pay any taxes owed by the holder of such Bonds, or that may
become insolvent or subject to a bankruptcy proceeding, for so long as such
Residual Bonds remain outstanding.
14. That Owner will, in connection with any transfer that it makes of any of
the Residual Bonds, obtain from its transferee the representations required
by Section 2.15 of the Indenture under which the Residual Bonds were issued
and will not consummate any such transfer if it knows, or knows facts that
should lead it to believe, that any such representations are false.
15. That Owner will, in connection with any transfer that it makes of any of
the Residual Bonds, represent and warrant that it is not transferring the
Residual Bonds to impede the assessment or collection of any tax and that
it has no actual knowledge that the proposed transferee: (i) has
insufficient assets to pay any taxes owed by such transferee as holder of
the Residual Bonds; (ii) may become insolvent or subject to a bankruptcy
proceeding, for so long as the Residual Bonds remain outstanding; and (iii)
is not a "Permitted Transferee."
16. That the Owner is a United States Person.
17. That the Owner is not an employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or the Code,
nor a Person acting, directly or indirectly, on behalf of any such plan,
and understands that registration of transfer of any Security to any such
employee benefit plan, or to any person acting on behalf of such plan, will
not be made unless such employee benefit plan delivers a certification of
facts and an opinion of its counsel, addressed and satisfactory to the
Trustee and the Issuer to the effect that such transfer will not (a) cause
the assets of the Trust Estate to be treated as "plan assets" within the
meaning of Department of Labor regulations set forth in 29
C.F.R.ss.2510.3-101, (b) give rise to any fiduciary duty under ERISA on the
part of the Issuer or the Trustee, or (c) be treated as, or result in, a
prohibited transaction under Section 406 or 407 of ERISA or Section 4975 of
the Code.
-3-
58
IN WITNESS WHEREOF, the __________________ has caused this instrument
to be executed on its behalf, by the undersigned officer this ______ day of
______________, _____.
[OWNER]
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Personally appeared before me the above-named ___________________,
known or proved to me to be the same person who executed the foregoing
instrument and to be a ________________ of the Owner, and acknowledged to me
that he executed the same as his free act and deed and the free act and deed of
the Owner.
Subscribed and sworn before me this _____ day of _______________,
______.
-----------------------------------------
NOTARY PUBLIC
COUNTY OF
--------------
STATE OF
---------------
My Commission expires:
-------------------
-4-
59
EXHIBIT C
FORM OF TRANSFEROR CERTIFICATE
(RESIDUAL BONDS)
[DATE]
Capstead Securities Corporation IV
0000 X. Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Chase Bank of Texas, National Association
000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Capstead Securities Corporation IV
Collateralized Mortgage Obligations, Series 1998-3
Dear Sirs:
This letter is delivered to you in connection with the sale by
_____________________ (the "Transferor") to ____________________________________
(the "Purchaser") of the Collateralized Mortgage Obligations, Series 1998-3,
Class R Bonds (the "Residual Bonds"), issued pursuant to the Indenture (the
"Indenture") and the Series 1998-3 Supplement, each dated as of September 1,
1998, and each between Capstead Securities Corporation IV, as Issuer (the
"Issuer"), and Chase Bank of Texas, National Association, as Trustee (the
"Indenture Trustee"). All terms used herein and not otherwise defined shall have
the meaning set forth in the Indenture for the Series Supplement, as applicable.
The Transferor hereby certifies, represents and warrants to, and covenants
with, the Issuer and the Indenture Trustee that:
1. No purpose of the Transferor relating to the sale of the Residual Bonds by
the Transferor to the Purchaser is or will be to impede the assessment or
collection of any tax.
2. The Transferor understands that the Purchaser has delivered to the
Indenture Trustee a transferee affidavit and agreement in the form attached
to the Series Supplement as Exhibit B. The Transferor does not know or
believe that any representation contained therein is false.
3. The Transferor has at the time of the transfer conducted a reasonable
investigation of the financial condition of the Purchaser as contemplated
by Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result of that
investigation, the Transferor has determined that the
60
Purchaser has historically paid its debts as they have become due and has
found no significant evidence to indicate that the Purchaser will not
continue to pay its debts as they become due in the future. The Transferor
understands that the transfer of the Residual Bonds may not be respected
for United States income tax purposes (and the Transferor may continue to
be liable for United States income taxes associated therewith) unless the
Transferor has conducted such an investigation.
4. The Transferor has no actual knowledge that the proposed Transferee is a
Disqualified Organization, an agent of a Disqualified Organization or a
Non-U.S. Person.
Very truly yours,
-----------------------------------------
(Transferor)
-2-
