-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JlH+gllY3XkqWwthyZjw45y/gv8SmbwNoidCAfujJlUuxZ38uGxdVwFFLXJnEjpT 6uQICj0HsSx+ywzE3CKJ5A== 0000895345-97-000350.txt : 19971003 0000895345-97-000350.hdr.sgml : 19971003 ACCESSION NUMBER: 0000895345-97-000350 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 19971002 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COUNTRYWIDE CAPITAL III CENTRAL INDEX KEY: 0001047056 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-37047 FILM NUMBER: 97689996 BUSINESS ADDRESS: STREET 1: C/O COUNTRYWIDE CREDIT INDUSTRIES INC STREET 2: 4500 PARK GRANDA CITY: CALABASAS STATE: CA ZIP: 91302 BUSINESS PHONE: 8182253300 MAIL ADDRESS: STREET 2: 4500 PARK GRANADA CITY: CALABASAS STATE: CA ZIP: 91302 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COUNTRYWIDE CREDIT INDUSTRIES INC CENTRAL INDEX KEY: 0000025191 STANDARD INDUSTRIAL CLASSIFICATION: MORTGAGE BANKERS & LOAN CORRESPONDENTS [6162] IRS NUMBER: 132641992 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-37047-01 FILM NUMBER: 97689997 BUSINESS ADDRESS: STREET 1: 4500 PARK GRANADA BLVD CITY: CALABASAS STATE: CA ZIP: 91302 BUSINESS PHONE: 8182253000 MAIL ADDRESS: STREET 1: 4500 PARK GRANADA BLVD CITY: CALABASAS STATE: CA ZIP: 91302 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COUNTRYWIDE HOME LOANS INC CENTRAL INDEX KEY: 0000814509 STANDARD INDUSTRIAL CLASSIFICATION: MORTGAGE BANKERS & LOAN CORRESPONDENTS [6162] IRS NUMBER: 132631719 STATE OF INCORPORATION: NY FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-37047-02 FILM NUMBER: 97689998 BUSINESS ADDRESS: STREET 1: 4500 PARK GRANADA BLVD CITY: CALABASAS STATE: CA ZIP: 91302 BUSINESS PHONE: 8182253000 MAIL ADDRESS: STREET 1: 4500 PARK GRANADA CITY: CALABASAS STATE: CA ZIP: 91302 FORMER COMPANY: FORMER CONFORMED NAME: COUNTRYWIDE FUNDING CORP DATE OF NAME CHANGE: 19931018 S-4 1 As filed with the Securities and Exchange Commission on October 2, 1997 -- Registration No. 333- ------ =========================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- Countrywide Capital III (Exact name of registrant as specified in its charter) c/o Countrywide Credit Industries, Inc. 4500 Park Granada Calabasas, CA 91302 (818) 225-3000 Delaware (Address, including Applied for (State or other zip code, and (I.R.S. Employer jurisdiction of telephone number, Identification incorporation or including area code, of Number) organization) registrant's principal executive offices) Countrywide Home Loans, Inc. (Exact name of registrant as specified in its charter) 4500 Park Granada Calabasas, CA 91302 (818) 225-3000 New York (Address, including 13-2631719 (State or other zip code, and (I.R.S. Employer jurisdiction of telephone number, Identification incorporation or including area code, of Number) organization) registrant's principal executive offices) Countrywide Credit Industries, Inc. (Exact name of registrant as specified in its charter) 4500 Park Granada Calabasas, CA 91302 (818) 225-3000 Delaware (Address, including 13-2641992 (State or other zip code, and (I.R.S. Employer jurisdiction of telephone number, Identification incorporation or including area code, of Number) organization) registrant's principal executive offices) --------------- Davis S. Loeb Director Countrywide Home Loans, Inc. and President and Chairman of the Board Countrywide Credit Industries, Inc. 4500 Park Granada Calabasas, CA 91302 (818) 225-3000 (Name, address, including zip code, and telephone number, including area code, of agent for service) --------------- Copies to: Kenneth R. Blackman, Esq. Sandor E. Samuels, Esq. Fried, Frank, Harris, Shriver & Managing Director, Legal, Jacobson General Counsel and Secretary One New York Plaza Countrywide Credit New York, NY 10004-1980 Industries, Inc. (212) 859-8000 4500 Park Granada Calabasas, CA 91302 (818) 225-3000 --------------- The registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine. =========================================================================== (continued from previous page) Approximate date of commencement of the proposed exchange offer: As soon as practicable after the effective date of this Registration Statement. ------------------ If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is a compliance with General Instruction G, check the following box. [ ] ------------------
CALCULATION OF REGISTRATION FEE =========================================================================== Proposed Proposed Amount of Title of Each Class Maximum Maximum Maximum Registration of Securities to be Amount Offering Aggregate Fee Registered to be Price Offering Registered Per Unit Price (1) (1)(2) (1)(2) Subordinated Capital Income Securities ("Capital Securities") of Countrywide Capital III Junior Subordinated Debentures ("Debentures") of Countrywide Home Loans, Inc. (3) Guarantees of Capital Securities of Countrywide Capital III by Countrywide Credit Industries, Inc. and certain back-up undertakings ("Capital Securities Guarantees") (4)(5) Guarantees of Debentures of Countrywide Home Loans, Inc. by Countrywide Credit Industries, Inc. ("Debt Guarantees") (5) 200,000 Capital Total Securities 100% $200,000,000 $60,607 =========================================================================== (1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(f)(2). (2) Exclusive of accrued interest and distributions, if any. (3) The Debentures will be issued and sold to Countrywide Capital III. Such Debentures may later be distributed to the holders of Capital Securities upon a dissolution of Countrywide Capital III and the distribution of the assets thereof. (4) Includes the rights of holders of the Capital Securities under the Capital Securities Guarantees and certain back-up undertakings comprised of obligations of Countrywide Home Loans, Inc. ("CHL"), guaranteed by Countrywide Credit Industries, Inc. (the "Company"), to provide certain indemnities in respect of, and pay and be responsible for certain costs, expenses, debts and liabilities of, Countrywide Capital III (other than with respect to the Capital Securities) and certain obligations of the Company as set forth in the Indenture and the Declaration of Countrywide Capital III, in each case as further described in the Registration Statement. The Company's obligations under the Capital Securities Guarantees, the Debt Guarantees, the Indenture and the Declaration, taken together with CHL's obligations under the Debentures and the Indenture, including CHL's obligations to pay all costs, expenses and liabilities of Countrywide Capital III (other than with respect to the Capital Securities), will provide a full and unconditional guarantee by the Company of all of Countrywide Capital III's obligations under the Capital Securities. (5) No separate consideration will be received for any Capital Securities Guarantees or Debt Guarantees or back-up undertakings. ===========================================================================
SUBJECT TO COMPLETION, DATED OCTOBER 2, 1997 -- PROSPECTUS Countrywide Capital III Offer to Exchange its 8.05% Subordinated Capital Income Securities, Series B (SKISSM*) (Liquidation Amount $1,000 per Capital Security) which have been registered under the Securities Act of 1933, as amended, and are fully and unconditionally guaranteed as to distributions and other payments by, as set forth herein, by Countrywide Credit Industries, Inc. for any and all of its outstanding 8.05% Subordinated Capital Income Securities, Series A (SKISSM*) (Liquidation Amount $1,000 per Capital Security) which are fully and unconditionally guaranteed as to distributions and other payments, as set forth herein, by Countrywide Credit Industries, Inc. ------------------ THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997 UNLESS EXTENDED. ------------------ Countrywide Capital III, a Delaware statutory business trust (the "Trust"), hereby offers, upon the terms and subject to the conditions set forth in this Prospectus (as the same may be amended or supplemented from time to time, the "Prospectus") and in the accompanying Letter of Transmittal (which together constitute the "Exchange Offer"), to exchange up to $200,000,000 aggregate liquidation amount of its 8.05% Capital Income Securities, Series B (the "New Capital Securities"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to the Registration Statement (as defined herein) of which this Prospectus constitutes a part, for a like liquidation amount of its outstanding 8.05% Capital Income Securities, Series A (the "Old Capital Securities"), of which $200,000,000 aggregate liquidation amount is outstanding. As soon as practicable after the Exchange Offer: (i) Countrywide Credit Industries, Inc., a Delaware corporation (the "Company"), will exchange its full and unconditional guarantee with respect to the payment of Distributions (as defined herein) and payments on liquidation of the Trust or redemption of the Old Capital Securities (the "Old Trust Guarantee") for a like guarantee of the New Capital Securities (the "New Trust Guarantee," and together with the Old Trust Guarantee, the "Trust Guarantee"); (ii) all of the 8.05% Junior Subordinated Debentures due June 15, 2027, Series A (the "Old Debentures"), of Countrywide Home Loans, Inc., a New York corporation and a wholly-owned subsidiary of the Company ("CHL"), of which $206,200,000 aggregate principal amount is outstanding, will be exchanged for a like aggregate principal amount of CHL's 8.05% Junior Subordinated Debentures due June 15, 2027, Series B (the "New Debentures"); and (iii) the Company will exchange its full and unconditional guarantee with respect to the payment of principal of, premium, if any, and interest on the Old Debentures (the "Old Debt Guarantee") for a like guarantee of the New Debentures (the "New Debt Guarantee"). The New Trust Guarantee, the New Debentures and the New Debt Guarantee also have been registered under the Securities Act. The New Trust Guarantee, together with the New Debt Guarantee, are collectively referred to as the "New Guarantees," and the New Guarantees, together with the Old Trust Guarantee, to the extent it shall remain in effect because not all the Old Capital Securities are exchanged for New Capital Securities, are collectively referred to as the "Guarantees." The Exchange Offer is being made pursuant to the terms of a Registration Rights Agreement, dated June 4, 1997 (the "Registration Rights Agreement"), among the Company, CHL, the Trust and Lehman Brothers Inc., Countrywide Securities Corporation, Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Brothers Inc (the "Initial Purchasers") pursuant to the terms of a Purchase Agreement, dated May 30, 1997, among the Company, CHL, the Trust and the Initial Purchasers. See "The Exchange Offer - Purpose and Effect of the Exchange Offer." The Old Capital Securities, the Old Trust Guarantee, the Old Debentures and the Old Debt Guarantee are collectively referred to herein as the "Old Securities" and the New Capital Securities, the New Trust Guarantee, the New Debentures and the New Debt Guarantee are collectively referred to herein as the "New Securities." The terms of the New Securities are identical in all material respects to the terms of the Old Securities, except that the New Securities have been registered under the Securities Act and therefore will not be subject to certain restrictions on transfer applicable to the Old Securities. The New Capital Securities and the Old Capital Securities (together, the "Capital Securities") represent undivided beneficial ownership interests in the assets of the Trust and rank on a parity with each other. The Company is the owner of all of the beneficial ownership interests represented by common securities of the Trust (the "Common Securities," and together with the Capital Securities, the "Trust Securities"). The Trust was formed for the exclusive purposes of (i) issuing and selling the Trust Securities, (ii) investing the gross proceeds thereof in the Old Debentures and the Old Debt Guarantee, which will be exchanged for the New Debentures and the New Debt Guarantee, respectively, and (iii) engaging in only those other activities necessary or incidental thereto, including engaging in the Exchange Offer. (cover continued on next page) ------------------ See "Risk Factors" beginning on page 15 for a discussion of certain factors which investors should consider in connection with the Exchange Offer and an investment in the New Capital Securities. ------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------ * SKIS is a servicemark of Lehman Brothers Inc. ------------------ The date of this Prospectus is , 1997. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state. (continued from previous page) The New Debentures will mature on June 15, 2027, or earlier in certain circumstances following the occurrence of a Tax Event (as defined herein). See "Description of Capital Securities - Special Event Redemption or Distribution of New Debentures; Shortening of Stated Maturity." The Capital Securities will have a preference under certain circumstances with respect to cash distributions and amounts payable on liquidation, redemption or otherwise over the Common Securities. See "Description of Capital Securities - Subordination of Common Securities." Holders of Capital Securities will be entitled to receive cumulative cash distributions ("Distributions"), accumulating from June 4, 1997, the date of original issuance of the Old Capital Securities, at a rate per annum equal to 8.05% of the liquidation amount of $1,000 per Capital Security. Distributions will be payable semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15, 1997, and at maturity. At all times, the distribution rate in effect on the Capital Securities, the distribution payment dates and other payment dates for the Capital Securities will correspond to the interest rate, interest payment dates and other payment dates for the New Debentures, which, together with the New Debt Guarantee, will be the exclusive assets of the Trust. See "Description of Capital Securities - Distributions." The Company will guarantee the payment of Distributions and payments on liquidation of the Trust or redemption of the Capital Securities, but only, in each case, to the extent of funds held by the Trust, which funds will not be available except to the extent CHL has made payments of interest or principal or other payments on the New Debentures or the Company has made such payments pursuant to the New Debt Guarantee. See "Description of Trust Guarantee" and "Description of New Debentures and New Debt Guarantee." If CHL does not make payments on the New Debentures held by the Trust, and the Company does not make such payments, to the extent required, under the New Debt Guarantee, the Trust will have insufficient funds to make payments on the Capital Securities, and the Trust Guarantee will not apply to such payments until the Trust has sufficient funds available therefor. The Company's obligations under the Guarantees, the Indenture (as defined herein) and the Declaration (as defined herein), taken together with CHL's obligations under the New Debentures and the Indenture, including CHL's obligation to pay all costs, expenses and liabilities of the Trust (other than with respect to the Trust Securities), constitute a full and unconditional guarantee by the Company of all of the Trust's obligations under the Capital Securities. See "Relationship Among the Capital Securities, the New Debentures and the Guarantees." CHL's obligations under the New Debentures and the Indenture and the Company's obligations under the Guarantees and the Indenture will be subordinate and junior in right of payment to all existing and future Senior Indebtedness (as defined herein) of CHL and the Company, respectively, and will rank pari passu with the 8% Junior Subordinated Deferrable Interest Debentures due 2026 of CHL (the "1996 Debentures") and the related guarantee by the Company, respectively. See "Capitalization." In addition, at all times such obligations will be structurally subordinated to all existing and future liabilities and obligations of CHL's and the Company's subsidiaries, as the case may be. At May 31, 1997, after giving pro forma effect to the Offering (as defined herein), including the application of the proceeds therefrom, and the Exchange Offer (the Offering, the use of proceeds therefrom and the Exchange Offer are, collectively, the "Offerings"), CHL would have had approximately $6.5 billion aggregate principal amount of Senior Indebtedness outstanding and the Company would have had no indebtedness outstanding (excluding indebtedness of subsidiaries guaranteed by the Company). In addition, at such date, subsidiaries of the Company (other than CHL) had outstanding indebtedness of approximately $43 million. The terms of the Capital Securities, the New Debentures and the Guarantees place no limitation on the amount of Senior Indebtedness that may be incurred by the Company or CHL or on the amount of liabilities and obligations of the Company's or CHL's subsidiaries. See "Description of Trust Guarantee - Status of the Trust Guarantee" and "Description of New Debentures and New Debt Guarantee - Ranking." CHL has the right to defer payment of interest on the New Debentures at any time or from time to time for a period not exceeding 10 consecutive semi-annual periods with respect to each deferral period (each, an "Extension Period"), provided that no Extension Period may extend beyond the Stated Maturity (as defined herein) of the New Debentures. Upon the termination of any such Extension Period and the payment of all amounts then due on any Interest Payment Date (as defined herein), CHL may elect to begin a new Extension Period, subject to the requirements set forth herein. Accordingly, there could be multiple Extension Periods of varying lengths throughout the term of the New Debentures. If interest payments on the New Debentures are so deferred, Distributions on the Capital Securities will also be deferred and (a) the Company and CHL shall not declare or pay dividends on, or make a distribution with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of shares of any such capital stock or rights to acquire such capital stock in connection with the satisfaction by the Company or CHL, respectively, of its obligations under any employee benefit plans, (ii) as a result of a reclassification of the Company's or CHL's capital stock or rights to acquire such capital stock or the exchange or conversion of one class or series of the Company's or CHL's capital stock or rights to acquire such capital stock for another class or series of the Company's or CHL's capital stock or rights to acquire such capital stock, (iii) the purchase of fractional interests in shares of the Company's or CHL's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged or (iv) dividends and distributions made on the Company's or CHL's capital stock or rights to acquire such capital stock with the Company's or CHL's capital stock or rights to acquire such capital stock) or make any guarantee payments with respect to any of the foregoing and (b) the Company and CHL shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including any guarantees, other than the Guarantees) issued by the Company or CHL that rank pari passu with or junior to the New Debentures. During an Extension Period, interest on the New Debentures will continue to accrue (and the amount of Distributions to which holders of the Capital Securities are entitled will accumulate) at 8.05% per annum, compounded semi-annually, and holders of the Capital Securities will be required to accrue income, in the form of original issue discount ("OID"), for United States federal income tax purposes prior to receipt of cash related to such interest income. See "Description of New Debentures and New Debt Guarantee - Option to Extend Interest Payment Period" and "Certain United States Federal Income Tax Consequences - Interest Income and Original Issue Discount." The Trust Securities are subject to mandatory redemption, in whole but not in part, upon repayment of the New Debentures held by the Trust at maturity or their earlier redemption, in an aggregate liquidation amount equal to the aggregate principal amount of related New Debentures maturing or being redeemed and at a redemption price equal to the redemption price of such New Debentures, in each case, plus accumulated and unpaid Distributions thereon to the date of redemption. The New Debentures are not redeemable at the option of CHL, other than in certain circumstances following a Special Event (as defined herein). Upon the occurrence and continuation of a Special Event, CHL will have the right, if certain conditions are met, (i) in the case of a Tax Event, to shorten the Stated Maturity of the New Debentures to a date not earlier than December 15, 2011 or (ii) to redeem the New Debentures in whole (but not in part) within 90 days following the occurrence of such Special Event, at a redemption price equal to 100% of the aggregate principal amount of such New Debentures, plus accrued and unpaid interest to the date of redemption. See "Description of New Debentures and New Debt Guarantee - Redemption." The Company has the right at any time to dissolve the Trust, and cause the New Debentures to be distributed to the holders of the Trust Securities in exchange therefor upon liquidation of the Trust. In the event of the liquidation of the Trust, after satisfaction of the claims of creditors of the Trust, if any, as provided by applicable law, the holders of the Trust Securities will be entitled to receive a liquidation amount of $1,000 per Capital Security, plus accumulated and unpaid Distributions thereon to the date of payment, unless, in connection with such liquidation, New Debentures are distributed to the holders of Trust Securities. If such liquidation amount can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate liquidation amount, then the amounts payable directly by the Trust on the Trust Securities will be paid on a pro rata basis. The holders of the Common Securities will be entitled to receive distributions upon any such liquidation pro rata with the holders of the Capital Securities, except that if an Indenture Event of Default (as defined herein) has occurred and is continuing, the Capital Securities will have a priority over the Common Securities. See "Description of Capital Securities - Liquidation Distribution Upon Dissolution." THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. The Trust will accept for exchange any and all validly tendered Old Capital Securities on or prior to 5:00 p.m., New York City time, on , 1997, unless extended by the Trust (as so extended, the "Expiration Date"). Tenders of Old Capital Securities may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange Offer is not conditioned upon any minimum liquidation amount of Old Capital Securities being tendered for exchange. However, the Exchange Offer is subject to certain conditions, which may be waived by the Trust, and to the terms and provisions of the Registration Rights Agreement. Old Capital Securities may be tendered only in blocks having a minimum aggregate liquidation amount of $100,000 (100 Old Capital Securities) and in integral multiples of $1,000 in excess thereof. CHL has agreed to pay all the expenses of the Exchange Offer. See "The Exchange Offer." Any waiver, extension or termination of the Exchange Offer will be publicly announced by the Trust through a release to the Dow Jones News Service and as otherwise required by applicable law or regulations. The New Capital Securities will be obligations of the Trust entitled to the benefits of the Declaration. The form and terms of the New Capital Securities will be identical in all material respects to the form and terms of the Old Capital Securities except that (i) the New Capital Securities will have been registered under the Securities Act and therefore will not contain terms with respect to transfer restrictions, (ii) the Distribution Rate (as defined herein) on the New Capital Securities will not be subject to increase in certain circumstances relating to the timing of the Exchange Offer and (iii) the holders of New Capital Securities will not be entitled to certain rights under the Registration Rights Agreement, which rights will terminate when the Exchange Offer is consummated. Any Old Capital Securities not tendered and accepted in the Exchange Offer will remain outstanding and, except as described herein, will be entitled to all the rights and preferences, and will be subject to the limitations applicable thereto, under the Declaration. Following consummation of the Exchange Offer, the holders of the Old Capital Securities will not be entitled to any increase in the Distribution Rate thereon and will continue to be subject to any existing restrictions upon transfer thereof, and none of the Company, CHL and the Trust will have any further obligation to such holders (other than under certain limited circumstances) to provide for the registration under the Securities Act of the Old Capital Securities held by them. See "The Exchange Offer." The Company, CHL and the Trust are making the Exchange Offer in reliance on the position of the staff of the Division of Corporation Finance of the Securities and Exchange Commission (the "Commission") as set forth in certain interpretive letters addressed to third parties in other transactions. However, none of the Company, CHL and the Trust has sought its own interpretive letter and there can be no assurance that the staff of the Division of Corporation Finance of the Commission would make a similar determination with respect to the Exchange Offer as it has in such interpretive letters to third parties. Based on these interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Company, CHL and the Trust believe that New Capital Securities issued pursuant to the Exchange Offer in exchange for Old Capital Securities may be offered for resale, resold and otherwise transferred by a holder thereof (other than a holder who is a broker-dealer or who is an "affiliate" of the Company, CHL or the Trust within the meaning of Rule 405 of the Securities Act) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that (i) such New Capital Securities are acquired in the ordinary course of such holder's business and (ii) such holder is not participating, does not intend to participate and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of such New Capital Securities. However, any holder of Old Capital Securities who is an "affiliate" of the Company, CHL or the Trust or who intends to participate in the Exchange Offer for the purpose of distributing New Capital Securities, or, as to unsold allotments, any broker-dealer who purchased Old Capital Securities from the Trust to resell pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other available exemption under the Securities Act, (a) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the Commission set forth in the above-mentioned interpretive letters, (b) will not be permitted or entitled to tender such Old Capital Securities in the Exchange Offer and (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of such Old Capital Securities, with such resale covered by an effective registration statement containing the selling security holder information required by Item 507 of Regulation S-K under the Securities Act, unless such sale is made pursuant to an exemption from such requirements. In addition, as described below, if any broker-dealer holds Old Capital Securities acquired for its own account as a result of market-making or other trading activities and exchanges such Old Capital Securities for New Capital Securities, then such broker-dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such New Capital Securities. Each holder of Old Capital Securities who wishes to exchange Old Capital Securities for New Capital Securities in the Exchange Offer will be required to represent that (i) it is not an "affiliate" of the Company, CHL or the Trust, (ii) any New Capital Securities to be received by it are being acquired in the ordinary course of its business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Capital Securities and (iv) if such holder is not a broker-dealer, or is a broker-dealer but will not receive New Capital Securities for its own account in exchange for Old Capital Securities, such holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Capital Securities. In addition, the Company, CHL and the Trust may require such holder, as a condition to such holder's eligibility to participate in the Exchange Offer, to furnish to the Company, CHL and the Trust (or an agent thereof) in writing information as to the number of "beneficial owners" (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) on behalf of whom such holder holds the Old Capital Securities to be exchanged in the Exchange Offer. Each broker-dealer that receives New Capital Securities for its own account pursuant to the Exchange Offer must acknowledge that it acquired the Old Capital Securities for its own account as a result of market-making activities or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Capital Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Based on the position taken by the staff of the Division of Corporation Finance of the Commission in the interpretive letters referred to above, the Company, CHL and the Trust believe that broker-dealers who acquired Old Capital Securities for their own accounts, as a result of market-making or other trading activities ("Participating Broker-Dealers") may fulfill their prospectus delivery requirements with respect to the New Capital Securities received upon exchange of such Old Capital Securities (other than Old Capital Securities which represent an unsold allotment from the original sale of the Old Capital Securities) with a prospectus meeting the requirements of the Securities Act, which may be the prospectus prepared for an exchange offer so long as it contains a description of the plan of distribution with respect to the resale of such New Capital Securities. Accordingly, this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer during the period referred to below in connection with resales of New Capital Securities received in exchange for Old Capital Securities where such Old Capital Securities were acquired by such Participating Broker-Dealer for its own account as a result of market-making or other trading activities. Subject to certain provisions set forth in the Registration Rights Agreement, the Company, CHL and the Trust have agreed that this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of such New Capital Securities for a period ending 90 days after the Registration Statement of which this Prospectus constitutes a part is declared effective. However, a Participating Broker-Dealer who intends to use this Prospectus in connection with the resale of New Capital Securities received in exchange for Old Capital Securities pursuant to the Exchange Offer must notify the Company, CHL and the Trust, or cause the Company, CHL and the Trust to be notified, on or prior to the Expiration Date, that it is a Participating Broker-Dealer. Such notice may be given in the space provided for that purpose in the Letter of Transmittal or may be delivered to the Exchange Agent (as defined herein) at one of the addresses set forth herein under "The Exchange Offer - Exchange Agent." Any Participating Broker-Dealer who is an "affiliate" of the Company, CHL or the Trust may not rely on such interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. See "The Exchange Offer - - Resales of New Capital Securities." In that regard, each Participating Broker-Dealer who surrenders Old Capital Securities pursuant to the Exchange Offer will be deemed to have agreed, by execution of the Letter of Transmittal, that, upon receipt of notice from the Company, CHL or the Trust of the occurrence of any event or the discovery of any fact which makes any statement contained in this Prospectus untrue in any material respect or which causes this Prospectus to omit to state a material fact necessary in order to make the statements contained herein, in light of the circumstances under which they were made, not misleading or of the occurrence of certain other events specified in the Registration Rights Agreement, such Participating Broker-Dealer will suspend the sale of New Capital Securities pursuant to this Prospectus until the Company, CHL and the Trust have amended or supplemented this Prospectus to correct such misstatement or omission and have furnished copies of the amended or supplemented Prospectus to such Participating Broker-Dealer or the Company, CHL or the Trust has given notice that the sale of the New Capital Securities may be resumed, as the case may be. The New Capital Securities will be a new issue of securities for which there currently is no established trading market. The Trust has been advised by the Initial Purchasers that following completion of the Exchange Offer, they currently intend to make a market in the New Capital Securities; however, they are not obligated to do so and any market-making activities with respect to the New Capital Securities may be discontinued at any time. There can be no assurance that an active trading market for the New Capital Securities will develop. See "Risk Factors - Absence of Public Market for the New Capital Securities." The Trust and the Company do not currently intend to apply for listing of the New Capital Securities on the New York Stock Exchange (the "NYSE"). To the extent that Old Capital Securities are tendered and accepted in the Exchange Offer, a holder's ability to sell untendered Old Capital Securities could be adversely affected. See "Risk Factors - Consequences of a Failure to Exchange Old Capital Securities." None of the Company, CHL and the Trust will receive any proceeds from the Exchange Offer. No dealer-manager is being used in connection with the Exchange Offer. See "Use of Proceeds" and "Plan of Distribution." ------------------ NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION CONCERNING THE COMPANY, CHL, THE TRUST, THE NEW CAPITAL SECURITIES OR THE EXCHANGE OFFER NOT CONTAINED IN THIS PROSPECTUS, THE DOCUMENTS INCORPORATED OR DEEMED INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, CHL OR THE TRUST. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE OFFERING, SALE OR DELIVERY OF ANY NEW CAPITAL SECURITY SHALL CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME AFTER THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS OR PROSPECTS OF THE COMPANY, CHL OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. ------------------ NO EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), NO ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" OF ANY SUCH PLAN BY REASON OF SUCH PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN, MAY ACQUIRE OR HOLD THE NEW CAPITAL SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH EXCHANGING PERSON OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER AN APPLICABLE U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION ("PTE"), INCLUDING BUT NOT LIMITED TO PTE 96-23, 95-60, 91-38, 90- 1 OR 84-14 WITH RESPECT TO SUCH ACQUISITION OR HOLDING. ANY PERSON EXCHANGING OLD CAPITAL SECURITIES FOR NEW CAPITAL SECURITIES OR HOLDER OF THE NEW CAPITAL SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED AND COVENANTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (I) THE EXCHANGING PERSON OR HOLDER IS NOT A PLAN OR ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY AND IS NOT ACQUIRING SUCH NEW CAPITAL SECURITIES ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY PLAN OR (II) THE EXCHANGE AND HOLDING OF THE NEW CAPITAL SECURITIES IS COVERED BY ONE OF THE PROHIBITED TRANSACTION CLASS EXEMPTIONS UNDER ERISA AND THE CODE DESCRIBED ABOVE. TABLE OF CONTENTS Page AVAILABLE INFORMATION..................................... 1 INCORPORATION OF CERTAIN INFORMATION BY REFERENCE......... 2 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS......... 2 PROSPECTUS SUMMARY........................................ 4 RISK FACTORS.............................................. 15 USE OF PROCEEDS........................................... 20 RATIO OF EARNINGS TO FIXED CHARGES........................ 20 ACCOUNTING TREATMENT...................................... 20 CAPITALIZATION............................................ 21 THE COMPANY............................................... 22 CHL....................................................... 22 THE TRUST................................................. 23 THE EXCHANGE OFFER........................................ 24 DESCRIPTION OF CAPITAL SECURITIES......................... 35 DESCRIPTION OF NEW DEBENTURES AND NEW DEBT GUARANTEE...... 45 DESCRIPTION OF TRUST GUARANTEE............................ 52 RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE NEW DEBENTURES AND THE GUARANTEES............................ 54 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.... 56 BOOK-ENTRY ISSUANCE....................................... 59 ERISA CONSIDERATIONS...................................... 61 PLAN OF DISTRIBUTION...................................... 62 LEGAL MATTERS............................................. 63 INDEPENDENT AUDITORS...................................... 63 INDEX OF CERTAIN TERMS.................................... 64 ------------------ AVAILABLE INFORMATION The Company, CHL and the Trust have filed with the Commission a Registration Statement on Form S-4 (together with all amendments, exhibits, schedules and supplements thereto, the "Registration Statement") under the Securities Act with respect to the New Capital Securities offered hereby. This Prospectus, which forms a part of the Registration Statement, does not contain all the information set forth in the Registration Statement, certain parts of which have been omitted in accordance with the rules and regulations of the Commission. For further information with respect to the Company, CHL, the Trust and the New Capital Securities, reference is made to the Registration Statement and the exhibits and schedules relating thereto. Any statements contained herein concerning the provisions of any document filed as an exhibit to the Registration Statement or otherwise filed with the Commission or incorporated by reference herein are not necessarily complete, and, in each instance, reference is made to the copy of such document so filed for a more complete description of the matter involved. Each such statement is qualified in its entirety by such reference. The Registration Statement (and the exhibits and schedules thereto) can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; and at the Commission's regional offices at Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661-2511, and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of such material can also be obtained from the Commission at prescribed rates through its Public Reference Section at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Company is subject to the informational requirements of the Exchange Act, and in accordance therewith files reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information filed by the Company with the Commission pursuant to the informational requirements of the Exchange Act can be inspected and copied at the public reference facilities maintained by the Commission at its offices and the Commission's regional offices at the locations listed above. Copies of such material can also be obtained from the Public Reference Section of the Commission in the manner described above. Such reports and other information can also be inspected at the offices of the following exchanges on which certain of the Company's securities are listed: The New York Stock Exchange, 20 Broad Street, New York, New York 10005 and the Pacific Stock Exchange, 115 Sansome Street, San Francisco, California 94104. The Commission also maintains a Web site (http://www.sec.gov) that makes available reports, proxy statements and other information regarding the Company. No separate financial statements of the Trust have been included or incorporated by reference herein. The Company and CHL believe such financial statements would not be material to holders of the New Capital Securities because (i) all of the voting securities of the Trust are owned by the Company, a reporting company under the Exchange Act, (ii) the Trust has no independent operations but exists for the exclusive purposes of issuing the Trust Securities, representing undivided beneficial ownership interests in its assets, and investing the gross proceeds thereof in the Old Debentures and the Old Debt Guarantee, which Old Debentures and Old Debt Guarantee will be exchanged for the New Debentures and the New Debt Guarantee, respectively, pursuant to the Exchange Offer and (iii) the Company's obligations under the Guarantees, the Indenture and the Declaration, taken together with CHL's obligations under the New Debentures and the Indenture, including CHL's obligation to pay all costs, expenses and liabilities of the Trust (other than with respect to the Trust Securities), constitute a full and unconditional guarantee by the Company of all of the Trust's obligations under the Capital Securities. See "Relationship Among the Capital Securities, the New Debentures and the Guarantees." INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997 and Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 1997, previously filed by the Company with the Commission, are incorporated by reference in this Prospectus and shall be deemed to be a part hereof. Each document filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of any offering of securities made by this Prospectus shall be deemed to be incorporated herein by reference and to be a part hereof from the date of filing such document. Any statement contained herein, or in a document all or a portion of which is incorporated or deemed to be incorporated by reference herein, shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to any person to whom a copy of this Prospectus is delivered, upon written or oral request, a copy of any and all of the documents that have been or may be incorporated by reference herein (other than exhibits to such documents which are not specifically incorporated by reference into such documents). Request for such documents should be submitted in writing to the Company at 4500 Park Granada, Calabasas, California 91302, Attention: Investor Relations. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements. This Prospectus may contain or incorporate by reference forward- looking statements which reflect the Company's current views with respect to future events and financial performance. These forward- looking statements are subject to certain risks and uncertainties, including those identified below, which could cause future results to differ materially from historical results or those anticipated. The words "believe," expect," "anticipate," "intend," "estimate" and other expressions which indicate future events and trends identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward- looking statements, which speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The following factors, among others, could cause future results to differ materially from historical results or those anticipated: (1) the level of demand for mortgage credit, which is affected by such external factors as the level of interest rates, the strength of the various segments of the economy and demographics of the Company's lending markets; (2) the direction of interest rates; (3) the relationship between mortgage interest rates and the cost of funds; (4) federal and state regulation of the Company's mortgage banking operations; and (5) competition within the mortgage banking industry. See also "Risk Factors." PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the financial statements, including the notes thereto, appearing elsewhere or incorporated by reference in this Prospectus. Prospective investors are urged to read this Prospectus in its entirety. For an index of certain defined terms used in this Prospectus, see "Index of Certain Terms." The Trust The Trust is a statutory business trust formed under Delaware law pursuant to (i) a declaration of trust, dated as of May 28, 1997 and (ii) the filing of a certificate of trust with the Secretary of State of the State of Delaware on May 28, 1997. The Trust exists for the exclusive purposes of (i) issuing and selling the Trust Securities representing undivided beneficial ownership interests in the assets of the Trust, (ii) investing the gross proceeds from such sales in the Old Debentures and the Old Debt Guarantee, which will be exchanged for the New Debentures and the New Debt Guarantee, respectively, pursuant to the Exchange Offer and (iii) engaging in only those other activities necessary or incidental thereto, including engaging in the Exchange Offer. The Trust's registered office in the State of Delaware is c/o The Bank of New York (Delaware), 400 White Clay Center, Route 273, Newark, Delaware 19711, Attn: Corporate Trust Administration. The principal place of business of the Trust is c/o Countrywide Credit Industries, Inc., 4500 Park Granada, Calabasas, California 91302, and its telephone number is (818) 225-3000. The Company The Company is a holding company which through its principal subsidiary, CHL, is engaged primarily in the mortgage banking business. The Company, through its other wholly owned subsidiaries, offers products and services complementary to its mortgage banking business. The Company is a Delaware corporation and was originally incorporated in New York under the name of OLM Credit Industries, Inc. in 1969. Its principal executive offices are located at 4500 Park Granada, Calabasas, California 91302, and its telephone number is (818) 225-3000. CHL CHL, the principal subsidiary of the Company, is engaged primarily in the mortgage banking business and as such originates, purchases, sells and services mortgage loans. CHL is a New York corporation, originally incorporated in 1969. Its principal executive offices are located at 4500 Park Granada, Calabasas, California 91302, and its telephone number is (818) 225-3000. The Offering The Old Capital The Old Capital Securities were sold by the Securities: Trust in an offering consummated on June 4, 1997 (the "Offering"), and were subsequently resold to Qualified Institutional Buyers (as defined herein) pursuant to Rule 144A and to certain foreign purchasers in reliance on Regulation S under the Securities Act. Registration Rights In connection with the Offering, the Company, Agreement: CHL and the Trust entered into the Registration Rights Agreement, which granted holders of the Old Capital Securities certain exchange and registration rights. The Exchange Offer is intended to satisfy such exchange and registration rights, which terminate upon the consummation of the Exchange Offer, except under limited circumstances. See "The Exchange Offer - Shelf Registration Statement." The Exchange Offer Securities Up to $200,000,000 aggregate liquidation Offered: amount of New Capital Securities (liquidation amount $1,000 per New Capital Security) evidencing undivided beneficial ownership interests in the assets of the Trust. Holders of New Capital Securities will be entitled to a preference over the Common Securities in certain circumstances with respect to Distributions and amounts payable on liquidation, redemption or otherwise. The Exchange Pursuant to the Exchange Offer, $1,000 Offer: liquidation amount of New Capital Securities will be issued in exchange for each $1,000 liquidation amount of Old Capital Securities that are validly tendered and not withdrawn. Old Capital Securities may be tendered only in blocks having a minimum aggregate liquidation amount of $100,000 (100 Old Capital Securities) and in integral multiples of $1,000 in excess thereof. As of October 1, 1997, there was one registered holder of Old Capital Securities. On such date, $200,000,000 aggregate liquidation amount of Old Capital Securities were outstanding. The Exchange Offer is not being made to, nor will the Trust accept surrenders of Old Capital Securities for exchange from, holders thereof in any jurisdiction in which the Exchange Offer or the acceptance thereof would not be in compliance with the securities or blue sky laws of such jurisdiction. Resales: The Company, CHL and the Trust are making the Exchange Offer in reliance on the position of the staff of the Division of Corporation Finance of the Commission as set forth in certain interpretive letters addressed to third parties in other transactions. However, none of the Company, CHL and the Trust has sought its own interpretive letter and there can be no assurance that the staff of the Division of Corporation Finance of the Commission would make a similar determination with respect to the Exchange Offer as it has in such interpretive letters to third parties. Based on these interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Company, CHL and the Trust believe that New Capital Securities issued pursuant to the Exchange Offer in exchange for Old Capital Securities may be offered for resale, resold and otherwise transferred by a holder thereof (other than a holder who is a broker-dealer or who is an "affiliate" of the Company, CHL or the Trust within the meaning of Rule 405 of the Securities Act) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that (i) such New Capital Securities are acquired in the ordinary course of such holder's business and (ii) such holder is not participating, does not intend to participate and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of such New Capital Securities. However, any holder of Old Capital Securities who is an "affiliate" of the Company, CHL or the Trust or who intends to participate in the Exchange Offer for the purpose of distributing New Capital Securities, or, as to any unsold allotments, any broker-dealer who purchased Old Capital Securities from the Trust to resell pursuant to Rule 144A or any other available exemption under the Securities Act, (a) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the Commission set forth in the above-mentioned interpretive letters, (b) will not be permitted or entitled to tender such Old Capital Securities in the Exchange Offer and (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of such Old Capital Securities, with such resale covered by an effective registration statement containing the selling security holder information required by Item 507 of Regulation S-K under the Securities Act, unless such resale is made pursuant to an exemption from such requirements. In addition, as described below, if any broker- dealer holds Old Capital Securities acquired for its own account as a result of market- making or other trading activities and exchanges such Old Capital Securities for New Capital Securities, then such broker-dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such New Capital Securities. Each holder of Old Capital Securities who wishes to exchange Old Capital Securities for New Capital Securities in the Exchange Offer will be required to represent that (i) it is not an "affiliate" of the Company, CHL or the Trust, (ii) any New Capital Securities to be received by it are being acquired in the ordinary course of its business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Capital Securities and (iv) if such holder is not a broker-dealer, or is a broker- dealer but will not receive New Capital Securities for its own account in exchange for Old Capital Securities, such holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Capital Securities. In addition, the Company, CHL and the Trust may require such holder, as a condition to such holder's eligibility to participate in the Exchange Offer, to furnish to the Company, CHL and the Trust (or an agent thereof) in writing information as to the number of "beneficial owners" (within the meaning of Rule 13d-3 under the Exchange Act on behalf of whom such holder holds the Old Capital Securities to be exchanged in the Exchange Offer. Each broker-dealer that receives New Capital Securities for its own account pursuant to the Exchange Offer must acknowledge that it acquired the Old Capital Securities for its own account as a result of market-making activities or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Capital Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Based on the position taken by the staff of the Division of Corporation Finance of the Commission in the interpretive letters referred to above, the Company, CHL and the Trust believe that broker-dealers who acquired Old Capital Securities for their own accounts, as a result of market-making or other trading activities (i.e., Participating Broker- Dealers) may fulfill their prospectus delivery requirements with respect to the New Capital Securities received upon exchange of such Old Capital Securities (other than Old Capital Securities which represent an unsold allotment from the original sale of the Old Capital Securities) with a prospectus meeting the requirements of the Securities Act, which may be the prospectus prepared for an exchange offer so long as it contains a description of the plan of distribution with respect to the resale of such New Capital Securities. Accordingly, this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer during the period referred to below in connection with resales of New Capital Securities received in exchange for Old Capital Securities where such Old Capital Securities were acquired by such Participating Broker-Dealer for its own account as a result of market-making or other trading activities. Subject to certain provisions set forth in the Registration Rights Agreement, the Company, CHL and the Trust have agreed that this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker- Dealer in connection with resales of such New Capital Securities for a period ending 90 days after the Registration Statement of which this Prospectus constitutes a part is declared effective. However, a Participating Broker-Dealer who intends to use this Prospectus in connection with the resale of New Capital Securities received in exchange for Old Capital Securities pursuant to the Exchange Offer must notify the Company, CHL and the Trust, or cause the Company, CHL and the Trust to be notified, on or prior to the Expiration Date, that it is a Participating Broker-Dealer. Such notice may be given in the space provided for that purpose in the Letter of Transmittal or may be delivered to the Exchange Agent at one of the addresses set forth herein under "The Exchange Offer - Exchange Agent." Any Participating Broker- Dealer who is an "affiliate" of the Company, CHL or the Trust may not rely on such interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. In that regard, each Participating Broker- Dealer who surrenders Old Capital Securities pursuant to the Exchange Offer will be deemed to have agreed, by execution of the Letter of Transmittal, that, upon receipt of notice from the Company, CHL or the Trust of the occurrence of any event or the discovery of any fact which makes any statement contained in this Prospectus untrue in any material respect or which causes this Prospectus to omit to state a material fact necessary in order to make the statements contained herein, in light of the circumstances under which they were made, not misleading or of the occurrence of certain other events specified in the Registration Rights Agreement, such Participating Broker-Dealer will suspend the sale of New Capital Securities pursuant to this Prospectus until the Company, CHL and the Trust have amended or supplemented this Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to such Participating Broker-Dealer or the Company, CHL or the Trust have given notice that the sale of the New Capital Securities may be resumed, as the case may be. See "The Exchange Offer - Resales of New Capital Securities." Expiration Date: The Exchange Offer will expire at 5:00 p.m., New York City time, on ________, 1997, unless extended, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. Any extension, if made, will be publicly announced through a release to the Dow Jones News Service and as otherwise required by applicable law or regulations. See "The Exchange Offer - Expiration Date; Extensions; Amendments." Conditions to the The Exchange Offer is not conditioned upon Exchange Offer: any minimum liquidation amount of Old Capital Securities being tendered for exchange. However, the Exchange Offer is subject to certain conditions, which may be waived by the Trust, and to the terms and provisions of the Registration Rights Agreement. See "The Exchange Offer - Conditions of the Exchange Offer." The Company, CHL and the Trust reserve the right, in their sole discretion, subject to applicable law, (i) to delay accepting any Old Capital Securities, (ii) to terminate the Exchange Offer if any conditions set forth under "The Exchange Offer - Conditions of the Exchange Offer" shall not have been satisfied, (iii) to extend the Expiration Date of the Exchange Offer and retain all Old Capital Securities tendered pursuant to the Exchange Offer, subject, however, to the right of holders of Old Capital Securities to withdraw their tendered Old Capital Securities and (iv) to waive any condition or otherwise amend the terms of the Exchange Offer in any manner. See "The Exchange Offer - Expiration Date; Extensions; Amendments." Procedures for Each holder of Old Capital Securities wishing Tendering Old to tender their Old Capital Securities Capital pursuant to the Exchange Offer must complete, Securities: sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or a facsimile thereof, together with any other required documentation, and either with the Old Capital Securities to be tendered or in compliance with the specified procedures for guaranteed delivery of Old Capital Securities, to The Bank of New York, as exchange agent (the "Exchange Agent"), at the address set forth herein and therein or effect a tender of such Old Capital Securities pursuant to the procedures for book-entry transfers as provided herein and in the Letter of Transmittal. See "The Exchange Offer - Procedures for Tendering Old Capital Securities." Letters of Transmittal and certificates representing Old Capital Securities should not be sent to the Company, CHL or the Trust. Such documents should only be sent to the Exchange Agent. Questions regarding how to tender and requests for information should be directed to the Exchange Agent. See "The Exchange Offer - Exchange Agent." Special Procedures Any beneficial owner whose Old Capital for Beneficial Securities are registered in the name of a Owners: broker, dealer, commercial bank, trust company or other nominee and who wishes to tender such Old Capital Securities in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering such owner's Old Capital Securities, either make appropriate arrangements to register ownership of the Old Capital Securities in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the Expiration Date. See "The Exchange Offer - Procedures for Tendering Old Capital Securities." Guaranteed Holders of Old Capital Securities who wish to Delivery tender their Old Capital Securities and whose Procedures: Old Capital Securities are not immediately available or who cannot deliver their Old Capital Securities, the Letter of Transmittal or any other documents required by such Letter of Transmittal to the Exchange Agent prior to the Expiration Date or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Old Capital Securities according to the guaranteed delivery procedures set forth in "The Exchange Offer - Procedures for Tendering Old Capital Securities - Guaranteed Delivery." Untendered Old Holders of Old Capital Securities that are Capital eligible to participate in the Exchange Offer Securities: whose Old Capital Securities are not tendered and accepted in the Exchange Offer will continue to hold such Old Capital Securities and will be entitled to all the rights and preferences, and, except as described herein, will be subject to the limitations applicable thereto, under the Declaration. Following consummation of the Exchange Offer, such holders of Old Capital Securities will continue to be subject to any existing restrictions upon transfer thereof, and none of the Company, CHL and the Trust will have any further obligation to such holders (other than under certain limited circumstances) to provide for the registration under the Securities Act of the Old Capital Securities held by them and the Distribution Rate on the New Capital Securities will not be subject to increase as the Distribution Rate on the Old Capital Securities. To the extent that Old Capital Securities are tendered and accepted in the Exchange Offer, the liquidation amount outstanding of Old Capital Securities will be reduced by the liquidation amount so exchanged. Accordingly, a holder's ability to sell untendered Old Capital Securities could be adversely affected. Consequences of Except for Old Capital Securities that become Failure unrestricted securities as a result of to Exchange: transfers in accordance with Regulation S under the Securities Act, any Old Capital Securities that are not exchanged pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Old Capital Securities (if the holders thereof are not entitled to the benefit of the shelf registration statement described below) may be resold only (i) to CHL, (ii) pursuant to Rule 144A or Rule 144 under the Securities Act or pursuant to some other exemption from registration under the Securities Act, (iii) outside the United States pursuant to the requirements of Regulation S under the Securities Act or (iv) pursuant to an effective registration statement under the Securities Act. See "The Exchange Offer - Consequences of Failure to Exchange" and "- Shelf Registration Statement" and "Risk Factors - Consequences of a Failure to Exchange Old Capital Securities." The New Capital Securities and any Old Capital Securities which remain outstanding after consummation of the Exchange Offer will constitute a single class of Capital Securities under the Declaration and, accordingly, will vote together as a single class for purposes of determining whether holders of the requisite percentage in outstanding liquidation amount thereof have taken certain actions or exercised certain rights under the Declaration. See "Description of Capital Securities - General" and " - Voting Rights; Amendment of the Declaration." Shelf Registration If (i) the Company, CHL and the Trust are not Statement: required to file an Exchange Offer Registration Statement or permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy, (ii) CHL has received an opinion of counsel rendered by a law firm having a recognized national tax practice, to the effect that, as a result of the consummation of the Exchange Offer, there is more than an insubstantial risk that (x) the Trust would be subject to United States federal income tax with respect to income received or accrued on the Debentures, (y) interest payable by CHL on such Debentures would not be deductible by CHL, in whole or in part, for United States federal income tax purposes or (z) the Trust would be subject to more than a de minimis amount of other taxes, duties or other governmental charges or (iii) any holder of Old Capital Securities provides CHL with an opinion of counsel on or before the twentieth Business Day (as defined herein) following the consummation of the Exchange Offer to the effect that (A) such holder is prohibited by law or Commission policy from participating in the Exchange Offer, (B) such holder may not resell the New Capital Securities it acquired in the Exchange Offer to the public without delivering a prospectus and this Prospectus is not appropriate or available for such resales or (C) such holder is a broker-dealer and owns Old Capital Securities acquired directly from the Trust or an affiliate of the Trust, then the Company, CHL and the Trust will use their reasonable best efforts to file a shelf registration statement with respect to the resale of Old Capital Securities (the "Shelf Registration Statement") with the Commission on or prior to 150 days after such filing obligation arises and to cause the Shelf Registration Statement to be declared effective by the Commission on or prior to 180 days after such obligation arises and to keep the Shelf Registration Statement effective for two years from the date of the original issuance of the Old Capital Securities; provided, however, that if the Company or CHL is engaged in a material acquisition or disposition and in certain other circumstances, the Company, CHL and the Trust may suspend offers and sales under the Shelf Registration Statement, subject to certain conditions, for up to 30 days in each year during which the Shelf Registration Statement is required to be effective. See "The Exchange Offer - Shelf Registration Statement." Acceptance of Old Subject to certain conditions (as described Capital Securities more fully in the "The Exchange Offer - and Delivery of Conditions of the Exchange Offer"), the Trust New Capital will accept for exchange any and all Old Securities: Capital Securities which are properly tendered in the Exchange Offer and not withdrawn, prior to 5:00 p.m., New York City time, on the Expiration Date. The New Capital Securities issued pursuant to the Exchange Offer will be delivered as promptly as practicable following the Expiration Date. Withdrawal Rights: Except as otherwise provided herein, tenders of Old Capital Securities may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange Offer - Withdrawal Rights." Tax For a discussion of certain U.S. federal tax Considerations: considerations relating to the exchange of the New Capital Securities for the Old Capital Securities and the purchase, ownership and disposition of New Capital Securities, see "Certain United States Federal Income Tax Consequences." Exchange Agent: The Bank of New York is the Exchange Agent. The addresses, telephone numbers and facsimile numbers of the Exchange Agent are set forth in "The Exchange Offer - Exchange Agent" and in the Letter of Transmittal. Summary of Terms of the New Capital Securities General: The form and terms of the New Capital Securities will be identical in all material respects to the form and terms of the Old Capital Securities (which they replace) except that (i) the New Capital Securities will have been registered under the Securities Act and therefore will not contain terms with respect to transfer restrictions, (ii) the Distribution Rate on the New Capital Securities will not be subject to increase in certain circumstances relating to the timing of the Exchange Offer and (iii) the holders of New Capital Securities will not be entitled to certain rights under the Registration Rights Agreement, which rights will terminate when the Exchange Offer is consummated. The New Capital Securities will evidence the same undivided beneficial ownership interests in the assets of the Trust as the Old Capital Securities and, except as described herein, will be entitled to the benefits of the Declaration. See "Description of Capital Securities." Distributions: Holders of New Capital Securities will be entitled to receive Distributions at a rate per annum equal to 8.05% of the stated liquidation amount of $1,000 per New Capital Security (the "Distribution Rate"), accruing from the most recent date on which Distributions were made on the Old Capital Securities or, if no Distributions have been made on the Old Capital Securities, from June 4, 1997, and payable semi-annually in arrears on June 15 and December 15 of each year, commencing December 15, 1997, and at maturity. The Distribution Rate, distribution payment dates and other payment dates for the New Capital Securities will correspond to the interest rate, interest payment dates and other payment dates on the New Debentures. See "Description of Capital Securities - Distributions." New Debentures: $206,200,000 aggregate principal amount of New Debentures, to be exchanged for the Old Debentures. The Company will fully and unconditionally guarantee payment of principal of, premium, if any, and interest on the New Debentures as hereinafter described. The New Debentures will mature on June 15, 2027, or earlier in certain circumstances, following the occurrence of a Tax Event (the "Stated Maturity"). The New Debentures and the New Debt Guarantee will rank subordinate and junior in right of payment to all existing and future Senior Indebtedness of CHL and the Company, respectively, and will rank pari passu with the 1996 Debentures and the related guarantee by the Company, respectively. At all times, CHL's obligations under the New Debentures and the Company's obligations under the New Debt Guarantee will be structurally subordinated to all existing and future liabilities and obligations of CHL's and the Company's subsidiaries, respectively. See "Risk Factors - Ranking of Obligations Under the Guarantees and the New Debentures" and "Description of New Debentures and New Debt Guarantee - Ranking." Guarantees: Payment of Distributions out of moneys held by the Trust, and payments on liquidation of the Trust or the redemption of Capital Securities, are guaranteed by the Company to the extent the Trust has funds available therefor, which funds will not be available except to the extent CHL has made payments of interest or principal or other payments on the New Debentures or the Company has made such payments pursuant to the New Debt Guarantee. If CHL does not make payments on the New Debentures, and the Company does not make such payments, to the extent required, under the New Debt Guarantee, the Trust will not have sufficient funds to make payments on the Capital Securities, in which event the Trust Guarantee will not apply to such payments until the Trust has sufficient funds available therefor. The Company's obligations under the Guarantees, the Indenture and the Declaration, taken together with CHL's obligations under the New Debentures and the Indenture, including CHL's obligation to pay all costs, expenses and liabilities of the Trust (other than with respect to the Trust Securities), constitute a full and unconditional guarantee by the Company of all of the Trust's obligations under the Capital Securities. See "Description of Trust Guarantee" and "Relationship Among the Capital Securities, the New Debentures and the Guarantees." The obligations of the Company under the New Guarantees will be subordinate and junior in right of payment to all existing and future Senior Indebtedness of the Company. See "Risk Factors - Ranking of Obligations Under the Guarantees and the New Debentures," "Description of Trust Guarantee" and "Description of New Debentures and New Debt Guarantee - Ranking." Right to Defer CHL has the right to defer payment of Interest: interest on the New Debentures by extending the interest payment period on the New Debentures, from time to time, for up to 10 consecutive semi-annual periods. There could be multiple Extension Periods of varying lengths throughout the term of the New Debentures. If interest payments on the New Debentures are so deferred, Distributions on the Capital Securities will also be deferred for an equivalent period and (a) the Company and CHL shall not declare or pay dividends on, or make a distribution with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of shares of any such capital stock or rights to acquire such capital stock in connection with the satisfaction by the Company or CHL, respectively, of its obligations under any employee benefit plans, (ii) as a result of a reclassification of the Company's or CHL's capital stock or rights to acquire such capital stock or the exchange or conversion of one class or series of the Company's or CHL's capital stock or rights to acquire such capital stock for another class or series of the Company's or CHL's capital stock or rights to acquire such capital stock, (iii) the purchase of fractional interests in shares of the Company's or CHL's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged or (iv) dividends and distributions made on the Company's or CHL's capital stock or rights to acquire such capital stock with the Company's or CHL's capital stock or rights to acquire such capital stock) or make any guarantee payments with respect to any of the foregoing and (b) the Company and CHL shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including any guarantees, other than the Guarantees) issued by the Company or CHL that rank pari passu with or junior to the New Debentures. During an Extension Period, interest on the New Debentures will continue to accrue (and the amount of Distributions to which holders of the Capital Securities are entitled will accumulate) at the Distribution Rate, compounded semi-annually. During an Extension Period, holders of the New Capital Securities will be required to include the stated interest on their pro rata share of New Debentures in their income as OID, subject to United States federal income tax, even though the cash payments attributable thereto have not been made. See "Description of New Debentures and New Debt Guarantee - Option to Extend Interest Payment Period" and "Certain United States Federal Income Tax Consequences - Interest Income and Original Issue Discount." Redemption: The Trust Securities will be mandatorily redeemed upon repayment of the New Debentures held by the Trust at maturity or their earlier redemption. The New Debentures are not redeemable at the option of CHL, other than in certain circumstances following the occurrence of a Special Event, as described under "- Special Event" below. Special Event: Upon the occurrence and continuation of a Special Event, CHL will have the right, if certain conditions are met, (i) in the case of a Tax Event, to shorten the Stated Maturity of the New Debentures to a date not earlier than December 15, 2011 or (ii) to redeem the New Debentures in whole (but not in part) within 90 days following the occurrence of such Special Event (at a redemption price equal to 100% of the principal amount of such New Debentures, plus accrued and unpaid interest to the date of redemption) and thereby cause a mandatory redemption of the Capital Securities. See "Description of Capital Securities - Redemption - Special Event Redemption or Distribution of New Debentures; Shortening of Stated Maturity." Liquidation of the The Company has the right at any time to Trust: dissolve the Trust, and cause the New Debentures and the New Debt Guarantee to be distributed to the holders of the Capital Securities in exchange therefor upon liquidation of the Trust. In the event of the liquidation of the Trust, after satisfaction of the claims of creditors of the Trust, if any, as provided by applicable law, the holders of the Capital Securities will be entitled to receive a liquidation amount of $1,000 per Capital Security, plus accumulated and unpaid Distributions thereon to the date of payment, unless in connection with such liquidation, New Debentures are distributed to the holders of the Capital Securities. If such liquidation amount can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate liquidation amount, then the amounts payable directly by the Trust on the Capital Securities shall be paid on a pro rata basis. The holders of the Common Securities will be entitled to receive distributions upon any such liquidation pro rata with the holders of the Capital Securities, except that if an Indenture Event of Default has occurred and is continuing, the Capital Securities shall have a priority over the Common Securities. See "Description of Capital Securities - Liquidation Distribution Upon Dissolution." Ratings: The New Capital Securities are expected to be rated "A" by Standard & Poor's Ratings Group, "a3" by Moody's Investors Service, Inc. and "A" by Fitch Investors Service, Inc., which ratings were the ratings assigned by such rating agencies to the Old Capital Securities. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization. Use of Proceeds: None of the Company, CHL or the Trust will receive any proceeds from the issuance of the New Capital Securities pursuant to this Prospectus. See "Use of Proceeds." Absence of a The New Capital Securities will be a new Public Market for issue of securities for which there currently the New Capital is no established trading market. The Trust Securities: has been advised by the Initial Purchasers that following completion of the Exchange Offer, they currently intend to make a market in the New Capital Securities; however, they are not obligated to do so and any market- making activities with respect to the New Capital Securities may be discontinued at any time. There can be no assurance that an active trading market for the New Capital Securities will develop. The Trust and the Company do not currently intend to apply for listing of the New Capital Securities on the NYSE. See "Risk Factors - Absence of Public Market for the New Capital Securities." Risk Factors For a discussion of certain matters that should be considered in evaluating an investment in the New Capital Securities, see "Risk Factors." ERISA Considerations Prospective investors must carefully consider the restrictions on purchase set forth under "ERISA Considerations." Summary Historical Financial Information The summary consolidated financial data with respect to the Company set forth below for each of the five fiscal years in the period ended February 28, 1997 have been derived from, and should be read in conjunction with, the Company's related audited financial statements and accompanying notes incorporated by reference herein. The consolidated financial information presented below as of and for the three-month periods ended May 31, 1997 and May 31, 1996 is unaudited; however, in the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation have been included. The results of operations for the three-month period ended May 31, 1997 are not necessarily indicative of the results of operations that may be expected for the full year. See "Incorporation of Certain Information by Reference."
Three Months Ended May 31, Years Ended February 28 (29) 1997 1996 1997 1996 1995 1994 1993 ------ ------ ------ ------ ------ ------ ------ (in thousands, except Operating Data) SELECTED STATEMENT OF EARNINGS DATA: Revenues: Loan origination fees $53,499 $55,949 $193,079 $199,724 $203,426 $379,533 $241,584 Gain (loss) on sale of loans 90,235 47,080 247,450 92,341 (41,342) 88,212 67,537 --------- --------- ---------- ---------- ---------- ---------- ---------- Loan production revenue 143,734 103,029 440,529 292,065 162,084 467,745 309,121 Interest earned 82,180 88,848 350,263 308,449 249,560 300,999 179,785 Interest charges (81,834) (77,066) (316,705) (281,573) (205,464) (219,898) (128,612) --------- --------- ---------- ---------- ---------- ---------- ---------- Net interest income 346 11,782 33,558 26,876 44,096 81,101 51,173 Loan servicing income 214,315 179,274 773,715 620,835 460,351 326,695 188,895 Amortization and impairment/recovery of mortgage servicing rights (25,956) 48,285 (101,380) (342,811) (95,768) (242,177) (151,362) Servicing hedge benefit (expense) (44,743) (100,426) (125,306) 200,135 (40,030) 73,400 74,075 Less write-off of servicing hedge - - - - (25,600) - - --------- --------- ---------- ---------- ---------- ---------- ---------- Net loan administration income 143,616 127,133 547,029 478,159 298,953 157,918 111,608 Commissions, fees and other income 30,949 21,338 91,346 63,642 40,650 48,816 33,656 Gain on sale of servicing - - - - 56,880 - - --------- --------- ---------- ---------- ---------- ---------- ---------- Total revenues 318,645 263,282 1,112,462 860,742 602,663 755,580 505,558 --------- --------- ---------- ---------- ---------- ---------- ---------- Expenses: Salaries and related expenses 88,041 68,998 286,884 229,668 199,061 227,702 140,063 Occupancy and other office expenses 38,066 29,898 129,877 106,298 102,193 101,691 64,762 Guarantee fees 42,576 37,501 159,360 121,197 85,831 57,576 29,410 Marketing expenses 10,320 8,824 34,255 27,115 23,217 26,030 12,974 Other operating expenses 24,939 18,677 80,188 50,264 37,016 43,481 24,894 Branch and administrative office consolidation costs - - - - 8,000 - - --------- --------- ---------- ---------- ---------- ---------- ---------- Total expenses 203,942 163,898 690,564 534,542 455,318 456,480 272,103 --------- --------- ---------- ---------- ---------- ---------- ---------- Earnings before income taxes 114,703 99,384 421,898 326,200 147,345 299,100 233,455 Provision for income taxes 44,734 38,760 164,540 130,480 58,938 119,640 93,382 --------- --------- ---------- ---------- ---------- ---------- ---------- Net earnings $69,969 60,624 257,358 195,720 88,407 179,460 140,073 ========= ========= ========== ========== ========== ========== ========== SELECTED BALANCE SHEET DATA AT END OF PERIOD: Mortgage loans and mortgage- backed securities shipped and held for sale $4,580,769 $4,816,886 $2,579,972 $4,740,087 $2,898,825 $3,714,261 $2,316,297 Total assets 10,303,957 9,241,207 8,089,292 8,657,653 5,710,182 5,631,061 3,369,499 Short-term debt 4,240,271 4,873,088 2,567,420 4,423,738 2,664,006 3,111,945 1,579,68 Long-term debt 2,785,661 1,867,500 2,367,661 1,911,800 1,499,306 1,197,096 734,762 Convertible preferred stock - - - - - - 25,800 Common shareholders' equity 1,682,969 1,376,428 1,611,531 1,319,755 942,558 880,137 693,105 OPERATING DATA (DOLLAR AMOUNTS IN MILLIONS): Loan servicing portfolio (at period end)(1) $163,466 $143,438 $158,585 $136,835 $113,111 $84,678 $54,484 Volume of loans originated 9,360 11,002 37,811 34,584 27,866 52,459 32,388 Ratio of earnings to fixed charges(2) 2.37 2.26 2.30 2.13 1.69 2.32 2.76 - ---------- (1) Includes warehoused loans and loans under subservicing agreements. (2) For purposes of calculating the ratio of earnings to fixed charges, earnings consist of income before federal income taxes, plus fixed charges. Fixed charges include interest expense on debt and the portion of rental expenses which is considered to be representative of the interest factor (one-third of operating leases).
RISK FACTORS Before investing in the New Capital Securities, prospective investors should carefully review the information contained elsewhere in this Prospectus and should particularly consider the following matters. Enforcement of Certain Rights by Holders of Capital Securities If a Trust Enforcement Event (as defined herein) occurs and is continuing, then the holders of the Capital Securities would rely on, and in certain circumstances could cause, the enforcement by the Property Trustee (as defined herein) of its rights as a holder of the New Debentures and the New Debt Guarantee on behalf of the Trust against CHL and the Company, respectively. In addition, the holders of a majority in liquidation amount of the Capital Securities will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee or to direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration, including the right to direct the Property Trustee to exercise the remedies available to it as a holder of the New Debentures and the New Debt Guarantee. If the Property Trustee fails to enforce its rights with respect to the New Debentures or the New Debt Guarantee held by the Trust after a majority in liquidation amount of the Capital Securities have so directed the Property Trustee, any registered holder of Capital Securities may institute a legal proceeding directly against CHL to enforce the Property Trustee's rights under such New Debentures or against the Company to enforce the Property Trustee's rights under the New Debt Guarantee without first instituting any legal proceeding against the Property Trustee or any other person or entity. If CHL were to default on its obligation to pay amounts payable under the New Debentures and the Company does not make such payments, to the extent required, under the New Debt Guarantee, the Trust would lack funds for the payment of Distributions or amounts payable on redemption of the Capital Securities or otherwise, and, in such event, holders of the Capital Securities would not be able to rely upon the Trust Guarantee for payment of such amounts. However, in the event CHL failed to pay interest on, premium, if any, or principal of the New Debentures on the payment dates on which such payments are due and payable (including on any redemption date) and the Company does not make such payments, to the extent required, under the New Debt Guarantee, then a registered holder of Capital Securities may directly institute a proceeding against CHL or the Company, as the case may be, on or after such respective due dates specified in the New Debentures for enforcement of payment to such holder of the interest on, premium, if any, or principal of such New Debentures having an aggregate principal amount equal to the aggregate liquidation amount of the Capital Securities of such holder (a "Direct Action"). In connection with such Direct Action, the Company will be subrogated to the rights of such holder of Capital Securities under the Declaration to the extent of any payment made by the Company, pursuant to the New Debt Guarantee, to such holder of Capital Securities in such Direct Action. Except as described herein, holders of Capital Securities will not be able to exercise directly any other remedy available to the holders of New Debentures or assert directly any other rights in respect of the New Debentures or the New Debt Guarantee. See "Description of Capital Securities - Trust Enforcement Events," "Description of Trust Guarantee" and "Description of New Debentures and New Debt Guarantee - Indenture Events of Default." In the case of the issuance of one or more New Capital Securities in registered global form (the "Global Securities"), the record owner will be The Depository Trust Company ("DTC") or its nominee for credit to the account of Participants (as defined herein) in DTC. Persons who are not direct or indirect Participants may beneficially own such Global Securities only through such direct or indirect Participants. See "Book-Entry Issuance." The Declaration provides that each holder of Capital Securities by acceptance thereof agrees to the provisions of the Guarantees and the Indenture. Ranking of Obligations under the Guarantees and the New Debentures The obligations of CHL under the New Debentures and the Indenture and the obligations of the Company under the Guarantees and the Indenture will be unsecured and rank subordinate and junior in right of payment to all existing and future Senior Indebtedness of the Company and CHL, respectively, but will at all times be senior to common and preferred equity of the Company and CHL, respectively. In addition, at all times such obligations will be structurally subordinated to all existing and future liabilities and obligations of the Company's and CHL's subsidiaries, respectively. At May 31, 1997, after giving pro forma effect to the Offerings, CHL would have had approximately $6.5 billion aggregate principal amount of Senior Indebtedness outstanding and the Company would have had no indebtedness outstanding (excluding indebtedness of subsidiaries guaranteed by the Company). In addition, at such date, subsidiaries of the Company (other than CHL) had outstanding indebtedness of approximately $43 million. The terms of the Capital Securities, the New Debentures and the Guarantees place no limitation on the amount of Senior Indebtedness that may be incurred by the Company or CHL or on the amount of liabilities and obligations of the Company's or CHL's subsidiaries. See "Description of Trust Guarantee - Status of the Trust Guarantee" and "Description of New Debentures and New Debt Guarantee - Ranking." Trust Guarantee Covers Distribution and Other Payments Only to the Extent the Trust Has Available Funds; Related Remedies The following payments or distributions with respect to the Capital Securities, to the extent not paid by or on behalf of the Trust (the "Trust Guarantee Payments"), will be subject to the Trust Guarantee: (i) any accumulated and unpaid Distributions required to be paid on the Capital Securities, to the extent that the Trust has sufficient funds available therefor at such time, (ii) the Redemption Price (as defined herein) with respect to any Capital Securities called for redemption, to the extent that the Trust has sufficient funds available therefor at such time, or (iii) upon a voluntary or involuntary dissolution, winding up or liquidation of the Trust (unless the New Debentures are distributed to holders of the Capital Securities), the lesser of (a) the aggregate liquidation amount of the Capital Securities and all accrued and unpaid Distributions thereon to the date of payment, to the extent that the Trust has sufficient funds available therefor at such time, and (b) the amount of assets of the Trust remaining available for distribution to holders of Capital Securities. The Company's obligation to make a Trust Guarantee Payment may be satisfied by direct payment of the required amounts by the Company to the holders of the Capital Securities or by causing the Trust to pay such amounts to such holders. The Trust Guarantee will apply only to the extent that the Trust has sufficient funds available to make such payments. If CHL does not make payments on the New Debentures held by the Trust and the Company does not make such payments, to the extent required, under the New Debt Guarantee, the Trust will not be able to make payments on the Capital Securities and will not have funds legally available therefor. The Trust Guarantee does not limit the incurrence or issuance of other secured or unsecured debt of the Company, whether under any existing indenture or under any other indenture that the Company may enter into in the future or otherwise. An event of default under the Trust Guarantee will occur upon the failure of the Company to perform any of its payment or other obligations thereunder. The holders of not less than a majority in aggregate liquidation amount of the Capital Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trust Securities Guarantee Trustee (as defined herein) in respect of the Trust Guarantee or to direct the exercise of any trust or power conferred upon the Trust Securities Guarantee Trustee under the Trust Guarantee. If the Trust Securities Guarantee Trustee fails to enforce the Trust Guarantee, then any holder of the Capital Securities may institute a legal proceeding directly against the Company to enforce the Trust Securities Guarantee Trustee's rights under the Trust Guarantee without first instituting a legal proceeding against the Trust, the Trust Securities Guarantee Trustee or any other person or entity. See "Description of Trust Guarantee." Option to Extend Interest Payment Period; Tax Consequences CHL has the right under the Indenture to defer the payment of interest on the New Debentures at any time or from time to time for a period not exceeding 10 consecutive semi-annual periods, provided that no Extension Period may extend beyond the Stated Maturity of the New Debentures. As a consequence of any such deferral, semi-annual Distributions on the Capital Securities by the Trust will be deferred during such Extension Period but will continue to accumulate at 8.05% per annum, compounded semi-annually during any such Extension Period. Prior to the termination of any such Extension Period, CHL may further extend the Extension Period, provided that no Extension Period may exceed 10 consecutive semi-annual periods or extend beyond the Stated Maturity of the New Debentures. Upon the termination of any Extension Period and the payment of all amounts then due on any Interest Payment Date, CHL may elect to begin a new Extension Period subject to the above requirements. See "Description of Capital Securities - Distributions," "Description of New Debentures and New Debt Guarantee - Option to Extend Interest Payment Period" and "- Certain Covenants of CHL and the Company." During any Extension Period, a holder of Capital Securities will be required to accrue income (in the form of OID) for United States federal income tax purposes in respect of its pro rata share of the New Debentures held by the Trust. As a result, holders of Capital Securities will include such income in their income subject to United States federal income tax, in advance of the receipt of cash attributable to such income, and will not receive the cash related to such income from the Trust if the holder disposes of the Capital Securities prior to the record date for the payment of Distributions with respect to such Extension Period. See "Certain United States Federal Income Tax Consequences - Interest Income and Original Issue Discount" and "- Sales of New Capital Securities." CHL has no current intention of exercising its right to defer payments of interest by extending any interest payment period on the New Debentures. However, should CHL elect to exercise such right in the future, the market price of the Capital Securities is likely to be adversely affected. A holder that disposes of its Capital Securities during an Extension Period, therefore, might not receive the same return on its investment as a holder that continues to hold its Capital Securities. In addition, as a result of the existence of CHL's right to defer interest payments, the market price of the Capital Securities (which represent undivided beneficial ownership interests in the New Debentures and the New Debt Guarantee) may be more volatile than the market prices of other similar securities where the issuer does not have such right to defer interest payments. Liquidation Distribution of New Debentures At any time, the Company will have the right to dissolve the Trust and, after the satisfaction of liabilities to creditors of the Trust (if any), cause the New Debentures, together with the New Debt Guarantee, to be distributed to the holders of the Trust Securities in liquidation of the Trust. In addition, upon certain other events, the Trust may be liquidated and the New Debentures and the New Debt Guarantee may be distributed to such holders. Under current United States federal income tax law and interpretations thereof and assuming, as expected, the Trust is treated as a grantor trust for United States federal income tax purposes, a distribution by the Trust of the New Debentures and the New Debt Guarantee pursuant to a liquidation of the Trust will not be a taxable event to the Trust or to holders of the Capital Securities and will result in a holder of the Capital Securities receiving directly such holder's pro rata share of the New Debentures and the New Debt Guarantee (previously held indirectly through the Trust). If, however, the liquidation of the Trust were to occur because the Trust is subject to United States federal income tax with respect to income accrued or received on the New Debentures as a result of the occurrence of a Tax Event or otherwise, the distribution of New Debentures and the New Debt Guarantee to holders of the Capital Securities by the Trust could be a taxable event to the Trust and each holder, and holders of the Capital Securities may be required to recognize gain or loss as if they had exchanged their Capital Securities for the New Debentures and the New Debt Guarantee they received upon the liquidation of the Trust. See "Certain United States Federal Income Tax Consequences - Distribution of New Debentures or Cash Upon Liquidation of the Trust." There can be no assurance as to the market prices for the Capital Securities or the New Debentures and the New Debt Guarantee that may be distributed in exchange for the Capital Securities if a dissolution or liquidation of the Trust occurs. Accordingly, the Capital Securities that an investor may receive or purchase, whether pursuant to the Exchange Offer or in the secondary market, or the New Debentures and the New Debt Guarantee that a holder of Capital Securities may receive on dissolution or liquidation of the Trust, may trade at a discount to the price that the investor paid to purchase the Capital Securities. Because the ability of the Trust to pay amounts due on the Capital Securities is wholly dependent upon CHL's making payments on the New Debentures as and when required, or the Company's making payments on the New Debt Guarantee as and when required, and because holders of the Capital Securities may receive the New Debentures and the New Debt Guarantee upon a dissolution of the Trust, prospective purchasers of the Capital Securities are also making an investment decision with regard to the New Debentures and New Debt Guarantee and should carefully review all the information regarding the New Debentures, the New Debt Guarantee, CHL and the Company contained or incorporated herein, and evaluate the credit risk of CHL and the Company. See "Description of Capital Securities - Redemption - Special Event Redemption or Distribution of New Debentures; Shortening of Stated Maturity" and "Description of New Debentures and New Debt Guarantee - General." Special Event Redemption; Shortening of Stated Maturity Upon the occurrence and continuation of a Special Event, CHL will have the right, if certain conditions are met, (i) in the case of a Tax Event, to shorten the Stated Maturity of the New Debentures to a date not earlier than December 15, 2011 or (ii) to redeem the New Debentures in whole (but not in part) within 90 days following the occurrence of such Special Event at a redemption price equal to 100% of the aggregate principal amount of such New Debentures, plus accrued and unpaid interest to the date of redemption, and thereby cause a mandatory redemption of the Capital Securities. See "Description of Capital Securities - Redemption - Special Event Redemption or Distribution of New Debentures; Shortening of Stated Maturity." There can be no assurance as to the market prices for the Capital Securities (or the New Debentures that may be distributed in exchange for Capital Securities if a dissolution or liquidation of the Trust were to occur) if the Stated Maturity of the New Debentures is shortened. Accordingly, the Capital Securities that an investor may receive or purchase, whether pursuant to the Exchange Offer or in the secondary market, or the New Debentures and the New Debt Guarantee that a holder of Capital Securities may receive on liquidation of the Trust, may trade at a discount to the price that the investor paid to purchase the Capital Securities. Because the ability of the Trust to pay amounts due on the Capital Securities is wholly dependent upon CHL's making payments on the New Debentures as and when required, or the Company's making payments on the New Debt Guarantee as and when required, and because holders of Capital Securities may receive the New Debentures and the New Debt Guarantee upon a dissolution of the Trust, prospective purchasers of Capital Securities are also making an investment decision with regard to the New Debentures and the New Debt Guarantee and should carefully review all the information regarding the New Debentures, the New Debt Guarantee, CHL and the Company contained or incorporated herein, and evaluate the credit risk of CHL and the Company. See "Description of Capital Securities - Redemption - - Special Event Redemption or Distribution of New Debentures; Shortening of Stated Maturity." Recent Tax Legislation Recently enacted U.S. federal income tax legislation will have no effect on the income tax treatment of the Capital Securities. However, there can be no assurance that future legislation will not adversely affect the ability of CHL to deduct interest on the New Debentures or otherwise affect the tax treatment of the transactions described herein. Moreover, such legislation could give rise to a Tax Event, which would permit CHL to shorten the maturity of the New Debentures or cause a redemption of the Capital Securities, as described more fully under "Description of Capital Securities - Redemption - Special Event Redemption or Distribution of New Debentures; Shortening of Stated Maturity." Declaration May Be Modified to Effect Adverse Changes to Rights, Powers and/or Preferences of Capital Securities Without the Consent of Each Holder of Capital Securities Affected Thereby The Declaration provides that it may be modified and amended if approved by the Regular Trustees (as defined herein) (and in certain circumstances, the Property Trustee and the Delaware Trustee (as defined herein)), provided that, if any proposed amendment would (i) adversely affect the powers, preferences or special rights of the Trust Securities or (ii) result in the dissolution, winding-up or termination of the Trust other than pursuant to the terms of the Declaration, then the holders of the Trust Securities, voting together as a single class, will be entitled to vote on such amendment, and such amendment shall not be effective except with the approval of at least a majority in liquidation amount of the Trust Securities affected thereby; provided that if any amendment referred to in clause (i) above would adversely affect only the Capital Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment and such amendment shall not be effective except with the approval of a majority in liquidation amount of such class of Trust Securities. Notwithstanding any provision of the Declaration, however, Section 316(b) of the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") provides that the right of any holder of Trust Securities to receive payment of Distributions and other payments upon redemption or otherwise on or after their respective due dates, or to institute suit for the enforcement of any such payment on or after such respective due dates, shall not be impaired or affected without the consent of such holder. Accordingly, amendments to the Declaration that may adversely affect the powers, preferences or special rights of the Capital Securities - other than those affecting a holder's rights to receive payments on or after their respective due dates and to institute suit to enforce such payments on or after their respective due dates as described in Section 316(b) of the Trust Indenture Act - may be effected with the consent of only a majority in liquidation amount of Capital Securities rather than with the consent of each holder of Capital Securities affected thereby. Limited Voting Rights Holders of Capital Securities generally will have limited voting rights relating only to the modification of the Capital Securities and certain other matters described herein. Holders of Capital Securities will not be entitled to vote to appoint, remove or replace any of the Trustees (as defined herein), which voting rights are vested exclusively in the holder of the Common Securities. The Trustees and the Company may amend the Declaration without the consent of holders of Capital Securities to ensure that the Trust will be classified as a grantor trust for United States federal income tax purposes, even if such action adversely affects the interests of such holders. See "Description of Capital Securities - Voting Rights; Amendment of the Declaration." Absence of Public Market for the New Capital Securities Although the New Capital Securities will generally be permitted to be resold or otherwise transferred by the holders (who are not affiliates of the Company, CHL or the Trust) without compliance with the registration requirements under the Securities Act, they will constitute a new issue of securities with no established trading market. Accordingly, no assurance can be given that an active public or other market will develop for the New Capital Securities or as to the liquidity of or the trading market for the New Capital Securities. The Trust and the Company do not currently intend to apply for a listing of the New Capital Securities on the NYSE. If an active public market does not develop, the market price and liquidity of the New Capital Securities may be adversely affected. If a public trading market develops for the New Capital Securities, future trading prices of such securities will depend on many factors, including, among other things, prevailing interest rates, results of operations and the market for similar securities. Depending on prevailing interest rates, the market for similar securities and other factors, including the financial condition of the Company, the New Capital Securities may trade at a discount. Notwithstanding the registration of the New Capital Securities, holders who are "affiliates" (as defined under Rule 405 of the Securities Act) of the Company, CHL or the Trust may publicly offer for sale or resell the New Capital Securities only in compliance with the provisions of Rule 144 under the Securities Act. Each broker-dealer that receives New Capital Securities for its own account in exchange for Old Capital Securities, where such Old Capital Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Capital Securities. See "Plan of Distribution." Consequences of a Failure to Exchange Old Capital Securities The Old Capital Securities have not been registered under the Securities Act or any state securities laws and therefore may not be offered, sold or otherwise transferred except in compliance with the registration requirements of the Securities Act and any other applicable securities laws, or pursuant to an exemption therefrom or in a transaction not subject thereto, and in each case in compliance with certain other conditions and restrictions, including the Trust's and the Property Trustee's right in certain cases to require the delivery of opinions of counsel, certifications and other information prior to any such transfer. After consummation of the Exchange Offer, Old Capital Securities that remain outstanding will continue to bear legends restricting transfers. In addition, upon consummation of the Exchange Offer, holders of Old Capital Securities which remain outstanding (subject to limited exceptions, if applicable) will not be entitled to any rights to have such Old Capital Securities registered under the Securities Act or to any similar rights under the Registration Rights Agreement. The Trust currently does not intend to register under the Securities Act any Old Capital Securities which remain outstanding after consummation of the Exchange Offer (subject to limited exceptions, if applicable). To the extent that Old Capital Securities are tendered and accepted in the Exchange Offer, the liquidation amount of outstanding Old Capital Securities will be reduced by the liquidation amount so tendered and exchanged and a holder's ability to sell untendered Old Capital Securities could be adversely affected. In addition, although the Old Capital Securities have been designated for trading in the Private Offerings, Resale and Trading through Automatic Linkages ("PORTAL") market, to the extent that Old Capital Securities are tendered and accepted in connection with the Exchange Offer, any trading market for Old Capital Securities which remain outstanding after the Exchange Offer could be adversely affected. The Old Capital Securities provide for certain Distribution Rate increases if the Exchange Offer is not consummated by January 14, 1998. Upon consummation of the Exchange Offer, holders of Old Capital Securities will not be entitled to any increase in the Distribution Rate thereon or any further registration rights under the Registration Rights Agreement, except under limited circumstances. See "The Exchange Offer - Purpose and Effect of the Exchange Offer" and "- Shelf Registration Statement." The New Capital Securities and any Old Capital Securities that remain outstanding after consummation of the Exchange Offer will constitute a single class of Capital Securities under the Declaration and, accordingly, will vote together as a single class for purposes of determining whether holders of a requisite percentage in outstanding liquidation amount thereof have taken certain actions or exercised certain rights under the Declaration. See "Description of Capital Securities - General" and "- Voting Rights; Amendment of the Declaration." USE OF PROCEEDS None of the Company, CHL or the Trust will receive any proceeds from the issuance of the New Capital Securities offered hereby. In consideration for issuing the New Capital Securities as contemplated in this Prospectus, the Trust will receive in exchange Old Capital Securities in like liquidation amount, the terms and forms of which are identical in all material respects to the New Capital Securities. RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the historical ratios of earnings to fixed charges for the Company and its subsidiaries. For purposes of calculating the ratio of earnings to fixed charges, earnings consist of income before federal income taxes, plus fixed charges. Fixed charges include interest expense on debt and the portion of rental expenses which is considered to be representative of the interest factor (one-third of operating leases).
Three Months Ended May 31, Year Ended February 28 (29), 1997 1996 1997 1996 1995 1994 1993 ------ ------ ------ ------ ------ ------ ------ Ratio of Earnings to Fixed Charges 2.37 2.26 2.30 2.13 1.69 2.32 2.76
ACCOUNTING TREATMENT The financial statements of the Trust will be consolidated into the Company's consolidated financial statements, with the New Capital Securities shown as "Company-Obligated Mandatorily Redeemable Subordinated Capital Income Securities of Subsidiary Trust Holding Solely a Company-Guaranteed Related Subordinated Debt." The Trust's sole assets will be the New Debentures and the New Debt Guarantee. See "Capitalization." CAPITALIZATION The following table sets forth the consolidated capitalization of the Company at May 31, 1997 on an historical basis and as adjusted to give effect to the Offerings. The table should be read in conjunction with the Company's consolidated financial statements and notes thereto incorporated by reference herein. See "Incorporation of Certain Information by Reference."
May 31, 1997 -------------------------- Actual Adjusted ------------ ----------- (Dollar amounts in thousands) Long-term debt: $2,785,661 $2,785,661 Company-Obligated Mandatorily Redeemable preferred securities of subsidiary trust holding Company- guaranteed related subordinated debt(1)........................... 300,000 300,000 Company-Obligated Mandatorily Redeemable Subordinated Capital Income Securities of subsidiary trust holding a Company- guaranteed related subordinated debt(2)........................... 0 200,000(3) Shareholders' equity: Preferred Stock - authorized 1,500,000 shares of $.05 par value; issued and outstanding, none.............................. 0 0 Common Stock - authorized, 240,000,000 shares of $.05 par value; 106,513,249 issued and outstanding, shares(4)............ 5,326 5,326 Additional paid-in capital......... 937,061 937,061 Unrealized loss on available-for- sale securities.................... (39,718) (39,718) Retained earnings.................. 780,300 780,300 Total shareholders' equity......... 1,682,969 1,682,969 Total Preferred Stock and common shareholders' equity $1,682,969 $1,682,969 - ------------------- (1) Represents the 8% Capital Trust Pass-through Securities of Countrywide Capital I, a Delaware business trust. (2) As described herein, the Trust invested the gross proceeds from the sale of the Common Securities and the Old Capital Securities in the Old Debentures in an aggregate principal amount of approximately $206,200,000 on June 4, 1997. In connection with the Exchange Offer, CHL intends to exchange the New Debentures for such Old Debentures. Upon the redemption of such New Debentures, Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of New Debentures being redeemed will be mandatorily redeemable. None of the Company, CHL or the Trust will receive any proceeds from the issuance of the New Capital Securities or the New Debentures. As described herein, the sole assets of the Trust will be the New Debentures and the New Debt Guarantee. The Company owns all of the Common Securities of the Trust. (3) Reflects the issuance of the Old Capital Securities on June 4, 1997 and the issuance of New Capital Securities in exchange therefor pursuant to the Exchange Offer. See Note (2). (4) Does not include 10,155,261 shares reserved for issuance upon exercise of stock options of which options for 4,159,678 shares were exercisable as of May 31, 1997.
THE COMPANY The Company is a holding company which through its principal subsidiary, CHL, is engaged primarily in the mortgage banking business, and as such originates, purchases, sells and services mortgage loans. The Company's mortgage loans are principally prime credit quality first-lien mortgage loans secured by single- (one-to-four) family residences ("Prime mortgages"). The Company also offers home equity loans both in conjunction with newly produced Prime mortgages and as a separate product. In addition, the Company offers sub-prime credit quality first-lien single- family mortgage loans ("Sub-prime loans"). The Company, through its other wholly-owned subsidiaries, offers products and services complementary to its mortgage banking business. One of these subsidiaries acts as an agent in the sale of insurance, including homeowners, fire, flood, earthquake, auto, annuities, home warranty, life and disability, to CHL's mortgagors and others. The Company also has a subsidiary that acts as a title insurance agent and provides escrow, credit reporting and home appraisal services. The Company also has subsidiaries that reinsure a portion of mortgage insurance losses on loans originated by the Company that are insured by the mortgage insurance companies with which the Company entered into the reinsurance agreement. Another subsidiary of the Company serves as trustee under deeds of trust in connection with foreclosures on loans in the Company's servicing portfolio in California and other states. There is a subsidiary of the Company which also provides tax services to ensure that property taxes are paid current at origination and throughout the life of the loan. On February 28, 1997, the Company acquired a mutual fund manager which provides investment advisory services for 15 affiliated mutual funds and individual investors and management services for unaffiliated funds. The Company also has a registered broker-dealer subsidiary, Countrywide Securities Corporation (which is one of the Initial Purchasers), which trades to other broker-dealers and institutional investors mortgage-backed securities and other mortgage-related assets. Through two subsidiaries, the Company issues mortgage- and asset-backed securities which are backed by Prime mortgage loans, Sub-prime loans or home equity loans. The Company is a Delaware corporation, and was originally incorporated in New York under the name of OLM Credit Industries, Inc. in 1969. Its principal executive offices are located at 4500 Park Granada, Calabasas, California 91302, and its telephone number is (818) 225-3000. CHL CHL, the principal subsidiary of the Company, is engaged primarily in the mortgage banking business and as such originates, purchases, sells and services mortgage loans. CHL's mortgage loans are principally Prime mortgages. CHL also offers home equity loans, both in conjunction with newly produced Prime mortgages and as a separate product, and Sub-prime loans. The principal sources of revenue of CHL are: (i) loan origination fees, (ii) gains from the sale of loans, if any, (iii) interest earned on mortgage loans during the period that they are held by CHL pending sale, net of interest paid on funds borrowed to finance such mortgage loans, (iv) loan servicing fees and (v) interest benefit derived from the custodial balances associated with CHL's servicing portfolio. CHL produces mortgage loans through three separate divisions. The Consumer Markets Division originates loans using direct contact with consumers through its nationwide network of retail branch offices and its telemarketing systems. Through its Wholesale Division, CHL originates loans through and purchases loans from mortgage loan brokers. Through the Correspondent Division, CHL purchases loans primarily from other mortgage bankers, commercial banks, savings and loan associations, credit unions and other financial intermediaries. CHL customarily sells all loans that it originates or purchases. To guarantee timely and full payment of principal and interest on mortgage-backed securities and whole loans sold to permanent investors and to transfer the credit risk of the loans in the servicing portfolio, the Company pays guarantee fees to the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. CHL services substantially all of the mortgage loans that it originates or purchases. In addition, CHL purchases bulk servicing contracts to service single-family residential mortgage loans originated by other lenders. Servicing mortgage loans includes collecting and remitting loan payments, making advances when required, accounting for principal and interest, holding custodial (impound) funds for payment of property taxes and hazard insurance, making any physical inspections of the property, counseling delinquent mortgagors, supervising foreclosures and property dispositions in the event of unremedied defaults and generally administering the loans. CHL receives fee income for servicing mortgage loans ranging generally from 1/4% to 1/2% per annum on the declining principal balances of the loans. CHL has sold, and may sell in the future, a portion of its portfolio of loan servicing rights to other mortgage servicers. CHL's principal financing needs are the financing of loan funding activities and the investment in servicing rights. To meet these needs, CHL currently utilizes commercial paper supported by its revolving credit facility, medium-term notes, mortgage-backed securities, repurchase agreements, subordinated notes, unsecured notes, pre-sale funding facilities and cash flows from operations. In the past, CHL has utilized whole loan repurchase agreements, servicing-secured bank facilities, direct borrowings from its revolving credit facility, privately-placed financings and contributions from the Company of the proceeds of public offerings of preferred and common stock. CHL is a New York corporation, originally incorporated in 1969. Its principal executive offices are located at 4500 Park Granada, Calabasas, California 91302, and its telephone number is (818) 225-3000. THE TRUST The Trust is a statutory business trust formed under the Delaware Business Trust Act, as amended (the "Trust Act"), pursuant to (i) a declaration of trust, dated as of May 28, 1997, as amended and restated as of June 4, 1997 (as so amended and restated, the "Declaration"), executed by the Company and (ii) a certificate of trust, dated as of May 28, 1997, filed with the Secretary of State of the State of Delaware. The Declaration incorporates such provisions as are required by the Trust Indenture Act. The Company acquired Common Securities in an aggregate liquidation amount equal to approximately 3% of the total capital of the Trust, at the same time as the Old Capital Securities were sold. The Trust used all the proceeds derived from the issuance of the Trust Securities to purchase the Old Debentures and Old Debt Guarantee and, accordingly, the assets of the Trust currently consist solely of the Old Debentures and the Old Debt Guarantee. Subsequent to the exchange of New Debentures for Old Debentures and the Old Guarantee for the New Debt Guarantee as described herein, the assets of the Trust will consist solely of the New Debentures and the New Debt Guarantee. The Trust exists for the exclusive purposes of (i) issuing and selling the Trust Securities representing undivided beneficial ownership interests in the assets of the Trust, (ii) investing the gross proceeds from such sales in the Old Debentures and the Old Debt Guarantee which will be exchanged for the New Debentures and the New Debt Guarantee and (iii) engaging in only those other activities necessary or incidental thereto, including engaging in the Exchange Offer. Pursuant to the Declaration, there are five trustees of the Trust (the "Trustees"). Three of the Trustees (the "Regular Trustees") are individuals who are employees or officers of or who are affiliated with the Company. The fourth Trustee is a financial institution that is unaffiliated with the Company (the "Property Trustee"). The fifth Trustee is an entity that maintains its principal place of business in the State of Delaware (the "Delaware Trustee"). The Bank of New York, a New York banking corporation, currently acts as Property Trustee, and its affiliate, The Bank of New York (Delaware), a Delaware corporation, currently acts as Delaware Trustee, and each will continue to serve in such capacity until it is removed or replaced by the Company as holder of the Common Securities. The Bank of New York also acts as trustee under the Trust Guarantee and under the Debt Guarantee and will act as trustee under the New Trust Guarantee (the "Trust Securities Guarantee Trustee") and the New Debt Guarantee. The Property Trustee will hold title to the New Debentures and New Debt Guarantee for the benefit of the holders of the Trust Securities and, as the holder of the New Debentures and New Debt Guarantee, the Property Trustee will have the power to exercise all rights, powers and privileges of a holder of the New Debentures and New Debt Guarantee under the Indenture. In addition, the Property Trustee will maintain exclusive control of a segregated non-interest bearing bank account (the "Property Account") to hold all payments made in respect of the New Debentures and New Debt Guarantee for the benefit of the holders of the Trust Securities. The Trust Securities Guarantee Trustee will hold the New Trust Guarantee for the benefit of the holders of the Trust Securities. The Property Trustee will make payments of Distributions and payments on liquidation, redemption and otherwise to registered holders of the Trust Securities out of funds in the Property Account. The Company, as the holder of all the Common Securities, has the right to appoint, remove or replace any of the Trustees and to increase or decrease the number of Trustees, provided that the number of Trustees will be at least three; provided further that at least one Trustee is a Delaware Trustee, at least one Trustee is the Property Trustee and at least one Trustee is a Regular Trustee. CHL is obligated to pay all fees and expenses related to the organization and operations of the Trust (including any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States or any other domestic taxing authority upon the Trust), the Offering and the Exchange Offer and be responsible for all debts and obligations of the Trust (other than with respect to the Trust Securities). For so long as the Capital Securities remain outstanding, the Company has covenanted (i) to maintain directly or indirectly 100% ownership of the Common Securities, (ii) to cause the Trust to remain a statutory business trust and not to voluntarily dissolve, wind-up, liquidate or be terminated, except as permitted by the Declaration, (iii) to use its commercially reasonable efforts to ensure that the Trust will not be an "investment company" for purposes of the Investment Company Act of 1940, as amended (the "1940 Act") and (iv) to take no action that would be reasonably likely to cause the Trust to be classified as an association or a publicly-traded partnership taxable as a corporation for United States federal income tax purposes. The rights of the holders of the Capital Securities, including economic rights, rights to information and voting rights, are set forth in the Declaration and the Trust Indenture Act. See "Description of Capital Securities." The location of the principal executive office of the Trust is c/o Countrywide Credit Industries, Inc., 4500 Park Granada, Calabasas, California 91302, and its telephone number is (818) 225-3000. THE EXCHANGE OFFER Purpose and Effect of the Exchange Offer The Old Capital Securities were sold by the Trust on June 4, 1997 to the Initial Purchasers in reliance on Section 4(2) of the Securities Act. The Initial Purchasers offered and sold the Old Capital Securities only (i) to "Qualified Institutional Buyers" (as defined in Rule 144A) in compliance with Rule 144A and (ii) outside the United States to persons other than U.S. Persons, which term includes dealers or other professional fiduciaries in the United States acting on a discretionary basis for foreign beneficial owners (other than an estate or trust), in reliance upon Regulation S under the Securities Act. In connection with the sale of the Old Capital Securities, the Company, CHL and the Trust and the Initial Purchasers entered into the Registration Rights Agreement, pursuant to which the Company, CHL and the Trust agreed to use their respective reasonable best efforts to file and to cause to be declared effective by the Commission a registration statement with respect to the exchange of the Old Capital Securities for capital income securities with terms identical in all material respects to the terms of the Old Capital Securities (except as described below). A copy of the Registration Rights Agreement has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. The Exchange Offer is being made pursuant to the Registration Rights Agreement to satisfy the Company's, CHL's and the Trust's obligations thereunder with regard to the Old Capital Securities. The form and terms of the New Capital Securities will be identical in all material respects to the form and terms of the Old Capital Securities except that (i) the New Capital Securities will have been registered under the Securities Act and therefore will not contain terms with respect to transfer restrictions, (ii) the Distribution Rate on the New Capital Securities will not be subject to increase in certain circumstances relating to the timing of the Exchange Offer and (iii) the holders of New Capital Securities will not be entitled to certain rights under the Registration Rights Agreement, which rights will terminate when the Exchange Offer is consummated. The Old Capital Securities provide, among other things, that if the Exchange Offer is not consummated by January 14, 1998 (the "Targeted Consummation Date"), the Distribution Rate will increase (as a result of a corresponding increase in interest payable on the Old Debentures) by $.05 per week per $1,000 liquidation amount of Old Capital Securities during the first 90- day period following the Targeted Consummation Date and then will increase by $.05 per week per $1,000 liquidation amount of Old Capital Securities during each subsequent 90-day period following the Targeted Consummation Date up to a maximum of $.25 per week per $1,000 liquidation amount of Old Capital Securities, until the Exchange Offer is consummated. See "Risk Factors - Consequences of a Failure to Exchange Old Capital Securities" and "Description of Capital Securities." Upon the Registration Statement being declared effective, the Trust will offer the New Capital Securities in exchange for surrender of the Old Capital Securities. The Company will keep the Exchange Offer open for not less than 20 Business Days (or longer if required by applicable law) after the date notice of the Exchange Offer is mailed to the holders of the Old Capital Securities. For each Old Capital Security surrendered to the Trust pursuant to the Exchange Offer, the holder of such Old Capital Security will receive a New Capital Security having a liquidation amount equal to that of the surrendered Old Capital Security. Distributions on each New Capital Security will accrue from the last Distribution Payment Date on which Distributions were made on the Old Capital Security surrendered in exchange therefor or, if no Distributions have been made on such Old Capital Security, from June 4, 1997. The term "holder" with respect to the Exchange Offer means any person in whose name Old Capital Securities are registered on the Property Trustee's books or any other person who has obtained a properly completed bond power from the registered holder, or any person whose Old Capital Securities are held of record by DTC who desires to deliver such Old Capital Securities, by book-entry transfer at DTC. See "Book- Entry Issuance." As soon as practicable after the Expiration Date, and as an integral part of their obligations under the Registration Rights Agreement, the Trust will exchange the Old Trust Guarantee for the New Trust Guarantee, all of the Old Debentures, of which $206,200,000 aggregate principal amount is outstanding, for a like aggregate principal amount of the New Debentures and the Old Debt Guarantee for the New Debt Guarantee. The New Trust Guarantee, the New Debentures and the New Debt Guarantee have been registered under the Securities Act. The Exchange Offer is not being made to, nor will the Trust accept surrenders of Old Capital Securities for exchange from, holders thereof in any jurisdiction in which the Exchange Offer or the acceptance thereof would not be in compliance with the securities or blue sky laws of such jurisdiction. Participation in the Exchange Offer is voluntary and holders should carefully consider whether to accept. Holders of the Old Capital Securities are urged to consult their financial and tax advisors in making their own decisions on whether to participate in the Exchange Offer. Terms of the Exchange Offer The Trust hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal, to exchange up to $200,000,000 aggregate liquidation amount of New Capital Securities for a like aggregate liquidation amount of Old Capital Securities properly tendered on or prior to the Expiration Date and not properly withdrawn in accordance with the procedures described below. Upon the terms and subject to the conditions set forth in this Prospectus and in the Letter of Transmittal, the Trust will accept any and all Old Capital Securities validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. Subject to the minimum denomination requirements of the New Capital Securities, the Trust will issue $1,000 liquidation amount of New Capital Securities in exchange for each $1,000 liquidation amount of outstanding Old Capital Securities accepted in the Exchange Offer. Holders may tender some or all of their Old Capital Securities pursuant to the Exchange Offer. However, Old Capital Securities may be tendered only in amounts that are in blocks having a minimum aggregate liquidation amount of $100,000 (100 Old Capital Securities) and in integral multiples of $1,000 liquidation amount. The Exchange Offer is not conditioned upon any minimum aggregate liquidation amount of Old Capital Securities being tendered for exchange. As of October 1, 1997, $200,000,000 aggregate liquidation amount of Old Capital Securities was outstanding with one registered holder. This Prospectus, together with the Letter of Transmittal, is being sent to such registered holder. Holders of Old Capital Securities do not have any appraisal or dissenters' rights under the Declaration in connection with the Exchange Offer. The Company, CHL and the Trust intend to conduct the Exchange Offer in accordance with the provisions of the Registration Rights Agreement and the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder. Old Capital Securities which are not tendered for exchange, are tendered but are validly withdrawn or are tendered but not accepted in connection with the Exchange Offer will remain outstanding, will continue to be entitled to the benefits of the Declaration, and Distributions thereon will continue to accrue, but such Old Capital Securities will not be entitled to any rights or benefits under the Registration Rights Agreement, except under limited circumstances. See "Risk Factors - - Consequences of a Failure to Exchange Old Capital Securities" and "Description of Capital Securities." The Trust shall be deemed to have accepted validly tendered Old Capital Securities when, as and if the Trust has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders for the purposes of receiving the New Capital Securities from the Trust. If any tendered Old Capital Securities are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, certificates for any such unaccepted Old Capital Securities will be returned, without expense, to the tendering holder thereof as promptly as practicable after the Expiration Date. Holders who tender Old Capital Securities in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Old Capital Securities pursuant to the Exchange Offer. CHL will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offer. See "- Fees and Expenses." Each holder who tenders Old Capital Securities will warrant and agree in the Letter of Transmittal that it has full power and authority to tender, exchange, sell, assign and transfer Old Capital Securities, that the Trust will acquire good, marketable and unencumbered title to the tendered Old Capital Securities, free and clear of all liens, restrictions, charges and encumbrances, and the Old Capital Securities tendered for exchange are not subject to any adverse claims or proxies. The holder also will warrant and agree that it will, upon request, execute and deliver any additional documents deemed by the Trust or the Exchange Agent to be necessary or desirable to complete the exchange, sale, assignment, and transfer of the Old Capital Securities tendered pursuant to the Exchange Offer. The Trust reserves the right in its sole discretion to (a) purchase or make offers for any Old Capital Securities that remain outstanding subsequent to the Expiration Date, (b) as set forth under "- Expiration Date; Extensions; Amendments," to terminate the Exchange Offer and (c) to the extent permitted by applicable law, purchase Old Capital Securities in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers may differ from the terms of the Exchange Offer. NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR ANY TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF OLD CAPITAL SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD CAPITAL SECURITIES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND IF SO, THE AGGREGATE LIQUIDATION AMOUNT OF OLD CAPITAL SECURITIES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISORS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS. Expiration Date; Extensions; Amendments The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1997, unless the Company and the Trust extend the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. Although the Company and the Trust have no current intention to extend the Exchange Offer, the Company and the Trust reserve the right to extend the Exchange Offer at any time and from time to time by giving oral or written notice to the Exchange Agent and by timely public announcement communicated, unless otherwise required by applicable law or regulation, by making a release to the Dow Jones News Service. During any extension of the Exchange Offer, all Old Capital Securities previously tendered pursuant to the Exchange Offer and not withdrawn will remain subject to the Exchange Offer. The date of the exchange of the New Capital Securities for Old Capital Securities will be the first New York Stock Exchange trading day following the Expiration Date. The Company, CHL and the Trust reserve the right, in their sole discretion, subject to applicable law, (i) to delay accepting any Old Capital Securities, (ii) to terminate the Exchange Offer if any of the conditions set forth below under "- Conditions of the Exchange Offer" shall not have been satisfied in the good faith determination of the Trust, by giving oral or written notice of such delay, extension or termination to the Exchange Agent, (iii) to extend the Expiration Date of the Exchange Offer and retain all Old Capital Securities tendered pursuant to the Exchange Offer, subject, however, to the right of holders of Old Capital Securities to withdraw their tendered Old Capital Securities as described under "- Withdrawal Rights" and (iv) to waive any condition or otherwise amend the terms of the Exchange Offer in any manner. If the Exchange Offer is amended in any manner determined by the Company and the Trust to constitute a material change, the Company and the Trust will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered holders, the Company and the Trust will extend the Exchange Offer for a period of time, depending upon the significance of the amendment and the manner of disclosure to the registered holders, if the Exchange Offer would otherwise expire during such period. Any such delay in acceptance, extension, termination, waiver or amendment will be followed as promptly as practicable by oral or written notice thereof to the Exchange Agent and by making public announcement thereof, and such announcement in the case of an extension will be made no later than 9:00 a.m., New York City time, on the next Business Day after the previously scheduled Expiration Date. Without limiting the manner in which the Company and the Trust may choose to make any public announcement, and subject to applicable law, the Company and the Trust shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to an appropriate news agency. In all cases, issuance of the New Capital Securities for Old Capital Securities that are accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of properly completed and duly executed Letters of Transmittal and all other required documents; provided, however, that the Trust reserves the absolute right to waive any conditions of the Exchange Offer or defects or irregularities in the tender of Old Capital Securities. If any tendered Old Capital Securities are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if Old Capital Securities are submitted for a greater liquidation amount at maturity, as the case may be, than the holder desires to exchange, such unaccepted or non-exchanged Old Capital Securities or substitute Old Capital Securities evidencing the unaccepted portion, as appropriate, will be returned without expense to the tendering holder, unless otherwise provided in the Letter of Transmittal, as promptly as practicable after the expiration or termination of the Exchange Offer. Distributions on the New Capital Securities Each New Capital Security will pay cumulative Distributions from the most recent date Distributions were made on the Old Capital Securities surrendered in exchange for such New Capital Securities or, if no distributions have been paid on such Old Capital Securities, from June 4, 1997. Holders of the Old Capital Securities whose Old Capital Securities are accepted for exchange will not receive accumulated Distributions on such Old Capital Securities for any period from and after the last date Distributions were made on such Old Capital Securities prior to the original issue date of the New Capital Securities or, if no such Distributions have been paid, will not receive any accumulated Distributions on such Old Capital Securities. Acceptance For Exchange and Issuance of New Capital Securities Upon the terms and subject to the conditions of the Exchange Offer, the Trust will exchange, and will issue to the Exchange Agent, New Capital Securities for Old Capital Securities validly tendered and not withdrawn (pursuant to the withdrawal rights described under "- Withdrawal Rights") promptly after the Expiration Date. In all cases, delivery of New Capital Securities in exchange for Old Capital Securities tendered and accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of (i) Old Capital Securities or a book-entry confirmation of a book-entry transfer of Old Capital Securities into the Exchange Agent's account at DTC, including an Agent's Message if the tendering holder has not delivered a Letter of Transmittal, (ii) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees or (in the case of a book-entry transfer) an Agent's Message in lieu of the Letter of Transmittal and (iii) any other documents required by the Letter of Transmittal. The term "book-entry confirmation" means a timely confirmation of a book-entry transfer of Old Capital Securities into the Exchange Agent's account at DTC. The term "Agent's Message" means a message, transmitted by DTC to and received by the Exchange Agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgement from the tendering Participant, which acknowledgement states that such Participant has received and agrees to be bound by the Letter of Transmittal and that the Trust and the Company may enforce such Letter of Transmittal against such Participant. Subject to the terms and conditions of the Exchange Offer, the Company and the Trust will be deemed to have accepted for exchange, and thereby exchanged, Old Capital Securities validly tendered and not withdrawn as, if and when the Trust gives oral or written notice to the Exchange Agent of the Company's and the Trust's acceptance of such Old Capital Securities for exchange pursuant to the Exchange Offer. The Exchange Agent will act as agent for the Company and the Trust for the purpose of receiving tenders of Old Capital Securities, Letters of Transmittal and related documents, and as agent for tendering holders for the purpose of receiving Old Capital Securities, Letters of Transmittal and related documents and transmitting New Capital Securities to validly tendering holders. Such exchange will be made promptly after the Expiration Date. If, for any reason whatsoever, acceptance for exchange or the exchange of any Old Capital Securities tendered pursuant to the Exchange Offer is delayed (whether before or after the Company's and the Trust's acceptance for exchange of Old Capital Securities) or the Company and the Trust extend the Exchange Offer or are unable to accept for exchange or exchange Old Capital Securities tendered pursuant to the Exchange Offer, then, without prejudice to the Company's and the Trust's rights set forth herein, the Exchange Agent may, nevertheless, on behalf of the Company and the Trust and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Old Capital Securities and such Old Capital Securities may not be withdrawn except to the extent tendering holders are entitled to withdrawal rights as described under " - Withdrawal Rights." Pursuant to the Letter of Transmittal or Agent's Message in lieu thereof, a holder of Old Capital Securities will warrant and agree in the Letter of Transmittal that it has full power and authority to tender, exchange, sell, assign and transfer Old Capital Securities, that the Trust will acquire good, marketable and unencumbered title to the tendered Old Capital Securities, free and clear of all liens, restrictions, charges and encumbrances, and the Old Capital Securities tendered for exchange are not subject to any adverse claims or proxies. The holder also will warrant and agree that it will, upon request, execute and deliver any additional documents deemed by the Company, the Trust or the Exchange Agent to be necessary or desirable to complete the exchange, sale, assignment, and transfer of the Old Capital Securities tendered pursuant to the Exchange Offer. Procedures For Tendering Old Capital Securities Valid Tender Except as set forth below, in order for Old Capital Securities to be validly tendered pursuant to the Exchange Offer, a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees or (in the case of a book-entry tender) an Agent's Message in lieu of the Letter of Transmittal and any other required documents, must be received by the Exchange Agent at its address set forth under "- Exchange Agent," on or prior to the Expiration Date and (i) tendered Old Capital Securities must be received by the Exchange Agent, or (ii) such Old Capital Securities must be tendered pursuant to the procedures for book-entry transfer set forth below and a book-entry confirmation, including an Agent's Message if the tendering holder has not delivered a Letter of Transmittal, must be received by the Exchange Agent, in each case on or prior to the Expiration Date, or (iii) the guaranteed delivery procedures set forth below must be complied with. If less than all of the Old Capital Securities are tendered, a tendering holder should fill in the amount of Old Capital Securities being tendered in the appropriate box on the Letter of Transmittal or so indicate in an Agent's Message in lieu of the Letter of Transmittal. The entire amount of Old Capital Securities delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Book-Entry Transfer The Exchange Agent will establish an account with respect to the Old Capital Securities at DTC for purposes of the Exchange Offer within two Business Days after the date of this Prospectus. Any financial institution that is a participant in DTC's book- entry transfer facility system may make a book-entry delivery of the Old Capital Securities by causing DTC to transfer such Old Capital Securities into the Exchange Agent's account at DTC in accordance with DTC's procedures for transfers. However, although delivery of Old Capital Securities may be effected through book-entry transfer into the Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in lieu of a Letter of Transmittal, and any other required documents, must in any case be delivered to and received by the Exchange Agent at its address set forth under "- Exchange Agent" on or prior to the Expiration Date, or the guaranteed delivery procedures set forth below must be complied with. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. Signature Guarantees Certificates for the Old Capital Securities need not be endorsed and signature guarantees on the Letter of Transmittal are unnecessary unless (i) a certificate for the Old Capital Securities is registered in a name other than that of the person surrendering the certificate or (ii) such registered holder completes the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" in the Letter of Transmittal. In the case of (i) or (ii) above, such certificates for Old Capital Securities must be duly endorsed or accompanied by a properly executed bond power, with the endorsement or signature on the bond power and on the Letter of Transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an "eligible guarantor institution," including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association (an "Eligible Institution"), unless surrendered on behalf of such Eligible Institution. See Instruction 1 to the Letter of Transmittal. Guaranteed Delivery If a holder desires to tender Old Capital Securities pursuant to the Exchange Offer and the certificates for such Old Capital Securities are not immediately available or time will not permit all required documents to reach the Exchange Agent on or before the Expiration Date, or the procedures for book-entry transfer cannot be completed on a timely basis, such Old Capital Securities may nevertheless be tendered, provided that all of the following guaranteed delivery procedures are complied with: (i) such tenders are made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form accompanying the Letter of Transmittal, is received by the Exchange Agent, as provided below, on or prior to the Expiration Date; and (iii) the certificates (or a book-entry confirmation) representing all tendered Old Capital Securities, in proper form for transfer, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof or Agent's Message in lieu thereof), with any required signature guarantees and any other documents required by the Letter of Transmittal are received by the Exchange Agent within three New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile or mail to the Exchange Agent and must include a guarantee by an Eligible Institution in the form set forth in such notice. Notwithstanding any other provision hereof, the delivery of New Capital Securities in exchange for Old Capital Securities tendered and accepted for exchange pursuant to the Exchange Offer will in all cases be made only after timely receipt by the Exchange Agent of Old Capital Securities, or of a book-entry confirmation with respect to such Old Capital Securities, and a properly completed and duly executed Letter of Transmittal (or facsimile thereof or an Agent's Message in lieu thereof), together with any required signature guarantees and any other documents required by the Letter of Transmittal. Accordingly, the delivery of New Capital Securities might not be made to all tendering holders at the same time, and will depend upon when Old Capital Securities, book-entry confirmations or an Agent's Message in lieu thereof with respect to Old Capital Securities and other required documents are received by the Exchange Agent. The Company and the Trust's acceptance for exchange of Old Capital Securities tendered pursuant to any of the procedures described above will constitute a binding agreement among the tendering holder, the Company and the Trust upon the terms and subject to the conditions of the Exchange Offer. Determination of Validity All questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tendered Old Capital Securities will be determined by the Company and the Trust, in their sole discretion, whose determination shall be final and binding on all parties. The Company and the Trust reserve the absolute right, in their sole discretion, to reject any and all tenders determined by them not to be in proper form or the acceptance of which, or exchange for, may, in the view of counsel to the Company or the Trust, be unlawful. The Company and the Trust also reserve the absolute right, subject to applicable law, to waive any of the conditions of the Exchange Offer as set forth under "- Conditions to the Exchange Offer" or any condition or irregularity in any tender of Old Capital Securities of any particular holder whether or not similar conditions or irregularities are waived in the case of other holders. The Company's and the Trust's interpretation of the terms and conditions of the Exchange Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. No tender of Old Capital Securities will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. None of the Company, the Trust, any affiliates or assigns of the Company or the Trust, the Exchange Agent or any other person shall be under any duty to give any notification of any irregularities in tenders or incur any liability for failure to give any such notification. If any Letter of Transmittal, endorsement, bond power, power of attorney, or any other document required by the Letter of Transmittal is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and unless waived by the Trust, proper evidence satisfactory to the Company and the Trust, in their sole discretion, of such person's authority to so act must be submitted. A beneficial owner of Old Capital Securities that are held by or registered in the name of a broker, dealer, commercial bank, trust company or other nominee or custodian is urged to contact such entity promptly if such beneficial holder wishes to participate in the Exchange Offer. Withdrawal Rights Except as otherwise provided herein, tenders of Old Capital Securities may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To withdraw a tender of Old Capital Securities in an Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Old Capital Securities to be withdrawn (the "Depositor"), (ii) identify the Old Capital Securities to be withdrawn (including the certificate number or numbers and liquidation amount of such Old Capital Securities), (iii) contain a statement that such holder is withdrawing its election to have such Old Capital Securities exchanged, (iv) be signed by such holder in the same manner as the original signature on the Letter of Transmittal by which such Old Capital Securities were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the Old Capital Securities register the transfer of such Old Capital Securities in the name of the person withdrawing the tender and (v) specify the name in which any such Old Capital Securities are to be registered, if different from that of the Depositor. If Old Capital Securities have been tendered pursuant to the procedures for book-entry transfer set forth in " Procedures for Tendering Old Capital Securities," the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of Old Capital Securities, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written, telegraphic, telex or facsimile transmission. Any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company and the Trust, in their sole discretion, whose determination shall be final and binding on all parties. None of the Company, the Trust, the Exchange Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Old Capital Securities so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no New Capital Securities will be issued with respect thereto unless the Old Capital Securities so withdrawn are validly retendered. Withdrawals of tenders of Old Capital Securities may not be rescinded. Any Old Capital Securities which have been tendered but which are not accepted for exchange will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Capital Securities may be retendered by following one of the procedures described above under "- Procedures for Tendering Old Capital Securities " at any time prior to the Expiration Date. Conditions of the Exchange Offer Notwithstanding any other terms of the Exchange Offer, or any extension of the Exchange Offer, the Company and the Trust shall not be required to accept for exchange, or to exchange New Capital Securities for, any Old Capital Securities, and, as described below, may terminate the Exchange Offer (whether or not any Old Capital Securities have theretofore been accepted for exchange) or may waive any conditions to amend the Exchange Offer, if any of the following conditions have occurred or exist or have not been satisfied: (a) there shall occur a change in the current interpretation by the staff of the Division of Corporation Finance of the Commission which permits the New Capital Securities issued pursuant to the Exchange Offer in exchange for Old Capital Securities to be offered for resale, resold and otherwise transferred by holders thereof (other than broker-dealers and any such holder which is an "affiliate" of the Company, CHL or the Trust within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Capital Securities are acquired in the ordinary course of such holders' business and such holders are not participating and have no arrangement or understanding with any person to participate in the distribution of such New Capital Securities; (b) any action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency or body with respect to the Exchange Offer which, in the Company's and the Trust's judgment, would reasonably be expected to impair the ability of the Trust or the Company to proceed with the Exchange Offer; (c) any law, statute, rule or regulation shall have been adopted or enacted which, in the Company's and the Trust's judgment, would reasonably be expected to impair the ability of the Trust or the Company to proceed with the Exchange Offer; (d) a banking moratorium shall have been declared by United States federal or New York State authorities which, in the Company's and the Trust's judgment, would reasonably be expected to impair the ability of the Trust or the Company to proceed with the Exchange Offer; (e) trading on the NYSE or generally in the United States over-the-counter market shall have been suspended by order of the Commission or any other governmental authority which, in the Company's and the Trust's judgment, would reasonably be expected to impair the ability of the Trust or the Company to proceed with the Exchange Offer; (f) a stop order shall have been issued by the Commission or any state securities authority suspending the effectiveness of the Registration Statement or proceedings shall have been initiated or, to the knowledge of the Company or the Trust, threatened for that purpose or that any governmental approval has not been obtained, which approval the Company and the Trust shall, in their sole discretion, deem necessary for the consummation of the Exchange Offer as contemplated hereby; (g) any change, or any development involving a prospective change, in the business or financial affairs of the Trust or the Company or any of its subsidiaries has occurred which, in the sole judgment of the Company and the Trust, might materially impair the ability of the Trust or the Company to proceed with the Exchange Offer; or (h) there is a reasonable likelihood in the Company's judgment that, or a material uncertainty exists in the Company's judgment as to whether, consummation of the Exchange Offer would result in an adverse tax consequence to the Company. If the Company and the Trust determine in their sole and absolute discretion that any of the above conditions are not satisfied, the Company and the Trust may, subject to applicable law, (i) terminate the Exchange Offer (whether or not any Old Capital Securities have theretofore been accepted for exchange), refuse to accept any Old Capital Securities and return all tendered Old Notes to the tendering holders, (ii) extend the Exchange Offer and retain all Old Capital Securities tendered prior to the Expiration Date, subject, however, to the right of holders to withdraw such Old Capital Securities (see " - Terms of the Exchange Offer" and " - Withdrawal Rights") or (iii) waive such unsatisfied conditions with respect to the Exchange Offer, or amend the terms of the Exchange Offer, and accept all validly tendered Old Capital Securities which have not been withdrawn. If such waiver or amendment constitutes a material change to the Exchange Offer, the Company and the Trust will promptly disclose such waiver or amendment by means of a prospectus supplement that will be distributed to the registered holders, and the Company and the Trust will extend the Exchange Offer for a period of time, depending upon the significance of the waiver and the manner of disclosure to the registered holders, if the Exchange Offer would otherwise expire during such period. Exchange Agent The Bank of New York has been appointed as Exchange Agent for the Exchange Offer. Delivery of the Letters of Transmittal and any other required documents, questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for the Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: By Hand or Overnight Courier: By Registered or Certified mail: The Bank of New York The Bank of New York 101 Barclay Street 101 Barclay Street Corporate Trust Services Window Floor 7E Ground Floor New York, New York 10286 New York, New York 10286 Attention: Reorganization Attention: Reorganization Section Section Facsimile Transmission: (Eligible Institutions Only) (212) 539-6339 Confirm by Telephone: (212) 815-2742 For information with respect to the Exchange Offer, call: The Bank of New York at (212) 815- Delivery to other than the above addresses or facsimile numbers will not constitute a valid delivery. Fees and Expenses The expenses of soliciting tenders will be borne by CHL. The principal solicitation is being made by mail; however, additional solicitation may be made by telecopy, telephone or in person by officers and regular employees of the Company, CHL, the Trust and their respective affiliates. No additional compensation will be paid to any such officers and employees who engage in soliciting tenders. Neither the Company nor the Trust has retained any dealer- manager or other soliciting agent in connection with the Exchange Offer, and CHL will not make any payments to brokers, dealers or others soliciting acceptance of the Exchange Offer. CHL, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. CHL may also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this Prospectus, the Letter of Transmittal and related documents to the beneficial owners of the Old Capital Securities and in handling or forwarding tenders for exchange. The expenses to be incurred in connection with the Exchange Offer will be paid by CHL. Such expenses include fees and expenses of the Exchange Agent and transfer agent and registrar, accounting and legal fees and printing costs, among others. CHL will pay all transfer taxes, if any, applicable to the exchange of the Old Capital Securities pursuant to the Exchange Offer. If, however, New Capital Securities, or Old Capital Securities for principal amounts not tendered or accepted for exchange, are to be delivered to, or to be issued in the name of, any person other than the registered holder of the Old Capital Securities tendered or if a transfer tax is imposed for any reason other than the exchange of the Old Capital Securities pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. Resales of New Capital Securities The Company, CHL and the Trust are making the Exchange Offer in reliance on the position of the staff of the Division of Corporation Finance of the Commission as set forth in certain interpretive letters addressed to third parties in other transactions. However, none of the Company, CHL and the Trust has sought its own interpretive letter and there can be no assurance that the staff of the Division of Corporation Finance of the Commission would make a similar determination with respect to the Exchange Offer as it has in such interpretive letters to third parties. Based on these interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Company, CHL and the Trust believe that New Capital Securities issued pursuant to the Exchange Offer in exchange for Old Capital Securities may be offered for resale, resold and otherwise transferred by a holder thereof (other than a holder who is a broker-dealer or who is an "affiliate" of the Company, CHL or the Trust within the meaning of Rule 405 of the Securities Act) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that (i) such New Capital Securities are acquired in the ordinary course of such holder's business and (ii) such holder is not participating, does not intend to participate and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of such New Capital Securities. However, any holder of Old Capital Securities who is an "affiliate" of the Company, CHL or the Trust or who intends to participate in the Exchange Offer for the purpose of distributing New Capital Securities, or, as to any unsold allotments, any broker-dealer who purchased Old Capital Securities from the Trust to resell pursuant to Rule 144A or any other available exemption under the Securities Act, (a) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the Commission set forth in the above-mentioned interpretive letters, (b) will not be permitted or entitled to tender such Old Capital Securities in the Exchange Offer and (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of such Old Capital Securities, with such resale covered by an effective registration statement containing the selling security holder information required by Item 507 of Registration S-K under the Securities Act, unless such resale is made pursuant to an exemption from such requirements. In addition, as described below, if any broker-dealer holds Old Capital Securities acquired for its own account as a result of market-making or other trading activities and exchanges such Old Capital Securities for New Capital Securities, then such broker-dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such New Capital Securities. Each holder of Old Capital Securities who wishes to exchange Old Capital Securities for New Capital Securities in the Exchange Offer will be required to represent that (i) it is not an "affiliate" of the Company, CHL or the Trust, (ii) any New Capital Securities to be received by it are being acquired in the ordinary course of its business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Capital Securities and (iv) if such holder is not a broker-dealer or is a broker-dealer but will not receive New Capital Securities for its own account in exchange for Old Capital Secutities, such holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Capital Securities. In addition, the Company, CHL and the Trust may require such holder, as a condition to such holder's eligibility to participate in the Exchange Offer, to furnish to the Company, CHL and the Trust (or an agent thereof) in writing information as to the number of "beneficial owners" (within the meaning of Rule 13d-3 under the Exchange Act) on behalf of whom such holder holds the Old Capital Securities to be exchanged in the Exchange Offer. Each broker-dealer that receives New Capital Securities for its own account pursuant to the Exchange Offer must acknowledge that it acquired the Old Capital Securities for its own account as a result of market-making activities or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Capital Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Based on the position taken by the staff of the Division of Corporation Finance of the Commission in the interpretive letters referred to above, the Company, CHL and the Trust believe that broker-dealers who acquired Old Capital Securities for their own accounts, as a result of market-making or other trading activities (i.e., Participating Broker-Dealers) may fulfill their prospectus delivery requirements with respect to the New Capital Securities received upon exchange of such Old Capital Securities (other than Old Capital Securities which represent an unsold allotment from the original sale of the Old Capital Securities) with a prospectus meeting the requirements of the Securities Act, which may be the prospectus prepared for an exchange offer so long as it contains a description of the plan of distribution with respect to the resale of such New Capital Securities. Accordingly, this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer during the period referred to below in connection with resales of New Capital Securities received in exchange for Old Capital Securities where such Old Capital Securities were acquired by such Participating Broker-Dealer for its own account as a result of market-making or other trading activities. Subject to certain provisions set forth in the Registration Rights Agreement, the Company, CHL and the Trust have agreed that this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of such New Capital Securities for a period ending 90 days after the Registration Statement of which this Prospectus constitutes a part is declared effective. However, a Participating Broker-Dealer who intends to use this Prospectus in connection with the resale of New Capital Securities received in exchange for Old Capital Securities pursuant to the Exchange Offer must notify the Company, or cause the Company to be notified, on or prior to the Expiration Date, that it is a Participating Broker-Dealer. Such notice may be given in the space provided for that purpose in the Letter of Transmittal or may be delivered to the Exchange Agent at one of the addresses set forth herein under " - Exchange Agent." Any Participating Broker-Dealer who is an "affiliate" of the Company, CHL or the Trust may not rely on such interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. In that regard, each Participating Broker-Dealer who surrenders Old Capital Securities pursuant to the Exchange Offer will be deemed to have agreed, by execution of the Letter of Transmittal, that, upon receipt of notice from the Company, CHL or the Trust of the occurrence of any event or the discovery of any fact which makes any statement contained in this Prospectus untrue in any material respect or which causes this Prospectus to omit to state a material fact necessary in order to make the statements contained herein, in light of the circumstances under which they were made, not misleading or of the occurrence of certain other events specified in the Registration Rights Agreement, such Participating Broker-Dealer will suspend the sale of New Capital Securities pursuant to this Prospectus until the Company, CHL and the Trust has amended or supplemented this Prospectus to correct such misstatement or omission and have furnished copies of the amended or supplemented Prospectus to such Participating Broker-Dealer or the Company, CHL or the Trust has given notice that the sale of the New Capital Securities may be resumed, as the case may be. Consequences of Failure to Exchange The Old Capital Securities have not been registered under the Securities Act or any state securities laws and therefore may not be offered, sold or otherwise transferred except in compliance with the registration requirements of the Securities Act and any other applicable securities laws, or pursuant to an exemption therefrom or in a transaction not subject thereto, and in each case in compliance with certain other conditions and restrictions, including the Trust's and the Property Trustee's right in certain cases to require the delivery of opinions of counsel, certifications and other information prior to any such transfer. After consummation of the Exchange Offer, Old Capital Securities that remain outstanding will continue to bear legends restricting transfer. In addition, upon consummation of the Exchange Offer, holders of Old Capital Securities which remain outstanding (subject to limited exceptions, if applicable) will not be entitled to any rights to have such Old Capital Securities registered under the Securities Act or to any similar rights under the Registration Rights Agreement. The Trust currently does not intend to register under the Securities Act any Old Capital Securities which remain outstanding after consummation of the Exchange Offer (subject to limited exceptions, if applicable). To the extent that Old Capital Securities are tendered and accepted in the Exchange Offer, the liquidation amount of outstanding Old Capital Securities will be reduced by the liquidation amount so tendered and exchanged and a holder's ability to sell untendered Old Capital Securities could be adversely affected. In addition, although the Old Capital Securities have been designated for trading in the PORTAL market, to the extent that Old Capital Securities are tendered and accepted in connection with the Exchange Offer, any trading market for Old Capital Securities which remain outstanding after the Exchange Offer could be adversely affected. The New Capital Securities and any Old Capital Securities which remain outstanding after consummation of the Exchange Offer will constitute a single Capital Securities under the Declaration and, accordingly, will vote together as a single class for purposes of determining whether holders of the requisite percentage in outstanding liquidation amount thereof have taken certain actions or exercised certain rights under the Declaration. See "Description of Capital Securities - General" and " - Voting Rights; Amendment of the Declaration." Shelf Registration Statement If (i) the Company, CHL and the Trust are not required to file an Exchange Offer Registration Statement or permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy, (ii) CHL has received an opinion of counsel rendered by a law firm having a recognized national tax practice, to the effect that, as a result of the consummation of the Exchange Offer, there is more than an insubstantial risk that (x) the Trust would be subject to United States federal income tax with respect to income received or accrued on the Debentures, (y) interest payable by CHL on such Debentures would not be deductible by CHL, in whole or in part, for United States federal income tax purposes or (z) the Trust would be subject to more than a de minimis amount of other taxes, duties or other governmental charges or (iii) any holder of Old Capital Securities provides CHL with an opinion of counsel on or before the twentieth Business Day following the consummation of the Exchange Offer to the effect that (A) such holder is prohibited by law or Commission policy from participating in the Exchange Offer, (B) such holder may not resell the New Capital Securities it acquired in the Exchange Offer to the public without delivering a prospectus and this Prospectus is not appropriate or available for such resales or (C) such holder is a broker-dealer and owns Old Capital Securities acquired directly from the Trust or an affiliate of the Trust, then the Company, CHL and the Trust will use their reasonable best efforts to file a shelf registration statement with respect to the resale of Old Capital Securities with the Commission on or prior to 150 days after such filing obligation arises and to cause the Shelf Registration Statement to be declared effective by the Commission on or prior to 180 days after such obligation arises and to keep the Shelf Registration Statement effective for two years from the date of the original issuance of the Old Capital Securities; provided, however, that if the Company or CHL is engaged in a material acquisition or disposition and in certain other circumstances, the Company, CHL and the Trust may suspend offers and sales under the Shelf Registration Statement, subject to certain conditions, for up to 30 days in each year during which the Shelf Registration Statement is required to be effective. Each holder of the Old Capital Securities will be required to deliver information to be used in connection with the Shelf Registration Statement and to provide comments on the Shelf Registration Statement within the time periods set forth in the Registration Rights Agreement in order to have their Old Capital Securities included in the Shelf Registration Statement. Accounting Treatment The New Capital Securities would be recorded at the same carrying value as the Old Capital Securities, as reflected in the Company's accounting records on the date of the exchange. Accordingly, no gain or loss for accounting purposes will be recognized by the Company. The costs of the Exchange Offer and the unamortized expenses related to the issuance of the Old Capital Securities will be amortized over the terms of the Capital Securities. DESCRIPTION OF CAPITAL SECURITIES The Old Capital Securities offered in the Offering were issued, and the New Capital Securities offered pursuant to the Exchange Offer will be issued, under the Declaration. Upon the consummation of the Exchange Offer, the Declaration will be subject to and governed by the Trust Indenture Act. The following summary of the material provisions of the Declaration does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Declaration (a copy of which has been filed as an exhibit to the Registration Statement of which this Prospectus constitutes a part), including the definitions of certain terms contained therein and those terms made part of the Declaration by reference to the Trust Act and the Trust Indenture Act. For definitions of certain capitalized terms used in the following summary, see "Index of Certain Terms." References to "Section" are to sections of the Declaration. General The Capital Securities will rank on a parity, and payments will be made thereon pro rata, with the Common Securities except as described under "- Subordination of Common Securities." Legal title to the New Debentures and the New Debt Guarantee will be held by the Property Trustee in trust for the benefit of the holders of the Trust Securities. The Trust Guarantee executed by the Company for the benefit of the holders of the Capital Securities will be a guarantee with respect to the Capital Securities but will not guarantee payment of Distributions or amounts payable on redemption or liquidation of the Capital Securities when the Trust does not have sufficient funds available to make such payments. See "Description of Trust Guarantee." The Company's obligations under the Guarantees, the Indenture and the Declaration, taken together with CHL's obligations under the New Debentures and the Indenture, including CHL's obligation to pay all costs, expenses and liabilities of the Trust (other than with respect to the Trust Securities), constitute a full and unconditional guarantee by the Company of all of the Trust's obligations under the Capital Securities. Holders of the Capital Securities have no preemptive or similar rights. Distributions Distributions will accumulate from the most recent date Distributions were made on the Old Capital Securities or, if no Distributions have been made on the Old Capital Securities, from June 4, 1997, at a rate per annum equal to 8.05% of the stated liquidation amount of $1,000 per Capital Security. Distributions will be payable semi-annually in arrears on June 15 and December 15 of each year, commencing December 15, 1997, and at maturity. In the event that any date on which Distributions are payable on the Capital Securities is not a Business Day, then payment of the Distributions payable on such date will be made on the next succeeding day that is a Business Day (and without any additional Distributions or other payments in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date such payment was originally payable (each date on which Distributions are payable in accordance with the foregoing, a "Distribution Date"). A "Business Day" means any day other than a Saturday or a Sunday, or a day on which banking institutions in The City of New York or Los Angeles, California are authorized or required by law or executive order to remain closed or a day on which the principal corporate trust office of the Indenture Trustee (as defined herein) or the principal corporate trust office of the Property Trustee is closed for business. The amount of Distributions payable for any semi-annual distribution period will be computed (i) for any full 180-day semi-annual distribution period, on the basis of a 360- day year of twelve 30-day months and (ii) for any period shorter than a full 180-day semi-annual distribution period for which Distributions are computed, on the basis of the actual number of days elapsed in such 180-day semi-annual period (assuming each full month elapsed in such period consists of 30 days). Distributions on the Capital Securities (other than distributions on a redemption date) will be payable to the holders thereof as they appear on the register of the Trust as of the close of business on the relevant record dates, which, as long as the Capital Securities are represented by one or more global certificated securities ("Global Certificates"), will be the close of business on the Business Day prior to the relevant Distribution Dates, unless otherwise provided in the Declaration or unless a different regular record date is established or provided for the corresponding interest payment date on the New Debentures. If the Capital Securities are no longer represented by one or more Global Certificates, the Regular Trustees will have the right to select record dates, which will be at least one Business Day prior to the relevant payment dates. Distributions payable on any Capital Securities that are not punctually paid on any Distribution Date will cease to be payable to the person in whose name such Capital Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the person in whose name such Capital Securities are registered on the special record date or other specified date determined in accordance with the Declaration. At all times, the Distribution Rate, the Distribution Dates and other payment dates for the Capital Securities will correspond to the interest rate, interest payment dates and other payment dates on the New Debentures, which, together with the New Debt Guarantee, will be the sole assets of the Trust. Distributions on the Capital Securities must be paid on the dates payable to the extent that the Trust has funds available for the payment of such Distributions. The revenue of the Trust available for distribution to holders of its Capital Securities will be limited to payments received from CHL under the New Debentures or from the Company under the New Debt Guarantee. See "Description of New Debentures and New Debt Guarantee." If CHL does not make payments on the New Debentures and the Company does not make such payments, to the extent required, pursuant to the New Debt Guarantee, the Property Trustee will not have funds available to make payments on the Capital Securities, and the Trust Guarantee will not apply to such payments until the Trust has sufficient funds therefor. CHL will have the right under the Indenture to defer the payment of interest on the New Debentures at any time or from time to time for a period not exceeding 10 consecutive semi-annual periods provided that no Extension Period may extend beyond the Stated Maturity of the New Debentures. Accordingly, there could be multiple Extension Periods of varying terms throughout the term of the New Debentures. As a consequence of any such extension, semi-annual Distributions on the Capital Securities will be deferred by the Trust during any such Extension Period. Distributions to which holders of the Capital Securities are entitled will accumulate and compound semi-annually at the Distribution Rate from the relevant Distribution Date for such Distributions. The term "Distributions" as used herein includes any such compounded amounts unless the context otherwise requires. During any such Extension Period, (a) the Company and CHL shall not declare or pay dividends on, or make a distribution with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of shares of any such capital stock or rights to acquire such capital stock in connection with the satisfaction by the Company or CHL, respectively, of its obligations under any employee benefit plans, (ii) as a result of a reclassification of the Company's or CHL's capital stock or rights to acquire such capital stock or the exchange or conversion of one class or series of the Company's or CHL's capital stock or rights to acquire such capital stock for another class or series of the Company's or CHL's capital stock or rights to acquire such capital stock, (iii) the purchase of fractional interests in shares of the Company's or CHL's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged or (iv) dividends and distributions made on the Company's or CHL's capital stock or rights to acquire such capital stock with the Company's or CHL's capital stock or rights to acquire such capital stock) or make any guaranteed payments with respect to any of the foregoing and (b) the Company and CHL shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including any guarantees, other than the Guarantees) issued by the Company or CHL that rank pari passu with or junior to the New Debentures. Prior to the termination of any such Extension Period, CHL may further extend the Extension Period, provided that no Extension Period may exceed 10 consecutive semi-annual periods or extend beyond the Stated Maturity of the New Debentures. Upon the termination of any such Extension Period and the payment of all amounts then due on any Interest Payment Date, CHL may elect to begin a new Extension Period, subject to the foregoing requirements. See "Description of the New Debentures and New Debt Guarantee - Option to Extend Interest Payment Period" and "Certain United States Federal Income Tax Consequences - Interest Income and Original Issue Discount." CHL has no current intention of exercising its right to defer any payments of interest by extending any interest payment period of the New Debentures. Redemption General Upon the repayment or redemption of the New Debentures held by the Trust, whether at Stated Maturity or upon earlier redemption as provided in the Indenture, the proceeds from such repayment or redemption will be applied by the Property Trustee to redeem the Trust Securities. The New Debentures are not redeemable at the option of CHL other than in certain circumstances following a Special Event. See "Description of New Debentures and New Debt Guarantee - Redemption." Special Event Redemption or Distribution of New Debentures; Shortening of Stated Maturity If, at any time, either a Tax Event or an Investment Company Event (as defined herein) (each, a "Special Event") shall have occurred and be continuing, the Regular Trustees may, within 90 days following the occurrence of such Special Event, elect to dissolve the Trust upon not less than 30 nor more than 60 days' notice and, after satisfaction of liabilities to creditors of the Trust, if any, cause the New Debentures and the New Debt Guarantee to be distributed to the holders of the Trust Securities in liquidation of the Trust. If an Investment Company Event shall have occurred and be continuing, CHL also has the option to redeem the New Debentures, in whole but not in part (and thereby cause a mandatory redemption of the Capital Securities), at any time within 90 days following the occurrence of such Investment Company Event at a redemption price equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest to the date of redemption. In addition, if a Tax Event shall have occurred and be continuing and in the opinion of counsel, rendered by a law firm having a recognized national tax practice, there would in all cases, after effecting the dissolution of the Trust and the distribution of the New Debentures and the New Debt Guarantee to the holders of the Trust Securities in exchange therefor upon liquidation of the Trust, be more than an insubstantial risk that the Tax Event would continue to exist, then CHL will have the right (a) to shorten the Stated Maturity of the New Debentures to a date not earlier than December 15, 2011 (a "Maturity Advancement") such that, in the opinion of such counsel, after advancing the Stated Maturity of the New Debentures, interest paid on the New Debentures will be deductible by CHL for United States federal income tax purposes or (b) to redeem the New Debentures, in whole but not in part (and thereby cause a mandatory redemption of the Capital Securities), at any time within 90 days following the occurrence of a Tax Event at a redemption price equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest to the date of redemption. Under current United States federal income tax law and interpretations thereof and assuming that, as expected, the Trust is treated as a grantor trust, a distribution of the New Debentures and the New Debt Guarantee would not be a taxable event to holders of the Capital Securities. Should there be a change in law, a change in legal interpretation, a Tax Event or other circumstances, however, the distribution could be a taxable event to holders of the Capital Securities. See "Certain United States Federal Income Tax Consequences." If CHL does not elect any of the options described above, the Capital Securities will remain outstanding until the repayment of the New Debentures, whether at maturity or their earlier redemption, and in the event a Tax Event shall have occurred and be continuing, CHL will be obligated to pay any additional taxes, duties, assessments and other governmental charges (other than withholding taxes) to which the Trust has become subject as a result of a Tax Event. See "Description of New Debentures and New Debt Guarantee." As used herein: (i) "Tax Event" means that the Regular Trustees shall have received an opinion of counsel, rendered by a law firm having a recognized national tax practice, to the effect that, as a result of (a) any amendment to, or change (including any announced proposed change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such proposed change, pronouncement or decision is announced on or after the date of original issuance of the Old Capital Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days after the date thereof, subject to United States federal income tax with respect to interest accrued or received on the New Debentures, (ii) the Trust is, or will be within 90 days after the date thereof, subject to more than a de minimis amount of other taxes, duties or other governmental charges, or (iii) interest payable on the New Debentures is not, or within 90 days of the date thereof will not, be deductible, in whole or in part, by CHL for United States federal income tax purposes. (ii) "Investment Company Event" means that the Regular Trustees shall have received an opinion of counsel, rendered by a law firm having a recognized national securities practice, to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), there is more than an insubstantial risk that the Trust is or will be considered an "investment company" which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Old Capital Securities. Redemption Procedures Capital Securities redeemed on each redemption date will be redeemed at the redemption price in respect of the New Debentures plus an amount equal to accrued and unpaid Distributions thereon through the date of redemption (the "Redemption Price") with the applicable proceeds from the contemporaneous redemption or payment of the New Debentures. Redemptions of the Capital Securities will be made and the Redemption Price will be payable on each redemption date only to the extent that the Trust has sufficient funds available for the payment of such Redemption Price. See also "- Subordination of Common Securities." Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of Capital Securities to be redeemed at its registered address. If the Trust gives a notice of redemption in respect of the Capital Securities, then, by 12:00 noon, New York City time, on the redemption date, to the extent funds are available, the Property Trustee will deposit irrevocably with DTC funds sufficient to pay the applicable Redemption Price for all Capital Securities held by DTC and will give DTC irrevocable instructions and authority to pay the Redemption Price to the holders of the Capital Securities. See "Book-Entry Issuance." If any Capital Securities are not represented by one or more Global Certificates, the Trust, to the extent funds are available, will irrevocably deposit with the Paying Agent (as defined herein) for such Capital Securities funds sufficient to pay the applicable Redemption Price and will give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the holders thereof upon surrender of their certificates evidencing the Capital Securities. Notwithstanding the foregoing, Distributions payable on or prior to the redemption date for any Capital Security called for redemption will be payable to the holders of such Capital Security on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then immediately prior to the close of business on the date of such deposit, all rights of the holders of such Capital Securities so called for redemption will cease, except the right of the holders of such Capital Securities to receive the Redemption Price, but without interest on such Redemption Price, and such Capital Securities will cease to be outstanding. In the event that any date fixed for redemption of Capital Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date such payment was originally payable. In the event that payment of the Redemption Price in respect of Capital Securities called for redemption is improperly withheld or refused and not paid either by the Trust or by the Company pursuant to the Trust Guarantee as described under "Description of Trust Guarantee," Distributions on such Capital Securities will continue to accumulate at the Distribution Rate, to the extent permitted by applicable law, from the redemption date originally established by the Trust for the Capital Securities to the date such Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the Redemption Price. See " - Distributions." Subject to applicable law (including, without limitation, United States federal securities law), the Company or any of its subsidiaries may at any time and from time to time purchase outstanding New Capital Securities by tender, in the open market or by private agreement. Subordination of Common Securities Payment of Distributions on, and the Redemption Price of, the Trust Securities, as applicable, shall be made pro rata based on the liquidation amount of such Trust Securities; provided, however, that, if on any Distribution Date or redemption date an Indenture Event of Default shall have occurred and be continuing, no payment of any Distribution on, or Redemption Price of, any of the Common Securities, and no other payment on account of the redemption, liquidation or other acquisition of such Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions on all of the outstanding Capital Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price, the full amount of such Redemption Price on all of the outstanding Capital Securities then called for redemption, shall have been made or provided for, and all funds available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions on, or Redemption Price of, the Capital Securities then due and payable. Distribution of the New Debentures At any time, the Company will have the right to dissolve the Trust and, after satisfaction of the liabilities of creditors of the Trust as provided by applicable law, cause the New Debentures and the New Debt Guarantee to be distributed to the holders of the Trust Securities in liquidation of the Trust. Under current United States federal income tax law and interpretation and assuming, as expected, the Trust is treated as a grantor trust, a distribution of the New Debentures and the New Debt Guarantee would not be a taxable event to holders of the Capital Securities. Should there be a change in law, a change in legal interpretation, a Tax Event or other circumstances, however, the distribution could be a taxable event to the holders of the Capital Securities. In addition, a dissolution of the Trust in which holders of the Capital Securities receive cash would be a taxable event to such holders. See "Certain United States Federal Income Tax Consequences." Liquidation Distribution Upon Dissolution Pursuant to the Declaration, the Trust shall automatically dissolve on the first to occur of: (i) the bankruptcy of the Company or CHL, (ii) the filing of a certificate of dissolution or its equivalent with respect to the Company or CHL and the revocation of the charter of the Company or CHL and the expiration of 90 days after the date of revocation without a reinstatement thereof, (iii) the entry of a decree of judicial dissolution of the Company, CHL or the Trust, (iv) the time when all of the Trust Securities shall have been called for redemption and the amounts then due thereon shall have been paid to the holders thereof in accordance with the terms of the Trust Securities, (v) upon the election of the Regular Trustees, following the occurrence and continuation of a Special Event pursuant to which the Trust shall have been dissolved in accordance with the terms of the Trust Securities and all of the New Debentures and the New Debt Guarantee shall have been distributed to the holders of the Trust Securities in exchange for all of the Trust Securities or (vi) the time when all of the Regular Trustees and the Company shall have consented to termination of the Trust, provided such action is taken before the issuance of any Trust Securities. If an early dissolution occurs as described in clause (i), (ii), (iii), (v) or (vi) above, the Trust shall be liquidated by the Trustees as expeditiously as the Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, to the holders of the Trust Securities their pro rata interest in the New Debentures and the New Debt Guarantee, unless such distribution is determined by the Property Trustee not to be practical, in which event such holders will be entitled to receive out of the assets of the Trust available for distribution to holders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to the aggregate of the stated liquidation amount of $1,000 per Capital Security, plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If such Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Trust Securities shall be paid on a pro rata basis. The holder(s) of the Common Securities will be entitled to receive distributions upon any such liquidation pro rata with the holders of the Capital Securities, except that if an Indenture Event of Default has occurred and is continuing, the Capital Securities shall have a priority over the Common Securities with regard to such distributions. After the liquidation date is fixed for any distribution of New Debentures to holders of the Capital Securities, (i) the Capital Securities will no longer be deemed to be outstanding, (ii) DTC or its nominee, as a record holder of Capital Securities, will receive a registered Global Certificate or Certificates representing the New Debentures to be delivered upon such distribution and (iii) any certificates representing Capital Securities not held by DTC or its nominee will be deemed to represent New Debentures having an aggregate principal amount equal to the aggregate liquidation amount of such Capital Securities, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on such Capital Securities until such certificates are presented for cancellation whereupon CHL will issue to such holder(s), and the Indenture Trustee will authenticate, a certificate representing such New Debentures. Trust Enforcement Events An Indenture Event of Default that has occurred and is continuing constitutes a "Trust Enforcement Event" under the Declaration with respect to the Trust Securities, provided that pursuant to the Declaration, the holder of the Common Securities will be deemed to have waived any Trust Enforcement Event with respect to the Common Securities until all Trust Enforcement Events with respect to the Capital Securities have been cured, waived or otherwise eliminated. Until such Trust Enforcement Event with respect to the Capital Securities has been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the holders of the Capital Securities and only the holders of the Capital Securities will have the right to direct the Property Trustee with respect to certain matters under the Declaration, and therefore the Indenture. Upon the occurrence of a Trust Enforcement Event, the Indenture Trustee or the Property Trustee as the holder of the New Debentures will have the right under the Indenture to declare the principal of, premium, if any, and interest on the New Debentures to be immediately due and payable. Each of the Company and the Trust is required to file annually with the Property Trustee an officers' certificate as to its compliance with all conditions and covenants under the Declaration. If the Property Trustee fails to enforce its rights with respect to the New Debentures or the New Debt Guarantee held by the Trust, after holders of a majority in liquidation amount of the Capital Securities have so directed the Property Trustee, any registered holder of Capital Securities may institute a legal proceeding directly against CHL or the Company, respectively, to enforce the Property Trustee's rights under the Indenture and the New Debt Guarantee without first instituting any legal proceeding against the Property Trustee or any other person or entity. In addition, if a Trust Enforcement Event has occurred and is continuing and such event is attributable to the failure of CHL to pay interest, principal or other required payments on the New Debentures on the date such interest, principal or other payment is otherwise payable (including any redemption date), and the Company does not make such payments, to the extent required, under the New Debt Guarantee, then a registered holder of Capital Securities may, on or after the respective due dates specified in the New Debentures, institute a Direct Action against CHL or the Company, respectively. In connection with such Direct Action, the rights of the Company will be subrogated to the rights of such holder of Capital Securities to the extent of any payment made by the Company pursuant to the New Debt Guarantee to such holder of Capital Securities. In the case of the issuance of one or more Global Securities, the record owner will be DTC or its nominee for credit to the account of Participants or Indirect Participants in DTC. Persons who are not Participants or Indirect Participants may beneficially own such Global Securities only through such Participants or Indirect Participants. See "Book- Entry Issuance." The Declaration provides that the Property Trustee may, under certain circumstances, withhold from the holders of Capital Securities notice of a Trust Enforcement Event (except for any default in the payment of principal of, premium, if any, or interest on the New Debentures) if the Property Trustee considers it in the interest of such holders to do so. Voting Rights; Amendment of the Declaration Except as provided below and under "Description of Trust Guarantee - Amendments and Assignment" and as otherwise required by law and the Declaration, the holders of the Capital Securities will have no voting rights. So long as any New Debentures are held by the Property Trustee, the holders of a majority in liquidation amount of the Capital Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or to direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration, including the right to direct the Property Trustee, as holder of the New Debentures and the New Debt Guarantee, to (i) exercise the remedies available to it under the Indenture and the New Debt Guarantee, (ii) consent to any amendment or modification of the Indenture or the New Debentures where such consent shall be required or (iii) waive any past default and its consequences that is waivable under the Indenture; provided, however, that if an Indenture Event of Default has occurred and is continuing, then the holders of 25% of the aggregate liquidation amount of the Capital Securities may direct the Property Trustee to declare the principal of, premium, if any, and interest on the New Debentures due and payable; provided, further, that where a consent or action under the Indenture would require the consent or act of the holders of more than a majority of the aggregate principal amount of New Debentures affected thereby, only the holders of the percentage of the aggregate stated liquidation amount of the Capital Securities which is at least equal to the percentage required under the Indenture may direct the Property Trustee to give such consent to take such action. The Property Trustee shall notify each holder of the Capital Securities of any notice of any Indenture Event of Default which it receives from CHL with respect to the New Debentures. Except with respect to directing the time, method, and place of conducting a proceeding for a remedy, the Property Trustee shall be under no obligation to take any of the actions described in clauses (i) and (ii) and (iii) above unless the Property Trustee has obtained an opinion of independent tax counsel to the effect that the Trust will not fail to be classified as a grantor trust for United States federal income tax purposes, as a result of such action, and each holder will be treated as owning an undivided beneficial ownership interest in the New Debentures and the New Debt Guarantee. The Declaration may also be amended without the consent of the holders of the Trust Securities to (i) cure any ambiguity, (ii) correct or supplement any provision in the Declaration that may be defective or inconsistent with any other provision of the Declaration, (iii) add to the covenants, restrictions or obligations of the Company, (iv) conform to any change in Rule 3a-5 under the 1940 Act ("Rule 3a-5") or written change in interpretation or application of Rule 3a-5 by any legislative body, court, government agency or regulatory authority which amendment does not have a material adverse effect on the rights, preferences or privileges of the holders or (v) modify, eliminate and add to any provision of the Declaration to ensure that the Trust will be classified as a grantor trust for United States federal income tax purposes at all times that any Trust Securities are outstanding or to ensure that the Trust will not be required to register as an "investment company" under the 1940 Act, provided, however, that such modification, elimination or addition would not adversely affect in any material respect the rights, privileges or preferences of any holder of the Trust Securities. The Declaration provides that it may be modified and amended if approved by the Regular Trustees (and in certain circumstances, the Property Trustee and the Delaware Trustee) provided that, if any proposed amendment would (i) adversely affect the powers, preferences or special rights of the Trust Securities or (ii) result in the dissolution, winding-up or termination of the Trust other than pursuant to the terms of the Declaration, then the holders of the Trust Securities voting together as a single class will be entitled to vote on such amendment and such amendment shall not be effective except with the approval of at least a majority in liquidation amount of the Trust Securities affected thereby; provided that if any amendment referred to in clause (i) above would adversely affect only the Capital Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment and such amendment shall not be effective except with the approval of a majority in liquidation amount of such class of Trust Securities. Notwithstanding any provision of the Declaration, however, Section 316(b) of the Trust Indenture Act provides that the right of any holder of Trust Securities to receive payment of Distributions and other payments upon redemption or otherwise on or after their respective due dates, or to institute suit for the enforcement of any such payment on or after such respective due dates, shall not be impaired or affected without the consent of such holder. Accordingly, amendments to the Declaration that may adversely affect the powers, preferences or special rights of the Capital Securities - other than those affecting a holder's rights to receive payments on or after their respective due dates and to institute suit to enforce such payments on or after their respective due dates as described in Section 316(b) of the Trust Indenture Act - may be effected with the consent of only a majority in liquidation amount of Capital Securities rather than with the consent of each holder of Capital Securities affected thereby. In addition, the Declaration provides that no amendment shall be made, and any such purported amendment shall be void and ineffective which would (i) cause the Trust to be classified other than as a grantor trust for United States federal income tax purposes, (ii) reduce or otherwise adversely affect the powers of the Property Trustee in contravention of the Trust Indenture Act or (iii) cause the Trust to be deemed to be an "investment company" required to be registered under the 1940 Act. Any required approval or direction of holders of Capital Securities may be given at a meeting of holders of Capital Securities convened for such purpose or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which holders of Capital Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be given to each holder of record of Capital Securities in the manner set forth in the Declaration. No vote or consent of the holders of Capital Securities will be required for the Trust to redeem and cancel its Capital Securities in accordance with the Declaration. Notwithstanding that holders of Capital Securities are entitled to vote or consent under any of the circumstances described above, any of the Capital Securities that are owned by the Company, the Trustees or any affiliate of the Company or any Trustees, shall, for purposes of such vote or consent, be treated as if they were not outstanding. Expenses and Taxes In the Indenture, CHL, as borrower, has agreed to pay all debts and other obligations (other than with respect to the Trust Securities) and all costs and expenses of the Trust (including costs and expenses relating to the organization of the Trust, the fees and expenses of the Trustees and the costs and expenses relating to the operation of the Trust) and to pay any and all taxes and all costs and expenses with respect thereto (other than United States withholding taxes) to which the Trust might become subject. The foregoing obligations of CHL under the Indenture are for the benefit of, and shall be enforceable by, any person to whom any such debts, obligations, costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor has received notice thereof. Any such Creditor may enforce such obligations of CHL directly against CHL, and CHL has irrevocably waived any right or remedy to require that any such Creditor take any action against the Trust or any other person before proceeding against CHL. CHL has also agreed in the Indenture to execute such additional agreements as may be necessary or desirable to give full effect to the foregoing. Registrar and Transfer Agent The Property Trustee will act as registrar and transfer agent for the Capital Securities. Registration of transfers or exchanges of Capital Securities will be effected without charge by or on behalf of the Trust, but upon payment of any tax or other governmental charges that may be imposed in connection with any transfer or exchange, the Trust may charge a sum sufficient to cover any such payment. The Trust will not be required (i) to issue, register or cause to be registered the transfer or exchange of any Capital Securities during a period beginning at the opening of business 15 days before the day of the mailing of the relevant notice of redemption and ending at the close of business on the day of such mailing or (ii) to register or cause to be registered the transfer or exchange of any Capital Securities to be redeemed. Information Concerning the Property Trustee The Property Trustee, other than during the occurrence and continuance of a Trust Enforcement Event, undertakes to perform only such duties as are specifically set forth in the Declaration (and no implied covenants shall be read into the Declaration against the Property Trustee) and, after the occurrence of such Trust Enforcement Event (which has not been cured or waived), must exercise the same degree of care and skill as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. Subject to this provision, the Property Trustee is under no obligation to exercise any of the powers vested in it by the Declaration at the request of any holder of Capital Securities unless it is offered reasonable security and indemnity against the costs, expenses and liabilities that might be incurred thereby, provided that the Property Trustee, upon the occurrence of an Indenture Event of Default, will not be relieved of its obligation to exercise the rights and powers vested in it under the Declaration. If no Trust Enforcement Event has occurred and is continuing and the Property Trustee is required to decide between alternative courses of action, construe ambiguous provisions in the Declaration or is unsure of the application of any provision of the Declaration, and the matter is not one on which holders of Capital Securities are entitled under the Declaration to vote, then the Property Trustee may, but shall be under no duty to, take such action as is directed by the Company and, if not so directed, shall take such action as it deems advisable and in the best interests of the holders of the Trust Securities and will have no liability except for its own bad faith, negligence or willful misconduct. Payment and Paying Agency Payments in respect of the Global Certificates shall be made to DTC, which shall credit the relevant accounts at DTC on the applicable Distribution Dates or, if the Capital Securities are not represented by one or more Global Certificates, such payments shall be made by check mailed to the address of the holder entitled thereto as such address shall appear on the register in respect of the registrar. The paying agent (the "Paying Agent") shall initially be the Property Trustee and any co-paying agent chosen by the Property Trustee and acceptable to the Regular Trustees and the Company. The Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Property Trustee and the Company. In the event that the Property Trustee shall no longer be the Paying Agent, the Regular Trustees shall appoint a successor (which shall be a bank or trust company acceptable to the Regular Trustees and the Company) to act as Paying Agent. Mergers, Consolidations, Amalgamations or Replacements of the Trust The Trust may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other Person (as defined in the Declaration), except as described below. The Trust may, at the request of the Company, with the consent of the Regular Trustees or, if there are more than two, a majority of the Regular Trustees, and without the consent of the holders of the Capital Securities, the Delaware Trustee or the Property Trustee, merge with or into, consolidate, amalgamate, be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of any State, provided that (i) such successor entity (if not the Trust) either (a) expressly assumes all of the obligations of the Trust with respect to the Capital Securities or (b) substitutes for the Capital Securities other securities having substantially the same terms as the Capital Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Capital Securities rank in priority with respect to distributions and payments upon liquidation, redemption and otherwise, (ii) the Company expressly appoints a trustee of such successor entity possessing the same powers and duties as the Property Trustee as the holder of the New Debentures and the New Debt Guarantee, (iii) the Capital Securities or any Successor Securities continue to be listed or quoted, or any Successor Securities will be listed or quoted upon notification of issuance, on any national securities exchange or with any other organization on or through which the Capital Securities are then listed or quoted immediately prior to the effective date of such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, (iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Capital Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Capital Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the holders' percentage interest in the successor entity), (vi) such successor entity has a purpose identical to that of the Trust, (vii) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer, or lease, the Company has received an opinion from independent counsel to the Trust experienced in such matters to the effect that (a) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Capital Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the holders' percentage interest in the successor entity) and (b) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, (1) neither the Trust nor such successor entity will be required to register as an "investment company" under the 1940 Act and (2) the Trust or the successor entity will continue to be classified as a grantor trust for United States federal income tax purposes, (viii) the Company or any permitted successor or assignee owns all of the Common Securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Trust Guarantee and (ix) such successor entity expressly assumes all of the obligations of the Trust with respect to the Trustees. Notwithstanding the foregoing, the Trust shall not, except with the consent of holders of 100% in aggregate liquidation amount of the Capital Securities, consolidate, amalgamate, merge with or into, be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Trust or the successor entity to be classified as other than a grantor trust for United States federal income tax purposes and each holder of the Capital Securities not to be treated as owning an undivided beneficial interest in the New Debentures and the New Debt Guarantee. Merger or Consolidation of Trustees Any corporation into which the Property Trustee, the Delaware Trustee or any Regular Trustee that is not a natural person may be merged or converted or with which such Trustee may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of such Trustee, shall be the successor of such Trustee under the Declaration, provided such corporation shall be otherwise qualified and eligible. Miscellaneous The Regular Trustees are authorized and directed to conduct the affairs of and to operate the Trust in such a way that the Trust will not be deemed to be an "investment company" required to be registered under the 1940 Act or classified as other than a grantor trust for United States federal income tax purposes and so that the New Debentures will be treated as indebtedness of CHL for United States federal income tax purposes. In this connection, the Company and the Regular Trustees are authorized to take any action, not inconsistent with applicable law, the Certificate of Trust or the Declaration, that the Company and the Regular Trustees determine in their discretion to be necessary or desirable for such purposes, as long as such action does not materially adversely affect the interests of the holders of the Capital Securities. The Trust may not borrow money, issue debt, reinvest proceeds derived from investments, mortgage or pledge any of its assets. In addition the Trust may not undertake any activity that would cause the Trust not to be classified as a grantor trust for United States federal income tax purposes. DESCRIPTION OF NEW DEBENTURES AND NEW DEBT GUARANTEE The New Debentures and the New Debt Guarantee are to be issued pursuant to an Indenture (the "Indenture"), among CHL, as issuer, the Company, as guarantor, and The Bank of New York, as trustee (the "Indenture Trustee"). This summary of material terms and provisions of the New Debentures, the Indenture and the New Debt Guarantee does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the provisions of the Indenture (a copy of which has been filed as an exhibit to the Registration Statement of which this Prospectus constitutes a part), including the definitions of certain terms contained therein and those terms made part of the Indenture by reference to the Trust Indenture Act. The New Debentures will be fully and unconditionally guaranteed as to principal, premium, if any, and interest by the Company pursuant to the New Debt Guarantee. Certain capitalized terms used herein are defined in the Indenture. General The New Debentures will be in an aggregate principal amount equal to the aggregate liquidation amount of the Trust Securities. The New Debentures will accrue interest at a rate equal to 8.05% of the principal amount thereof, payable semi- annually in arrears on June 15 and December 15 of each year, commencing December 15, 1997, and at maturity. Each of the foregoing semi-annual interest payment dates is herein referred to as an "Interest Payment Date." Interest on the New Debentures is payable to the person in whose name the New Debentures are registered, subject to certain exceptions, at the close of business on the Business Day next preceding the relevant Interest Payment Date. In the event the Capital Securities shall not continue to be represented by one or more Global Certificates and the New Debentures are not represented by one or more Global Certificates, CHL shall have the right to select record dates, which shall be at least one Business Day before the relevant Interest Payment Date. It is anticipated that, until the liquidation, if any, of the Trust, each New Debenture will be held in the name of the Property Trustee in trust for the benefit of the holders of the Trust Securities. The amount of interest payable for any semi-annual interest period will be computed (i) for any full 180-day semi- annual interest payment period, on the basis of a 360-day year of twelve 30-day months and (ii) for any period shorter than a full 180-day semi-annual interest payment period for which interest payments are computed, on the basis of the actual number of days elapsed in such period (assuming each full month elapsed in such period consists of 30 days). In the event that any date on which interest is payable on the New Debentures is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day that is a Business Day (and without any additional interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date such payment was originally payable. Accrued interest that is not paid on the applicable Interest Payment Date will bear additional interest on the amount thereof (to the extent permitted by law) at the interest rate specified for the New Debentures, compounded semi-annually. The term "interest" as used herein shall include interest payments and interest on interest payments not paid on the applicable Interest Payment Date. The New Debentures will mature on June 15, 2027, or earlier, in certain circumstances, upon the occurrence and continuation of a Tax Event. See "Description of Capital Securities - Redemption - Special Event Redemption or Distribution of New Debentures; Shortening of Stated Maturity." The New Debentures and the New Debt Guarantee will be unsecured and will rank junior and be subordinate in right of payment to all existing and future Senior Indebtedness of CHL and the Company, respectively. The Indenture does not limit the incurrence or issuance of other secured or unsecured debt of CHL or the Company, whether under any existing indenture or under any other indenture that CHL or the Company may enter into in the future or otherwise. See "- Ranking" and "Risk Factors - Ranking of Obligations under the Guarantees and the New Debentures." The general provisions of the Indenture do not afford holders of the New Debentures protection in the event of a highly leveraged or other transaction involving CHL or the Company that may adversely affect holders of the New Debentures. New Debt Guarantee The Indenture provides that the Company will fully and unconditionally guarantee the due and punctual payment of the principal of, premium, if any, and interest on the New Debentures when the same shall become due and payable, whether at maturity, upon redemption or otherwise. Because the Company is a holding company, the right of the Company and, hence, the right of creditors of the Company (including the holders of the New Debentures with respect to the New Debt Guarantee) to participate in any distribution of the assets of any subsidiaries of the Company, whether upon liquidation, reorganization or otherwise, is subject to prior claims of creditors of its subsidiaries, except to the extent that claims of the Company itself as a creditor of a subsidiary may be recognized. Option to Extend Interest Payment Period So long as no Indenture Event of Default has occurred and is continuing, CHL has the right under the Indenture to defer the payment of interest at any time or from time to time for a period not exceeding 10 consecutive semi-annual periods with respect to each Extension Period, provided that no Extension Period may extend beyond the Stated Maturity of the New Debentures. At the end of any Extension Period, CHL must pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the New Debentures, compounded semi-annually, to the extent permitted by applicable law). During an Extension Period, interest will continue to accrue and holders of New Debentures (or holders of Capital Securities while the Capital Securities are outstanding) will be required to accrue interest income (as OID) for United States federal income tax purposes. See "Certain United States Federal Income Tax Consequences - Interest Income and Original Issue Discount." During any such Extension Period, (a) the Company and CHL shall not declare or pay dividends on, or make a distribution with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of shares of any such capital stock or rights to acquire such capital stock in connection with the satisfaction by the Company or CHL, respectively, of its obligations under any employee benefit plans, (ii) as a result of a reclassification of the Company's or CHL's capital stock or rights to acquire such capital stock or the exchange or conversion of one class or series of the Company's or CHL's capital stock or rights to acquire such capital stock for another class or series of the Company's or CHL's capital stock or rights to acquire such capital stock, (iii) the purchase of fractional interests in shares of the Company's or CHL's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged or (iv) dividends and distributions made on the Company's or CHL's capital stock or rights to acquire such capital stock with the Company's or CHL's capital stock or rights to acquire such capital stock) or make any guarantee payments with respect to any of the foregoing and (b) the Company and CHL shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including any guarantees, other than the Guarantees) issued by the Company or CHL that rank pari passu with or junior to the New Debentures. Prior to the termination of any such Extension Period, CHL may further extend the Extension Period, provided that no Extension Period may exceed 10 consecutive semi-annual periods or extend beyond the Stated Maturity of the New Debentures. Upon the termination of any such Extension Period and the payment of all amounts then due on any Interest Payment Date, CHL may elect to begin a new Extension Period, subject to the above requirements. Accordingly, there could be multiple Extension Periods of varying lengths throughout the term of the New Debentures. No interest shall be due and payable during an Extension Period, except at the end thereof. CHL must give the Company, the Property Trustee, the Regular Trustees and the Indenture Trustee written notice of its election of such Extension Period not less than one Business Day prior to the record date for the applicable Interest Payment Date. The Property Trustee shall give notice of CHL's election to begin a new Extension Period to the holders of the Capital Securities. Redemption The New Debentures are not redeemable at the option of CHL, unless a Special Event shall have occurred and be continuing. If, at any time, a Special Event shall have occurred and be continuing, the New Debentures are redeemable at the option of CHL, in whole (but not in part), in certain circumstances within 90 days of the occurrence of such Special Event, at a redemption price equal to 100% of the aggregate principal amount of such New Debentures, plus accrued and unpaid interest, if any, to the date of redemption. See "Description of Capital Securities - Redemption - Special Event Redemption or Distribution of New Debentures; Shortening of Stated Maturity." If the New Debentures are redeemed, the Trust must redeem the Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of New Debentures so redeemed. See "Description of Capital Securities - Redemption." Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of New Debentures to be redeemed at its registered address. Unless CHL defaults in payment of the redemption price, on and after the redemption date interest ceases to accrue on such New Debentures to be redeemed. Certain Covenants of CHL and the Company CHL has covenanted in the Indenture that if and so long as the Trust is the holder of all the New Debentures, CHL, as borrower, will pay all debts and obligations of the Trust (other than with respect to the Trust Securities), all costs and expenses related to the organization and operation of the Trust and all other costs and expenses of the Trust (including any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States or any domestic taxing authority upon the Trust. The Company and CHL has also covenanted that they will not (i) declare or pay any dividends or distributions on, or make a distribution with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock (other than (1) purchases or acquisitions of shares of any such capital stock or rights to acquire such capital stock in connection with the satisfaction by the Company or CHL, respectively, of its obligations under any employee benefit plans, (2) as a result of a reclassification of the Company's or CHL's capital stock or rights to acquire such capital stock or the exchange or conversion of one class or series of the Company's or CHL's capital stock or rights to acquire such capital stock for another class or series of the Company's or CHL's capital stock or rights to acquire such capital stock, (3) the purchase of fractional interests in shares of the Company's or CHL's capital stock pursuant to conversion or exchange provisions of such capital stock or the security being converted or exchanged or (4) dividends and distributions made on the Company's or CHL's capital stock or rights to acquire such capital stock with the Company's or CHL's capital stock or rights to acquire such capital stock) or make any guarantee payments with respect to any of the foregoing and (ii) make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including any guarantees, other than the Guarantees) issued by the Company or CHL that rank pari passu with or junior to the New Debentures, if at such time (x) there shall have occurred any event of which the Company has actual knowledge that (I) with the giving of notice or the lapse of time, or both, would constitute an Indenture Event of Default with respect to New Debentures and (II) in respect of which CHL shall not have taken reasonable steps to cure, (y) the Company shall be in default with respect to its payment of any obligations under the New Debt Guarantee or (z) CHL shall have given notice of its election of an Extension Period as provided in the Indenture and shall not have rescinded such notice, or such Extension Period, or any extension thereof, shall be continuing. In addition, the Company has also covenanted, with respect to the New Debentures, that for so long as the Trust Securities remain outstanding, the Company will, among other things, (i) maintain 100% direct or indirect ownership of the Common Securities; provided, however, that any permitted successor of the Company under the New Debt Guarantee may succeed to the Company's ownership of the Common Securities, (ii) timely perform its duties as sponsor of the Trust, (iii) use its reasonable efforts to cause the Trust (a) to remain a business trust classified as a grantor trust, except in connection with a distribution of the New Debentures and the New Debt Guarantee to the holders of Capital Securities in liquidation of the Trust, the redemption of all of the Trust Securities or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, and (b) continue not to be treated as an association taxable as a corporation for United States federal income tax purposes (other than in connection with a distribution of New Debentures and the New Debt Guarantee to the holders of Capital Securities in liquidation of the Trust) and (iv) use its reasonable efforts to cause each holder of Trust Securities to be treated as owning an undivided beneficial interest in the New Debentures. Ranking The New Debentures will be subordinated and junior in right of payment to all existing and future Senior Indebtedness of CHL. In addition, the New Debt Guarantee will be subordinated and junior in right of payment to all existing and future Senior Indebtedness of the Company. Accordingly: (I) no payment of principal (including redemption payments) of, premium, if any, or interest on the New Debentures and no payment under the New Debt Guarantee may be made if (A) any principal of, premium, if any, or interest on any Senior Indebtedness of CHL or the Company, as the case may be, is not paid when due and any applicable grace period with respect to such payment default under such Senior Indebtedness has ended and such default has not been cured or waived or (B) the maturity of any Senior Indebtedness of CHL or the Company, as the case may be, has been accelerated because of a default; (II) upon any payment by or any distribution of assets of CHL or the Company, as the case may be, to creditors upon any dissolution, winding-up, liquidation or reorganization, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all principal of, premium, if any, and interest due or to become due on all Senior Indebtedness of CHL or the Company, as the case may be, must be paid in full (or payment thereof provided for) before the holders of New Debentures or the New Debt Guarantee are entitled to receive or retain any payment; and (III) upon satisfaction of all claims of all Senior Indebtedness then outstanding, the holders of New Debentures or the New Debt Guarantee will be subrogated to the rights of the holders of Senior Indebtedness of CHL or the Company, as the case may be, to receive payments or distributions applicable to Senior Indebtedness until all amounts owing on the New Debentures or the New Debt Guarantee, as the case may be, are paid in full. "Senior Indebtedness" means, with respect to CHL or the Company, as the case may be, (i) the principal, premium, if any, and interest in respect of (A) indebtedness of such obligor for money borrowed and (B) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by such obligor, (ii) all capital lease obligations of such obligor, (iii) all obligations of such obligor issued or assumed as the deferred purchase price of property, all conditional sale obligations of such obligor and all obligations of such obligor under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business), (iv) all obligations of such obligor for reimbursement on any letter of credit, any banker's acceptance, any security purchase facility, any repurchase agreement or similar arrangement, any interest rate swap, any other hedging arrangement, any obligation under options or any similar credit or other transaction, (v) all obligations of the type referred to in clauses (i) through (iv) above of other persons for the payment of which such obligor is responsible or liable as obligor, guarantor or otherwise and (vi) all obligations of the type referred to in clauses (i) through (v) above of other persons secured by any lien on any property or asset of such obligor (whether or not such obligation is assumed by such obligor), except for (1) any such indebtedness that contains express terms, or is issued under a deed, indenture or other instrument that contains express terms, providing that it is subordinate or ranks pari passu with the New Debentures or the New Debt Guarantee, as the case may be, (2) any indebtedness between or among CHL or the Company or any affiliate of CHL or the Company and (3) all other debt securities and guarantees in respect of those debt securities, in any case issued by CHL or the Company to any trust (including, without limitation, Countrywide Capital I), or a trustee of such trust, partnership or other entity affiliated with CHL or the Company that is a financing vehicle of CHL or the Company (a "financing entity") in connection with the issuance by such financing entity of securities of a similar nature to the Capital Securities or of other securities that rank pari passu with, or junior to, the Capital Securities. Such Senior Indebtedness shall continue to be Senior Indebtedness and to be entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness. The Indenture places no limitation on the amount of additional Senior Indebtedness that may be incurred by the Company or CHL or on the amount of any indebtedness or other liabilities that may be incurred by the Company's or CHL's subsidiaries. CHL's obligations under the New Debentures and the Company's obligations under the New Debt Guarantee will be structurally subordinated to all existing and future liabilities and obligations of the Company's and CHL's subsidiaries, as the case may be. At May 31, 1997, after giving pro forma effect to the Offerings, CHL would have had approximately $6.5 billion aggregate principal amount of Senior Indebtedness outstanding and the Company would have had no indebtedness outstanding (excluding indebtedness of subsidiaries guaranteed by the Company). In addition, at such date, the Company's subsidiaries (other than CHL) had outstanding indebtedness of $43 million. Indenture Events of Default The Indenture provides that any one or more of the following described events with respect to the New Debentures that has occurred and is continuing constitutes an "Indenture Event of Default" with respect to the New Debentures: (a) default for 30 days in payment of any interest on the New Debentures when due; provided, however, that a valid extension of the interest payment period by CHL shall not constitute a default in the payment of interest on the New Debentures; or (b) default in payment of principal and premium, if any, on the New Debentures when due either at maturity, upon redemption, by declaration or otherwise; or (c) default by CHL or the Company in the performance of any other of the covenants or agreements in the Indenture which shall not have been remedied for a period of 90 days after notice; or (d) certain events of bankruptcy, insolvency or reorganization of CHL or the Company; or (e) the voluntary or involuntary dissolution, winding- up or termination of the Trust, except in connection with the distribution of the New Debentures to the holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities of the Trust, or certain mergers, consolidations or amalgamations, each as permitted by the Declaration. The Indenture provides that the Indenture Trustee may, under certain circumstances, withhold from the holders notice of default with respect to the New Debentures (except for any default in the payment of principal of, premium, if any, or interest on the New Debentures) if the Indenture Trustee considers it in the interest of such holders to do so. The Indenture provides that if an Indenture Event of Default on the New Debentures shall have occurred and be continuing, either the Indenture Trustee or the holders of not less than 25% in aggregate principal amount of the New Debentures then outstanding may declare the principal of, premium, if any, and accrued interest on all the New Debentures to be due and payable immediately, but upon certain conditions such declarations may be annulled and past defaults may be waived (except defaults in payment of principal of, premium, if any, or interest on the New Debentures, which must be cured or paid in full) by the holders of a majority in aggregate principal amount of the New Debentures. No holder of any New Debenture shall have any right to institute any suit, action or proceeding for any remedy under the Indenture, unless such holder previously shall have given to the Indenture Trustee written notice of a continuing Indenture Event of Default with respect to the New Debentures and unless the holders of not less than 25% in aggregate principal amount of the New Debentures then outstanding shall have given the Indenture Trustee a written request to institute such action, suit or proceeding and shall have offered to the Indenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred thereby, and the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action, suit or proceeding; provided that no holder of New Debentures shall have any right to prejudice the rights of any other holder of New Debentures, obtain priority or preference over any other such holder or enforce any right under the Indenture except as provided in the Indenture and for the equal, ratable and common benefit of all holders of New Debentures. Notwithstanding the foregoing, the right of any holder of any New Debenture to receive payment of the principal of, premium, if any, and interest, if any, on such New Debenture when due, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such holder. The holders of a majority in aggregate principal amount of the New Debentures then outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to, or exercising any trust or power conferred on, the Indenture Trustee under the Indenture; provided, however, that, except under certain circumstances, the Indenture Trustee may decline to follow any such direction if the Indenture Trustee determines that the action so directed would be unjustly prejudicial to holders not taking part in such direction or unlawful or would involve the Indenture Trustee in personal liability. The Indenture requires the annual filing by CHL with the Indenture Trustee of a certificate as to the absence of certain defaults under the Indenture. In case an Indenture Event of Default shall occur and be continuing, the Property Trustee will have the right to declare the principal of and premium, if any, and the interest on such New Debentures and any other amounts payable under the Indenture, to be forthwith due and payable and to enforce its other rights as a creditor with respect to such New Debentures. Enforcement of Certain Rights by Holders of Capital Securities An Indenture Event of Default that has occurred and is continuing constitutes a Trust Enforcement Event. The holders of Capital Securities in certain circumstances have the right to direct the Property Trustee to exercise its rights as the holder of the New Debentures and the New Debt Guarantee. See "Description of Capital Securities - Trust Enforcement Events" and "- Voting Rights; Amendment of the Declaration." If CHL were to default on its obligation to pay amounts payable under the New Debentures and the Company does not make such payments, to the extent required, under the New Debt Guarantee, the Trust would lack funds for the payment of Distributions or amounts payable on redemption of the Capital Securities or otherwise, and, in such event, holders of the Capital Securities would not be able to rely upon the New Trust Guarantee for payment of such amounts. However, in the event CHL failed to pay interest on, premium, if any, or principal of the New Debentures on the payment date on which such payment is due and payable (including on any redemption date) and the Company does not make such payments, to the extent required, under the New Debt Guarantee, then a registered holder of Capital Securities may directly institute a proceeding against CHL or the Company, as the case may be, on or after such respective due dates specified in the New Debentures for enforcement of payment to such holder of the interest on, premium, if any, or principal of such New Debentures having a principal amount equal to the aggregate liquidation amount of the Capital Securities of such holder. In connection with such Direct Action, the Company will be subrogated to the rights of such holder of Capital Securities under the Declaration to the extent of any payment made by the Company, pursuant to the New Debt Guarantee, to such holder of Capital Securities in such Direct Action. Except to the extent described above under "Description of Capital Securities - Trust Enforcement Events" and "- Voting Rights; Amendment of the Declaration," the holders of Capital Securities will not be able to exercise directly any other remedy available to the holders of the New Debentures and the New Debt Guarantee. Consolidation, Merger, Sale of Assets and Other Transactions Nothing contained in the Indenture or in the New Debentures or New Debt Guarantee shall prevent any consolidation or merger of CHL or the Company with or into any other corporation (whether or not affiliated with CHL or the Company, as the case may be) or successive consolidations or mergers in which CHL or the Company, as the case may be, or its successor or successors shall be a party, or shall prevent any sale, conveyance, transfer or other disposition of the property of CHL or the Company, as the case may be, or its successor or successors as an entirety, or substantially as an entirety, to any other corporation (whether or not affiliated with CHL or the Company, as the case may be, or its successor or successors) authorized to acquire and operate the same; provided, however, CHL or the Company, as the case may be, shall, upon any such consolidation, merger, sale, conveyance, transfer or other disposition, cause the obligations of CHL under the New Debentures or the obligations of the Company under the New Debt Guarantee, as the case may be, and under the Indenture, to be expressly assumed, by supplemental indenture satisfactory in form to the Indenture Trustee and executed and delivered to the Indenture Trustee, by the successor entity formed by such consolidation or into which CHL or the Company, as the case may be, shall have been merged, or which shall have acquired such property. Upon execution and delivery of such supplemental indenture to the Indenture Trustee, such successor entity will be substituted under the Indenture, the New Debentures or the New Debt Guarantee, as the case may be, and thereupon CHL or the Company, as the case may be, will be relieved of any further liability or obligation thereunder. Modification of Indenture The Indenture contains provisions permitting CHL, the Company and the Indenture Trustee, with the consent of the holders of not less than a majority in principal amount of the New Debentures at the time outstanding, to modify the Indenture or the rights of the holders of the New Debentures; provided, however, that no such modification shall, without the consent of the holder of each outstanding New Debenture affected thereby, (a) change the stated maturity of, the principal of, or any installment of interest on, any New Debenture, or reduce the principal amount thereof or the rate of interest thereon, or change the place of payment where, or the coin or currency in which, any New Debenture or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof (or, in the case of redemption, on or after the redemption date), or modify the provisions of the Indenture with respect to the subordination of the New Debentures in a manner adverse to the holders of the New Debentures, (b) reduce the percentage in principal amount of the New Debentures outstanding, the consent of whose holders is required for any such modification, or the consent of whose holders is required for any waiver (of compliance with certain provisions of the Indenture or certain defaults thereunder and their consequences) provided for in the Indenture or (c) modify any of the provisions of the Indenture regarding amendment with the consent of the holders of the New Debentures, waiver of defaults and waiver of compliance with covenants, except to increase the percentage of aggregate principal amount of outstanding New Debentures required to consent to such modification or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the holder of each outstanding New Debenture affected thereby; provided, that, so long as any of the Capital Securities remains outstanding, no such amendment shall be made that adversely affects the holders of the Capital Securities, and no termination of the Indenture shall occur, and no waiver of any Indenture Event of Default or compliance with any covenant under the Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate liquidation amount of the outstanding Capital Securities unless and until the principal of and any premium on the New Debentures and all accrued and unpaid interest thereon have been paid in full. Without the consent of any holders of the New Debentures, CHL and the Company, when authorized by appropriate board resolutions, and the Indenture Trustee, may enter into one or more supplemental indentures: (a) to evidence the succession of another person to CHL or the Company and the assumption by any such successor of the covenants of CHL or the Company in the Indenture and in the New Debentures, (b) to add to the covenants of CHL or the Company for the benefit of the holders of the New Debentures, or to surrender any right or power herein conferred upon CHL or the Company, (c) to cure any ambiguity, to correct or supplement any provision in the Indenture which may be inconsistent with any other provision in the Indenture, or to make any other provisions with respect to matters or questions arising under the Indenture which will not be inconsistent with the provisions of the Indenture, provided that such action shall not adversely affect the interests of the holders of the New Debentures or, so long as any of the Capital Securities shall remain outstanding, the holders of the Capital Securities, or (d) to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. Defeasance and Discharge The Indenture provides that CHL, at its option: (a) will be discharged from any and all obligations in respect of the New Debentures (except for certain obligations to register the transfer or exchange of New Debentures, replace mutilated, defaced, destroyed, lost or stolen New Debentures, maintain paying agencies and hold moneys for payment in trust) or (b) need not comply with certain covenants of the Indenture (including those described under "-- Certain Covenants of CHL and the Company" above), in each case, if CHL deposits, in trust with the Indenture Trustee or the Defeasance Agent (as defined in the Indenture), money or U.S. Government Obligations, or any combination thereof, which through the payment of interest thereon and principal thereof in accordance with their terms will provide money in an amount sufficient to pay all the principal of, premium, if any, and interest on, the New Debentures on the dates such payments in respect thereof are due in accordance with the terms of such New Debentures. To exercise any such option, CHL, among other things, is required to deliver to the Indenture Trustee and the Defeasance Agent, if any, an opinion of counsel to the effect that the deposit and related defeasance would not cause the holders of the New Debentures to recognize income, gain or loss for United States federal income tax purposes and that such holders will be subject to United States federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, defeasance and/or discharge had not occurred, and, in the case of a discharge pursuant to clause (a), such opinion shall be based on the fact that (x) CHL has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since the date of the Indenture, there has been a change in applicable federal income tax law, in each case, to such effect. Distributions of New Debentures; Book-Entry Issuance At any time, New Debentures may be distributed to the holders of the Trust Securities in liquidation of the Trust after satisfaction of liabilities to creditors of the Trust as provided by applicable law. If distributed to holders of New Capital Securities in liquidation, the New Debentures will initially be issued in the form of Global Certificates. DTC, or any successor depositary, will act as depositary for such Global Certificates. It is anticipated that the depositary arrangements for such Global Certificates would be substantially identical to those in effect for the Capital Securities. For a description of Global Certificates, see "Book-Entry Issuance." If New Debentures are distributed to holders of Capital Securities in liquidation, CHL will use its reasonable efforts to arrange to list, or seek approval for quotation of, such New Debentures on any securities exchange or other organization on which the Capital Securities are then listed or quoted, if any. There can be no assurance as to the market price of any New Debentures that may be distributed to the holders of Capital Securities. See "Risk Factors - Liquidation Distribution of New Debentures." Payment and Paying Agents CHL initially will act as Paying Agent with respect to the New Debentures except that, if the New Debentures are distributed to the holders of the Capital Securities in liquidation of such holders' interests in the Trust, the Indenture Trustee will act as the Paying Agent. CHL at any time may designate additional Paying Agents or rescind the designation of any Paying Agent or approve a change in the office through which any Paying Agent acts, except that CHL will be required to maintain a Paying Agent at the place of payment. Any moneys deposited with the Indenture Trustee or any Paying Agent, or then held by CHL in trust, for the payment of the principal of and premium, if any, or interest on any New Debentures and remaining unclaimed for two years after such principal and premium, if any, or interest has become due and payable shall, at the request of CHL, be repaid to CHL, and the holder of such New Debentures shall thereafter look, as a general unsecured creditor, only to CHL for payment thereof. Governing Law The Indenture is, and the New Debentures will be, governed by and construed in accordance with the laws of the State of New York. Information Concerning the Indenture Trustee The Indenture Trustee has been and is subject to all the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act. Subject to such provisions, the Indenture Trustee is under no obligation to exercise any of the powers vested in it by the Indenture at the request of any holder of New Debentures, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. The Indenture Trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the Indenture Trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it. DESCRIPTION OF TRUST GUARANTEE The New Trust Guarantee will be executed and delivered by the Company concurrently with the issuance by the Trust of the New Capital Securities for the benefit of the holders from time to time of such New Capital Securities. The Bank of New York will act as Trust Securities Guarantee Trustee under the New Trust Guarantee. This summary of material provisions of the New Trust Guarantee and the Old Trust Guarantee does not purport to be complete and is subject to, and qualified in its entirety by reference to, all of the provisions of the Trust Guarantee, including the definitions therein of certain terms and the provisions of the Trust Indenture Act made a part thereof. The Trust Securities Guarantee Trustee will hold the New Trust Guarantee for the benefit of the holders of the New Capital Securities. General The Company will irrevocably and unconditionally agree to pay in full, to the extent set forth herein, the Trust Guarantee Payments to the holders of the Capital Securities, as and when due, regardless of any defense, right of set-off or counterclaim that the Trust may have or assert. The following payments or distributions with respect to the Capital Securities, to the extent not paid by or on behalf of the Trust, will be subject to the Trust Guarantee: (i) any accumulated and unpaid Distributions required to be paid on the New Capital Securities, to the extent that the Trust has sufficient funds available therefor at such time, (ii) the Redemption Price with respect to any Capital Securities called for redemption, to the extent that the Trust has sufficient funds available therefor at such time, or (iii) upon a voluntary or involuntary dissolution, winding up or liquidation of the Trust (unless the New Debentures are distributed to holders of the Capital Securities), the lesser of (a) the aggregate liquidation amount of the Capital Securities and all accrued and unpaid Distributions thereon to the date of payment, to the extent that the Trust has sufficient funds available therefor at such time, and (b) the amount of assets of the Trust remaining available for distribution to holders of Capital Securities. The Company's obligation to make a Trust Guarantee Payment may be satisfied by direct payment of the required amounts by the Company to the holders of the Capital Securities or by causing the Trust to pay such amounts to such holders. The Trust Guarantee will apply only to the extent that the Trust has sufficient funds available to make such payments. If CHL does not make payments on the New Debentures held by the Trust and the Company does not make such payments, to the extent required, under the New Debt Guarantee, the Trust will not be able to make payments on the Capital Securities and will not have funds legally available therefor. The Trust Guarantee does not limit the incurrence or issuance of other secured or unsecured debt of the Company, whether under any existing indenture or under any other indenture that the Company may enter into in the future or otherwise. The Company's obligations under the New Guarantees, the Indenture and the Declaration, taken together with CHL's obligations under the New Debentures and the Indenture, including CHL's obligation to pay all costs, expenses and liabilities of the Trust (other than with respect to the Trust Securities) constitute a full and unconditional guarantee by the Company of all of the Trust's obligations under the Capital Securities. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes such guarantee. It is only the combined operation of these documents that has the effect of providing a full and unconditional guarantee by the Company of the Trust's obligations under the Capital Securities. See "Relationship Among the Capital Securities, the New Debentures and the Guarantees." Status of the Trust Guarantee The Old Trust Guarantee ranks, and the New Trust Guarantee will rank, subordinate and junior in right of payment to all existing and future Senior Indebtedness of the Company. The Trust Guarantee does not place a limitation on the amount of additional Senior Indebtedness that may be incurred by the Company. See "Risk Factors - Ranking of Obligations under the Guarantees and the New Debentures." The Trust Guarantee will constitute a guarantee of payment and not of collection (i.e., the guaranteed party may institute a legal proceeding directly against the Company to enforce its rights under the Trust Guarantee without first instituting a legal proceeding against any other person or entity). The Trust Guarantee will be held by the Trust Securities Guarantee Trustee for the benefit of the holders of the Capital Securities. The Trust Guarantee will not be discharged except by payment of the Trust Guarantee Payments in full to the extent not paid by the Trust or upon distribution of the New Debentures to the holders of the Capital Securities in exchange for all of the Capital Securities. Amendments and Assignment Except with respect to any changes that do not materially adversely affect the rights of holders of the Capital Securities (in which case no consent of such holders will be required), the Trust Guarantee may not be amended without the prior approval of the holders of not less than a majority of the aggregate liquidation amount of the outstanding Capital Securities. All guarantees and agreements contained in the Trust Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the holders of the Capital Securities then outstanding. Events of Default An event of default under the Trust Guarantee will occur upon the failure of the Company to perform any of its payment or other obligations thereunder. The holders of not less than a majority in aggregate liquidation amount of the Capital Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trust Securities Guarantee Trustee in respect of the Trust Guarantee or to direct the exercise of any trust or power conferred upon the Trust Securities Guarantee Trustee under the Trust Guarantee. If the Trust Securities Guarantee Trustee fails to enforce the Trust Guarantee, then any holder of the Capital Securities may institute a legal proceeding directly against the Company to enforce the Trust Securities Guarantee Trustee's rights under the Trust Guarantee without first instituting a legal proceeding against the Trust, the Trust Securities Guarantee Trustee or any other person or entity. The Company, as guarantor, is required to file annually with the Trust Securities Guarantee Trustee a certificate as to whether or not the Company is in compliance with all the conditions and covenants applicable to it under the Trust Guarantee. Information Concerning the Trust Securities Guarantee Trustee The Trust Securities Guarantee Trustee, other than during the occurrence and continuance of a default by the Company in performance of the Trust Guarantee, undertakes to perform only such duties as are specifically set forth in the New Trust Guarantee and, after default with respect to the Trust Guarantee (that has not been cured or waived) that is actually known to a responsible officer of the Trust Securities Guarantee Trustee, must exercise the same degree of care and skill as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. Subject to this provision, the Trust Securities Guarantee Trustee is under no obligation to exercise any of the powers vested in it by the Trust Guarantee at the request of any holder of any Capital Security unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. Termination of the Trust Guarantee The Trust Guarantee will terminate and be of no further force and effect upon full payment of the Redemption Price of all of the Capital Securities, upon full payment of the amounts payable upon liquidation of the Trust or upon distribution of New Debentures to the holders of the Capital Securities in exchange for all of the Capital Securities. The Trust Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of the Capital Securities must restore payment of any sums paid under the Capital Securities or the Trust Guarantee. Governing Law The Old Trust Guarantee is and the New Trust Guarantee will be governed by and construed and interpreted in accordance with the laws of the State of New York. RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE NEW DEBENTURES AND THE GUARANTEES Payments of Distributions and other amounts due on the Capital Securities (to the extent the Trust has funds available for such payments) are fully, unconditionally and irrevocably guaranteed by the Company to the extent set forth under "Description of Trust Guarantee." If and to the extent that CHL does not make payments under the New Debentures and the Company does not make such payments, to the extent required, under the New Debt Guarantee, the Trust will not pay Distributions or other amounts due on the Capital Securities. The Trust Guarantee does not cover payment of Distributions and such other amounts when the Trust has insufficient funds to pay the same. In such event, a holder of Capital Securities may institute a legal proceeding directly against CHL or the Company to enforce payment of such amounts to such holder after the respective due dates. Taken together, the Company's obligations under the Guarantees, the Indenture and the Declaration, and CHL's obligations under the Indenture and the New Debentures, including CHL's obligation to pay all costs, expenses and liabilities of the Trust (other than with respect to the Trust Securities), provide, in the aggregate, a full and unconditional guarantee by the Company of payments of Distributions and other amounts due on the Capital Securities. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes such guarantee. It is only the combined operation of these documents that has the effect of providing a full and unconditional guarantee by the Company of the Trust's obligations under the Capital Securities. Sufficiency of Payments As long as payments of interest, principal and other payments are made when due on the New Debentures, such payments will be sufficient to cover Distributions and other payments due on the Capital Securities, primarily because (i) the aggregate principal amount of the New Debentures will be equal to the sum of the aggregate stated liquidation amount of the Trust Securities; (ii) the interest rate, the Interest Payment Dates and the other payment dates on the New Debentures will match the Distribution Rate, the Distribution Dates and the other payment dates for the Capital Securities; (iii) CHL will pay for all and any costs, expenses and liabilities of the Trust except the Trust's obligations under the Trust Securities; and (iv) the Declaration further provides that the Trust will not engage in any activity that is not consistent with the limited purposes of the Trust. Notwithstanding anything to the contrary in the Indenture, the Company has the right to set-off any payment it is otherwise required to make thereunder with and to the extent the Company has theretofore made, or is concurrently on the date of such payment making, a related payment under the Trust Guarantee. Limited Purpose of Trust The Capital Securities evidence an undivided beneficial ownership interest in the assets of the Trust, and the Trust exists for the exclusive purposes of issuing the Trust Securities and investing the proceeds thereof in the Old Debentures and the Old Debt Guarantee, which Old Debentures and Old Debt Guarantee, will be exchanged for the New Debentures and New Debt Guarantee, respectively, pursuant to the Exchange Offer. A principal difference between the rights of a holder of Capital Securities and a holder of New Debentures is that a holder of New Debentures is entitled to receive from CHL (or from the Company under the New Debt Guarantee) the principal amount of, premium, if any, and interest accrued on New Debentures held, while a holder of Capital Securities is entitled to receive Distributions from the Trust (or from the Company under the Trust Guarantee if and to the extent the Trust has funds available for the payment of such Distributions). Rights Upon Termination Upon any voluntary or involuntary dissolution of the Trust involving the liquidation of the Trust, the holders of the Capital Securities will be entitled to receive, out of assets held by the Trust, the Liquidation Distribution in cash. See "Description of Capital Securities - Liquidation Distribution Upon Dissolution." Upon any voluntary or involuntary liquidation or bankruptcy of CHL or the Company, the Property Trustee, as holder of the New Debentures and the New Debt Guarantee, would be a subordinated creditor of CHL and the Company, subordinated in right of payment to all Senior Indebtedness, but entitled to receive payment in full of principal and interest before any stockholders of CHL or the Company, as the case may be, receive payments or distributions. Because the Company is the guarantor under the Guarantees and CHL has agreed to pay for all costs, expenses and liabilities of the Trust (other than the Trust's obligations to the holders of the Trust Securities), the positions of a holder of Capital Securities and a holder of the New Debentures relative to other creditors and to stockholders of CHL or the Company in the event of liquidation or bankruptcy of CHL or the Company would be substantially the same. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES The following is a general summary of certain U.S. federal income tax consequences of the purchase, ownership and disposition of the New Capital Securities and the exchange of Old Capital Securities for New Capital Securities, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own and dispose of the New Capital Securities or exchange Old Capital Securities for New Capital Securities. This summary does not describe any tax consequences arising under the laws of any state, locality or taxing jurisdiction other than the United States. Prospective purchasers of the New Capital Securities and holders of Old Capital Securities considering an exchange of Old Capital Securities for New Capital Securities should consult their own tax advisors as to the U.S. and other tax consequences of the purchase, ownership and disposition of the New Capital Securities and the exchange of Old Capital Securities for New Capital Securities, including the particular tax consequences to them in light of their particular investment circumstances. General In addition to the two specific opinions referred to below under "- Classification of the Trust" and "- Classification of the New Debentures," Fried, Frank, Harris, Shriver & Jacobson (a partnership which includes professional corporations), special counsel to the Company, CHL and the Trust ("Counsel"), has rendered its opinion generally to the effect that, subject to the exceptions and qualifications set forth therein, the discussion of United States federal income taxation which follows summarizes the material United States federal income tax consequences of the purchase, ownership and disposition of New Capital Securities. This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations thereunder, and administrative and judicial interpretations thereof, each as of the date hereof, all of which are subject to change, possibly on a retroactive basis, and is for general information only. Except as otherwise stated, this summary deals only with a Security held as a capital asset by a holder who or which (i) purchased New Capital Securities upon original issuance (an "Initial Holder") and (ii) is a US Holder (as defined below). It does not deal with all aspects of United States federal income taxation, nor with the particular United States federal income tax (hereafter, "income tax") consequences which may be applicable to certain classes of US Holders (such as banks, thrift institutions, real estate investment trusts, regulated investment companies, insurance companies, brokers and dealers in securities or currencies, other financial institutions, tax- exempt organizations, persons holding New Capital Securities as a position in a "straddle," as part of a "synthetic security or hedge," as part of a "conversion transaction" or as part of any other integrated investment, persons having a functional currency other than the U.S. Dollar and certain United States expatriates). Further, this summary does not address (a) the income tax consequences to shareholders in, or partners or beneficiaries of, a holder of New Capital Securities, (b) the United States federal alternative minimum tax consequences of the purchase, ownership or disposition of New Capital Securities or (c) any state, local or foreign tax consequences of the purchase, ownership and disposition of New Capital Securities. A "US Holder" is a holder of New Capital Securities who or which is a citizen or individual resident (or is treated as a citizen or individual resident) of the United States for income tax purposes, a corporation or partnership created or organized (or treated as created or organized for income tax purposes) in or under the laws of the United States or any political subdivision thereof, or a trust or estate the income of which is includable in its gross income for income tax purposes without regard to its source. (For taxable years beginning after December 31, 1996 (or for the immediately preceding taxable year, if the trustee of a trust so elects), a trust is a US Holder for income tax purposes if, and only if (i) a court within the United States is able to exercise primary supervision over the administration of the trust, and (ii) one or more United States trustees have the authority to control all substantial decisions of the trust.) Exchange of New Capital Securities The issuance of New Capital Securities in exchange for Old Capital Securities will not be a taxable event, and the federal tax characteristics of the New Capital Securities (e.g., tax basis and holding period) will be the same as those of the Old Capital Securities surrendered in exchange therefor. Classification of the Trust Counsel has rendered its opinion generally to the effect that, under then current law and assuming full compliance with the terms of the Declaration (and other documents), and based on certain assumptions and qualifications referenced in the opinion, the Trust will be characterized for United States federal income tax purposes as a grantor trust, and will not be characterized as an association taxable as a corporation for such purposes. Accordingly, for income tax purposes, each holder of New Capital Securities generally will be considered the owner of an undivided interest in the New Debentures owned by the Trust, and each US Holder will be required to include all income or gain recognized for income tax purposes with respect to its allocable share of the New Debentures on its own income tax return. Classification of the New Debentures The Company, CHL, the Trust and the holders of the New Capital Securities (by acceptance of a beneficial interest in a New Capital Security) will agree to treat the New Debentures as indebtedness for all United States income tax purposes. Counsel has rendered its opinion generally to the effect that, under then current law and assuming full compliance with the terms of the Indenture (and other documents), and based on certain assumptions and qualifications referenced in the opinion, the New Debentures will be characterized for United States federal income tax purposes as debt of CHL. Interest Income and Original Issue Discount Under the terms of the New Debentures, CHL has the option to defer payments of interest from time to time for a period not exceeding 10 consecutive semi-annual periods, but not beyond the Stated Maturity of the New Debentures. Recently issued Treasury regulations under Section 1273 of the Code provide that debt instruments like the New Debentures will not be considered issued with OID by reason of CHL's option to defer payments of interest if the likelihood of deferral is "remote." CHL has concluded, and this discussion assumes, that, as of the date of this Prospectus, the likelihood of exercise of that option is "remote" within the meaning of the applicable regulations, in part because exercising that option would prevent the Company and CHL from declaring dividends on their stock and would prevent the Company and CHL from making any payments with respect to debt securities that rank pari passu or junior to the New Debentures. Therefore, the New Debentures should not be treated as issued with OID by reason of CHL's deferral option. Rather, stated interest on the New Debentures will generally be taxable to a US Holder, as ordinary income, when paid or accrued in accordance with that holder's method of accounting for income tax purposes. It should be noted, however, that these regulations have not yet been addressed in any rulings or other interpretations by the Internal Revenue Service ("IRS"). Accordingly, it is possible that the IRS could take a position contrary to the interpretation described herein. In the event CHL subsequently exercised its option to defer payments of interest, the New Debentures would be treated as reissued for OID purposes and the sum of the remaining interest payments on the New Debentures (and any de minimis OID on the New Debentures (discussed below)) would thereafter be treated as OID, which would accrue, and be includable in a US Holder's taxable income, on an economic accrual basis (regardless of the US Holder's method of accounting for income tax purposes) over the remaining term of the New Debentures (including any period of interest deferral), without regard to the timing of payments under the New Debentures. (Subsequent distributions of interest on the New Debentures generally would not be taxable.) The amount of OID that accrued in any period would generally equal the amount of interest that accrued on the New Debentures in that period at the stated interest rate (adjusted for any de minimis OID on the New Debentures). Consequently, during any period of interest deferral, US Holders will include OID in gross income in advance of the receipt of cash, and a US Holder which disposes of a New Capital Security prior to the record date for payment of Distributions on the New Debentures following that period will be subject to income tax on OID accrued through the date of disposition (and not previously included in income), but will not receive cash from the Trust with respect to that OID. In the absence of CHL's election to defer an interest payment period, de minimis OID would not be subject to income tax until a holder's New Debentures were sold, redeemed or retired, in which event the de minimis OID would increase any gain or decrease any loss recognized by the holder. De minimis OID will be present with respect to the New Debentures, in an amount equal to the excess of (a) the stated redemption price at maturity (as defined for income tax purposes) of a New Debenture, over (b) the issue price of an Old Debenture, if such amount is less than the product of (x) 0.25% of that redemption price, and (y) the number of complete calendar years from an Old Debenture's issue date to the maturity of a New Debenture. If CHL's option to defer payments of interest were not treated as remote, the Old Debentures and the New Debentures would be treated as initially issued with OID in an amount equal to the aggregate stated interest over the term of the Old Debentures and the New Debentures, plus the amount of de minimis OID on the Old Debentures and the New Debentures. That OID would generally be includable in a US Holder's taxable income, over the term of the Old Debentures and the New Debentures, on an economic accrual basis. Because the income underlying the New Capital Securities will not be characterized as dividends for income tax purposes, corporate holders of New Capital Securities will not be entitled to a dividend received deduction for any income recognized with respect to the New Capital Securities. Market Discount and Bond Premium Holders of New Capital Securities other than Initial Holders may be considered to have acquired their undivided interests in the New Debentures with market discount or acquisition premium (as each phrase is defined for income tax purposes). Distribution of New Debentures or Cash upon Liquidation of the Trust Under the circumstances described under the caption "Description of New Capital Securities - Redemption - Special Event Redemption or Distribution of New Debentures; Shortening of Stated Maturity" above, New Debentures, together with the New Debt Guarantee, may be distributed to holders in exchange for the New Capital Securities and in liquidation of the Trust. Except as discussed below, such a distribution would not be a taxable event for income tax purposes, and each US Holder would have an aggregate adjusted basis in its New Debentures (including the New Debt Guarantee) for income tax purposes equal to such holder's aggregate adjusted basis in its New Capital Securities. For income tax purposes, a US Holder's holding period in the New Debentures (including the New Debt Guarantee) received in such a liquidation of the Trust would include the period during which the New Capital Securities were held by the holder. If, however, the relevant event is a Tax Event which results in the Trust being treated as an association taxable as a corporation, the distribution would likely constitute a taxable event to US Holders of the New Capital Securities for income tax purposes. Upon retirement of the New Capital Securities, and under certain circumstances described herein (see "Description of Capital Securities"), the New Debentures may be redeemed for cash and the proceeds of such redemption distributed to holders in redemption of their New Capital Securities. Such a redemption would be taxable for income tax purposes, and a US Holder would recognize gain or loss as if it had sold the New Capital Securities for cash. See " Sales of New Capital Securities" below. Sales of New Capital Securities A US Holder that sells New Capital Securities will recognize gain or loss equal to the difference between its adjusted basis in the New Capital Securities and the amount realized on the sale of such New Capital Securities. A US Holder's adjusted basis in the New Capital Securities generally will be its initial purchase price, increased by OID, if any, previously included (or currently includable) in such holder's gross income to the date of disposition, and decreased by payments received on the New Capital Securities subsequent to the effective date of CHL's first exercise of its option to defer payments of interest. Any such gain or loss generally will be capital gain or loss, and generally will be a long-term capital gain or loss if the New Capital Securities have been held for more than one year. A holder who disposes of its New Capital Securities between record dates for payments of Distributions will be required to include accrued but unpaid interest (or OID) on the New Debentures through the date of disposition in its taxable income for United States federal income tax purposes (notwithstanding that the holder may receive a separate payment from the purchaser with respect to accrued interest), and to deduct that amount from the sales proceeds received (including the separate payment, if any, with respect to accrued interest) for the New Capital Securities (or as to OID only, to add such amount to such holder's adjusted tax basis in its New Capital Securities). To the extent the selling price is less than the holder's adjusted tax basis (which will include accrued but unpaid OID, if any), a holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. Recent Tax Legislation Recently enacted U.S. federal income tax legislation will have no effect on the income tax treatment of the Capital Securities. However, there can be no assurance that future legislation will not adversely affect the ability of CHL to deduct interest on the New Debentures, or otherwise affect the tax treatment of the transactions described herein. Moreover, such legislation could give rise to a Tax Event, which would permit CHL to shorten the maturity of the New Debentures or cause a redemption of the Capital Securities, as described more fully under "Description of Capital Securities - Redemption - Special Event Redemption or Distribution of New Debentures; Shortening of Stated Maturity." Non-United States Holders The following discussion applies to an Initial Holder who is not a US Holder (a "Non-US Holder"). Payments to a holder of a New Capital Security which is a Non-US Holder will generally not be subject to withholding of income tax, provided that (a) the beneficial owner of the New Capital Security does not (directly or indirectly, actually or constructively) own 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote, (b) the beneficial owner of the New Capital Security is not a controlled foreign corporation that is related to the Company through stock ownership, and (c) either (i) the beneficial owner of the New Capital Securities certifies to the Trust or its agent, under penalties of perjury, that it is a Non-US Holder and provides its name and address, or (ii) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "Financial Institution"), and holds the New Capital Security in such capacity, certifies to the Trust or its agent, under penalties of perjury, that such a statement has been received from the beneficial owner by it or by another Financial Institution between it and the beneficial owner in the chain of ownership, and furnishes the Trust or its agent with a copy thereof. As discussed above (see "Description of Capital Securities - Redemption - Special Event Redemption or Distribution of New Debentures; Shortening of Stated Maturity"), changes in legislation affecting the income tax consequences of the New Debentures are possible, and could adversely affect the ability of CHL to deduct the interest payable on the New Debentures. Moreover, any such legislation could, as the Proposed Legislation would have, adversely affect Non-US Holders by characterizing income derived from the New Debentures as dividends, generally subject to a 30% income tax (on a withholding basis) when paid to a Non-US Holder, rather than as interest which, as discussed above, is generally exempt form income tax in the hands of a Non- US Holder. A Non-US Holder of a New Capital Security will generally not be subject to withholding of income tax on any gain realized upon the sale or other disposition of a New Capital Security. A Non-US Holder which holds New Capital Securities in connection with the active conduct of a United States trade or business will be subject to income tax on all income and gains recognized with respect to its proportionate share of the New Debentures. Information Reporting and Backup Withholding In general, information reporting requirements will apply to payments made on, and proceeds from the sale of, New Capital Securities held by a noncorporate US Holder within the United States. In addition, payments made on, and payments of the proceeds from the sale of, New Capital Securities to or through the United States office of a broker are subject to information reporting unless the holder thereof certifies as to its non- United States status or otherwise establishes an exemption from information reporting and backup withholding. Taxable income on the New Capital Securities for a calendar year should be reported to US Holders on Forms 1099 by the following January 31st. Payments made on, and proceeds from the sale of, the New Capital Securities may be subject to a "backup" withholding tax of 31% unless the holder complies with certain identification or exemption requirements. Any amounts so withheld will be allowed as a credit against the holder's income tax liability, or refunded, provided the required information is provided to the IRS. * * * The preceding discussion is only a summary and does not address the consequences to a particular holder of the purchase, ownership and disposition of New Capital Securities. Potential holders of New Capital Securities are urged to contact their own tax advisors to determine their particular tax consequences. BOOK-ENTRY ISSUANCE The description of book-entry procedures in this Prospectus includes summaries of certain rules and operating procedures of DTC that affect transfers of interests in the Global Certificate or Certificates issued in connection with sales of New Capital Securities. Except as described in the next paragraph, the New Capital Securities will be issued only as fully registered securities registered in the name of Cede & Co. (as nominee for DTC). One or more fully registered Global Certificates will be issued, representing, in the aggregate, the New Capital Securities, and will be deposited with DTC. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of securities in definitive form. Such laws may impair the ability to transfer beneficial interests in the Global Securities as represented by a Global Certificate. DTC has advised the Company and the Trust that it is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Participants in DTC include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others, such as securities brokers and dealers, banks and trust companies that clear transactions through or maintain a direct or indirect custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Commission. Purchases of New Capital Securities within the DTC system must be made by or through Direct Participants, which will receive a credit of the New Capital Securities on DTC's records. The ownership interest of each actual purchaser of each New Capital Security ("Beneficial Owner") is in turn to be recorded on the Direct Participants' and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners purchased New Capital Securities. Transfers of ownership interests in the New Capital Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the New Capital Securities, except in the event that use of the book- entry system for the New Capital Securities is discontinued. To facilitate subsequent transfers, all the New Capital Securities deposited by Participants with DTC will be registered in the name of DTC's nominee, Cede & Co. The deposit of New Capital Securities with DTC and their registration in the name of Cede & Co. will effect no change in beneficial ownership. DTC will have no knowledge of the actual Beneficial Owners of the New Capital Securities. DTC's records will reflect only the identity of the Direct Participants to whose accounts such New Capital Securities are credited, which may or may not be the Beneficial Owners. The Direct Participants and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. So long as DTC, or its nominee, is the registered owner or holder of a Global Certificate in respect of the New Capital Securities, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the New Capital Securities represented thereby for all purposes under the Declaration and such New Capital Securities. No Beneficial Owner of an interest in a Global Certificate will be able to transfer that interest except in accordance with DTC's applicable procedures. DTC has advised the Company that it will take any action permitted to be taken by a holder of New Capital Securities (including the presentation of New Capital Securities for exchange as described below) only at the direction of one or more Participants to whose accounts the DTC interests in the Global Certificates are credited and only in respect of such portion of the aggregate liquidation amount of New Capital Securities as to which such Participant or Participants has or have given such direction. However, if there is a Declaration Event of Default with respect to the New Capital Securities, DTC will, upon notice, exchange the Global Certificates in respect of such New Capital Securities for certificated securities, which it will distribute to its Participants. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices in respect of the New Capital Securities held in book-entry form will be sent to Cede & Co. If less than all of the New Capital Securities are being redeemed, the New Capital Securities will be redeemed on a pro rata basis. Although voting with respect to the New Capital Securities is limited, in those cases where a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to the New Capital Securities. Under its usual procedures, DTC would mail an omnibus proxy to the Trust as soon as possible after the record date. The omnibus proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the New Capital Securities are credited on the record date (identified in a listing attached to the omnibus proxy). Distributions on the New Capital Securities held in book- entry form will be made to DTC in immediately available funds. DTC's practice is to credit Direct Participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on such payment date. Payments by Direct Participants and Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices and will be the responsibility of such Direct Participants and Indirect Participants and not of DTC, the Trust or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of distributions to DTC is the responsibility of the Trust, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Benficial Owners is the responsibility of Direct Participants and Indirect Participants. Except as provided herein, a Beneficial Owner of an interest in a Global Certificate will not be entitled to receive physical delivery of New Capital Securities. Accordingly, each Beneficial Owner must rely on the procedures of DTC, the Direct Participants and the Indirect Participants to exercise any rights under the New Capital Securities. Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Certificates among the Participants of DTC, DTC is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of the Company, the Trust or the Trustees will have any responsibility for the performance by DTC or its Direct Participants or Indirect Participants under the rules and procedures governing DTC. DTC may discontinue providing its services as a securities depositary with respect to the Capital Securities at any time by giving notice to the Trust. Under such circumstances, in the event that a successor securities depositary is not obtained, New Capital Security certificates will be required to be printed and delivered. Additionally, the Trust (with the consent of the Company) may decide to discontinue use of the system of book- entry transfers through DTC (or a successor depositary) with respect to the New Capital Securities of the Trust. In that event, certificates for such New Capital Securities will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Company and the Trust believes to be reliable, but none of the Company, DTC, or the Trust takes responsibility for the accuracy thereof. ERISA CONSIDERATIONS Generally, employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code ("Plans"), may purchase New Capital Securities, subject to the investing fiduciary's determination that the investment in New Capital Securities satisfies ERISA's fiduciary standards and other requirements applicable to investments by the Plan. Accordingly, an investing fiduciary of a Plan should consider whether the investment satisfies ERISA's diversification and prudence requirements, whether the investment constitutes unauthorized delegation of fiduciary authority and whether the investment is in accordance with the documents and instruments governing such Plan. The Department of Labor ("DOL") has issued a regulation (29 C.F.R. Section 2510.3-101) (the "DOL Regulation") concerning the definition of what constitutes the assets of a Plan. The DOL Regulation provides that as a general rule, the underlying assets and properties of corporations, partnerships, trusts and certain other entities in which a plan makes an "equity" investment, where such investment interest does not represent a "publicly offered security" or a security issued by an investment company registered under the 1940 Act, will be deemed for purposes of ERISA to be assets of the investing plan unless it is established either that the entity is an operating company or that equity participation by benefit plan investors is not significant. Under the DOL Regulation, equity participation by benefit plan investors will not be considered "significant" on any date only if, immediately after the most recent acquisition of New Capital Securities, the aggregate interest in the New Capital Securities held by benefit plan investors will be less than 25% of the value of the New Capital Securities. There can be no assurance that any of the exceptions set forth in the DOL Regulation will apply to the purchase of New Capital Securities offered hereby and, as a result, an investing Plan's assets could be considered to include an undivided beneficial interest in the New Debentures held by the Trust. In the event that assets of the Trust are considered assets of an investing Plan, the Company, CHL and the Trustees and other persons, in providing services with respect to the New Debentures, may be considered fiduciaries to such Plan and subject to the fiduciary responsibility provisions of Title I of ERISA (including the prohibited transaction provisions thereof). In addition, the prohibited transaction provisions of Section 4975 of the Code could apply with respect to transactions engaged in by any "disqualified person," as defined below, involving such assets unless a statutory or administrative exemption applies. Even if they are not fiduciaries, the Company and/or any of its affiliates may be considered a "party in interest" (within the meaning of ERISA) or a "disqualified person" (within the meaning of Section 4975 of the Code) with respect to certain Plans. The acquisition and ownership of New Capital Securities by a Plan (or by an individual retirement arrangement or other plan described in Section 4975(e)(1) of the Code) may constitute or result in a prohibited transaction under ERISA or Section 4975 of the Code, unless such New Capital Securities are acquired pursuant to and in accordance with an applicable exemption. As a result, Plans with respect to which the Company or any of its affiliates is a party in interest or a disqualified person should not acquire New Capital Securities unless such New Capital Securities are acquired pursuant to and in accordance with an applicable exemption, including but not limited to: Prohibited Transaction Class Exemption ("PTE") 90-1, regarding investments by insurance company pooled separate accounts; PTE 91-38, regarding investments by bank collective investment funds; PTE 84-14, regarding transactions effected by qualified professional asset managers; PTE 96-23, regarding transactions effected by in-house asset managers; or PTE 95-60, regarding investments by insurance company general accounts. Any purchaser or holder of the New Capital Securities or any interest therein will be deemed to have represented and covenanted by its purchase and holding thereof that either (i) the purchaser and holder is not a Plan or any entity whose underlying assets include "plan assets" by reason of any Plan's investment in the entity and is not purchasing such New Capital Securities on behalf of or with "plan assets" of any Plan or (ii) the purchase and holding of the New Capital Securities is covered by one of the prohibited transaction class exemptions under ERISA and the Code described above. Notwithstanding the foregoing, it is possible that the New Capital Securities may qualify as "publicly offered securities" under the DOL Regulation if, in addition to an effective registration statement filed in connection with the Exchange Offer, they are also "widely held" and "freely transferable" following consummation of the Exchange Offer. Under the DOL Regulation, a class of New Capital Securities is "widely held" only if it is a class of New Capital Securities owned by 100 or more investors independent of the issuer and each other. Although it is possible that at the time of the Exchange Offer the New Capital Securities will be "widely held", no assurances can be given that will be true. If the New Capital Securities are "publicly offered securities" following consummation of the Exchange Offer, the assets of the Trust would not be assets of the Investing Plans as of such time. If the New Capital Securities did not qualify as "publicly offered securities", the foregoing discussion about plan assets in the preceding paragraphs would also be applicable to the New Capital Securities. Government plans and certain church plans (as defined in Sections 3(32) and 3(33) of ERISA, respectively), are not subject to ERISA, and are also not subject to the prohibited transaction provisions under Section 4975 of the Code. However, state laws or regulations governing the investment and management of the assets of such plans may contain fiduciary and prohibited transaction requirements similar to those under ERISA and the Code discussed above. Accordingly, fiduciaries of governmental or church plans, in consultation with their advisors, should consider the impact of their respective state pension codes on investments in the New Capital Securities, and the considerations discussed above, to the extent applicable. The foregoing discussion is general in nature and is not intended to be all inclusive. Thus, any Plans or other entities whose assets include Plan assets subject to ERISA or Section 4975 of the Code proposing to acquire New Capital Securities or New Capital Securities should consult with their own counsel. PLAN OF DISTRIBUTION Each broker-dealer that receives New Capital Securities for its own account in connection with the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Capital Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by Participating Broker-Dealers during the period referred to below in connection with resales of New Capital Securities received in exchange for Old Capital Securities if such Old Capital Securities were acquired by such Participating Broker- Dealers for their own accounts as a result of market-making or other trading activities. The Company, CHL and the Trust have agreed that this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of such New Capital Securities for a period ending 90 days after the date the Registration Statement of which this Prospectus is a part is declared effective. However, a Participating Broker-Dealer who intends to use this Prospectus in connection with the resale of New Capital Securities received in exchange for Old Capital Securities pursuant to the Exchange Offer must notify the Company, CHL and the Trust, or cause the Company, CHL and the Trust to be notified, on or prior to the Expiration Date, that it is a Participating Broker-Dealer. Such notice may be given in the space provided for that purpose in the Letter of Transmittal or may be delivered to the Exchange Agent at one of the addresses set forth herein under "The Exchange Offer - Exchange Agent." See "The Exchange Offer - Resales of New Capital Securities." The Company will not receive any proceeds from any sale of New Capital Securities by broker-dealers. New Capital Securities received by Participating Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Capital Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such New Capital Securities. Any Participating Broker-Dealer that resells New Capital Securities that were received by it for its own account pursuant to the Exchange Offer may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of the New Capital Securities and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. LEGAL MATTERS Certain matters of Delaware law relating to the validity of the New Capital Securities will be passed upon for the Trust by Morris Nichols Arsht & Tunnell, special Delaware counsel to the Company, CHL and the Trust. The validity of the New Debentures and the New Guarantees will be passed upon for CHL and the Company by Fried, Frank, Harris, Shriver & Jacobson (a partnership which includes professional corporations). Edwin Heller (whose professional corporation retired as a partner of Fried, Frank, Harris, Shriver & Jacobson in September 1996) is of counsel to Fried, Frank, Harris, Shriver & Jacobson and is a director of the Company. Fried, Frank, Harris, Shriver & Jacobson will rely on the opinion of Morris Nichols Arsht & Tunnell as to matters of Delaware law. INDEPENDENT AUDITORS The consolidated financial statements of the Company appearing in the Company's Annual Report on Form 10-K for the year ended February 28, 1997, have been audited by Grant Thornton LLP, independent auditors, as set forth in their report thereon, included therein and incorporated herein by reference. INDEX OF CERTAIN TERMS Page Agent's Message...............................................27 book-entry confirmation.......................................27 Beneficial Owner..............................................60 Business Day..................................................36 Capital Securities............................................i Change in 1940 Act Law........................................38 CHL...........................................................i Code..........................................................vi, 56 Commission ...................................................iv Common Securities ............................................ i Company ...................................................... i Counsel ......................................................55 Creditor......................................................42 Declaration ..................................................23 Delaware Trustee .............................................23 Depositor.....................................................30 Direct Action ................................................15 Direct Participants ..........................................60 Distribution Date ............................................36 Distribution Rate ............................................10 Distributions ................................................ii DOL ..........................................................61 DOL Regulation ...............................................61 DTC ..........................................................15 Eligible Institution .........................................29 ERISA ........................................................vi, 61 Exchange Act ................................................. v Exchange Agent ............................................... 8 Exchange Offer ............................................... i Expiration Date ..............................................iii, 7, 26 Extension Period .............................................ii Financial Institution ........................................58 financing entity .............................................49 Global Certificates ..........................................36 Global Securities ............................................15 Guarantees ................................................... i income tax ...................................................56 Indenture ....................................................45 Indenture Event of Default ...................................48 Indenture Trustee ............................................45 Indirect Participants ........................................60 Initial Holder ...............................................56 Initial Purchasers ........................................... i interest .....................................................45 Interest Payment Date ........................................45 Investment Company Event .....................................38 IRS ..........................................................57 Letter of Transmittal ........................................ i Liquidation Distribution .....................................40 Maturity Advancement .........................................38 New Capital Securities ....................................... i New Debentures ............................................... i New Debt Guarantee ........................................... i New Guarantees ............................................... i New Securities ............................................... i New Trust Guarantee .......................................... i 1940 Act .....................................................24 1996 Debentures ..............................................ii Non-US Holder ................................................58 NYSE ......................................................... v Offering ..................................................... 4 Offerings ....................................................ii OID ..........................................................iii Old Capital Securities ....................................... i Old Debentures ............................................... i Old Debt Guarantee ........................................... i Old Securities ............................................... i Old Trust Guarantee .......................................... i Participants .................................................60 Participating Broker-Dealers ................................. v Paying Agent .................................................43 Plans ........................................................61 PORTAL .......................................................19 Prime mortgages ..............................................22 Property Account .............................................23 Property Trustee .............................................23 Prospectus ................................................... i PTE ..........................................................vi, 61 Qualified Institutional Buyers ...............................24 Redemption Price .............................................38 Registration Rights Agreement ................................ i Registration Statement ....................................... i Regular Trustees .............................................23 Rule 144A ....................................................iv Rule 3a-5 ....................................................41 Securities Act ............................................... i Senior Indebtedness ..........................................48 Shelf Registration Statement ................................. 9 Special Event ................................................37 Stated Maturity ..............................................11 Sub-prime loans ..............................................22 Successor Securities .........................................43 Targeted Consummation Date ...................................24 Tax Event ....................................................38 Trust ........................................................ i Trust Act ....................................................23 Trust Enforcement Event ......................................40 Trust Guarantee .............................................. i Trust Guarantee Payments .....................................16 Trust Indenture Act ..........................................18 Trust Securities ............................................. i Trust Securities Guarantee Trustee ...........................23 Trustees .....................................................23 U.S. Person ..................................................24 US Holder ....................................................57 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 20. Indemnification of Directors and Officers. Section 145 of the Delaware General Corporation Law provides, in substance, that Delaware corporations shall have the power, under specified circumstances, to indemnify their directors, officers, employees and agents in connection with actions, suits or proceedings brought against them by a third party or in the right of the corporation, by reason of the fact that they were or are such directors, officers, employees or agents, against expenses incurred in any such action, suit or proceeding. The Delaware General Corporation Law also provides that Delaware corporations may purchase insurance on behalf of any such director, officer, employee or agent. Sections 722, 723, 725 and 726 of the Delaware General Corporation Law. Article SIXTH of the Certificate of Incorporation of CCI provides that CCI may indemnify its directors and officers to the full extent permitted by the laws of the State of Delaware. Article VIII of CCI's Bylaws provides that CCI shall indemnify its directors and officers, and persons serving as directors and officers of CHL at the request of CCI, against any threatened, pending or completed action, suit or proceeding or investigation brought against such directors and officers by reason of the fact that such persons were such directors or officers, provided that such persons acted in good faith and in a manner which they reasonably believed to be in or not opposed to the best interests of CCI; except that in the case of actions brought by or in the right of CCI to procure a judgment in its favor, no indemnification is permitted in respect of any claim, issue or matter as to which any such director or officer shall have been adjudged to be liable to CCI unless the court in which the action was brought determines that such person is entitled to indemnification. CCI's Bylaws further contemplate that the indemnification provisions permitted thereunder are not exclusive of any rights to which such directors and officers are otherwise entitled by means of Bylaw provisions, agreements, vote of stockholders or disinterested directors or otherwise. CCI has entered into indemnity agreements with certain of its directors and executive officers (including the directors and executive officers of CHL), whereby such individuals are indemnified by CCI up to an aggregate limit of $5,000,000 for any claims made against such individual based on any act, omission or breach of duty committed while acting as a director or officer, except, among other things, cases involving dishonesty or improper personal benefit. CCI also maintains an insurance policy pursuant to which its directors and officers (including the directors and executive officers of CHL) are insured against certain liabilities which might arise out of their relationship with CCI as directors and officers. Article SEVENTH of the Certificate of Incorporation of CCI provides that a director of CCI shall have no personal liability to CCI or its stockholders for monetary damages for breach of his fiduciary duty of care as a director to the full extent permitted by the Delaware General Corporation Law, as it may be amended from time to time. Item 21. Exhibits and Financial Statement Schedules. Number Description Page No. 4.1 Certificate of Trust of Countrywide Capital III, dated May 28, 1997 4.2 Declaration of Trust of Countrywide Capital III, dated May 28, 1997 4.3 Amended and Restated Declaration of Trust of Countrywide Capital III, dated as of June 4, 1997 4.4 Indenture, dated as of June 4, 1997, among Countrywide Home Loans, Inc., as Issuer, Countrywide Credit Industries, Inc., as Guarantor, and The Bank of New York, as Trustee 4.5 Form of New Capital Security (included in Exhibit 4.3 above) 4.6 Form of New Debenture (included in Exhibit 4.4 above) 4.7 Guarantee Agreement, dated as of June 4, 1997, between Countrywide Credit Industries, Inc. and The Bank of New York, as trustee for the benefit of the holders of Trust Securities 4.8 Registration Rights Agreement, dated as of June 4, 1997, among Countrywide Capital III, Countrywide Credit Industries, Inc., Countrywide Home Loans, Inc., and certain Initial Purchasers 5.1 Opinion of Morris, Nichols, Arsht & Tunell as to the validity of the New Capital Securities 5.2 Opinion of Fried, Frank, Harris, Shriver & Jacobson as to the validity of the New Debentures and the New Debt Guarantee 8.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson as to certain United States federal income tax matters 12.1 Statement regarding computation of ratio of earnings to fixed charges of Countrywide Credit Industries, Inc. (Incorporated by reference to Exhibit 12.1 to the Quarterly Report on Form 10-Q of Countrywide Credit Industries, Inc. for the fiscal quarter ended May 31, 1997) 23.1 Consent of Grant Thornton LLP 23.2 Consent of Morris, Nichols, Arsht & Tunell (included in Exhibit 5.1) 23.3 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5.2) 23.4 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 8.1) 24.1 Powers of Attorney (included on signature pages) 25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of New York, as Indenture Trustee under the Indenture (bound separately) 25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of New York, as Property Trustee under the Amended and Restated Declaration of Trust of Countrywide Capital III (bound separately) 25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of New York, as Trust Guarantee Trustee under the Trust Securities Guarantee of Countrywide Credit Industries, Inc. for the benefit of the holders of Capital Securities (bound separately) 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery 99.3 Form of Letter to Registered Holders 99.4 Form of Instructions to Registered Holders 99.5 Form of Letter to Clients Item 22. Undertakings. (a) The undersigned, Countrywide Capital III, CHL and the Company (collectively, the "Registrants"), hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment hereof) which, individually of in the aggregate, represent a fundamental change in the information set forth in this Registration Statement; notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of a prospectus filed with the Securities and Exchange Commission (the "Commission") pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the "Securities Act") if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement; provided, however, that the undertakings set forth in paragraphs (1)(i) and (ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Company pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are incorporated by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post- effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Each of the undersigned Registrants hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of CCI's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrants pursuant to the provisions permitted under Item 20 above or otherwise, the Registrants have been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted against the Registrants by such director, officer or controlling person in connection with the securities being registered hereby, the Registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by them is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (d) The undersigned Registrants hereby undertake that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time if was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (e) The undersigned Registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This undertaking includes information contained in documents filed subsequent to the effective date of this Registration Statement through the date of responding to the request. (f) The undersigned Registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Countrywide Capital III certifies that it has duly caused this Registration Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Calabasas, State of California, on the 2nd day of October, 1997. Countrywide Capital III By:Countrywide Credit Industries, Inc., as Sponsor By: /s/ Angelo R. Mozilo --------------------------------- Angelo R. Mozilo Executive Vice President and Vice Chairman of the Board of Directors SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Countrywide Home Loans, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Calabasas, State of California, on the 2nd day of October, 1997. Countrywide Home Loans, Inc. By:Countrywide Credit Industries, Inc., as Sponsor By: /s/ Angelo R. Mozilo -------------------------------- Angelo R. Mozilo Chairman of the Board of Directors POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David S. Loeb, Angelo R. Mozilo, Stanford L. Kurland and Carlos M. Garcia, and each of them, his true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement, and any registration statement related to the offering contemplated by this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting until said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as might or could be done in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-4 has been signed by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ David S. Loeb Director October 2, - ---------------------------------------- 1997 David S. Loeb /s/ Angelo R. Mozilo Chairman of the October 2, - ---------------------------------------- Board of Directors 1997 Angelo R. Mozilo and Chief Executive Officer (Principal Executive Officer); Director /s/ Stanford L. Kurland President and Chief October 2, - ---------------------------------------- Operating Officer; 1997 Stanford L. Kurland Director /s/ Thomas K. McLaughlin Managing Director October 2, - ---------------------------------------- and Chief Financial 1997 Thomas K. McLaughlin Officer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Countrywide Credit Industries, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Calabasas, State of California, on the 2nd day Of October, 1997. COUNTRYWIDE CREDIT INDUSTRIES, INC. By: COUNTRYWIDE CREDIT INDUSTRIES, INC. By: /s/ David S. Loeb ---------------------------------------- David S. Loeb Chairman of the Board of Directors and President POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David S. Loeb, Angelo R. Mozilo, Stanford L. Kurland and Carlos M. Garcia, and each of them, his true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement, and any registration statement related to the offering contemplated by this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as might or could be done in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-4 has been signed by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ David S. Loeb Chairman of the October 2, - ---------------------------------------- Board of Directors 1997 David S. Loeb and President (Principal Executive Officer); Director /s/ Angelo R. Mozilo Executive Vice October 2, - ---------------------------------------- President and Vice 1997 Angelo R. Mozilo Chairman of the Board of Directors; Director /s/ Carlos M. Garcia Managing Director -- October 2, - ---------------------------------------- Finance, Chief 1997 Carlos M. Garcia Financial Officer and Chief Accounting Officer (Principal Financial and Accounting Officer) /s/ Robert J. Donato Director October 2, - ---------------------------------------- 1997 Robert J. Donato /s/ Ben M. Enis Director October 2, - ---------------------------------------- 1997 Ben M. Enis /s/ Edwin Heller Director October 2, - ---------------------------------------- 1997 Edwin Heller /s/ Harley W. Snyder Director October 2, - ---------------------------------------- 1997 Harley W. Snyder EXHIBIT INDEX NUMBER DESCRIPTION PAGE NO. 4.1 Certificate of Trust of Countrywide Capital III, dated May 28, 1997 4.2 Declaration of Trust of Countrywide Capital III, dated May 28, 1997 4.3 Amended and Restated Declaration of Trust of Countrywide Capital III, dated as of June 4, 1997 4.4 Indenture, dated as of June 4, 1997, among Countrywide Home Loans, Inc., as Issuer, Countrywide Credit Industries, Inc., as Guarantor, and The Bank of New York, as Trustee 4.5 Form of New Capital Security (included in Exhibit 4.3 above) 4.6 Form of New Debenture (included in Exhibit 4.4 above) 4.7 Guarantee Agreement, dated as of June 4, 1997, between Countrywide Credit Industries, Inc. and The Bank of New York, as trustee for the benefit of the holders of Trust Securities 4.8 Registration Rights Agreement, dated as of June 4, 1997, among Countrywide Capital III, Countrywide Credit Industries Inc., Countrywide Home Loans, Inc., and certain Initial Purchasers 5.1 Opinion of Morris, Nichols, Arsht & Tunell as to the validity of the New Capital Securities 5.2 Opinion of Fried, Frank, Harris, Shriver & Jacobson as to the validity of the New Debentures and the New Debt Guarantee 8.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson as to certain United States federal income tax matters 12.1 Statement regarding computation of ratio of earnings to fixed charges of Countrywide Credit Industries, Inc. (Incorporated by reference to Exhibit 12.1 to the Quarterly Report on Form 10-Q of Countrywide Credit Industries, Inc. for the fiscal quarter ended May 31, 1997) 23.1 Consent of Grant Thornton LLP 23.2 Consent of Morris, Nichols, Arsht & Tunell (included in Exhibit 5.1) 23.3 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5.2) 23.4 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 8.1) 24.1 Powers of Attorney (included on signature pages) 25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of New York, as Indenture Trustee under the Indenture (bound separately) 25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of New York, as Property Trustee under the Amended and Restated Declaration of Trust of Countrywide Capital III (bound separately) 25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of New York, as Trust Guarantee Trustee under the Trust Securities Guarantee of Countrywide Credit Industries, Inc. for the benefit of the holders of Capital Securities (bound separately) 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery 99.3 Form of Letter to Registered Holders 99.4 Form of Instructions to Registered Holders 99.5 Form of Letter to Clients EX-4.1 2 EXHIBIT 4.1 CERTIFICATE OF TRUST OF COUNTRYWIDE CAPITAL III This Certificate of Trust of Countrywide Capital III (the "Trust") dated May 28, 1997, is being duly executed and filed by the undersigned, as trustees, to form a business trust pursuant to the Delaware Business Trust Act, 12 Del. C. (S) 3801, et seq. The undersigned, as trustees, do hereby certify as follows: 1. The name of the business trust being formed hereby is "Countrywide Capital III." 2. The name and business address of the trustee of the Trust which has its principal place of business in the State of Delaware is as follows: The Bank of New York (Delaware) 400 White Clay Center, Route 273 Newark, Delaware 19711 3. This Certificate of Trust shall be effective as of the date of filing. IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust, have executed this Certificate of Trust as of the date first above written. Dated: May 28, 1997 /s/Sandor E. Samuels ----------------------------------- Sandor E. Samuels, as Trustee /s/Thomas Keith McLaughlin ----------------------------------- Thomas Keith McLaughlin, as Trustee THE BANK OF NEW YORK (DELAWARE), as Trustee By: /s/Melissa Beneduce ----------------------------------- Name: Melissa Beneduce Title: Assistant Vice President EX-4.2 3 EXHIBIT 4.2 DECLARATION OF TRUST OF COUNTRYWIDE CAPITAL III THIS DECLARATION OF TRUST (this "Declaration"), dated and effective as of May 28, 1997, by the undersigned trustees (together with all other Persons from time to time duly appointed and serving as trustees in accordance with the provisions of this Declaration, the "Trustees"), Countrywide Credit Industries, Inc., a Delaware corporation, as trust sponsor (the "Sponsor"), and by the holders, from time to time, of undivided beneficial interests in the Trust to be issued pursuant to this Declaration; W I T N E S S E T H: WHEREAS, the Trustees and the Sponsor desire to establish a trust (the "Trust") pursuant to the Delaware Business Trust Act for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain Debentures (as hereinafter defined) of the Debenture Issuer (as hereinafter defined); NOW THEREFORE, it being the intention of the parties hereto that the Trust constitute a business trust under the Delaware Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of undivided beneficial interests in the assets of the Trust, subject to the provisions of this Declaration. ARTICLE I. DEFINITIONS AND INTERPRETATION SECTION 1.1. Definitions. Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned thereto in this Section 1.1. A term defined anywhere in this Declaration has the same meaning throughout. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder. "Business Day" means, with respect to any series of Securities, any day other than a day on which federal or state banking institutions in the Borough of Manhattan, The City of New York, are authorized or obligated by law, executive order or regulation to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. (S)3801, et seq, as it may be amended from time to time. "Certificate" means a Common Security Certificate or a Preferred Security Certificate. "Common Security" means a security representing a common undivided beneficial interest in the assets of the Trust with such terms as may be set out in any amendment to this Declaration. "Common Security Certificate" means a definitive certificate in fully registered form representing a Common Security. "Covered Person" means: (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder. "Debenture Issuer" means Countrywide Home Loans, Inc., a New York corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as the issuer of the Debentures. "Debentures" means the resettable rate debentures to be issued by the Debenture Issuer and purchased with the proceeds of the Securities, and the debentures to be issued in exchange therefor. "Delaware Trustee" has the meaning set forth in Section 3.1. "Holder" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. "Indemnified Person" means (a) any Trustee; (b) any Affiliate of any Trustee; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Trustee; or (d) any employee or agent of the Trust or its Affiliates. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Security" means a security representing a preferred undivided beneficial interest in the assets of the Trust with such terms as may be set out in any amendment to this Declaration. "Preferred Security Certificate" means a certificate representing a Preferred Security. "Regular Trustee" means any Trustee other than the Delaware Trustee. "Securities" means the Common Securities and the Preferred Securities. "Securities Act" means the Securities Act of 1933, as amended from time to time, and any successor legislation. "Sponsor" means Countrywide Credit Industries, Inc., a Delaware corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as Sponsor of the Trust. "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. SECTION 1.2. Interpretation. Each definition in this Declaration includes the singular and the plural, and references to the neuter gender include the masculine and feminine where appropriate. Terms which relate to accounting matters shall be interpreted in accordance with generally accepted accounting principles in effect from time to time. References to any statute mean such statute as amended at that time and include any successor legislation. The word "or" is not exclusive, and the words "herein," "hereof" and "hereunder" refer to this Declaration as a whole. The headings to the Articles and Sections are for convenience of reference and shall not affect the meaning or interpretation of this Declaration. Reference to Articles, Sections and Exhibits means the Articles, Sections and Exhibits of this Declaration. The Exhibits are hereby incorporated by reference into, and shall be deemed a part of, this Declaration. ARTICLE II. ORGANIZATION SECTION 2.1. Name. The Trust created by this Declaration is named "Countrywide Capital III." The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION 2.2. Office. The address of the principal office of the Trust is c/o Countrywide Credit Industries, Inc., 4500 Park Granada, Calabasas, CA 91302. At any time, the Regular Trustees may designate another principal office. SECTION 2.3. Purpose. The exclusive purposes and functions of the Trust are (a) to issue and sell Securities and use the proceeds from such sale to acquire the Debentures and (b) except as otherwise limited herein, to engage in only those other activities necessary or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments or pledge any of its assets. SECTION 2.4. Authority. Subject to the limitations provided in this Declaration, the Regular Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Regular Trustees in accordance with their powers shall constitute the act of, and serve to bind, the Trust. In dealing with the Regular Trustees acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Regular Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Regular Trustees as set forth in this Declaration. SECTION 2.5. Title to Property of the Trust. Legal title to all assets of the Trust shall be vested in the Trust. SECTION 2.6. Powers of the Regular Trustees. The Regular Trustees shall have the exclusive power and authority to cause the Trust to engage in the following activities: (a) to issue and sell the Preferred Securities and the Common Securities in accordance with this Declaration; provided, however, that the Trust may issue no more than two series of Preferred Securities and no more than one series of Common Securities, and, provided further, there shall be no interests in the Trust other than the Securities; (b) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors, and consultants and provide for reasonable compensation for such services; (c) to incur expenses which are necessary or incidental to carry out any of the purposes of this Declaration; (d) to execute and enter into purchase agreements and other related agreements to provide for the sale of the securities; (e) to execute and enter into a registration rights agreement and other related agreements; and (f) to execute all other documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing. SECTION 2.7. Filing of Certificate of Trust. On or after the effective date of this Declaration, the Trustees shall cause the Certificate of Trust for the Trust in the form attached hereto as Exhibit A to be filed with the Secretary of State of the State of Delaware. SECTION 2.8. Duration of Trust. The Trust, absent termination pursuant to the provisions of Section 5.2, shall have existence for [thirty-five] years from the date hereof. ARTICLE III. TRUSTEES SECTION 3.1. Trustees. The number of Trustees shall initially be three, and thereafter the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by the Sponsor. The Sponsor is entitled to appoint or remove without cause any Trustee at any time; provided that the number of Trustees shall in no event be less than three; and provided further that one Trustee, in the case of a natural person, shall be a person who is resident of the State of Delaware or which, if not a natural person, has its principal place of business in the State of Delaware and meets the requirements of applicable Delaware law (the "Delaware Trustee"). Except as expressly set forth in this Declaration, any power of the Regular Trustees may be exercised by, or with the consent of, a majority of the Regular Trustees; provided that if there are two or fewer Regular Trustees, all powers of the Regular Trustees shall be exercised by, or with the consent of, all of the Regular Trustees. The initial Regular Trustees shall be: Sandor E. Samuels Thomas Keith McLaughlin The initial Delaware Trustee shall be: The Bank of New York (Delaware) SECTION 3.2. Delaware Trustee. Notwithstanding any other provisions of this Declaration, the Delaware Trustee, in its capacity as Delaware Trustee, shall not be entitled to exercise any of the powers, nor shall the Delaware Trustee have any of the duties and responsibilities, of the Regular Trustees described in this Declaration. The Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Business Trust Act. SECTION 3.3. Execution of Documents. (a) The Regular Trustees are authorized to execute on behalf of the Trust any documents that the Regular Trustees have the power and authority to cause the Trust to execute pursuant to Section 2.6. (b) The Regular Trustees may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 their power for the purposes of signing any documents which the Regular Trustees have power and authority to cause the Trust to execute pursuant to Section 2.6. ARTICLE IV. LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 4.1. Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which distributions to Holders might properly be paid. SECTION 4.2. Fiduciary Duty. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law in equity, are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person. (b) Unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between an Indemnified Person and Covered Persons, or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering, in each case, the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise. (c) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision: (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interest and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of, or factors affecting, the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 4.3. Indemnification. (a) To the fullest extent permitted by applicable law, the Sponsor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence or willful misconduct with respect to such acts or omissions. (b) To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Sponsor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Sponsor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 4.3(a). SECTION 4.4. Other Businesses. Any Covered Person, the Sponsor and the Delaware Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust; the Trust and the Holders shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom; and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor or the Delaware Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor and the Delaware Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person and the Delaware Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act on any committee or body of holders of securities or other obligations of the Sponsor or its Affiliates. ARTICLE V. AMENDMENTS, TERMINATION, MISCELLANEOUS SECTION 5.1. Amendments. At any time before the issue of any Securities, this Declaration may be amended by, and only by, a written instrument executed by a majority of the Regular Trustees and the Sponsor. SECTION 5.2. Termination of Trust. (a) The Trust shall terminate and be of no further force or effect: (i) upon the bankruptcy of the Sponsor; (ii) upon the filing of a certificate of dissolution or its equivalent with respect to the Sponsor or the revocation of the Sponsor's Certificate of Incorporation; (iii) upon the entry of a decree of judicial dissolution of the Sponsor or the Trust; or (iv) before the issuance of any Securities, with the consent of at least a majority of the Regular Trustees and the Sponsor. (b) As soon as is practicable after the occurrence of an event referred to in Section 5.2(a), the Trustees shall file a Certificate of Cancellation for the Trust with the Secretary of State of the State of Delaware. SECTION 5.3. Governing Law. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. SECTION 5.4. Successors and Assigns. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether or not so expressed. SECTION 5.5. Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to any Person or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 5.6. Counterparts. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. IN WITNESS WHEREOF, the undersigned has caused this Declaration of Trust of Countrywide Capital III to be executed as of the day and year first above written. TRUSTEES: /s/Sandor E. Samuels ---------------------------------------- Sandor E. Samuels, as Trustee /s/Thomas Keith McLaughlin ---------------------------------------- Thomas Keith McLaughlin, as Trustee THE BANK OF NEW YORK (DELAWARE), as Delaware Trustee By: /s/Melissa Beneduce ---------------------------------------- Name: Melissa Beneduce Title: Assistant Vice President SPONSOR: COUNTRYWIDE CREDIT INDUSTRIES, INC. By: /s/Sandor E. Samuels ---------------------------------------- Name: Sandor E. Samuels Title: Managing Director, Legal, General Counsel & Secretary EXHIBIT A CERTIFICATE OF TRUST OF COUNTRYWIDE CAPITAL III This Certificate of Trust of Countrywide Capital III (the "Trust") dated May __, 1997, is being duly executed and filed by the undersigned, as trustees, to form a business trust pursuant to the Delaware Business Trust Act, 12 Del. C. (S) 3801, et seq. The undersigned, as trustees, do hereby certify as follows: 1. The name of the business trust being formed hereby is "Countrywide Capital III." 2. The name and business address of the trustee of the Trust which has its principal place of business in the State of Delaware is as follows: The Bank of New York (Delaware) 400 White Clay Center, Route 273 Newark, Delaware 19711 3. This Certificate of Trust shall be effective as of the date of filing. IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust, have executed this Certificate of Trust as of the date first above written. Dated: May , 1997 ---------------------------------------- Sandor E. Samuels, as Trustee ---------------------------------------- Thomas Keith McLaughlin, as Trustee THE BANK OF NEW YORK (DELAWARE), as Trustee By:_____________________________ Name: Title: EX-4.3 4 EXHIBIT 4.3 - ------------------------------------------------------------------------------ AMENDED AND RESTATED DECLARATION OF TRUST of Countrywide Capital III Dated as of June 4, 1997 - ------------------------------------------------------------------------------ CROSS REFERENCE TABLE* Section of Trust Indenture Act of Section of 1939, AS AMENDED AGREEMENT - ---------------- --------- 310(a).....................................................................6.3 310(b)..........................................................6.3(c); 6.3(d) 310(c)............................................................Inapplicable 311(a)..................................................................2.2(b) 311(b)..................................................................2.2(b) 311(c)............................................................Inapplicable 312(a)..................................................................2.2(a) 312(b)..................................................................2.2(b) 312(c)............................................................Inapplicable 313(a).....................................................................2.3 313(b).....................................................................2.3 313(c).....................................................................2.3 313(d).....................................................................2.3 314(a).....................................................................2.4 314(b)............................................................Inapplicable 314(c).....................................................................2.5 314(d)............................................................Inapplicable 314(e).....................................................................2.5 314(f)............................................................Inapplicable 315(a).........................................................3.9(b); 3.10(a) 315(b)..................................................................2.7(a) 315(c)..................................................................3.9(a) 315(d)..................................................................3.9(b) 316(a).....................................................2.6; 7.6(b); 7.7(c) 316(b)............................................................Inapplicable 316(c)............................................................Inapplicable 317(a)....................................................................3.16 317(b)............................................................Inapplicable 318(a)..................................................................2.1(c) TABLE OF CONTENTS* PAGE ---- ARTICLE 1 INTERPRETATION AND DEFINITIONS.......................1 SECTION 1.1 Interpretation and Definitions.............................2 "Affiliate"................................................2 "Authorized Officer".......................................2 "Beneficial Owners"........................................2 "Business Day".............................................3 "Business Trust Act".......................................3 "Capital Security".........................................3 "Capital Security Certificate".............................3 "Cedel"....................................................3 "Certificate"..............................................3 "Certificate of Trust".....................................3 "Closing Date".............................................3 "Code".....................................................3 "Commission"...............................................4 "Common Securities Holder".................................4 "Common Security"..........................................4 "Common Security Certificate"..............................4 "Corporate Trust Office"...................................4 "Covered Person"...........................................4 "Debenture Issuer".........................................4 "Debenture Issuer Indemnified Person"......................5 "Debenture Trustee"........................................5 "Debentures"...............................................5 "Debt Guarantee"...........................................5 "Defaulted Distributions"..................................5 "Delaware Trustee".........................................5 "Depositary"...............................................5 - --------------- * This Table of Contents does not constitute part of the Agreement and shall not have any bearing upon the interpretation of any of its terms or provisions. "Depositary Participant"...................................5 "Direct Action"............................................5 "Distribution".............................................6 "Distribution Date"........................................6 "Distribution Rate"........................................6 "DWAC".....................................................6 "ERISA"....................................................6 "ERISA Plan"...............................................6 "Euroclear"................................................6 "Exchange Act".............................................6 "Fiduciary Indemnified Person".............................6 "Fiscal Year"..............................................7 "Fitch"....................................................7 "Global Security"..........................................7 "Guarantor"................................................7 "Holder"...................................................7 "Indemnified Person".......................................7 "Indenture"................................................7 "Indenture Event of Default"...............................7 "Initial Purchasers".......................................8 "Investment Company".......................................8 "Investment Company Act"...................................8 "Investment Company Event".................................8 "Legal Action".............................................8 "Liquidation"..............................................8 "Liquidation Distribution".................................8 "List of Holders"..........................................8 "Majority in Liquidation Amount"...........................8 "Moody's"..................................................9 "New Capital Securities"...................................9 "New Capital Security Certificate".........................9 "New York Stock Exchange"..................................9 "Officers' Certificate"....................................9 "Paying Agent"............................................10 "Person"..................................................10 "PORTAL Market"...........................................10 "Private Placement Legend"................................10 "Property Account"........................................10 "Property Trustee"........................................10 "Pro Rata"................................................10 "Qualified Institutional Buyer"...........................10 "Quorum"..................................................10 "Redemption/Distribution Notice"..........................11 "Redemption Price"........................................11 "Registration Rights Agreement"...........................11 "Regular Trustee".........................................11 "Regulation S"............................................11 "Regulation S Global Security"............................11 "Related Party"...........................................11 "Responsible Officer".....................................11 "Restricted Global Security"..............................12 "Restricted Period".......................................12 "Restricted Security".....................................12 "Rule 144A"...............................................12 "Rule 3a-5"...............................................12 "Rule 3a-7"...............................................12 "S&P".....................................................12 "Securities"..............................................12 "Securities Act"..........................................13 "Security Register".......................................13 "Security Registrar"......................................13 "Special Event"...........................................13 "Special Record Date".....................................13 "Sponsor".................................................13 "Successor Delaware Trustee"..............................13 "Successor Entity"........................................13 "Successor Property Trustee"..............................13 "Successor Security"......................................13 "Super Majority"..........................................13 "Tax Event"...............................................14 "10% in Liquidation Amount"...............................14 "Transfer Restricted Securities"..........................14 "Transfer Restricted Securities Certificate"..............14 "Treasury Regulations"....................................14 "Trust"...................................................14 "Trust Enforcement Event".................................15 "Trust Guarantee".........................................15 "Trust Indenture Act".....................................15 "Trustee" or "Trustees"...................................15 ARTICLE 2 TRUST INDENTURE ACT...........................15 SECTION 2.1. Trust Indenture Act; Application..........................15 SECTION 2.2. Lists of Holders of Securities............................16 SECTION 2.3. Reports by the Property Trustee...........................16 SECTION 2.4. Periodic Reports to the Property Trustee..................16 SECTION 2.5. Evidence of Compliance with Conditions Precedent..........17 SECTION 2.6. Trust Enforcement Events; Waiver..........................17 SECTION 2.7. Trust Enforcement Event; Notice...........................19 ARTICLE 3 ORGANIZATION...............................20 SECTION 3.1. Name and Organization.....................................20 SECTION 3.2. Office....................................................20 SECTION 3.3. Purpose...................................................20 SECTION 3.4. Authority.................................................20 SECTION 3.5. Title to Property of the Trust............................21 SECTION 3.6. Powers and Duties of the Regular Trustees.................21 SECTION 3.7. Prohibition of Actions by the Trust and the Trustees......24 SECTION 3.8. Powers and Duties of the Property Trustee.................26 SECTION 3.9. Certain Duties and Responsibilities of the Property Trustee. 28 SECTION 3.10. Certain Rights of Property Trustee........................30 SECTION 3.11. Delaware Trustee..........................................34 SECTION 3.12. Execution of Documents....................................34 SECTION 3.13. Not Responsible for Recitals or Issuance of Securities....34 SECTION 3.14. Duration of Trust.........................................34 SECTION 3.15. Mergers...................................................34 SECTION 3.16. Property Trustee May File Proofs of Claim.................37 ARTICLE 4 SPONSOR.................................38 SECTION 4.1. Responsibilities of the Sponsor...........................38 SECTION 4.2. Indemnification and Expenses of the Trustees..............39 ARTICLE 5 COMMON SECURITIES HOLDER.........................39 SECTION 5.1. Sponsor's Purchase of Common Securities...................39 SECTION 5.2. Covenants of the Common Securities Holder.................39 ARTICLE 6 TRUSTEES.................................40 SECTION 6.1. Number of Trustees........................................40 SECTION 6.2. Delaware Trustee; Eligibility.............................40 SECTION 6.3. Property Trustee; Eligibility.............................40 SECTION 6.4. Qualifications of Regular Trustees and Delaware Trustee Generally..............................................42 SECTION 6.5. Initial Regular Trustees..................................42 SECTION 6.6. Appointment, Removal and Resignation of Trustees..........42 SECTION 6.7. Vacancies among Trustees..................................44 SECTION 6.8. Effect of Vacancies.......................................44 SECTION 6.9. Meetings..................................................44 SECTION 6.10. Merger, Conversion, Consolidation or Succession to Business. 45 SECTION 6.11. Delegation of Power.......................................45 ARTICLE 7 THE SECURITIES..............................45 SECTION 7.1. General Provisions Regarding Securities...................45 SECTION 7.2. Distributions.............................................48 SECTION 7.3. Redemption of Securities..................................50 SECTION 7.4. Redemption Procedures.....................................51 SECTION 7.5. Voting Rights of Capital Securities.......................53 SECTION 7.6. Voting Rights of Common Securities........................55 SECTION 7.7. Paying Agent..............................................57 SECTION 7.8. Transfer of Securities....................................57 SECTION 7.9. Mutilated, Destroyed, Lost or Stolen Certificates.........58 SECTION 7.10. Deemed Security Holders...................................58 SECTION 7.11. Global Securities.........................................59 SECTION 7.12. Restrictive Legend........................................61 SECTION 7.13. Special Transfer Provisions...............................63 ARTICLE 8 DISSOLUTION AND TERMINATION OF TRUST...................67 SECTION 8.1. Dissolution and Termination of Trust......................67 SECTION 8.2. Liquidation Distribution Upon Dissolution of the Trust....68 ARTICLE 9 LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, DELAWARE TRUSTEES OR OTHERS..........................69 SECTION 9.1. Liability.................................................69 SECTION 9.2. Exculpation...............................................70 SECTION 9.3. Fiduciary Duty............................................70 SECTION 9.4. Indemnification...........................................71 SECTION 9.5. Outside Businesses........................................75 ARTICLE 10 ACCOUNTING................................76 SECTION 10.1. Fiscal Year...............................................76 SECTION 10.2. Certain Accounting Matters................................76 SECTION 10.3. Banking...................................................77 SECTION 10.4. Withholding...............................................77 ARTICLE 11 AMENDMENTS AND MEETINGS.........................78 SECTION 11.1. Amendments................................................78 SECTION 11.2. Meetings of the Holders of Securities; Action by Written Consent................................................80 ARTICLE 12 REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE...........................82 SECTION 12.1. Representations and Warranties of the Property Trustee....82 SECTION 12.2. Representations and Warranties of the Delaware Trustee....83 ARTICLE 13 MISCELLANEOUS..............................84 SECTION 13.1. Notices...................................................84 SECTION 13.2. Governing Law.............................................84 SECTION 13.3. Intention of the Parties..................................85 SECTION 13.4. Headings..................................................85 SECTION 13.5. Successors and Assigns....................................85 SECTION 13.6. Partial Enforceability....................................85 SECTION 13.7. Counterparts..............................................86 AMENDED AND RESTATED DECLARATION OF TRUST THIS AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration"), dated as of June 4, 1997, by and among Countrywide Credit Industries, Inc., a Delaware corporation, as sponsor (the "Sponsor"), and Eric P. Sieracki, Sandor E. Samuels and Thomas Keith McLaughlin, as the initial Regular Trustees, The Bank of New York, a New York banking corporation, as the initial Property Trustee and The Bank of New York (Delaware), a Delaware corporation, as the initial Delaware Trustee, not in their individual capacities but solely as Trustees, and the holders, from time to time, of undivided beneficial ownership interests in the Trust to be issued pursuant to this Declaration. WHEREAS, Countrywide Capital III (the "Trust"), a business trust under the Business Trust Act (as defined herein), has been created pursuant to a Declaration of Trust, dated as of May 28, 1997, (the "Original Declaration") and a Certificate of Trust (the "Certificate of Trust") filed with the Secretary of State of the State of Delaware on May 28, 1997; and WHEREAS, the exclusive purposes of the Trust shall be to issue and sell certain securities representing undivided beneficial ownership interests in the assets of the Trust, to invest the proceeds from such sales in the Debentures (as defined herein) issued by the Debenture Issuer (as defined herein) and the Debt Guarantee (as defined herein) of the Sponsor endorsed thereon and to engage in only those activities necessary or incidental thereto; and WHEREAS, as of the date hereof, no interests in the Trust have been issued; WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration. NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees hereby declare that all assets contributed to the Trust be held in trust for the benefit of the Holders, from time to time, of the Securities representing undivided beneficial ownership interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE 1. INTERPRETATION AND DEFINITIONS SECTION 1.1. INTERPRETATION AND DEFINITIONS. Unless the context otherwise requires: (a) capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles, Sections, Recitals and Exhibits are to Articles and Sections of, or Recitals and Exhibits to, this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa and a reference to any masculine form of a term shall include the feminine form of a term, as applicable. (g) the following terms have the following meanings: "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder. "Authorized Officer" of a Person means any Person that is expressly authorized to bind such Person. "Beneficial Owners" means, for Capital Securities represented by a Global Security, the Person who acquires an interest in the Capital Securities which is reflected on the records of the Depositary through the Depositary Participants. "Business Day" means any day other than a Saturday or Sunday or a day on which banking institutions in The City of New York or Los Angeles, California are authorized or required by law or executive order to remain closed or a day on which the Corporate Trust Office of the Debenture Trustee, or the principal corporate trust office of the Property Trustee, is closed for business. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time to time, or any successor legislation. "Capital Security" has the meaning specified in Section 7.1(a). "Capital Security Certificate" means a definitive certificate in fully registered form representing a Capital Security, substantially in the form of Exhibit A, in the case of Transfer Restricted Securities or Exhibit B, in the case of New Capital Securities. "Cedel" means Cedel, S.A. "Certificate" means a Common Security Certificate or a Capital Security Certificate. "Certificate of Trust" has the meaning specified in the Recitals hereto. "Closing Date" means the date on which the Capital Securities are issued and sold. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. A reference to a specific section of the Code refers not only to such specific section but also to any corresponding provision of any federal tax statute enacted after the date of this Declaration, as such specific section or corresponding provision is in effect on the date of application of the provisions of this Declaration containing such reference. "Commission" means the Securities and Exchange Commission or any successor federal agency performing comparable functions. "Common Securities Holder" means Countrywide Credit Industries, Inc., or any successor thereto, in its capacity as purchaser and holder of all of the Common Securities issued by the Trust. "Common Security" has the meaning specified in Section 7.1(a). "Common Security Certificate" means a definitive certificate in fully registered form representing a Common Security, substantially in the form of Exhibit C hereto. "Corporate Trust Office" means the office of the Debenture Trustee at which the corporate trust business of the Debenture Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Declaration is located at 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention: Corporate Trust Administration; telecopy no. (212) 815-5915. "Covered Person" means (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities. "Debenture Issuer" means Countrywide Home Loans, Inc., or any successor thereto, in its capacity as issuer of the Debentures under the Indenture. "Debenture Issuer Indemnified Person" means (a) any Regular Trustee; (b) any Affiliate of any Regular Trustee; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Regular Trustee or any Affiliate thereof; or (d) any officer, employee or agent of the Trust or its Affiliates. "Debenture Trustee" means The Bank of New York, in its capacity as trustee under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee. "Debentures" means (i) the 8.05% Junior Subordinated Debentures due June 15, 2027, Series A, and (ii) the 8.05% Junior Subordinated Debentures due June 15, 2027, Series B, to be issued in exchange therefor, in each case to be issued by the Debenture Issuer and to be held by the Property Trustee. "Debt Guarantee" means the guarantee by the Guarantor of principal of, and premium, if any, and interest on the Debentures pursuant to the Indenture. "Defaulted Distributions" has the meaning specified in Section 7.2(c). "Delaware Trustee" has the meaning set forth in Section 6.2. "Depositary" means, with respect to Securities issuable in whole or in part in the form of one or more Global Securities, a clearing agency registered under the Exchange Act that is designated to act as Depositary for such Securities. "Depositary Participant" means a member of, or participant in, the Depositary. "Direct Action" has the meaning specified in Section 3.8(e). "Distribution" means a distribution payable to Holders of Securities in accordance with Section 7.2. "Distribution Date" has the meaning specified in Section 7.2(c). "Distribution Rate" has the meaning specified in Section 7.2(a). "DWAC" means Deposit and Withdrawal At Custodian Service. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Plan" means an employee benefit plan subject to ERISA or an individual retirement account or plan subject to Section 4975 of the Code. "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation. "Extension Period" has the meaning specified in the Indenture. "Fiduciary Indemnified Person" has the meaning specified in Section 9.4(b). "Fiscal Year" has the meaning specified in Section 10.1. "Fitch" means Fitch Investors Service, Inc. or any successor thereto. "Global Security" means a fully registered, global Capital Security Certificate. "Guarantor" means Countrywide Credit Industries, Inc., a Delaware corporation, in its capacity as guarantor of the Debentures under the Indenture and/or the Securities under the Trust Guarantee. "Holder" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act; provided, however, that in determining whether the Holders of the requisite liquidation amount of Capital Securities have voted on any matter provided for in this Declaration, then for the purpose of such determination only (and not for any other purpose hereunder), if the Capital Securities remain in the form of one or more Global Securities and if the Depositary which is the holder of such Global Securities has sent an omnibus proxy to the Trust assigning voting rights to Depositary Participants to whose accounts the Capital Securities are credited on the record date, the term "Holders" shall mean such Depositary Participants acting at the direction of Beneficial Owners. "Indemnified Person" means a Debenture Issuer Indemnified Person or a Fiduciary Indemnified Person. "Indenture" means the Indenture, dated as of June 4, 1997, among the Debenture Issuer, the Guarantor and the Debenture Trustee, and any indenture supplemental thereto pursuant to which the Debentures and the Debt Guarantee are to be issued. "Indenture Event of Default" means an "Event of Default" as defined in the Indenture. "Initial Purchasers" means Lehman Brothers Inc., Countrywide Securities Corporation, Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Brothers Inc. "Investment Company" means an "investment company" as defined in the Investment Company Act and the regulations promulgated thereunder. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation. "Investment Company Event" means the Regular Trustees shall have received an opinion of counsel, rendered by a law firm having a recognized national securities practice, to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), there is more than an insubstantial risk that the Trust is or will be considered an "investment company" which is required to be registered under the Investment Company Act, which Change in 1940 Act Law becomes effective on or after the Closing Date. "Legal Action" has the meaning specified in Section 3.6(g). "Liquidation" has the meaning specified in Section 8.2(a). "Liquidation Distribution" has the meaning specified in Section 8.2(a). "List of Holders" has the meaning specified in Section 2.2(a). "Majority in Liquidation Amount" means, except as provided in the terms of the Capital Securities or by the Trust Indenture Act, Holder(s) of outstanding Securities, voting together as a single class, or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities, voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including accumulated and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "Moody's" means Moody's Investors Service, Inc. or any successor thereto. "New Capital Securities" has the meaning specified in Section 7.1(a). "New Capital Security Certificate" means a Capital Security Certificate in the form of Exhibit B. "New York Stock Exchange" means The New York Stock Exchange, Inc. or any successor thereto. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person on behalf of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer on behalf of such Person in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer and on behalf of such Person, such condition or covenant has been complied with; provided, that the term "Officers' Certificate," when used with reference to Regular Trustees who are natural persons, shall mean a certificate signed by two of the Regular Trustees which otherwise satisfies the foregoing requirements. "Paying Agent" has the meaning specified in Section 3.8(h). "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof or any other entity of whatever nature. "PORTAL Market" means the Private Offerings, Resales and Trading through Automated Linkages (PORTAL) Market of the NASDAQ Stock Market, Inc. "Private Placement Legend" has the meaning specified in Section 2.20 of the Indenture. "Property Account" has the meaning specified in Section 3.8(c). "Property Trustee" means the Trustee meeting the eligibility requirements set forth in Section 6.3. "Pro Rata" means pro rata to each Holder of Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities outstanding. "Qualified Institutional Buyer" or "QIB" has the meaning specified in Rule 144A under the Securities Act. "Quorum" means a majority of the Regular Trustees or, if there are only two Regular Trustees, both of them. "Redemption/Distribution Notice" has the meaning set forth in Section 7.4(a). "Redemption Price" means the amount for which the Securities will be redeemed, which amount will equal the redemption price paid by the Debenture Issuer to repay or redeem the Debentures held by the Trust plus an amount equal to accrued and unpaid Distributions on such Securities through the date of their redemption. "Registration Rights Agreement" means the Registration Rights Agreement, dated the date hereof, among the Sponsor, the Debenture Issuer, the Trust and the Initial Purchasers for the benefit of themselves and the Holders, as the same may be amended from time to time in accordance with the terms thereof. "Regular Trustee" means any Trustee other than the Property Trustee and the Delaware Trustee. "Regulation S" means Regulation S under the Securities Act and any successor regulation thereto. "Regulation S Global Security" means any Global Security or Securities evidencing Securities that are to be traded pursuant to Regulation S. "Related Party" means, with respect to the Sponsor, any direct or wholly owned subsidiary of the Sponsor or any Person that owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. "Responsible Officer" means, with respect to the Property Trustee, any officer within the Corporate Trust Office of the Property Trustee, including any vice-president, any assistant vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer or other officer of the Corporate Trust Office of the Property Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Restricted Global Security" means any Global Security or Securities evidencing Capital Securities that are to be traded pursuant to Rule 144A. "Restricted Period" has the meaning specified in Section 7.13(g). "Restricted Security" has the meaning assigned to such term in Rule 144(a)(3), as amended from time to time or any successor rule, under the Securities Act. "Rule 144A" means Rule 144A, as amended from time to time or any successor rule, under the Securities Act. "Rule 3a-5" means Rule 3a-5 under the Investment Company Act or any successor rule thereunder. "Rule 3a-7" means Rule 3a-7 under the Investment Company Act or any successor rule thereunder. "S&P" means Standard & Poor's Ratings Group or any successor thereto. "Securities" means the Common Securities and the Capital Securities. "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation. "Security Register" has the meaning specified in Section 7.8(a). "Security Registrar" has the meaning specified in Section 7.8(a). "Special Event" means a Tax Event or an Investment Company Event. "Special Record Date" has the meaning specified in Section 7.2(d). "Sponsor" means Countrywide Credit Industries, Inc., or any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust. "Successor Delaware Trustee" has the meaning specified in Section 6.6(b). "Successor Entity" has the meaning specified in Section 3.15(b)(i). "Successor Property Trustee" has the meaning specified in Section 6.6(b). "Successor Security" has the meaning specified in Section 3.15(b)(i)b. "Super Majority" has the meaning set forth in Section 2.6(a)(ii). "Tax Event" means the receipt by the Regular Trustees of an opinion of counsel, rendered by a law firm having a recognized national tax practice, to the effect that, as a result of (a) any amendment to, or change (including any announced proposed change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such proposed change, pronouncement or decision is announced on or after the Closing Date, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days after the date thereof, subject to the United States federal income tax with respect to interest accrued or received on the Debentures, (ii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of other taxes, duties or other governmental charges or (iii) interest payable on the Debentures is not, or within 90 days of the date thereof will not be deductible, in whole or in part, by the Debenture Issuer for United States federal income tax purposes. "10% in Liquidation Amount" means, except as provided in the terms of the Capital Securities or by the Trust Indenture Act, Holder(s) of outstanding Securities, voting together as a single class, or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities, voting separately as a class, who are the record owners of 10% or more of the aggregate liquidation amount (including accumulated and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "Transfer Restricted Securities" has the meaning specified in Section 7.1(a). "Transfer Restricted Securities Certificate" means a Capital Security Certificate in the form of Exhibit A. "Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trust" has the meaning set forth in the Recitals hereto. "Trust Enforcement Event" in respect of the Securities means an Indenture Event of Default has occurred and is continuing in respect of the Securities. "Trust Guarantee" means the Guarantee Agreement, dated as of June 4, 1997, of the Guarantor in respect of the Securities. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation. "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. ARTICLE 2. TRUST INDENTURE ACT SECTION 2.1. TRUST INDENTURE ACT; APPLICATION. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration and shall, to the extent applicable, be governed by such provisions. (b) The Property Trustee shall be the only Trustee which is a Trustee for the purposes of the Trust Indenture Act. (c) If and to the extent that any provision of this Declaration conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. (d) The application of the Trust Indenture Act to this Declaration shall not affect the Trust's classification as a grantor trust for United States federal income tax purposes and shall not affect the nature of the Securities as equity securities representing undivided beneficial ownership interests in the assets of the Trust. SECTION 2.2. LISTS OF HOLDERS OF SECURITIES. (a) Unless the Property Trustee acts as Security Registrar, each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide the Property Trustee (i), except while the Capital Securities are represented by one or more Global Securities, at least one Business Day prior to the date for payment of Distributions, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Holders of the Securities ("List of Holders") as of the record date relating to the payment of such Distributions, and (ii) at any other time, within 30 days of receipt by the Trust of a written request from the Property Trustee for a List of Holders as of a date no more than 15 days before such List of Holders is given to the Property Trustee; provided that neither the Sponsor nor the Regular Trustees on behalf of the Trust shall be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Property Trustee by the Sponsor and the Regular Trustees on behalf of the Trust. The Property Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders given to it or which it receives in the capacity as Paying Agent (if acting in such capacity), provided that the Property Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Property Trustee shall comply with its obligations under, and shall be entitled to the benefits of, Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act. SECTION 2.3. REPORTS BY THE PROPERTY TRUSTEE. Within 60 days after May 15 of each year (commencing with the year of the first anniversary of the issuance of the Capital Securities), the Property Trustee shall provide to the Holders of the Capital Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Property Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4. PERIODIC REPORTS TO THE PROPERTY TRUSTEE. Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6. TRUST ENFORCEMENT EVENTS; WAIVER. (a) The Holders of a Majority in Liquidation Amount of the Capital Securities may, by vote or written consent, on behalf of the Holders of all of the Capital Securities, waive any past Trust Enforcement Event in respect of the Capital Securities and its consequences, provided that, if the underlying Indenture Event of Default: (i) is not waivable under the Indenture, the Trust Enforcement Event under the Declaration shall also not be waivable; or (ii) requires the consent or vote of greater than a majority in principal amount of the holders of the Debentures (a "Super Majority") to be waived under the Indenture, the related Trust Enforcement Event under the Declaration may only be waived by the vote or written consent of the Holders of at least the proportion in liquidation amount of the Capital Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. The foregoing provisions of this Section 2.6(a) shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such default shall cease to exist, and any Trust Enforcement Event with respect to the Capital Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration and the Capital Securities, but no such waiver shall extend to any subsequent or other Trust Enforcement Event with respect to the Capital Securities or impair any right consequent thereon. Any waiver by the Holders of the Capital Securities of a Trust Enforcement Event with respect to the Capital Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Trust Enforcement Event with respect to the Common Securities for all purposes of this Declaration without any further act, vote, or consent of the Holders of the Common Securities. (a) The Holders of a Majority in Liquidation Amount of the Common Securities may, by vote or written consent, on behalf of the Holders of all of the Common Securities, waive any past Trust Enforcement Event in respect of the Common Securities and its consequences, provided that, if the underlying Indenture Event of Default: (i) is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Trust Enforcement Event under the Declaration as provided below in this Section 2.6(b), the Trust Enforcement Event under the Declaration shall also not be waivable; or (ii) requires the consent or vote of a Super Majority to be waived under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Trust Enforcement Event under the Declaration as provided below in this Section 2.6(b), the Trust Enforcement Event under the Declaration may only be waived by the vote or written consent of the Holders of at least the proportion in liquidation amount of the Common Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding; provided further, each Holder of Common Securities will be deemed to have waived any Trust Enforcement Event with respect to the Common Securities and the consequences thereof until all Trust Enforcement Events with respect to the Capital Securities have been cured, waived or otherwise eliminated, and until such Trust Enforcement Events with respect to the Capital Securities have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the Holders of the Capital Securities and only the Holders of the Capital Securities will have the right to direct the Property Trustee with respect to certain matters under this Declaration. The foregoing provisions of this Section 2.6(b) shall be in lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Subject to the foregoing provisions of this Section 2.6(b), upon such cure, waiver or other elimination, any such default shall cease to exist and any Trust Enforcement Event with respect to the Common Securities arising therefrom shall be deemed to have been cured for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other Trust Enforcement Event with respect to the Common Securities or impair any right consequent thereon. (c) A waiver of an Indenture Event of Default by the Property Trustee at the direction of the Holders of the Capital Securities constitutes a waiver of the corresponding Trust Enforcement Event with respect to the Capital Securities under this Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. SECTION 2.7. TRUST ENFORCEMENT EVENT; NOTICE. (a) The Property Trustee shall, within 90 days after the occurrence of a Trust Enforcement Event, transmit by mail, first class postage prepaid, to the Holders of the Securities, notices of all defaults with respect to the Securities actually known to a Responsible Officer of the Property Trustee, unless such defaults have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 2.7(a) being hereby defined to be an Indenture Event of Default, not including any periods of grace provided for therein and irrespective of the giving of any notice provided therein); provided that, except for a default in the payment of principal of (or premium, if any) or interest on any of the Debentures, the Property Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Property Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities. (b) The Property Trustee shall not be deemed to have knowledge of any default except: (i) a default under Sections 7.1(1) and 7.1(2) of the Indenture; or (ii) any default as to which the Property Trustee shall have received written notice or of which a Responsible Officer of the Property Trustee charged with the administration of this Declaration shall have actual knowledge. ARTICLE 3. ORGANIZATION SECTION 3.1. NAME AND ORGANIZATION. The Trust hereby continued is named "Countrywide Capital III" as such name may be modified from time to time by the Regular Trustees following written notice to the Holders of Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION 3.2. OFFICE. The address of the principal office of the Trust is c/o Countrywide Credit Industries, Inc., 4500 Park Granada, Calabasas, California 91302. On ten Business Days' written notice to the Holders of Securities, the Regular Trustees may designate another principal office. SECTION 3.3. PURPOSE. The exclusive purposes and functions of the Trust are (a) to issue and sell Securities and use the gross proceeds from such sale to acquire the Debentures and the Debt Guarantee and (b) except as otherwise limited herein, to engage in only those other activities necessary or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified as a grantor trust for United States federal income tax purposes. It is the intention of the Common Securities Holder that the Trust be classified as a grantor trust for United States federal income tax purposes under Subpart E of Subchapter J of the Code, pursuant to which the owners of the Capital Securities and the Common Securities will be treated as the owners of undivided interests in the Debentures for United States federal income tax purposes, and such owners will include directly in their gross income the income, deductions and credits of the Trust as if the Trust did not exist. By the acceptance of this Trust, each of the Trustees, the Sponsor, the Holders of the Capital Securities and Common Securities and the Capital Securities Beneficial Owners agrees that he, she or it will not take any position for United States federal income tax purposes contrary to the classification of the Trust as a grantor trust. SECTION 3.4. AUTHORITY. Subject to the limitations provided in this Declaration and to the specific duties of the Property Trustee, the Regular Trustees shall have exclusive authority to carry out the purposes of the Trust. An action taken by the Regular Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Property Trustee on behalf of the Trust in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. Except as expressly set forth in this Declaration and except if a meeting of the Regular Trustees is called with respect to any matter over which the Regular Trustees have power to act, any power of the Regular Trustees may be exercised by, or with the consent of, any one such Regular Trustee. SECTION 3.5. TITLE TO PROPERTY OF THE TRUST. Except as provided in Section 3.8 with respect to the Debentures, the Debt Guarantee and the Property Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial ownership interest in the assets of the Trust. SECTION 3.6. POWERS AND DUTIES OF THE REGULAR TRUSTEES. The Regular Trustees shall have the exclusive power, duty and authority to cause the Trust to engage in the following activities: (a) to issue and sell the Capital Securities and the Common Securities in accordance with this Declaration; provided, however, that the Trust may issue no more than two series of Capital Securities (which will consist exclusively of the Transfer Restricted Securities and the New Capital Securities) and no more than one series of Common Securities, and, provided further, that there shall be no interests in the Trust other than the Securities, and the issuance of Securities shall be limited to a one-time, simultaneous issuance of both Transfer Restricted Securities and Common Securities on the Closing Date and issuances of New Capital Securities in exchange for Transfer Restricted Securities as contemplated by the Registration Rights Agreement; (b) in connection with the issue and sale of the Capital Securities, at the direction of the Sponsor, to: (i) prepare and issue an offering memorandum and/or execute and file with the Commission one or more registration statements on the applicable forms prepared by the Sponsor and the Debenture Issuer, including any amendments thereto, pertaining, in each case, to the Capital Securities, the Trust Guarantee, the Debentures and the Debt Guarantee; (ii) if deemed necessary or desirable by the Sponsor, execute and file an application, prepared by the Sponsor, to the New York Stock Exchange or any other national securities exchange or the NASDAQ Stock Market's National Market or the PORTAL Market for listing of any Capital Securities, the Trust Guarantee, the Debentures and the Debt Guarantee; (iii) if deemed necessary or desirable by the Sponsor, execute and file with the Commission a registration statement on Form 8-A, including any amendments thereto, prepared by the Sponsor and the Debenture Issuer, relating to the registration of the Capital Securities, under Section 12(b) of the Exchange Act; (iv) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor to be necessary, in order to qualify or register all or part of the Capital Securities in any State or other jurisdiction in which the Sponsor has determined to qualify or register such Capital Securities for sale; (v) execute and enter into a purchase agreement and other related agreements providing for the sale of the Capital Securities to the Initial Purchasers; and (vi) execute and enter into the Registration Rights Agreement. (c) to acquire the Debentures with the proceeds of the sale of the Capital Securities and the Common Securities; provided, however, that the Regular Trustees shall cause legal title to the Debentures to be held of record in the name of the Property Trustee for the benefit of the Holders of the Capital Securities and the Holders of the Common Securities; (d) to give the Sponsor and the Property Trustee prompt written notice of the occurrence of a Special Event; provided that the Regular Trustees shall consult with the Sponsor and the Property Trustee before taking or refraining from taking any action in relation to any such Special Event; (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including and with respect to, for the purposes of Section 316(c) of the Trust Indenture Act, Distributions (and other distributions upon dissolution, winding-up or termination), voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Capital Securities and Holders of Common Securities as to such actions and applicable record dates; (f) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to the terms of this Declaration and the Securities; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has the exclusive power to bring such Legal Action; (h) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors and consultants to conduct only those services that the Regular Trustees have authority to conduct directly, and to pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; (j) to give the certificate required by Section 314(a)(4) of the Trust Indenture Act to the Property Trustee, which certificate may be executed by any Regular Trustee; (k) to incur expenses that are necessary or incidental to carry out any of the purposes of the Trust; (l) to act as, or appoint another Person to act as, registrar and transfer agent for the Securities; (m) to give prompt written notice to the Holders of the Securities of any notice received from the Debenture Issuer of its election to defer payments of interest on the Debentures as authorized by the Indenture; (n) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Securities or to enable the Trust to effect the purposes for which the Trust was created; (o) to take any action, not inconsistent with applicable law, that the Regular Trustees determine in their discretion to be necessary or desirable in carrying out the purposes and functions of the Trust as set out in Section 3.3 or the activities of the Trust as set out in this Section 3.6, including, but not limited to: (i) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act; (ii) causing the Trust to be classified as a grantor trust for United States federal income tax purposes; and (iii) cooperating with the Debenture Issuer to ensure that the Debentures will be treated as indebtedness of the Debenture Issuer for United States federal income tax purposes. (p) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of the Trust; (q) to call a meeting of the Holders of the Securities if so directed by Holders in accordance with Section 11.2; and (r) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing. The Regular Trustees shall exercise the powers set forth in this Section 3.6 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Regular Trustees shall have no power to, and shall not, take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.3. Subject to this Section 3.6, the Regular Trustees shall have none of the powers or the authority of the Property Trustee set forth in Section 3.8. Any expenses incurred by the Regular Trustees pursuant to this Section 3.6 shall be reimbursed by the Debenture Issuer. SECTION 3.7. PROHIBITION OF ACTIONS BY THE TRUST AND THE Trustees. (a) The Trust shall not, and the Trustees (including the Property Trustee) shall cause the Trust not to engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Trustees (including the Property Trustee) shall cause the Trust not to: (i) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders of Securities pursuant to the terms of this Declaration and of the Securities; (ii) acquire any assets other than as expressly provided herein; (iii) possess Trust property for other than a Trust purpose; (iv) make any loans or incur any indebtedness; (v) possess any power or otherwise act in such a way as to vary the Trust assets; (vi) possess any power or otherwise act in such a way as to vary the terms of the Securities in any way whatsoever (except to the extent expressly authorized in this Declaration or by the terms of the Securities); (vii) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; or (viii)other than as provided in this Declaration or by the terms of the Securities, (A) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable, or (D) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless the Trust shall have received an opinion of counsel to the effect that such modification will not cause more than an insubstantial risk that the Trust will be deemed an Investment Company required to be registered under the Investment Company Act, or the Trust will not be classified as a grantor trust for United States federal income tax purposes; (ix) take any action inconsistent with the status of the Trust as a grantor trust for United States federal income tax purposes; or (x) revoke any action previously authorized or approved by vote of the Holders of the Capital Securities. SECTION 3.8. POWERS AND DUTIES OF THE PROPERTY TRUSTEE. (a) The legal title to the Debentures and the Debt Guarantee shall be owned by and held of record in the name of the Property Trustee in trust for the benefit of the Trust and the Holders of the Securities. The right, title and interest of the Property Trustee to the Debentures and the Debt Guarantee shall vest automatically in each Person who may hereafter be appointed as Property Trustee in accordance with Section 6.6. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures or the Debt Guarantee have been executed and delivered. (b) The Property Trustee shall not transfer its right, title and interest in the Debentures or the Debt Guarantee to the Regular Trustees or to the Delaware Trustee (if the Property Trustee does not also act as Delaware Trustee). (c) The Property Trustee shall: (i) establish and maintain a segregated non-interest bearing trust account (the "Property Account") in the name of and under the exclusive control of the Property Trustee on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures or the Debt Guarantee held by the Property Trustee, deposit such funds into the Property Account and make payments to the Holders of the Securities from the Property Account in accordance with Section 7.2 and upon liquidation, redemption or otherwise. Funds in the Property Account shall be held uninvested and without liability for interest thereon until disbursed in accordance with this Declaration. The Property Account shall be an account that is maintained with a banking institution the rating on whose long-term unsecured indebtedness is at least equal to the rating assigned to the Capital Securities by a "nationally recognized statistical rating organization", within the meaning of Rule 436(g)(2) under the Securities Act; (ii) exchange one series of Debentures for the other series of Debentures in connection with the exchange of Transfer Restricted Securities for New Capital Securities as contemplated by Section 3.6(a); (iii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Capital Securities and the Common Securities to the extent the Debentures are redeemed or mature; and (iv) upon written notice of distribution issued by the Regular Trustees in accordance with the terms of the Securities, engage in such ministerial activities as so directed and as shall be necessary or appropriate to effect the distribution of the Debentures and the Debt Guarantee to Holders of Securities upon the occurrence of a Special Event or upon liquidation of the Trust. (d) The Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of this Declaration and the Securities. (e) The Property Trustee shall take any Legal Action which arises out of or in connection with either a Trust Enforcement Event of which a Responsible Officer of the Property Trustee has actual knowledge or the Property Trustee's duties and obligations under this Declaration or the Trust Indenture Act; provided however, that if a Trust Enforcement Event has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest, principal or other required payments on the Debentures on the date such interest, principal or other payment is otherwise payable (or in the case of redemption, on the redemption date, and the Guarantor does not make such payments, to the extent required, under the Debt Guarantee), then, on or after the respective due date specified in the Debentures, a Holder of Capital Securities may directly institute a proceeding against the Debenture Issuer or the Guarantor, respectively, for enforcement of payment to such Holder of the principal of or interest on Debentures having a principal amount equal to the aggregate liquidation amount of the Capital Securities of such Holder (a "Direct Action"). (f) The Property Trustee shall continue to serve as a Trustee until either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of Securities pursuant to the terms of the Securities; or (ii) a Successor Property Trustee has been appointed and has accepted that appointment in accordance with Section 6.6. (g) The Property Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Debentures and the Debt Guarantee under the Indenture and, if a Trust Enforcement Event actually known to a Responsible Officer of the Property Trustee occurs and is continuing, the Property Trustee shall, for the benefit of Holders of the Securities, enforce its rights as holder of the Debentures and the Debt Guarantee subject to the rights of the Holders pursuant to the terms of such Securities. (h) The Property Trustee may authorize one or more Persons (each, a "Paying Agent") to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to all Securities and any such Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the Property Trustee at any time and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Property Trustee. (i) Subject to this Section 3.8, the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Regular Trustees set forth in Section 3.6. The Property Trustee shall exercise the powers set forth in this Section 3.8 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Property Trustee shall have no power to, and shall not, take any action that is inconsistent with the purposes and functions of the Trust set out in Section 3.3. SECTION 3.9. CERTAIN DUTIES AND RESPONSIBILITIES OF THE PROPERTY TRUSTEE. (a) The Property Trustee, before the occurrence of any Trust Enforcement Event and after the curing of all Trust Enforcement Events that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants shall be read into this Declaration against the Property Trustee. In case a Trust Enforcement Event has occurred (that has not been cured or waived pursuant to Section 2.6) of which a Responsible Officer of the Property Trustee has actual knowledge, the Property Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) No provision of this Declaration shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of a Trust Enforcement Event and after the curing or waiving of all such Trust Enforcement Events that may have occurred: a. the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Declaration and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Property Trustee; and b. in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it without negligence, in good faith in accordance with the direction of the Holders of not less than a Majority in Liquidation Amount of the Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Declaration; (iv) no provision of this Declaration shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or indemnity reasonably satisfactory to the Property Trustee against such risk or liability is not reasonably assured to it; (v) the Property Trustee's sole duty with respect to the custody, safe-keeping and physical preservation of the Debentures, the Debt Guarantee and the Property Account shall be to deal with such property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Declaration and the Trust Indenture Act; (vi) the Property Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Debentures or the Debt Guarantee or the payment of any taxes or assessments levied thereon or in connection therewith; (vii) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Sponsor. Money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Property Account maintained by the Property Trustee pursuant to Section 3.8(c)(i) and except to the extent otherwise required by law; and (ix) the Property Trustee shall not be responsible for monitoring the compliance by the Regular Trustees or the Sponsor with their respective duties under this Declaration, nor shall the Property Trustee be liable for any default or misconduct of the Regular Trustees or the Sponsor. SECTION 3.10. CERTAIN RIGHTS OF PROPERTY TRUSTEE. (a) Subject to the provisions of Section 3.9: (i) the Property Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Sponsor or the Regular Trustees contemplated by this Declaration shall be sufficiently evidenced by an Officers' Certificate; (iii) whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Regular Trustees; (iv) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or registration thereof; (v) the Property Trustee may consult with counsel of its choice or other experts and the advice or opinion of such counsel and experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion; such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees. The Property Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Property Trustee security and indemnity, reasonably satisfactory to the Property Trustee, against the costs, expenses (including reasonable attorneys' fees and expenses and the expenses of the Property Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Property Trustee; provided that, nothing contained in this Section 3.10(a) shall be taken to relieve the Property Trustee, upon the occurrence of an Indenture Event of Default, of its obligation to exercise the rights and powers vested in it by this Declaration; (vii) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii)the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, custodians, nominees or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities, and the signature of the Property Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Property Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action; (x) whenever in the administration of this Declaration the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Property Trustee (i) may request instructions from the Holders of the Securities which instructions may only be given by the Holders of the same proportion in liquidation amount of the Securities as would be entitled to direct the Property Trustee under the terms of the Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in or accordance with such instructions; (xi) If no Trust Enforcement Event has occurred and is continuing and the Property Trustee is required to decide between alternative courses of action, construe ambiguous provisions in this Declaration or is unsure of the application of any provision of this Declaration, and the matter is not one on which Holders of Capital Securities are entitled under the Declaration to vote, then the Property Trustee may, but shall be under no duty to, take such action as is directed by the Company and, if not so directed, shall take such action as it deems advisable and in the best interests of the Holders of the Securities and will have no liability except for its own bad faith, negligence or willful misconduct; (xii) except as otherwise expressly provided by this Declaration, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration; and (xiii)the Property Trustee shall not be liable for any action taken, suffered or omitted to be taken by it without negligence, in good faith and reasonably believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Declaration. (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. SECTION 3.11. DELAWARE TRUSTEE. Notwithstanding any other provision of this Declaration other than Section 6.2, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Regular Trustees or the Property Trustee described in this Declaration. Except as set forth in Section 6.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Business Trust Act. SECTION 3.12. EXECUTION OF DOCUMENTS. (a) Unless otherwise determined by the Regular Trustees, and except as otherwise required by the Business Trust Act or applicable law, any Regular Trustee is authorized to execute on behalf of the Trust any documents that the Regular Trustees have the power and authority to execute pursuant to Section 3.6, provided, that the registration statements referred to in Section 3.6(b)(i), including any amendments thereto, shall be signed by or on behalf of a majority of the Regular Trustees; and (b) a Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purposes of signing any documents which the Regular Trustees have power and authority to cause the Trust to execute pursuant to Section 3.6. SECTION 3.13 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration, the Securities, the Debentures, the Debt Guarantee or the Indenture. SECTION 3.14 DURATION OF TRUST. The Trust shall exist until terminated pursuant to the provisions of Article 8 hereof. SECTION 3.15 MERGERS. (a) The Trust may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any Person, except as described in Section 3.15(b) and (c). (b) The Trust may, at the request of the Sponsor and with the consent of the Regular Trustees or, if there are more than two, a majority of the Regular Trustees and without the consent of the Holders of the Securities, the Delaware Trustee or the Property Trustee, merge with or into, consolidate, amalgamate, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of any State; provided, that: (i) such successor entity (the "Successor Entity"), if not the Trust, either: a. expressly assumes all of the obligations of the Trust with respect to the Capital Securities; or b. substitutes for the Securities other securities having substantially the same terms as the Capital Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Capital Securities rank in priority with respect to Distributions and payments upon Liquidation, redemption and otherwise; (ii) the Sponsor expressly appoints a trustee of such Successor Entity that possesses the same powers and duties as the Property Trustee as the holder of the Debentures and the Debt Guarantee; (iii) the Capital Securities or any Successor Securities continue to be listed or quoted, or any Successor Securities will be listed or quoted upon notification of issuance, on any national securities exchange or with any other organization on or through which the Capital Securities are then listed or quoted immediately prior to the effective date of such merger, consolidation,amalgamation, replacement, conveyance, transfer or lease; (iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Capital Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization; (v) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders of the Capital Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the Holders' percentage interest in the Successor Entity); (vi) such Successor Entity has a purpose identical to that of the Trust; (vii) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease the Sponsor has received an opinion of independent counsel to the Trust experienced in such matters to the effect that: a. such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders of the Capital Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the Holders' percentage interest in the Successor Entity); b. following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease neither the Trust nor the Successor Entity will be required to register as an Investment Company; and c. following such merger, consolidation, amalgamation or replacement or lease, the Trust (or the Successor Entity) will continue to be classified as a grantor trust for United States federal income tax purposes; (viii) the Sponsor or any permitted successor or assignee owns all of the Common Securities of such Successor Entity and the Guarantor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Trust Guarantee; and (ix) such Successor Entity expressly assumes all of the obligations of the Trust with respect to the Trustees. (c) Notwithstanding Section 3.15(b), the Trust shall not, except with the consent of Holders of 100% in aggregate liquidation amount of the Capital Securities, consolidate, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to, any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it, if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Trust or Successor Entity to be classified as other than a grantor trust for United States federal income tax purposes and each Holder of the Capital Securities not to be treated as owning an undivided beneficial interest in the Debentures and the Debt Guarantee. SECTION 3.16. PROPERTY TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other similar judicial proceeding relative to the Trust or any other obligor upon the Securities or the property of the Trust or of such other obligor or their creditors, the Property Trustee (irrespective of whether any Distributions on the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Property Trustee shall have made any demand on the Trust for the payment of any past due Distributions) shall be entitled and empowered, to the fullest extent permitted by law, by intervention in such proceeding or otherwise: (a) to file and prove a claim for the whole amount of any Distributions owing and unpaid in respect of the Securities (or, if the Securities are original issue discount Securities, such portion of the liquidation amount as may be specified in the terms of such Securities) and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Property Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Property Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Property Trustee and, in the event the Property Trustee shall consent to the making of such payments directly to the Holders, to pay to the Property Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Property Trustee, its agents and counsel, and any other amounts due the Property Trustee. Nothing herein contained shall be deemed to authorize the Property Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or compensation affecting the Securities or the rights of any Holder thereof or to authorize the Property Trustee to vote in respect of the claim of any Holder in any such proceeding. ARTICLE 4. SPONSOR SECTION 4.1. RESPONSIBILITIES OF THE SPONSOR. In connection with the issue and sale of the Capital Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities: (a) to prepare an offering memorandum and/or to prepare for filing by the Trust with the Commission one or more registration statements on the applicable forms, including any amendments thereto, pertaining, in each case, to the Capital Securities, the Trust Guarantee, the Debentures and the Debt Guarantee; (b) to determine the States or other jurisdictions in which to take appropriate action to qualify or register for sale all or part of the Capital Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States or other jurisdictions; (c) to prepare any filing by the Trust of an application to the New York Stock Exchange or any other national securities exchange or the NASDAQ Stock Market's National Market or the PORTAL Market for listing, if such filing is determined to be necessary or desirable by the Sponsor; (d) to prepare any filing by the Trust with the Commission of a registration statement on Form 8-A, including any amendments thereto, relating to the registration of the Capital Securities under Section 12 of the Exchange Act if such filing is determined to be necessary or desirable by the Sponsor; (e) to negotiate the terms of a purchase agreement and other related agreements providing for the sale of the Capital Securities to the Initial Purchasers; and (f) to negotiate the terms of the Registration Rights Agreement. SECTION 4.2. INDEMNIFICATION AND EXPENSES OF THE TRUSTEES. The Debenture Issuer agrees to indemnify the Property Trustee and the Delaware Trustee for, and to hold each of them harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Property Trustee or the Delaware Trustee, as the case may be, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending either of them against any claim or liability in connection with the exercise or performance of any of their respective powers or duties hereunder; the provisions of this Section 4.2 shall survive the resignation or removal of the Delaware Trustee or the Property Trustee or the termination of this Declaration. ARTICLE 5. COMMON SECURITIES HOLDER SECTION 5.1. SPONSOR'S PURCHASE OF COMMON SECURITIES. On the Closing Date the Sponsor will acquire Common Securities in an amount at least equal to 3% of the capital of the Trust, at the same time as the Capital Securities are sold. The aggregate stated liquidation amount of Common Securities outstanding at any time shall be not less than 3% of the capital of the Trust. SECTION 5.2. COVENANTS OF THE COMMON SECURITIES HOLDER. For so long as the Capital Securities and the Common Securities remain outstanding, the Common Securities Holder covenants (i) to maintain, directly or indirectly, 100% ownership of the Common Securities, PROVIDED, HOWEVER, that any permitted successor of the Guarantor under the Debt Guarantee may succeed to the Sponsor's ownership of such Common Securities, (ii) to timely perform its duties as sponsor of the Trust, (iii) to use its reasonable efforts to cause the Trust (A) to remain a business trust classified as a grantor trust except in connection with the distribution of the Debentures and Debt Guarantee to the Holders of the Capital Securities and the Common Securities in liquidation of the Trust, the redemption of all Capital Securities and Common Securities of the Trust or certain mergers, consolidations or amalgamations, each as permitted by this Declaration, and (B) to continue not to be treated as an association taxable as a corporation for United States federal income tax purposes and (iv) to use its reasonable efforts to cause each Holder of Capital Securities and Common Securities to be treated as owning an undivided beneficial interest in the Debentures and Debt Guarantee. ARTICLE 6. TRUSTEES SECTION 6.1. NUMBER OF TRUSTEES. The number of Trustees initially shall be five, and: (a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and (b) after the issuance of any Securities, the number of Trustees may be increased or decreased by vote of the Holders of a Majority in Liquidation Amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities or by written consent in lieu of such meeting provided that, if the Property Trustee does not also act as Delaware Trustee, the number of Trustees shall be at least three (3); and provided further that (1) the Delaware Trustee, in the case of a natural person, shall be a person who is a resident of the State of Delaware or that, if not a natural person, is an entity which has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law; (2) at least one Regular Trustee is an employee or officer of, or is affiliated with, the Sponsor; and (3) one Trustee shall be the Property Trustee for so long as this Declaration is required to qualify as an indenture under the Trust Indenture Act, and such Trustee may also serve as Delaware Trustee if it meets the applicable requirements. SECTION 6.2. DELAWARE TRUSTEE; ELIGIBILITY. If required by the Business Trust Act, one Trustee (the "Delaware Trustee") shall be: (a) a natural person who is a resident of the State of Delaware; or (b) if not a natural person, an entity which has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law, provided that, if the Property Trustee has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, then the Property Trustee shall also be the Delaware Trustee and Section 3.11 shall have no application. SECTION 6.3. PROPERTY TRUSTEE; ELIGIBILITY. (a) There shall at all times be one Trustee which shall act as Property Trustee which shall: (i) not be an Affiliate of the Sponsor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or other Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 6.3(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published; and (iii) if the Trust is excluded from the definition of an Investment Company solely by means of Rule 3a-7 and to the extent Rule 3a-7 requires a Trust having certain qualifications to hold title to the "eligible assets" (as defined in Rule 3a-7) of the Trust, the Property Trustee shall possess those qualifications. (b) If at any time the Property Trustee shall cease to be eligible to so act under Section 6.3(a), the Property Trustee shall immediately resign in the manner and with the effect set forth in Section 6.6(c). (c) If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Property Trustee and the Holder of the Common Securities (as if it were the obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. (d) The Indenture, the Debentures, the Debt Guarantee and the Trust Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. SECTION 6.4. QUALIFICATIONS OF REGULAR TRUSTEES AND DELAWARE TRUSTEE GENERALLY. Each Regular Trustee and the Delaware Trustee (unless the Property Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more Authorized Officers. SECTION 6.5. INITIAL REGULAR TRUSTEES. The initial Regular Trustees shall be: Eric P. Sieracki, Sandor E. Samuels and Thomas Keith McLaughlin, the business address of each of whom is 4500 Park Granada, Calabasas, California 91302. SECTION 6.6. APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES. (a) Subject to Section 6.6(b), Trustees may be appointed or removed without cause at any time: (i) until the issuance of any Securities, by written instrument executed by the Sponsor; and (ii) after the issuance of any Securities, by vote of the Holders of a Majority in Liquidation Amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities. (b) The Trustee that acts as Property Trustee shall not be removed in accordance with Section 6.6(a) until a successor Trustee possessing the qualifications to act as Property Trustee under Section 6.3(a) (a "Successor Property Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Property Trustee and delivered to the Regular Trustees and the Sponsor. The Trustee that acts as Delaware Trustee shall not be removed in accordance with Section 6.6(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 6.2 and 6.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees and the Sponsor. (c) A Trustee appointed to office shall hold office until his or its successor shall have been appointed, until his death or its dissolution or until his or its removal or resignation. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: (i) No such resignation of the Trustee that acts as the Property Trustee shall be effective: a. until a Successor Property Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Property Trustee and delivered to the Trust, the Sponsor and the resigning Property Trustee; or b. until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the Holders of the Securities; and (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee. (d) The Holders of the Common Securities shall use their best efforts to promptly appoint a Successor Delaware Trustee or Successor Property Trustee, as the case may be, if the Property Trustee or the Delaware Trustee delivers an instrument of resignation in accordance with this Section 6.6. (e) If no Successor Property Trustee or Successor Delaware Trustee, as the case may be, shall have been appointed and accepted appointment as provided in this Section 6.6 within 60 days after delivery to the Sponsor and the Trust of an instrument of resignation or removal, the resigning or removed Property Trustee or Delaware Trustee, as applicable, may petition any court of competent jurisdiction for appointment of a Successor Property Trustee or Successor Delaware Trustee, as applicable. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be. (f) No Property Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any Successor Property Trustee or Successor Delaware Trustee, as the case may be. SECTION 6.7. VACANCIES AMONG TRUSTEES. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 6.1, or if the number of Trustees is increased pursuant to Section 6.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by the Regular Trustees or, if there are more than two, a majority of the Regular Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 6.6. SECTION 6.8. EFFECT OF VACANCIES. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy in the number of Regular Trustees shall occur, until such vacancy is filled by the appointment of a Regular Trustee in accordance with Section 6.6, the Regular Trustees in office, regardless of their number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration. SECTION 6.9. MEETINGS. If there is more than one Regular Trustee, meetings of the Regular Trustees shall be held from time to time upon the call of any Regular Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in-person meetings of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at a meeting by vote of a majority of the Regular Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by the unanimous written consent of the Regular Trustees. In the event there is only one Regular Trustee, any and all action of such Regular Trustee shall be evidenced by a written consent of such Regular Trustee. SECTION 6.10. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation into which the Property Trustee, the Delaware Trustee or any Regular Trustee that is not a natural person, may be merged or converted or with such Trustee may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of such Trustee, shall be the successor of such Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. SECTION 6.11. DELEGATION OF POWER. The Regular Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. ARTICLE 7. THE SECURITIES SECTION 7.1. GENERAL PROVISIONS REGARDING SECURITIES. (a) The Regular Trustees shall on behalf of the Trust issue a class of capital securities representing undivided beneficial ownership interests in the assets of the Trust (the "Transfer Restricted Securities"), a class of capital securities to be issued only in exchange for the Transfer Restricted Securities (the "New Capital Securities," and, together with the Transfer Restricted Securities, the "Capital Securities"), and one class of common securities representing undivided beneficial ownership interests in the assets of the Trust (the "Common Securities"). (i) Capital Securities. The Capital Securities of the Trust have an aggregate liquidation amount with respect to the assets of the Trust of $200,000,000 and a liquidation amount with respect to the assets of the Trust of $1,000 per Capital Security. The Transfer Restricted Capital Securities are hereby designated for identification purposes only as the 8.05% Subordinated Capital Income Securities, Series A, of the Trust and the New Capital Securities are hereby designated for identification purposes only as the 8.05% Subordinated Capital Income Securities, Series B, of the Trust. The Transfer Restricted Capital Security Certificates and the New Capital Security Certificates evidencing the Capital Securities, respectively, shall be substantially in the form of Exhibits A and B to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of any securities exchange on which the Capital Securities are listed or quoted. (ii) Common Securities. The Common Securities of the Trust have an aggregate liquidation amount with respect to the assets of the Trust of $6,200,000 and a liquidation amount with respect to the assets of the Trust of $1,000 per Common Security. The Common Securities are hereby designated for purposes of identification only as the Common Securities of the Trust. The Common Security Certificates evidencing the Common Securities shall be substantially in the form of Exhibit C to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. (b) Payment of Distributions on, and amounts payable on liquidation, redemption or otherwise with respect to, the Securities, as applicable, shall be made Pro Rata based on the liquidation amount of such Securities; provided, however, that if on any Distribution Date or redemption date an Indenture Event of Default shall have occurred and be continuing, no payment of any Distribution on, or Redemption Price of, any of the Common Securities, and no other payment on account of the redemption, liquidation or other acquisition of such Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions on all of the outstanding Capital Securities for all distribution periods terminating on or prior thereto, or in the case of the Redemption Price the full amount of such Redemption Price on all of the outstanding Capital Securities then called for redemption, shall have been made or provided for, and all funds available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions on, or Redemption Price of, the Capital Securities then due and payable. The Trust shall issue no securities or other interests in the assets of the Trust other than the Capital Securities and the Common Securities. (c) The Certificates shall be signed on behalf of the Trust by a Regular Trustee. Such signature shall be the manual or facsimile signature of any present or any future Regular Trustee. In case a Regular Trustee of the Trust who shall have signed any of the Certificates shall cease to be such Regular Trustee before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the person who signed such Certificates had not ceased to be such Regular Trustee; and any Certificate may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Certificate, shall be the Regular Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such a Regular Trustee. Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation of any stock exchange on which Securities may be listed, or to conform to usage. A Capital Security Certificate shall not be valid until authenticated by the manual signature of an Authorized Officer of the Property Trustee. Such signature shall be conclusive evidence that the Capital Security Certificate has been authenticated under this Declaration. Upon a written order of the Trust signed by one Regular Trustee, the Property Trustee shall authenticate the Capital Security Certificates for original issue. The aggregate number of Capital Securities outstanding at any time shall not exceed the liquidation amount set forth in Section 7.1(a)(i). The Property Trustee may appoint an authenticating agent acceptable to the Trust to authenticate Capital Security Certificates. An authenticating agent may authenticate Capital Security Certificates whenever the Property Trustee may do so. Each reference in this Declaration to authentication by the Property Trustee includes authentication by such agent. An authenticating agent has the same rights as the Property Trustee to deal with the Sponsor or an Affiliate of the Sponsor. (d) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (e) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and non-assessable beneficial ownership interests in the assets of the Trust. (f) Every Person, by virtue of having become a Holder or a Capital Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration and the terms of the Securities, the Trust Guarantee, the Debt Guarantee, the Indenture and the Debentures. (g) The holders of the Securities shall have no preemptive rights. SECTION 7.2. DISTRIBUTIONS. (a) Holders of Securities shall be entitled to receive cumulative cash distributions (the "Distributions") at a rate per annum equal to 8.05% of the stated liquidation amount of $1,000 per Security (the "Distribution Rate"). At all times, the Distribution Rate, the Distribution Dates and other payment dates for the Securities will correspond to the interest rate, interest payment dates and payment dates on the Debentures. (b) (i) Distributions will be payable semi-annually, in arrears, on June 15 and December 15 of each year, commencing December 15, 1997, and upon redemption, when, as and if available for payment, by the Property Trustee, except as otherwise described below. Distributions are payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Trust has funds available for the payment of such Distributions in the Property Account. The amount of distributions payable for any semi-annual distribution period shall be computed (i) for any full 180-day semi-annual distribution period, on the basis of a 360-day year of twelve 30-day months and (ii) for any period shorter than a full 180-day semi-annual distribution period for which Distributions are computed, on the basis of the actual number of days elapsed in such 180-day semi-annual period (assuming each full month elapsed in such period consists of 30 days). Subject to Section 7.1(b), Distributions shall be made on the Capital Securities and the Common Securities on a Pro Rata basis. (c) Distributions on the Securities (other than on a redemption date) shall be payable to the Holders thereof as they appear on the Security Register as of the close of business on the relevant record dates. While the Capital Securities are represented by one or more Global Securities, the relevant record dates will be the close of business on the Business Day prior to the relevant Distribution Dates, unless otherwise provided in this Declaration or unless a different regular record date is established or provided for the corresponding interest payment date on the Debentures. The relevant record dates for the Common Securities shall be the same as for the Capital Securities. If the Capital Securities shall not continue to remain represented by one or more Global Securities, the relevant record dates for the Capital Securities shall be selected by the Regular Trustees and shall be at least one Business Day prior to the relevant payment dates. At all times, the Distribution payment dates shall correspond to the interest payment dates on the Debentures. Distributions payable on any Securities that are not punctually paid on any Distribution Date, as a result of the Debenture Issuer having failed to make a payment under the Debentures or the Guarantor having failed to make a payment under the Debt Guarantee, in each case when due (taking into account any Extension Period) ("Defaulted Distributions"), shall cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such Defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with Sections 7.2(d) and 7.2(e). In the event that any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distributions payable on such date will be made on the next succeeding day that is a Business Day (and without any additional Distributions or other payments in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date such payment was originally payable (each date on which Distributions are payable in accordance with the foregoing, a "Distribution Date"). Applicable Distributions on the Securities will be deferred by the Trust during any Extension Period. Distributions that are not paid on the applicable Distribution Date (including Distributions deferred during any Extension Period) will accumulate and compound semi-annually at the rate of 8.05% per annum, to the extent permitted by applicable law. (d) The Regular Trustees may elect to make payment of any Defaulted Distributions to the Persons in whose names the Securities are registered at the close of business on a special record date for the payment of such Defaulted Distributions (a "Special Record Date"), which shall be fixed in the following manner. The Regular Trustees shall notify the Property Trustee in writing of the amount of Defaulted Distributions proposed to be paid on each Security and the date of the proposed payment (based upon the proposed amounts and dates of payment of correlative payments with respect to the Debentures held by the Property Trustee), such amount when received to be held in trust in the Property Account Persons entitled to such Defaulted Distributions as in this Section 7.2(d) provided. Thereupon the Property Trustee shall fix a Special Record Date for the payment of such Defaulted Distributions which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Property Trustee of the notice of the proposed payment. The Property Trustee shall promptly notify the Regular Trustees and the Debenture Issuer of such Special Record Date and, at the expense of the Debenture Issuer, shall cause notice of the proposed payment of such Defaulted Distributions and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Distributions and the Special Record Date therefor having been so mailed, such Defaulted Distributions, to the extent funds are then available therefor in the Property Account, shall be paid to the Persons in whose names the Securities are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following paragraph (e). (e) The Regular Trustees may cause payment of any Defaulted Distributions to be made in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and, if so listed, upon such notice as may be required by such exchange, if, after notice given by the Regular Trustees to the Property Trustee of the proposed payment pursuant to this Section 7.2(e), such manner of payment shall be deemed practicable by the Property Trustee. (f) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata among the Holders of the Securities. SECTION 7.3. REDEMPTION OF SECURITIES. (a) Upon the repayment or redemption of the Debentures held by the Trust, whether at the stated maturity of the Debentures or upon earlier redemption as provided in the Indenture, the proceeds from such repayment or redemption will be simultaneously applied Pro Rata (subject to Section 7.1(b)) to redeem Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so repaid or redeemed at the Redemption Price. The Debentures are not redeemable at the option of the Debenture Issuer, other than in certain circumstances following a Special Event as described in Section 7.3(c). Holders shall be given not less than 30 nor more than 60 days notice of such redemption in accordance with Section 7.4 below. (b) On the date fixed for any distribution of Debentures, upon dissolution of the Trust, (i) the Securities will no longer be deemed to be outstanding and (ii) Certificates representing Securities will be deemed to represent the Debentures having an aggregate principal amount equal to the stated liquidation amount of, and bearing accrued and unpaid interest equal to accrued and unpaid Distributions on, such Securities until such Certificates are presented to the Sponsor or its agent for transfer or reissuance. (c) If, at any time, a Special Event shall have occurred and be continuing, the Regular Trustees may, within 90 days following the occurrence of such Special Event, elect to dissolve the Trust upon not less than 30 nor more than 60 days' notice and, after paying or making reasonable provision to pay all claims and obligations of the Trust in accordance with Section 3808(e) of the Business Trust Act, cause the Debentures and the Debt Guarantee to be distributed to the holders of the Trust Securities in liquidation of the Trust. If an Investment Company Event shall have occurred and be continuing, the Debenture Issuer has the option to redeem the Debentures, in whole but not in part (and thereby cause a mandatory redemption of the Securities), at any time within 90 days following the occurrence of such Investment Company Event at a redemption price equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest to the date of redemption. In addition, if a Tax Event shall have occurred and be continuing and in the opinion of counsel, rendered by a law firm having a recognized national tax practice, there would in all cases, after effecting the dissolution of the Trust and the distribution of the Debentures and the Debt Guarantee to the holders of the Securities in exchange therefor upon liquidation of the Trust, be more than an insubstantial risk that the Tax Event would continue to exist, then the Debenture Issuer will have the right (a) to shorten the stated maturity of the Debentures to a date not earlier than December 15, 2011 such that, in the opinion of such counsel, after advancing the stated maturity of the Debentures, interest paid on the Debentures will be deductible by the Debenture Issuer for United States federal income tax purposes or (b) to redeem the Debentures, in whole but not in part (and thereby cause a mandatory redemption of the Securities), at any time within 90 days following the occurrence of a Tax Event at a redemption price equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest to the date of redemption. SECTION 7.4. REDEMPTION PROCEDURES. (a) Notice of any redemption of Debentures, or notice of the distribution of Debentures by the Trust in exchange for the Securities (either, a "Redemption/Distribution Notice"), will be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged at least 30 days but not more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Debentures. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this Section 7.4(a), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of Securities at the address of each such Holder appearing in the Security Register. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (b) Subject to the Trust's fulfillment of the notice requirements set forth in Section 7.4(a) above, if Securities are to be redeemed, then (i) with respect to Capital Securities represented by one or more Global Securities, by 12:00 noon, New York City time, on the redemption date, provided the Debenture Issuer or the Guarantor has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Property Trustee will deposit irrevocably with the Depositary or its nominee (or successor Clearing Agency or its nominee) funds sufficient to pay the applicable Redemption Price for all the Capital Securities held by the Depositary and will give the Depositary irrevocable instructions and authority to pay the Redemption Price to the Holders of the Capital Securities and (ii) with respect to Capital Securities not represented by one or more Global Securities, provided the Debenture Issuer or the Guarantor has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Trust will irrevocably deposit with the Paying Agent for such Capital Securities funds sufficient to pay the applicable Redemption Price and will give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the Holders thereof upon surrender of their certificates evidencing the Capital Securities and, upon such surrender, the Paying Agent shall pay the applicable Redemption Price to such Holders by check mailed to their respective addresses appearing on the Security Register on the redemption date. In the event any date fixed for redemption of Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date such payment was originally payable. If payment of the Redemption Price in respect of any Securities is improperly withheld or refused and not paid either by the Property Trustee or by the Guarantor pursuant to the Trust Guarantee, Distributions on such Securities will continue to accrue at the then applicable rate from the original redemption date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. For these purposes, the applicable Redemption Price shall not include Distributions which are being paid to Holders who were Holders on a relevant record date. Upon satisfaction of the foregoing conditions, then immediately prior to the close of business on the date of such deposit or payment, Distributions will cease to accrue on the Securities called for redemption and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the Redemption Price, but without interest on such Redemption Price, and from and after the date fixed for redemption, such Securities will cease to be outstanding. Neither the Regular Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Securities that have been called for redemption. (c) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), the Sponsor or any of its subsidiaries (including the Debenture Issuer) may at any time and from time to time purchase outstanding Capital Securities by tender, in the open market or by private agreement. SECTION 7.5. VOTING RIGHTS OF CAPITAL SECURITIES. (a) Except as provided under Section 11.1 and this Article 7 and as otherwise required by the Business Trust Act, the Trust Indenture Act and other applicable law, the Holders of the Capital Securities shall have no voting rights. (b) Subject to the requirement of the Property Trustee obtaining a tax opinion in certain circumstances set forth in Section 7.5(d) below, the Holders of a Majority in Liquidation Amount of the Capital Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or to direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration, including the right to direct the Property Trustee, as holder of the Debentures and the Debt Guarantee, to (i) exercise the remedies available to it under the Indenture and the Debt Guarantee, (ii) consent to any amendment or modification of the Indenture or the Debentures where such consent shall be required or (iii) waive any past default and its consequences that is waivable under Section 7.13 of the Indenture; provided, however, that if an Indenture Event of Default has occurred and is continuing, then the Holders of 25% of the aggregate liquidation amount of the Capital Securities may direct the Property Trustee to declare the principal of and interest on the Debentures due and payable; provided, further, that where a consent or action under the Indenture would require the consent or act of the Holders of more than a majority of the aggregate principal amount of Debentures affected thereby, only the Holders of the percentage of the aggregate stated liquidation amount of the Capital Securities which is at least equal to the percentage required under the Indenture may direct the Property Trustee to give such consent to take such action. (c) If the Property Trustee fails to enforce its rights under the Debentures or the Debt Guarantee after Holders of a Majority in Liquidation Amount of Capital Securities have so directed the Property Trustee, a Holder of Capital Securities may institute a legal proceeding directly against the Debenture Issuer or the Guarantor, respectively, to enforce the Property Trustee's rights under the Indenture without first instituting any legal proceeding against the Property Trustee or any other person or entity. In addition, if a Trust Enforcement Event has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to make any interest, principal or other required payments when due on the Debentures on the date such interest, principal or other payment is otherwise payable (including any redemption date) and the Guarantor does not make such payments, to the extent required, under the Debt Guarantee, then a Holder of Capital Securities may directly institute a Direct Action against the Debenture Issuer or the Guarantor, respectively, on or after the respective due date specified in the Debentures. (d) The Property Trustee shall notify all Holders of the Capital Securities of any notice of any Indenture Event of Default which it receives from the Debenture Issuer with respect to the Debentures. Such notice shall state that such Indenture Event of Default also constitutes a Trust Enforcement Event. Except with respect to directing the time, method, and place of conducting a proceeding for a remedy, the Property Trustee shall be under no obligation to take any of the actions described in clause 7.5(b)(i) through 7.5(b)(iii) above unless the Property Trustee has obtained an opinion of independent tax counsel to the effect that the Trust will not fail to be classified as a grantor trust for United States federal income tax purposes, as a result of such action, and each Holder will be treated as owning an undivided beneficial ownership interest in the Debentures and the Debt Guarantee. (e) In the event the consent of the Property Trustee, as the holder of the Debentures, is required under the Indenture with respect to any amendment or modification of the Indenture, the Property Trustee shall request the direction of the Holders of the Securities with respect to such amendment or modification and shall vote with respect to such amendment or modification as directed by a Majority in Liquidation Amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require the consent of the Holders of more than a majority of the aggregate principal amount of the Debentures, the Property Trustee may only give such consent at the direction of the Holders of at least the same proportion in aggregate stated liquidation amount of the Securities. The Property Trustee shall not take any such action in accordance with the directions of the Holders of the Securities unless the Property Trustee has obtained an opinion of independent tax counsel to the effect that the Trust will not be classified as other than a grantor trust for United States federal income tax purposes, as a result of such action, and each Holder will be treated as owning an undivided beneficial ownership interest in the Debentures. (f) A waiver of an Indenture Event of Default with respect to the Debentures will constitute a waiver of the corresponding Trust Enforcement Event. (g) Any required approval or direction of Holders of Capital Securities may be given at a separate meeting of Holders of Capital Securities convened for such purpose, at a meeting of all of the Holders of Securities or pursuant to written consent. The Regular Trustees shall cause a notice of any meeting at which Holders of Capital Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Capital Securities. Each such notice shall include a statement setting forth the following information: (i) the date of such meeting or the date by which such action is to be taken; (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought; and (iii) instructions for the delivery of proxies or consents. (h) No vote or consent of the Holders of Capital Securities shall be required for the Trust to redeem and cancel Capital Securities or distribute Debentures in accordance with the Declaration. (i) Notwithstanding that Holders of Capital Securities are entitled to vote or consent under any of the circumstances described above, any of the Securities that are owned at such time by the Guarantor, the Trustees or any Affiliate of the Guarantor or any Trustees, shall, for purposes of such vote or consent, be treated as if such Securities were not outstanding. (j) Holders of the Capital Securities shall have no rights to appoint or remove the Trustees, who may be appointed, removed or replaced solely by the Common Securities Holder. SECTION 7.6. VOTING RIGHTS OF COMMON SECURITIES. (a) Except as provided under Section 6.1(b), this Section 7.6 or Section 11.1 or as otherwise required by the Business Trust Act, the Trust Indenture Act or other applicable law or provided by the Declaration, the Holders of the Common Securities shall have no voting rights. (b) The Holders of the Common Securities shall be entitled, in accordance with Article V of the Declaration, to vote to appoint, remove or replace any Trustee or to increase or decrease the number of Trustees. (c) Subject to Section 2.6 and only after all Trust Enforcement Events with respect to the Capital Securities have been cured, waived, or otherwise eliminated and subject to the requirement of the Property Trustee obtaining a tax opinion in certain circumstances set forth in this Section 7.6(c), the Holders of a Majority in Liquidation Amount of the Common Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration, including the right to direct the Property Trustee, as holder of the Debentures and the Debt Guarantee, to (i) exercise the remedies available to it under the Indenture and the Debt Guarantee or (ii) consent to any amendment or modification of the Indenture or the Debentures where such consent shall be required; provided, however, that where a consent or action under the Indenture would require the consent or act of the Holders of more than a majority of the aggregate principal amount of Debentures affected thereby, only the Holders of the percentage of the aggregate stated liquidation amount of the Common Securities which is at least equal to the percentage required under the Indenture may direct the Property Trustee to have such consent or take such action. Except with respect to directing the time, method, and place of conducting a proceeding for a remedy, the Property Trustee shall be under no obligation to take any of the actions described in clause 7.6(c)(i) or 7.6(c)(ii) above unless the Property Trustee has obtained an opinion of independent tax counsel to the effect that, as a result of such action, for United States federal income tax purposes the Trust will not fail to be classified as a grantor trust and each Holder will be treated as owning an undivided beneficial ownership interest in the Debentures. (d) If the Property Trustee fails to enforce its rights under the Debentures after Holders of a Majority in Liquidation Amount of the Common Securities have so directed the Property Trustee as provided in Section 7.6(c), a Holder of Common Securities may directly institute a legal proceeding directly against the Debenture Issuer or the Guarantor, respectively, to enforce the Property Trustee's rights under the Indenture without first instituting any legal proceeding against the Property Trustee or any other person or entity. In addition, if a Trust Enforcement Event has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to make any interest, principal or other required payments when due under the Indenture and the Guarantor does not make such payments, to the extent required, under the Debt Guarantee, then a Holder of Common Securities may directly institute a Direct Action against the Debenture Issuer or the Guarantor, respectively, on or after the respective due date specified in the Debentures. (e) A waiver of an Indenture Event of Default with respect to the Debentures will constitute a waiver of the corresponding Trust Enforcement Event. (f) Any required approval or direction of Holders of Common Securities may be given at a separate meeting of Holders of Common Securities convened for such purpose, at a meeting of all of the Holders of Securities or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Trust Common Securities are entitled to vote, or of any matter on which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Common Securities. Each such notice will include a statement setting forth the following information: (i) the date of such meeting or the date by which such action is to be taken; (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought; and (iii) instructions for the delivery of proxies or consents. (g) No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute Debentures in accordance with the Declaration. SECTION 7.7. PAYING AGENT. In the event that any Capital Securities are not in book-entry only form, the Trust shall maintain in the Borough of Manhattan, City of New York, State of New York, an office or agency where the Capital Securities may be presented for payment (the "Paying Agent"). The Trust may appoint the Paying Agent and may appoint one or more additional paying agents in such other locations as it shall determine. The term "Paying Agent" includes any additional paying agent. The Trust may change any Paying Agent without prior notice to the Holders. The Trust shall notify the Property Trustee of the name and address of any Paying Agent not a party to this Declaration. If the Trust fails to appoint or maintain another entity as Paying Agent, the Property Trustee shall act as such. The Trust or any of its Affiliates may act as Paying Agent. The Property Trustee shall initially act as Paying Agent for the Capital Securities and the Common Securities. In the event the Property Trustee shall no longer be the Paying Agent, the Regular Trustees shall appoint a successor (which shall be a bank or trust company acceptable to the Regular Trustees and the Guarantor) to act as Paying Agent. The Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Property Trustee and the Guarantor. SECTION 7.8. TRANSFER OF SECURITIES. (a) The Trust shall cause to be kept at the Corporate Trust Office of the Property Trustee a register (the register maintained in such office being herein sometimes referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Trust shall provide for the registration of Securities and of transfers of Securities. The Property Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. (b) Upon surrender for registration of transfer of any Security at an office or agency of the Trust designated for such purpose, the Trust shall execute, and the Property Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations and of a like aggregate principal amount. (c) At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Trust shall execute, and the Property Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. (d) Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Trust or the Property Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Trust and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. (e) No service charge shall be made for any registration of transfer or exchange of Securities, but the Trust may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities. SECTION 7.9. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If: (a) any mutilated Certificates should be surrendered to the Regular Trustees, or if the Regular Trustees shall receive evidence to their satisfaction of the destruction, loss or theft of any Certificate; and (b) there shall be delivered to the Regular Trustees such security or indemnity as may be required by them to keep each of them, the Sponsor and the Trust harmless, then, in the absence of notice that such Certificate shall have been acquired by a bona fide purchaser, any Regular Trustee on behalf of the Trust shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 7.9, the Regular Trustees may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section 7.9 shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. SECTION 7.10. DEEMED SECURITY HOLDERS. The Trustees may treat the Person in whose name any Certificate shall be registered on the Security Register of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust shall have actual or other notice thereof. SECTION 7.11. GLOBAL SECURITIES. The Transfer Restricted Securities shall be, and the New Capital Securities may be, issued as Global Securities; if Capital Securities are to be issued in the form of one or more Global Securities, then the Trust shall execute and the Property Trustee shall authenticate and deliver one or more Global Securities that (i) shall represent and shall be denominated in an amount equal to the aggregate liquidation amount of all of the Capital Securities to be issued in the form of Global Securities and not yet canceled, (ii) shall be registered in the name of the Depositary for such Global Security or Global Securities or the nominee of such Depositary, and (iii) shall be delivered by the Property Trustee to such Depositary or pursuant to such Depositary's instructions. Global Securities shall bear a legend substantially to the following effect: "This Capital Security is a Global Security within the meaning of the Declaration hereinafter referred to and is registered in the name of The Depository Trust Company, a New York corporation (the "Depositary"), or a nominee of the Depositary. This Capital Security is exchangeable for Capital Securities registered in the name of a Person other than the Depositary or its nominee only in the limited circumstances described in the Declaration and no transfer of this Capital Security (other than a transfer of this Capital Security as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. Unless this Capital Security Certificate is presented by an authorized representative of the Depositary to Countrywide Capital III or its agent for registration of transfer, exchange or payment, and any Security Certificate issued is registered in the name of Cede & Co. or such other name as registered by an authorized representative of the Depositary (and any payment hereon is made to Cede & Co. or to such other entity as is requested by an authorized representative of the Depositary), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein." Capital Securities not represented by a Global Security issued in exchange for all or a part of a Global Security pursuant to this Section 7.11 shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect Participants or otherwise, shall instruct the Property Trustee. Upon execution and authentication, the Property Trustee shall deliver such Capital Securities not represented by a Global Security to the persons in whose names such definitive Capital Securities are so registered. At such time as all interests in Global Securities have been redeemed, repurchased or canceled, such Global Securities shall be, upon receipt thereof, canceled by the Property Trustee in accordance with standing procedures of the Depositary. At any time prior to such cancellation, if any interest in Global Securities is exchanged for Capital Securities not represented by a Global Security, redeemed, canceled or transferred to a transferee who receives Capital Securities not represented by a Global Security therefor or any Capital Security not represented by a Global Security is exchanged or transferred for part of a Global Security, the principal amount of such Global Securities shall, in accordance with the standing procedures of the Depositary, be reduced or increased, as the case may be, and an endorsement shall be made on such Global Securities by the Property Trustee to reflect such reduction or increase. The Trust and the Property Trustee may for all purposes, including the making of payments due on the Capital Securities, deal with the Depositary as the authorized representative of the Holders for the purposes of exercising the rights of Holders hereunder. The rights of the owner of any beneficial interest in a Global Security shall be limited to those established by law and agreements between such owners and depository participants or Euroclear and Cedel; provided, that no such agreement shall give any rights to any Person against the Trust or the Property Trustee without the written consent of the parties so affected. Multiple requests and directions from and votes of the Depositary as Holder of Capital Securities in global form with respect to any particular matter shall not be deemed inconsistent to the extent they do not represent an amount of Capital Securities in excess of those held in the name of the Depositary or its nominee. If at any time the Depositary for any Capital Securities represented by one or more Global Securities notifies the Trust that it is unwilling or unable to continue as Depositary for such Capital Securities or if at any time the Depositary for such Capital Securities shall no longer be eligible under this Section 7.11, the Trust shall appoint a successor Depositary with respect to such Capital Securities. If a successor Depositary for such Capital Securities is not appointed by the Trust within 90 days after the Trust receives such notice or becomes aware of such ineligibility, the Trust's election that such Capital Securities be represented by one or more Global Securities shall no longer be effective and the Trust shall execute, and the Property Trustee will authenticate and deliver, Capital Securities in definitive registered form, in any authorized denominations, in an aggregate liquidation amount equal to the aggregate liquidation amount of the Global Security or Global Securities representing such Capital Securities in exchange for such Global Security or Capital Securities. The Trust may at any time and in its sole discretion determine that the Capital Securities issued in the form of one or more Global Securities shall no longer be represented by a Global Security or Global Securities. In such event the Trust shall execute, and the Property Trustee, shall authenticate and deliver, Capital Securities in definitive registered form, in any authorized denominations, in an aggregate liquidation amount equal to the principal amount of the Global Security or Global Securities representing such Capital Securities, in exchange for such Global Security or Global Securities. Notwithstanding any other provisions of this Declaration (other than the provisions set forth in Section 7.8), Global Securities may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. Interests of beneficial owners in a Global Security may be transferred or exchanged for Capital Securities not represented by a Global Security and Capital Securities not represented by a Global Security may be transferred or exchanged for Global Securities in accordance with rules of the Depositary and the provisions of Section 7.13. Any Capital Security in global form may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Declaration as may be required by the Depositary or by the National Association of Securities Dealers, Inc. in order for the Capital Securities to be tradable on the PORTAL Market or as may be required for the Capital Securities to be tradable on any other market developed for trading of securities pursuant to Rule 144A or required to comply with any applicable law or any regulation thereunder or with Regulation S or with the rules and regulations of any securities exchange upon which the Capital Securities may be listed or traded or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Capital Securities are subject. SECTION 7.12. RESTRICTIVE LEGEND. (a) Each Global Security and Capital Security not represented by a Global Security that constitutes a Restricted Security shall bear the following legend (the "Private Placement Legend") on the face thereof until two years after the later of the date of original issue and the last date on which the Sponsor or any affiliate of the Sponsor was the owner of such Capital Securities (or any predecessor thereto) (the "Resale Restriction Termination Date"), unless otherwise agreed by the Trust and the Holder thereof: "THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE ISSUER OF THIS SECURITY THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY PRIOR TO THE LATER OF THE DATE WHICH IS TWO YEARS AFTER THE DATE OF ORIGINAL ISSUANCE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF SUCH RESTRICTED SECURITIES (OR ANY PREDECESSOR) EXCEPT (A) TO COUNTRYWIDE HOME LOANS, INC., (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSES (II)(D) AND (E) IS SUBJECT TO THE RIGHT OF THE ISSUER AND THE PROPERTY TRUSTEE FOR SUCH SECURITY TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THEM IN FORM AND SUBSTANCE." Any Capital Security (or security issued in exchange or substitution therefor) as to which such restrictions on transfer shall have expired in accordance with their terms may, upon satisfaction of the requirements of Section 7.12(b) and surrender of such Capital Security for exchange to the Security Registrar in accordance with the provisions of Section 7.12(b), be exchanged for a new Capital Security or Capital Securities, of like tenor and aggregate liquidation amount, which shall not bear the restrictive legend required by this Section 7.12(a). (a) Upon any sale or transfer of any Restricted Security (including any interest in a Global Security) (i) that is effected pursuant to an effective registration statement under the Securities Act or (ii) in connection with which the Property Trustee receives certificates and other information (including an opinion of counsel, if requested) reasonably acceptable to the Sponsor and the Property Trustee to the effect that such security will no longer be subject to the resale restrictions under federal and state securities laws, then (A) in the case of a Restricted Security in definitive form, the Security Registrar shall permit the holder thereof to exchange such Restricted Security for a security that does not bear the legend set forth in Section 7.12(a), and shall rescind any such restrictions on transfer and (B) in the case of Restricted Securities represented by a Global Security, such Capital Securities shall no longer be subject to the restrictions contained in the legend set forth in Section 7.12(a) (but still subject to the other provisions hereof). In addition, any Capital Security (or security issued in exchange or substitution therefor) as to which the restrictions on transfer described in the legend set forth in Section 7.12(a) have expired by their terms, may, upon surrender thereof (in accordance with terms of this Declaration) together with such certifications and other information (including an opinion of counsel having substantial experience in practice under the Securities Act and otherwise reasonably acceptable to the Sponsor, addressed to the Sponsor and the Property Trustee and in form acceptable to the Sponsor, to the effect that the transfer of such Restricted Security has been made in compliance with Rule 144 or such successor provision) acceptable to the Sponsor and the Property Trustee as either of them may reasonably require, be exchanged for a new Capital Security or Capital Securities of like tenor and aggregate liquidation amount, which shall not bear the restrictive legends set forth in Section 7.12(a). SECTION 7.13. SPECIAL TRANSFER PROVISIONS. (a) At any time at the request of the Beneficial Owner of a Capital Security in global form, such Beneficial Owner shall be entitled to obtain a definitive Capital Security upon written request to the Property Trustee in accordance with the standing instructions and procedures existing between the Depositary and the Property Trustee for the issuance thereof. Any transfer of a beneficial interest in a Capital Security in global form which cannot be effected through book-entry settlement must be effected by the delivery to the transferee (or its nominee) of a definitive Capital Security or Securities registered in the name of the transferee (or its nominee) on the books maintained by the Security Registrar. With respect to any such transfer, the Property Trustee shall cause, in accordance with the standing instructions and procedures existing between the Depositary and the Property Trustee, the aggregate liquidation amount of the Global Security to be reduced and, following such reduction, the Property Trustee shall cause definitive Capital Securities in the appropriate aggregate liquidation amount in the name of such transferee (or its nominee) and bearing such restrictive legends as may be required by this Declaration to be delivered. In connection with any such transfer, the Property Trustee may request such representations and agreements relating to the restrictions on transfer of such Capital Securities from such transferee (or such transferee's nominee) as the Property Trustee may reasonably require. (b) So long as the Capital Securities are eligible to be held as Global Securities, or unless otherwise required by law, upon any transfer of a definitive Capital Security to a QIB in accordance with Rule 144A, unless otherwise requested by the transferor, and upon receipt of the definitive Capital Security being so transferred, together with a certification from the transferor that the transferor reasonably believes the transferee is a QIB (or other evidence satisfactory to the Property Trustee), the Property Trustee shall make an endorsement on the Restricted Global Security to reflect an increase in the aggregate liquidation amount of the Restricted Global Security, and the Property Trustee shall cancel such definitive Capital Security and cause, in accordance with the standing instructions and procedures existing between the Depositary and the Property Trustees, the aggregate liquidation amount of Capital Securities represented by the Restricted Global Security to be increased accordingly. (c) So long as the Capital Securities are eligible for book-entry settlement, or unless otherwise required by law, upon any transfer of a definitive Capital Security in accordance with Regulation S, if requested by the transferor, and upon receipt of the definitive Capital Security or Capital Securities being so transferred, together with a certification from the transferor that the transfer was made in accordance with Rule 903 or 904 of Regulation S or Rule 144 under the Securities Act (or other evidence satisfactory to the Property Trustee), the Property Trustee shall make an endorsement on the Regulation S Global Security to reflect an increase in the aggregate liquidation amount of the Capital Securities represented by the Regulation S Global Security, the Property Trustee shall cancel such definitive Capital Security or Capital Securities and cause, in accordance with the standing instructions and procedures existing between the Depositary and the Property Trustee, the aggregate liquidation amount of Capital Securities represented by the Regulation S Global Security to be increased accordingly. (d) If a holder of a beneficial interest in the Restricted Global Security wishes at any time to exchange its interest in the Restricted Global Security for an interest in the Regulation S Global Security, or to transfer its interest in the Restricted Global Security to a Person who wishes to take delivery thereof in the form of an interest in the Regulation S Global Security, such holder may, subject to the rules and procedures of the Depositary and to the requirements set forth in the following sentence, exchange or cause the exchange or transfer or cause the transfer of such interest for an equivalent beneficial interest in the Regulation S Global Security. Upon receipt by the Property Trustee, as transfer agent of (1) instructions given in accordance with the Depositary's procedures from or on behalf of a holder of a beneficial interest in the Restricted Global Security, directing the Property Trustee (via DWAC), as transfer agent, to credit or cause to be credited a beneficial interest in the Regulation S Global Security in an amount equal to the beneficial interest in the Restricted Global Security to be exchanged or transferred, (2) a written order given in accordance with the Depositary's procedures containing information regarding the Euroclear or Cedel account to be credited with such increase and the name of such account and (3) a certificate given by the holder of such beneficial interest stating that the exchange or transfer of such interest has been made pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S or Rule 144 under the Securities Act (or other evidence satisfactory to the Property Trustee), the Property Trustee, as transfer agent, shall promptly deliver appropriate instructions to the Depositary (via DWAC), its nominee, or the custodian for the Depositary, as the case may be, to reduce or reflect on its records a reduction of the Restricted Global Security by the aggregate liquidation amount of the beneficial interest in such Restricted Global Security to be so exchanged or transferred from the relevant participant, and the Property Trustee, as transfer agent, shall promptly deliver appropriate instructions (via DWAC) to the Depositary, its nominee, or the custodian for the Depositary, as the case may be, concurrently with such reduction, to increase or reflect on its records an increase of the aggregate liquidation amount of such Regulation S Global Security by the aggregate liquidation amount of the beneficial interest in such Restricted Global Security to be so exchanged or transferred, and to credit or cause to be credited to the account of the Person specified in such instructions (who may be Morgan Guaranty Trust Company of New York, Brussels office, as operator of Euroclear or Cedel or another agent member of Euroclear or Cedel, or both, as the case may be, acting for and on behalf of them) a beneficial interest in such Regulation S Global Security equal to the reduction in the aggregate liquidation amount of such Restricted Global Security. (e) If a holder of a beneficial interest in the Regulation S Global Security wishes at any time to exchange its interest in the Regulation S Global Security for an interest in the Restricted Global Security, or to transfer its interest in the Regulation S Global Security to a Person who wishes to take delivery thereof in the form of an interest in the Restricted Global Security, such holder may, subject to the rules and procedures of Euroclear or Cedel and the Depositary, as the case may be, and to the requirements set forth in the following sentence, exchange or cause the exchange or transfer or cause the transfer of such interest for an equivalent beneficial interest in the Restricted Global Security. Upon receipt by the Property Trustee, as transfer agent of (l) instructions given in accordance with the procedures of Euroclear or Cedel and the Depositary, as the case may be, from or on behalf of a beneficial owner of an interest in the Regulation S Global Security directing the Property Trustee, as transfer agent, to credit or cause to be credited a beneficial interest in the Restricted Global Security in an amount equal to the beneficial interest in the Regulation S Global Security to be exchanged or transferred, (2) a written order given in accordance with the procedures of Euroclear or Cedel and the Depositary, as the case may be, containing information regarding the account with the Depositary to be credited with such increase and the name of such account and (3) prior to the expiration of the Restricted Period, a certificate given by the holder of such beneficial interest and stating that the person transferring such interest in such Regulation S Global Security reasonably believes that the person acquiring such interest in the Restricted Global Security is a QIB and is obtaining such beneficial interest in a transaction meeting the requirements of Rule 144A and any applicable securities laws of any State of the United States or any other jurisdiction (or other evidence satisfactory to the Property Trustee), the Property Trustee, as transfer agent, shall promptly deliver (via DWAC) appropriate instructions to the Depositary, its nominee, or the custodian for the Depositary, as the case may be, to reduce or reflect on its records a reduction of the Regulation S Global Security by the aggregate liquidation amount of the beneficial interest in such Regulation S Global Security to be exchanged or transferred, and the Property Trustee, as transfer agent, shall promptly deliver (via DWAC) appropriate instructions to the Depositary, its nominee, or the custodian for the Depositary, as the case may be, concurrently with such reduction, to increase or reflect on its records an increase of the liquidation amount of the Restricted Global Security by the aggregate liquidation amount of the beneficial interest in the Regulation S Global Security to be so exchanged or transferred, and to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Restricted Global Security equal to the reduction in the aggregate liquidation amount of the Regulation S Global Security. After the expiration of the Restricted Period, the certification requirement set forth in clause (3) of the second sentence of this Section 7.13(e) will no longer apply to such exchanges and transfers. (f) Any beneficial interest in one of the Global Securities that is transferred to a Person who takes delivery in the form of an interest in the other Global Security will, upon transfer, cease to be an interest in such Global Security and become an interest in the other Global Security and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in such other Global Security for as long as it remains such an interest. (g) Prior to or on the 40th day after the later of the commencement of the offering of the Capital Securities and the Closing Date (the "Restricted Period"), beneficial interests in a Regulation S Global Security may only be held through Morgan Guaranty Trust Company of New York, Brussels office, as operator of Euroclear or Cedel or another agent member of Euroclear and Cedel acting for and on behalf of them, unless delivery is made through the Restricted Global Security in accordance with the certification requirements hereof. During the Restricted Period, interests in the Regulation S Global Security, may be exchanged for interests in the Restricted Global Security or for definitive Securities only in accordance with the certification requirements described above. (h) Capital Securities may not be acquired by any Person who is, or who in acquiring such Capital Securities is using the assets of, an ERISA Plan unless Capital Securities are acquired pursuant to and in accordance with an applicable exemption, including but not limited to: (i) Prohibited Transaction Class Exemption 90-1 ("PTE 90-1"), regarding investments by insurance company pooled separate accounts, (ii) Prohibited Transaction Class Exemption 91-38 ("PTE 91-38") regarding investments by bank collective investment funds, (iii) Prohibited Transaction Class Exemption 84-14 ("PTE 84-14"), regarding transactions effected by qualified professional asset managers, (iv) Prohibited Transaction Class Exemption 96-23 ("PTE 96-23"), regarding transactions effected by in-house asset managers, or (v) Prohibited Transaction Class Exemption 95-60 ("PTE 95-60"), regarding investments by insurance company general accounts. The acquisition of Capital Securities by any Person who is, or who in acquiring such Capital Securities is using the assets of, an ERISA Plan shall be deemed to constitute a representation by such Person to the Trust that (i) such Person is eligible for exemptive relief available pursuant to an applicable exemption, including but not limited to, PTE 90-1, PTE 91-38, PTE 84-14, PTE 96-23 or PTE 95-60 with respect to the acquisition and holding of such Capital Securities, and (ii) none of Countrywide Home Loans, Inc., Countrywide Credit Industries, Inc., Countrywide Financial Services, Inc. or Countrywide Securities Corporation is a "fiduciary", within the meaning of Section 3(21) of ERISA and the regulations thereunder, with respect to such Person's interest in the Capital Securities or the Debentures. ARTICLE 8. DISSOLUTION AND TERMINATION OF TRUST SECTION 8.1. DISSOLUTION AND TERMINATION OF TRUST. (a) The Trust shall dissolve upon the earliest of: (i) the bankruptcy of the Sponsor or the Debenture Issuer; (ii) the filing of a certificate of dissolution or its equivalent with respect to the Sponsor; and the revocation of the charter of the Sponsor or the Debenture Issuer and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii) the entry of a decree of judicial dissolution of the Sponsor, the Debenture Issuer or the Trust; (iv) the time when all of the Securities shall have been called for redemption and the amounts then due thereon shall have been paid to the Holders thereof in accordance with the terms of the Securities; (v) upon the election of the Regular Trustees, following the occurrence and continuation of a Special Event pursuant to which the Trust is dissolved in accordance with the terms of the Securities, and all of the Debentures and the Debt Guarantee are distributed to the Holders of the Securities in exchange for all of the Securities; or (vi) the time when all of the Regular Trustees and the Sponsor shall have consented to termination of the Trust provided such action is taken before the issuance of any Securities. (b) In addition to the provisions of Section 8.1(a), the Sponsor shall have the right, at any time, to dissolve the Trust and, after causing payment or reasonable provision for payment to be made with respect to all claims and obligations of the Trust in accordance with Section 3808(e) of the Business Trust Act, cause the Debentures and the Debt Guarantee to be distributed to the holders of the Trust Securities in liquidation of the Trust. (c) As soon as practicable following completion of any the winding up and liquidation of the Trust, the Trustees shall terminate the Trust by filing a certificate of cancellation with the Secretary of State of the State of Delaware. (d) The provisions of Section 3.9, Section 4.2 and Article 10 shall survive the termination of the Trust. SECTION 8.2. LIQUIDATION DISTRIBUTION UPON DISSOLUTION OF THE TRUST. (a) In the event of any voluntary or involuntary dissolution, winding-up and liquidation of the Trust (each a "Liquidation"), the Holders of the Capital Securities on the date of the Liquidation will be entitled to receive, out of the assets of the Trust available for distribution to Holders of Securities, after paying or making reasonable provision to pay all claims and obligations of the Trust in accordance with Section 3808(e) of the Business Trust Act, distributions in cash or other immediately available funds in an amount equal to the aggregate of the stated liquidation amount of $1,000 per Security plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"), unless, in connection with such Liquidation, Debentures in an aggregate stated principal amount equal to the aggregate stated liquidation amount of, with a distribution rate identical to the distribution rate of, and accrued and unpaid distributions equal to accumulated and unpaid distributions on, such Securities shall be distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities. (b) If, upon any such Liquidation, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Securities shall be paid on a Pro Rata basis. The Holders of the Common Securities will be entitled to receive distributions upon any such Liquidation Pro Rata with the Holders of the Capital Securities except that if an Indenture Event of Default has occurred and is continuing, the Capital Securities shall have a preference over the Common Securities with regard to such distributions. ARTICLE 9. LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, DELAWARE TRUSTEES OR OTHERS SECTION 9.1. LIABILITY. (a) Except as expressly set forth in this Declaration and the terms of the Securities, the Sponsor: (i) shall not be personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; and (ii) shall not be required to pay to the Trust or to any Holder of Securities any deficit upon dissolution of the Trust or otherwise. (b) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of the Common Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware; provided, however, the Holder of the Common Securities shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities) to the extent not satisfied out of the Trust's assets. (c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of the Capital Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION 9.2. EXCULPATION. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. SECTION 9.3. FIDUCIARY DUTY. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to an other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person. (b) Unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between any Covered Persons; or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise. (c) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision: (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 9.4. INDEMNIFICATION. (a) (i) The Debenture Issuer shall indemnify, to the full extent permitted by law, any Debenture Issuer Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) by reason of the fact that such Person is or was a Debenture Issuer Indemnified Person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such Person in connection with such action, suit or proceeding if he acted in good faith and in a manner such Person reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such Person's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Debenture Issuer Indemnified Person did not act in good faith and in a manner which such Person reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such Person's conduct was unlawful. (ii) The Debenture Issuer shall indemnify, to the full extent permitted by law, any Debenture Issuer Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Trust to procure a judgment in its favor by reason of the fact that such Person is or was a Debenture Issuer Indemnified Person against expenses (including attorneys' fees) actually and reasonably incurred by such Person in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner such Person reasonably believed to be in or not opposed to the best interests of the Trust and except that no such indemnification shall be made in respect of any claim, issue or matter as to which such Debenture Issuer Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such Person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper. (iii) Any indemnification under paragraphs (i) and (ii) of this Section (unless ordered by a court) shall be made by the Debenture Issuer only as authorized in the specific case upon a determination that indemnification of the Debenture Issuer Indemnified Person is proper in the circumstances because such Person has met the applicable standard of conduct set forth in paragraphs (i) and (ii). Such determination shall be made (1) by the Regular Trustees by a majority vote of a quorum consisting of such Regular Trustees who were not parties to such action, suit or proceeding, (2) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Regular Trustees so directs, by independent legal counsel in a written opinion or (3) by the Common Security Holder of the Trust. (iv) Expenses (including attorneys' fees) reasonably incurred by a Debenture Issuer Indemnified Person in defending a civil, criminal, administrative or investigative action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 9.4(a) shall be paid by the Debenture Issuer in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Debenture Issuer Indemnified Person to repay such amount if it shall ultimately be determined that such Person is not entitled to be indemnified by the Debenture Issuer as authorized in this Section 9.4(a). Notwithstanding the foregoing, no advance shall be made by the Debenture Issuer if a determination is reasonably and promptly made (i) by the Regular Trustees by a majority vote of a quorum of disinterested Regular Trustees, (ii) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Regular Trustees so directs, by independent legal counsel in a written opinion or (iii) the Common Security Holder of the Trust, that, based upon the facts known to the Regular Trustees, counsel or the Common Security Holder at the time such determination is made, such Debenture Issuer Indemnified Person acted in bad faith or in a manner that such Person did not believe to be in or not opposed to the best interests of the Trust, or, with respect to any criminal proceeding, that such Debenture Issuer Indemnified Person believed or had reasonable cause to believe such Person's conduct was unlawful. In no event shall any advance be made in instances where the Regular Trustees, independent legal counsel or the Common Security Holder reasonably determine that such Person deliberately breached such Person's duty to the Trust or its Common or Capital Security Holders. (v) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 9.4(a) shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors of the Debenture Issuer or Capital Security Holders of the Trust or otherwise, both as to action in such Person's official capacity and as to action in another capacity while holding such office. All rights to indemnification under this Section 9.4(a) shall be deemed to be provided by a contract between the Debenture Issuer and each Debenture Issuer Indemnified Person who serves in such capacity at any time while this Section 9.4(a) is in effect. Any repeal or modification of this Section 9.4(a) shall not affect any rights or obligations then existing. (vi) The Debenture Issuer or the Trust may purchase and maintain insurance on behalf of any Person who is or was a Debenture Issuer Indemnified Person against any liability asserted against such Person and incurred by such Person in any such capacity, or arising out of such Person's status as such, whether or not the Debenture Issuer would have the power to indemnify such Person against such liability under the provisions of this Section 9.4(a). (vii) For purposes of this Section 9.4(a), references to "the Trust" shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any Person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 9.4(a) with respect to the resulting or surviving entity as such Person would have with respect to such constituent entity if its separate existence had continued. (viii)The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 9.4(a) shall, unless otherwise provided when authorized or ratified, continue as to a Person who has ceased to be a Debenture Issuer Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a Person. The obligation to indemnify as set forth in this Section 9.4(a) shall survive the satisfaction and discharge of this Declaration. (b) The Debenture Issuer agrees to indemnify the (i) Property Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee and the Delaware Trustee and (iv) any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Property Trustee and the Delaware Trustee (each of the Persons in (i) through (iv) being referred to as a "Fiduciary Indemnified Person") for, and to hold each Fiduciary Indemnified Person harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 9.4(a) shall survive the satisfaction and discharge of this Declaration. SECTION 9.5. OUTSIDE BUSINESSES. Any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the activities of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the activities of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor, the Delaware Trustee or the Property Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE 10. ACCOUNTING SECTION 10.1. FISCAL YEAR. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION 10.2. CERTAIN ACCOUNTING MATTERS. (a) At all times during the existence of the Trust, the Regular Trustees shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail, each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The Trust shall use the accrual method of accounting for United States federal income tax purposes. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Regular Trustees. (b) The Regular Trustees shall cause to be prepared and delivered to each of the Holders of Capital Securities, such financial information, if any, as may be required by any national securities exchange or other organization on or through which the Capital Securities are listed or quoted. (c) The Regular Trustees shall cause to be duly prepared and delivered to each of the Holders of Securities, an annual United States federal income tax information statement, required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Regular Trustees shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust. (d) The Regular Trustees shall cause to be duly prepared and filed with the appropriate taxing authority, an annual United States federal income tax return, on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Regular Trustees on behalf of the Trust with any State or local taxing authority. SECTION 10.3. BANKING. The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Property Trustee shall be made directly to the Property Account and no other funds of the Trust shall be deposited in the Property Account. The sole signatories for such accounts shall be designated by the Regular Trustees; provided, however, that the Property Trustee shall designate the signatories for the Property Account. SECTION 10.4. WITHHOLDING. The Trust and the Regular Trustees shall comply with all withholding requirements under United States federal, state and local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Regular Trustees shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Holder. In the event of any claimed over withholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual distributions made, the Trust may reduce subsequent distributions by the amount of such withholding. ARTICLE 11. AMENDMENTS AND MEETINGS SECTION 11.1. AMENDMENTS. (a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may only be amended by a written instrument approved and executed by the Sponsor and (i) the Regular Trustees (or, if there are more than two Regular Trustees, a majority of the Regular Trustees) and (ii) by the Property Trustee if the amendment affects the rights, powers, duties, obligations or immunities of the Property Trustee; and (iii) by the Delaware Trustee if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee. (b) No amendment shall be made, and any such purported amendment shall be void and ineffective: (i) unless, in the case of any proposed amendment, the Property Trustee shall have first received an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); (ii) unless, in the case of any proposed amendment which affects the rights, powers, duties, obligations or immunities of the Property Trustee, the Property Trustee shall have first received: a. an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and b. an opinion of counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (iii) to the extent the result of such amendment would be to: a. cause the Trust to be classified other than as a grantor trust for United States federal income tax purposes; b. reduce or otherwise adversely affect the powers of the Property Trustee in contravention of the Trust Indenture Act; or c. cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act. (c) At such time after the Trust has issued any Securities that remain outstanding, any amendment that would (i) adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise or (ii) result in the dissolution, winding-up or termination of the Trust other than pursuant to the terms of this Declaration, then the holders of the Securities voting together as a single class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of at least a Majority in Liquidation Amount of the Securities affected thereby; provided that, if any amendment or proposal referred to in clause (i) above would adversely affect only the Capital Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a Majority in Liquidation Amount of such class of Securities. Notwithstanding the foregoing, however, no amendment of this Declaration shall impair or affect the right of any Holder of Securities to receive payment of Distributions and other payments upon redemption or otherwise on or after their respective due dates, or to institute suit for the enforcement of any such payment on or after such respective due dates without the consent of such Holder. (d) Section 7.5(c) and this Section 11.1 shall not be amended without the consent of all of the Holders of the Securities. (e) Article 5 shall not be amended without the consent of the Holders of a Majority in Liquidation Amount of the Common Securities. (f) The rights of the Holders of the Common Securities under Article 6 to increase or decrease the number of, and appoint and remove Trustees shall not be amended without the consent of the Holders of a Majority in Liquidation Amount of the Common Securities. (g) Notwithstanding Section 11.1(c), this Declaration may be amended without the consent of the Holders of the Securities to: (i) cure any ambiguity; (ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration; (iii) add to the covenants, restrictions or obligations of the Sponsor; (iv) to conform to any change in Rule 3a-5 or written change in interpretation or application of Rule 3a-5 by any legislative body, court, government agency or regulatory authority which amendment does not have a material adverse effect on the rights, preferences or privileges of the Holders; or (v) to modify, eliminate and add to any provision of this Declaration to ensure that the Trust will be classified as a grantor trust for U.S. federal income tax purposes at all times that any Securities are outstanding or to ensure that the Trust will not be required to register as an Investment Company under the Investment Company Act; provided, however, that such modification, elimination or addition would not adversely affect in any material respect the rights, privileges or preferences of any Holder of the Securities. SECTION 11.2. MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN CONSENT. (a) Meetings of the Holders of any class of Securities may be called at any time by the Regular Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any securities exchange on which the Capital Securities are listed or admitted for trading. The Regular Trustees shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 10% in Liquidation Amount of such class of Securities. Such direction shall be given by delivering to the Regular Trustees one or more calls in a writing stating that the signing Holders of Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of Securities calling a meeting shall specify in writing the Certificates held by the Holders of Securities exercising the right to call a meeting and only those Securities specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. (b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of Securities: (i) notice of any such meeting shall be given to all the Holders of Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of Securities is permitted or required under this Declaration or the rules of any securities exchange on which the Capital Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the Holders of Securities. Any action that may be taken at a meeting of the Holders of Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of Securities owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the Security Holders for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees; (ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of Securities executing such proxy. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation; (iii) each meeting of the Holders of the Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate; and (iv) unless the Business Trust Act, this Declaration, the terms of the Securities, the Trust Indenture Act or the listing rules of any securities exchange on which the Capital Securities are then listed for trading, otherwise provides, the Regular Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. ARTICLE 12. REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE SECTION 12.1. REPRESENTATIONS AND WARRANTIES OF THE PROPERTY TRUSTEE. The Trustee that acts as initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee that: (a) the Property Trustee is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration; (b) the Property Trustee satisfies the requirements set forth in Section 6.3(a); (c) the execution, delivery and performance by the Property Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Property Trustee. This Declaration has been duly executed and delivered by the Property Trustee, and it constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law); (d) the execution, delivery and performance of this Declaration by the Property Trustee does not conflict with or constitute a breach of the articles of association or incorporation, as the case may be, or the by-laws (or other similar organizational documents) of the Property Trustee; and (e) no consent, approval or authorization of, or registration with or notice to, any State or federal banking authority is required for the execution, delivery or performance by the Property Trustee of this Declaration. SECTION 12.2. REPRESENTATIONS AND WARRANTIES OF THE DELAWARE TRUSTEE. The Trustee that acts as initial Delaware Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee that: (a) the Delaware Trustee satisfies the requirements set forth in Section 6.2 and has the power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration and, if it is not a natural person, is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization; (b) the Delaware Trustee has been authorized to perform its obligations under the Certificate of Trust and this Declaration. This Declaration under Delaware law constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law); and (c) no consent, approval or authorization of, or registration with or notice to, any State or federal banking authority is required for the execution, delivery or performance by the Delaware Trustee of this Declaration. ARTICLE 13. MISCELLANEOUS SECTION 13.1. NOTICES. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows: (a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Property Trustee, the Delaware Trustee and the Holders of the Securities): Countrywide Capital III, c/o Countrywide Credit Industries, Inc., 4500 Park Granada, Calabasas, California 91302, Attention: Sandor E. Samuels. (b) if given to the Delaware Trustee, at the mailing address set forth below (or such other address as the Delaware Trustee may give notice of to the Regular Trustees, the Property Trustee and the Holders of the Securities): (c) if given to the Property Trustee, at its Corporate Trust Office (or such other address as the Property Trustee may give notice of to the Regular Trustees, the Delaware Trustee and the Holders of the Securities). (d) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice of to the Property Trustee, the Delaware Trustee and the Trust): 4500 Park Granada, Calabasas, California 91302, Attention: Corporate Secretary. (e) if given to any other Holder, at the address set forth on the Security Register of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 13.2. GOVERNING LAW. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws of the State of Delaware or any other jurisdiction that would call for the application of the law of any jurisdiction other than the State of Delaware; provided, however, that there shall not be applicable to the Trust, the Trustees or this Declaration any provision of the laws (statutory or common) of the State of Delaware pertaining to trusts that relate to or regulate, in a manner inconsistent with the terms hereof (a) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee fees and charges, (b) affirmative requirements to post bonds for trustees, officers, agents or employees of a trust, (c) the necessity for obtaining court or other governmental approval concerning the acquisition, holding or disposition of real or personal property, (d) fees or other sums payable to the trustees, officers, agents or employees of a trust, (e) the allocation of receipts and expenditures to income or principal, (f) restrictions or limitations on the permissible nature, amount or concentration of trust investments or requirements relating to the titling, storage or other manner of holding or investing trust assets or (g) the establishment of fiduciary or other standards of responsibility or limitations on the acts or powers of trustees that are inconsistent with the limitations or liabilities or authorities and powers of the Trustees as set forth or referenced in this Declaration. Section 3540 of Title 12 of the Delaware Code shall not apply to the Trust. SECTION 13.3. INTENTION OF THE PARTIES. It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted in a manner consistent with such classification. SECTION 13.4. HEADINGS. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 13.5. SUCCESSORS AND ASSIGNS. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 13.6. PARTIAL ENFORCEABILITY. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to Persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 13.7. COUNTERPARTS. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written. COUNTRYWIDE CREDIT INDUSTRIES, INC., as Sponsor and Common Securities Holder By: /S/ STANFORD L. KURLAND ---------------------------------- Name: Stanford L. Kurland Title: Senior Managing Director THE BANK OF NEW YORK, as Property Trustee By: /S/ VIVIAN GEORGES ---------------------------------- Name: Vivian Georges Title:Assistant Vice President THE BANK OF NEW YORK (Delaware), as Delaware Trustee By: /S/ MARY JANE MORRISSEY ---------------------------------- Name: Mary Jane Morrissey Title: Authorized Signatory /S/ ERIC P. SIERACKI, AS REGULAR TRUSTEE ----------------------------------------- Eric P. Sieracki, as Regular Trustee /S/ SANDOR E. SAMUELS ----------------------------------------- Sandor E. Samuels, as Regular Trustee /S/ THOMAS KEITH MCLAUGHLIN ----------------------------------------- Thomas Keith McLaughlin, as Regular Trustee EXHIBIT A This Capital Security is a Global Security within the meaning of the Declaration hereinafter referred to and is registered in the name of The Depository Trust Company, a New York corporation (the "Depositary"), or a nominee of the Depositary. This Capital Security is exchangeable for Capital Securities registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Declaration and no transfer of this Capital Security (other than a transfer of this Capital Security as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depository to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. Unless this Capital Security Certificate is presented by an authorized representative of the Depositary to Countrywide Capital III or its agent for registration of transfer, exchange or payment, and any Capital Security Certificate issued is registered in the name of Cede & Co. or such other name as registered by an authorized representative of the Depositary (and any payment hereon is made to Cede & Co. or to such other entity as is requested by an authorized representative of the Depositary), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein. CERTIFICATE NO. 1 NUMBER OF CAPITAL SECURITIES: CUSIP NO. $ LIQUIDATION AMOUNT -------- --------- CERTIFICATE EVIDENCING CAPITAL SECURITIES OF COUNTRYWIDE CAPITAL III 8.05% SUBORDINATED CAPITAL INCOME SECURITIES, SERIES A (LIQUIDATION AMOUNT $1,000 PER SECURITY) Countrywide Capital III, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co. (the "Holder") is the registered owner of securities of the Trust representing undivided beneficial ownership interests in the assets of the Trust designated the 8.05% Subordinated Capital Income Securities, Series A (liquidation amount $1,000 per Security) (the "Capital Securities"). The Capital Securities are transferable on the register of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in the Declaration (as defined below). The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust, dated as of June 4, 1997 (as the same may be amended from time to time (the "Declaration"), among Countrywide Credit Industries, Inc., a Delaware corporation, as Sponsor (the "Sponsor") Eric P. Sieracki, Sandor E. Samuels and Thomas Keith McLaughlin, as Regular Trustees, The Bank of New York, a New York banking corporation, as Property Trustee, and The Bank of New York (Delaware), a Delaware corporation, as Delaware Trustee, the terms of which are incorporated by reference herein. Capitalized terms used herein but not defined shall have the meaning given to them in the Declaration. The Holder is entitled to the benefits of the Trust Guarantee to the extent described therein. The Sponsor will provide a copy of the Declaration, the Trust Guarantee and the Indenture to a Holder without charge upon written request to the Sponsor at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Capital Securities as evidence of undivided indirect beneficial ownership interests in the Debentures and the Debt Guarantee. Capital Securities may not be acquired by any Person who is, or who in acquiring such Capital Securities is using the assets of, an ERISA Plan unless Capital Securities are acquired pursuant to and in accordance with an applicable exemption, including but not limited to: (i) Prohibited Transaction Class Exemption 90-1 ("PTE 90-1"), regarding investments by insurance company pooled separate accounts, (ii) Prohibited Transaction Class Exemption 91-38 ("PTE 91-38"), regarding investments by bank collective investment funds, (iii) Prohibited Transaction Class Exemption 84-14 ("PTE 84-14"), regarding transactions effected by qualified professional asset managers, (iv) Prohibited Transaction Class Exemption 96-23 ("PTE 96-23"), regarding transactions effected by in-house asset managers, or (v) Prohibited Transaction Class Exemption 95-60 ("PTE 95-60"), regarding investments by insurance company general accounts. The acceptance of this Certificate by any Person who is, or who in acquiring this Certificate is using the assets of, an ERISA Plan shall be deemed to constitute a representation by such Person to the Trust that (i) such Person is eligible for exemptive relief available pursuant to an applicable exemption, including but not limited to, PTE 90-1, PTE 91-38, PTE 84-14, PTE 96-23 or PTE 95-60 with respect to the acquisition and holding of the Capital Securities represented by this Certificate, and (ii) none of Countrywide Home Loans Inc., Countrywide Credit Industries, Inc., Countrywide Financial Services, Inc. or Countrywide Securities Corporation is a "fiduciary", within the meaning of Section 3(21) of ERISA and the regulations thereunder, with respect to such Person's interest in the Capital Securities or the Debentures. IN WITNESS WHEREOF, the Trust has executed this certificate this day of , 1997. COUNTRYWIDE CAPITAL III By: ---------------------------------- Name: Title: Regular Trustee This is one of the Capital Securities referred to in the within-mentioned Declaration. THE BANK OF NEW YORK Dated: By: -------- ---------------------------------- Name: Title: In connection with any transfer of this Capital Security occurring prior to the date which is the earlier of (i) the date of the declaration by the Commission of the effectiveness of a registration statement under the Securities Act covering resales of this Capital Security (which effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) two years after the later of the date of original issue and the last date on which the Sponsor or any affiliate of the Sponsor was the owner of such Capital Securities (or any predecessor thereto) (the "Resale Restriction Termination Date"), the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer: [CHECK ONE] (1) [ ] to Countrywide Home Loans, Inc. or a subsidiary thereof; or (2) [ ] pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or (3) [ ] outside the United States to a "foreign person" in compliance with Rule 904 of Regulation S under the Securities Act of 1933, as amended; or (4) [ ] pursuant to the exemption from registration provided by Rule 144 under the Securities Act of 1933, as amended; or (5) [ ] pursuant to an effective registration statement under the Securities Act of 1933, as amended; or (6) [ ] pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended. Unless one of the boxes is checked, the Trustees will refuse to register any of the Securities evidenced by this certificate in the name of any Person other than the registered Holder thereof; provided, however, that if box (3), (4) or (6) is checked, the Sponsor or the Trustees may require, prior to registering any such transfer of the Capital Securities, in its sole discretion, such written legal opinions, certifications (including an investment letter in the case of box (3)) and other information as the Trustees or the Sponsor has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended. If none of the foregoing boxes is checked, the Trustees or Registrar shall not be obligated to register this Capital Security in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.8 of the Indenture shall have been satisfied. Dated: Signed: -------- ---------------------------------- (Sign exactly as name appears on the other side of this Capital Security) Signature Guarantee: Note: Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Capital Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Sponsor as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: NOTICE: To be executed by an executive officer TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Capital Security outside the United States as a "foreign person" in compliance with Rule 904 of Regulation S under the Securities Act and is aware that the sale to it is being made in reliance on Regulation S. Dated: NOTICE: To be executed by an executive officer EXHIBIT B This Capital Security is a Global Security within the meaning of the Declaration hereinafter referred to and is registered in the name of The Depository Trust Company, a New York corporation (the "Depositary"), or a nominee of the Depositary. This Capital Security is exchangeable for Capital Securities registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Declaration and no transfer of this Capital Security (other than a transfer of this Capital Security as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. Unless this Capital Security Certificate is presented by an authorized representative of the Depositary to Countrywide Capital III or its agent for registration of transfer, exchange or payment, and any Capital Security Certificate issued is registered in the name of Cede & Co. or such other name as registered by an authorized representative of the Depositary (and any payment hereon is made to Cede & Co. or to such other entity as is requested by an authorized representative of the Depositary), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein. CERTIFICATE NO. 1 NUMBER OF CAPITAL SECURITIES: CUSIP NO. $ LIQUIDATION -------- ------ AMOUNT CERTIFICATE EVIDENCING CAPITAL SECURITIES OF COUNTRYWIDE CAPITAL III 8.05% SUBORDINATED CAPITAL INCOME SECURITIES, SERIES B (LIQUIDATION AMOUNT $1,000 PER SECURITY) Countrywide Capital III, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co. (the "Holder") is the registered owner of securities of the Trust representing undivided beneficial ownership interests in the assets of the Trust designated 8.05% Subordinated Capital Income the Securities, Series B (liquidation amount $1,000 per Security) (the "Capital Securities"). The Capital Securities are transferable on the register of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in the Declaration (as defined below). The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust, dated as of June 4, 1997 (as the same may be amended from time to time (the "Declaration"), among Countrywide Credit Industries, Inc., as Sponsor (the "Sponsor"), Eric P. Sieracki, Sandor E. Samuels and Thomas Keith McLaughlin, as Regular Trustees, The Bank of New York, a New York banking corporation, as Property Trustee, and The Bank of New York (Delaware), a Delaware corporation, as Delaware Trustee, the terms of which are incorporated by reference herein. Capitalized terms used herein but not defined shall have the meaning given to them in the Declaration. The Holder is entitled to the benefits of the Trust Guarantee to the extent described therein. The Sponsor will provide a copy of the Declaration, the Trust Guarantee and the Indenture to a Holder without charge upon written request to the Sponsor at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Capital Securities as evidence of undivided indirect beneficial ownership interests in the Debentures and the Debt Guarantee. Capital Securities may not be acquired by any Person who is, or who in acquiring such Capital Securities is using the assets of, an ERISA Plan unless Capital Securities are acquired pursuant to and in accordance with an applicable exemption, including but not limited to: (i) Prohibited Transaction Class Exemption 90-1 ("PTE 90-1"), regarding investments by insurance company pooled separate accounts, (ii) Prohibited Transaction Class Exemption 91-38 ("PTE 91-38"), regarding investments by bank collective investment funds, (iii) Prohibited Transaction Class Exemption 84-14 ("PTE 84-14"), regarding transactions effected by qualified professional asset managers, (iv) Prohibited Transaction Class Exemption 96-23 ("PTE 96-23"), regarding transactions effected by in-house asset managers, or (v) Prohibited Transaction Class Exemption 95-60 ("PTE 95-60"), regarding investments by insurance company general accounts. The acceptance of this Certificate by any Person who is, or who in acquiring this Certificate is using the assets of, an ERISA Plan shall be deemed to constitute a representation by such Person to the Trust that (i) such Person is eligible for exemptive relief available pursuant to an applicable exemption, including but not limited to, PTE 90-1, PTE 91-38, PTE 84-14, PTE 96-23 or PTE 95-60 with respect to the acquisition and holding of the Capital Securities represented by this Certificate, and (ii) none of Countrywide Home Loans Inc., Countrywide Credit Industries, Inc., Countrywide Financial Services, Inc. or Countrywide Securities Corporation is a "fiduciary", within the meaning of Section 3(21) of ERISA and the regulations thereunder, with respect to such Person's interest in the Capital Securities or the Debentures. IN WITNESS WHEREOF, the Trust has executed this certificate this day of , . COUNTRYWIDE CAPITAL III By: ---------------------------- Name: Title: Regular Trustee This is one of the Capital Securities referred to in the within-mentioned Declaration. THE BANK OF NEW YORK Dated: By: ----------- ---------------------------- Name: Title: EXHIBIT C THIS CERTIFICATE IS NOT TRANSFERABLE CERTIFICATE NO. 1 NUMBER OF COMMON SECURITIES: --- CERTIFICATE EVIDENCING COMMON SECURITIES OF COUNTRYWIDE CAPITAL III COMMON SECURITIES (LIQUIDATION AMOUNT $1,000 PER COMMON SECURITY) Countrywide Capital III, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that Countrywide Credit Industries, Inc. (the "Holder") is the registered owner of common securities of the Trust representing an undivided beneficial ownership interest in the assets of the Trust designated the Common Securities (liquidation amount $1,000 per Common Security) (the "Common Securities"). The Common Securities are not transferable and any attempted transfer thereof shall be void. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust, dated as of June 4, 1997 (as the same may be amended from time to time, the "Declaration"), among Countrywide Credit Industries, Loans, Inc. a Delaware corporation, as Sponsor, Eric P. Sieracki, Sandor E. Samuels and Thomas Keith McLaughlin, as Regular Trustees, The Bank of New York, a New York banking corporation, as Property Trustee, and The Bank of New York (Delaware) a Delaware corporation, as Delaware Trustee, the terms of which are incorporated by reference herein. The Holder is entitled to the benefits of the Trust Guarantee to the extent described therein. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Sponsor will provide a copy of the Declaration, the Trust Guarantee and the Indenture to a Holder without charge upon written request to the Sponsor at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of an undivided indirect beneficial ownership interest in the Debentures and the Debt Guarantee. IN WITNESS WHEREOF, the Trust has executed this certificate this day of , 1997. - ---- ------- COUNTRYWIDE CAPITAL III By: ---------------------------------------- Name: Title: Regular Trustee EXHIBITS Exhibit A Form of Capital Security Certificate, Series A Exhibit B Form of Capital Security Certificate, Series B Exhibit C Form of Common Security Certificate - -------- * _____ This Cross-Reference Table does not constitute part of the Agreement and shall not have any bearing upon the interpretation of any of its terms or provisions. EX-4.4 5 EXHIBIT 4.4 COUNTRYWIDE HOME LOANS, INC. Issuer COUNTRYWIDE CREDIT INDUSTRIES, INC. Guarantor AND THE BANK OF NEW YORK Trustee INDENTURE Dated as of June 4, 1997 $206,200,000 8.05% Junior Subordinated Debentures due June 15, 2027 TABLE OF CONTENTS* Page ARTICLE I Definitions and Other Provisions of General Application SECTION 1.1 Interpretation and Definitions..........................2 SECTION 1.2 Compliance Certificates and Opinions...................13 SECTION 1.3 Form of Documents Delivered to Trustee.................13 SECTION 1.4 Acts of Holders; Record Dates..........................13 SECTION 1.5 Notices, Etc. to Trustee and the Company...............14 SECTION 1.6 Notice to Holders; Waiver..............................15 SECTION 1.7 Conflict with Trust Indenture Act......................15 SECTION 1.8 Effect of Headings and Table of Contents...............16 SECTION 1.9 Separability Clause....................................16 SECTION 1.10 Benefits of Indenture..................................16 SECTION 1.11 Governing Law..........................................16 SECTION 1.12 Legal Holidays.........................................16 SECTION 1.13 Acknowledgment of Rights...............................16 SECTION 1.14 Assignment.............................................17 ARTICLE II General Terms and Conditions of the Debt Securities SECTION 2.1 Designation and Principal Amount.......................17 SECTION 2.2 Forms of Securities....................................17 SECTION 2.3 Maturity...............................................18 SECTION 2.4 Interest...............................................18 SECTION 2.5 Ranking................................................19 SECTION 2.6 Denominations..........................................20 SECTION 2.7 Forms..................................................20 SECTION 2.8 Special Transfer Provisions............................20 SECTION 2.9 Unconditional Guarantee................................24 SECTION 2.10 INTENTIONALLY DELETED..................................26 SECTION 2.11 Execution, Authentication, Delivery and Dating.................................................26 SECTION 2.12 Temporary Securities...................................26 SECTION 2.13 Registration; Registration of Transfer and Exchange...............................................27 SECTION 2.14 Mutilated, Destroyed, Lost and Stolen Securities.............................................28 SECTION 2.15 Payment of Interest; Interest Rights Preserved..............................................29 SECTION 2.16 Persons Deemed Owners..................................30 SECTION 2.17 Cancellation...........................................30 SECTION 2.18 CUSIP Numbers..........................................31 SECTION 2.19 Global Securities......................................31 SECTION 2.20 Restrictive Legend.....................................33 ARTICLE III Redemption of the Debt Securities SECTION 3.1 Optional Redemption; Shortening of Stated Maturity...............................................36 SECTION 3.2 Election to Redeem; Notice to Trustee..................36 SECTION 3.3 INTENTIONALLY DELETED..................................36 SECTION 3.4 INTENTIONALLY DELETED..................................37 SECTION 3.5 Notice of Redemption...................................37 SECTION 3.6 Deposit of Redemption Price............................37 SECTION 3.7 Debt Securities Payable on Redemption Date.............37 SECTION 3.8 INTENTIONALLY DELETED..................................38 SECTION 3.9 No Sinking Fund........................................38 ARTICLE IV Intentionally Deleted ARTICLE V Extension of Interest Payment Period SECTION 5.1 Extension of Interest Payment Period...................38 SECTION 5.2 Notice of Extension....................................39 ARTICLE VI Satisfaction and Discharge; Defeasance SECTION 6.1 Satisfaction and Discharge of Indenture................39 SECTION 6.2 Defeasance and Discharge...............................40 SECTION 6.3 Covenant Defeasance....................................40 SECTION 6.4 Conditions to Defeasance or Covenant Defeasance.............................................41 SECTION 6.5 Application of Trust Money.............................42 SECTION 6.6 Indemnity for U.S. Government Obligations..............42 ARTICLE VII Remedies SECTION 7.1 Events of Default......................................42 SECTION 7.2 Acceleration of Maturity; Rescission and Annulment..............................................44 SECTION 7.3 Collection of Indebtedness and Suits for Enforcement by Trustee.................................44 SECTION 7.4 Trustee May File Proofs of Claim.......................45 SECTION 7.5 Trustee May Enforce Claims Without Possession of Securities...............................45 SECTION 7.6 Application of Money Collected.........................46 SECTION 7.7 Limitation on Suits....................................46 SECTION 7.8 Unconditional Right of Holders to Receive Principal and Interest.................................47 SECTION 7.9 Restoration of Rights and Remedies.....................47 SECTION 7.10 Rights and Remedies Cumulative.........................47 SECTION 7.11 Delay or Omission Not Waiver...........................47 SECTION 7.12 Control by Holders.....................................48 SECTION 7.13 Waiver of Past Defaults................................48 SECTION 7.14 Undertaking for Costs..................................49 SECTION 7.15 Waiver of Stay or Extension Laws.......................49 SECTION 7.16 Capital Security Holders Rights........................49 ARTICLE VIII The Trustee SECTION 8.1 Certain Duties and Responsibilities....................49 SECTION 8.2 Notice of Defaults.....................................50 SECTION 8.3 Certain Rights of Trustee..............................50 SECTION 8.4 Trustee Not Responsible for Recitals or Issuance of Securities.................................51 SECTION 8.5 Trustee May Hold Securities............................51 SECTION 8.6 Money Held in Trust....................................52 SECTION 8.7 Compensation; Reimbursement; and Indemnity.............52 SECTION 8.8 Disqualification; Conflicting Interests................53 SECTION 8.9 Corporate Trustee Required; Eligibility................53 SECTION 8.10 Resignation and Removal; Appointment of Successor..............................................53 SECTION 8.11 Acceptance of Appointment by Successor.................55 SECTION 8.12 Merger, Conversion, Consolidation or Succession to Business.................................55 SECTION 8.13 Preferential Collection of Claims Against Company................................................55 ARTICLE IX Holders' Lists and Reports by Trustee and Company SECTION 9.1 Company to Furnish Trustee Names and Addresses of Holders...................................56 SECTION 9.2 Preservation of Information; Communications to Holders.............................................56 SECTION 9.3 Reports by Trustee. ..................................56 SECTION 9.4 Reports by the Guarantor...............................57 ARTICLE X Consolidation, Merger, Conveyance, Transfer or Lease SECTION 10.1 Company or Guarantor May Consolidate, etc., on Certain Terms.......................................57 SECTION 10.2 Successor Corporation to be Substituted................58 SECTION 10.3 Opinion of Counsel to be Given Trustee.................58 ARTICLE XI Supplemental Indentures SECTION 11.1 Supplemental Indentures Without Consent of Holders................................................58 SECTION 11.2 Supplemental Indentures with Consent of Holders................................................59 SECTION 11.3 Execution of Supplemental Indentures...................60 SECTION 11.4 Effect of Supplemental Indentures......................60 SECTION 11.5 Conformity with Trust Indenture Act....................61 SECTION 11.6 Reference in Securities to Supplemental Indentures.............................................61 ARTICLE XII Covenants; Representations and Warranties SECTION 12.1 Payment of Principal and Interest......................61 SECTION 12.2 Maintenance of Office or Agency........................61 SECTION 12.3 Money for Security Payments to Be Held in Trust..................................................62 SECTION 12.4 Statement by Officers as to Default....................63 SECTION 12.5 Existence..............................................63 SECTION 12.6 INTENTIONALLY DELETED..................................63 SECTION 12.7 INTENTIONALLY DELETED..................................63 SECTION 12.8 Additional Covenants...................................63 SECTION 12.9 Waiver of Certain Covenants............................64 SECTION 12.10 Restrictions on Payments and Distributions.............64 SECTION 12.11 Listing or Quotation of Debentures.....................65 ARTICLE XIII Subordination of Securities SECTION 13.1 Securities Subordinate to Senior Indebtedness...........................................65 SECTION 13.2 Default on Senior Indebtedness.........................66 SECTION 13.3 Liquidation; Dissolution; Bankruptcy...................66 SECTION 13.4 Subrogation............................................68 SECTION 13.5 Trustee to Effectuate Subordination....................69 SECTION 13.6 Notice by the Company and the Guarantor................69 SECTION 13.7 Rights of the Trustee; Holders of Senior Indebtedness...........................................70 SECTION 13.8 Subordination May Not be Impaired......................71 EXHIBITS Exhibit A Form of Debentures Exhibit B Form of New Debentures - -------- * This Table of Contents shall not, for any purpose, be deemed to be part of the Indenture. Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of June 4, 1997* Trust Indenture Indenture Act Section Section ------------------- ------------ ss. 310 (a)(1) 8.9 (a)(2) 8.9 (a)(5) 8.9 (b) 8.8, 8.10 ss. 311 (a) 8.13 (b) 8.13 ss. 312 (a) 9.1 (b) 9.2 (c) 9.2 ss. 313 (a) 9.3 (b) 9.3 (c) 9.3 (d) 9.3 ss. 314 (a) 9.4 (a)(4) 12.4 (c)(1) 1.2 (c)(2) 1.2 (e) 1.2 ss. 315 (a) 8.1 (b) 8.2 (c) 8.1 (d) 8.1 (e) 7.14 ss. 316 (a)(last sentence) 1.1, "Outstanding" ss. 316 (a)(1)(A) 7.12 (a)(1)(B) 7.13 (b) 7.8 (c) 1.4(c) ss. 317 (a)(1) 7.3 (a)(2) 7.4 (b) 12.3 ss.318 (a) 1.7 ------------------------------------- * This reconciliation and tie shall not, for any purpose, be deemed to be part of the Indenture. INDENTURE, dated as of June 4, 1997, among Countrywide Home Loans, Inc., a New York corporation, (the "Company"), Countrywide Credit Industries, Inc., a Delaware corporation (the "Guarantor") and The Bank of New York, a New York banking corporation (the "Trustee"). Unless otherwise defined herein, all capitalized terms used herein shall have the meanings ascribed to them in the Amended and Restated Declaration of Trust among the Guarantor, as sponsor, Eric P. Sieracki, Sandor E. Samuels and Thomas Keith McLaughlin, as Regular Trustees, The Bank of New York, a New York banking corporation, as Property Trustee, and The Bank of New York (Delaware), as Delaware Trustee, dated as of June 4, 1997 (the "Declaration"), as in effect on the date hereof, and which is incorporated herein by reference. WHEREAS, for its lawful corporate purposes, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of its 8.05% Junior Subordinated Debentures due June 15, 2027, Series A (the "Debentures"), and its 8.05% Junior Subordinated Debentures due June 15, 2027, Series B (the "New Debentures", and with the Debentures, the "Debt Securities") to be issued in exchange for the Debentures; WHEREAS, for its lawful corporate purposes, the Guarantor has duly authorized the execution and delivery of this Indenture and deems it appropriate to issue its guarantee of the Debt Securities on the terms herein provided (the "Debt Guarantee" and, together with the Debt Securities, the "Securities"); WHEREAS, Countrywide Capital III (the "Trust") intends to sell $200,000,000 aggregate liquidation amount of its 8.05% Subordinated Capital Income Securities, Series A (together with the 8.05% Subordinated Capital Income Securities, Series B, of the Trust to be issued in exchange therefor as contemplated by the Declaration, the "Capital Securities"), representing undivided beneficial ownership interests in the assets of the Trust and proposes to invest the proceeds from such offering in addition to the proceeds of the sale of $6,200,000 aggregate liquidation amount of the Common Securities (as defined), in $206,200,000 aggregate principal amount of the Debentures; WHEREAS, to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered, the Company and the Guarantor have duly authorized the execution of this Indenture; WHEREAS, all acts and things necessary to make this Indenture a valid agreement in accordance to its terms, have been done and performed. NOW, THEREFORE, THIS INDENTURE WITNESSETH:+ For and in consideration of the premises and the purchase of the Securities by the Holder thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE I Definitions and Other Provisions of General Application SECTION 1.1 Interpretation and Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Section have the meanings assigned to them in this Section and include the plural as well as the singular; (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; (d) the words "herein," and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (e) a reference to any Person shall include its successors and assigns; (f) a reference to any agreement or instrument shall mean such agreement or instrument as supplemented, modified, amended or amended and restated and in effect from time to time; (g) a reference to any statute, law, rule or regulation, shall include any amendments thereto applicable to the relevant Person, and any successor statute, law, rule or regulation; (h) a reference to any particular rating category shall be deemed to include any corresponding successor category, or any corresponding rating category issued by a successor or subsequent rating agency; (i) all references in this Indenture to Articles, Sections, Recitals and Exhibits are to Articles, Sections, Recitals and Exhibits to this Indenture, unless otherwise specified. "Act," when used with respect to any Holder, has the meaning specified in Section 1.4. "Additional Interest" has the meaning specified in Section 2.4(a). "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Authenticating Agent" means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Debt Securities. "Board Resolution" means a copy of a resolution certified by the Secretary or Assistant Secretary of the Company to have been duly adopted by the Company's Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day other than a Saturday or a Sunday, or a day on which banking institutions in The City of New York or Los Angeles, California are authorized or required by law or executive order to remain closed or a day on which the Corporate Trust Office of the Trustee, or the principal corporate trust office of the Property Trustee, is closed for business. "Capital Securities" has the meaning specified in the Recitals to this Indenture. "Cedel" means Cedel, S.A. "Change in 1940 Act Law" has the meaning set forth in the definition of "Investment Company Event". "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. A reference to a specific section of the Code refers not only to such specific section but also to any corresponding provision of any federal tax statute enacted after the date of this Indenture, as such specific section or corresponding provision is in effect on the date of application of the provisions of this Indenture containing such reference. "Commission" means the Securities and Exchange Commission or such successor agency performing comparable functions. "Common Securities" has the meaning specified in the Declaration. "Company" has the meaning specified in the Recitals to this Indenture. "Company Order" or "Company Request" means a written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President, any Managing Director or any Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Corporate Trust Office" means the principal office of the Trustee in The City of New York, at which at any particular time its corporate trust business shall be administered and which at the date of this Indenture is 101 Barclay Street, Floor 21 West, New York, New York 10286. "Covenant Defeasance" has the meaning specified in Section 6.3. "Custodian" means the custodian for the time being for any Global Security. "Debentures" has the meaning specified in the Recitals to this Indenture. "Debt Guarantee" means the agreement of the Guarantor, in the form set forth in Section 2.9 hereof, to be endorsed on the Debt Securities authenticated and delivered under this Indenture. "Debt Securities" has the meaning specified in the Recitals to this Indenture. "Declaration" has the meaning specified in the Recitals to this Indenture. "Defaulted Interest" has the meaning specified in Section 2.15. "Defeasance" has the meaning specified in Section 6.2. "Defeasance Agent" means another financial institution which is eligible to act as Trustee under this Indenture and which assumes all of the obligations of the Trustee necessary to enable the Trustee to act under Sections 6.2 and 6.3. In the event such a Defeasance Agent is appointed, the following conditions shall apply: 1. The Trustee shall have approval rights over the document appointing such Defeasance Agent and the document setting forth such Defeasance Agent's rights and responsibilities; 2. The Defeasance Agent shall provide verification to the Trustee acknowledging receipt of sufficient money and/or U.S. Government Obligations to meet the applicable conditions set forth in Sections 6.2 and 6.3; 3. The Trustee shall determine whether the Company and the Guarantor shall be deemed to have been Discharged from its respective obligations with respect to the Securities. "Depositary" means, with respect to Securities issuable in whole or in part in the form of one or more Global Securities, a clearing agency registered under the Exchange Act that is designated to act as Depositary for such Securities. "Depositary Participant" means a member of, or participant in, the Depositary. "Dissolution Event" means an event pursuant to which the Trust is dissolved in accordance with the Declaration, and the Securities held by the Property Trustee are distributed to the holders of the Capital Securities and Common Securities issued by the Trust pro rata in accordance with the Declaration. "DWAC" means Deposit and Withdrawal At Custodian Service. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Plan" means an employee benefit plan subject to ERISA or an individual retirement account or plan subject to Section 4975 of the Code. "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System. "Event of Default" has the meaning specified in Section 7.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor legislation. "Extension Period" has the meaning specified in Section 5.1. "Global Security" or "Global Debt Security" means a Security that evidences all or part of the Securities and is authenticated and delivered to, and registered in the name of, the Depositary for such Securities or a nominee thereof. "Guarantees" means the Trust Guarantee and the Debt Guarantee. "Guarantor" has the meaning specified in the Recitals to this Indenture. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. "Initial Purchasers" means Lehman Brothers Inc., Countrywide Securities Corporation, Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Brothers Inc. "Interest Payment Date" has the meaning specified in Section 2.4(a). "Investment Company" means an "investment company" as defined in the 1940 Act and the regulations promulgated thereunder. "Investment Company Event" means that the Regular Trustees shall have received an Opinion of Counsel, rendered by a law firm having a recognized national securities practice, to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), there is more than insubstantial risk that the Trust is or will be considered an "investment company" which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Capital Securities. "Maturity," when used with respect to any Security, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Maturity Advancement" has the meaning specified in Section 3.1(a). "New Debentures" has the meaning specified in the Recitals to this Indenture. "1940 Act" means the Investment Company Act of 1940, as amended from time to time, and any successor legislation. "1996 Debentures" has the meaning specified in Section 2.5. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the President, any Managing Director or any Vice President, and by the Treasurer, an Assistant Treasurer, the Comptroller, an Assistant Comptroller, the Secretary or an Assistant Secretary, of the Company or the Guarantor, as the case may be, and delivered to the Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 12.4 shall be the principal executive, financial or accounting officer of the Company. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Indenture shall include: (i) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (ii) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (iii) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Opinion of Counsel" means a written opinion of counsel, who (except as otherwise expressly provided herein) may be counsel for the Company (and who (except as otherwise expressly provided herein) may be an employee of the Company), and who shall be reasonably acceptable to the Trustee. An opinion of counsel may rely on certificates as to matters of fact. "Outstanding," when used with respect to Securities, means, as of the date of determination, all Securities authenticated and delivered under this Indenture, except: (i) Securities cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holder of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Securities which have been paid pursuant to Section 2.14, or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company, provided, however, that in determining whether the holders of the requisite principal amount of Outstanding Securities are present at a meeting of holders of Securities for quorum purposes or have consented to or voted in favor of any request, demand, authorization, direction, notice, consent, waiver, amendment or modification hereunder, Securities held for the account of the Company, any of its subsidiaries or any of its affiliates shall be disregarded and deemed not to be Outstanding, except that in determining whether the Trustee shall be protected in making such a determination or relying upon any such quorum, consent or vote, only Securities which the Trustee actually knows to be so owned shall be so disregarded. "Paying Agent" means any Person authorized by the Company to pay the principal of or interest on any Securities on behalf of the Company. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof or any other entity of whatever nature. "PORTAL Market" means the Private Offerings, Resales and Trading through Automated Linkages (PORTAL) Market of the NASDAQ Stock Market, Inc. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 2.14 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Private Placement Legend" has the meaning specified in Section 2.20 of this Indenture. "Property Trustee" has the meaning set forth in the Declaration. "Qualified Institutional Buyer" or "QIB" shall have the meaning specified in Rule 144A under the Securities Act. "Record Date" means a Regular Record Date or a Special Record Date. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of June 4, 1997, among the Company, the Guarantor, the Trust and the Initial Purchasers for the benefit of themselves and the Holders (as defined therein) of the Capital Securities, as the same may be amended from time to time in accordance with the terms thereof. "Regular Record Date" for the interest payable on any Interest Payment Date means the Business Day next preceding such Interest Payment Date or if the Securities are no longer in the form prescribed by Section 2.19, the date selected by the Company which shall be more than one Business Day but less than 60 Business Days prior to the relevant Interest Payment Date. "Regular Trustees" has the meaning specified in the Declaration. "Regulation S" means Regulation S under the Securities Act and any successor regulation thereto. "Regulation S Global Security" or "Regulation S Global Debt Security" means any Global Security or Securities evidencing Securities that are to be traded pursuant to Regulation S. "Responsible Officer," when used with respect to the Trustee, means the chairman or any vice-chairman of the board of directors, the chairman or any vice-chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Global Security" or "Restricted Global Debt Security" means any Global Security or Securities evidencing Securities that are to be traded pursuant to Rule 144A. "Restricted Period" has the meaning specified in Section 2.8(f). "Restricted Security" has the meaning assigned to such term in Rule 144(a)(3) of the Securities Act. "Rule 144A" means Rule 144A under the Securities Act. "Securities" has the meaning specified in the Recitals to this Indenture. "Securities Act" means the Securities Act of 1933, as amended, or any successor statute. "Security Register" and "Security Registrar" have the respective meanings specified in Section 2.13. "Senior Indebtedness" means, with respect to the Company or the Guarantor, as the case may be, (i) the principal, premium, if any, and interest in respect of (A) indebtedness of such obligor for money borrowed and (B) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by such obligor, (ii) all capital lease obligations of such obligor, (iii) all obligations of such obligor issued or assumed as the deferred purchase price of property, all conditional sale obligations of such obligor and all obligations of such obligor under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business), (iv) all obligations of such obligor for reimbursement on any letter of credit, any banker's acceptance, any security purchase facility, any repurchase agreement or similar arrangement, any interest rate swap, any other hedging arrangement, any obligation under options or any similar credit or other transaction, (v) all obligations of the type referred to in clauses (i) through (iv) above of other Persons for the payment of which such obligor is responsible or liable as obligor, guarantor or otherwise and (vi) all obligations of the type referred to in clauses (i) through (v) above of other Persons secured by any lien on any property or asset of such obligor (whether or not such obligation is assumed by such obligor), except for (1) any such indebtedness that contains express terms, or is issued under a deed, indenture or other instrument that contains express terms, providing that it is subordinate or ranks pari passu with the Debt Securities or the Debt Guarantee, as the case may be, (2) any indebtedness between or among the Company or the Guarantor or any Affiliate of the Company or the Guarantor and (3) all other debt securities and guarantees in respect of those debt securities, in any case issued by the Company or the Guarantor to any trust (including, without limitation, Countrywide Capital I, a Delaware statutory business trust), or a trustee of such trust, partnership or other entity affiliated with the Company or the Guarantor that is a financing vehicle of the Company or the Guarantor (a "financing entity") in connection with the issuance by such financing entity of securities of a similar nature to the Capital Securities or of other securities that rank pari passu with, or junior to the Capital Securities. Such Senior Indebtedness shall continue to be Senior Indebtedness and to be entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness. "Special Event" means either an Investment Company Event or a Tax Event. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 2.15. "Stated Maturity," when used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the date on which the principal, together with any accrued and unpaid interest, of such Security or such installment of interest is due and payable, as extended, if applicable, pursuant to Section 5.1 (whether the initial date or, if pursuant to Section 3.1 the Company elects to accelerate the Stated Maturity, such earlier date as is chosen by the Company). "Subsidiary" means with respect to any Person, (i) any corporation at least a majority of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture or similar entity, at least a majority of the outstanding partnership or similar interests of which shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. For the purposes of this definition, "voting stock" means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power by reason of the occurrence of a contingency. "Tax Event" means the receipt by the Regular Trustees of a Tax Opinion. "Tax Opinion" means an Opinion of Counsel, rendered by a law firm having a recognized national tax practice, to the effect that, as a result of (a) any amendment to, or change (including any announced proposed change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such proposed change, pronouncement or decision is announced on or after the date of original issuance of the Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days after the date thereof, subject to United States federal income tax with respect to interest accrued or received on the Debentures, (ii) the Trust is, or will be within 90 days after the date thereof, subject to more than a de minimis amount of other taxes, duties or other governmental charges or (iii) interest payable to the Trust on the Debentures is not, or within 90 days of the date thereof, will not be deductible, in whole or in part, by the Company for United States federal income tax purposes. "Trust" has the meaning specified in the Recitals to this Indenture. "Trust Enforcement Event" has the meaning specified in the Declaration. "Trust Guarantee" means the Guarantee Agreement, dated as of June 4, 1997, made by the Guarantor in respect of the Common Securities and the Capital Securities. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "U.S. Government Obligations" means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case under clause (i) or (ii), are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt. "Vice President," when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president." SECTION 1.2 Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by an officer of the Company, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirement set forth in this Indenture. SECTION 1.3 Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under the Indenture, they may, but need not, be consolidated and form one instrument. SECTION 1.4 Acts of Holders; Record Dates. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee at the address specified in Section 1.5 and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 8.1) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section 1.4. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The Company may, in the circumstances permitted by the Trust Indenture Act, fix any day as the record date for the purpose of determining the Holders entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders. If not set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 9.1 prior to such first solicitation or vote, as the case may be). With regard to any record date, only the Holders on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. (d) The ownership of Securities shall be proved by the Security Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. SECTION 1.5 Notices, Etc. to Trustee and the Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (a) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration; or (b) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company. SECTION 1.6 Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 1.7 Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under the Trust Indenture Act to be a part of and govern this Indenture, the provision of the Trust Indenture Act shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. SECTION 1.8 Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 1.9 Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 1.10 Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the holders of Senior Indebtedness, the holders of Capital Securities (to the extent provided therein) and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 1.11 Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF. THIS INDENTURE IS SUBJECT TO THE PROVISIONS OF THE TRUST INDENTURE ACT THAT ARE REQUIRED TO BE PART OF THIS INDENTURE AND SHALL, TO THE EXTENT APPLICABLE, BE GOVERNED BY SUCH PROVISIONS. SECTION 1.12 Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal of the Securities need not be made on such date, but may be made on the next succeeding Business Day (except that, if such Business Day is in the next succeeding calendar year, such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, shall be the immediately preceding Business Day) with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity; provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. SECTION 1.13 Acknowledgment of Rights. The Company and the Guarantor acknowledge that, with respect to any Securities held by the Trust or a trustee of such Trust, if the Property Trustee of such Trust fails to enforce its rights under this Indenture as the holder of Securities held as the assets of the Trust after the holders of a majority in liquidation amount of the Capital Securities have so directed the Property Trustee any registered holder of Capital Securities may institute a legal proceeding directly against the Company or the Guarantor to enforce such Property Trustee's rights under this Indenture without first instituting any legal proceeding against such Property Trustee or any other person or entity. In addition, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest, principal or other required payment on the Securities on the date such interest, principal or other required payment is otherwise payable, the Company and the Guarantor acknowledge that a registered holder of Capital Securities may directly institute a proceeding against the Company and the Guarantor for enforcement of payment to such holder of the principal, interest or other required payment on the Securities on or after the respective due dates specified in the Securities. SECTION 1.14 Assignment. The Company and the Guarantor will have the right at all times to assign any of their respective rights or obligations under this Indenture to a direct or indirect wholly-owned Subsidiary of the Company or the Guarantor, provided that, in the event of any such assignment, (i) the Company or the Guarantor, as the case may be, will remain liable for all such obligations and (ii) the Company shall have received an Opinion of Counsel, rendered by a law firm having a recognized national tax practice to the effect that such assignment will not result in a taxable exchange to Holders of Debt Securities for United States federal income tax purposes. Subject to the foregoing, the Indenture is binding upon and inures to the benefit of the parties hereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties hereto. ARTICLE II General Terms and Conditions of the Debt Securities SECTION 2.1 Designation and Principal Amount. There is hereby authorized (a)(i) a series of Debt Securities designated the "8.05% Junior Subordinated Debentures due June 15, 2027, Series A" of the Company and (ii) a Debt Guarantee in respect of such Debt Securities by the Guarantor and (b) (i) a series of Securities designated the "8.05% Junior Subordinated Debentures due June 15, 2027, Series B" of the Company and (ii) a Debt Guarantee in respect of such Debt Securities by the Guarantor. The aggregate principal amount of Debt Securities which may be authenticated and delivered under this Indenture is limited to $206,200,000 except for Debt Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Debt Securities pursuant to Section 2.13 of this Indenture. The New Debentures shall be issued in exchange for the Debentures in connection with the exchange of Capital Securities as contemplated by Section 3.6(a) of the Declaration. SECTION 2.2 Forms of Securities. The Securities and the Trustee's certificates of authentication shall be in substantially the forms set forth in Exhibit A. If the Securities are distributed to the holders of Capital Securities and Common Securities, the record holder (including any Depositary) of any Capital Securities or Common Securities shall be issued Securities in definitive, fully registered form without interest coupons, substantially in the form provided in Exhibit A, with the legends in substantially the form of the legends existing on the security representing the Capital Securities or Common Securities to be exchanged (with such changes thereto as the officers executing such Securities determine to be necessary or appropriate, as evidenced by their execution of the Securities) and such other legends as may be applicable thereto (including any legend required by Section 2.20 hereof), duly executed by the Company and the Guarantor and authenticated by the Trustee or Authenticating Agent as provided herein, which Securities, if to be held in global form by any Depositary, may be deposited on behalf of the holders of the Securities represented thereby with the Trustee, as custodian for the Depositary, and registered in the name of a nominee of the Depositary. The Securities shall have appropriate insertions, omissions, substitutions and other variations as are required or permitted by the Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. The definitive Securities shall be printed, lithographed or engraved or produced by any combination of these or other methods, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. SECTION 2.3 Maturity. The Stated Maturity of the Debt Securities shall be June 15, 2027, unless a Maturity Advancement occurs as a result of a Tax Event, in which case the Stated Maturity shall be such advanced maturity date. SECTION 2.4 Interest. Each Debt Security shall bear interest at a rate of 8.05% per annum from the original date of issuance or from the most recent Interest Payment Date to which interest on such Debt Security (including, in the case of a New Debenture, the Debenture in exchange for which it was issued) has been paid or duly provided for, as the case may be, and such interest will be payable semi-annually (subject to deferral as set forth herein) in arrears, on June 15 and December 15 of each year (each, an "Interest Payment Date"), commencing December 15, 1997 until the principal thereof is paid or made available for payment, to the Holder of such Debt Security on the close of business on the Regular Record Date. Accrued interest that is not paid on the applicable Interest Payment Date (including, as described in Section 5.1, during any Extension Period) will bear additional interest on the amount thereof (to the extent permitted by law) at the interest rate specified for the Debt Securities, compounded semi-annually. The term "interest" as used herein shall include interest payments and interest on interest payments not paid on the applicable Interest Payment Date. In the event that a Registration Default (as defined in the Registration Rights Agreement) occurs, additional interest ("Additional Interest") shall become payable in respect of the Debt Securities with respect to the first 90-day period immediately following the occurrence of such Registration Default, in an amount equal to $.05 per week per $1,000 liquidation amount of Debt Securities for each week or portion thereof that the Registration Default continues. Additional Interest will increase by an additional $.05 per week per $1,000 liquidation amount of Debt Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Additional Interest of $.25 per week per $1,000 liquidation amount of Debt Securities. (b) The amount of interest payable for any semi-annual interest payment period will be computed (i) for any full 180-day semi-annual interest payment period, on the basis of a 360-day year of twelve 30-day months and (ii) for any period shorter than a full 180-day semi-annual interest payment period for which interest payments are computed, on the basis of the actual number of days elapsed in such period (assuming each full month elapsed in such period consists of 30 days). In the event that any date on which interest is payable on the Debt Securities is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day that is a Business Day (and without any additional interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as it made on the date such payment was originally payable. (c) The principal of and interest on the Debt Securities shall be payable at the office or agency of the Paying Agent in the United States maintained for such purpose and at any other office or agency maintained by the Company for such purpose 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; provided, however, that at the option of the Company payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer in immediately available funds at such place and to such account as may be designated by the Person entitled thereto as specified in the Security Register. SECTION 2.5 Ranking. The obligations of the Company under the Indenture and the obligations of the Guarantor under the Debt Guarantee and this Indenture shall be unsecured obligations of the Company and the Guarantor, respectively, and shall rank junior and subordinated in right of payment to all Senior Indebtedness of the Company and the Guarantor, respectively. Notwithstanding the foregoing, this Indenture does not limit the incurrence or issuance of other secured or unsecured debt of the Company or the Guarantor, whether under this Indenture, or any existing or other indenture that the Company or the Guarantor may enter into in the future or otherwise. The Debt Securities shall rank pari passu with the 8% Junior Subordinated Deferrable Interest Debentures due December 16, 2026 of the Company (the "1996 Debentures"), and the Debt Guarantee shall rank pari passu with the Guarantor's guarantee in respect of the 1996 Debentures. The Debt Securities shall be redeemable as provided in Article III hereof. SECTION 2.6 Denominations. The Debt Securities shall be issuable only in registered form, without coupons, and only in denominations of $1,000 and any integral multiple thereof. SECTION 2.7 Forms. The Debentures in definitive form shall be in the form attached hereto as Exhibit A and the New Debentures in definitive form shall be in the form attached hereto as Exhibit B. SECTION 2.8 Special Transfer Provisions. (a) As used in this Section 2.8, the term "Debt Securities" shall be deemed also to refer to the "Securities". At the request of the beneficial holder of an interest in Debt Securities in global form, such beneficial holder shall be entitled to obtain a definitive Debt Security upon written request to the Trustee in accordance with the standing instructions and procedures existing between the Depositary and the Trustee for the issuance thereof. Any transfer of a beneficial interest in a Debt Security in global form which cannot be effected through book-entry settlement must be effected by the delivery to the transferee (or its nominee) of a definitive Debt Security or Debt Securities registered in the name of the transferee (or its nominee) on the Security Register. With respect to any such transfer, the Trustee will cause, in accordance with the standing instructions and procedures existing between the Depositary and the Trustee, the aggregate principal amount of the Debt Securities in global form to be reduced and, following such reduction, the Trustee will cause definitive Debt Securities in the appropriate aggregate principal amount in the name of such transferee (or its nominee) and bearing such restrictive legends as may be required by this Indenture to be delivered. In connection with any such transfer, the Trustee may request such representations and agreements relating to the restrictions on transfer of such Debt Security or Debt Securities from such transferee (or such transferee's nominee) as the Trustee may reasonably require. (b) So long as the Debt Securities are eligible to be held as Debt Securities in global form, or unless otherwise required by law, upon any transfer of a definitive Debt Security or Debt Securities to a QIB in accordance with Rule 144A, unless otherwise requested by the transferor, and upon receipt of the definitive Debt Security or Debt Securities being so transferred, together with a certification in the form attached to the form of Debt Security from the transferor that the transferor reasonably believes the transferee is a QIB (or other evidence satisfactory to the Trustee), the Trustee shall make an endorsement on the Restricted Global Debt Security to reflect an increase in the aggregate principal amount of the Restricted Global Debt Security, and the Trustee shall cancel such definitive Debt Security or Debt Securities and cause, in accordance with the standing instructions and procedures existing between the Depositary and the Trustee, the aggregate principal amount of Debt Securities represented by the Restricted Global Debt Security to be increased accordingly. (c) So long as the Debt Securities are eligible for book-entry settlement, or unless otherwise required by law, upon any transfer of a definitive Debt Security in accordance with Regulation S, if requested by the transferor, and upon receipt of the definitive Debt Security or Debt Securities being so transferred, together with a certification in the form attached to the form of Debt Security from the transferor that the transfer was made in accordance with Rule 903 or 904 of Regulation S or Rule 144 under the Securities Act (or other evidence satisfactory to the Trustee), the Trustee shall make an endorsement on the Regulation S Global Debt Security to reflect an increase in the aggregate principal amount of the Debt Securities represented by the Regulation S Global Debt Security, the Trustee shall cancel such definitive Debt Security or Debt Securities and cause, in accordance with the standing instructions and procedures existing between the Depositary and the Trustee, the aggregate principal amount of Debt Securities represented by the Regulation S Global Debt Security to be increased accordingly. (d) If a holder of a beneficial interest in the Restricted Global Debt Security wishes at any time to exchange its interest in the Restricted Global Debt Security for an interest in the Regulation S Global Debt Security, or to transfer its interest in the Restricted Global Debt Security to a Person who wished to take delivery thereof in the form of an interest in the Regulation S Global Debt Security, such holder may, subject to the rules and procedures of the Depositary and to the requirements set forth in the following sentence, exchange or cause the exchange or transfer or cause the transfer of such interest for an equivalent beneficial interest in the Regulation S Global Debt Security. Upon receipt by the Trustee, as transfer agent of (1) written instructions given in accordance with the Depositary's procedures from or on behalf of a holder of a beneficial interest in the Restricted Global Debt Security, directing the Trustee (via DWAC), as transfer agent, to credit or cause to be credited a beneficial interest in the Regulation S Global Debt Security in an amount equal to the beneficial interest in the Restricted Global Debt Security to be exchanged or transferred, (2) a written order given in accordance with the Depositary's procedures containing information regarding the Euroclear or Cedel account to be credited with such increase and the name of such account, and (3) a certificate in the form attached to the form of Debt Security given by the holder of such beneficial interest stating that the exchange or transfer of such interest has been made pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S or Rule 144 under the Securities Act (or other evidence satisfactory to the Trustee), the Trustee, as transfer agent, shall promptly deliver appropriate instructions to the Depositary (via DWAC), its nominee or the custodian for the Depositary, as the case may be, to reduce or reflect on its records a reduction of the Restricted Global Debt Security by the aggregate principal amount of the beneficial interest in such Restricted Global Debt Security to be so exchanged or transferred from the relevant participant, and the Trustee, as transfer agent, shall promptly deliver appropriate instructions (via DWAC) to the Depositary, its nominee, or the custodian for the Depositary, as the case may be, concurrently with such reduction, to increase or reflect on its records an increase of the principal amount of such Regulation S Global Debt Security by the aggregate principal amount of the beneficial interest in such Restricted Global Debt Security to be so exchanged or transferred, and to credit or cause to be credited to the account of the person specified in such instructions (who may be Morgan Guaranty Trust Company of New York, Brussels office, as operator of Euroclear or Cedel or another agent member of Euroclear or Cedel, or both, as the case may be, acting for and on behalf of them) a beneficial interest in such Regulation S Global Debt Security equal to the reduction in the principal amount of such Restricted Global Debt Security. (e) If a holder of a beneficial interest in the Regulation S Global Debt Security wishes at any time to exchange its interest in the Regulation S Global Debt Security for an interest in the Restricted Global Debt Security, or to transfer its interest in the Regulation S Global Debt Security to a Person who wishes to take delivery thereof in the form of an interest in the Restricted Global Debt Security, such holder may, subject to the rules and procedures of Euroclear or Cedel and the Depositary, as the case may be, and to the requirements set forth in the following sentence, exchange or cause the exchange or transfer or cause the transfer of such interest for an equivalent beneficial interest in the Restricted Global Debt Security. Upon receipt by the Trustee, as transfer agent of (1) written instructions given in accordance with the procedures of Euroclear or Cedel and the Depositary, as the case may be, from or on behalf of a beneficial owner of an interest in the Regulation S Global Debt Security directing the Trustee, as transfer agent, to credit or cause to be credited a beneficial interest in the Restricted Global Debt Security in an amount equal to the beneficial interest in the Regulation S Global Debt Security to be exchanged or transferred, (2) a written order given in accordance with the procedures of Euroclear or Cedel and the Depositary, as the case may be, containing information regarding the account with the Depositary to be credited with such increase and the name of such account and (3) prior to the expiration of the Restricted Period, a certificate in the form attached to the form of Debt Security given by the holder of such beneficial interest and stating that the person transferring such interest in such Regulation S Global Debt Security reasonably believes that the person acquiring such interest in the Restricted Global Debt Security is a QIB and is obtaining such beneficial interest in a transaction meeting the requirements of Rule 144A and any applicable securities laws of any State of the United States or any other jurisdiction (or other evidence satisfactory to the Trustee), the Trustee, as transfer agent, shall promptly deliver (via DWAC) appropriate instructions to the Depositary, its nominee, or the custodian for the Depositary, as the case may be, to reduce or reflect on its records a reduction of the Regulation S Global Debt Security by the aggregate principal amount of the beneficial interest in such Regulation S Global Debt Security to be exchanged or transferred, and the Trustee, as transfer agent, shall promptly deliver (via DWAC) appropriate instructions to the Depositary, its nominee, or the custodian for the Depositary, as the case may be, concurrently with such reduction, to increase or reflect on its records an increase of the principal amount of the Restricted Global Debt Security by the aggregate principal amount of the beneficial interest in the Regulation S Global Debt Security to be so exchanged or transferred, and to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Restricted Global Debt Security equal to the reduction in the aggregate principal amount of the Regulation S Global Debt Security. After the expiration of the Restricted Period, the certification requirement set forth in clause (3) of the second sentence of this Section 2.8(d) will no longer apply to such exchanges and transfers. (f) Any beneficial interest in one of the Global Debt Securities that is transferred to a Person who takes delivery in the form of an interest in the other Global Debt Security will, upon transfer, cease to be an interest in such Global Debt Security and become an interest in the other Global Debt Security and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in such other Global Debt Security for as long as it remains such an interest. (g) Prior to or on the 40th day after the later of the commencement of the offering of the Capital Securities and the Closing Date (the "Restricted Period"), beneficial interests in a Regulation S Global Debt Security may only be held through Morgan Guaranty Trust Company of New York, Brussels Office, as operator of Euroclear or Cedel or another agent member of Euroclear and Cedel acting for and on behalf of them, unless delivery is made through the Restricted Global Debt Security in accordance with the certification requirements hereof. During the Restricted Period, interests in the Regulation S Global Debt Security may be exchanged for interests in the Restricted Global Debt Security or for definitive Debt Securities only in accordance with the certification requirements described above. (h) Securities may not be acquired by any Person who is, or who in acquiring such Securities is using the assets of, an ERISA Plan unless Securities are acquired pursuant to and in accordance with an applicable exemption, including but not limited to: (i) Prohibited Transaction Class Exemption 90-1 ("PTE 90-1"), regarding investments by insurance company pooled separate accounts, (ii) Prohibited Transaction Class Exemption 91-38 ("PTE 91-38") regarding investments by bank collective investment funds, (iii) Prohibited Transaction Class Exemption 84-14 ("PTE 84-14"), regarding transactions effected by qualified professional asset managers, (iv) Prohibited Transaction Class Exemption 96-23 ("PTE 96-23"), regarding transactions effected by in-house asset managers, or (v) Prohibited Transaction Class Exemption 95-60 ("PTE 95-60"), regarding investments by insurance company general accounts. The acquisition of Securities by any Person who is, or who in acquiring such Securities is using the assets of, an ERISA Plan shall be deemed to constitute a representation by such Person to the Trust that (i) such Person is eligible for exemptive relief available pursuant to an applicable exemption, including but not limited to, PTE 90-1, PTE 91-38, PTE 84-14, PTE 96-23 or PTE 95-60 with respect to the acquisition and holding of such Securities, and (ii) none of Countrywide Home Loans, Inc., Countrywide Credit Industries, Inc., Countrywide Financial Services, Inc. or Countrywide Securities Corporation, is a "fiduciary", within the meaning of Section 3(21) of ERISA and the regulations thereunder, with respect to such Person's interest in the Securities. SECTION 2.9 Unconditional Guarantee. Subject to the terms of this Section 2.9, including the form of Guarantee set forth below, the Guarantor hereby unconditionally guarantees to each Holder of a Debt Security the due and punctual payment of the principal of and premium, if any, and interest on such Debt Security, when and as the same shall become due and payable, whether at Maturity, by declaration thereof or otherwise. The form of the Guarantee to be affixed to the reverse side of each Security shall be as follows: FOR VALUE RECEIVED, the Guarantor hereby unconditionally guarantees to the holder of the Debt Security upon which this Guarantee is endorsed the due and punctual payment of the principal, premium, if any, and interest on said Debt Security, when and as the same shall become due and payable, whether at maturity, upon redemption or otherwise, according to the terms thereof and of the Indenture referred to therein. The Guarantor agrees to determine, at least one Business Day prior to the date upon which a payment of principal of and premium, if any, or interest on said Debt Security is due and payable, whether the Company has available the funds to make such payment as the same shall become due and payable. In case of the failure of the Company punctually to pay any such principal, premium, if any, or interest, the Guarantor hereby agrees to cause any such payment to be made punctually when and as the same shall become due and payable, whether at maturity, upon redemption, or otherwise, and as if such payment were made by the Company. The Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrevocable, and absolute, irrespective of the validity, regularity, or enforceability of said Debt Security or said Indenture, the absence of any action to enforce the same, any waiver or consent by the Holder of said Debt Security with respect to any provisions thereof, the recovery of any judgment against the Company or any action to enforce the same, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a proceeding first against the Company, protest or notice with respect to said Debt Security or indebtedness evidenced thereby, and all demands whatsoever and covenants that this Guarantee will not be discharged except by complete performance of the obligations contained in said Debt Security and in this Guarantee. The Guarantor shall be subrogated to all rights of the holder of said Debt Security against the Company in respect of any amounts paid by the Guarantor pursuant to the provisions of this Guarantee; provided, however, that the Guarantor shall not, without the consent of the holders of all of the Debt Securities then outstanding, be entitled to enforce or to receive any payments arising out of or based upon such right of subrogation until the principal of and premium, if any, and interest on all Debt Securities shall have been paid in full or payment thereof shall have been provided for in accordance with said Indenture. Notwithstanding anything to the contrary contained herein, if following any payment of principal or interest by the Company on the Debt Securities to the holders of the Debt Securities it is determined by a final decision of a court of competent jurisdiction that such payment shall be avoided by a trustee in bankruptcy (including any debtor-in-possession) as a preference under 11 U.S.C. Section 547 and such payment is paid by such holder of such trustee in bankruptcy, then and to the extent of such repayment, the obligations of the Guarantor hereunder shall remain in full force and effect. This Guarantee shall not be valid or become obligatory for any purpose with respect to a Debt Security until the certificate of authentication on such Security shall have been signed by the Trustee (or the Authentication Agent). This Guarantee shall be governed by the laws of the State of New York without regard to conflict of laws principles thereof. IN WITNESS WHEREOF, Countrywide Credit Industries, Inc. has caused this Guarantee to be signed in its corporate name by the facsimile signature of two of its officers thereunto duly authorized. COUNTRYWIDE CREDIT INDUSTRIES, INC. By: -------------------------------------------------- Name: Title: By: -------------------------------------------------- Name: Title: SECTION 2.10 INTENTIONALLY DELETED. SECTION 2.11 Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company and the Guarantor by their respective Chairmen of the Board, Vice Chairmen of the Board, President, one of their Managing Directors or one of their respective Vice Presidents, or the Treasurer. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company or the Guarantor shall bind the Company or the Guarantor, as the case may be, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time, and from time to time, after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company and the Guarantor to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and make available for delivery such Securities as in this Indenture provided and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. SECTION 2.12 ______ Temporary Securities. Pending the preparation of definitive Securities, the Company and the Guarantor may execute, and upon Company Order the Trustee shall authenticate and make available for delivery, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency of the Company designated pursuant to Section 12.2, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. SECTION 2.13 Registration; Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (designated pursuant to Section 12.2 being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at an office or agency of the Company designated pursuant to Section 12.2 for such purpose, the Company shall execute, and the Trustee shall authenticate and make available for delivery, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations and of a like aggregate principal amount. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company and the Guarantor shall execute, and the Trustee shall authenticate and make available for delivery, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company and the Guarantor, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 2.12, 3.8 or 11.6 not involving any transfer. The Company shall not be required to issue, register the transfer of or exchange any Securities during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of any Securities and ending at the close of business on the day of such mailing. So long as the Securities are eligible for book-entry settlement with the Depositary, or unless otherwise required by law, all Securities to be traded on the PORTAL Market shall be represented by the Restricted Global Security registered in the name of the Depositary or the nominee of the Depositary. The transfer and exchange of beneficial interests in any Global Security, which does not involve the issuance of a definitive Security or the transfer of interests to another Global Security, shall be effected through the Depositary (but not the Trustee or the Custodian) in accordance with this Indenture (including the restrictions on transfer set forth in Section 2.8) and the procedures of the Depositary therefor. Neither the Trustee nor the Custodian (in such respective capacities) will have any responsibility for the transfer and exchange of beneficial interests in such Global Security that does not involve the issuance of a definitive Security or the transfer of interests to another Global Security. SECTION 2.14 Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company and the Guarantor shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and make available for delivery, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section 2.14 in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section 2.14 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 2.15 Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clauses (a) and (b) below. (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a special record date for the payment of such Defaulted Interest (a "Special Record Date"), which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (b). (b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and, if so listed, upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 2.16 Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee shall treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of, premium, if any, and (subject to Section 2.15) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. SECTION 2.17 Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee and returned to the Company. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of as directed by a Company Order, provided, however, that the Trustee may, but shall not be required to, destroy such cancelled Securities. SECTION 2.18 CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be place only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the CUSIP numbers. SECTION 2.19 Global Securities. If the Securities are distributed to holders of Capital Securities in liquidation of such holder's interests in the Trust, such Securities will initially be issued as a Global Security. If the Company shall establish that the Securities are to be issued in the form of one or more Global Securities, then the Company shall execute and the Trustee shall, in accordance with Section 2.11 and the Company Order, authenticate and make available for delivery one or more Global Securities that (i) shall represent and shall be denominated in an amount equal to the aggregate principal amount of all of the Securities to be issued in the form of Global Securities and not yet cancelled, (ii) shall be registered in the name of the Depositary for such Global Security or Securities or the nominee of such Depositary and (iii) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions. Global Securities shall bear a legend substantially to the following effect: This Security is a Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee of a Depositary. This Global Security is exchangeable for Securities registered in the name of a Person other than the Depositary or its nominee only in the limited circumstances described in the Indenture, and no transfer of this Security (other than a transfer of this Security as a whole by the Depositary to another nominee of the Depositary) may be registered except in such limited circumstances. Every Security delivered upon registration of transfer of, or in exchange for, or in lieu of, this Global Security shall be a Global Security subject to the foregoing, except in the limited circumstances described above. Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Company 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 requested by an authorized representative of DTC (and any payment is to be 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. Notwithstanding the provisions of Section 2.13, unless and until it is exchanged in whole or in part for Securities in definitive registered form, a Global Security representing all or a part of the Securities may not be transferred in the manner provided in Section 2.13 except as a whole by the Depositary to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. If at any time the Depositary for any Securities represented by one or more Global Securities notifies the Company that it is unwilling or unable to continue as Depositary for such Securities or if at any time the Depositary for such Securities shall no longer be eligible under this Section 2.19, the Company shall appoint a successor Depositary with respect to such Securities. If a successor Depositary for such Securities is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, the Company's election that such Securities be represented by one or more Global Securities shall no longer be effective and the Company shall execute, and the Trustee, upon receipt of, a Company Order for the authentication and delivery of definitive Securities, will authenticate and make available for delivery Securities in definitive registered form, in denominations of $1,000 and integral multiples thereof, in an aggregate principal amount equal to the principal amount of the Global Security or Securities representing such Securities in exchange for such Global Security or Securities. The Company may at any time and in its sole discretion determine that the Securities issued in the form of one or more Global Securities shall no longer be represented by a Global Security or Securities. In such event, the Company shall execute, and the Trustee, upon receipt of, a Company Order or an Officers' Certificate for the authentication and delivery of definitive Securities, shall authenticate and make available for delivery, Securities in definitive registered form, in denominations of $1,000 and integral multiples thereof, in an aggregate principal amount equal to the principal amount of the Global Security or Securities representing such Securities, in exchange for such Global Security or Securities. If specified by the Company with respect to Securities represented by a Global Security, the Depositary for such Global Security may surrender such Global Security in exchange, in whole or in part, for Securities in definitive registered form on such terms as are acceptable to the Company and such Depositary. Thereupon, the Company shall execute, and the Trustee shall authenticate and make available for delivery, without service charge, (i) to the Person specified by such Depositary, a new Security or Securities, of any authorized denominations as requested by such Person, in an aggregate principal amount equal to and in exchange for such Person's beneficial interest in the Global Security; and (ii) to such Depositary a new Global Security in a denomination equal to the difference, if any, between the principal amount of the surrendered Global Security and the aggregate principal amount of Securities authenticated and delivered pursuant to clause (i) above. Upon the exchange of a Global Security for Securities in definitive registered form in authorized denominations, such Global Security shall be cancelled by the Trustee or an agent of the Company or the Trustee. Securities in definitive registered form issued in exchange for a Global Security pursuant to this Section 2.19 shall be registered in such names and in such authorized denominations as the Depositary for such Global Security, pursuant to instructions from its direct or indirect Participants or otherwise, shall instruct the Trustee or an agent of the Company or the Trustee. The Trustee or such agent shall deliver at its office such Securities to or as directed by the Persons in whose names such Securities are so registered. Interests of beneficial owners in Global Security may be transferred or exchanged for definitive Securities and definitive Securities may be transferred or exchanged for Global Securities in accordance with rules of the Depositary and the provisions of Section 2.8. Any Security in global form may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Indenture as may be required by the Custodian, the Depositary or by the National Association of Securities Dealers, Inc. in order for the Securities to be tradeable on the PORTAL Market or as may be required for the Securities to be tradeable on any other market developed for trading of securities pursuant to Rule 144A or required to comply with any applicable law or any regulation thereunder or with the rules and regulations of any securities exchange upon which the Securities may be listed or traded or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Securities are subject. SECTION 2.20 Restrictive Legend. (a) Each Global Security and definitive Security that constitutes a Restricted Security shall bear the following legend (the "Private Placement Legend") on the face thereof until two years after the later of the date of original issue and the last date on which the Company or any Affiliate of the Company was the owner of such Security (or any predecessor thereto) (the "Resale Restriction Termination Date"), unless otherwise agreed by the Company and the Holder thereof: THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE ISSUER THAT (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL, OR OTHERWISE TRANSFER THIS SECURITY PRIOR TO THE LATER OF THE DATE WHICH IS TWO YEARS AFTER THE DATE OF ORIGINAL ISSUANCE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF SUCH RESTRICTED SECURITIES (OR ANY PREDECESSOR) EXCEPT (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (III) IT WILL AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSES (II)(D) AND (E) IS SUBJECT TO THE RIGHT OF THE ISSUER AND THE PROPERTY TRUSTEE FOR SUCH SECURITIES TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THEM IN FORM AND SUBSTANCE. Any Security (or security issued in exchange or substitution therefor) as to which such restrictions on transfer shall have expired in accordance with their terms may, upon satisfaction of the requirements of Section 2.20(b) and surrender of such Security for exchange to the Security Registrar in accordance with the provisions of this Section 2.20(b), be exchanged for a new Security or Securities, of like tenor and aggregate principal amount, which shall not bear the restrictive legend required by this Section 2.20(a). (b) Upon any sale or transfer of any Restricted Security (including any interest in a Global Security) (i) that is effected pursuant to an effective registration statement under the Securities Act or (ii) in connection with which the Trustee receives certificates and other information (including an Opinion of Counsel, if requested) reasonably acceptable to the Company and the Trustee to the effect that such security will no longer be subject to the resale restrictions under federal and state securities laws, then (A) in the case of a Restricted Security in definitive form, the Security Registrar or co-Registrar shall permit the holder thereof to exchange such Restricted Security for a Security that does not bear the legend set forth in Section 2.20(a), and shall rescind any restrictions on transfer and (B) in the case of Restricted Securities represented by a Global Security, such Security shall no longer be subject to the restrictions contained in the legend set forth in Section 2.20(a). In addition, any Security (or Security issued in exchange or substitution therefor) as to which the restrictions on transfer described in the legend set forth in Section 2.20(a) have expired by their terms, may, upon surrender thereof (in accordance with the terms of this Indenture) together with such certifications and other information (including an Opinion of Counsel having substantial experience in practice under the Securities Act and otherwise reasonably acceptable to the Company, addressed to the Company and the Trustee and in a form acceptable to the Company, to the effect that the transfer of such Restricted Security has been made in compliance with Rule 144 or any successor provision thereto) acceptable to the Company and the Trustee as either of them may reasonably require, be exchanged for a new Security or Securities of like tenor and aggregate principal amount, which shall not bear the restrictive legends set forth in Section 2.20(a). ARTICLE III Redemption of the Debt Securities SECTION 3.1 Optional Redemption; Shortening of Stated Maturity. (a) The Debt Securities are not redeemable at the option of the Company; provided that the Debt Securities shall be redeemable at the option of the Company at any time in whole (but not in part), within 90 days of the occurrence of a Special Event, at a Redemption Price equal to 100% of the aggregate principal amount of such Debt Securities to be redeemed, plus accrued and unpaid interest, if any, to the Redemption Date. In addition, if a Tax Event shall occur and be continuing and in the Opinion of Counsel, rendered by a law firm having a recognized national tax practice, there would in all cases, after effecting the dissolution of the Trust and the distribution of the Debt Securities to the Holders of the Capital Securities and Common Securities in exchange therefor upon liquidation of the Trust, be more than an insubstantial risk that the Tax Event would continue to exist, then the Company shall have the right to shorten the Stated Maturity of the Debt Securities to a date not earlier than December 15, 2011 (a "Maturity Advancement"), such that, in the opinion of counsel to the Trust rendered by a law firm having a recognized national tax practice, after advancing the Stated Maturity of the Debt Securities, interest paid on the Debt Securities will be deductible by the Company for United States federal income tax purposes. (b) For so long as the Trust is the Holder of all Debt Securities Outstanding, the proceeds of any redemption described in this Section 3.1 shall be used by the Trust to redeem Common Securities and Capital Securities in accordance with their terms. SECTION 3.2 Election to Redeem; Notice to Trustee. The election of the Company to redeem Debt Securities pursuant to Section 3.1 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company pursuant to Section 3.1, the Company shall, at least 45 days and no more than 60 days prior to the Redemption Date fixed by the Company, notify the Trustee of such Redemption Date and of the aggregate principal amount of Debt Securities to be redeemed and provide a copy of the notice of redemption given to Holders of Debt Securities to be redeemed pursuant to Section 3.1. SECTION 3.3 INTENTIONALLY DELETED. SECTION 3.4 INTENTIONALLY DELETED. SECTION 3.5 Notice of Redemption. (a) Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Debt Securities to be redeemed, at his or her address appearing in the Security Register. (b) All notices of redemption shall identify the Debt Securities to be redeemed (including the CUSIP number thereof) and shall state: (1) the Redemption Date, (2) the Redemption Price, (3) that on the Redemption Date the Redemption Price will become due and payable upon each such Debt Security to be redeemed and that interest thereon will cease to accrue on and after said date, and (4) the place or places where such Debt Securities are to be surrendered for payment of the Redemption Price. (c) Notice of redemption of Debt Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 3.6 Deposit of Redemption Price. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 6.5 hereof) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Debt Securities which are to be redeemed on that date; provided, however, that any such deposit on a Redemption Date shall be initiated prior to 10:00 a.m. (New York time) in same-day funds. SECTION 3.7 Debt Securities Payable on Redemption Date. (a) Subject to the fulfillment of the notice requirements set forth in Section 3.5 above, the Debt Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Debt Securities shall cease to bear interest. Upon surrender of any such Debt Security for redemption in accordance with said notice, such Debt Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Debt Securities, or one or more Predecessor Debt Securities, registered as such at the close of business on the relevant Record Dates according to their terms. (b) If any Debt Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid, bear interest from the Redemption Date at the rate borne by the Debt Security. SECTION 3.8 INTENTIONALLY DELETED. SECTION 3.9 No Sinking Fund. The Debt Securities are not entitled to the benefit of any sinking fund. ARTICLE IV Intentionally Deleted ARTICLE V Extension of Interest Payment Period SECTION 5.1 Extension of Interest Payment Period. So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time during the term of the Debt Securities, from time to time, to defer payment of interest on such Debt Securities, for a period not to exceed 10 consecutive semi-annual periods (an "Extension Period"); provided, that no Extension Period may extend beyond the Stated Maturity of the Debt Securities. There may be multiple Extension Periods of varying lengths during the term of the Debt Securities. At the end of any Extension Period, if any, the Company shall pay all interest then accrued and unpaid, together with interest thereon, compounded semi-annually at the rate specified for the Debt Securities to the extent permitted by applicable law. During any such Extension Period, (a) the Company and the Guarantor shall not declare or pay any dividends on, or make a distribution with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock or rights to acquire such capital stock (other than (i) purchases or acquisitions of shares of any such capital stock or rights to acquire such capital stock in connection with the satisfaction by the Company or the Guarantor, respectively, of its obligations under any employee benefit plans, (ii) as a result of a reclassification of the Company's or the Guarantor's capital stock or rights to acquire such capital stock or the exchange or conversion of one class or series of the Company's or the Guarantor's capital stock or rights to acquire such capital stock for another class or series of the Company's or the Guarantor's capital stock or rights to acquire such capital stock, (iii) the purchase of fractional interests in shares of the Company's or the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged or (iv) dividends and distributions made on the Company's or the Guarantor's capital stock or rights to acquire such capital stock with the Company's or the Guarantor's capital stock or rights to acquire such capital stock) or make any guarantee payments with respect to any of the foregoing and (b) the Company and the Guarantor shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including any guarantees, other than the Guarantees) issued by the Company or the Guarantor that rank pari passu with or junior to the Debt Securities and the Debt Guarantee. Prior to the termination of any such Extension Period, the Company may further extend the Extension Period, provided that no Extension Period may exceed 10 consecutive semi-annual periods or extend beyond the Stated Maturity of the Debt Securities. Upon the termination of any such Extension Period and the payment of all amounts then due on any Interest Payment Date, the Company may elect to begin a new Extension Period subject to the above requirements. No interest shall be due and payable during an Extension Period, except at the end thereof. SECTION 5.2 Notice of Extension. The Company shall give the Guarantor, the Property Trustee, the Regular Trustees and the Trustee written notice of its election of such Extension Period not less than one Business Day prior to the Record Date for the applicable Interest Payment Date. The Property Trustee shall promptly give notice of the Company's election of such Extension Period to the Holders of the Capital Securities. ARTICLE VI Satisfaction and Discharge; Defeasance SECTION 6.1 Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, on written demand of and at the expense of the Company, shall execute instruments supplied by the Company acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.14 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 12.3) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) if redeemable at the option of the Company, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company and the Guarantor, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose of an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal, premium, if any, and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 8.7 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section 6.1, the obligations of the Trustee under Sections 6.2, 6.3 and the last paragraph of Section 12.3 shall survive. SECTION 6.2 Defeasance and Discharge. In addition to discharge of this Indenture pursuant to Sections 6.1 and 6.3, in the case of any Securities with respect to which the exact amount described in subparagraph (a) of Section 6.4 can be determined at the time of making the deposit referred to in such subparagraph (a), (i) the Company shall be deemed to have paid and discharged the entire indebtedness on all the Securities as provided in this Section 6.2 on and after the date the conditions set forth in Section 6.4 are satisfied, and the provisions of this Indenture with respect to the Securities shall no longer be in effect (except as to (i) rights of registration of transfer and exchange of Securities, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Securities, (iii) rights of Holders of Securities to receive, solely from the trust fund described in subparagraph (a) of Section 6.4, payments of principal thereof and interest, if any, on the Debentures upon the original stated due dates therefor (but not upon acceleration), (iv) the rights, obligations, duties and immunities of the Trustee hereunder, (v) the obligations of the Company and the Guarantor pursuant to Section 12.8, (vi) this Section 6.2 and (vii) the rights of the Holders of Securities as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them) (hereinafter called "Defeasance"), and the Trustee at the cost and expense of the Company, shall execute proper instruments acknowledging the same. SECTION 6.3 Covenant Defeasance. In the case of any Securities with respect to which the exact amount described in subparagraph (a) of Section 6.4 can be determined at the time of making the deposit referred to in such subparagraph (a), (i) the Company shall be released from its obligations under any covenants specified in or pursuant to this Indenture (except as to (i) rights of registration of transfer and exchange of Securities, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Securities, (iii) rights of Holders of Securities to receive, from the Company pursuant to Section 12.1, payments of principal thereof and interest, if any, on the Debentures upon the original stated due dates therefor (but not upon acceleration), (iv) the rights, obligations, duties and immunities of the Trustee hereunder, (v) the obligations of the Company and the Guarantor pursuant to Section 12.8 and (vi) the rights of the Holders of Securities as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them), and (ii) the occurrence of any event specified in Section 7.1(3) (with respect to any of the covenants specified in or pursuant to this Indenture) shall be deemed not to be or result in an Event of Default, in each case with respect to the Outstanding Securities as provided in this Section on and after the date the conditions set forth in Section 6.4 are satisfied (hereinafter called "Covenant Defeasance"), and the Trustee, at the cost and expense of the Company, shall execute proper instruments acknowledging the same. For this purpose, such Covenant Defeasance means that the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document, but the remainder of this Indenture and the Securities shall be unaffected thereby. SECTION 6.4 Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 6.2 or 6.3 to the Outstanding Securities: (a) with reference to Section 6.2 or 6.3, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee or the Defeasance Agent (as defined below) as funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of Securities (i) money, or (ii) U.S. Government Obligations, maturing as to principal and interest, if any, at such times and in such amounts as will insure the availability of cash, or (iii) a combination thereof, in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee or the Defeasance Agent, to pay and discharge the principal of, premium, if any, and interest, if any, on all Securities on each date that such principal or interest, if any, is due and payable; (b) in the case of Defeasance under Section 6.2, the Company has delivered to the Trustee or the Defeasance Agent an Opinion of Counsel based on the fact that (x) the Company has received from, or there has been published by, the United States Internal Revenue Service a ruling or (y), since the date hereof, there has been a change in the applicable United States federal income tax law, in either case to the effect that, and such opinion shall confirm that, the Holders of the Securities of such series will not recognize income, gain or loss for United States federal income tax purposes as a result of such deposit, Defeasance and discharge and will be subject to United States federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, Defeasance and discharge had not occurred; (c) in the case of Covenant Defeasance under Section 6.3, the Company has delivered to the Trustee or the Defeasance Agent and Opinion of Counsel to the effect that, and such opinion shall confirm that, the Holders of the Securities will not recognize income, gain or loss for United States federal income tax purposes as a result of such deposit and Covenant Defeasance and will be subject to United States federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit and Covenant Defeasance had not occurred; (d) such Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any agreement or instrument to which the Company is a party or by which it is bound; and (e) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent contemplated by this provision have been complied with. SECTION 6.5 Application of Trust Money. Subject to the provisions of the last paragraph of Section 12.3, all money and U.S. Government Obligations deposited with the Trustee pursuant to Section 6.1 shall be held in trust and such money and all money from such U.S. Government Obligations shall be applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, in respect of the principal and interest for whose payment such money and U.S. Government Obligations has been deposited with the Trustee. SECTION 6.6 Indemnity for U.S. Government Obligations. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 6.1 or the principal or interest received in respect of such obligations other than any such tax, fee or other charge that by law is for the account of the Holders of Outstanding Securities. ARTICLE VII Remedies SECTION 7.1 Events of Default. "Event of Default," wherever used herein, means any one of the following events that has occurred and is continuing (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article XIII or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) the Company or the Guarantor defaults in the payment of any interest (including Additional Interest) upon the Securities when it becomes due and payable, and continuance of such default for a period of 30 days; provided, however, that a valid deferral of any due date in the case of an Extension Period shall not constitute a default in the payment of interest for this purpose; or (2) the Company or the Guarantor defaults in the payment of all or any part of the principal of (or premium, if any, on) the Securities as and when the same shall become due and payable whether at Stated Maturity, upon redemption, by declaration or otherwise; or (3) the Company or the Guarantor defaults in the performance, or breaches, of any of its covenants or warranties in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section 7.1 specifically dealt with), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Company and the Guarantor by the Trustee or to the Company, the Guarantor and the Trustee by the holders of at least 25% in principal amount of the outstanding Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (4) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company or the Guarantor in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or the Guarantor or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or (5) the Company or the Guarantor shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or the Guarantor or of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or (6) the Trust shall have voluntarily or involuntarily dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of the Securities to holders of the Capital Securities and Common Securities in liquidation of their interests in the Trust, (ii) the redemption of all of the outstanding Capital Securities and Common Securities of the Trust or (iii) certain mergers, consolidations or amalgamations, each as permitted by the Declaration. SECTION 7.2 Acceleration of Maturity; Rescission and Annulment. If an Event of Default occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities shall have the right to declare the principal of and the interest on all the Debentures and any other amounts payable hereunder to be due and payable immediately. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article VII, the Holders of a majority in aggregate principal amount of the Outstanding Securities, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities, (B) the principal of (and premium, if any, on) any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Securities and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default, other than the non-payment of the principal of Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 7.13. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 7.3 Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if: (a) default is made in the payment of any interest (including "Additional Interest") on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and interest, and, to the extent that payment thereof shall be legally enforceable, interest on any overdue principal and on any overdue interest, at the rate borne by the Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 7.4 Trustee May File Proofs of Claim. In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 8.7. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 7.5 Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 7.6 Application of Money Collected. Subject to Article XIII, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 8.7; SECOND: To the payment of all Senior Indebtedness of the Company, if and to the extent required by Article XIII; THIRD: To the payment of the amounts then due and unpaid for principal of and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and interest, respectively; and FOURTH: To the Company if any balance shall remain. SECTION 7.7 Limitation on Suits. No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (b) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. SECTION 7.8 Unconditional Right of Holders to Receive Principal and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest on such Security on the Stated Maturity (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 7.9 Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 7.10 Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 2.14, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 7.11 Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article VII or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 7.12 Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, provided that (subject to the provisions of Section 8.1) the Trustee shall have the right to decline to follow any such direction if the Trustee shall determine that the action so directed would be unjustly prejudicial to the Holders not taking part in such direction or if the Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith by its board of directors or trustees, executive committee, or a trust committee of directors or trustees and/or Responsible Officers shall determine that the action or proceedings so directed would involve the Trustee in personal liability. SECTION 7.13 Waiver of Past Defaults. Subject to Sections 11.2 and 12.9 hereof, the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default: (a) in the payment of the principal of or interest on any Security (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Trustee); or (b) in respect of a covenant or provision hereof which under Article XI cannot be modified or amended without the consent of the Holder of each Outstanding Security affected; provided, however, that so long as any of the Capital Securities remain outstanding such waiver or modification thereof shall not be effective until the Holders of a majority in aggregate liquidation amount of Capital Securities shall have consented to such waiver or modification thereof and, if the consent of the Holder of each of the Outstanding Securities is required, such waiver shall not be effective until each Holder of the Capital Securities shall have consented to such waiver. Upon any such waiver, such default shall cease to exist, effective as of the date specified in such waiver (and effective retroactively to the date of default, if so specified) and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 7.14 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs, including legal fees and expenses, of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, that neither this Section 7.14 nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company or the Trustee or in any suit for the enforcement of the right to receive the principal of and interest on any Security. SECTION 7.15 Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 7.16 Capital Security Holders Rights. If an Event of Default constituting the failure to pay interest, principal or premium, if any, on the Securities on the date such interest, principal or premium, if any, is otherwise payable has occurred and is continuing and the Guarantor has failed to make payments to the extent required hereunder, then a registered holder of Capital Securities may directly institute a proceeding against the Company or the Guarantor for enforcement of payment to such holder directly of the principal of or interest on the Securities having a principal amount equal to the aggregate liquidation amount of the Capital Securities of such holder on or after the respective due dates specified in the Securities (a "Direct Action"). The Company and the Guarantor may not amend this Section 7.16 without the prior written consent of the holders of all of the Capital Securities. Notwithstanding any payment made to such holder of Capital Securities by the Company or the Guarantor in connection with such a Direct Action, the Guarantor shall be subrogated to the rights of the holder of such Capital Securities with respect to payments on the Capital Securities to the extent of any payments made by the Guarantor to such holder in any Direct Action. ARTICLE VIII The Trustee SECTION 8.1 Certain Duties and Responsibilities. The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act and no implied covenants or obligations shall be read into this Indenture against the Trustee. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 8.1. SECTION 8.2 Notice of Defaults. The Trustee shall give the Holders notice of any default hereunder as and to the extent provided by the Trust Indenture Act; provided, however, that except in the case of a default in the payment of the principal of or interest on any Security, the Trustee shall be protected in withholding such notice if and so long as the Board of Directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interests of the Holders of Securities; provided, further, that in the case of any default of the character specified in Section 7.1(3), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section 8.2, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. For purposes of this Section 8.2, the Trustee shall not be deemed to have knowledge of a default unless the Trustee has actual knowledge of such default or has received written notice of such default in the manner contemplated by Section 1.5. SECTION 8.3 Certain Rights of Trustee. Subject to the provisions of Section 8.1: (1) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (2) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (4) the Trustee may consult with counsel of its choice and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (6) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (7) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (8) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture. SECTION 8.4 Trustee Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 8.5 Trustee May Hold Securities. The Trustee, any Paying Agent, any Security Registrar, or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 8.8 and 8.13, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar, or such other agent. Money held by the Trustee in trust hereunder shall not be invested by the Trustee pending distribution thereof to the holders of the Securities. SECTION 8.6 Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest or any money received by it hereunder except as otherwise agreed in writing with the Company. SECTION 8.7 Compensation; Reimbursement; and Indemnity. The Company as issuer of the Debt Securities agrees (a) to pay to the Trustee from time to time such compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify each of the Trustee and any predecessor Trustee for, and to hold it harmless against, any and all loss, damage, claim, liability or expenses, including taxes (other than taxes based on the income of the Trustee) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust or the trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligations of the Company under this Section 8.7 to compensate the Trustee, to pay or reimburse the Trustee for expenses, disbursements and advances and to indemnify and hold harmless the Trustee shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. As security for the performance of such obligations of the Company, the Trustee shall have a lien prior to the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (and premium, if any, on) or interest on particular Securities. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 7.1(5) or Section 7.1(6), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable Federal or State bankruptcy, insolvency or other similar law. SECTION 8.8 Disqualification; Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. SECTION 8.9 Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be a person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000 and has its Corporate Trust Office in New York, New York. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 8.9, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VIII. SECTION 8.10 Resignation and Removal; Appointment of Successor.(a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article VIII shall become effective until the acceptance of appointment by the successor Trustee under Section 8.11. (b) The Trustee may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of removal, the Trustee being removed may petition any court of competent jurisdiction for the appointment of a successor Trustee. (d) If at any time: (1) the Trustee shall fail to comply with Section 8.8 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 8.9 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 7.14, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company or the Guarantor, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company or the Guarantor. If no successor Trustee shall have been so appointed by the Company or the Guarantor or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company or the Guarantor shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders in the manner provided in Section 1.6. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 8.11 Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and the Guarantor and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; provided that, on request of the Company, the Guarantor or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company and the Guarantor shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article VIII. SECTION 8.12 Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article VIII, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 8.13 Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). ARTICLE IX Holders' Lists and Reports by Trustee and Company SECTION 9.1 Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee: (a) semi-annually, not later than January 15 and July 15 in each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders to the extent the Company has knowledge thereof as of a date not more than 15 days prior to the delivery thereof, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. SECTION 9.2 Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 9.1 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 9.1 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. SECTION 9.3 Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. If required by Section 313(a) of the Trust Indenture Act, the Trustee shall, within sixty days after each May 15 following the date of this Indenture deliver to Holders a brief report, dated as of such May 15, which complies with the provisions of such Section 313(a). (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each securities exchange upon which the Securities are listed, with the Commission and with the Company. The Company will promptly notify the Trustee when the Securities are listed on any securities exchange. SECTION 9.4 Reports by the Guarantor. The Guarantor shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). ARTICLE X Consolidation, Merger, Conveyance, Transfer or Lease SECTION 10.1 Company or Guarantor May Consolidate, etc., on Certain Terms. Nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of the Company or the Guarantor with or into any other corporation or corporations (whether or not affiliated with the Company or the Guarantor, as the case may be), or successive consolidations or mergers in which the Company or the Guarantor, as the case may be, or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property of the Company or the Guarantor, as the case may be, or its successor or successors as an entirety, or substantially as an entirety, to any other corporation (whether or not affiliated with the Company and the Guarantor, as the case may be, or its successor or successors) authorized to acquire and operate the same; provided, however, the Company and the Guarantor hereby covenant and agree that, upon any such consolidation, merger, sale, conveyance, transfer or other disposition, the due and punctual payment, in the case of the Company, of the principal of (premium, if any) and interest on all of the Securities, according to their tenor or, in the case of the Guarantor, the performance of all obligations under the Guarantees, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Company or the Guarantor, as the case may be, shall be expressly assumed, by supplemental indenture (which shall conform to the provisions of the Trust Indenture Act, as then in effect) satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which the Company or the Guarantor, as the case may be, shall have been merged, or by the entity which shall have acquired such property. SECTION 10.2 Successor Corporation to be Substituted. In case of any such consolidation, merger, sale, conveyance, transfer or other disposition and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of, in the case of the Company, the due and punctual payment of the principal of and premium, if any, and interest on all of the Securities or, in the case of the Guarantor, the performance of all obligations under the Guarantees, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company or the Guarantor, as the case may be, such successor corporation shall succeed to and be substituted for the Company or the Guarantor, as the case may be, with the same effect as if it had been named herein as the Company or the Guarantor, as the case may be, and thereupon the predecessor corporation shall be relieved of any further liability or obligation hereunder or upon the Securities. Such successor corporation thereupon may cause to be signed, and may issue either in its own name or in the name of Countrywide Home Loans, Inc. or Countrywide Credit Industries, Inc., any or all of the Securities or Guarantees, respectively, issuable hereunder which theretofore shall not have been signed by the Company or the Guarantor and delivered to the Trustee; and, upon the order of such successor corporation instead of the Company or the Guarantor, as the case may be, and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and deliver any Securities which previously shall have been signed and delivered by the officers of the Company or the Guarantor, as the case may be, to the Trustee for authentication, and any Securities which such successor corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. SECTION 10.3 Opinion of Counsel to be Given Trustee. The Trustee, subject to the provisions of Sections 8.1 and 8.2, may receive an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale, conveyance, transfer or other disposition, and any assumption, permitted or required by the terms of this Article X complies with the provisions of this Article X. ARTICLE XI Supplemental Indentures SECTION 11.1 Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company and the Guarantor, when authorized by appropriate Board Resolutions, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another Person to the Company or the Guarantor and the assumption by any such successor of the covenants of the Company or the Guarantor herein and in the Securities, as and to the extent permitted under this Indenture; or (b) to add to the covenants of the Company or the Guarantor for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company or the Guarantor; or (c) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided that such action pursuant to this clause (c) shall not adversely affect the interests of the Holders of the Securities or, so long as any of the Capital Securities shall remain outstanding, the holders of the Capital Securities; or (d) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act. SECTION 11.2 Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company, the Guarantor and the Trustee, the Company and the Guarantor, when authorized by appropriate Board Resolutions, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (a) change the Stated Maturity of, the principal of, or any installment of interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon, or change the place of payment where, or the coin or currency in which, any Security or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or modify the provisions of this Indenture with respect to the subordination of the Securities in a manner adverse to the Holders, (b) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (c) modify any of the provisions of this Section, Section 7.13 or Section 12.9, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided, that, so long as any of the Capital Securities remain outstanding, no such amendment shall be made that adversely affects the holders of the Capital Securities, and no termination of this Indenture shall occur, and no waiver of any Event of Default or compliance with any covenant under this Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate liquidation preference of the outstanding Capital Securities unless and until the principal of and any premium on the Securities and all accrued and unpaid interest thereon have been paid in full. It shall not be necessary for any Act of Holders under this Section 11.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 11.3 Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article XI or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 8.1) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 11.4 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article XI, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 11.5 Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article XI shall conform to the requirements of the Trust Indenture Act. SECTION 11.6 Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company and the Guarantor shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Company and the Guarantor, to any such supplemental indenture may be prepared and executed by the Company and the Guarantor and authenticated and delivered by the Trustee in exchange for Outstanding Securities. ARTICLE XII Covenants; Representations and Warranties SECTION 12.1 Payment of Principal and Interest. The Company will duly and punctually pay the principal of and interest on the Securities in accordance with the terms of the Securities and this Indenture and comply with all other terms, agreements and conditions contained herein. SECTION 12.2 Maintenance of Office or Agency. The Company will maintain in The City of New York an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange, where Securities may be surrendered for conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in the United States) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the United States for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 12.3 Money for Security Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or at the option of the Company on or before each due date of the principal of or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. In such case the Company shall not invest the amount so segregated and held in trust pending the distribution thereof. Whenever the Company shall have one or more Paying Agents, it will, on or prior to each due date of the principal of or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act; provided, however, that any such deposit on a due date shall be initiated prior to 12:00 noon (New York time) in same-day funds. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section 12.3, that such Paying Agent will (i) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the continuance of any default by the Company (or any other obligor upon the Securities) in the making of any payment in respect of the Securities, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent as such. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or interest on any Security and remaining unclaimed for two years after such principal or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease. SECTION 12.4 Statement by Officers as to Default. The Company will deliver to the Trustee, upon 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observance of any of the material terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. SECTION 12.5 Existence. Subject to Article X, the Company and the Guarantor will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company and the Guarantor shall not be required to preserve any such right or franchise if its Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of its business and that the loss hereof is not disadvantageous in any material respect to the Holders and, while any Capital Securities are outstanding, the holders of the Capital Securities. SECTION 12.6 INTENTIONALLY DELETED. SECTION 12.7 INTENTIONALLY DELETED. SECTION 12.8 Additional Covenants. (a) The Guarantor also covenants that so long as the Capital Securities and Common Securities remain outstanding (i) to maintain 100% direct or indirect ownership of the Common Securities of the Trust; provided, however, that any permitted successor of the Guarantor hereunder may succeed to the Guarantor's ownership of such Common Securities, (ii) to timely perform its duties as sponsor of the Trust, (iii) to use its reasonable efforts to cause the Trust (A) to remain a business trust classified as a grantor trust except in connection with the distribution of the Securities to the Holders of the Capital Securities in liquidation of the Trust, the redemption of all Capital Securities and Common Securities of the Trust or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, and (B) to continue not to be treated as an association taxable as a corporation for United States Federal income tax purposes and (iv) to use its reasonable efforts to cause each Holder of Capital Securities and Common Securities to be treated as owning an undivided beneficial interest in the Securities. (b) Because the Trust is being formed solely to facilitate an investment in the Securities, the Company, as borrower, hereby covenants to pay all debts and obligations (other than with respect to the Capital Securities and Common Securities) and all costs and expenses of the Trust (including, but not limited to, all costs and expenses relating to the organization of the Trust, the fees and expenses of the Trustees and all costs and expenses relating to the operation of the Trust) and to pay any and all taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed on the Trust by the United States, or any other taxing authority, so that the net amounts received and retained by the Trust and the Property Trustee after paying such expenses will be equal to the amounts the Trust and the Property Trustee would have received had no such costs or expenses been incurred by or imposed on the Trust. The foregoing obligations of the Company are for the benefit of, and shall be enforceable by, any person to whom any such debts, obligations, costs, expenses and taxes are owed (each, a "Creditor") whether or not such Creditor has received notice thereof. Any such Creditor may enforce such obligations of the Company directly against the Company, and the Company irrevocably waives any right or remedy to require that any such Creditor take any action against the Trust or any other person before proceeding against the Company. The Company shall execute such additional agreements as may be necessary or desirable to give full effect to the foregoing. SECTION 12.9 Waiver of Certain Covenants. Except as otherwise specified as contemplated by Section 3.1 for Securities, the Company and the Guarantor may, with respect to the Securities, omit in any particular instance to comply with any term, provision or condition set forth in any covenant provided pursuant to Section 11.1(b) for the benefit of the Holders if before the time for such compliance the Holders of at least a majority in aggregate principal amount of the Outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in resect of any such term, provision or condition shall remain in full force and effect. SECTION 12.10 Restrictions on Payments and Distributions. The Company and the Guarantor will not declare or pay any dividends on, or make a distribution with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of their capital stock or rights to acquire such capital stock (other than (1) purchases or acquisitions of shares of any such capital stock or rights to acquire such capital stock in connection with the satisfaction by the Company or the Guarantor, respectively, of its obligations under any employee benefit plans, (2) as a result of a reclassification of the Company's or the Guarantor's capital stock or rights to acquire such capital stock or the exchange or conversion of one class or series of the Company's or Guarantor's capital stock or rights to acquire such capital stock for another class or series of the Company's or the Guarantor's capital stock or rights to acquire such capital stock, (3) the purchase of fractional interests in the Company's or the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged or (4) dividends and distributions made on the Company's or the Guarantor's capital stock or rights to acquire such capital stock with the Company's or the Guarantor's capital stock or rights to acquire such capital stock) or make any guarantee payments with respect to any of the foregoing and 0.2. make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including any guarantees, other than the Guarantees) issued by the Company or the Guarantor that rank pari passu with or junior to the Debt Securities or the Debt Guarantee, if at such time (x) there shall have occurred any event of which the Company or the Guarantor has actual knowledge that (I) with the giving of notice or the lapse of time, or both, would constitute an Event of Default with respect to Debentures and (II) in respect of which the Company shall not have taken reasonable steps to cure, (y) the Guarantor shall be in default with respect to its payment of any obligations under the Debt Guarantee or (z) the Company shall have given notice of its election of an Extension Period as provided in Section 5.2 and shall not have rescinded such notice, or such Extension Period, or any extension thereof, shall be continuing. SECTION 12.11 Listing or Quotation of Debentures. If the Securities are to be distributed to the holders of Capital Securities and Common Securities upon a Dissolution Event, the Company shall use its reasonable efforts to arrange to list, or seek approval for quotation of, such Debentures on any securities exchange or other organization on which the Capital Securities are then listed or quoted, if any. ARTICLE XIII Subordination of Securities SECTION 13.1 Securities Subordinate to Senior Indebtedness. The Company covenants and agrees, and each Holder of a Security, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article XIII (subject to Article VI), the payment of the principal of and interest on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full in cash of all Senior Indebtedness, whether outstanding at the date of this Indenture or thereafter incurred. The payment by the Guarantor of any obligation due under the Debt Guarantee shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Guarantor, whether outstanding at the date of this Indenture or thereafter incurred. This Article XIII shall constitute a continuing offer to all persons who become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness and such holders are made obligees hereunder and any one or more of them may enforce such provisions. Holders of Senior Indebtedness need not prove reliance on the subordination provisions hereof. SECTION 13.2 Default on Senior Indebtedness. In the event and during the continuation of any default by the Company or the Guarantor in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness (and any applicable grace period with respect to such default has ended and such default has not been cured or waived) or in the event that the maturity of any Senior Indebtedness of the Company or the Guarantor, as the case may be, has been accelerated because of a default, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption payments) of, premium, if any, or interest on, the Securities, including payment with respect to any obligation due under the Debt Guarantee. In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by the preceding paragraph of this Section 13.2, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness. SECTION 13.3 Liquidation; Dissolution; Bankruptcy. Upon any payment by the Company or the Guarantor, or distribution of assets of the Company or the Guarantor of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company or the Guarantor, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all principal of, and premium, if any, and interest due or to become due upon all Senior Indebtedness of the Company or the Guarantor, as the case may be (including interest after the commencement of any bankruptcy, insolvency, receivership or other proceedings at the rate specified in the applicable Senior Indebtedness whether or not such interest is an allowable claim in any such proceeding) shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made on account of the principal or interest on the Securities, and upon any such dissolution or winding-up or liquidation or reorganization any payment by the Company or the Guarantor, or distribution of substantially all of the assets of the Company or the Guarantor of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee would be entitled, except for the provisions of this Article XIII, shall be paid by the Company or the Guarantor, as the case may be, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders of the Securities or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness of the Company or the Guarantor, as the case may be, (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company or the Guarantor, as the case may be) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all Senior Indebtedness in full of the Company or the Guarantor, as the case may be, (including interest after the commencement of any bankruptcy, insolvency, receivership or other proceedings at the rate specified in the applicable Senior Indebtedness whether or not such interest is an allowable claim in any such proceeding) or to provide for such payment in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness, before any payment or distribution is made to the Holders of Securities or to the Trustee. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company or the Guarantor of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee or the Holders of the Securities before all Senior Indebtedness of the Company or the Guarantor is paid in full, of the Company or the Guarantor, as the case may be (including interest after the commencement of any bankruptcy, insolvency, receivership or other proceedings at the rate specified in the applicable Senior Indebtedness whether or not such interest is an allowable claim in any such proceeding) or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company or the Guarantor, for application to the payment of all Senior Indebtedness of the Company or the Guarantor, as the case may be, remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness. Any holder of Senior Indebtedness may file any proof of claim or similar instrument on behalf of the Trustee and the Holders if such instrument has not been filed by the date which is 30 days prior to the date specified for filing thereof. For purposes of this Article XIII, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company or the Guarantor as reorganized or readjusted, or securities of the Company or the Guarantor or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article XIII with respect to the Securities to the payment of all Senior Indebtedness of the Company or the Guarantor, as the case may be, that may at the time be outstanding, provided, however, that (i) the Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of the Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company or the Guarantor with, or the merger of the Company or the Guarantor into, another corporation or the liquidation or dissolution of the Company or the Guarantor following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article X hereof shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 13.3 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article X hereof. Nothing in Section 13.2 or in this Section 13.3 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 8.7. SECTION 13.4 Subrogation. Subject to the payment in full of all Senior Indebtedness of the Company or the Guarantor, the rights of the Holders of the Securities shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company or the Guarantor, as the case may be, applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities shall paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article XIII, and no payment over pursuant to the provisions of this Article XIII, to or for the benefit of the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as between (i) the Company, its creditors other than holders of Senior Indebtedness of the Company, and the Holders of the Securities, or (ii) the Guarantor, its creditors other than the holders of Senior Indebtedness of the Guarantor, and the Holders of the Securities, be deemed to be a payment by the Company or the Guarantor, as the case may be, to or on account of the Senior Indebtedness. It is understood that the provisions of this Article XIII are and are intended solely for the purposes of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of the Senior Indebtedness on the other hand. Nothing contained in this Article XIII or elsewhere in this Indenture or in the Securities is intended to or shall impair, as between (i) the Company, its creditors other than the holders of Senior Indebtedness of the Company, and the Holders of the Securities, or (ii) the Guarantor, its creditors other than holders of Senior Indebtedness of the Guarantor, and the Holders of the Securities, the obligation of the Company or the Guarantor, as the case may be, which is absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Securities and creditors of the Company or the Guarantor, as the case may be, other than the holders of the Senior Indebtedness or the Guarantor, as the case may be, nor shall anything herein or therein prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XIII of the holders of Senior Indebtedness in respect of cash, property or securities of the Company or the Guarantor, as the case may be, received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company or the Guarantor referred to in this Article XIII, the Trustee, subject to the provisions of Section 8.1, and the Holders of the Securities, shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, Trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the trustee or to the Holders of the Securities, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Company or the Guarantor, as the case may be, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XIII. SECTION 13.5 Trustee to Effectuate Subordination. Each Holder of a Security by acceptance thereof authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article XIII and appoints the Trustee such Holder's attorney-in-fact for any and all such purposes. SECTION 13.6 Notice by the Company and the Guarantor. The Company or the Guarantor shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company or the Guarantor that would prohibit the making of any payment of monies to or by the Trustee in respect of the Securities pursuant to the provisions of this Article XIII. Notwithstanding the provisions of this Article XIII or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Securities pursuant to the provisions of this Article XIII, unless and until a Responsible Officer of the Trustee shall have received written notice thereof at the Corporate Trust Office of the Trustee from the Company or the Guarantor or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Section 8.1, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 13.6 at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. The Trustee, subject to the provisions of Section 8.1, shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of Senior Indebtedness of the Company or the Guarantor, as the case may be, or a trustee on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article XIII, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XIII, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 13.7 Rights of the Trustee; Holders of Senior Indebtedness. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XIII in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article XIII shall apply to claims of, or payments to, the Trustee under or pursuant to Section 8.7. With respect to the holders of Senior Indebtedness of the Company or the Guarantor, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XIII, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and, subject to the provisions of Section 8.1, the Trustee shall not be liable to any holder of Senior Indebtedness if it shall pay over or deliver to holders of Securities, the Company, the Guarantor or any other Person money or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article XIII or otherwise. SECTION 13.8 Subordination May Not be Impaired. No right of any present or future holder of any Senior Indebtedness of the Company or the Guarantor to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or the Guarantor, as the case may be, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company or the Guarantor, as the case may be, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness of the Company or the Guarantor may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article XIII or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any Person liable in any manner for the collection of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company or the Guarantor, as the case may be, and any other Person. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. COUNTRYWIDE HOME LOANS, INC. By: /s/Stanford L. Kurland ------------------------------------------- Name: Stanford L. Kurland Title: Senior Managing Director COUNTRYWIDE CREDIT INDUSTRIES, INC. By: /s/Stanford L. Kurland ------------------------------------------- Name: Stanford L. Kurland Title: Senior Managing Director THE BANK OF NEW YORK, as Trustee By: /s/Vivian Georges ------------------------------------------- Name: Vivian Georges Title: Assistant Vice President Exhibit A This Security may not be acquired by any Person who is, or who in acquiring this Security is using the assets of, an ERISA Plan unless this Security is acquired pursuant to and in accordance with an applicable exemption, including but not limited to: (i) Prohibited Transaction Class Exemption 90-1 ("PTE 90-1"), regarding investments by insurance company pooled separate accounts, (ii) Prohibited Transaction Class Exemption 91-38 ("PTE 91-38") regarding investments by bank collective investment funds, (iii) Prohibited Transaction Class Exemption 84-14 ("PTE 84-14"), regarding transactions effected by qualified professional asset managers, (iv) Prohibited Transaction Class Exemption 96-23 ("PTE 96-23"), regarding transactions effected by in-house asset managers, or (v) Prohibited Transaction Class Exemption 95-60 ("PTE 95-60"), regarding investments by insurance company general accounts. The acquisition of this Security by any Person who is, or who in acquiring this Security is using the assets of, an ERISA Plan shall be deemed to constitute a representation by such Person to the Trust that (i) such Person is eligible for exemptive relief available pursuant to an applicable exemption, including but not limited to, PTE 90-1, PTE 91-38, PTE 84-14, PTE 96-23 or PTE 95-60 with respect to the acquisition and holding of this Security, and (ii) none of Countrywide Home Loans, Inc., Countrywide Credit Industries, Inc., Countrywide Financial Services, Inc. or Countrywide Securities Corporation is a "fiduciary", within the meaning of Section 3(21) of ERISA and the regulations thereunder, with respect to such Person's interest in this Security. COUNTRYWIDE HOME LOANS, INC. 8.05% Junior Subordinated Debentures due June 15, 2027, Series A $ -------------------- Certificate No. -- COUNTRYWIDE HOME LOANS, INC., a corporation duly organized and existing under the laws of the State of New York (herein called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to , or registered assigns, the principal sum of ($ ) on June 15, 2027 (the "Stated Maturity"; unless a Maturity Advancement (as hereinafter defined) occurs as a result of a Tax Event, in which case the Stated Maturity shall be such advanced maturity date), and to pay interest on said principal from , 199 or from the most recent interest payment date to which interest on this Security has been paid or duly provided for, semi-annually (subject to deferral as set forth herein) in arrears on June 15 and December 15 of each year (each, an "Interest Payment Date"), commencing December 15, 1997, at a rate of 8.05% per annum until the principal hereof shall have been paid or made available for payment, and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum compounded semi-annually. In the event that a Registration Default (as defined in the Registration Rights Agreement) occurs, additional interest ("Additional Interest") shall become payable in respect of this Security with respect to the first 90-day period immediately following the occurrence of such Registration Default, in an amount equal to $.05 per week per $1,000 liquidation amount of this Security for each week or portion thereof that the Registration Default continues, as provided in the Registration Rights Agreement. Additional Interest will increase by an additional $.05 per week per $1,000 liquidation amount of this Security with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Additional Interest of $.25 per week per $1,000 liquidation amount of this Security. The amount of interest payable for any semi-annual interest period will be computed for any full 180-day semi-annual interest payment period, on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any period shorter than a full 180-day semi-annual interest payment period for which interest payments are computed, will be computed on the basis of actual number of days elapsed in such 180-day period (assuming each full month elapsed in such period consists of 30 days). In the event that any date on which interest is payable on this Security is not a Business Day (as hereinafter defined), then a payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any additional interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date such payment was originally payable; provided that no interest shall accrue for the period from and after the date such payment was originally payable. A "Business Day" shall mean any day other than a Saturday or a Sunday, or a day on which banking institutions in The City of New York or Los Angeles, California are authorized or required by law or executive order to remain closed or a day on which the Corporate Trust Office of the Trustee, or the principal corporate trust office of the Property Trustee under the Declaration, is closed for business. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name the Securities (or one or more Predecessor Securities, as defined in the Indenture) is registered at the close of business on the Regular Record Date for such interest installment, which shall be determined as provided in the Indenture. Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name the Securities or one or more Predecessor Securities is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. So long as no Event of Default has occurred and is continuing, the Company shall have the right at any time during the term of this Security, from time to time, to defer payment of interest on such Security for a period not to exceed 10 semi-annual periods, (an "Extension Period"), provided, that no Extension Period may extend past the Stated Maturity of this Security. There may be multiple Extension Periods of varying lengths during the term of this Security. At the end of any Extension Period, if any, the Company shall pay all interest then accrued and unpaid, together with interest thereon, compounded semi-annually at the rate specified on this Security to the extent permitted by applicable law. During any such Extension Period, the Company and the Guarantor shall not, declare or pay any dividends on, or make a distribution with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock or rights to acquire such capital stock (other than (i) purchases or acquisitions of shares of any such capital stock or rights to acquire such capital stock in connection with the satisfaction by the Company or the Guarantor, respectively, of its obligations under any employee benefit plans, (ii) as a result of a reclassification of the Company's or the Guarantor's capital stock or rights to acquire such capital stock or the exchange or conversion of one class or series of the Company's or the Guarantor's capital stock or rights to acquire such capital stock for another class or series of the Company's or the Guarantor's capital stock or rights to acquire such capital stock, (iii) the purchase of fractional interests in shares of the Company's or the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged or (iv) dividends and distributions made on the Company's or the Guarantor's capital stock or rights to acquire such capital stock with the Company's or the Guarantor's capital stock or rights to acquire such capital stock) or make any guarantee payments with respect to any of the foregoing and (b) the Company and the Guarantor shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including any guarantees, other than the Guarantees) issued by the Company or the Guarantor that rank pari passu with or junior to this Security and the Debt Guarantee. Prior to the termination of any such Extension Period, the Company may further extend the Extension Period, provided that no Extension Period may exceed 10 consecutive semi-annual periods or extend beyond the Stated Maturity of this Security. Upon the termination of any such Extension Period and the payment of all amounts then due on any Interest Payment Date, the Company may elect to begin a new Extension Period subject to the above requirements. No interest shall be due and payable during an Extension Period, except at the end thereof. The Company shall give the Guarantor, the Property Trustee, the Regular Trustees and the Trustee written notice of its election of such Extension Period not less than one Business Day prior to the record date for the applicable Interest Payment Date. Payment of the principal of and interest on this Security will be made at the office or agency of the Paying Agent maintained for that purpose in the United States, 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; provided, however, that at the option of the Company, payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer in immediately available funds at such place and to such account as may be designated by the Person entitled thereto as specified in the Security Register. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof, by his acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. Reference is hereby made to the further provisions of the Indenture summarized on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, Countrywide Home Loans, Inc. has caused this instrument to be duly executed. COUNTRYWIDE HOME LOANS, INC. By: ---------------------------------------------- Name: Title: Attest: - ---------------------- Name: Title: Secretary [Form of Reverse of Security] This Security is one of a duly authorized issue of Securities of Countrywide Home Loans, Inc. (the "Company"), designated as its 8.05% Junior Subordinated Debentures due June 15, 2027, Series A (herein called the "Securities"), limited in aggregate principal amount to $206,200,000 issued under an Indenture, dated as of June 4, 1997 (herein called the "Indenture"), among the Company, Countrywide Credit Industries, Inc. (the "Guarantor") and The Bank of New York, a New York banking corporation, as Trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Trustee, the Company, the Guarantor and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. This Security is not redeemable at the option of the Company; provided that this Security shall be redeemable at the option of the Company at any time in whole (but not in part), within 90 days of the occurrence of a Special Event (as defined in the Indenture), at a Redemption Price equal to 100% of the aggregate principal amount of the Securities to be redeemed, plus accrued and unpaid interest, if any, to the Redemption Date. In addition, if a Tax Event shall occur and be continuing and in the opinion of counsel, rendered by a law firm having a recognized national tax practice, there would in all cases, after effecting the dissolution of the Trust and the distribution of the Securities to the Holders of the Capital Securities and Common Securities in exchange therefor upon liquidation of the Trust, be more than an insubstantial risk that the Tax Event would continue to exist, then the Company shall have the right to shorten the Stated Maturity of the Securities to a date not earlier than December 15, 2011 (a "Maturity Advancement"), such that, in the opinion of counsel to the Trust rendered by a law firm having a recognized national tax practice, after advancing the Stated Maturity of the Debt Securities, interest paid on the Securities will be deductible by the Company for United States federal income tax purposes. For so long as the Trust is the Holder of all the Securities Outstanding, the proceeds of any redemption described herein shall be used by the Trust to redeem Common Securities and Capital Securities in accordance with their terms. If an Event of Default with respect to the Securities shall occur and be continuing, the principal of the Securities may be declared due and payable in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions for satisfaction and discharge or legal defeasance of the entire indebtedness of this Security and for the defeasance of certain covenants under the Indenture at any time upon compliance by the Company with certain conditions set forth in the Indenture. The Indenture contains provisions permitting the Company, the Guarantor and the Trustee, with the consent of Holders of not less than a majority in principal amount of the Outstanding Securities, to modify the Indenture in a manner affecting the rights of the Holders of the Securities; provided that no such modification may, without the consent of the Holder of each Outstanding Security affected thereby, (i) except to the extent permitted and subject to the conditions set forth in the Indenture with respect to extension of the installments of interest on the Securities or shortening of the Stated Maturity of the Securities, change the Stated Maturity of, the principal of, or any installment of interest on, this Security or reduce the principal amount thereof, or the rate of payment of interest thereon, or change the place of payment where, or the coin or currency in which, this Security or interest thereon is payable, or impair the right to institute suit for the enforcement of such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or modify the provisions of the Indenture with respect to the subordination of the Securities in a manner adverse to the Holders, (ii) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for such supplemental Indenture or the consent of whose Holders is required for any waiver (of compliance with certain provisions of the Indenture or certain defaults thereunder and their consequences) provided for in the Indenture, or (iii) modify any of the provisions of Section 7.13, Section 11.2 or Section 12.9 of the Indenture, except to increase any such percentage or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby, provided that, so long as any of the Capital Securities remain outstanding, no such amendment shall be made that adversely affects the holders of the Capital Securities, and no termination of the Indenture shall occur, and no waiver of an Event of Default or compliance with any covenant under the Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate liquidation preference of the outstanding Capital Securities unless and until the principal of and any premium on the Securities and all accrued and unpaid interest thereon have been paid in full. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in New York, New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Securities are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities of different authorized denominations, as requested by the Holder surrendering the same. THE SECURITIES AND THE INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF. This is one of the Securities referred to in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee By: ---------------------------------------------- Authorized Signatory Dated: In connection with any transfer of this Security occurring prior to the date which is the earlier of (i) the date of the declaration by the Commission of the effectiveness of a registration statement under the Securities Act covering resales of this Security (which effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) two years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date"), the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer: [Check One] ------------- (1) to the Company or a subsidiary thereof; or --- (2) pursuant to and in compliance with Rule 144A under the Securities --- Act of 1933, as amended; or (3) outside the United States to a "foreign person" in compliance --- with Rule 904 of Regulation S under the Securities Act of 1933, as amended; or (4) pursuant to the exemption from registration provided by Rule 144 --- under the Securities Act of 1933, as amended; or (5) pursuant to an effective registration statement under the --- Securities Act of 1933, as amended; or (6) pursuant to another available exemption from the registration --- requirements of the Securities Act of 1933, as amended. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered Holder thereof; provided, however, that if box (3), (4) or (6) is checked, the Company or the Trustee may require, prior to registering any such transfer of the Securities, in its sole discretion, such written legal opinions, certifications (including an investment letter in the case of box (3)) and other information as the Trustee or the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended. If none of the foregoing boxes is checked, the Trustee or Registrar shall not be obligated to register this Security in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.8 of the Indenture shall have been satisfied. Dated: Signed: ------------------ ----------------------------------- (Sign exactly as name appears on the other side of this Security) Signature Guarantee: ------------------------------------ TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ----------------- ------------------------------------- NOTICE: To be executed by an executive officer TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing the Security outside the United States as a "foreign person" in compliance with Rule 904 of Regulation S under the Securities Act and is aware that the sale to it is being made in reliance on Regulation S. Dated: ----------------- ------------------------------------- NOTICE: To be executed by an executive officer FOR VALUE RECEIVED, the Guarantor hereby unconditionally guarantees to the holder of this Security upon which this Guarantee is endorsed the due and punctual payment of the principal, premium, if any, and interest on said Security, when and as the same shall become due and payable, whether at maturity, upon redemption or otherwise, according to the terms thereof and of the Indenture referred to therein. The Guarantor agrees to determine, at least one Business Day prior to the date upon which a payment of principal of and premium, if any, or interest on said Security is due and payable, whether the Company has available the funds to make such payment as the same shall become due and payable. In case of the failure of the Company punctually to pay any such principal, premium, if any, or interest, the Guarantor hereby agrees to cause any such payment to be made punctually when and as the same shall become due and payable, whether at maturity, upon redemption, or otherwise, and as if such payment were made by the Company. The Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrevocable, and absolute, irrespective of the validity, regularity, or enforceability of said Security or said Indenture, the absence of any action to enforce the same, any waiver or consent by the Holder of said Security with respect to any provisions thereof, the recovery of any judgment against the Company or any action to enforce the same, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a proceeding first against the Company, protest or notice with respect to said Security or indebtedness evidenced thereby, and all demands whatsoever and covenants that this Guarantee will not be discharged except by complete performance of the obligations contained in said Security and in this Guarantee. The Guarantor shall be subrogated to all rights of the holder of said Security against the Company in respect of any amounts paid by the Guarantor pursuant to the provisions of this Guarantee; provided, however, that the Guarantor shall not, without the consent of the holders of all of the Securities then outstanding, be entitled to enforce or to receive any payments arising out of or based upon such right of subrogation until the principal of and premium, if any, and interest on all Securities shall have been paid in full or payment thereof shall have been provided for in accordance with said Indenture. Notwithstanding anything to the contrary contained herein, if following any payment of principal or interest by the Company on the Securities to the holders of the Securities it is determined by a final decision of a court of competent jurisdiction that such payment shall be avoided by a trustee in bankruptcy (including any debtor-in-possession) as a preference under 11 U.S.C. Section 547 and such payment is paid by such holder of such trustee in bankruptcy, then and to the extent of such repayment, the obligations of the Guarantor hereunder shall remain in full force and effect. This Guarantee shall not be valid or become obligatory for any purpose with respect to a Security until the certificate of authentication on such Security shall have been signed by the Trustee (or the Authentication Agent). This Guarantee shall be governed by the laws of the State of New York without regard to conflict of laws principles thereof. IN WITNESS WHEREOF, Countrywide Credit Industries, Inc. has caused this Guarantee to be signed in its corporate name by the facsimile signature of two of its officers thereunto duly authorized. COUNTRYWIDE CREDIT INDUSTRIES, INC. By: ---------------------------------------------- Name: Title: By: ---------------------------------------------- Name: Title: Exhibit B COUNTRYWIDE HOME LOANS, INC. 8.05% Junior Subordinated Debentures due June 15, 2027, Series B $ -------------------- Certificate No. --- This Security may not be acquired by any Person who is, or who in acquiring such this Security is using the assets of, an ERISA Plan unless this Security is acquired pursuant to and in accordance with an applicable exemption, including but not limited to: (i) Prohibited Transaction Class Exemption 90-1 ("PTE 90-1"), regarding investments by insurance company pooled separate accounts, (ii) Prohibited Transaction Class Exemption 91-38 ("PTE 91-38") regarding investments by bank collective investment funds, (iii) Prohibited Transaction Class Exemption 84-14 ("PTE 84-14"), regarding transactions effected by qualified professional asset managers, (iv) Prohibited Transaction Class Exemption 96-23 ("PTE 96-23"), regarding transactions effected by in-house asset managers, or (v) Prohibited Transaction Class Exemption 95-60 ("PTE 95-60"), regarding investments by insurance company general accounts. The acquisition of this Security by any Person who is, or who in acquiring this Security is using the assets of, an ERISA Plan shall be deemed to constitute a representation by such Person to the Trust that (i) such Person is eligible for exemptive relief available pursuant to an applicable exemption, including but not limited to, PTE 90-1, PTE 91-38, PTE 84-14, PTE 96-23 or PTE 95-60 with respect to the acquisition and holding of this Security, and (ii) none of Countrywide Home Loans, Inc., Countrywide Credit Industries, Inc., Countrywide Financial Services, Inc. or Countrywide Securities Corporation is a "fiduciary", within the meaning of Section 3(21) of ERISA and the regulations thereunder, with respect to such Person's interest in this Security. COUNTRYWIDE HOME LOANS, INC., a corporation duly organized and existing under the laws of the State of New York (herein called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to , or registered assigns, the principal sum of ($ ) on June 15, 2027 (the "Stated Maturity"; unless a Maturity Advancement (as hereinafter defined) occurs as a result of a Tax Event, in which case the Stated Maturity shall be such advanced maturity date), and to pay interest on said principal from , 199 or from the most recent interest payment date to which interest on this Security (or the 8.05% Junior Subordinated Debentures due June 15, 1987, Series A, in exchange for which this Security was issued) has been paid or duly provided for, semi-annually (subject to deferral as set forth herein) in arrears on June 15 and December 15 of each year (each, an "Interest Payment Date"), commencing December 15, 1997, at a rate of 8.05% per annum until the principal hereof shall have been paid or made available for payment, and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum compounded semi-annually. In the event that a Registration Default (as defined in the Registration Rights Agreement) occurs, additional interest ("Additional Interest") shall become payable in respect of this Security with respect to the first 90-day period immediately following the occurrence of such Registration Default, in an amount equal to $.05 per week per $1,000 liquidation amount of this Security for each week or portion thereof that the Registration Default continues, as provided in the Registration Rights Agreement. Additional Interest will increase by an additional $.05 per week per $1,000 liquidation amount of this Security with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Additional Interest of $.25 per week per $1,000 liquidation amount of this Security. The amount of interest payable for any semi-annual period will be computed for any full 180-day semi-annual interest payment period, on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any period shorter than a full 180-day semi-annual interest payment period for which interest payments are computed, will be computed on the basis of actual number of days elapsed in such 180-day period (assuming each full month elapsed in such period consists of 30 days). In the event that any date on which interest is payable on this Security is not a Business Day (as hereinafter defined), then a payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any additional interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date such payment was originally payable; provided that no interest shall accrue for the period from and after the date such payment was originally payable. A "Business Day" shall mean any day other than a Saturday or a Sunday, or a day on which banking institutions in The City of New York or Los Angeles, California are authorized or required by law or executive order to remain closed or a day on which the Corporate Trust Office of the Trustee, or the principal corporate trust office of the Property Trustee under the Declaration, is closed for business. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name the Securities (or one or more Predecessor Securities, as defined in the Indenture) is registered at the close of business on the Regular Record Date for such interest installment, which shall be determined as provided in the Indenture. Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name the Securities or one or more Predecessor Securities is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. So long as no Event of Default has occurred and is continuing, the Company shall have the right at any time during the term of this Security, from time to time, to defer payment of interest on such Security for a period not to exceed 10 semi-annual periods, (an "Extension Period"), provided, that no Extension Period may extend past the Stated Maturity of this Security. There may be multiple Extension Periods of varying lengths during the term of this Security. At the end of any Extension Period, if any, the Company shall pay all interest then accrued and unpaid, together with interest thereon, compounded semi-annually at the rate specified on this Security to the extent permitted by applicable law. During any such Extension Period, the Company and the Guarantor shall not, declare or pay any dividends on, or make a distribution with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock or rights to acquire such capital stock (other than (i) purchases or acquisitions of shares of any such capital stock or rights to acquire such capital stock in connection with the satisfaction by the Company or the Guarantor, respectively, of its obligations under any employee benefit plans, (ii) as a result of a reclassification of the Company's or the Guarantor's capital stock or rights to acquire such capital stock or the exchange or conversion of one class or series of the Company's or the Guarantor's capital stock or rights to acquire such capital stock for another class or series of the Company's or the Guarantor's capital stock or rights to acquire such capital stock, (iii) the purchase of fractional interests in shares of the Company's or the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged or (iv) dividends and distributions made on the Company's or the Guarantor's capital stock or rights to acquire such capital stock with the Company's or the Guarantor's capital stock or rights to acquire such capital stock) or make any guarantee payments with respect to any of the foregoing and (b) the Company and the Guarantor shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including any guarantees, other than the Guarantees) issued by the Company or the Guarantor that rank pari passu with or junior to this Security and the Debt Guarantee. Prior to the termination of any such Extension Period, the Company may further extend the Extension Period, provided that no Extension Period may exceed 10 consecutive semi-annual periods or extend beyond the Stated Maturity of this Security. Upon the termination of any such Extension Period and the payment of all amounts then due on any Interest Payment Date, the Company may elect to begin a new Extension Period subject to the above requirements. No interest shall be due and payable during an Extension Period, except at the end thereof. The Company shall give the Guarantor, the Property Trustee, the Regular Trustees and the Trustee written notice of its election of such Extension Period not less than one Business Day prior to the record date for the applicable Interest Payment Date. Payment of the principal of and interest on this Security will be made at the office or agency of the Paying Agent maintained for that purpose in the United States, 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; provided, however, that at the option of the Company, payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer in immediately available funds at such place and to such account as may be designated by the Person entitled thereto as specified in the Security Register. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof, by his acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. Reference is hereby made to the further provisions of the Indenture summarized on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, Countrywide Home Loans, Inc. has caused this instrument to be duly executed. COUNTRYWIDE HOME LOANS, INC. By: ---------------------------------------------- Name: Title: Attest: - --------------------------- Name: Title: Secretary [Form of Reverse of Security] This Security is one of a duly authorized issue of Securities of Countrywide Home Loans, Inc. (the "Company"), designated as its 8.05% Junior Subordinated Debentures due June 15, 2027, Series B (herein called the "Securities"), limited in aggregate principal amount to $206,200,000 issued under an Indenture, dated as of June 4, 1997 (herein called the "Indenture"), among the Company, Countrywide Credit Industries, Inc. (the "Guarantor") and The Bank of New York, a New York banking corporation, as Trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Trustee, the Company, the Guarantor and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. This Security is not redeemable at the option of the Company; provided that this Security shall be redeemable at the option of the Company at any time in whole (but not in part), within 90 days of the occurrence of a Special Event (as defined in the Indenture), at a Redemption Price equal to 100% of the aggregate principal amount of the Securities to be redeemed, plus accrued and unpaid interest, if any, to the Redemption Date. In addition, if a Tax Event shall occur and be continuing and in the opinion of counsel, rendered by a law firm having a recognized national tax practice, there would in all cases, after effecting the dissolution of the Trust and the distribution of the Securities to the Holders of the Capital Securities and Common Securities in exchange therefor upon liquidation of the Trust, be more than an insubstantial risk that the Tax Event would continue to exist, then the Company shall have the right to shorten the Stated Maturity of the Securities to a date not earlier than December 15, 2011 (a "Maturity Advancement"), such that, in the opinion of counsel to the Trust rendered by a law firm having a recognized national tax practice, after advancing the Stated Maturity of the Debt Securities, interest paid on the Securities will be deductible by the Company for United States federal income tax purposes. For so long as the Trust is the Holder of all the Securities Outstanding, the proceeds of any redemption described herein shall be used by the Trust to redeem Common Securities and Capital Securities in accordance with their terms. If an Event of Default with respect to the Securities shall occur and be continuing, the principal of the Securities may be declared due and payable in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions for satisfaction and discharge or legal defeasance of the entire indebtedness of this Security and for the defeasance of certain covenants under the Indenture at any time upon compliance by the Company with certain conditions set forth in the Indenture. The Indenture contains provisions permitting the Company, the Guarantor and the Trustee, with the consent of Holders of not less than a majority in principal amount of the Outstanding Securities, to modify the Indenture in a manner affecting the rights of the Holders of the Securities; provided that no such modification may, without the consent of the Holder of each Outstanding Security affected thereby, (i) except to the extent permitted and subject to the conditions set forth in the Indenture with respect to extension of the installments of interest on the Securities or shortening of the Stated Maturity of the Securities, change the Stated Maturity of, the principal of, or any installment of interest on, this Security or reduce the principal amount thereof, or the rate of payment of interest thereon, or change the place of payment where, or the coin or currency in which, this Security or interest thereon is payable, or impair the right to institute suit for the enforcement of such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or modify the provisions of the Indenture with respect to the subordination of the Securities in a manner adverse to the Holders, (ii) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for such supplemental Indenture or the consent of whose Holders is required for any waiver (of compliance with certain provisions of the Indenture or certain defaults thereunder and their consequences) provided for in the Indenture, or (iii) modify any of the provisions of Section 7.13, Section 11.2 or Section 12.9 of the Indenture, except to increase any such percentage or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby, provided that, so long as any of the Capital Securities remain outstanding, no such amendment shall be made that adversely affects the holders of the Capital Securities, and no termination of the Indenture shall occur, and no waiver of an Event of Default or compliance with any covenant under the Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate liquidation preference of the outstanding Capital Securities unless and until the principal of and any premium on the Securities and all accrued and unpaid interest thereon have been paid in full. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in New York, New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Securities are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities of different authorized denominations, as requested by the Holder surrendering the same. THE SECURITIES AND THE INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF. This is one of the Securities referred to in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee By: ---------------------------------------------- Authorized Signatory Dated: In connection with any transfer of this Security occurring prior to the date which is the earlier of (i) the date of the declaration by the Commission of the effectiveness of a registration statement under the Securities Act covering resales of this Security (which effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) two years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date"), the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer: [Check One] (1) to the Company or a subsidiary thereof; or --- (2) pursuant to and in compliance with Rule 144A under the Securities --- Act of 1933, as amended; or (3) outside the United States to a "foreign person" in compliance --- with Rule 904 of Regulation S under the Securities Act of 1933, as amended; or (4) pursuant to the exemption from registration provided by Rule 144 --- under the Securities Act of 1933, as amended; or (5) pursuant to an effective registration statement under the --- Securities Act of 1933, as amended; or (6) pursuant to another available exemption from the registration --- requirements of the Securities Act of 1933, as amended. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered Holder thereof; provided, however, that if box (3), (4) or (6) is checked, the Company or the Trustee may require, prior to registering any such transfer of the Securities, in its sole discretion, such written legal opinions, certifications (including an investment letter in the case of box (3) or (4)) and other information as the Trustee or the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended. If none of the foregoing boxes is checked, the Trustee or Registrar shall not be obligated to register this Security in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.8 of the Indenture shall have been satisfied. Dated: Signed: --------------------- ------------------------------ (Sign exactly as name appears on the other side of this Security) Signature Guarantee: ---------------------------------- TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ------ ------------------------------------- NOTICE: To be executed by an executive officer TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing the Security outside the United States as a "foreign person" in compliance with Rule 904 of Regulation S under the Securities Act and is aware that the sale to it is being made in reliance on Regulation S. Dated: ------ ------------------------------------- NOTICE: To be executed by an executive officer FOR VALUE RECEIVED, the Guarantor hereby unconditionally guarantees to the holder of this Security upon which this Guarantee is endorsed the due and punctual payment of the principal, premium, if any, and interest on said Security, when and as the same shall become due and payable, whether at maturity, upon redemption or otherwise, according to the terms thereof and of the Indenture referred to therein. The Guarantor agrees to determine, at least one Business Day prior to the date upon which a payment of principal of and premium, if any, or interest on said Security is due and payable, whether the Company has available the funds to make such payment as the same shall become due and payable. In case of the failure of the Company punctually to pay any such principal, premium, if any, or interest, the Guarantor hereby agrees to cause any such payment to be made punctually when and as the same shall become due and payable, whether at maturity, upon redemption, or otherwise, and as if such payment were made by the Company. The Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrevocable, and absolute, irrespective of the validity, regularity, or enforceability of said Security or said Indenture, the absence of any action to enforce the same, any waiver or consent by the Holder of said Security with respect to any provisions thereof, the recovery of any judgment against the Company or any action to enforce the same, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a proceeding first against the Company, protest or notice with respect to said Security or indebtedness evidenced thereby, and all demands whatsoever and covenants that this Guarantee will not be discharged except by complete performance of the obligations contained in said Security and in this Guarantee. The Guarantor shall be subrogated to all rights of the holder of said Security against the Company in respect of any amounts paid by the Guarantor pursuant to the provisions of this Guarantee; provided, however, that the Guarantor shall not, without the consent of the holders of all of the Securities then outstanding, be entitled to enforce or to receive any payments arising out of or based upon such right of subrogation until the principal of and premium, if any, and interest on all Securities shall have been paid in full or payment thereof shall have been provided for in accordance with said Indenture. Notwithstanding anything to the contrary contained herein, if following any payment of principal or interest by the Company on the Securities to the holders of the Securities it is determined by a final decision of a court of competent jurisdiction that such payment shall be avoided by a trustee in bankruptcy (including any debtor-in-possession) as a preference under 11 U.S.C. Section 547 and such payment is paid by such holder of such trustee in bankruptcy, then and to the extent of such repayment, the obligations of the Guarantor hereunder shall remain in full force and effect. This Guarantee shall not be valid or become obligatory for any purpose with respect to a Security until the certificate of authentication on such Security shall have been signed by the Trustee (or the Authentication Agent). This Guarantee shall be governed by the laws of the State of New York without regard to conflict of laws principles thereof. IN WITNESS WHEREOF, Countrywide Credit Industries, Inc. has caused this Guarantee to be signed in its corporate name by the facsimile signature of two of its officers thereunto duly authorized. COUNTRYWIDE CREDIT INDUSTRIES, INC. By:---------------------------------------------- Name: Title: By: Name: Title: EX-4.7 6 EXHIBIT 4.7 - ------------------------------------------------------------------------------- GUARANTEE AGREEMENT Countrywide Capital III Dated as of June 4, 1997 - ------------------------------------------------------------------------------- TABLE OF CONTENTS* ------------------ PAGE ---- ARTICLE 1 INTERPRETATION AND DEFINITIONS.......................1 SECTION 1.1 Interpretation and Definitions..........................1 ARTICLE 2 TRUST INDENTURE ACT..................................5 SECTION 2.1 Trust Indenture Act; Application........................5 SECTION 2.2 Lists of Holders of Securities..........................5 SECTION 2.3 Reports by Guarantee Trustee............................6 SECTION 2.4 Periodic Reports to Guarantee Trustee...................6 SECTION 2.5 Evidence of Compliance with Conditions Precedent........6 SECTION 2.6 Guarantee Event of Default; Waiver......................6 SECTION 2.7 Guarantee Event of Default; Notice......................6 SECTION 2.8 Conflicting Interests...................................7 SECTION 2.9 Disclosure of Information...............................7 SECTION 2.10 Guarantee Trustee May File Proofs of Claim..............7 ARTICLE 3 POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE....................................7 SECTION 3.1 Powers and Duties of Guarantee Trustee..................7 SECTION 3.2 Certain Rights of Guarantee Trustee.....................9 SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee..11 ARTICLE 4 GUARANTEE TRUSTEE...................................11 SECTION 4.1 Guarantee Trustee; Eligibility.........................11 SECTION 4.2 Appointment, Removal and Resignation of Guarantee Trustee................................................11 ARTICLE 5 GUARANTEE...........................................12 SECTION 5.1 Guarantee..............................................12 SECTION 5.2 Waiver of Notice and Demand............................12 SECTION 5.3 Obligations Not Affected...............................13 SECTION 5.4 Rights of Holders......................................14 SECTION 5.5 Guarantee of Payment...................................14 SECTION 5.6 Subrogation............................................14 SECTION 5.7 Independent Obligations................................14 ARTICLE 6 LIMITATION OF TRANSACTIONS; SUBORDINATION...........15 SECTION 6.1 Limitation of Transactions.............................15 SECTION 6.2 Ranking................................................15 ARTICLE 7 TERMINATION.........................................16 SECTION 7.1 Termination............................................16 ARTICLE 8 INDEMNIFICATION.....................................16 SECTION 8.1 Exculpation............................................16 SECTION 8.2 Indemnification........................................16 ARTICLE 9 MISCELLANEOUS.......................................17 SECTION 9.1 Successors and Assigns.................................17 SECTION 9.2 Amendments.............................................17 SECTION 9.3 Notices................................................17 SECTION 9.4 Benefit................................................18 SECTION 9.5 Governing Law..........................................18 - ---------- * This Table of Contents does not constitute part of the Agreement and shall not have any bearing upon the interpretation of any of its terms or provisions. CROSS REFERENCE TABLE* ---------------------- Section of Trust Indenture Act of Section of 1939, as amended Agreement ---------------- ---------- 310(a)..............................4.1(a) 310(b)..............................2.8; 4.1(c) 310(c)..............................Inapplicable 311(a)..............................2.2(b) 311(b)..............................2.2(b) 311(c)..............................Inapplicable 312(a)..............................2.2(a); 2.9 312(b)..............................2.2(b); 2.9 312(c)..............................2.9 313(a)..............................2.3 313(b)..............................2.3 313(c)..............................2.3 313(d)..............................2.3 314(a)..............................2.4 314(b)..............................Inapplicable 314(c)..............................2.5 314(d)..............................Inapplicable 314(e)..............................2.5 314(f)..............................Inapplicable 315(a)..............................3.1(d); 3.2(a) 315(b)..............................2.7(a) 315(c)..............................3.1(c) 315(d)..............................3.1(d) 316(a)..............................2.6; 5.4(a) 316(b)..............................5.3 316(c)..............................Inapplicable 317(a)..............................2.10 317(b)..............................Inapplicable 318(a)..............................2.1(b) - ---------- * This Cross-Reference Table does not constitute part of the Agreement and shall not have any bearing upon the interpretation of any of its terms or provisions. GUARANTEE AGREEMENT This GUARANTEE AGREEMENT (the "Guarantee"), dated as of June 4, 1997, is executed and delivered by Countrywide Credit Industries, Inc., a Delaware corporation (the "Guarantor"), and The Bank of New York, a New York banking corporation, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Securities (as defined herein) of Countrywide Capital III, a Delaware statutory business trust (the "Trust"). W I T N E S S E T H : WHEREAS, pursuant to the Declaration (as defined herein), the Trust is issuing on the date hereof $200,000,000 aggregate liquidation amount of subordinated capital income securities, having a liquidation amount of $1,000 per security and designated the 8.05% Subordinated Capital Income Securities, Series A, of the Trust (together with the 8.05% Subordinated Capital Income Securities, Series B, of the Trust proposed to be issued in exchange therefor as contemplated by the Declaration, the "Capital Securities"); and $6,200,000 aggregate liquidation amount of common securities, having a liquidation amount of $1,000 per security and designated the Common Securities of the Trust (the "Common Securities" and, together with the Capital Securities, the "Securities"); WHEREAS, as incentive for the Holders to purchase the Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Guarantee, to pay to the Holders of the Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein; and WHEREAS, if a Trust Enforcement Event (as defined herein) has occurred and is continuing, the rights of holders of the Common Securities to receive Guarantee Payments under this Guarantee are subordinated to the rights of Holders of Capital Securities to receive Guarantee Payments under this Guarantee; NOW, THEREFORE, in consideration of the purchase by each Holder of Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of the Holders. ARTICLE 1 INTERPRETATION AND DEFINITIONS SECTION 1.1 Interpretation and Definitions. In this Guarantee, unless the context otherwise requires: (a) capitalized terms used in this Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Guarantee has the same meaning throughout; (c) all references to "the Guarantee" or "this Guarantee" are to this Guarantee as modified, supplemented or amended from time to time; (d) all references in this Guarantee to Articles, Sections and Recitals are to Articles, Sections and Recitals of this Guarantee, unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee unless otherwise defined in this Guarantee or unless the context otherwise requires; (f) a reference to the singular includes the plural and vice versa and a reference to any masculine form of a term shall include the feminine form of a term, as applicable; and (g) the following terms have the following meanings: "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder. "Business Day" has the meaning specified in the Indenture. "Common Securities" has the meaning specified in the Recitals hereto. "Company" means Countrywide Home Loans, Inc., a New York corporation and wholly-owned subsidiary of the Guarantor. "Corporate Trust Office" means the office of the Guarantee Trustee at which the corporate trust business of the Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Guarantee is located at 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention: Corporate Trust Trustee Administration; telecopy no. (212) 815-5915. "Covered Person" means a Holder or beneficial owner of Securities. "Debentures"(i) means the series of subordinated debentures to be issued by the Company, designated the "8.05% Junior Subordinated Debentures due 2027, Series A (the "Series A Debentures"), and (ii) the series of subordinated debentures to be issued by the Company, designated the "8.05% Junior Subordinated Debentures due June 15, 2027, Series B", to be issued in exchange for the Series A Debentures, in each case held by the Property Trustee (as defined in the Declaration) of the Trust. "Debt Guarantee" means the guarantee by the Guarantor of the principal of and premium, if any, and interest on the Debentures pursuant to the Indenture. "Declaration" means the Amended and Restated Declaration of Trust, dated as of June 4, 1997, as amended, modified or supplemented from time to time, among the trustees of the Trust named therein, the Guarantor, as sponsor, and the Holders, from time to time, of undivided beneficial ownership interests in the assets of the Trust. "Guarantee Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Guarantee. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Securities, to the extent not paid by or on behalf of the Trust: (i) any accumulated and unpaid Distributions (as defined in the Declaration) required to be paid on such Securities, to the extent the Trust has sufficient funds available therefor at the time, (ii) the redemption price, including all accrued and unpaid Distributions through the date of redemption, with respect to any Securities called for redemption, to the extent the Trust shall have sufficient funds available therefor at the time or (iii) upon a voluntary or involuntary dissolution, winding up or liquidation of the Trust (unless, in connection therewith, the Debentures are distributed to the Holders in exchange for Securities as provided in the Declaration), the lesser of (a) the aggregate liquidation amount and all accrued and unpaid Distributions on the Securities to the date of payment, to the extent the Trust has sufficient funds available therefor at the time, and (b) the amount of assets of the Trust remaining available for distribution to Holders (in either case, the "Liquidation Distribution"). "Guarantee Trustee" means The Bank of New York, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee and thereafter means each such Successor Guarantee Trustee. "Holder" means a Person in whose name a certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Delaware Business Trust Act. "Indemnified Person" means the Guarantee Trustee, any Affiliate of the Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Guarantee Trustee. "Indenture" means the Indenture, dated as of June 4, 1997, among the Company, as issuer, the Guarantor, as guarantor, and the Guarantee Trustee, as trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued to the Property Trustee (as defined in the Declaration) of the Trust. "List of Holders" has the meaning specified in Section 2.2(a). "Majority in Liquidation Amount" means, except as provided in the terms of the Capital Securities or by the Trust Indenture Act, Holder(s) of outstanding Securities, voting together as a single class, or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities, voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including accumulated and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. In determining whether the holders of the requisite amount of Securities have voted, Securities which are owned by the Guarantor (including the Company) or by an Affiliate of the Guarantor shall be disregarded for the purpose of any such determination. "Officers' Certificate" means, with respect to any Person, a certificate signed on behalf of such Person by two Authorized Officers (as defined in the Declaration) of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer on behalf of such Person in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer on behalf of such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer acting on behalf of such Person, such condition or covenant has been complied with. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Securities" has the meaning specified in the Recitals hereto. "Property Trustee" has the meaning specified in the Declaration. "Redemption Price" has the meaning specified in the Declaration. "Responsible Officer" means, with respect to the Guarantee Trustee, any officer within the Corporate Trust Office of the Guarantee Trustee, including any vice president, any assistant vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer or other officer of the Corporate Trust Office of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Securities" has the meaning specified in the Recitals hereto. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1. "Trust Enforcement Event" in respect of the Securities means an Indenture Event of Default (as defined in the Indenture) has occurred and is continuing in respect of the Debentures. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation. ARTICLE 2 TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application (a) This Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee and shall, to the extent applicable, be governed by such provisions. (b) If and to the extent that any provision of this Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2 Lists of Holders of Securities. (a) Unless the Guarantee Trustee shall be the registrar for the Securities, the Guarantor shall provide the Guarantee Trustee, (i) except while the Capital Securities are represented by one or more Global Securities, at least one Business Day prior to the date for payment of Distributions, a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders of the Securities ("List of Holders") as of the record date relating to the payment of such Distributions, and (ii) at any other time, within 30 days of receipt by the Guarantor of a written request from the Guarantee Trustee for a List of Holders as of a date no more than 15 days before such List of Holders is given to the Guarantee Trustee; provided that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Guarantee Trustee by the Guarantor. The Guarantee Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders given to it, provided that the Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Guarantee Trustee shall comply with its obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by Guarantee Trustee. Within 60 days after May 15 of each year (commencing with the year of the first anniversary of the issuance of the Securities), the Guarantee Trustee shall provide to the Holders of the Securities such reports as are required by Section 313 of the Trust Indenture Act (if any) in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Guarantee Trustee. The Guarantor shall provide to the Guarantee Trustee such documents, reports and information as required by Section 314(a) (if any) of the Trust Indenture Act and the compliance certificate required by Section 314(a) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314(a) of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent. The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Guarantee Event of Default; Waiver. The Holders of a Majority in Liquidation Amount of the Securities may, by vote or written consent, on behalf of the Holders of all of the Securities, waive any past Guarantee Event of Default and its consequences. Upon such waiver, any such Guarantee Event of Default shall cease to exist, and any Guarantee Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee, but no such waiver shall extend to any subsequent or other default or Guarantee Event of Default or impair any right consequent thereon. SECTION 2.7 Guarantee Event of Default; Notice. (a) The Guarantee Trustee shall, within 90 days after the occurrence of a Guarantee Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Securities, notices of all Guarantee Events of Default actually known to a Responsible Officer of the Guarantee Trustee, unless such defaults have been cured before the giving of such notice; provided, that the Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities. (b) The Guarantee Trustee shall not be deemed to have knowledge of any Guarantee Event of Default unless the Guarantee Trustee shall have received written notice thereof or a Responsible Officer of the Guarantee Trustee charged with the administration of the Declaration shall have obtained actual knowledge thereof. SECTION 2.8 Conflicting Interests. The Declaration, the Indenture and the Debt Guarantee shall be deemed to be specifically described in this Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. SECTION 2.9 Disclosure of Information. The disclosure of information as to the names and addresses of the Holders of the Securities in accordance with Section 312 of the Trust Indenture Act, regardless of the source from which such information was derived, shall not be deemed to be a violation of any existing law, or any law hereafter enacted which does not specifically refer to Section 312 of the Trust Indenture Act, nor shall the Guarantee Trustee be held accountable by reason of mailing any material pursuant to a request made under Section 312(b) of the Trust Indenture Act. SECTION 2.10 Guarantee Trustee May File Proofs of Claim. Upon the occurrence of a Guarantee Event of Default, the Guarantee Trustee is hereby authorized to (a) recover judgment, in its own name and as trustee of an express trust, against the Guarantor for the whole amount of any Guarantee Payments remaining unpaid and (b) file such proofs of claim and other papers or documents as may be necessary or advisable in order to have its claims and those of the Holders of the Securities allowed in any judicial proceedings relative to the Guarantor, its creditors or its property. ARTICLE 3 POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of Guarantee Trustee. (a) This Guarantee shall be held by the Guarantee Trustee on behalf of the Trust for the benefit of the Holders of the Securities, and the Guarantee Trustee shall not transfer this Guarantee to any Person except to a Holder of Securities exercising his, her or its rights pursuant to Section 5.4(b) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee in and to this Guarantee shall automatically vest in any Successor Guarantee Trustee, and such vesting and succession of title shall be effective whether or not conveyance documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee. (b) If a Guarantee Event of Default actually known to a Responsible Officer of the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee for the benefit of the Holders of the Securities. (c) The Guarantee Trustee, before the occurrence of any Guarantee Event of Default and after the curing of all Guarantee Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee, and no implied covenants shall be read into this Guarantee against the Guarantee Trustee. In case a Guarantee Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to a Responsible Officer of the Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Guarantee shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Guarantee Event of Default and after the curing or waiving of all such Guarantee Events of Default that may have occurred: (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee, and no implied covenants or obligations shall be read into this Guarantee against the Guarantee Trustee; and (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee; (ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in Liquidation Amount of the Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee; and (iv) no provision of this Guarantee shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee or if the Guarantee Trustee shall have reasonable grounds for believing that an indemnity, reasonably satisfactory to the Guarantee Trustee, against such risk or liability is not reasonably assured to it under the terms of this Guarantee. SECTION 3.2 Certain Rights of Guarantee Trustee. (a) Subject to the provisions of Section 3.1: (i) The Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) Any direction or act of the Guarantor contemplated by this Guarantee shall be sufficiently evidenced by an Officers' Certificate; (iii) Whenever, in the administration of this Guarantee, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor; (iv) The Guarantee Trustee shall have no duty to see to any recording, filing or registration or any instrument (or any rerecording, refiling or re-registration thereof); (v) The Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee from any court of competent jurisdiction; (vi) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee such security and indemnity, reasonably satisfactory to the Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Guarantee Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided, that nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Guarantee Trustee, upon the occurrence of a Guarantee Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee; (vii) The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) Any action taken by the Guarantee Trustee or its agents hereunder shall bind the Holders, and the signature of the Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Guarantee, both of which shall be conclusively evidenced by the Guarantee Trustee's or its agent's taking such action; and (x) Whenever in the administration of this Guarantee the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (i) may request written instructions from the Holders of a Majority in Liquidation Amount of the Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such written instructions are received and (iii) shall be protected in conclusively relying on or acting in accordance with such written instructions. (b) No provision of this Guarantee shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty. SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee. The recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representations as to the validity or sufficiency of this Guarantee. ARTICLE 4 GUARANTEE TRUSTEE SECTION 4.1 Guarantee Trustee; Eligibility. (a) There shall be at all times a Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia, or a corporation or other Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2 Appointment, Removal and Resignation of Guarantee Trustee. (a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or removed with or without cause at any time by the Guarantor. (b) The Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor. (c) The Guarantee Trustee appointed to office shall hold such office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee. (d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 30 days after delivery to the Guarantor of an instrument of removal or resignation, the removed or resigning Guarantee Trustee may petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee. (e) No Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Guarantee Trustee. (f) Upon termination of this Guarantee or removal or resignation of the Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Guarantee Trustee all amounts owing for fees and reimbursement of expenses which have accrued to the date of such termination, removal or resignation. (g) The Guarantor shall promptly notify the Holders of the Securities of the removal, resignation or appointment of the Guarantee Trustee. ARTICLE 5 GUARANTEE SECTION 5.1 Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Trust), as and when due, regardless of any defense, right of set-off or counterclaim that the Trust may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Trust to pay such amounts to the Holders. SECTION 5.2 Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of this Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Trust or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.3 Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee shall be absolute and unconditional and shall remain in full force and effect until the entire liquidation amount of all outstanding Securities shall have been paid and such obligation shall in no way be affected or impaired by reason of the happening from time to time of any event, including without limitation, the following, whether or not with notice to, or the consent of, the Guarantor: (a) The release or waiver, by operation of law or otherwise, of the performance or observance by the Trust of any express or implied agreement, covenant, term or condition relating to the Securities to be performed or observed by the Trust; (b) The extension of time for the payment by the Trust of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with the Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures or any change to the maturity date of the Debentures permitted by the Indenture); (c) Any failure, omission, delay or lack of diligence on the part of the Property Trustee or the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Property Trustee or the Holders pursuant to the terms of the Securities, or any action on the part of the Trust granting indulgence or extension of any kind; (d) The voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Trust or any of the assets of the Trust; (e) Any invalidity of, or defect or deficiency in, the Securities; (f) The settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) Any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Guarantee Trustee or the Holders to give notice to, or obtain consent of, the Guarantor or any other Person with respect to the happening of any of the foregoing. No set-off, counterclaim, reduction or diminution of any obligation, or any defense of any kind or nature that the Guarantor has or may have against any Holder shall be available hereunder to the Guarantor against such Holder to reduce the payments to it under this Guarantee. SECTION 5.4 Rights of Holders. The Holders of at least a Majority in Liquidation Amount of the Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee. If the Guarantee Trustee fails to enforce this Guarantee, then any Holder of Securities may, subject to the subordination provisions of Section 6.2, institute a legal proceeding directly against the Guarantor to enforce the Guarantee Trustee's rights under this Guarantee without first instituting a legal proceeding against the Trust, the Guarantee Trustee or any other person or entity. In addition, if the Guarantor has failed to make a Guarantee Payment, a Holder of Securities may, subject to the subordination provisions of Section 6.2, directly institute a proceeding against the Guarantor for enforcement of the Guarantee for such payment to the Holder of the Securities of the principal of or interest on the Debentures on or after the respective due dates specified in the Debentures, and the amount of the payment will be based on the Holder's pro rata share of the amount due and owing on all of the Securities. The Guarantor hereby waives any right or remedy to require that any action on this Guarantee be brought first against the Trust or any other person or entity before proceeding directly against the Guarantor. SECTION 5.5 Guarantee of Payment. This Guarantee creates a guarantee of payment and not of collection. SECTION 5.6 Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders of Securities against the Trust in respect of any amounts paid to such Holders by the Guarantor under this Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if at the time of any such payment, any amounts are due and unpaid under this Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Guarantee Trustee for the benefit of the Holders. SECTION 5.7 Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Trust with respect to the Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee notwithstanding the occurrence of any event referred to in subsections 5.3(a) through 5.3(g), inclusive, hereof. ARTICLE 6 LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1 Limitation of Transactions. So long as any Securities remain outstanding, if there shall have occurred a Guarantee Event of Default or a Trust Enforcement Event, then the Guarantor shall not, and shall not permit the Company, to (i) declare or pay any dividends or distributions on, or make a distribution with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to any of its capital stock or rights to acquire such capital stock (other than (1) purchases or acquisitions of shares of any such capital stock or rights to acquire such capital stock in connection with the satisfaction by the Guarantor or the Company, respectively, of its obligations under any employee benefit plans, (2) as a result of a reclassification of the Guarantor's or the Company's capital stock or rights to acquire such capital stock or the exchange or conversion of one class or series of the Guarantor's or the Company's capital stock or rights to acquire such capital stock for another class or series of the Guarantor's or the Company's capital stock or rights to acquire such capital stock, (3) the purchase of fractional interests in shares of the Guarantor's or the Company's capital stock pursuant to conversion or exchange provisions of such capital stock or the security being converted or exchanged or (4) dividends and distributions made on the Guarantor's or the Company's capital stock or rights to acquire such capital stock with the Guarantor's or the Company's capital stock or rights to acquire such capital stock) or make any guarantee payments with respect to any of the foregoing or (ii) make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including any guarantees, other than this Guarantee and the Debt Guarantee) issued by the Guarantor or the Company that rank pari passu with or junior to the Debentures or the Debt Guarantee. SECTION 6.2 Ranking. The obligations of the Guarantor under this Guarantee and the Indenture will be subordinate and junior in right of payment to all Senior Indebtedness (as defined in the Indenture) of the Guarantor. In addition, at all times such obligations will be structurally subordinated to all liabilities and obligations of the Guarantor's subsidiaries. If a Trust Enforcement Event has occurred and is continuing under the Declaration, the rights of the holders of the Common Securities to receive Guarantee Payments hereunder shall be subordinated to the rights of the Holders of the Preferred Securities to receive Guarantee Payments hereunder. ARTICLE 7 TERMINATION SECTION 7.1 Termination. This Guarantee shall terminate upon (i) full payment of the Redemption Price of all Securities, (ii) distribution of the Debentures to the Holders of all the Securities or (iii) full payment of the amounts payable in accordance with the Declaration upon liquidation of the Trust. Notwithstanding the foregoing, this Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Securities must restore payment of any sums paid under the Securities or under this Guarantee. ARTICLE 8 INDEMNIFICATION SECTION 8.1 Exculpation. No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage, liability, expense or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. SECTION 8.2 Indemnification. The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 8.2 shall survive the termination of this Guarantee. ARTICLE 9 MISCELLANEOUS SECTION 9.1 Successors and Assigns. All guarantees and agreements contained in this Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Securities then outstanding. SECTION 9.2 Amendments. Except with respect to any changes that do not adversely affect the rights of the Holders (in which case no consent of the Holders will be required), this Guarantee may only be amended with the prior approval of the Holders of at least a Majority in Liquidation Amount of the Securities. The provisions of Section 11.2 of the Declaration with respect to meetings of, and action by written consent of, the Holders of the Securities apply to the giving of such approval. SECTION 9.3 Notices. All notices provided for in this Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered by hand, telecopied or mailed by registered or certified mail, as follows: (a) If given to the Guarantee Trustee, at the Guarantee Trustee's mailing address set forth below (or such other address as the Guarantee Trustee may give notice of to the Guarantor and the Holders of the Securities): The Bank of New York 101 Barclay Street, Floor 21 West New York, New York 10286 Attn: Corporate Trust Trustee Administration Fax: (212) 815-5915 (b) If given to the Guarantor, at the Guarantor's mailing addresses set forth below (or such other address as the Guarantor may give notice of to the Guarantee Trustee and the Holders of the Securities): Countrywide Credit Industries, Inc. 4500 Park Granada Calabasas, California 91302 Attn: General Counsel Fax: (818) 225-4055 (c) If given to any Holder of Securities, at the address set forth on the books and records of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.4 Benefit. This Guarantee is solely for the benefit of the Holders of the Securities and, subject to Section 3.1(a), is not separately transferable from the Securities. SECTION 9.5 Governing Law. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF. IN WITNESS WHEREOF, this Guarantee is executed as of the day and year first above written. COUNTRYWIDE CREDIT INDUSTRIES, INC. as Guarantor By: /s/ Stanford L. Kurland ------------------------------------ Name: Stanford L. Kurland Title: Senior Managing Director THE BANK OF NEW YORK as Guarantee Trustee By: /s/ Vivian Georges ------------------------------------ Name: Vivian Georges Title: Assisant Vice President EX-4.8 7 EXHIBIT 4.8 ================================================================================ REGISTRATION RIGHTS AGREEMENT Dated as of June 4, 1997 Among COUNTRYWIDE CAPITAL III, COUNTRYWIDE CREDIT INDUSTRIES, INC., COUNTRYWIDE HOME LOANS, INC. and LEHMAN BROTHERS INC., COUNTRYWIDE SECURITIES CORPORATION, GOLDMAN, SACHS & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, SALOMON BROTHERS INC, as Initial Purchasers ================================================================================ This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of June 4, 1997 by and among COUNTRYWIDE CAPITAL III, a Delaware statutory business trust (the "Trust"), COUNTRYWIDE CREDIT INDUSTRIES, INC., a Delaware corporation ("the Company"), COUNTRYWIDE HOME LOANS, INC., a New York corporation ("CHL"), and LEHMAN BROTHERS INC., COUNTRYWIDE SECURITIES CORPORATION, GOLDMAN, SACHS & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and SALOMON BROTHERS INC (collectively, the "Initial Purchasers"). This Agreement is entered into in connection with the Purchase Agreement, dated as of May 30, 1997, among the Company, CHL, the Trust and the Initial Purchasers (the "Purchase Agreement"), which provides for the sale by the Trust to the Initial Purchasers of an aggregate of $200,000,000 liquidation amount of the Trust's 8.05% Subordinated Capital Income Securities, Series A, liquidation amount $1,000 per security (the "Preferred Securities"). The Company will be the owner of all of the beneficial ownership interest represented by the common securities (the "Common Securities") of the Trust. The Preferred Securities and the Common Securities will be guaranteed by a guarantee (the "Trust Guarantee") by the Company, to the extent provided for in a Guarantee Agreement, dated as of June 4, 1997. Concurrently with the issuance of the Preferred Securities, the Trust Guarantee and the Common Securities, the Trust will invest the proceeds of each thereof in CHL's 8.05% Junior Subordinated Debentures due June 15, 2027, Series A (the "Debentures"). The Debentures will be guaranteed by a guarantee (the "Debt Guarantee" and, together with the Preferred Securities, the Trust Guarantee and the Debentures, the "Securities") by the Company. In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Trust, CHL and the Company have agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchasers, and its and their direct and indirect transferees and assigns. The execution and delivery of this Agreement is a condition to the Initial Purchasers' obligation to purchase the Preferred Securities under the Purchase Agreement. The parties hereby agree as follows: 1. Interpretation and Definitions. In this Agreement, unless the context otherwise requires: (a) capitalized terms used in this Agreement but not defined in the preamble above have the respective meanings assigned to them in this Section 1.; (b) a term defined anywhere in this Agreement has the same meaning throughout; (c) all references to "the Agreement" or "this Agreement" are to this Agreement as modified, supplemented or amended from time to time; (d) all references in this Agreement to Sections are to Sections of this Agreement, unless otherwise specified; (e) capitalized terms not defined herein shall have the meaning given to such terms in the Declaration or, if the Debentures have been distributed to the Holders of Preferred Securities in liquidation of the Trust, the Indenture; (f) a reference to the singular includes the plural and vice versa and a reference to the masculine form of a term includes the feminine form of a term, as applicable; and (g) the following terms have the following meanings: Additional Distributions: As defined in Section 5(a). Additional Interest: As defined in Section 5(a). Broker-Dealer: Any broker or dealer registered under the Exchange Act. Closing Date: The date on which the Securities were sold. Commission: The Securities and Exchange Commission. Consummate: A Registered Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Securities Act of the Exchange Offer Registration Statement relating to the New Securities to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Registrants of the New Securities in the same aggregate amount as the aggregate amount of Transfer Restricted Securities that were validly tendered by Holders thereof pursuant to the Exchange Offer. Declaration: The Amended and Restated Declaration of Trust, dated as of June 4, 1997, among the Company, The Bank of New York as Property Trustee, The Bank of New York (Delaware), as Delaware Trustee and the other trustees named therein, pursuant to which the Preferred Securities are being issued, as amended or supplemented from time to time in accordance with the terms thereof. Distribution: As defined in the Declaration. Effectiveness Target Date: As defined in Section 5. Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. Exchange Offer: The registration by the Registrants under the Securities Act of the New Securities pursuant to a Registration Statement pursuant to which the Registrants will offer the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for New Securities in an aggregate amount equal to the aggregate amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the Prospectus which forms a part thereof. Exempt Resales: The transactions in which the Initial Purchasers propose to sell the Securities to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Securities Act, and to certain non-U.S. persons. Guarantee Agreement: The Guarantee Agreement, dated as of June 4, 1997, between the Company and The Bank of New York, as Guarantee Trustee, pursuant to which the Trust Guarantee is being issued, as amended or supplemented from time to time in accordance with the terms thereof. Holders: As defined in Section 2(b) hereof. Indemnified Holder: As defined in Section 8(a) hereof. Indenture: The Indenture, dated as of June 4, 1997, among CHL, the Company and The Bank of New York, as trustee (the "Trustee"), pursuant to which the Debentures, the Debt Guarantee, the New Junior Subordinated Debentures and the New Debt Guarantee are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof. Initial Purchasers: As defined in the preamble hereto. NASD: National Association of Securities Dealers, Inc. New Debt Guarantee: The Company's guarantee of the New Junior Subordinated Debentures pursuant to the Indenture. New Junior Subordinated Debentures: CHL's Junior Subordinated Debentures to be issued pursuant to the Indenture in the Exchange Offer. New Securities: The securities to be issued pursuant to the Indenture, the Declaration and the Trust Guarantee Agreement in the Exchange Offer. Person: An individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. Prospectus: The prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. Registrants: The Trust, the Company and CHL or, if the Debentures have been distributed to the Holders of the Preferred Securities in liquidation of the Trust, the Company and CHL only. Registration Default: As defined in Section 5 hereof. Registration Statement: Any registration statement of the Registrants relating to (a) an offering of New Securities pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. Securities Act: The Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. Shelf Filing Deadline: As defined in Section 4 hereof. Shelf Registration Statement: As defined in Section 4 hereof. TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb), as amended. Transfer Restricted Securities: Each Security, (for the purposes of this definition, if the Debentures have been distributed to the Holders of Preferred Securities in liquidation of the Trust, each Debenture and the Debt Guarantee) until the earliest to occur of (a) the date on which such Security has been exchanged by a person other than a Broker-Dealer for New Securities in the Exchange Offer, (b) following the exchange by a Broker-Dealer in the Exchange Offer of such Security for one or more New Securities, the date on which such New Securities are sold to a purchaser who receives from such Broker-Dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (c) the date on which such Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (d) the date on which such Security is sold to the public pursuant to Rule 144 under the Securities Act. Underwritten Registration or Underwritten Offering: A registration in which securities of the Registrants are sold to an underwriter for reoffering to the public. 2. Securities Subject to This Agreement. (a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities. 3. Registered Exchange Offer. (a) Unless (i) the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), or (ii) CHL has received an opinion of counsel, rendered by a law firm having a recognized national tax practice, to the effect that, as a result of the consummation of the Exchange Offer, there is more than an insubstantial risk that (1) the Trust would be subject to United States federal income tax with respect to income received or accrued on the Debentures or New Junior Subordinated Debentures, (2) interest payable by CHL on such Debentures or New Junior Subordinated Debentures would not be deductible by CHL, in whole or in part, for United States federal income tax purposes, or (3) the Trust would be subject to more than a de minimis amount of other taxes, duties or other governmental charges (in each case a "Tax Event Opinion"), (x) the Registrants shall (A) cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 150 days after the Closing Date, a Registration Statement under the Securities Act relating to the New Securities and the Exchange Offer, (B) use their respective reasonable best efforts to cause such Registration Statement to become effective at the earliest possible time, but in no event later than 180 days after the Closing Date, (C) in connection with the foregoing, file (1) all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (2) if applicable, a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Securities Act and (3) cause all necessary filings in connection with the registration and qualification of the New Securities to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (y) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Registrants shall commence the Exchange Offer and use their reasonable best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 30 business days thereafter, unless under applicable law the Exchange Offer is required to remain open for a longer period. The Exchange Offer shall be on the appropriate form permitting registration of the New Securities to be offered in exchange for the Transfer Restricted Securities and to permit resales of New Securities held by Broker-Dealers as contemplated by Section 3(c) below. (b) The Registrants shall cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 business days. The Company and the Trust shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the New Securities shall be included in the Exchange Offer Registration Statement. (c) The Registrants shall indicate in a "Plan of Distribution" section contained in the Prospectus contained in the Exchange Offer Registration Statement that any Broker-Dealer who holds Securities that are Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Registrants) may exchange such Securities pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of the New Securities received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such resales by Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of New Securities held by any such Broker-Dealer except to the extent required by the Commission as a result of a change in policy announced after the date of this Agreement. The Registrants shall use their respective best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of New Securities acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of 90 days from the date on which the Exchange Offer Registration Statement is declared effective. The Registrants shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request at any time during such 90-day period in order to facilitate such resales. 4. Shelf Registration. (a) Shelf Registration. If (i) the Registrants are not required to file an Exchange Offer Registration Statement or permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), (ii) the Company has received a Tax Event Opinion (as defined in Section 3(a)) or (iii) if any Holder of Transfer Restricted Securities provides CHL with an opinion of counsel on or before the twentieth business day following the Consummation of the Exchange Offer (A) that such Holder is prohibited by applicable law or Commission policy from participating in the Exchange Offer, (B) that such Holder may not resell the New Securities acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales, or (C) that such Holder is a Broker-Dealer and owns Securities acquired directly from the Trust or one of its affiliates, then the Registrants shall use their respective reasonable best efforts to: (x) cause to be filed a shelf registration statement pursuant to Rule 415 under the Securities Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the "Shelf Registration Statement"), on or prior to the earliest to occur of (1) the 150th day after the date on which the Registrants determine that they are not required to file the Exchange Offer Registration Statement or (2) the 150th day after the date on which the Registrants receive notice from a Holder of Transfer Restricted Securities as contemplated by clause (iii) above (such earliest date being the "Shelf Filing Deadline"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof; and (y) cause such Shelf Registration Statement to be declared effective by the Commission on or prior to the 180th day after the Shelf Filing Deadline. The Registrants shall use their respective best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Securities by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period ending on the second anniversary of the Closing Date. (a) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Registrants in writing, within 20 business days after receipt of a request therefor, such information as the Registrants may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to Additional Interest and Additional Distributions pursuant to Section 5 hereof unless and until such Holder shall have used its best efforts to provide all such reasonably requested information and a sufficient time has passed after the receipt of such information to provide Registrants a reasonable opportunity to satisfy their obligations hereunder. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Registrants all information required to be disclosed in order to make the information previously furnished to the Registrants by such Holder not materially misleading. 5. Additional Interests and Additional Distributions. (a) If (a) any of the Registration Statements required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (b) any of such Registration Statements has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement (the "Effectiveness Target Date"), (c) the Exchange Offer has not been Consummated within 30 business days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (d) subject to the provisions of Section 6(c)(i) below with respect to any Shelf Registration Statement, any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded within two business days by a post-effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effective (each such event referred to in clauses (a) through (d), a "Registration Default"), additional interest (the "Additional Interest") shall become payable in respect of the Debentures (including in respect of amounts accruing during any Extension Period (as defined in the Indenture)) and corresponding additional Distributions (the "Additional Distributions") shall accrue to each Holder of Trust Securities with respect to the first 90-day period immediately following the occurrence of such Registration Default in an amount equal to $.05 per week per $1,000 liquidation amount of Preferred Securities held by such Holder for each week or portion thereof that the Registration Default continues. The amount of Additional Interest, and the corresponding amount of Additional Distributions accruing to any Holder of Trust Securities shall increase by an additional $.05 per week per $1,000 in liquidation amount of Trust Securities held by such Holder with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Additional Interest (and corresponding Additional Distributions) of $.25 per week per $1,000 liquidation amount of Trust Securities. All accrued Additional Interest (and corresponding Additional Distributions) shall be paid to Holders by CHL and the Property Trustee in the same manner as interest and Distributions are made pursuant to the Indenture and the Declaration. Following the cure of all Registration Defaults relating to any particular Transfer Restricted Securities, the accrual of Additional Interest (and corresponding Additional Distributions) with respect to such Transfer Restricted Securities will cease. All obligations of the Company set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such Transfer Restricted Security shall have been satisfied in full. (b) CHL shall notify the Property Trustee (or, if the Debentures shall have been distributed to the Holders of the Preferred Securities in liquidation of the Trust, the Debenture Trustee) within one business day after each and every date on which an event occurs in respect of which Additional Interest (and corresponding Additional Distributions) are required to be paid (an "Event Date"). Additional Interest (and corresponding Additional Distributions) shall be paid by depositing with the Property Trustee (or, if the Debentures shall have been distributed to the Holders of the Preferred Securities in liquidation of the Trust, the Debenture Trustee), in trust, for the benefit of the Holders thereof, on or before the applicable interest payment date (whether or not any payment other than Additional Interest (and corresponding Additional Distributions) is payable on the Preferred Securities or the Debentures, as the case may be), immediately available funds in sums sufficient to pay the Additional Interest (and corresponding Additional Distributions) then due to Holders of Transfer Restricted Securities. Each obligation to pay Additional Interest (and corresponding Additional Distributions) shall be deemed to accrue from the applicable date of the occurrence of the Registration Default. 6. Registration Procedures. (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Registrants shall comply with all of the provisions of Section 6(c) below, shall use their best efforts to effect such exchange to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions: (i) If, in the reasonable opinion of counsel to the Registrants, there is a question as to whether the Exchange Offer is permitted by applicable law, the Registrants hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Registrants to Consummate an Exchange Offer for the Transfer Restricted Securities. The Registrants hereby agree to pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable action to effect a change of Commission policy. The Registrants hereby agree, however, to (A) participate in telephonic conferences with the Commission, (B) deliver to the Commission staff an analysis prepared by counsel to the Registrants setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursue a resolution (which need not be favorable) by the Commission staff of such submission. (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Registrants, prior to the Consummation thereof, a written representation to the Registrants (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate of the Registrants, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the New Securities to be issued in the Exchange Offer and (C) it is acquiring the New Securities in its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Registrants' preparations for the Exchange Offer. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of New Securities obtained by such Holder in exchange for Securities acquired by such Holder directly from the Registrants. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Registrants shall provide a supplemental letter to the Commission (A) stating that the Registrants are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) and, if applicable, any no-action letter obtained pursuant to clause (i) above and (B) including a representation that the Registrants have not entered into any arrangement or understanding with any Person to distribute the New Securities to be received in the Exchange Offer and that, to the best of the Registrants' information and belief, each Holder participating in the Exchange Offer is acquiring the New Securities in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the New Securities received in the Exchange Offer. (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Registrants shall comply with all the provisions of Section 6(c) below and shall use their best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Registrants will as expeditiously as possible prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Securities Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof. (c) General Provisions. In connection with any Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Securities by Broker-Dealers), the Registrants shall: (i) use their best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Registrants shall file promptly an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use their best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter; notwithstanding the foregoing, the Registrants may suspend the offering and sales under the Shelf Registration Statement for up to 30 days in each year during which such Shelf Registration Statement is required to be effective and usable hereunder (each such year to be measured from the date of effectiveness of such Shelf Registration Statement to successive anniversaries thereof) if (A) either (y)(I) either the Company or CHL is engaged in a material acquisition or disposition and (II)(aa) such acquisition or disposition is required to be disclosed in the Shelf Registration Statement, the related Prospectus or any amendment or supplement thereto, or the failure by the Registrants to disclose such transaction in the Shelf Registration Statement or related Prospectus, or any amendment or supplement thereto, as then amended or supplemented, would cause such Shelf Registration Statement, Prospectus or amendment or supplement thereto, to contain an untrue statement of material fact or omit to state a material fact necessary in order to make the statement therein, in light of the circumstances under which they were made, not misleading, (bb) information regarding the existence of such acquisition or disposition has not then been publicly disclosed by or on behalf of the Company or CHL and (cc) a majority of the Board of Directors of the Company or CHL, as the case may be, determines in the exercise of its good faith judgment that disclosure of such acquisition or disposition would not be in the best interest of such Registrant or would have a material adverse effect on the consummation of such acquisition or disposition or (z) a majority of the Board of Directors of the Company determines in the exercise of its good faith judgment that compliance with the disclosure obligations set forth in this Section 6(c)(i) would otherwise have a material adverse effect on the Company and its subsidiaries, taken as a whole, and (B) the Registrants notify the Holders within two business days after such Boards of Directors make the relevant determinations set forth in clause (A); provided, however, that in each such case (1) the applicable period specified in Section 4 hereof during which the Shelf Registration Statement is required to be kept effective and usable shall be extended by the number of days during which such effectiveness was suspended pursuant to the foregoing, (2) the Registrants shall use all reasonable efforts to permit resumption of the offering and sales under the Shelf Registration Statement at the earliest practicable time and (3) the Additional Interest (and corresponding Additional Distributions) provided for in Section 5 hereof shall not apply during any period the Registrants are permitted to suspend offerings and sales under this sentence; (ii) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise the underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Registrants shall use their best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) furnish to each of the selling Holders and each of the underwriter(s), if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review of such Holders and underwriter(s), if any, for a period of at least five business days, and the Registrants will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which a selling Holder of Transfer Restricted Securities covered by such Registration Statement or the underwriter(s), if any, shall reasonably object within five business days after the receipt thereof. A selling Holder or underwriter, if any, shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission; (v) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to the selling Holders and to the underwriter(s), if any, make the Registrants' representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such selling Holders or underwriter(s), if any, reasonably may request; (vi) make available at reasonable times for inspection by the selling Holders, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney or accountant retained by such selling Holders or any of the underwriter(s), all financial and other records, pertinent corporate documents and properties of the Registrants and cause the Registrants' officers, trustees, directors, managers and employees to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement subsequent to the filing thereof and prior to its effectiveness; (vii) if requested by any selling Holders or the underwriter(s), if any, promptly incorporate in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the liquidation or principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Registrants are notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; (viii)cause the Transfer Restricted Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate liquidation or principal amount of Securities covered thereby or the underwriter(s), if any; (ix) furnish to each selling Holder and each of the underwriter(s), if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (x) deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Registrants hereby consent to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (xi) enter into such agreements (including an underwriting agreement), and make such representations and warranties, and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all to such extent as may be requested by any Initial Purchaser or by any Holder of Transfer Restricted Securities or underwriter in connection with any sale or resale pursuant to any Registration Statement contemplated by this Agreement; and in connection with an Underwritten Registration, the Registrants shall: (A) upon request, furnish to each selling Holder and each underwriter, if any, in such substance and scope as they may request and as are customarily made by issuers to underwriters in primary underwritten offerings, upon the date of the effectiveness of the Shelf Registration Statement: (1) a certificate, dated the date of the effectiveness of the Shelf Registration Statement, signed by (x) the Chairman of the Board, President, Vice Chairman of the Board, Executive Vice President, Senior Managing Director or a Managing Director of the Company, (y) the Chairman of the Board, Chief Executive Officer, President, Chief Operating Officer or a Managing Director of CHL and (z) the Chief Financial Officer of the Company and CHL, confirming, as of the date thereof, such matters as such parties may reasonably request; (2) an opinion, dated the date of the effectiveness of the Shelf Registration Statement, of counsel for the Registrants, covering such matters as such parties may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Registrants, representatives of the independent public accountants for the Company, the Initial Purchasers' representatives and the Initial Purchasers' counsel in connection with the preparation of such Registration Statement and the related Prospectus and have considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing (relying as to materiality to a large extent upon facts provided to such counsel by officers and other representatives of the Company, CHL and the Trust and without independent check or verification), no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement, as of its date, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (3) a customary comfort letter, dated the date of the effectiveness of the Shelf Registration Statement, from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters by underwriters in connection with primary underwritten offerings. (B) set forth in full or incorporate by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (C) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Registrants pursuant to this clause (xi), if any. If at any time the representations and warranties of the Company contemplated in clause (A)(1) above cease to be true and correct, the Company shall so advise the Initial Purchasers and the underwriter(s), if any, and each selling Holder promptly and, if requested by such Persons, shall confirm such advice in writing; (xii) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders or underwriter(s) may reasonably request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that no Registrant shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (xiii)issue, upon the request of any Holder of Securities covered by the Shelf Registration Statement, New Securities in the same amount as the Securities surrendered to the Registrants by such Holder in exchange therefor or being sold by such Holder; such New Securities to be registered in the name of such Holder or in the name of the purchaser(s) of such Securities, as the case may be; in return, the Securities held by such Holder shall be surrendered to the Registrants for cancellation; (xiv) cooperate with the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least two business days prior to any sale of Transfer Restricted Securities made by such underwriter(s); (xv) use its best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xii) above; (xvi) subject to the provisions of Section 6(c)(i) above with respect to any Shelf Registration Statement, if any fact or event contemplated by clause (c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (xvii)provide CUSIP numbers for all Transfer Restricted Securities not later than the effective date of the Registration Statement and provide certificates for the Transfer Restricted Securities; (xviii)cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD, and use its best efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary to enable the Holders selling Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities; (xix) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement; (xx) cause the Indenture and, if the Debentures shall not have been distributed to the Holders of the Preferred Securities in liquidation of the Trust, the Declaration and the Trust Guarantee to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate with the Trustee and the Holders of Securities to effect such changes to the Indenture, the Declaration and the Trust Guarantee as may be required for the Indenture, the Declaration and the Trust Guarantee to be so qualified in accordance with the terms of the TIA; and execute and use their best efforts to cause the Indenture Trustee, Trust Guarantee Trustee and the Property Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and (xxi) provide promptly to each Holder upon request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from any Registrant of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing (the "Advice") by any Registrant that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by a Registrant, each Holder will deliver to such Registrant (at the Registrants' expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company, CHL or the Trust shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received the Advice. 7. Registration Expenses. All expenses incident to the Registrants' performance of or compliance with this Agreement will be borne by CHL, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings made by any Initial Purchaser or Holder with the NASD (and, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel that may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the New Securities to be issued in the Exchange Offer and printing of Prospectuses) and messenger and delivery services; (iv) all fees and disbursements of counsel for the Registrants; (v) all application and filing fees in connection with listing Securities on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance). The Registrants will, in any event, bear their internal expenses (including, without limitation, all salaries and expenses of their officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts and legal counsel, retained by the Registrants. 8. Indemnification and Contribution. (a) In connection with a Shelf Registration Statement or in connection with any delivery of a Prospectus contained in an Exchange Offer Registration Statement by any participating Broker-Dealer or Initial Purchaser, as applicable, who seeks to sell New Securities, the Company and CHL, jointly and severally, shall indemnify and hold harmless each Holder of Transfer Restricted Securities included within any such Shelf Registration Statement and each participating Broker-Dealer or Initial Purchaser selling New Securities, and each person, if any, who controls any such person within the meaning of the Securities Act (each, a "Participant"), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of Securities) to which such Participant or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any preliminary Prospectus, such Registration Statement or any Prospectus or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse each Participant promptly upon demand for any legal or other expenses reasonably incurred by such Participant in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that (i) the Company and CHL shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any such Registration Statement or any prospectus forming part thereof or in any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company, CHL and the Trust by or on behalf of any Participant specifically for inclusion therein; and provided further that as to any preliminary Prospectus, the indemnity agreement contained in this Section 8(a) shall not inure to the benefit of any such Participant or any controlling person of such Participant on account of any loss, claim, damage, liability or action arising from the sale of the New Securities to any person by that Participant if (i) that Participant failed to send or give a copy of the Prospectus, as the same may be amended or supplemented, to that person within the time required by the Securities Act and (ii) the untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact in such preliminary Prospectus was corrected in the Prospectus, unless, in each case, such failure resulted from non-compliance by the Registrants with Section 6(c). The foregoing indemnity agreement is in addition to any liability which the Registrants may otherwise have to any Participant or to any controlling person of that Participant. (b) Each Participant, severally and not jointly, shall indemnify and hold harmless the Registrants, each of their respective trustees, directors, officers, employees or agents and each person, if any, who controls the Company, CHL or the Trust within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Registrants or any such director, officer, employees or agents or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any preliminary Prospectus, Registration Statement or Prospectus or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Registrants by or on behalf of that Participant specifically for inclusion herein, and shall reimburse the Registrants and any such trustee, director, officer, employees or agents or controlling person for any legal or other expenses reasonably incurred by the Registrants or any such trustee, director, officer, employees or agents or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which any Participant may otherwise have to the Registrants or any such trustee, director, officer or controlling person. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent it has been materially prejudiced by such failure and, provided further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 8. If any such claim or action shall be brought against an indemnified party, and it shall have notified the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that if the defendants in any such action include both the indemnified and indemnifying party or parties the indemnified party or parties shall have the right to employ separate counsel if, in the reasonable judgment of such indemnified party or parties, there may be legal defenses available to it or them and/or other indemnified parties that are different from or additional to those available to the indemnifying party or parties, and in that event the fees and expenses of such separate counsel shall be paid by the indemnifying party or parties (it being understood, however, that the indemnifying party or parties shall not be liable for the expenses of more than one separate counsel in any single jurisdiction). Each indemnified party, as a condition of the indemnity agreements contained in Section 8, shall use its best efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding, or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss of liability by reason of such settlement or judgment. (d) If the indemnification hereinbefore provided for in this Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, in such proportion as shall be appropriate to reflect the relative fault of the Registrants on the one hand and the Participants on the other with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Registrants or the Participants, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Registrants and the Participants agree that it would not be just and equitable if contributions pursuant to this Section 8(d) were to be determined by pro rata allocation (even if the Participants were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 8(d) shall be deemed to include, for purposes of this Section 8(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8(d), no Participant shall be required to contribute any amount in excess of the amount by which the total proceeds received by such Participant with respect to the sale of its Securities exceeds the amount of any damages which such Participant has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Participants' obligations to contribute as provided in this Section 8(d) are several and not joint. 9. Rule 144A. The Registrants hereby agree with each Holder, for so long as any Transfer Restricted Securities remain outstanding, to make available upon request to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information, if any, required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. 10. Participation in Underwritten Registrations. No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements. 11. Selection of Underwriters. The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal or liquidation amount of the Transfer Restricted Securities included in such offering; provided, that such investment bankers and managers must be reasonably satisfactory to the Company. 12. Miscellaneous. (a) Remedies. Each of the Company, CHL and the Trust agrees that monetary damages (including any Additional Interest or Additional Distributions contemplated hereby) would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company, CHL and the Trust shall not on or after the date of this Agreement enter into any agreement with respect to their securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The Company, CHL and the Trust have not previously entered into any agreement granting any registration rights pursuant to which the holders of such rights have any right to demand or request that the Company register the securities held by them (or any securities they have any right to acquire) as a result of the filing of any Registration Statement required to be filed hereunder. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Trust's, CHL's and the Company's securities under any agreement in effect on the date hereof. (c) Adjustments Affecting the Securities. The Company, CHL and the Trust shall not take any action, or permit any change to occur, with respect to Securities that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Company, CHL and the Trust have obtained the written consent of Holders of a majority of the outstanding principal or liquidation amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal or liquidation amount of Transfer Restricted Securities being tendered or registered. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Trust; and (ii) if to the Company, CHL and the Trust: c/o Countrywide Credit Industries, Inc. 4500 Park Granada Calabasas, California 91302 Attn: General Counsel With a copy to: Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, New York 10004 Attn: Kenneth R. Blackman, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Indenture Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder. The indemnity agreement of the Company and CHL contained in Section 8(a) of this Agreement shall also be deemed to be for the benefit of each of the Participants; and the indemnity agreement of the Participants contained in Section 8(b) of this Agreement shall also be deemed to be for the benefit of directors, officers and employees of the Company and CHL and the trustees of the Trust and any Person controlling the Company, CHL or the Trust within the meaning of the Securities Act. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement together with the other transaction documents is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company, CHL and the Trust with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (l) Required Consents. Whenever the consent or approval of Holders of a specified percentage of Transfer Restricted Securities is required hereunder, Transfer Restricted Securities held by the Company or its affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. COUNTRYWIDE CREDIT INDUSTRIES, INC. By: /s/Stanford L. Kurland ------------------------------- Name: Stanford L. Kurland Title: Senior Managing Director COUNTRYWIDE HOME LOANS, INC. BY: /s/Stanford L. Kurland ------------------------------- Name: Stanford L. Kurland Title: Senior Managing Director COUNTRYWIDE CAPITAL III BY: /s/Sandor E. Samuels ------------------------------- REGULAR TRUSTEE Accepted as of the date thereof LEHMAN BROTHERS INC., for itself and on behalf of the other Initial Purchasers Identified in this Agreement By: /s/Neil Sherman ----------------------- Name: Neil Sherman Title:Managing Director EX-5.1 8 EXHIBIT 5.1 [LETTERHEAD OF MORRIS, NICHOLS, ARSHT & TUNNELL] October 2, 1997 Countrywide Capital III c/o Countrywide Credit Industries, Inc. 4500 Park Granada Calabasas, California 91302 RE: Countrywide Capital III ----------------------- Ladies and Gentlemen: We have acted as special Delaware counsel to Countrywide Capital III, a Delaware statutory business trust (the "Trust"), in connection with certain matters relating to the creation of the Trust and the proposed issuance of 8.05% Subordinated Capital Income Securities, Series B (the New Capital Securities"), to beneficial owners pursuant to and as described in Registration Statement No. 333- (and the Prospectus forming a part thereof) on Form S-4 filed with the Securities and Exchange Commission on September , 1997 (the "Registration Statement"). Capitalized terms used herein and not otherwise herein defined are used as defined in the Amended and Restated Declaration of Trust of the Trust dated as of June 4, 1997 (the "Governing Instrument"). In rendering this opinion, we have examined and relied upon copies of the following documents in the forms provided to us: the Certificate of Trust of the Trust as filed in the Office of the Secretary of State of the State of Delaware (the "State Office") on May 28, 1997 (the "Certificate of Trust"); a Declaration of Trust of the Trust dated as of May 28 1997 (the "Original Governing Instrument"); the Governing Instrument; the Indenture dated as of June 4, 1997 among Countrywide Home Loans, Inc., a New York corporation ("CHL"), Countrywide Credit Industries, Inc., a Delaware corporation ("Countrywide Credit"), and The Bank of New York, as Trustee; the Guarantee Agreement, dated as of June 4, 1997, between Countrywide Credit and The Bank of New York, as Trustee, relating to the Securities; the Registration Rights Agreement dated as of June 4, 1997 among the Trust, CHL, Countrywide Credit and the "Initial Purchasers" (as defined therein) (the "Registration Rights Agreement"); the Registration Statement; and a certification of good standing of the Trust obtained as of recent date from the State Office. In such examinations, we have assumed the genuineness of all signatures, the conformity to original documents of all documents submitted to us as drafts or copies or forms of documents to be executed and the legal capacity of natural persons to complete the execution of documents. We have further assumed for purposes of this opinion: (i) the due formation or organization, valid existence and good standing of each entity (other than the Trust) that is a party to any of the documents reviewed by us under the laws of the jurisdiction of its respective formation or organization; (ii) the due authorization, execution and delivery by, or on behalf of, each of the parties thereto of the above-referenced documents (including, without limitation, the due authorization, execution and delivery of the Governing Instrument and the Registration Rights Agreement prior to the first issuance of New Capital Securities); (iii) that no event has occurred subsequent to the filing of the Certificate of Trust that would cause a dissolution or liquidation of the Trust under the Original Governing Instrument or the Governing Instrument, as applicable; (iv) that the activities of the Trust have been and will be conducted in accordance with the Original Governing Instrument or the Governing Instrument, as applicable, and the Delaware Business Trust Act, 12 Del. C. ss.ss. 3801 et seq. (the "Delaware Act"); (v) that each Person that will acquire New Capital Securities in the "Exchange Offer" (as defined in the Registration Statement and as used herein, the "Exchange Offer") will validly tender Transfer Restricted Securities in exchange therefor, that such Transfer Restricted Securities will be duly accepted, and that such Person will duly receive New Capital Security Certificates in consideration thereof, all in accordance with the terns and conditions of the Governing Instrument, the Registration Statement and the Registration Rights Agreement and that the New Capital Securities are otherwise issued to the New Capital Securities Holders in accordance with the terms, conditions, requirements and procedures set forth in the Governing Instrument, the Registration Statement and the Registration Rights Agreement; and (vi) that the documents examined by us are in full force and effect, express the entire understanding of the parties thereto with respect to the subject matter thereof and have not been modified, supplemented or otherwise amended, except as herein referenced. We have not reviewed any documents other than those identified above in connection with this opinion, and we have assumed that there are no other documents that are contrary to or inconsistent with the opinions expressed herein. Further, we express no opinion with respect to, and assume no responsibility for the contents of, the Registration Statement or any other offering material relating to the New Capital Securities. No opinion is expressed herein with respect to the requirements of, or compliance with, federal or state securities or blue sky laws. As to any fact material to our opinion, other than those assumed, we have relied without independent investigation on the above-referenced documents and on the accuracy, as of the date hereof, of the matters therein contained. Based on and subject to the foregoing, and limited in all respects to matters of Delaware law, it is our opinion that: 1. The Trust is a duly created and validly existing business trust in good standing under the laws of the State of Delaware. 2. The New Capital Securities, upon issuance pursuant to the Exchange Offer, will constitute validly issued and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable beneficial interests in the assets of the Trust. 3. Under the Delaware Act and the terms of the Governing Instrument, each New Capital Security Holder of the Trust, in such capacity, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware; provided, however, we express no opinion with respect to the liability of any New Capital Security Holder who is, was or may become a named Trustee of the Trust. Notwithstanding the foregoing, we note that pursuant to Section 10.4 of the Governing Instrument, the Trust may withhold amounts otherwise distributable to a Holder and pay over such amounts to the applicable jurisdictions in accordance with federal, state and local law and any amount withheld will be deemed to have been distributed to such Holder and that, pursuant to the Governing Instrument, New Capital Security Holders may be obligated to make payments or provide indemnity or security under the circumstances set forth therein. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name and reference to our opinion under the heading "LEGAL MATTERS" in the Prospectus forming a part thereof. In giving this consent, we do not thereby admit that we come within the Category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. This opinion speaks only as of the date hereof and is based on our understandings and assumptions as to present facts, and on our review of the above-referenced documents and the application of Delaware law as the same exist as of the date hereof, and we undertake no obligation to update or supplement this opinion after the date hereof for the benefit of any person or entity with respect to any facts or circumstances that may hereafter come to our attention or any changes in facts or law that may thereafter occur or take effect. Very truly yours, /s/ Morris, Nichols, Arsht & Tunnell ------------------------------------ MORRIS, NICHOLS, ARSHT & TUNNELL EX-5.2 9 EXHIBIT 5.2 [LETTERHEAD OF FRIED, FRANK, HARRIS, SHRIVER & JACOBSON] 212-859-8280 October 2, 1997 (FAX: 212-859-8586) Countrywide Credit Industries, Inc. Countrywide Home Loans, Inc. Countrywide Capital III 4500 Park Granada Calabasas, CA 91302 Ladies and Gentlemen: We are acting as special counsel to Countrywide Credit Industries, Inc., a Delaware corporation (the "Guarantor"), Countrywide Home Loans, Inc., a New York corporation and a wholly-owned subsidiary of the Guarantor (the "Company"), and Countrywide Capital III, a Delaware statutory business trust (the "Trust"), in connection with the preparation of a Registration Statement on Form S-4 of the Trust, the Company and the Guarantor (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act") with respect to the contemplated issuance of (i) $206,200,000 aggregate principal amount of the Company's 8.05% Subordinated Debentures due June 15, 2027, Series B (the "Debentures"), (ii) the related guarantee by the Guarantor as to payments of principal, premium, if any, and interest on the Debentures (the "Debt Guarantee") and (iii) the guarantee by the Guarantor (the "Trust Guarantee") in respect of distributions and payments on liquidation or redemption of the Trust's common securities (the "Common Securities") and its 8.05% Subordinated Capital Income Securities, Series B (the "Capital Securities"), in each case, representing undivided beneficial interests in the assets of the Trust. The Debentures and the Debt Guarantee, which will be issued to the Trust, will be issued pursuant to the Indenture, dated as of June 4, 1997 (the "Indenture"), among the Company, the Guarantor and The Bank of New York, as trustee. The Debentures and the Debt Guarantee will be exchanged for the Company's 8.05% Subordinated Debentures due June 15, 2027, Series A, and the related guarantee by the Guarantor thereon, in accordance with the terms of the Exchange Offer as described in the Registration Statement. The Trust Guarantee will be issued to The Bank of New York, as trustee for the benefit of the holders of the Capital Securities and the Common Securities ("Guarantee Trustee"), pursuant to a Guarantee Agreement, dated as of June 4, 1997, between the Guarantor and The Bank of New York, as Guarantee Trustee. We have examined the originals, or certified, conformed or reproduction copies, of all such records, agreements, instruments and documents as we have deemed relevant or necessary as the basis for the opinion hereinafter expressed. In all such examinations, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all original and certified copies and the conformity to original or certified copies of all copies submitted to us as conformed or reproduction copies. We also have assumed, with respect to all parties to agreements or instruments relevant hereto other than the Company and the Guarantor, that such parties have the requisite power and authority (corporate or otherwise) to execute, deliver and perform such agreements or instruments, that such agreements or instruments have been duly authorized by all requisite action (corporate or otherwise), and that when executed and delivered by such parties, such agreements or instruments will be the valid, binding and enforceable obligations of such parties. As to various questions of fact relevant to such opinions, we have relied upon, and have assumed the accuracy of certificates and oral or written statements and other information of or from public officials, officers or representatives of the Company, the Guarantor, the Trust and others. With respect to the opinion expressed in paragraph 2 below, we have relied with your permission on the opinion of Morris, Nichols, Arsht & Tunnell of even date herewith with respect to matters of Delaware trust law. To the extent that such opinion contains qualifications, assumptions and exceptions, we are incorporating such qualifications, assumptions and exceptions herein. Based upon the foregoing and subject to the limitations set forth herein, we are of the opinion that: 1. When (i) the Debt Guarantee has been duly endorsed on the Debentures and executed in accordance with the terms of the Indenture and (ii) the Debentures have been duly executed and authenticated in accordance with the terms of the Indenture and issued as contemplated in the Registration Statement, the Debentures will constitute valid and binding obligations of the Company and the Debt Guarantee will constitute a valid and binding obligation of the Guarantor, subject in each case to (i) applicable bankruptcy, insolvency, moratorium, fraudulent transfer and other similar laws now or hereafter in effect affecting creditors' rights and remedies generally and (ii) general principles of equity, including, without limitation, standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits as to the availability of equitable remedies, whether considered in a proceeding in equity or at law. 2. The Trust Guarantee constitutes a valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, moratorium, fraudulent transfer and other similar laws now or hereafter in effect affecting creditors' rights and remedies generally and (ii) general principles of equity, including, without limitation, standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits as to the availability of equitable remedies, whether considered in a proceeding in equity or at law. This opinion is expressly limited to the laws of the State of New York and, to the extent required by the foregoing opinions, the General Corporation Law of the State of Delaware, each as currently in effect. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to this firm under the captions "Legal Matters" in the Prospectus forming a part of the Registration Statement. In giving this consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act. Very truly yours, FRIED, FRANK, HARRIS, SHRIVER & JACOBSON By: /s/ Kenneth R. Blackman ------------------------------------ Kenneth R. Blackman EX-8.1 10 EXHIBIT 8.1 [LETTERHEAD OF FRIED, FRANK, HARRIS, SHRIVER & JACOBSON] 212-859-8171 October 2, 1997 (Fax: 212-859-8588) Countrywide Credit Industries, Inc. Countrywide Home Loans, Inc. Countrywide Capital III 4500 Park Granada Calabasas, CA 91302 Ladies and Gentlemen: We are acting as special counsel to Countrywide Home Loans, Inc., a New York corporation (the "Company") and a wholly owned subsidiary of Countrywide Credit Industries, Inc., a Delaware corporation ("CCI"), CCI and Countrywide Capital III, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), in connection with (a) the proposed issuance by the Company of 8.05% Junior Subordinated Debentures due June 15, 2027, Series B (the "Subordinated Debentures") in exchange for the Company's outstanding 8.05% Junior Subordinated Debentures due June 15, 2027, Series A, and (b) the Trust's proposed issuance of 8.05% Subordinated Capital Income Securities, Series B (the "Capital Securities") in exchange for its outstanding 8.05% Subordinated Capital Income Securities, Series A, all as contemplated by the joint Registration Statement on Form S-4 of the Company, CCI and the Trust (the "Registration Statement"). Terms with initial capitals used in this letter and not otherwise defined herein have the meanings set forth in the Registration Statement. You have requested our opinion concerning (a) the characterization of the Trust and the Subordinated Debentures for United States federal income tax purposes, and (b) the section of the Registration Statement captioned "Certain United States Federal Income Tax Consequences." In expressing our opinion, we have examined and relied upon the Registration Statement, the Declaration and the Indenture (each as filed as Exhibits to the Registration Statement), certain representations of officers of CCI and the Company (the "Representations") and such other materials as we have deemed necessary or appropriate. We have assumed, with your permission, that the facts stated in the Registration Statement and the Representations are true and complete, that the Trust will be administered in accordance with the terms of the Declaration, that the Subordinated Debentures will be issued and administered in accordance with the terms of the Indenture and that the Capital Securities will be issued and administered in accordance with the terms of the Declaration. Our opinion is based upon the provisions of the United States Internal Revenue Code of 1986, as amended, existing and proposed Treasury regulations promulgated thereunder, judicial decisions and rulings and other pronouncements of the Internal Revenue Service (the "Service"), all as in effect on the date hereof. The application of some of these provisions, regulations, decisions, rulings and other pronouncements is uncertain in the absence of definitive guidance and may be subject to differing interpretations. Our opinion does not bind the Internal Revenue Service and there can be no assurance that the Service or a court of law would agree with the conclusions expressed in our opinion. Further, all such provisions, regulations, decisions, rulings and other pronouncements are subject to change, possibly with retroactive effect. Accordingly, there can be no assurance that future changes in law will not affect the conclusions set forth herein. Characterization of the Trust. Based upon and subject to the foregoing, it is our opinion that, for federal income tax purposes, the Trust will be characterized as a grantor trust, and will not be characterized as an association taxable as a corporation. Accordingly, for federal income tax purposes, each holder of Capital Securities generally will be considered the owner of an undivided interest in the Subordinated Debentures owned by the Trust, and each US Holder will be required to include all income or gain recognized for federal income tax purposes with respect to its allocable share of the Subordinated Debentures on its own income tax return. Characterization of the Subordinated Debentures. Based upon and subject to the foregoing, and although there is no controlling authority directly on point, it is our opinion that the Subordinated Debentures will be characterized as indebtedness of the Company for federal income tax purposes. "Certain United States Federal Income Tax Consequences" Section. Based upon and subject to the foregoing, and based upon the assumptions and subject to the qualifications and limitations set forth in such section, we hereby affirm that (a) it is our opinion, as of the date hereof, that the statements in the section of the Registration Statement captioned "Certain United States Federal Income Tax Consequences" summarize the material federal income tax consequences of the purchase, ownership and disposition of the Capital Securities, and (b) to the extent such statements constitute statements of law or legal conclusions with respect thereto, such statements represent our opinion, as of the date hereof, with respect to the matters set forth therein. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm under the captions "Certain United States Federal Income Tax Consequences" and "Legal Matters" therein. In giving this consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended. No opinion is expressed on any matter other than that specifically referred to herein. Very truly yours, FRIED, FRANK, HARRIS, SHRIVER & JACOBSON By: /s/ Lee S. Parker ------------------------------------ Lee S. Parker EX-23.1 11 | EXHIBIT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We have issued our report dated April 22, 1997, accompanying the consolidated financial statements and schedules of Countrywide Credit Industries, Inc. and Subsidiaries appearing in the Annual Report on Form 10-K for the year ended February 28, 1997, which is incorporated by reference in the Registration Statement on Form S-4 (the "Registration Statement"). We consent to the incorporation by reference in the Registration Statement of the aforementioned report. GRANT THORNTON LLP /s/GRANT THORNTON LLP Los Angeles, California September 30, 1997 EX-25.1 12 EXHIBIT 25-1 CONFORMED COPY =============================================================================== FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) |__| ----------------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ----------------------- COUNTRYWIDE HOME LOANS, INC. (Exact name of obligor as specified in its charter) New York 13-2631719 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 4500 Park Granada Calabasas, California 91302 (Address of principal executive offices) (Zip code) ---------------------- COUNTRYWIDE CREDIT INDUSTRIES, INC. (Exact name of obligor as specified in its charter) Delaware 13-2641992 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 4500 Park Granada Calabasas, California 91302 (Address of principal executive offices) (Zip code) ----------------------- Junior Subordinated Debentures (Title of the indenture securities) ================================================================================ 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R. 229.10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 26th day of September, 1997. THE BANK OF NEW YORK By: /S/MARY LAGUMINA ------------------------------- Name: MARY LAGUMINA Title: ASSISTANT VICE PRESIDENT Exhibit 7 - -------------------------------------------------------------------------------- Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business June 30, 1997, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS in Thousands Cash and balances due from depos- itory institutions: Noninterest-bearing balances and currency and coin .................. $ 7,769,502 Interest-bearing balances .......... 1,472,524 Securities: Held-to-maturity securities ........ 1,080,234 Available-for-sale securities ...... 3,046,199 Federal funds sold and Securities pur- chased under agreements to resell...... 3,193,800 Loans and lease financing receivables: Loans and leases, net of unearned income .................35,352,045 LESS: Allowance for loan and lease losses ..............625,042 LESS: Allocated transfer risk reserve........................429 Loans and leases, net of unearned income, allowance, and reserve 34,726,574 Assets held in trading accounts ...... 1,611,096 Premises and fixed assets (including capitalized leases) ................ 676,729 Other real estate owned .............. 22,460 Investments in unconsolidated subsidiaries and associated companies .......................... 209,959 Customers' liability to this bank on acceptances outstanding ............ 1,357,731 Intangible assets .................... 720,883 Other assets ......................... 1,627,267 ----------- Total assets ......................... $57,514,958 =========== LIABILITIES Deposits: In domestic offices ................ $26,875,596 Noninterest-bearing ......11,213,657 Interest-bearing .........15,661,939 In foreign offices, Edge and Agreement subsidiaries, and IBFs ... 16,334,270 Noninterest-bearing .........596,369 Interest-bearing .........15,737,901 Federal funds purchased and Securities sold under agreements to repurchase. 1,583,157 Demand notes issued to the U.S. Treasury ........................... 303,000 Trading liabilities .................. 1,308,173 Other borrowed money: With remaining maturity of one year or less .......................... 2,383,570 With remaining maturity of more than one year through three years.......... 0 With remaining maturity of more than three years ......................... 20,679 Bank's liability on acceptances exe- cuted and outstanding .............. 1,377,244 Subordinated notes and debentures .... 1,018,940 Other liabilities .................... 1,732,792 ----------- Total liabilities .................... 52,937,421 ----------- EQUITY CAPITAL Common stock ........................ 1,135,284 Surplus ............................. 731,319 Undivided profits and capital reserves .......................... 2,721,258 Net unrealized holding gains (losses) on available-for-sale securities ........................ 1,948 Cumulative foreign currency transla- tion adjustments .................. ( 12,272) ------------ Total equity capital ................ 4,577,537 ----------- Total liabilities and equity capital ........................... $57,514,958 =========== I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Alan R. Griffith / J. Carter Bacot / Thomas A. Renyi / Directors - -------------------------------------------------------------------------------- EX-25.2 13 EXHIBIT 25.2 CONFORMED COPY ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) |__| ----------------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ----------------------- COUNTRYWIDE CAPITAL III (Exact name of obligor as specified in its charter) Delaware Applied for (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) c/o Countrywide Credit Industries, Inc. 4500 Park Granada Calabasas, California 91302 (Address of principal executive offices) (Zip code) ----------------------- Subordinated Capital Income Securities (Title of the indenture securities) ================================================================================ 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the 2 Rector Street, New York, State of New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R. 229.10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 26th day of September, 1997. THE BANK OF NEW YORK By: /S/MARY LAGUMINA ------------------------------- Name: MARY LAGUMINA Title: ASSISTANT VICE PRESIDENT Exhibit 7 - -------------------------------------------------------------------------------- Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business June 30, 1997, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS in Thousands Cash and balances due from depos- itory institutions: Noninterest-bearing balances and currency and coin .................. $ 7,769,502 Interest-bearing balances .......... 1,472,524 Securities: Held-to-maturity securities ........ 1,080,234 Available-for-sale securities ...... 3,046,199 Federal funds sold and Securities pur- chased under agreements to resell...... 3,193,800 Loans and lease financing receivables: Loans and leases, net of unearned income .................35,352,045 LESS: Allowance for loan and lease losses ..............625,042 LESS: Allocated transfer risk reserve........................429 Loans and leases, net of unearned income, allowance, and reserve 34,726,574 Assets held in trading accounts ...... 1,611,096 Premises and fixed assets (including capitalized leases) ................ 676,729 Other real estate owned .............. 22,460 Investments in unconsolidated subsidiaries and associated companies .......................... 209,959 Customers' liability to this bank on acceptances outstanding ............ 1,357,731 Intangible assets .................... 720,883 Other assets ......................... 1,627,267 ----------- Total assets ......................... $57,514,958 =========== LIABILITIES Deposits: In domestic offices ................ $26,875,596 Noninterest-bearing ......11,213,657 Interest-bearing .........15,661,939 In foreign offices, Edge and Agreement subsidiaries, and IBFs ... 16,334,270 Noninterest-bearing .........596,369 Interest-bearing .........15,737,901 Federal funds purchased and Securities sold under agreements to repurchase. 1,583,157 Demand notes issued to the U.S. Treasury ........................... 303,000 Trading liabilities .................. 1,308,173 Other borrowed money: With remaining maturity of one year or less .......................... 2,383,570 With remaining maturity of more than one year through three years.......... 0 With remaining maturity of more than three years ......................... 20,679 Bank's liability on acceptances exe- cuted and outstanding .............. 1,377,244 Subordinated notes and debentures .... 1,018,940 Other liabilities .................... 1,732,792 ----------- Total liabilities .................... 52,937,421 ----------- EQUITY CAPITAL Common stock ........................ 1,135,284 Surplus ............................. 731,319 Undivided profits and capital reserves .......................... 2,721,258 Net unrealized holding gains (losses) on available-for-sale securities ........................ 1,948 Cumulative foreign currency transla- tion adjustments .................. ( 12,272) ------------ Total equity capital ................ 4,577,537 ----------- Total liabilities and equity capital ........................... $57,514,958 =========== I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Alan R. Griffith / J. Carter Bacot / Thomas A. Renyi / Directors - -------------------------------------------------------------------------------- EX-25.3 14 EXHIBIT 25.3 CONFORMED COPY =============================================================================== FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) |__| ----------------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ----------------------- COUNTRYWIDE CREDIT INDUSTRIES, INC. (Exact name of obligor as specified in its charter) Delaware 13-2641992 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 4500 Park Granada Calabasas, California 91302 (Address of principal executive offices) (Zip code) ----------------------- Guarantee of Subordinated Capital Income Securities of Countrywide Capital III (Title of the indenture securities) =============================================================================== 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R. 229.10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 26th day of September, 1997. THE BANK OF NEW YORK By: /S/MARY LAGUMINA ------------------------------- Name: MARY LAGUMINA Title: ASSISTANT VICE PRESIDENT Exhibit 7 - -------------------------------------------------------------------------------- Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business June 30, 1997, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS in Thousands Cash and balances due from depos- itory institutions: Noninterest-bearing balances and currency and coin .................. $ 7,769,502 Interest-bearing balances .......... 1,472,524 Securities: Held-to-maturity securities ........ 1,080,234 Available-for-sale securities ...... 3,046,199 Federal funds sold and Securities pur- chased under agreements to resell...... 3,193,800 Loans and lease financing receivables: Loans and leases, net of unearned income .................35,352,045 LESS: Allowance for loan and lease losses ..............625,042 LESS: Allocated transfer risk reserve........................429 Loans and leases, net of unearned income, allowance, and reserve 34,726,574 Assets held in trading accounts ...... 1,611,096 Premises and fixed assets (including capitalized leases) ................ 676,729 Other real estate owned .............. 22,460 Investments in unconsolidated subsidiaries and associated companies .......................... 209,959 Customers' liability to this bank on acceptances outstanding ............ 1,357,731 Intangible assets .................... 720,883 Other assets ......................... 1,627,267 ----------- Total assets ......................... $57,514,958 =========== LIABILITIES Deposits: In domestic offices ................ $26,875,596 Noninterest-bearing ......11,213,657 Interest-bearing .........15,661,939 In foreign offices, Edge and Agreement subsidiaries, and IBFs ... 16,334,270 Noninterest-bearing .........596,369 Interest-bearing .........15,737,901 Federal funds purchased and Securities sold under agreements to repurchase. 1,583,157 Demand notes issued to the U.S. Treasury ........................... 303,000 Trading liabilities .................. 1,308,173 Other borrowed money: With remaining maturity of one year or less .......................... 2,383,570 With remaining maturity of more than one year through three years.......... 0 With remaining maturity of more than three years ......................... 20,679 Bank's liability on acceptances exe- cuted and outstanding .............. 1,377,244 Subordinated notes and debentures .... 1,018,940 Other liabilities .................... 1,732,792 ----------- Total liabilities .................... 52,937,421 ----------- EQUITY CAPITAL Common stock ........................ 1,135,284 Surplus ............................. 731,319 Undivided profits and capital reserves .......................... 2,721,258 Net unrealized holding gains (losses) on available-for-sale securities ........................ 1,948 Cumulative foreign currency transla- tion adjustments .................. ( 12,272) ------------ Total equity capital ................ 4,577,537 ----------- Total liabilities and equity capital ........................... $57,514,958 =========== I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Alan R. Griffith / J. Carter Bacot / Thomas A. Renyi / Directors - -------------------------------------------------------------------------------- EX-99.1 15 Exhibit 99.1 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED LETTER OF TRANSMITTAL COUNTRYWIDE CAPITAL III OFFER TO EXCHANGE ITS 8.05% SUBORDINATED CAPITAL INCOME SECURITIES, SERIES B (SKISSM*) (LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY), WHICH ARE FULLY AND UNCONDITIONALLY GUARANTEED AS TO DISTRIBUTIONS AND OTHER PAYMENTS BY COUNTRYWIDE CREDIT INDUSTRIES, INC. AND WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND ALL OF ITS OUTSTANDING 8.05% SUBORDINATED CAPITAL INCOME SECURITIES, SERIES A (SKISSM*) (LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY), WHICH ARE FULLY AND UNCONDITIONALLY GUARANTEED AS TO DISTRIBUTIONS AND OTHER PAYMENTS BY COUNTRYWIDE CREDIT INDUSTRIES, INC. EXCHANGE AGENT: THE BANK OF NEW YORK By Hand or Overnight By Registered or Certified By Facsimile: Courier: Mail: (Eligible Institutions Only) (212) 571-6339 The Bank of New York The Bank of New York 101 Barclay Street 101 Barclay Street Corporate Trust Services Floor 7E Confirm by Window, New York, New York 10286 telephone to: Ground Floor Attention: Reorganization (212) 815-2742 New York, New York 10286 Section Attention: Reorganization Section DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. The undersigned acknowledges receipt of the Prospectus, dated , 1997 (the "Prospectus"), of Countrywide Capital III, a Delaware statutory business trust (the "Trust"), and Countrywide Credit Industries, a Delaware corporation (the "Guarantor"), which, together with this Letter of Transmittal (the "Letter of Transmittal"), constitute the Trust's offer (the "Exchange Offer") to exchange up to $200,000,000 aggregate liquidation amount of its 8.05% Subordinated Capital Income Securities, Series B (the "New Capital Securities"), for a like liquidation amount of its outstanding 8.05% Subordinated Capital Income Securities, Series A (the "Old Capital Securities"). Capitalized terms used but not defined herein have the same meanings given them in the Prospectus. The form and terms of the New Capital Securities will be identical in all material respects to the form and terms of the Old Capital Securities except that (i) the New Capital Securities will have been registered under the Securities Act of 1933, as amended (the "Securities Act"), and therefore will not contain terms with respect to transfer restrictions, (ii) the Distribution Rate will not be subject to increase in certain circumstances relating to the timing of the Exchange Offer and (iii) the holders of New Capital Securities will not be entitled to certain rights under the Registration Rights, which rights will terminate when the Exchange Offer is consummated. Any Old Capital Securities not tendered and accepted in the Exchange Offer will remain outstanding and will be entitled to all the rights and preferences, and will be subject to the limitations applicable thereto, under the Declaration (except for those rights relating to the Exchange Offer which terminate upon consummation of the Exchange Offer). Following consummation of the Exchange Offer, the holders of the Old Capital Securities will not be entitled to any increase in the Distribution Rate thereon and will continue to be subject to any existing restrictions upon transfer thereof, and none of the Company, CHL and the Trust will have any further obligation to such holders (other than under certain limited circumstances) to provide for the registration under the Securities Act of the Old Capital Securities held by them. - -------- * SKIS is a servicemark of Lehman Brothers Inc. The term "Expiration Date" means 5:00 p.m., New York City time, on , 1997, unless the Exchange Offer is extended, as provided in the Prospectus, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended. This Letter of Transmittal is to be completed by holders of Old Capital Securities either (i) if Old Capital Securities are forwarded herewith or (ii) if tender of Old Capital Securities is to be made by book-entry transfer to an account maintained by The Bank of New York (the "Exchange Agent") at the The Depository Trust Company ("DTC") pursuant to the procedures set forth in "The Exchange Offer -- Procedures for Tendering Old Capital Securities" in the Prospectus. Holders of Old Capital Securities whose certificates (the "Certificates") for such Old Capital Securities are not immediately available or who cannot deliver their Certificates and all other required documents to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date or who cannot complete the procedures for book-entry transfer on a timely basis must tender their Old Capital Securities according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Procedures for Tendering Old Capital Securities -- Guaranteed Delivery" in the Prospectus. See Instruction 1. The term "holder" with respect to the Exchange Offer means any person in whose name Old Capital Securities are registered on the books of the Trust or any other person who has obtained a properly completed bond power from the registered holder. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. Holders who wish to tender their Old Capital Securities must complete this Letter of Transmittal in its entirety. PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED, QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT. List below the Old Capital Securities to which this Letter of Transmittal relates. If the space provided below is inadequate, the Certificate Numbers and Liquidation Amounts should be listed on a separate signed schedule affixed hereto. BOX 1 - -------------------------------------------------------------------------------- DESCRIPTION OF OLD CAPITAL SECURITIES TENDERED - -------------------------------------------------------------------------------- LIQUIDATION AMOUNT OF OLD CAPITAL SECURITIES TENDERED NUMBER OF BENEFICIAL NAME(S) AND ADDRESS(ES) OF (IF LIQUIDATION HOLDERS FOR WHOM OLD REGISTERED HOLDER(S) CERTIFICATE AMOUNT IS LESS CAPITAL SECURITIES (PLEASE FILL IN) NUMBER(S)* THAN ALL)** ARE HELD - -------------------------------------------------------------------------------- - ------------------------------------------------------------- - ------------------------------------------------------------- - ------------------------------------------------------------- - ------------------------------------------------------------- TOTAL: - -------------------------------------------------------------------------------- * Need not be completed by book-entry holders. ** Old Capital Securities may be tendered in whole or in part in denominations of $100,000 liquidation amount and integral multiples of $1,000 in excess thereof, provided that if any Old Capital Securities are tendered for exchange in part, the untendered liquidation amount thereof must be $100,000 or any integral multiple of $1,000 in excess thereof. All Old Capital Securities held shall be deemed tendered unless a lesser number is specified in this column. - -------------------------------------------------------------------------------- (BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY) [ ] CHECK HERE IF TENDERED OLD CAPITAL SECURITIES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN DTC MAY DELIVER OLD CAPITAL SECURITIES BY BOOK-ENTRY TRANSFER (SEE INSTRUCTION 1)): Name of Tendering Institution: --------------------------------------------- DTC Account Number: -------------------------------------------------------- Transaction Code Number: --------------------------------------------------- [ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF TENDERED OLD CAPITAL SECURITIES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING (SEE INSTRUCTION 5): Name of Registered Holder(s): ----------------------------------------------- Window Ticket Number (if any): --------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: ------------------------- Name of Institution Which Guaranteed Delivery: ------------------------------ If guaranteed delivery is to be made by book-entry transfer: ---------------- Name of Tendering Institution: --------------------------------------------- DTC Account Number: --------------------------------------------------------- Transaction Code Number: ---------------------------------------------------- [ ] CHECK HERE IF OLD CAPITAL SECURITIES TENDERED BY BOOK-ENTRY TRANSFER BUT NOT EXCHANGED ARE TO BE RETURNED BY CREDITING A DTC ACCOUNT NUMBER SET FORTH ABOVE. [ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD CAPITAL SECURITIES FOR YOUR OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ----------------------------------------------------------------------- Address: -------------------------------------------------------------------- Area Code and Telephone Number: --------------------------------------------- Contact Person: ------------------------------------------------------------- PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Trust and the Guarantor the above-described liquidation amount of Old Capital Securities in exchange for a like liquidation amount of New Capital Securities. Subject to and effective upon the acceptance for exchange of the Old Capital Securities tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Trust all right, title and interest in and to such Old Capital Securities as are being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that said Exchange Agent acts as the agent of the Trust and the Guarantor in connection with the Exchange Offer) with respect to the tendered Old Capital Securities, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), subject only to the right of withdrawal described in the Prospectus, to (i) deliver Certificates for Old Capital Securities, together with all accompanying evidences of transfer and authenticity to, or upon the order of, the Trust upon receipt by the Exchange Agent, as the undersigned's agent, of the New Capital Securities to be issued in exchange for such Old Capital Securities, (ii) present Certificates for such Old Capital Securities for transfer, and to transfer the Old Capital Securities on the books of the Trust, and (iii) receive for the account of the Trust all benefits and otherwise exercise all rights of beneficial ownership of such Old Capital Securities, all in accordance with the terms and conditions of the Exchange Offer. The undersigned represents and warrants that it has full power and authority to tender, exchange, sell, assign and transfer the Old Capital Securities tendered hereby and to acquire New Capital Securities issuable upon the exchange of such tendered Old Capital Securities, and that, when the same are accepted for exchange, the Trust will acquire good, marketable and unencumbered title to the tendered Old Capital Securities, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent, the Trust or the Guarantor to be necessary or desirable to complete the exchange, assignment and transfer of tendered Old Capital Securities or to transfer ownership of such Old Capital Securities on the account books maintained by DTC. The undersigned has read and agreed to all of the terms of the Exchange Offer. If any tendered Old Capital Securities are not exchanged pursuant to the Exchange Offer for any reason, or if Certificates are submitted for more Old Capital Securities than are tendered or accepted for exchange, Certificates for such non-exchanged or non-tendered Old Capital Securities will be returned (or, in the case of Old Capital Securities tendered by book-entry transfer, such Old Capital Securities will be credited to an account maintained at DTC), without expense to the tendering holder, promptly following the expiration or termination of the Exchange Offer. The undersigned understands that tender of Old Capital Securities pursuant to any one of the procedures described in "The Exchange Offer -- Procedures for Tendering Old Capital Securities" in the Prospectus and in this Letter of Transmittal, and the Trust's and the Guarantor's acceptance for exchange of such tendered Old Capital Securities, will constitute a binding agreement between the undersigned, the Trust and the Guarantor upon the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that, under certain circumstances set forth in the Prospectus, the Trust and the Guarantor may not be required to accept for exchange any of the Old Capital Securities tendered hereby. Unless otherwise indicated in the box entitled "Special Issuance Instructions" below, the undersigned hereby directs that the New Capital Securities be issued in the name(s) of the undersigned, or in the case of book-entry transfer of Old Capital Securities, that such New Capital Securities be credited to the account indicated above maintained at DTC. If applicable, substitute Certificates representing Old Capital Securities not exchanged or not accepted for exchange will be issued to the undersigned or, in the case of a book-entry transfer of Old Capital Securities, will be credited to the account indicated above maintained at DTC. Similarly, unless otherwise indicated under "Special Delivery Instructions," please deliver New Capital Securities to the undersigned at the address shown below the undersigned's signature. The undersigned acknowledges that this Offer is being made in reliance on an interpretation by the staff of the Division of Corporation Finance of the Securities and Exchange Commission (the "SEC") that the New Capital Securities issued pursuant to the Exchange Offer in exchange for the Old Capital Securities may be offered for resale, resold and otherwise transferred by holders thereof (other than broker-dealers, as set forth below, and any such holder which is an "affiliate" of the Trust within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such New Capital Securities are acquired in the ordinary course of such holders' business and such holders have no arrangement or understanding with any person to participate in the distribution of such New Capital Securities. By tendering Old Capital Securities and executing this Letter of Transmittal, the undersigned hereby represents to the Trust, the Guarantor and Countrywide Home Loans, Inc., a New York corporation, and a wholly-owned subsidiary of the Guarantor ("CHL"), that (i) the undersigned is not an "affiliate" of the Trust, the Guarantor or CHL, (ii) any New Capital Securities to be received by the undersigned are being acquired in the ordinary course of its business, (iii) the undersigned has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Capital Securities to be received in the Exchange Offer and (iv) if the undersigned is not a broker-dealer or is a broker-dealer but will not receive New Capital Securities for its own account in exchange for Old Capital Secutities, the undersigned is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Capital Securities. By tendering Old Capital Securities pursuant to the Exchange Offer and executing this Letter of Transmittal, a holder of Old Capital Securities which is a broker-dealer represents and agrees, consistent with certain interpretive letters issued by the staff of the Division of Corporation Finance of the SEC to third parties, that (a) such Old Capital Securities held by the broker-dealer are held only as a nominee or (b) such Old Capital Securities were acquired by such broker-dealer for its own account as a result of market-making activities or other trading activities and it will deliver a prospectus (as amended or supplemented from time to time) meeting the requirements of the Securities Act in connection with any resale of such New Capital Securities (provided that by so acknowledging and by delivering a prospectus, such broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act). The Trust, the Guarantor and CHL have agreed that, subject to the provisions of the Registration Rights Agreement, the Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer (as defined below) in connection with resales of New Capital Securities received in exchange for Old Capital Securities where such Old Capital Securities were acquired by such Participating Broker-Dealer for its own account as a result of market-making or other trading activities for a period ending 90 days after the Registration Statement is declared effective. In that regard, each broker-dealer who acquired Old Capital Securities for its own account as a result of market-making or other trading activities (a "Participating Broker-Dealer"), by tendering such Old Capital Securities and executing this Letter of Transmittal, agrees that, upon receipt of notice from the Trust, the Guarantor or CHL of the occurrence of any event or the discovery of any fact which makes any statement contained in the Prospectus untrue in any material respect or which causes the Prospectus to omit to state a material fact necessary in order to make the statements contained herein, in light of the circumstances under which they were made, not misleading or of the occurrence of certain other events specified in the Registration Rights Agreement, such Participating Broker-Dealer will suspend the sale of New Capital Securities pursuant to the Prospectus until the Trust, the Guarantor and CHL have amended or supplemented the Prospectus to correct such misstatement or omission and have furnished copies of the amended or supplemented Prospectus to such Participating Broker-Dealer or the Trust, the Guarantor or CHL has given notice that the sale of the New Capital Securities may be resumed, as the case may be. All authority herein conferred or agreed to be conferred shall survive the death, bankruptcy or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. Tendered Old Capital Securities may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. BOX 2 - -------------------------------------------------------------------------------- TENDERING HOLDER(S) SIGN HERE (SEE INSTRUCTIONS 2, 5 AND 6) - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ SIGNATURE(S) OF HOLDER(S) Dated: , 199 ---------------- -- (Must be signed by registered holder(s) exactly as name(s) appear(s) on Certificate(s) for Old Capital Securities or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth the full title of such person.) See Instruction 5. Name (s): ----------------------------------------------------------------------- (PLEASE PRINT) Capacity (full title): ---------------------------------------------------------- Address: ------------------------------------------------------------------------ (INCLUDE ZIP CODE) Area Code and Telephone No.: ---------------------------------------------------- Tax Identification No.: --------------------------------------------------------- GUARANTEE OF SIGNATURE(S) (IF REQUIRED - SEE INSTRUCTION 2) Authorized Signature: ----------------------------------------------------------- Name: --------------------------------------------------------------------------- Title: -------------------------------------------------------------------------- Address: ------------------------------------------------------------------------ Name of Firm: ------------------------------------------------------------------- Area Code and Telephone No.: ---------------------------------------------------- Dated: , 199 ----------- -- - -------------------------------------------------------------------------------- BOX 3 TO BE COMPLETED BY ALL TENDERING HOLDERS - -------------------------------------------------------------------------------- PAYOR'S NAME: COUNTRYWIDE CAPITAL III - -------------------------------------------------------------------------------- Part I - PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND ------------------- CERTIFY BY SIGNING AND SOCIAL SECURITY DATING BELOW NUMBER OR EMPLOYER IDENTIFICATION NUMBER - -------------------------------------------------------------------------------- SUBSTITUTE FORM W-9 DEPARTMENT OF THE TREASURY Part 2 - Check the box if you are NOT subject to INTERNAL REVENUE back-up withholding under the provisions of Section SERVICE 3406 (a) (1) (C) of the Internal Revenue Code because (1) you have not been notified that you are subject to back-up withholding as a result of failure to report all interest or dividends, (2) the Internal Revenue Service has notified you that you are no longer subject to back-up withholding or (3) you are exempt. [ ] - -------------------------------------------------------------------------------- PAYOR'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN) CERTIFICATE -- UNDER THE PENALTIES PART 3 OF PERJURY, I CERTIFY THAT THE CHECK IF INFORMATION PROVIDED ON THIS FORM AWAITING TIN IS TRUE, CORRECT AND COMPLETE. [ ] SIGNATURE DATE ------------- ----------- - -------------------------------------------------------------------------------- BOX 4 BOX 5 - --------------------------------------- --------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5 AND 6) (SEE INSTRUCTIONS 1, 5 AND 6) To be completed ONLY if certificates To be completed ONLY if certificates for Old Capital Securities in a for Old Capital Securities in a liquidation amount not tendered, or liquidation amount not tendered, or New Capital Securities are to be New Capital Securities, are to be issued in the name of someone other delivered to someone other than the than the person whose signature person whose signature appears in Box appears in Box 2. 2 or to an address other than that shown in Box 1. Issue and deliver: Deliver: (check appropriate boxes) (check appropriate boxes) [ ] Old Capital Securities not tendered [ ] Old Capital Securities not tendered [ ] New Capital Securities, to: [ ] New Capital Securities, to: Name Name ---------------------------------- ---------------------------------- (PLEASE TYPE OR PRINT) (PLEASE TYPE OR PRINT) Please complete the Substitute Form Address W-9 at Box 3 ------------------------------- -------------------------------------- Tax I.D. or Social Security Number: -------------------- - --------------------------------------- --------------------------------------- GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE Payer.--Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. - --------------------------------------- -------------------------------------- FOR THIS TYPE OF GIVE THE SOCIAL FOR THIS TYPE OF GIVE THE SOCIAL ACCOUNT: SECURITY NUMBER ACCOUNT: SECURITY NUMBER OF -- OF -- - --------------------------------------- -------------------------------------- 1. An individual's The individual 8. Sole The owner (4) account proprietorship account 2. Two or more The actual owner 9. A valid The legal (Do entity individuals of the account trust, estate, not furnish (joint account) or, if combined or pension trust the identifying funds, any one of number of the the individuals personal (1) representative or trustee unless the legal entity itself is not designated in the account title.)(5) 3. Husband and The actual owner 10. Corporate The corporation wife (joint of the account account account) or, if joint funds, either person (1) 4. Custodian The minor (2) 11. Religious, The organization account of a charitable, or minor (Uniform educational Gift to Minors organization Act) account 5. Adult and minor The adult or, if 12. Partnership The partnership (joint account) the minor is the account held in only contributor, the name of the the minor (1) business 6. Account in the The ward, minor, 13. Association, The organization name of guardian or incompetent club, or other or committee for person (3) tax exempt a designated organization ward, minor, or incompetent person 7. a. The usual The grantor- 14. A broker or The broker or revocable trustee (1) registered nominee savings trust nominee account (grantor is also trustee) b. So-called trust The actual owner 15. Account with The public entity account that is (1) the Department not a legal or of Agriculture valid trust in the name of under State law a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments - --------------------------------------- -------------------------------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup with-holding on ALL payments include the following: -- A corporation. -- A financial institution. -- An organization exempt from tax under section 501(a), or an individual retirement plan. -- The United States or any agency or instrumentality thereof. -- A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. -- A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. -- An international organization or any agency or instrumentality thereof. -- A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. -- A real estate investment trust. -- A common trust fund operated by a bank under section 584(a). -- An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(I). -- An entity registered at all times under the Investment Company Act of 1940. -- A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: -- Payments to nonresident aliens subject to withholding under section 1441. -- Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. -- Payments of patronage dividends where the amount received is not paid in money. -- Payments made by certain foreign organizations. -- Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: -- Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. -- Payments of tax-exempt interest (including exempt-interest dividends under section 852). -- Payments described in section 6049(b)(5) to nonresident aliens. -- Payments on tax-free covenant bonds under section 1451. -- Payments made by certain foreign organizations. -- Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payee. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMA-TION.--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFOR-MATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed either if (a) Certificates are forwarded herewith or (b) tenders are to be made pursuant to the procedures for tender by book-entry transfer set forth in "The Exchange Offer - Procedures for Tendering Old Capital Securities" in the Prospectus. Certificates for Old Capital Securities being tendered, or timely confirmation of a book-entry transfer of such Old Capital Securities into the Exchange Agent's account at DTC, as well as this Letter of Transmittal (or a facsimile therof), properly completed and duly executed, with any required siganture guarantees, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Old Capital Securities may be tendered in whole or in part in the liquidation amount of $100,000 (100 Old Capital Securities) and integral multiples of $1,000 in excess thereof; provided that, if any Old Capital Securities are tendered for exchange in part, the untendered liquidation amount thereof must be $100,000 (100 Old Capital Securities) or any integral multiple of $1,000 in excess thereof. Holders who wish to tender their Old Capital Securities and (i) whose Old Capital Securities are not immediately available or (ii) who cannot deliver their Old Capital Securities, this Letter of Transmittal and all other required documents to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date or (iii) who cannot complete the procedures for delivery by book-entry transfer on a timely basis may tender their Old Capital Securities by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in "The Exchange Offer -- Procedures for Tendering Old Capital Securities -- Guaranteed Delivery" in the Prospectus. Pursuant to such procedures: (i) such tender must be made by or through an Eligible Institution (as defined below); (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Trust and the Guarantor, must be received by the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date; and (iii) the Certificates (or a Book-Entry Confirmation) representing all tendered Old Capital Securities, in proper form for transfer, together with a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent within three New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in "The Exchange Offer -- Procedures for Tendering Old Capital Securities" in the Prospectus. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile or mail to the Exchange Agent, and must include a guarantee by an Eligible Institution in the form set forth in such Notice. As used herein and in the Prospectus, "Eligible Institution" means a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution," including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association. THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSUME DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. CERTIFICATES AND THIS LETTER OF TRANSMITTAL SHOULD NOT BE SENT TO THE TRUST OR THE GUARANTOR. TENDERING HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Old Capital Securities for exchange. 2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of Transmittal is required if: (i) this Letter of Transmittal is signed by the registered holder (which term, for purposes of this document, shall include any participant in DTC whose name appears on a security position listing as the owner of the Old Capital Securities) of Old Capital Securities tendered herewith, unless such holder has completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" above, or (ii) such Old Capital Securities are tendered for the account of a firm that is an Eligible Institution. In all other cases, an Eligible Institution must guarantee the signature(s) on this Letter of Transmittal. 3. INADEQUATE SPACE. If the space provided in the box entitled "Description of Old Capital Securities Tendered" is inadequate, the Certificate number(s) and/or liquidation amount of Old Capital Securities and any other required information should be listed on a separate signed schedule which is attached to this Letter of Transmittal. 4. PARTIAL TENDERS; WITHDRAWALS. Tenders of Old Capital Securities will be accepted in only in the liquidation amount of $100,000 (100 Old Capital Securities) and integral multiples of $1,000 in excess thereof, provided that any Old Capital Securities are tendered for exchange in part, the untendered liquidation amount thereof must be $100,000 (100 Old Capital Securities) or any integral multiple of $1,000 in excess thereof. If fewer than all the Old Capital Securities evidenced by any Certificate submitted are to be tendered; fill in the liquidation amount of Old Capital Securities which are to be tendered in the box entitled "Liquidation Amount of Old Capital Securities Tendered (if liquidation amount is less than all)." In such case, new Certificate(s) for the remainder of the Old Capital Securities that were evidenced by such old Certificate(s) will only be sent to the holder of Old Capital Securities, promptly after the Expiration Date. All Old Capital Securities represented by Certificates delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. Except as otherwise provided herein, tenders of Old Capital Securities may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. In order for a withdrawal to be effective on or prior to that time, a written, telegraphic, telex or facsimile transmission of such notice of withdrawal must be timely received by the Exchange Agent at one of its addresses set forth above or in the Prospectus prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must specify the name of the person who tendered the Old Capital Securities to be withdrawn, the aggregate liquidation amount of Old Capital Securities to be withdrawn, and (if Certificates for Old Capital Securities have been tendered) the name of the registered holder of the Old Capital Securities as set forth on the Certificate for the Old Capital Securities, if different from that of the person who tendered such Old Capital Securities. If Certificates for the Old Capital Securities have been delivered or otherwise identified to the Exchange Agent, then prior to the physical release of such Certificates for the Old Capital Securities, the tendering holder must submit the serial numbers shown on the particular Certificates for the Old Capital Securities to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Old Capital Securities tendered for the account of an Eligible Institution. If Old Capital Securities have been tendered pursuant to the procedures for book-entry transfer set forth in "The Exchange Offer -- Procedures for Tendering Old Capital Securities," the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of Old Capital Securities, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written, telegraphic, telex or facsimile transmission. Withdrawals of tenders of Old Capital Securities may not be rescinded. Old Capital Securities properly withdrawn will not be deemed validly tendered for purposes of the Exchange Offer, but may be retendered at any subsequent time prior to 5:00 p.m., New York City time, on the Expiration Date by following any of the procedures described in the Prospectus under "The Exchange Offer--Procedures for Tendering Old Capital Securities." All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Trust and the Guarantor, in their sole discretion, whose determination shall be final and binding on all parties. None of the Trust, the Guarantor, any affiliate or assign of the Trust or the Guarantor or the Exchange Agent or any other person shall be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Old Capital Securities which have been tendered but which are withdrawn will be returned to the holder thereof without cost to such holder promptly after withdrawal. 5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Old Capital Securities tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the Certificate(s) without alteration, enlargement or any change whatsoever. If any of the Old Capital Securities tendered hereby is owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Old Capital Securities are registered in different name(s) on several Certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or facsimiles thereof) as there are different registrations of Certificates. If this Letter of Transmittal or any Certificates or bond powers are signed by trustees, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and must submit proper evidence satisfactory to the Trust and the Guarantor, in their sole discretion, of such persons' authority to so act. When this Letter of Transmittal is signed by the registered owner(s) of the Old Capital Securities listed and transmitted hereby, no endorsement(s) of Certificate(s) or separate bond power(s) are required unless New Capital Securities are to be issued in the name of a person other than the registered holder(s). Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered owner(s) of the Old Capital Securities listed, the Certificates must be endorsed or accompanied by appropriate bond power(s), signed exactly as the name or names of the registered owner(s) appear(s) on the Certificates. Signatures on such Certificates or bond powers must be guaranteed by an Eligible Institution. 6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Capital Securities are to be issued in the name of a person other than the signer of this Letter of Transmittal, or if New Capital Securities are to be sent to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Certificates for Old Capital Securities not exchanged will be returned by mail, or, if tendered by book-entry transfer, by crediting the account indicated above maintained at DTC. See Instruction 4. 7. IRREGULARITIES. The Trust and the Guarantor will determine, in their sole discretion, all questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of Old Capital Securities, which determination shall be final and binding on all parties. The Trust and the Guarantor reserve the absolute right to reject any and all tenders determined by either of them not to be in proper form or the acceptance of which, or exchange for, may, in the view of counsel to the Trust and the Guarantor, be unlawful. The Trust and the Guarantor also reserve the absolute right, subject to applicable law, to waive any of the conditions of the Exchange Offer set forth in the Prospectus under "The Exchange Offer -- Conditions to the Exchange Offer" or any conditions or irregularity in any tender of Old Capital Securities of any particular holder whether or nor similar conditions or irregularities are waived in the case of other holders. The Trust's and the Guarantor's interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) will be final and binding. No tender of Old Capital Securities will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. None of the Trust, the Guarantor, any affiliate or assign of the Trust or the Guarantor or the Exchange Agent nor any other person shall be under any duty to give notification of any irregularities in tenders or incur any liability for failure to give such notification. 8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and requests for assistance may be directed to the Exchange Agent at its address and telephone number set forth on of this Letter of Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the Letter of Transmittal may be obtained from the Exchange Agent. 9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under the U.S. federal income tax law, a holder whose tendered Old Capital Securities are accepted for exchange is required to provide the Exchange Agent with such holder's correct taxpayer identification number ("TIN") on the Substitute Form W-9 above. If the Exchange Agent is not provided with the correct TIN, the Internal Revenue Service (the "IRS") may subject the holder or the payee to a $50 penalty. In addition, payments to such holders or other payees with respect to New Capital Securities exchanged pursuant to the Exchange Offer may be subject to 31% backup withholding. The box in Part 3 of Substitute Form W-9 may be checked if the tendering holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the holder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Exchange Agent will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Exchange Agent. The Exchange Agent will retain such amounts withheld during the 60 day period following the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent with its TIN within 60 days after the date of the Substitute Form W-9, the amounts retained during the 60 day period will be remitted to the holder and no further amounts shall be retained or withheld from payments made to the holder thereafter. If, however, the holder has not provided the Exchange Agent with its TIN within such 60 day period, amounts withheld will be remitted to the IRS as backup withholding. In addition, 31% of all payments made thereafter will be withheld and remitted to the IRS until a correct TIN is provided. The holder is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the registered owner of Old Capital Securities or of the last transferee appearing on the transfers attached to, or endorsed on, the Old Capital Securities. If the Old Capital Securities are registered in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" above for additional guidance on which number to report. Certain holders (including, among others, corporations, financial institutions and certain foreign persons) may not be subject to these backup withholding and reporting requirements. Such holders should nevertheless complete the Substitute Form W-9 below, and write "exempt" on the face thereof, to avoid possible erroneous backup withholding. A foreign person may qualify as an exempt recipient by submitting a properly completed IRS Form W-8, signed under penalties of perjury, attesting to that holder's exempt status. Please consult the "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" above for additional guidance on which holders are exempt from backup withholding. Backup withholding is not an additional U.S. federal income tax. Rather, the U.S. federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. 10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s) representing Old Capital Securities have been lost, destroyed or stolen, the holder should promptly notify the Exchange Agent. The holder will then be instructed as to the steps that must be taken in order to replace the Certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen Certificate(s) have been followed. 11. SECURITY TRANSFER TAXES. Holders who tender their Old Capital Securities for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, New Capital Securities are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Old Capital Securities tendered, or if a transfer tax is imposed for any reason other than the exchange of Old Capital Securities in connection with the Exchange Offer, then the amount of any such transfer tax (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. EX-99.2 16 EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF ANY OR ALL OUTSTANDING 8.05% SUBORDINATED CAPITAL INCOME SECURITIES, SERIES A (SKISSM*) (LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY) OF COUNTRYWIDE CAPITAL III IN EXCHANGE FOR ITS 8.05% SUBORDINATED CAPITAL INCOME SECURITIES, SERIES B (SKISSM*) Registered holders of outstanding 8.05% Subordinated Capital Income Securities, Series A (the "Old Capital Securities") of Countrywide Capital III, a Delaware statutory business trust (the "Trust"), who wish to tender their Old Capital Securities in exchange for a like principal amount of 8.05% Subordinated Capital Income Securities, Series B (the "New Capital Securities") of the Trust and (i) whose certificates for such Old Capital Securities are not immediately available, (ii) who cannot deliver their certificates for such Old Capital Securities, the Letter of Transmittal and all other documents required by the Letter of Transmittal to The Bank of New York (the "Exchange Agent"), on or prior to 5:00 p.m., New York City time on the Expiration Date (as defined in the Prospectus referred to below) or (iii) who cannot complete the procedures for book-entry transfer on a timely basis, may use this Notice of Guaranteed Delivery or one substantially equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight delivery) or mail to the Exchange Agent. See "The Exchange Offer -- Procedures for Tendering Old Capital Securities -- Guaranteed Delivery" in the Prospectus. The Exchange Agent for the Exchange Offer is: THE BANK OF NEW YORK By Hand or Overnight By Registered or Certified By Facsimile: Courier: Mail: (Eligible Institutions Only) The Bank of New York The Bank of New York (212) 815-6339 101 Barclay Street 101 Barclay Street Corporate Trust Services Floor 7E Confirm by telephone Window,Ground Floor New York, New York 10286 to: New York, New York 10286 Attention: Reorganization (212) 815-2742 Attention: Reorganization Section Section Delivery of this Notice of Guaranteed Delivery to an address other than as set forth above or transmission of instructions via a facsimile transmission to a number other than as set forth above will not constitute a valid delivery. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Institution, such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for Guarantee of Signatures. - ---------- * SKIS is a servicemark of Lehman Brothers Inc. Ladies and Gentlemen: The undersigned hereby tenders to the Trust, upon the terms and subject to the conditions set forth in the Prospectus, dated , 1997 (as the same may be amended or supplemented from time to time) (the "Prospectus") of the Trust and Countrywide Credit Industries, Inc., a Delaware corporation, and the related Letter of Transmittal (which together constitute the "Exchange Offer"), receipt of which is hereby acknowledged, the aggregate liquidation amount of Old Capital Securities set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer - Procedures for Tendering Old Capital Securities." All capitalized terms used herein but not defined herein shall the meanings given to them in the Prospectus. The undersigned understands that tenders of Old Capital Securities will be accepted only in a liquidation amount equal to $100,000 (100 Old Capital Securities) and integral multiples of $1,000 in excess thereof. The undersigned understands that tenders of Old Capital Securities pursuant to the Exchange Offer may not be withdrawn after 5:00 p.m., New York City time, on the Expiration Date. The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1997, unless the Exchange Offer is extended as provided in the Prospectus, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death or incapacity of the undersigned and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. - -------------------------------------------------------------------------------- PLEASE SIGN AND COMPLETE Signature(s) of Registered Owner(s) Name(s) of Registered Holder(s): or Authorized Signatory: ---------- -------------------------------------- - ---------------------------------- -------------------------------------- - ---------------------------------- Taxpayer Identification or Social Security No(s).: --------------- Aggregate Liquidation Amount of Old Address: Capital Securities Tendered: ------------------------------ ------- -------------------------------------- Certificate No.(s) of Old Capital Area Code and Telephone No.: Securities (if available): ---------- --------- Date: --------------------------------- - ----------------------------------- If Tendered Old Capital Securities will be delivered by book-entry transfer, provide DTC Account No. And Transaction Code No. (if available): -------------------- - ----------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This Notice of Guaranteed Delivery must be signed by the registered holder(s) of Old Capital Securities exactly as its (their) name(s) appear on certificates for Old Capital Securities or on a security position listing as the owner of Old Capital Securities, or by person(s) authorized to become registered Holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If a signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or such representative capacity, such person must provide the following information. PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s): ------------------------------------------------------------------- ------------------------------------------------------------------- Capacity: ------------------------------------------------------------------- Address(es): ------------------------------------------------------------------- ------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm or other entity identified as an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereby (a) represents that each holder of Old Capital Securities on whose behalf this tender is being made "own(s)" the Old Capital Securities covered hereby within the meaning of Rule 14e-4 under the Exchange Act, (b) represents that such tender of Old Capital Securities complies with such Rule 14e-4, and (c) guarantees that, within three New York Stock Exchange trading days from the date of this Notice of Guaranteed Delivery, a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), together with certificates representing the Old Capital Securities covered hereby in proper form for transfer and any other required documents, will be deposited by the undersigned with the Exchange Agent. THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL AND OLD CAPITAL SECURITIES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME SET FORTH ABOVE AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE UNDERSIGNED. Name of Firm: Authorized Signature: ------------------------ ------------------- Address: ----------------------------- Name: - ------------------------------------- ----------------------------------- Area Code and Telephone No.: Title: --------- ---------------------------------- Date: - ------------------------------------- ----------------------------------- - -------------------------------------------------------------------------------- DO NOT SEND OLD CAPITAL SECURITIES WITH THIS NOTICE OF GUARANTEED DELIVERY. OLD CAPITAL SECURITIES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS. EX-99.3 17 EXHIBIT 99.3 COUNTRYWIDE CAPITAL III TENDER OF ANY OR ALL OUTSTANDING 8.05% SUBORDINATED CAPITAL INCOME SECURITIES, SERIES A (SKIS[Servicemark]*) (LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY) IN EXCHANGE FOR 8.05% SUBORDINATED CAPITAL INCOME SECURITIES, SERIES B (SKIS[Servicemark]*) To Registered Holders: We are enclosing herewith the material listed below relating to the offer (the "Exchange Offer") by Countrywide Capital III, a Delaware statutory business trust (the "Trust"), and Countrywide Credit Industries, Inc., a Delaware corporation (the "Guarantor"), to exchange the Trust's 8.05% Subordinated Capital Income Securities, Series B (the "New Capital Securities"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of the Trust's issued and outstanding 8.05% Subordinated Capital Income Securities, Series A (the "Old Capital Securities") upon the terms and subject to the conditions set forth in the Prospectus, dated , 1997, of the Trust and the Guarantor and the related Letter of Transmittal. Enclosed herewith are copies of the following documents: 1. Prospectus, dated , 1997; 2. Letter of Transmittal; 3. Notice of Guaranteed Delivery; 4. Instruction to Registered Holder from Beneficial Owner; and 5. Letter which may be sent to your clients for whose account you hold Old Capital Securities in your name or in the name of your nominee, to accompany the instruction form referred to above, for obtaining such client's instruction with regard to the Exchange Offer. WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED. The Exchange Offer is not conditioned upon any minimum liquidation amount of Old Capital Securities being tendered. Pursuant to the Letter of Transmittal, each holder of Old Capital Securities will represent to the Trust that (i) it is not an "affiliate" of the Trust, the Guarantor or Countrywide Home Loans, Inc., a wholly-owned subsidiary of the Guarantor ("CHL"), (ii) any New Capital Securities to be received by it are being acquired in the ordinary course of its business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Capital Securities to be received in the Exchange Offer and (iv) if it is not a broker-dealer or is a broker-dealer but will not receive New Capital Securities for its own account in exchange for Old Capital Secutities, it is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Capital Securities. If the tendering holder of Old Capital Securities is a broker-dealer, you will represent on behalf of such broker-dealer that (a) such Old Capital Securities held by such broker-dealer are held only as a nominee or (b) such Old Capital Securities were acquired by such broker-dealer for its own account as a result of market-making activities or other trading activities and acknowledge on behalf of such broker-dealer that such broker-dealer will deliver a prospectus (as amended or supplemented from time to time) meeting the requirements of the Securities Act in connection with any resale of New Capital Securities. By acknowledging that it will deliver and by delivering such a prospectus, such broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The enclosed Instruction to Registered Holder from Beneficial Owner contains an authorization by the beneficial owners of the Old Capital Securities for you to make the foregoing representations. Neither the Trust nor the Guarantor will pay or cause to be paid any fee or commission to any broker or dealer or to any other persons (other than the Exchange Agent for the Exchange Offer) in connection with the solicitation of tenders of Old Capital Securities pursuant to the Exchange Offer. CHL will pay or cause to be paid any transfer taxes payable on the transfer of Old Capital Securities, except as otherwise provided in Instruction 11 of the enclosed Letter of Transmittal. Additional copies of the enclosed material may be obtained from the undersigned. Very truly yours, THE BANK OF NEW YORK NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE AGENT OF THE TRUST OR THE GUARANTOR, OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. - -------- * SKIS is a servicemark of Lehman Brothers Inc. EX-99.4 18 EXHIBIT 99.4 COUNTRYWIDE CAPITAL III INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER OF 8.05% SUBORDINATED CAPITAL INCOME SECURITIES, SERIES A (SKISSM*) (LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY) To Registered Holder: The undersigned hereby acknowledges receipt of the Prospectus, dated , 1997 (the "Prospectus"), of Countrywide Capital III, a Delaware statutory business trust (the "Trust"), and Countrywide Credit Industries, Inc., a Delaware corporation, and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that together constitute the Trust's offer (the "Exchange Offer") to exchange its 8.05% Subordinated Capital Income Securities, Series B (the "New Capital Securities"), for a like aggregate liquidation amount of its issued and outstanding 8.05% Subordinated Capital Income Securities, Series A (the "Old Capital Securities"). Capitalized terms used but not defined herein have the meanings given to them in the Prospectus. This will instruct you, the registered holder, as to the action to be taken by you relating to the Exchange Offer with respect to the Old Capital Securities held by you for the account of the undersigned. 1. The aggregate liquidation amount of the Old Capital Securities held by you for the account of the undersigned is (fill in amount): $ of 8.05% Subordinated Capital Income Securities, Series A. 2. With respect to the Exchange Offer, the undersigned hereby instructs you (check appropriate box): [ ] To TENDER the following Old Capital Securities held by you for the account of the undersigned (insert liquidation amount of Old Capital Securities to be tendered (if any)): $ of 8.05% Subordinated Capital Income Securities, Series A. [ ] NOT to TENDER any Old Capital Securities held by you for the account of the undersigned. - -------- * SKIS is a servicemark of Lehman Brothers Inc. If the undersigned instructs you to tender Old Capital Securities held by you for the account of the undersigned, it is understood that you are authorized to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations, that (i) the undersigned is not an "affiliate" of the Trust, the Guarantor or Countrywide Home Loans, Inc., a wholly-owned subsidiary of the Guarantor, (ii) any New Capital Securities to be received by the undersigned are being acquired in the ordinary course of its business, (iii) the undersigned has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Capital Securities to be received in the Exchange Offer and (iv) if the undersigned is not a broker-dealer or is a broker-dealer but will not receive New Capital Securities for its own account in exchange for Old Capital Secutities, the undersigned is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Capital Securities. If the undersigned is a broker-dealer, it represents that (a) such Old Capital Securities held by the undersigned are held only as a nominee or (b) such Old Capital Securities were acquired by the undersigned for the undersigned's own account as a result of market-making activities or other trading activities and the undersigned acknowledges that it will deliver a prospectus (as amended or supplemented from time to time) meeting the requirements of the Securities Act in connection with any resale of such New Capital Securities. By acknowledging that it will deliver and by delivering such a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. - -------------------------------------------------------------------------------- SIGN HERE Name of beneficial owner(s) (please print): ---------------------------------- Signature(s): ---------------------------------------------------------------- Address: --------------------------------------------------------------------- Telephone Number: ------------------------------------------------------------ Taxpayer identification or Social Security Number: --------------------------- Date: ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- EX-99.5 19 EXHIBIT 99.5 COUNTRYWIDE CAPITAL III TENDER OF ANY OR ALL OUTSTANDING 8.05% SUBORDINATED CAPITAL INCOME SECURITIES, SERIES A (SKISSM*) (LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY) IN EXCHANGE FOR 8.05% SUBORDINATED CAPITAL INCOME SECURITIES, SERIES B (SKISSM*) To Our Clients: We are enclosing herewith a Prospectus, dated , 1997 of Countrywide Capital III, a Delaware statutory business trust (the "Trust"), and Countrywide Credit Industries, Inc., a Delaware corporation (the "Guarantor"), and a related Letter of Transmittal (which together constitute the "Exchange Offer") relating to the offer by the Trust, to exchange its 8.05% Subordinated Capital Income Securities, Series B (the "New Capital Securities"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like aggregate liquidation amount of its issued and outstanding 8.05% Subordinated Capital Income Securities, Series A (the "Old Capital Securities") upon the terms and subject to the conditions set forth in the Exchange Offer. PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997 UNLESS EXTENDED. THE EXCHANGE OFFER IS NOT CONDITIONED UPON ANY MINIMUM LIQUIDATION AMOUNT OF OLD CAPITAL SECURITIES BEING TENDERED. We are the holder of record of Old Capital Securities held by us for your account. A tender of such Old Capital Securities can be made only by us as the record holder and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Old Capital Securities held by us for your account. We request instructions as to whether you wish to tender any or all of the Old Capital Securities held by us for your account pursuant to the terms and conditions of the Exchange Offer. We also request that you confirm that we may on your behalf make the representations contained in the Letter of Transmittal. Pursuant to the Letter of Transmittal, each Holder of Old Capital Securities will represent to the Trust that (i) it is not an "affiliate" of the Trust, the Guarantor or Countrywide Home Loans, Inc., a wholly-owned subsidiary of the Guarantor, (ii) any New Capital Securities to be received by it are being acquired in the ordinary course of its business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Capital Securities to be received in the Exchange Offer and (iv) if it is not a broker-dealer or is a broker-dealer but will not receive New Capital Securities for its own account in exchange for Old Capital Secutities, it is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Capital Securities. If the tendering holder of Old Capital Securities a broker-dealer, we will represent on behalf of such broker-dealer that (a) such Old Capital Securities held by such broker-dealer are held only as a nominee or (b) such Old Capital Securities were acquired by such broker-dealer for its own account as a result of market-making activities or other trading activities and acknowledge on behalf of such broker-dealer that such broker-dealer will deliver a prospectus (as amended or supplemented from time to time) meeting the requirements of the Securities Act in connection with any resale of New Capital Securities. By acknowledging that it will deliver and by delivering such a prospectus, such broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Very truly yours, - ---------- * SKIS is a servicemark of Lehman Brothers Inc. -----END PRIVACY-ENHANCED MESSAGE-----