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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 9, 1996
Chevy Chase Bank, F.S.B. (as Transferor and Servicer under a
Pooling and Servicing Agreement providing for the issuance of Capitol
Revolving Home Equity Loan Asset Backed Certificates, Series 1996-1)
Chevy Chase Bank, F.S.B.
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(Exact Name of Registrant as Specified in Charter)
New York 333-1682 52-0897004
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(State or Other Jurisdiction of (Commission File (I.R.S. Employer
Incorporation) Number) Identification Number)
c/o Stephen R. Halpin, Jr., 8401 Connecticut Avenue,
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Chevy Chase, Maryland 20815
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code (301) 986-7000
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(Former Name or former address, if changed since last report)
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Exhibit List is located on page 4
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Item 5.
Chevy Chase Bank, F.S.B. ("Chevy Chase"), as transferor (the "Transferor")
and as servicer (the "Servicer") registered issuances of up to $500,000,000
principal amount of asset-backed certificates on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Act"),
by a Registration Statement on Form S-3 (Registration File No. 333-1682) (as
amended, the "Registration Statement"). Pursuant to the Registration Statement,
the Transferor caused Capitol Revolving Home Equity Loan Trust 1996-1 to issue
$120,460,000 principal amount of Capitol Revolving Home Equity Loan Asset Backed
Certificates, Series 1996-1 (the "Certificates") on September 24, 1996 (the
"Closing Date").
The Certificates were issued pursuant to a pooling and servicing agreement
(the "Pooling and Servicing Agreement"), dated as of September 1, 1996 (the
"Initial Cut-Off Date"), among Chevy Chase Bank, F.S.B. ("Chevy Chase"), as
Transferor and as Servicer and The Chase Manhattan Bank, as trustee (the
"Trustee") and custodial agent (the "Custodial Agent").
This Current Report on Form 8-K is being filed to file a copy of the
Pooling and Servicing Agreement, the Underwriting Agreement entered into among
Chevy Chase, CS First Boston Corporation, and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, and the Certificate Insurance Policy issued by AMBAC
Indemnity Corporation.
Capitalized terms not defined herein have the meanings assigned in the
Pooling and Servicing Agreement attached hereto as Exhibit 4.1.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(a) Not applicable
(b) Not applicable
(c) Exhibits
1.1 Underwriting Agreement dated September 20, 1996 among Chevy
Chase, CS First Boston Corporation and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
4.1 Pooling and Servicing Agreement dated as of September 1, 1996 among
the Transferor, the Servicer, the Trustee and the Custodial Agent.
99.1 Certificate Insurance Policy issued by AMBAC Indemnity
Corporation.
2
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EXHIBIT INDEX
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Exhibit No. Description
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1.1 Underwriting Agreement dated September 20, 1996 among Chevy
Chase, CS First Boston Corporation and Merrill Lynch, Pierce,
Fenner & Smith Incorporated.
4.1 Pooling and Servicing Agreement dated as of September 1, 1996 among
the Transferor, the Servicer, the Trustee and the Custodial Agent.
99.1 Certificate Insurance Policy issued by AMBAC Indemnity
Corporation.
3
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CAPITOL REVOLVING HOME EQUITY LOAN TRUST 1996-1
By: Chevy Chase Bank, F.S.B., as Transferor
and Servicer
By: /s/ Stephen R. Halpin, Jr.
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Stephen R. Halpin, Jr.
Executive Vice President
Date: October 9, 1996
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EXECUTION COPY
$120,460,000
CHEVY CHASE BANK, F.S.B.
Capitol Revolving Home Equity Loan Asset Backed Certificates,
Series 1996-1, Investor Certificates
UNDERWRITING AGREEMENT
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September 20, 1996
CS FIRST BOSTON CORPORATION
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
World Financial Center
North Tower
250 Vesey Street
New York, NY 10281
Dear Sirs:
1. Introduction. Chevy Chase Bank, F.S.B., a federally chartered stock
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savings bank ("Chevy Chase"), has authorized the issuance and sale of Capitol
Revolving Home Equity Loan Asset Backed Certificates, Series 1996-1, Investor
Certificates (the "Investor Certificates"), and of Capitol Revolving Home Equity
Loan Asset Backed Certificates, Series 1996-1, Transferor Certificates (the
"Transferor Certificates" and together with the Investor Certificates, the
"Certificates"), evidencing interests in the Capitol Revolving Home Equity Loan
Trust 1996-1 (the "Trust") consisting primarily of the Cut-Off Date Trust
Balances of a pool of revolving credit line home equity loans conveyed to the
Trust on the Closing Date (the "Initial Mortgage Loans") and, to the extent of
the availability thereof, the Cut-Off Date Trust Balances of such other
revolving credit line home equity loans to be conveyed to the Trust on or before
June 20, 1997 (the "Subsequent Mortgage Loans") (the Subsequent Mortgage Loans
and the Initial Mortgage Loans and any substitutions therefor, collectively the
"Mortgage Loans" or the "Mortgage Loan Pool") and any additional balances
thereon ("Additional Balances" and together with the Cut-Off Date Trust
Balances, the "Trust Balances"). The Mortgage Loans are secured primarily by
second deeds of trust or mortgages on one-to-four family residential properties.
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The Certificates will be issued under a pooling and servicing agreement
(the "Pooling and Servicing Agreement"), dated as of September 1, 1996 between
Chevy Chase, as transferor and servicer, and The Chase Manhattan Bank, as
trustee (the "Trustee") and custodial agent (the "Custodial Agent"). The
Certificates will evidence fractional undivided interests in the Mortgage Loan
Pool and certain other property held in trust for the holders of such
Certificates (collectively, the "Trust Fund"). The aggregate undivided interest
in the Trust Fund represented by the Investor Certificates will initially be
equal to $120,460,000 which is approximately 98% of (i) the Cut-Off Date Trust
Balances of the Initial Mortgage Loans and (ii) the Original Pre-Funded Amount.
The Trustee, on behalf of the holders of the Investor Certificates will have the
benefit of an irrevocable certificate guaranty insurance policy (the
"Certificate Insurance Policy") issued by AMBAC Indemnity Corporation (the
"Certificate Insurer") pursuant to an insurance and indemnity agreement dated as
of September 24, 1996 (the "Insurance Agreement") among the Certificate Insurer,
Chevy Chase, in its individual capacity and as Transferor and Servicer, and the
Trustee. The forms of the Pooling and Servicing Agreement and the Certificate
Insurance Policy will be filed on a timely basis as exhibits to the Registration
Statement (as such term is hereinafter defined).
The Investor Certificates are more fully described in a Registration
Statement which Chevy Chase has furnished to each of you (together the
"Underwriters," and each of you an "Underwriter"). Capitalized terms used but
not defined herein shall have the meanings given to them in the Pooling and
Servicing Agreement.
The offering of the Investor Certificates will be made by you, and Chevy
Chase understands that you propose to make a public offering of the Investor
Certificates as soon after the date hereof as you deem advisable.
2. Representations and Warranties of Chevy Chase. Chevy Chase represents
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and warrants to, and agrees with, each of the Underwriters that:
(a) Chevy Chase has filed with the Securities and Exchange Commission
(the "Commission"), on February 27, 1996, a registration statement (No. 333-
1682) on Form S-3, including a prospectus, relating to the Investor
Certificates, which has become effective. Such registration statement, as
amended as of the date of this Agreement, is hereinafter referred to as the
"Registration Statement," and the prospectus included in such Registration
Statement, as supplemented by a prospectus supplement (the "Prospectus
Supplement") to reflect the terms of the Investor Certificates as first filed
with the Commission after the date of this Agreement pursuant to and in
accordance with Rule 424(b) ("Rule 424(b)") under the Securities Act of 1933, as
amended (the "1933 Act"), including all material incorporated by reference
therein, is hereinafter referred to as the "Prospectus." A "preliminary
prospectus" means any form of prospectus, including any prospectus supplement,
relating to the Investor Certificates used prior to the date of this Agreement
that is subject to completion.
(b) On the effective date of the Registration Statement, such
Registration Statement conformed in all material respects to the requirements of
the 1933 Act and the rules
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and regulations of the Commission thereunder (the "Rules and Regulations") and
did not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and on the date of this Agreement the Registration
Statement and the preliminary prospectus conform, and at the time of the filing
of the Prospectus in accordance with Rule 424(b), the Registration Statement and
the Prospectus will conform, in all respects to the requirements of the 1933 Act
and the Rules and Regulations, and neither of such documents will include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein (and with
respect to the Prospectus, in the light of the circumstances under which they
were made) not misleading, except that the foregoing does not apply to
statements in or omissions from any of such documents based upon written
information furnished to Chevy Chase by any Underwriter through CS First Boston
Corporation as representative of the Underwriters (the "Representative")
specifically for use therein (it being understood that the only such information
is the Underwriter Information, as defined in Section 8(a)(i)).
(c) Chevy Chase meets the requirements for use of Form S-3 under the
Act.
(d) The documents incorporated by reference in the Registration
Statement and Prospectus, at the time they were or hereafter are filed with the
Commission, complied and will comply in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder.
(e) Since the respective dates as of which information is given in the
Prospectus, or the Prospectus as amended and supplemented, there has not been
any material adverse change in the general affairs, management, or results of
operations of Chevy Chase or of its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus or the Prospectus as amended and supplemented,
nor has there been any adverse change in the general affairs, management, or
results of operations of any other affiliate of Chevy Chase which could have a
material adverse effect on the general affairs, management or results of
operations of Chevy Chase or its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus or the Prospectus as amended and supplemented.
(f) Chevy Chase is a federally chartered stock savings bank duly
organized and validly existing under the laws of the United States of America,
and has full corporate power, authority and legal right to own its properties
and conduct its business as such properties are presently owned and such
business is presently conducted, and to execute, deliver and perform its
obligations under this Agreement, the Pooling and Servicing Agreement, the
Insurance Agreement and the Custodial Agreement, dated the Closing Date (the
"Custodial Agreement") among Chevy Chase, the Trustee, the Custodial Agent and
Norwest Bank Minnesota, National Association, as Document Custodian, and to
cause the Certificates to be issued. Chevy Chase has conducted and is
conducting its business so as to comply in all material respects with all
applicable statutes and all regulations, including, without limitation, all
regulations, decisions, directives and orders of, as applicable, the Office of
Thrift Supervision and the Federal Home Loan Bank of Atlanta.
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(g) Except as set forth in the Prospectus, or the prospectus as amended
and supplemented, (i) there are no legal, governmental or regulatory proceedings
pending to which Chevy Chase is a party or of which any of its property is the
subject, which, if determined adversely to Chevy Chase, would individually or in
the aggregate have a material adverse effect on the performance by Chevy Chase
of this Agreement, the Pooling and Servicing Agreement, the Insurance Agreement
or the Custodial Agreement or the consummation of the transactions contemplated
hereunder or thereunder and (ii) to the best of its knowledge, no such
proceedings are threatened or contemplated by governmental or regulatory
authorities or threatened by others.
(h) This Agreement has been duly authorized and validly executed and
delivered by Chevy Chase and constitutes a valid and binding agreement of Chevy
Chase, enforceable against Chevy Chase in accordance with its terms, except to
the extent that (i) the enforceability hereof may be subject to insolvency,
reorganization, moratorium, receivership, conservatorship, or other similar
laws, regulations or procedures of general applicability now or hereafter in
effect relating to or affecting creditors', or other obligees', rights generally
or the rights of creditors or obligees of federally chartered stock savings
banks, the deposits of which are insured by the Federal Deposit Insurance
Corporation (the "FDIC"), (ii) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought
and (iii) rights to indemnification and contribution under this Agreement may be
limited by state or federal securities laws or the policies underlying such
laws.
(i) The Pooling and Servicing Agreement, the Insurance Agreement and
the Custodial Agreement have been duly authorized and, when executed and
delivered by Chevy Chase and assuming the due authorization, execution and
delivery of the Pooling and Servicing Agreement, the Insurance Agreement and the
Custodial Agreement by the other parties thereto, will constitute valid and
binding obligations of Chevy Chase enforceable against Chevy Chase in accordance
with their respective terms, except to the extent that (i) the enforceability
thereof may be subject to insolvency, reorganization, moratorium, receivership,
conservatorship, or other similar laws, regulations or procedures of general
applicability now or hereafter in effect relating to or affecting creditors', or
obligees' rights generally or the rights of creditors' or obligees' of federally
chartered stock savings banks, the deposits of which are insured by the FDIC and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
(j) The issuance and delivery of the Certificates, the consummation of
any other of the transactions contemplated herein, in the Pooling and Servicing
Agreement, in the Insurance Agreement, or in the Custodial Agreement, or the
fulfillment of the terms of this Agreement, the Pooling and Servicing Agreement,
the Insurance Agreement, or the Custodial Agreement do not and will not conflict
with or violate any term or provision of the Charter or By-Laws of Chevy Chase,
any statute, order or regulation applicable to Chevy Chase of any court,
regulatory body, administrative agency or governmental body having jurisdiction
over Chevy Chase and do not and will not conflict with, result in a breach or
violation or the acceleration of or constitute a
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default under or result in the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of Chevy Chase pursuant to the
terms of, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Chevy Chase is a party or by which Chevy Chase
may be bound or to which any of the property or assets of Chevy Chase may be
subject except for conflicts, violations, breaches, accelerations and defaults
which would not, individually or in the aggregate, be materially adverse to
Chevy Chase or materially adverse to the transactions contemplated by this
Agreement.
(k) Arthur Andersen LLP is an independent public accountant with
respect to Chevy Chase as required by the 1933 Act and the Rules and
Regulations.
(l) The direction by Chevy Chase to the Trustee to execute,
authenticate, issue and deliver the Certificates has been duly authorized by
Chevy Chase, and, assuming the Trustee has been duly authorized to do so, when
executed, authenticated, issued and delivered by the Trustee in accordance with
the Pooling and Servicing Agreement, the Certificates will be validly issued and
outstanding and will be entitled to the benefits of the Pooling and Servicing
Agreement.
(m) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of the United
States is required for the issuance and sale of the Investor Certificates, or
the consummation by Chevy Chase of the other transactions contemplated by this
Agreement, the Pooling and Servicing Agreement, the Insurance Agreement, or the
Custodial Agreement, except the registration under the 1933 Act of the Investor
Certificates and such consents, approvals, authorizations, registrations or
qualifications as may have been obtained or effected or as may be required under
securities or Blue Sky laws in connection with the purchase and distribution of
the Investor Certificates by you.
(n) Chevy Chase possesses all material licenses, certificates,
authorities or permits issued by the appropriate state, Federal or foreign
regulatory agencies or bodies necessary to conduct the business now conducted by
it and as described in the Prospectus and Chevy Chase has not received notice of
proceedings relating to the revocation or modification of any such license,
certificate, authority or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would materially and
adversely affect the conduct of its business, operations, financial condition or
income.
(o) At the time of execution and delivery of the Pooling and Servicing
Agreement, with respect to the Initial Mortgage Loans, and as of the applicable
Transfer Date, with respect to the Subsequent Mortgage Loans, Chevy Chase (i)
will have good and marketable title to the Mortgage Loans being transferred by
it to the Trustee pursuant thereto, free and clear of any lien, mortgage,
pledge, charge, encumbrance, adverse claim or other security interest
(collectively, "Liens"), except for the transfers and encumbrances for the
benefit of the Prior Trusts, (ii) will not have assigned to any person any of
its right, title or interest in such Mortgage Loans (other than such Prior
Trusts) or in the Pooling and Servicing Agreement or the Investor Certificates
and (iii) will have the power and authority to sell such Mortgage Loans to the
Trustee and to sell the Investor Certificates to you, and upon execution and
delivery of the Pooling and Servicing
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Agreement by the Trustee, the Trustee will have acquired beneficial ownership of
all of Chevy Chase's right, title and interest in and to the Mortgage Loans,
except for the transfers and encumbrances for the benefit of the Prior Trusts,
and upon delivery to you of the Investor Certificates you will have good and
marketable title to the Investor Certificates, in each case free of Liens.
(p) As of the Initial Cut-Off Date, each of the Initial Mortgage Loans
will meet the eligibility criteria described in the Prospectus and as of the
related Cut-Off Date for the Subsequent Mortgage Loans and any Eligible
Substitute Mortgage Loans, each of the Subsequent Mortgage Loans and Eligible
Substitute Mortgage Loans, as applicable, will meet the eligibility criteria
described in the Prospectus.
(q) The Trust Fund created by the Pooling and Servicing Agreement is
not, and immediately following the issuance and sale of the Investor
Certificates will not be, required to be registered as an "investment company"
under the Investment Company Act of 1940, as amended (the "1940 Act"), as in
effect on the date hereof.
(r) Each of the Investor Certificates, the Pooling and Servicing
Agreement, the Insurance Agreement and the Certificate Insurance Policy conforms
in all material respects to the descriptions thereof contained in the
Prospectus.
(s) Any taxes, fees and other governmental charges in connection with
the execution, delivery and issuance of this Agreement, the Pooling and
Servicing Agreement, the Insurance Agreement and the Certificates that are
required to be paid by Chevy Chase at or prior to the Closing Date have been
paid or will be paid at or prior to the Closing Date.
(t) As of the Closing Date, the representations and warranties of Chevy
Chase in the Pooling and Servicing Agreement and the Insurance Agreement will be
true and correct in all material respects.
Any certificate signed by an officer of Chevy Chase and delivered to you in
connection with an offering of the Investor Certificates shall be deemed, and
shall state that it is, a representation and warranty as to the matters covered
thereby to each person to whom the representations and warranties in this
Section 2 are made.
3. Purchase and Sale. The Underwriters' commitment to purchase the Investor
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Certificates pursuant to this Agreement shall be deemed to have been made on the
basis of the representations and warranties herein contained and shall be
subject to the terms and conditions herein set forth. Chevy Chase agrees to
instruct the Trustee to issue and agrees to sell to the Underwriters, and the
Underwriters agree, severally and not jointly, to purchase from Chevy Chase at a
purchase price set forth on Schedule 1 hereto, the principal amount of Investor
Certificates set forth opposite your respective names on Schedule 1 hereto.
4. Delivery and Payment. Payment of the purchase price for, and delivery of,
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any Investor Certificates to be purchased by you shall be made at the office of
Shaw, Pittman, Potts
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& Trowbridge, 2300 N Street, N.W., Washington, D.C., or at such other place as
shall be agreed upon by you and Chevy Chase, at 10:00 a.m. New York City time on
September 24, 1996 (the "Closing Date"), or at such other time or date as shall
be agreed upon in writing by you and Chevy Chase. Payment shall be made to Chevy
Chase by wire transfer of same day funds payable to the account of Chevy Chase.
Delivery of the Investor Certificates shall be made to you for your account
against payment of the purchase price thereof. Such Investor Certificates shall
be in such denominations and registered in such names as you may request in
writing at least one Business Day prior to the Closing Date. For purposes of
Rule 15c6-1 under the Exchange Act, the Closing Date (if later than the
otherwise applicable settlement date) shall be the settlement date for payment
of funds and delivery of the Investor Certificates. Such Investor Certificates,
which may be in temporary form, will be made available for examination and
packaging by you no later than 3:00 p.m. on the Business Day prior to the
Closing Date.
5. Covenants of Chevy Chase. Chevy Chase covenants with each of the
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Underwriters as follows:
(a) Chevy Chase will file the Prospectus with the Commission pursuant to
and in accordance with subparagraph (2) (or, if applicable and if consented to
by the Underwriters, subparagraph (5)) of Rule 424(b) not later than the second
Business Day following the execution and delivery of this Agreement. Chevy
Chase will advise the Underwriters promptly of any such filing pursuant to Rule
424(b).
(b) If at any time when the Prospectus as amended or supplemented is
required by the 1933 Act to be delivered in connection with sales of the
Investor Certificates by you, any event shall occur or condition exist as a
result of which it is necessary, in the opinion of counsel for Chevy Chase, to
further amend or supplement the Prospectus as then amended or supplemented in
order that the Prospectus as amended or supplemented will not include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of circumstances existing at the time
it is delivered to a purchaser, not misleading or if it shall be necessary, in
the opinion of any such counsel, at any such time to amend or supplement the
Registration Statement or the Prospectus as then amended or supplemented in
order to comply with the requirements of the 1933 Act or the Rules and
Regulations thereunder, Chevy Chase will promptly prepare and, subject to the
other provisions of this Section 5, file with the Commission such amendment or
supplement as may be necessary to correct such untrue statement or omission or
to make the Registration Statement comply with such requirements, and within two
Business Days will furnish to you as many copies of the Prospectus, as amended
or supplemented, as you shall reasonably request.
(c) Chevy Chase will give you reasonable notice of its intention to file
any amendment to the Registration Statement, the Prospectus or the Prospectus as
amended or supplemented, pursuant to the 1933 Act, will furnish you with copies
of any such amendment or supplement proposed to be filed a reasonable time in
advance of filing, and will not file any such amendment or supplement to which
you shall object. Neither the consent of the Underwriters (or
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their Representative) to, nor the delivery by the Representative of, any such
amendment or supplement shall constitute a waiver of any of the conditions set
forth in Section 6.
(d) Chevy Chase will notify you immediately, and confirm the notice in
writing, (i) of the effectiveness of any amendment to the Registration
Statement, (ii) of the mailing or the delivery to the Commission for filing of
any supplement to the Prospectus or the Prospectus as amended or supplemented,
(iii) of the receipt and contents of any comments from the Commission with
respect to the Registration Statement or the Prospectus or the Prospectus as
amended or supplemented, (iv) of any request by the Commission for any amendment
to the Registration Statement or any amendment or supplement to the Prospectus
or for additional information and (v) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose. Chevy Chase will make every
reasonable effort to prevent the issuance of any stop order and, if any stop
order is issued, to obtain the lifting thereof at the earliest possible moment.
(e) Chevy Chase will deliver to you as many signed and as many conformed
copies of each Registration Statement (as originally filed) and of each
amendment thereto (including exhibits filed therewith or incorporated by
reference therein and documents incorporated by reference in the Prospectus) as
you may reasonably request.
(f) Chevy Chase will cause the Trust Fund to make generally available to
holders of the Investor Certificates, as soon as practicable, but not later than
90 days after the close of the period covered thereby, an earnings statement of
the Trust Fund covering a period of at least 12 consecutive months beginning not
later than the first day of the first fiscal quarter following the Closing Date
and, in each case, satisfying the provisions of Section 11(a) of the 1933 Act
and the Rules and Regulations (including Rule 158).
(g) Chevy Chase will endeavor, in cooperation with you, to qualify the
Investor Certificates for offering and sale under the applicable securities laws
of such states and other jurisdictions of the United States as you may
designate, and will maintain or cause to be maintained such qualifications in
effect for as long as may be required for the distribution of the Investor
Certificates. Chevy Chase will file or cause the filing of such statements and
reports as may be required by the laws of each jurisdiction in which the
Investor Certificates have been qualified as above provided.
(h) Chevy Chase will not, without your prior consent, publicly offer or
sell or contract to sell any mortgage pass-through certificates, mortgage pass-
through notes or collateralized mortgage obligations or other similar
securities, of which Chevy Chase is the issuer, representing interests in or
secured by other mortgage-related assets for a period of 30 days following the
commencement of the offering of the Investor Certificates to the public.
(i) So long as the Investor Certificates shall be outstanding, Chevy
Chase will deliver to you the annual statement as to compliance delivered to the
Trustee pursuant to Section 3.9 of the Pooling and Servicing Agreement and the
annual statement of a firm of independent
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public accountants furnished to the Trustee pursuant to Section 3.10 of the
Pooling and Servicing Agreement, as soon as such statements are furnished to the
Trustee.
(j) Chevy Chase will apply the net proceeds from the sale of the Investor
Certificates in the manner set forth in the Prospectus.
(k) If, between the date hereof or, if earlier, the dates as of which
information is given in the Prospectus and the Closing Date, to the knowledge of
Chevy Chase there shall have been any material change, or any development
involving a prospective material change in or affecting the general affairs,
management, financial position, shareholders' equity or results of operations of
Chevy Chase, Chevy Chase will give prompt written notice thereof to you.
(l) Chevy Chase, during the period when the Prospectus is required to be
delivered under the 1933 Act, will file promptly all documents required to be
filed with the Commission pursuant to Section 13 or 14 of the Exchange Act,
including, without limitation, a Form 8-K containing this Agreement, the Pooling
and Servicing Agreement and the Certificate Insurance Policy.
6. Conditions of the Obligations of the Underwriters. The obligations of the
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several Underwriters to purchase the Investor Certificates pursuant to this
Agreement are subject to the accuracy on and as of the Closing Date of the
representations and warranties on the part of Chevy Chase herein contained, to
the accuracy of the statements of officers of Chevy Chase made pursuant hereto,
to the performance by Chevy Chase of all of its obligations hereunder and to the
following conditions at the Closing Date:
(a) The Prospectus shall have been filed with the Commission in
accordance with the Rules and Regulations and Section 5(a) hereof. No stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or, to the
knowledge of Chevy Chase, threatened by the Commission.
(b) You shall have received the favorable opinion, dated the Closing
Date, of Shaw, Pittman, Potts & Trowbridge, counsel to Chevy Chase, in the form
attached hereto as Exhibit A.
(c) You shall have received the favorable opinion of counsel to the
Trustee, dated the Closing Date, addressed to you and in form and scope
satisfactory to you, to the effect that:
i) The Trustee is duly organized and is validly existing and in good
standing as a banking corporation under the laws of the State of New York.
ii) The Trustee has duly authorized, executed and delivered the
Pooling and Servicing Agreement and the Insurance Agreement.
iii) The Trustee has full power and authority to execute and deliver
the Pooling and Servicing Agreement and the Insurance Agreement and to perform
its obligations
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thereunder and each of the Pooling and Servicing Agreement and the Insurance
Agreement constitutes the valid, legal and binding obligation of the Trustee,
enforceable against the Trustee in accordance with its terms (subject, as to
enforcement, to bankruptcy, reorganization, insolvency, moratorium and other
laws affecting creditors' rights generally and to general equity principles).
iv) The Certificates have been duly executed and authenticated by the
Trustee.
v) The execution and delivery by the Trustee of the Pooling and
Servicing Agreement and the Insurance Agreement and the performance by the
Trustee of its duties thereunder do not conflict with or result in a violation
of (a) any law or regulation of the United States of America or the State of New
York, (b) the charter or by-laws of the Trustee or (c) any order, writ, judgment
or decree.
vi) No consent, approval or authorization of, or registration,
declaration or filing with, any court or governmental agency or body of the
United States of America or any state thereof is required for the execution,
delivery or performance by the Trustee of the Pooling and Servicing Agreement
and the Insurance Agreement.
(d) You shall have received the favorable opinion, dated the date of
Closing Date, of counsel for the Certificate Insurer, in form and scope
satisfactory to you, to the effect that:
i) The Certificate Insurer is duly organized as a corporation and is
validly existing under the laws of the State of Wisconsin, and has the full
power and authority (corporate and other) to issue the Certificate Insurance
Policy, and to take all action required of it under, the Certificate Insurance
Policy, the Insurance Agreement and the Indemnification Agreement, dated
September 20, 1996 (the "Indemnification Agreement") between the Certificate
Insurer and the Underwriters.
ii) The execution, delivery and performance by the Certificate Insurer
of the Certificate Insurance Policy, the Insurance Agreement and the
Indemnification Agreement have been duly authorized by all necessary corporate
action on the part of the Certificate Insurer.
iii) The execution, delivery and performance by the Certificate Insurer
of the Certificate Insurance Policy, the Insurance Agreement and the
Indemnification Agreement do not require the consent or approval of, the giving
of notice to, the registration with, or the taking of any other action in
respect of any state or other governmental agency or authority which has not
previously been effected.
iv) The Certificate Insurance Policy, the Insurance Agreement and the
Indemnification Agreement have been duly authorized, executed and delivered by
the Certificate Insurer and constitute legal, valid and binding obligations of
the Certificate Insurer, enforceable against the Certificate Insurer in
accordance with their terms (subject, as to enforcement, to bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights
-10-
<PAGE>
generally and to general equity principles and to state or federal securities
laws or the policies underlying such laws).
v) The Certificate Insurance Policy is not required to be registered
under the 1933 Act.
(e) You shall have received an opinion, dated the Closing Date, of Shaw,
Pittman, Potts & Trowbridge, counsel to Chevy Chase, addressed to, and
satisfactory to, Standard and Poor's Ratings Services, Moody's Investors
Service, Inc. and you, relating to the perfection of a security interest in the
Trust Balances of the Initial Mortgage Loans to the Custodial Agent.
(f) You shall have received an opinion, dated the Closing Date, of Shaw,
Pittman, Potts & Trowbridge, counsel to Chevy Chase, addressed to, and
satisfactory to, you to the effect that the Certificates will be treated as debt
for federal income tax purposes.
(g) Chevy Chase shall have furnished to you a certificate signed on
behalf of Chevy Chase by the principal accounting or principal financial officer
thereof, dated the Closing Date, as to (i) the accuracy of the representations
and warranties of Chevy Chase herein at and as of the Closing Date, (ii) the
performance by Chevy Chase of all of its obligations hereunder to be performed
at or prior to the Closing Date and (iii) such other matters as you may
reasonably request.
(h) The Trustee shall have furnished to you a certificate of the Trustee,
signed by one or more duly authorized officers of the Trustee, dated the Closing
Date, as to the due acceptance of the Pooling and Servicing Agreement by the
Trustee and the due execution and delivery of the Certificates by the Trustee
thereunder and such other matters as you shall reasonably request.
(i) The Certificate Insurer shall have furnished to you and Chevy Chase a
certificate of the Certificate Insurer, signed by one or more duly authorized
officers of the Certificate Insurer, dated the Closing Date, to the effect that
(i) the information relating to the Certificate Insurer in the Prospectus is
true and correct in all material respects as of the dates specified therein and
(ii) there has been no change in the financial condition of the Certificate
Insurer since December 31, 1995 which could have a material adverse effect on
the Certificate Insurer's ability to meet its obligations under the Certificate
Insurance Policy.
(j) The Certificate Insurance Policy shall have been issued by the
Certificate Insurer pursuant to the Insurance Agreement.
(k) The Investor Certificates shall have been rated "AAA" by Standard and
Poor's Ratings Services or "Aaa" by Moody's Investors Service, Inc., and such
ratings shall not have been rescinded.
(l) You shall have received from Arthur Andersen LLP, or other independent
certified public accountants acceptable to you, letters, on or prior to the date
of this Agreement,
-11-
<PAGE>
delivered at such times in form satisfactory to you, confirming that they are
independent public accountants within the meaning of the 1933 Act and the
applicable published Rules and Regulations thereunder and stating in effect that
(i) they have performed certain specified procedures as a result of which they
determined that certain information of an accounting, financial or statistical
nature (which is limited to accounting, financial or statistical information
derived from the general accounting records of Chevy Chase) set forth in the
Registration Statement and the Prospectus (and any supplements thereto), agrees
with the accounting records of Chevy Chase, excluding any questions of legal
interpretation, and (ii) they have performed certain specified procedures with
respect to the accounts.
(m) Prior to the Closing Date, you shall have been furnished with such
documents and opinions as you may reasonably require in order to evidence the
accuracy and completeness of any of the representations and warranties or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by Chevy Chase in connection with the issuance and sale of the Investor
Certificates as herein contemplated shall be satisfactory in form and substance
to you.
(n) Since the respective dates as of which information is given in the
Prospectus, there shall not have been any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of Chevy Chase otherwise
than as set forth in the Prospectus, the effect of which is in your judgment so
material and adverse as to make it impracticable or inadvisable to proceed with
the public offering or the delivery of the Investor Certificates on the terms
and in the manner contemplated in the Prospectus.
(o) You shall have received evidence satisfactory to you that (i) on or
before the Closing Date, UCC-1 financing statements have been filed with the
Virginia State Corporation Commission and with the Maryland State Department of
Assessments and Taxation, reflecting the interest of the Trust Fund in the
Mortgage Loans and the proceeds thereof.
(p) The Representative shall have received copies of each opinion of
counsel and certificate delivered to either Rating Agency or the Certificate
Insurer, together with a letter addressed to the Representative, dated the
Closing Date, to the effect that each Underwriter may rely on each such opinion
to the same extent as if such opinion were addressed to it as of such date.
(q) Prior to the Closing Date, Chevy Chase shall have furnished to you
such further information, certificates and documents as you may reasonably
request.
If any condition specified in this Section 6 shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by you by
notice to Chevy Chase at any time at or prior to the Closing Date, and such
termination shall be without liability of any party to any other party except as
provided in Section 7.
-12-
<PAGE>
7. Payment of Expenses. Chevy Chase agrees to pay all expenses incident to
-------------------
the performance of its obligations under this Agreement, including without
limitation those related to (i) the filing of the Registration Statement and all
amendments thereto, (ii) the duplication and delivery to you, in such quantities
as you may reasonably request, of copies of this Agreement, (iii) the
preparation, issuance and delivery of the Investor Certificates, (iv) the fees
and disbursements of Arthur Andersen LLP, accountants of Chevy Chase, and fifty
percent of the fees and disbursements of Shaw, Pittman, Potts & Trowbridge, the
remaining fifty percent of such fees (not to exceed the amount previously agreed
upon by Chevy Chase and the Underwriters) and the remaining fifty percent of
such disbursements to be paid by the Underwriters, (v) the qualification of the
Investor Certificates under securities and Blue Sky laws and the determination
of the eligibility of the Investor Certificates for investment in accordance
with the provisions of subsection 5(i), including filing fees, in connection
therewith and in connection with the preparation of any Blue Sky Survey, (vi)
the printing and delivery to you, in such quantities as you may reasonably
request, hereinabove stated, of copies of the Registration Statement and
Prospectus and all amendments and supplements thereto, and of any Blue Sky
Survey, (vii) the duplication and delivery to you, in such quantities as you may
reasonably request, of copies of the Pooling and Servicing Agreement and the
Insurance Agreement, (viii) the fees charged by nationally recognized
statistical rating agencies for rating the Investor Certificates, (ix) the fees
and expenses of the Trustee and its counsel; (x) the fees and expenses of the
Certificate Insurer and its counsel; (xi) the fees and expenses of the Custodial
Agent and its counsel; and (xii) fifty percent of the fees and disbursements of
Stroock & Stroock & Lavan in the amount previously agreed, the remaining fifty
percent of such amount to be paid by the Underwriters.
Notwithstanding the foregoing, if this Agreement is terminated by you in
accordance with the provisions of Section 6 and Section 11(i), Chevy Chase shall
reimburse you for all reasonable out-of-pocket expenses.
8. Indemnification.
---------------
(a) Chevy Chase agrees to indemnify and hold harmless you and each
person, if any, who controls you within the meaning of the 1933 Act or the
Exchange Act, as follows:
i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment or supplement thereto), or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading or arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Prospectus, or any related preliminary prospectus or preliminary prospectus
supplement (or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, unless such untrue statement or omission or alleged untrue statement
or omission was made in reliance upon and in conformity with written information
furnished to Chevy Chase
-13-
<PAGE>
by any Underwriter through the Representative expressly for use in the
Registration Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto), it being understood and agreed that the only
such information furnished by any Underwriter consists of the following
information (collectively, the "Underwriter Information"): (A) the first two
sentences of the sixth paragraph on the cover of the Prospectus (discussing the
lack of a secondary market); (B) the last paragraph on the cover of the
Prospectus (discussing the offering of the Certificates); (C) the first
paragraph on the inside cover of the Prospectus (discussing over-allotments and
stabilization); and (D) the information contained under the heading
"Underwriting" in the Prospectus.
ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever arising out
of or based upon any such untrue statement or omission, or any such alleged
untrue statement or omission, if such settlement is effected with the written
consent of Chevy Chase; and
iii) against any and all expense whatsoever (including the fees and
disbursements of counsel chosen by you, subject to subsection 8(c)) as
reasonably incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever arising out of or based upon
any such untrue statement or omission, to the extent that any such expense is
not paid under i) or ii) above.
This indemnity agreement will be in addition to any liability which Chevy
Chase may otherwise have.
(b) Each of you agrees, severally and jointly, to indemnify and hold
harmless Chevy Chase, each of its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls Chevy Chase within
the meaning of the 1933 Act or the Exchange Act against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or the Prospectus, or any related
preliminary prospectus or preliminary prospectus supplement (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
furnished to Chevy Chase by any Underwriter through the Representative expressly
for use therein, it being understood and agreed that the only such information
furnished by any Underwriter consists of the Underwriter Information. This
indemnity agreement will be in addition to any liability which you may otherwise
have.
(c) Each indemnified party shall give prompt notice to each indemnifying
party of any action commenced against it with respect to which indemnity may be
sought hereunder but failure to so notify an indemnifying party shall not
relieve it from any liability which it may have on account of this indemnity
agreement other than to the extent that such indemnifying party is materially
prejudiced by the indemnified party's failure to provide such notification. An
-14-
<PAGE>
indemnifying party may participate at its own expense in the defense of such
action. If it so elects within a reasonable time after receipt of such notice,
an indemnifying party, jointly with any other indemnifying parties receiving
such notice, may assume the defense of such action with counsel chosen by it and
approved by the indemnified parties defendant in such action, unless such
indemnified parties reasonably object to such assumption on the ground that
there may be legal defenses available to them which are different from or in
addition to those available to such indemnifying party. If an indemnifying
party assumes the defense of such action, the indemnifying parties shall not be
liable for any fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action other than reasonable costs of
investigation. In no event shall the indemnifying parties be liable for the
fees and expenses of more than one counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
unless (i) if the defendants in any such action include one or more of the
indemnified parties and the indemnifying party, one or more of the indemnified
parties shall have employed separate counsel after having reasonably concluded
that there may be legal defenses available to it or them that are different from
or additional to those available to the indemnifying party or to one or more of
the other indemnified parties or (ii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the commencement
of the action. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or threatened
action in respect of which any indemnified party is or could have been a party
and indemnity could have been sought hereunder by such indemnified party unless
such settlement includes an unconditional release of such indemnified party from
all liability on any claims that are the subject matter of such action.
9. Contribution. In order to provide for just and equitable contribution in
------------
circumstances in which the indemnity agreement provided for in Section 8 is for
any reason held to be unenforceable by the indemnified parties although
applicable in accordance with its terms, Chevy Chase on the one hand, and each
of you, on the other, shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by said indemnity
agreement incurred by Chevy Chase and you (i) in such proportion as is
appropriate to reflect the relative benefits received by Chevy Chase on the one
hand and each of you on the other from the offering of the Investor Certificates
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
Chevy Chase on one hand and each of you on the other in connection with the
statements or omissions which resulted in the losses, liabilities, claims,
damages and expenses. The relative benefits received by Chevy Chase on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by Chevy Chase bear to the total underwriting discounts and
commissions received by the Underwriters; provided, however, that no person
-------- -------
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by Chevy
-15-
<PAGE>
Chase or by you and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. Notwithstanding the provisions of this Section 9, you shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Investor Certificates underwritten by you and distributed to
the public were offered to the public exceeds the amount of any damages which
you may have otherwise been required to pay in respect of such losses,
liabilities, claims, damages and expenses. For purposes of this Section 9, each
person, if any, who controls you within the meaning of the 1933 Act or the
Exchange Act shall have the same rights to contribution as each of you and each
director of Chevy Chase, each officer of Chevy Chase who signed the Registration
Statement, and each person, if any, who controls Chevy Chase within the meaning
of the 1933 Act or the Exchange Act shall have the same rights to contribution
as Chevy Chase.
10. Representations, Warranties and Agreements to Survive Delivery. All
--------------------------------------------------------------
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of Chevy Chase submitted pursuant hereto
shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of you or controlling person of you, or by or
on behalf of Chevy Chase and shall survive delivery of any Investor Certificates
to you.
11. Termination of Agreement. You may terminate this Agreement, immediately
------------------------
upon notice to Chevy Chase, at any time at or prior to the Closing Date (i) if
there has occurred any outbreak of hostilities or other calamity or crisis the
effect of which on the financial market of the United States of America is such
as to make it, in your judgment, impracticable to market the Investor
Certificates or enforce contracts for the sale of the Investor Certificates, or
(ii) if trading generally on either the New York Stock Exchange or the American
Stock Exchange has been suspended, or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices for securities have been required, by
either of such exchanges or by order of the Commission or any other governmental
authority, or if a banking moratorium has been declared by either Federal or New
York State authorities. In the event of any such termination, the covenant set
forth in subsection 5(d), the provisions of Section 7, the indemnity agreement
set forth in Section 8, the contribution provisions set forth in Section 9 and
the provisions of Sections 10 and 13 shall remain in effect.
12. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to have been duly given if mailed or transmitted by
any standard form of telecommunication. Notices to CS First Boston Corporation
shall be directed to the address set forth on the first page hereof, or sent by
facsimile machine which produces an electronic confirmation of receipt to
212/318-0532, attention: Investment Banking Department, Transactions Advisory
Group. Notices to Merrill Lynch, Pierce, Fenner & Smith Incorporated shall be
directed to the address set forth on the first page hereof, or sent by facsimile
machine which produces an electronic confirmation of receipt to 212/449-2784,
attention: Syndicate Operations. Notices to Chevy Chase shall be directed to
Chevy Chase Bank, F.S.B., 8401
-16-
<PAGE>
Connecticut Avenue, Chevy Chase, Maryland 20815, or sent by facsimile machine
which produces an electronic confirmation of receipt to 301/986-7401, attention:
Stephen R. Halpin, Jr.
13. Parties. This Agreement shall inure to the benefit of and be binding
-------
upon you and Chevy Chase, and their respective successors. Nothing expressed or
mentioned in this Agreement is intended nor shall it be construed to give any
person, firm or corporation, other than the parties hereto or thereto and their
respective successors and the controlling persons and officers and directors
referred to in Sections 8 and 9 and their heirs and legal representatives, any
legal or equitable right, remedy or claim under or with respect to this
Agreement or any provision herein contained. This Agreement and all conditions
and provisions hereof are intended to be for the sole and exclusive benefit of
the parties and their respective successors and said controlling persons and
officers and directors and their heirs and legal representatives (to the extent
of their rights as specified herein and therein) and except as provided above
for the benefit of no other person, firm or corporation. No purchaser of
Investor Certificates from you shall be deemed to be a successor by reason
merely of such purchase.
14. Representation of Underwriters. The Representative will act for the
------------------------------
several Underwriters in connection with this financing, and any action taken by
the Representative under this Agreement will be binding upon all the
Underwriters.
15. Governing Law and Time. This Agreement shall be governed by the laws of
----------------------
the State of New York and shall be construed in accordance with such laws.
Specified times of day refer to New York City time.
16. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed to be an original, but together they shall constitute but
one instrument.
-17-
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between you and
Chevy Chase in accordance with its terms.
Very truly yours,
CHEVY CHASE BANK, F.S.B.
By: /s/ Mark A. Holles
------------------
Name: Mark A. Holles
Title: Vice President
CONFIRMED AND ACCEPTED, as of the
date first above written:
CS FIRST BOSTON CORPORATION
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By: CS FIRST BOSTON CORPORATION,
as Representative
By: /s/ Nita Sue Cherry
--------------------------
Name: Nita S. Cherry
Title: Director
-18-
<PAGE>
Schedule 1
Underwriting
----------
<TABLE>
<CAPTION>
Purchase Price Proceeds to
Underwriter Percentage Principal Amount Chevy Chase
----------- --------------- ---------------- -----------
<S> <C> <C> <C>
CS First Boston Corporation 99.70% $60,230,000 $60,049,310
Merrill Lynch, Pierce, Fenner & 99.70% $60,230,000 $60,049,310
Smith Incorporated
</TABLE>
-19-
<PAGE>
Exhibit A
[SHAW, PITTMAN, POTTS & TROWBRIDGE LETTERHEAD]
September 24, 1996
Merrill Lynch, Pierce, Fenner & Smith
CS First Boston Corporation Incorporated
Park Avenue Plaza World Financial Center
55 East 52nd Street North Tower - 15th Floor
New York, New York 10055 250 Vesey Street
New York, New York 10281
Standard & Poor's Ratings Moody's Investor Service, Inc.
Services 99 Church Street
25 Broadway New York, New York 10007
New York, New York 10004
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Re: Capitol Revolving Home Equity Loan Asset Backed
Certificates, Series 1996-1
----------------------------------------
Dear Sirs:
We have acted as counsel to Chevy Chase Bank, F.S.B., a federally
chartered stock savings bank ("Chevy Chase"), in connection with the issuance
and sale of $120,460,000 principal amount of Capitol Revolving Home Equity Loan
Asset Backed Certificates, Series 1996-1, (the "Certificates"), issued by
Capitol Revolving Home Equity Loan Trust 1996-1 (the "Trust"). The Certificates
will be issued pursuant to the terms of a Pooling and Servicing Agreement dated
as of September 1, 1996 (the "Pooling and Servicing Agreement") between Chevy
Chase, as Transferor and as Servicer, and The Chase Manhattan Bank, as trustee
and custodial agent (the "Trustee" and the "Custodial Agent," respectively, as
the case may be). Holders of the Certificates will be entitled to the benefits
of a Certificate Insurance Policy (the "Policy") issued pursuant to an Insurance
and Indemnity Agreement dated as of September 24, 1996 (the "Insurance
Agreement") among Chevy Chase, as Transferor and Servicer, AMBAC Indemnity
Corporation ("AMBAC") and the Trustee.
<PAGE>
This opinion is furnished pursuant to Section 6(b) of the Underwriting
Agreement dated September 20, 1996 (the "Underwriting Agreement") among Chevy
Chase, CS First Boston Corporation ("First Boston") and Merrill, Lynch, Pierce
Fenner & Smith Incorporated ("Merrill") (First Boston and Merrill collectively
referred to herein as, the "Underwriters"). Capitalized terms used but not
defined herein shall have the meanings ascribed to such terms in the
Underwriting Agreement.
Because the primary purpose of our professional engagement as counsel to
Chevy Chase was not to establish or confirm factual matters or financial or
accounting matters and because of the wholly or partially non-legal character of
many of the statements contained in the Registration Statement, the Prospectus
and the Prospectus Supplement (or the 8-Ks (as defined below)), we are not
passing upon and do not assume any responsibility for the accuracy, completeness
or fairness of the statements contained in the Registration Statement, the
Prospectus, or the Prospectus Supplement (or the 8-Ks (as defined below)), and
we make no representation that we have independently verified the accuracy,
completeness or fairness of such statements. Without limiting the foregoing, we
assume no responsibility for, and have not independently verified, the accuracy,
completeness or fairness of the financial statements and schedules and other
financial or statistical data included in the Registration Statement, the
Prospectus, or the Prospectus Supplement (or the 8-Ks (as defined below)), and
we have not examined the accounting or financial records from which such
financial statements, schedules and data are derived. We note that, although
certain portions of the Registration Statement (including financial statements
and schedules) have been included therein on the authority of "experts" within
the meaning of the 1933 Act, we are not such experts with respect to any portion
of the Registration Statement, including, without limitation, such financial
statements or schedules or other financial or statistical data included therein.
We have not been requested to, and we render no opinion with respect to the
information contained in the Registration Statement, the Prospectus or the
Prospectus Supplement under the heading "Description of the Certificate Insurer"
or with respect to the Underwriter Information.
In rendering our opinion, we have examined the federal stock charter, as
amended, of Chevy Chase; the bylaws, as amended, of Chevy Chase; a written
consent of the Executive Committee of the Board of Directors of Chevy Chase
effective September 10, 1996; a certificate of corporate existence of Chevy
Chase issued by the Office of Thrift Supervision, Department of the Treasury;
and executed copies of the Pooling and Servicing Agreement, the Underwriting
Agreement, the Custodial Agreement and the Insurance Agreement. In our
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified or photostatic copies
and the authenticity of the originals of such latter documents.
As to factual matters material to our opinion, we have relied upon
certificates of public officials and the certificate of officers of Chevy Chase
attached hereto as Exhibit A (the "Officers' Certificate"), without independent
investigation or verification by us of the accuracy of
<PAGE>
such matters. In basing our opinion and other matters set forth herein on "our
knowledge" or matters "known to us," the words "our knowledge" or "known to us,"
or words to that effect, signify that, in the course of our representation of
Chevy Chase and any affiliates thereof in matters with respect to which we have
been engaged by any of them as legal counsel, no information has come to our
attention that would give us actual knowledge that any such opinions or other
matters are not accurate or that any of the information on which we have relied
is not accurate and complete. Except as otherwise stated herein, we have
undertaken no investigation or verification of such matters. We have not
undertaken to communicate the substance or details of this transaction to all
attorneys in our firm who have performed services for Chevy Chase or its
affiliates as counsel on other matters. The words "our knowledge" or "known to
us," or other words to that effect used herein, are intended to be limited to
the current, actual knowledge of those attorneys in our firm who are familiar
with the subject matter of this opinion and the subject transaction.
In rendering this opinion, we have assumed that each party (other than
Chevy Chase) that has executed or will execute an agreement to which Chevy Chase
is a party has all requisite power and authority and has taken all necessary
action to execute and deliver such agreement and to perform the transactions
contemplated thereby, and that all such agreements are the legal, valid and
binding obligations of such parties (other than Chevy Chase) enforceable against
such parties in accordance with their respective terms.
Based upon the foregoing and subject to the limitations and qualifications
hereinafter set forth, we are of the opinion that:
(i) Chevy Chase has been duly chartered and is validly existing as a
federally chartered stock savings bank under the laws of the United States of
America, and has full corporate power and authority to own its properties and
conduct its business as such properties are presently owned and such business is
presently conducted, and has full corporate power and authority to execute,
deliver and perform its obligations under the Underwriting Agreement, the
Pooling and Servicing Agreement, the Custodial Agreement and the Insurance
Agreement and to cause the Certificates to be issued.
(ii) The Underwriting Agreement, the Pooling and Servicing Agreement, the
Custodial Agreement and the Insurance Agreement have been duly authorized,
executed and delivered by Chevy Chase.
(iii) The Pooling and Servicing Agreement, the Underwriting Agreement, the
Custodial Agreement and the Insurance Agreement constitute valid and binding
obligations of Chevy Chase, enforceable against Chevy Chase in accordance with
their respective terms, subject, as to enforcement, to (A) the effect of
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
receivership, conservatorship or other similar laws, regulations or procedures
of general applicability relating to or affecting creditors' or other obligees'
rights generally or the
<PAGE>
rights of creditors or obligees of federally chartered stock savings banks, the
deposits of which are insured by the Federal Deposit Insurance Corporation; (B)
the application of general principles of equity and the discretion of the court
before which any proceeding is brought (regardless of whether enforceability is
considered in a proceeding in equity or at law) and (C) the qualification that
enforceability of rights to indemnification and contribution under the
Underwriting Agreement may be limited by state or federal securities laws or the
policies underlying such laws. We express no opinion as to the enforceability of
any provision of the Pooling and Servicing Agreement, the Custodial Agreement or
Insurance Agreement specifying post-judgment interest at the contract rate or
providing for waiver of jury trial.
(iv) The direction by Chevy Chase to the Trustee to execute, issue,
countersign and deliver the Certificates, the consummation of any other of the
transactions contemplated in the Underwriting Agreement, the Pooling and
Servicing Agreement, the Custodial Agreement, the Insurance Agreement, or the
fulfillment of the terms of the Underwriting Agreement, the Pooling and
Servicing Agreement, the Custodial Agreement or the Insurance Agreement, (A) do
not and will not conflict with or violate any term or provision of the federal
stock charter or bylaws of Chevy Chase, of any federal or state statute or
regulation applicable to Chevy Chase, or of any order of which we have knowledge
which is applicable to Chevy Chase and issued by any court, regulatory body,
administrative agency or governmental body having jurisdiction over Chevy Chase,
and (B) do not and will not conflict with, result in a breach or violation or
the acceleration of, constitute a default under, or, other than pursuant to the
Pooling and Servicing Agreement, the Custodial Agreement or the Insurance
Agreement, result in the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of Chevy Chase pursuant to, the
terms of any material indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which Chevy Chase is a party or by which Chevy
Chase may be bound or to which any of the property or assets of Chevy Chase may
be subject. We render no opinion pursuant to clause (A) of this paragraph (iv)
with respect to any statute, order or regulation under which rights to indemnity
and contribution for violation of federal or state securities laws may be
limited or prohibited. The opinion in this paragraph (iv) is based solely upon
the Officers' Certificate and our knowledge with respect to the identification
of the material indentures, mortgages, deeds of trust, loan agreements or other
agreements or instruments referred to in clause (B).
(v) The direction by Chevy Chase to the Trustee to execute, countersign
and deliver the Certificates has been duly authorized by Chevy Chase and,
assuming that the Trustee has been duly authorized to do so, the Certificates,
when executed, countersigned and delivered by the Trustee, will be validly
issued and outstanding and will be entitled to the benefits of the Pooling and
Servicing Agreement.
(vi) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of the United
States is required for the issuance of the Certificates and the sale of the
Certificates to the Underwriters on the date hereof, or the
<PAGE>
consummation by Chevy Chase of the other transactions contemplated by the
Underwriting Agreement, the Pooling and Servicing Agreement, the Custodial
Agreement or the Insurance Agreement, except (A) the registration under the 1933
Act of the offering of the Certificates, (B) such consents, approvals,
authorizations, registrations or qualifications as may have been obtained or
effected or as may be required under the securities or "blue sky" laws of any
jurisdiction in connection with the purchase and distribution of the
Certificates and except where the failure to obtain the same would not have a
material adverse effect upon the rights of the Certificateholders and (C) the
filing of a Uniform Commercial Code Financing Statement in the Maryland State
Department of Assessments and Taxation and the Office of the Virginia State
Corporation Commission with respect to the transfer of Mortgage Loans to the
Trust.
(vii) The Registration Statement is effective under the 1933 Act and, to
our knowledge, based upon the Officers' Certificate and oral advice rendered to
us by a staff member of the Commission, no stop order suspending the
effectiveness of the Registration Statement has been issued under the 1933 Act
or proceedings therefor initiated or threatened by the Commission.
(viii) Chevy Chase meets the requirements for use of Form S-3 under the 1933
Act.
(ix) To our knowledge, there are no actions, proceedings or investigations
pending or threatened before any court, administrative agency or other tribunal
to which Chevy Chase is a named party or to which its assets are subject
(A) asserting the invalidity of the Pooling and Servicing Agreement, the
Custodial Agreement, the Insurance Agreement or the Certificates, (B) seeking
to prevent the issuance of the Certificates or the consummation by Chevy Chase
of any of the transactions contemplated by the Pooling and Servicing Agreement,
the Custodial Agreement, the Insurance Agreement or the Underwriting Agreement,
or (C) that might adversely affect the validity or enforceability of the Pooling
and Servicing Agreement, the Insurance Agreement, the Underwriting Agreement or
the Certificates.
(x) The Pooling and Servicing Agreement is not required to be qualified
under the Trust Indenture Act of 1939, as amended.
(xi) The Trust is not required to be registered under the Investment
Company Act of 1940, as amended, and immediately following the issuance and sale
of the Certificates in the manner contemplated by the Pooling and Servicing
Agreement and the Underwriting Agreement, the Trust will not be required to be
so registered.
(xii) The Certificates, the Pooling and Servicing Agreement and the Policy
conform as to legal matters in all material respects to the respective
descriptions thereof contained in the Prospectus.
(xiii) The statements in the Prospectus Supplement under the headings
"Prospectus Supplement Summary of Terms - Certain Federal Income Tax
Consequences," "Prospectus
<PAGE>
Supplement Summary - ERISA Considerations," "Risk Factors - Insolvency-Related
Matters," "Certain Legal Aspects of the Mortgage Loans," "Certain Federal Income
Tax Consequences" and "ERISA Considerations," to the extent that they constitute
matters of law or legal conclusions with respect thereto, have been prepared or
reviewed by us and are correct in all material respects.
We have not participated in the preparation of the documents incorporated
by reference in the Registration Statement or the Prospectus (such documents
(other than (i) the Current Report on Form 8-K filed with the Commission by
Chevy Chase under the Pooling and Servicing Agreement on September 13, 1996 for
the purpose of filing the Consent of KPMG Peat Marwick LLP, the Consent of Shaw,
Pittman, Potts & Trowbridge, and certain audited and unaudited financial
statements of AMBAC Indemnity Corporation, and (ii) the Current Report on Form
8-K that will be filed with the Commission by Chevy Chase as transferor and
servicer under the Pooling and Servicing Agreement after September 24, 1996 for
the purpose of filing the Underwriting Agreement and the Certificate Insurance
Policy (such documents set forth in (i) and (ii), collectively, the "8-Ks")) at
the time they were filed with the Commission pursuant to the Exchange Act, the
"Incorporated Documents").
On the basis of (i) our participation, as counsel to Chevy Chase, with
representatives of Chevy Chase in the preparation of the Prospectus Supplement
and our participation with representatives of Chevy Chase, its accountants and
the Underwriters at meetings in which the contents of the Prospectus Supplement
and related matters were reviewed and discussed and (ii) the examination by us
of such corporate records, statutes, documents and questions of law as we deemed
necessary, but without independent verification by us of the accuracy,
completeness and fairness of the statements contained in the Registration
Statement, the Prospectus or the Prospectus Supplement (in each case excluding
the Incorporated Documents), and without commenting as to the financial
statements and schedules and other financial or statistical data included
therein, nothing has come to out attention that would lead us to believe that
(A) the Registration Statement (excluding the Incorporated Documents), at the
time it 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 (B) the Prospectus or the
Prospectus Supplement (excluding the Incorporated Documents), as of the date
thereof and as of the Closing Date, contained any untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
The foregoing opinions are, with your concurrence, predicated upon and
qualified by the following:
(a) The foregoing opinions are based upon and are limited to the laws
of the State of Maryland, the Commonwealth of Virginia, the State of New York
and the relevant laws of the United States of America, in each case excluding
the choice of law provisions thereof, and we
<PAGE>
render no opinion with respect to the law of any other jurisdiction. You are
advised that George M. Rogers, Jr., whose professional corporation is a member
of our firm, is a director of Chevy Chase and a trustee or director of several
entities affiliated with Chevy Chase. Our opinion does not reflect any
information concerning the matters discussed therein which has been communicated
to Mr. Rogers by reason of his service in the foregoing capacities.
(b) Our opinion is based upon and limited to laws and regulations as
in effect on the date of this letter. We assume no obligation to update the
opinion set forth herein.
(c) Our opinion is limited to the matters set forth in this letter,
and no other opinions should be inferred beyond the matters expressly stated.
Except as agreed by us in writing, our opinion is solely for the benefit of
the addressees shown on the first page hereof and may be relied upon solely by
such addressees for the purposes for which it is being furnished. Without our
express permission, this opinion letter may not be used, circulated, quoted or
otherwise referred to for any purpose except as stated herein, except that
reference may be made to this letter in the list of closing documents pertaining
to the offering of the Certificates.
Very truly yours,
/s/ Shaw, Pittman, Potts & Trowbridge
SHAW, PITTMAN, POTTS & TROWBRIDGE
cc: Chevy Chase Bank, F.S.B.
<PAGE>
- --------------------------------------------------------------------------------
CHEVY CHASE BANK, F.S.B.,
as Transferor and Servicer
and
THE CHASE MANHATTAN BANK,
as Trustee and Custodial Agent
--------------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of September 1, 1996
--------------------------------------
Capitol Revolving Home Equity Loan
Asset Backed Certificates
Series 1996-1
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
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<S> <C>
ARTICLE I DEFINITIONS ..................................................... 1
Section 1.1 Definitions .................................................. 1
Section 1.2 Other Definitional Provisions ................................ 24
Section 1.3 Interest Calculations ........................................ 24
ARTICLE II CONVEYANCE OF MORTGAGE
LOANS; ORIGINAL ISSUANCE OF CERTIFICATES ......................... 25
Section 2.1 Conveyance of Initial Mortgage Loans ......................... 25
Section 2.2 Acceptance by Custodial Agent; Reassignment of Mortgage
Loans; Substitution of Eligible Substitute Mortgage Loans .... 29
Section 2.3 Representations and Warranties Regarding the Servicer ........ 32
Section 2.4 Representations and Warranties of the Transferor Regarding
the Mortgage Loans; Removal and Substitution Obligations ..... 33
Section 2.5 Official Record .............................................. 37
Section 2.6 Retransfers of Mortgage Loans at Election of Transferor ...... 37
Section 2.7 Tax Treatment ................................................ 38
Section 2.8 Conveyances of Subsequent Mortgage Loans ..................... 39
ARTICLE III ADMINISTRATION AND SERVICING OF
MORTGAGE LOANS ................................................. 40
Section 3.1 The Servicer ................................................. 40
Section 3.2 Collection of Certain Mortgage Loan Payments ................. 43
Section 3.3 Permitted Withdrawals from the Certificate Account ........... 45
Section 3.4 Maintenance of Hazard Insurance; Property Protection
Expenses ..................................................... 46
Section 3.5 Assumption and Modification Agreements ....................... 47
Section 3.6 Realization Upon Defaulted Mortgage Loans .................... 47
Section 3.7 Trustee to Cooperate ......................................... 48
Section 3.8 Servicing Compensation; Payment of Certain
Expenses by Servicer ......................................... 49
Section 3.9 Annual Statement as to Compliance ............................ 50
Section 3.10 Annual Independent Public Accountants' Servicing Report ..... 50
Section 3.11 Access to Certain Documentation and Information
Regarding the Mortgage Loans ................................ 50
Section 3.12 Maintenance of Certain Servicing Policies ................... 51
</TABLE>
i
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<TABLE>
<S> <C>
Section 3.13 Reports to the Securities and Exchange Commission ........... 51
Section 3.14 Information Required by the Internal Revenue Service
Generally and Reports of Foreclosures and
Abandonments of Mortgaged Property .......................... 51
Section 3.15 Tax Returns ................................................. 51
ARTICLE IV SERVICING CERTIFICATE; CERTIFICATE
INSURANCE POLICY ................................................ 52
Section 4.1 Servicing Certificate ........................................ 52
Section 4.2 Certificate Insurance Policy ................................. 54
Section 4.3 Replacement Certificate Insurance Policy ..................... 55
ARTICLE V PAYMENTS AND STATEMENTS TO
CERTIFICATEHOLDERS; RIGHTS OF
CERTIFICATEHOLDERS ............................................... 55
Section 5.1 Distributions ................................................ 55
Section 5.2 Calculation of the Investor Certificate Rate ................. 58
Section 5.3 Statements to Certificateholders ............................. 58
Section 5.4 Rights of Certificateholders ................................. 60
Section 5.5 Rights of the Certificate Insurer To Exercise Rights
of Investor Certificateholders ............................... 60
ARTICLE VI THE CERTIFICATES ............................................... 62
Section 6.1 The Certificates ............................................. 62
Section 6.2 Registration of Transfer and Exchange of Investor
Certificates; Restrictions on Transfer ....................... 62
Section 6.3 Mutilated, Destroyed, Lost or Stolen Certificates ............ 64
Section 6.4 Persons Deemed Owners ........................................ 65
Section 6.5 Restrictions on Transfer of Transferor Certificates .......... 65
Section 6.6 Appointment of Paying Agent .................................. 66
Section 6.7 Access to List of Certificateholders' Names and Addresses .... 66
Section 6.8 Actions of Certificateholders ................................ 67
ARTICLE VII THE SERVICER AND THE TRANSFEROR ............................... 68
Section 7.1 Liability of the Servicer .................................... 68
Section 7.2 Merger or Consolidation of, or Assumption of the obligations
of, the Servicer or Transferor ............................... 68
Section 7.3 Limitation on Liability of the Servicer and Others ........... 68
Section 7.4 Delegation of Duties ......................................... 69
Section 7.5 Servicer Not to Resign ....................................... 70
Section 7.6 Limitation on Liability of Certain Persons ................... 71
</TABLE>
ii
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<TABLE>
<S> <C>
Section 7.7 Liability of Transferor ...................................... 71
Section 7.8 Transferor May Own Certificates .............................. 71
ARTICLE VIII DEFAULT ...................................................... 72
Section 8.1 Events of Default ............................................ 72
Section 8.2 Trustee to Act; Appointment of Successor ..................... 74
Section 8.3 Notification to Investor Certificateholders .................. 75
Section 8.4 Waiver of Past Events of Default ............................. 75
ARTICLE IX THE TRUSTEE .................................................... 76
Section 9.1 Duties of Trustee ............................................ 76
Section 9.2 Certain Matters Affecting the Trustee ........................ 78
Section 9.3 Trustee Not Liable for Certificates or Mortgage Loans ........ 79
Section 9.4 Trustee May Own Certificates ................................. 80
Section 9.5 Servicer to Pay Trustee's Fees and Expenses .................. 80
Section 9.6 Eligibility Requirements for Trustee ......................... 80
Section 9.7 Resignation or Removal of Trustee ............................ 81
Section 9.8 Successor Trustee ............................................ 82
Section 9.9 Merger or Consolidation of Trustee ........................... 82
Section 9.10 Appointment of Co-Trustee or Separate Trustee ............... 82
Section 9.11 Waiver of Bond Requirement .................................. 84
Section 9.12 Waiver of Inventory, Accounting and Appraisal Requirement ... 84
Section 9.13 Streit Act .................................................. 84
ARTICLE X TERMINATION ..................................................... 84
Section 10.1 Termination ................................................. 84
ARTICLE XI RAPID AMORTIZATION EVENTS ...................................... 86
Section 11.1 Rapid Amortization Events ................................... 86
Section 11.2 Additional Rights Upon the Occurrence of Certain Events ..... 88
ARTICLE XII MISCELLANEOUS PROVISIONS ...................................... 89
Section 12.1 Amendment ................................................... 89
Section 12.2 Recordation of Agreement .................................... 91
Section 12.3 Limitation on Rights of Certificateholders .................. 91
Section 12.4 Application of Certain Provisions of this Agreement ......... 92
Section 12.5 Governing Law ............................................... 92
Section 12.6 Notices ..................................................... 93
Section 12.7 Severability of Provisions .................................. 93
Section 12.8 Assignment .................................................. 93
Section 12.9 Certificates Nonassessable and Fully Paid ................... 94
</TABLE>
iii
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<TABLE>
<S> <C>
Section 12.10 Counterparts ................................................ 94
Section 12.11 Effect of Headings and Table of Contents .................... 94
Section 12.12 Third Party Beneficiary ..................................... 94
Section 12.13 Merger and Integration ...................................... 94
</TABLE>
iv
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EXHIBITS
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Page
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<S> <C> <C>
Exhibit A Form of Investor Certificate ............................................. A-1
Exhibit B Form of Transferor Certificate ........................................... B-1
Exhibit C Form of Certificate Insurance Policy ..................................... C-1
Exhibit D Loan Agreement Amendment ................................................. D-1
Exhibit E Form of Custodial Agent Certificate as to Mortgage Files ................. E-1
Exhibit F Form of Custodial Agent Certificate as to Mortgage Assignments ........... F-1
Exhibit G Form of Trust Assignment of Mortgage Loan ................................ G-1
Exhibit H Form of Servicer Certificate as to Payment of Trust Balance .............. H-1
Exhibit I Form of Trust Receipt for Release of Mortgage Files to Servicer .......... I-1
Exhibit J Form of Servicing Certificate ............................................ J-1
Exhibit K Form of Monthly Certificateholders' Statement ............................ K-1
Exhibit L Form of Depository Agreement ............................................. L-1
</TABLE>
v
<PAGE>
POOLING AND SERVICING AGREEMENT, dated as of September 1, 1996, between
CHEVY CHASE BANK, F.S.B., a federal savings bank organized under the laws of the
United States, as Transferor and Servicer, and The Chase Manhattan Bank, as
Trustee, Custodial Agent and Prior Trust Trustee,
W I T N E S S E T H T H A T:
-----------------------------
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
------------
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the meanings specified in this
Article.
Accelerated Principal Distribution Amount: With respect to any
-----------------------------------------
Distribution Date, the amount, if any, required to reduce the Investor
Certificate Principal Balance (after giving effect to the distribution of all
other amounts actually distributed on the Investor Certificates on such
Distribution Date) so that the Invested Amount (immediately following such
Distribution Date) exceeds the Investor Certificate Principal Balance (as so
reduced) by the Required Overcollateralization Amount.
Accrual Period: As to any Distribution Date other than the first
--------------
Distribution Date, the period beginning on the immediately preceding
Distribution Date and ending on the day immediately preceding such Distribution
Date, and with respect to the first Distribution Date, the period beginning on
the Closing Date and ending on the day immediately preceding the first
Distribution Date.
Additional Balance: As to any Mortgage Loan (other than 91-1 Mortgage
------------------
Loans) and day, the unpaid balance of any principal advanced under the terms of
the Loan Agreement after the date and time as of which the Cut-Off Date Trust
Balance is calculated.
Aggregate Investor Liquidation Loss Amount: With respect to any
------------------------------------------
Distribution Date, the sum of the Daily Investor Liquidation Loss Amounts for
the related Collection Period.
Agreement: This Pooling and Servicing Agreement and all amendments
---------
hereof and supplements hereto.
1
<PAGE>
Alternative Principal Payment: As to any Distribution Date, the greater of
-----------------------------
(x) 1% of the Investor Certificate Principal Balance immediately prior to such
Distribution Date and (y) the amount (but not less than zero) equal to the
aggregate amount of Principal Collections received during the related Collection
Period less the aggregate amount of Draws made during the related Collection
Period.
Appointment Day: As defined in Section 11.2.
---------------
Appraised Value: As to any Mortgaged Property and time referred to herein,
---------------
the appraised value of the Mortgaged Property based upon the drive-by appraisal
or other estimate of value made by or on behalf of the Transferor at the time
the related Loan Agreement was executed.
Available Funds: As to any Distribution Date, the aggregate amount on
---------------
deposit in the Certificate Account reduced by any withdrawals permitted to be
made pursuant to clauses (ii) and (iii) of Section 3.3(a).
Base Rate: During a billing cycle, as to any Mortgage Loans which have
---------
their interest rate adjusted quarterly, the rate of interest publicly announced
from time to time as the "prime" or "base" rate of interest or any successor
rate of interest charged by the index bank specified in the related Loan
Agreement or any successor rate determined as provided in the Loan Agreement as
in effect at the close of business on the last day of the last full calendar
month of the immediately preceding quarter. During a billing cycle, as to any
Mortgage Loans which have their interest rate adjusted monthly, the highest
prime rate published in the "Money Rates" section of The Wall Street Journal on
-----------------------
the first Business Day of the calendar month.
Basic Overcollateralization Amount: shall mean on any date of
----------------------------------
determination the lesser of (i) $4,517,250 and (ii) the sum of (A) the lesser of
(x) 1% of the Original Investor Certificate Principal Balance and (y) 2% of the
Investor Certificate Principal Balance as of such date of determination, (B) 25%
of the Investor Certificateholders' Floating Allocation Percentage of the Trust
Balances which are 60-89 days delinquent and (C) 75% of the Investor
Certificateholders' Floating Allocation Percentage of the Trust Balances which
are 90 days or more delinquent; provided, however, that if Chevy Chase has been
-------- -------
replaced as Servicer and the Servicing Fee Rate increases up to a maximum rate
of 0.75%, then the rates in subclauses (A)(x) and (A)(y) shall increase by an
equal amount of up to a maximum amount of 0.25%.
Basis Risk Payment: As to any Accrual Period, an amount which is equal to
------------------
the sum of (a) the amount of interest accrued on the Investor Certificate
Principal Balance as of the first day of such Accrual Period (after giving
effect to the distributions made on the first day of such Accrual Period) at a
rate equal to the difference, if any, stated as a per annum rate, between (i)
the Investor Certificate Rate calculated without giving effect to the proviso to
the definition thereof and (ii) the Maximum Rate and (b) any previous Basis Risk
Payment not paid pursuant to Section 5.1(a)(x) or 5.1(b) plus interest accrued
thereon at the Investor Certificate Rate (without giving effect to the proviso
in the definition thereof); and which is payable to Investor Certificateholders
from the following sources and in the following priority: (A) from Investor
Interest Collection pursuant to
2
<PAGE>
Section 5.1(a)(x) and (B) from Principal Collections pursuant to Section 5.1(b)
to the extent that the Overcollateralization Amount exceeds the Basic
Overcollateralization Amount.
BIF: The Bank Insurance Fund, as from time to time constituted, created
---
under the Financial Institutions Reform, Recovery, and Enhancement Act of 1989,
or if at any time after the execution of this instrument the Bank Insurance Fund
is not existing and performing duties now assigned to it, the body performing
such duties on such date.
Book-Entry Certificate: Any Investor Certificate registered in the name of
----------------------
the Depository, Foreign Depository or the nominee of either the Depository or
Foreign Depository, beneficial ownership of which is reflected on the books of
the Depository or the Foreign Depository or on the books of a person maintaining
an account with such Depository or Foreign Depository (directly or as an
indirect participant in accordance with the rules of such Depository or Foreign
Depository).
Business Day: Any day other than a Saturday, a Sunday or a day on which
------------
banking institutions in New York, New York, Chevy Chase, Maryland or the city in
which the Corporate Trust Office or the main business office of the Paying Agent
is located are obligated or authorized by law or executive order to be closed.
Capitalized Interest Account: The account maintained with the Trustee
----------------------------
for the benefit of the Certificateholders pursuant to Section 5.6(a). The
Capitalized Interest Account shall be an Eligible Account.
Capitalized Interest Requirement: With respect to any Distribution Date
--------------------------------
occurring during the Pre-Funding Period, an amount equal to the excess, if any,
of (a) the sum of (i) the amount of interest accrued on the Investor
Certificates during the related Accrual Period at the Investor Certificate Rate
on 98% of the Pre-Funded Amount (excluding any net investment earnings thereon)
immediately following the preceding Distribution Date (or, in the case of the
first Distribution Date, as of the Closing Date) and (ii) the product of (x) the
Premium Rate divided by twelve and (y) 98% of the Pre-Funded Amount (excluding
any net investment earnings thereon) immediately following the preceding
Distribution Date (or, in the case of the first Distribution Date, as of the
Closing Date) over (b) the amount of any net investment income on deposit in the
Pre-Funding Account on such Distribution Date.
Certificate: Any Investor Certificate or Transferor Certificate.
-----------
Certificate Account: The trust account or accounts created and
-------------------
maintained in the name of the Trustee for the benefit of the
Certificateholders and the Certificate Insurer pursuant to Section 3.2(b). The
Certificate Account shall be an Eligible Account.
Certificate Insurance Draw Amount: As to any Distribution Date, an amount
---------------------------------
equal to the sum of (x) the amount by which the amount to be distributed to
Investor Certificateholders pursuant to Section 5.1(a)(ii) and (a)(iii) exceeds
the amount of Investor Interest Collections on deposit in the Certificate
Account on the Business Day preceding such Distribution Date that is available
to be applied therefor and (y) the amount, if any, required to reduce the
Investor
3
<PAGE>
Certificate Principal Balance (after giving effect to all other amounts
distributable and allocable to principal on the Investor Certificates on such
Distribution Date) to the Invested Amount following such Distribution Date.
Notwithstanding the foregoing, as to the earlier of the Stated Maturity Date or
the Dissolution Distribution Date, the Certificate Insurance Draw Amount shall
equal an amount equal to the sum of (i) any amount calculated pursuant to the
preceding sentence and (ii) an amount equal to the remaining Investor
Certificate Principal Balance after giving effect to all other amounts
distributed to Investor Certificateholders in reduction of the Investor
Certificate Principal Balance.
Certificate Insurance Policy: The certificate insurance policy number
----------------------------
AB0078BE dated as of the Closing Date, issued by the Certificate Insurer to the
Trustee for the benefit of the Investor Certificateholders.
Certificate Insurer: AMBAC Indemnity Corporation, any successor thereto
-------------------
or any replacement credit enhancer substituted pursuant to Section 4.3.
Certificate Insurer Default: The occurrence and continuance of the failure
---------------------------
of the Certificate Insurer to make a payment required under the Certificate
Insurance Policy or a Certificate Insurer Insolvency.
Certificate Insurer Insolvency: The Certificate Insurer shall voluntarily
------------------------------
go into liquidation, consent to the appointment of a conservator or receiver or
liquidator or similar person in any insolvency, readjustment of debt, marshaling
of assets and liabilities or similar proceedings of or relating to the
Certificate Insurer or of or relating to all or substantially all of its
property, or a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a conservator,
receiver, liquidator or similar person in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against the
Certificate Insurer and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or the Certificate Insurer
shall admit in writing its inability to pay its debts generally as they become
due, file a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations
Certificate Owner: With respect to an Investor Certificate, the Person
-----------------
who is the beneficial owner of a Book-Entry Certificate.
Certificate Register and Certificate Registrar: The register maintained
----------------------------------------------
and the registrar appointed pursuant to Section 6.2(a).
Certificateholder or Holder: The Person in whose name a Certificate is
---------------------------
registered in the Certificate Register, except that, solely for the purpose of
the giving of any consent, waiver, request or demand pursuant to this Agreement,
unless all Certificates are then so held, any Certificate registered in the name
of the Transferor or the Servicer or any affiliate of either shall be deemed not
to be outstanding and the Percentage Interest evidenced thereby shall not be
taken into
4
<PAGE>
account in determining whether the requisite amount of Percentage Interests
necessary to effect any such consent, waiver, request or demand shall have been
obtained; provided, however, that in determining whether the Trustee shall be
protected in relying upon any such consent, waiver, request or demand, only
Certificates which a Responsible Officer of the Trustee assigned to matters
under this Agreement actually knows to be so owned shall not be so taken into
account.
Chevy Chase: Chevy Chase Bank, F.S.B., a federal savings bank organized
-----------
under the laws of the United States, or its permitted successor in interest.
Closing Date: September 24, 1996.
------------
Code: The Internal Revenue Code of 1986, as the same may be amended from
----
time to time, any successor statutes thereto, and the applicable Department of
the Treasury temporary or final regulations thereunder.
Collection Period: As to any Distribution Date, the calendar month
-----------------
immediately preceding the calendar month in which such Distribution Date
occurs.
Combined Loan-to-Value Ratio: As of any date and as to any Mortgage Loan,
----------------------------
the fraction, expressed as a percentage, the numerator of which is the sum of
(i) the Credit Limit of such Mortgage Loan as of such date and (ii) the unpaid
principal balance (as of the date of execution of the Loan Agreement for such
Mortgage Loan) of the mortgage loan, if any, that is senior in priority to such
Mortgage Loan and which is secured by the same Mortgaged Property, and the
denominator of which is the Appraised Value of the related Mortgaged Property.
Common Mortgage Loan Interests: The Common Mortgage Loans and, to the
------------------------------
extent provided in Section 2.1(a), the related Loan Agreements, Mortgages and
other Mortgage File documents.
Common Mortgage Loans: The Trust 1990 Common Mortgage Loans, the Trust
---------------------
1991 Common Mortgage Loans, the Trust 1992 Common Mortgage Loans, the Trust 1993
Common Mortgage Loans, the Trust 1994 Common Mortgage Loans and, in the event
that 91-1 Mortgage Loans are transferred to the Trust during the Pre-Funding
Period, the Trust 1995 Common Mortgage Loans.
Corporate Trust Office: The office of the Trustee at which at any
----------------------
particular time its corporate trust business shall be principally administered,
which office at the date of execution of this Agreement is located at the
address set forth in Section 12.6.
Credit Limit: As to any Mortgage Loan, the maximum Loan Balance permitted
------------
under the terms of the related Loan Agreement and the Servicer's normal and
customary servicing procedures.
Custodial Agent: As defined in Section 2.1(a).
---------------
5
<PAGE>
Custodial Agreement: The custodial agreement dated September 24, 1996
-------------------
among the Transferor, the Servicer, the Trustee, the Custodial Agent and the
Document Custodian including any amendments or supplements thereto
Cut-Off Date: With respect to each Initial Mortgage Loan, the opening of
------------
business on September 1, 1996 and, with respect to each Subsequent Mortgage Loan
or Eligible Substitute Mortgage Loan, the opening of business on the first day
of the month in which such Subsequent Mortgage Loan or Eligible Substitute
Mortgage Loan, respectively, was transferred to the Trust.
Cut-Off Date Pool Balance: The aggregate of the Cut-Off Date Trust
-------------------------
Balances of the Initial Mortgage Loans.
Cut-Off Date Trust Balance: As to any Mortgage Loan, the unpaid
--------------------------
principal balance thereof as of the applicable Cut-Off Date.
Cycle Date: As to any Mortgage Loan, the day of the month on which the
----------
related billing cycle for such Mortgage Loan ends.
Daily Investor Interest Collections: As to any day, an amount equal to the
-----------------------------------
product of (i) the amount of Trust Interest received by the Servicer for such
day and (ii) the Investor Certificateholders' Floating Allocation Percentage on
such day.
Daily Investor Liquidation Loss Amount: With respect to any day, the
--------------------------------------
amount equal to the product of the Investor Certificateholders' Floating
Allocation Percentage for such day and the Liquidation Loss Amounts for such
day.
Daily Investor Principal Collections: As to any day, an amount equal to
------------------------------------
the product of (i) the aggregate amount of Principal Collections received on
such day and (ii) the Investor Fixed Allocation Percentage on such day.
Defective Mortgage Loan: Any Mortgage Loan which is required to be removed
-----------------------
or replaced by the Transferor pursuant to Section 2.2(c) or 2.4(b) or purchased
or replaced by the Servicer pursuant to Section 3.1.
Definitive Certificates: As defined in Section 6.2(d).
-----------------------
Depository: The initial Depository shall be The Depository Trust Company,
----------
the nominee of which is CEDE & Co., as the registered Holder of one or more
Investor Certificates evidencing the aggregate principal amount of the Investor
Certificates. The Depository at all times shall be a "clearing corporation" as
defined in Section 8-102 of the Uniform Commercial Code of the State of New York
and an organization registered as a "clearing agency" pursuant to Section 17A of
the Securities Exchange Act of 1934, as amended. The Transferor, the Servicer,
the Trustee and the initial Depository shall enter into a Depository Agreement
substantially in the form of Exhibit L.
6
<PAGE>
Depository Participant: A broker, dealer, bank or other financial
----------------------
institution or other Person for whom from time to time a Depository or foreign
Depository effects book-entry transfers and pledges of securities deposited with
the Depository or foreign Depository.
Determination Date: With respect to any Distribution Date, the fifth
------------------
(5th) Business Day prior thereto.
Dissolution Distribution Date: The date on which the proceeds from the
-----------------------------
sale, disposition or liquidation of the Trust Balances of the Mortgage Loans
pursuant to Section 11.2 are received and distributed to Certificateholders.
Distribution Date: October 20, 1996 and the 20th day of each month
-----------------
thereafter (or, if such day is not a Business Day, the next succeeding
Business Day).
Document Custodian: Norwest Bank Minnesota, National Association or its
------------------
successor in interest under Section 3.8 of the Custodial Agreement, and any
Person that is appointed as successor document custodian in accordance with the
terms of the Custodial Agreement.
Draw: With respect to any Mortgage Loan (other than 91-1 Mortgage Loans),
----
an increase in the Loan Balance subsequent to the related Cut-Off Date in
accordance with the related Loan Agreement subject to Section 5.1(c).
Electronic Ledger: The electronic master record of home equity revolving
-----------------
credit line loan accounts (including the Mortgage Loans) maintained by the
Servicer.
Eligible Account: An account that is (i) maintained with a depository
----------------
institution which has a short-term certificate of deposit rating at the time of
any deposit therein in the highest short-term debt rating category by the Rating
Agencies, (ii) one or more accounts with a depository institution whose accounts
are fully insured by either SAIF or BIF of the Federal Deposit Insurance
Corporation with a minimum long-term unsecured debt rating of Baa3, (iii) a
trust account maintained with the Trustee in its corporate trust department or
(iv) otherwise acceptable to each Rating Agency as evidenced by a letter from
such Rating Agency to the Trustee, without reduction or withdrawal of their then
current ratings of the Certificates, and acceptable to the Certificate Insurer.
Eligible Substitute Mortgage Loan: A Mortgage Loan proposed to be
---------------------------------
substituted by the Transferor for a Defective Mortgage Loan which, on the date
of such substitution, shall (i) have an outstanding Loan Balance (except as
provided below) not less than 95% of the Trust Balance of such Defective
Mortgage Loan on the date of such substitution; (ii) have a Loan Rate not less
than the current Loan Rate of such Defective Mortgage Loan and not more than one
hundred (100) basis points in excess of the current Loan Rate of such Defective
Mortgage Loan; (iii) have a Margin that is not less than the Margin of such
Defective Mortgage Loan and not more than one hundred (100) basis points higher
than the Margin of such Defective Mortgage Loan; (iv) have a remaining term to
maturity not later than nor more than six months earlier than the remaining term
7
<PAGE>
to maturity of such Defective Mortgage Loan; (v) comply with each representation
and warranty set forth in Section 2.4(a) as if made on the date of such
substitution; (vi) other than in the case referred to in clause (vii) below,
have a Combined Loan-to-Value Ratio not greater than the Combined Loan-to-Value
Ratio of such Defective Mortgage Loan as of the related Cut-Off Date; (vii) in
the case of an Eligible Substitute Mortgage Loan substituted for a Mortgage Loan
pursuant to Section 3.1(c), have a Combined Loan-to-Value Ratio of not more than
80% (rounded to the nearest whole percent); (viii) have a maximum Loan Rate not
lower than the maximum Loan Rate applicable to such Defective Mortgage Loan;
(ix) have a Loan Rate that is based on the same index as that of such Defective
Mortgage Loan; (x) be secured by a Mortgaged Property that is subject to the
same use (owner-occupied, second home or rental property) and that has the same
structural characteristic (attached or detached) as the Mortgaged Property
securing such Defective Mortgage Loan, provided, however, that an owner-occupied
-------- -------
Mortgaged Property and a detached Mortgaged Property shall satisfy the
applicable requirements of this clause (x) in all cases; and (xi) have a
Mortgage in a lien position not junior to the lien position of the Mortgage of
such Defective Mortgage Loan. If more than one Mortgage Loan is substituted for
Defective Mortgage Loans on any substitution date, the requirements of clause
(i) of this definition shall be satisfied if such Mortgage Loans shall have
aggregate Loan Balances not less than 95% of the aggregate Trust Balances of
such Defective Mortgage Loans on the date of substitution. If balances under a
Mortgage Loan substituted for a Defective Mortgage Loan have been transferred to
any Prior Trust or to any other Person, the requirements of clause (i) of this
definition shall be satisfied if the unpaid principal balance of such Mortgage
Loan transferred to the Trust is not less than 95% of the Trust Balance of such
Defective Mortgage Loan on the date of substitution.
Event of Default: As defined in Section 8.1.
----------------
Excess Spread Conditions: With respect to any day, (a) the average of the
------------------------
Excess Spread Percentages for the preceding three Collection Periods equals or
exceeds 1.5% and (b) the average of the Excess Spread Percentages for the
preceding six Collection Periods equals or exceeds 2%.
Excess Spread Percentage: With respect to any Collection Period, an amount
------------------------
equal to the percentage equivalent of a fraction, (a) the numerator of which is
the product of (x) Investor Interest Collections with respect to such Collection
Period remaining after making the distributions pursuant to Section 5.1(a)(i)
through (iv) on the following Distribution Date and (y) a fraction, the
numerator of which is the number of days in the year and the denominator of
which is the number of days in the Collection Period, and (b) the denominator of
which is the average daily Investor Certificate Principal Balance with respect
to such Collection Period.
Foreclosure Proceedings: Proceedings or action for foreclosure, deed in
-----------------------
lieu of foreclosure or trustee's sale with respect to any Mortgage Loan and
the related Mortgaged Property.
Initial Mortgage Loan: Each Mortgage Loan that is transferred and
---------------------
assigned to the Trust on the Closing Date pursuant to Section 2.1.
Insolvency Event: As defined in Section 11.1(c).
----------------
8
<PAGE>
Insurance Agreement: The insurance and indemnity agreement dated September
-------------------
24, 1996 among Chevy Chase Bank, F.S.B., in its individual capacity, the
Transferor, the Servicer, the Certificate Insurer and the Trustee, including any
amendments or supplements thereto, and from and after the date any replacement
certificate insurance policy or other credit enhancement arrangements are
substituted for the Certificate Insurance Policy pursuant to Section 4.3, the
agreement relating to such replacement surety bonds or other credit enhancement
arrangements.
Insurance Proceeds: Proceeds paid to the Servicer by any insurer other
------------------
than the Certificate Insurer pursuant to any insurance policy covering a
Mortgage Loan, net of any component thereof covering any reasonable expenses
incurred by or on behalf of the Servicer in connection with obtaining such
Insurance Proceeds.
Insured Amount: With respect to any Distribution Date, the Certificate
--------------
Insurance Draw Amount for such Distribution Date.
Interest Period: As to any payment of interest on a Mortgage Loan, the
---------------
period ending on a Cycle Date during which the interest covered by such payment
accrued.
Invested Amount: With respect to any day, an amount equal to the Original
---------------
Invested Amount minus (i) the amount of Investor Principal Collections
previously distributed to Investor Certificateholders including Investor
Principal Collections distributed in payment of any Basis Risk Payment pursuant
to Section 5.1(b), minus (ii) any amounts distributed as principal to
Certificateholders at the end of the Pre-Funding Period from funds on deposit in
the Pre-Funding Account pursuant to Sections 5.1(b) and 5.6(e), minus (iii) an
amount equal to the Aggregate Investor Liquidation Loss Amounts as to any prior
Distribution Date and minus (iv) any Overcollateralization Adjustment Amount
previously distributed to the Transferor Certificateholder.
Investor Certificate: Any certificate executed and authenticated by the
--------------------
Trustee substantially in the form set forth in Exhibit A hereto.
Investor Certificate Interest: With respect to any Distribution Date,
-----------------------------
interest for the related Accrual Period at the applicable Investor Certificate
Rate on the Investor Certificate Principal Balance on the first day of such
Accrual Period (after giving effect to the distributions made on the first day
of such Accrual Period).
Investor Certificate Principal Balance: With respect to any date: (a)
--------------------------------------
the Original Investor Certificate Principal Balance less (b) the aggregate of
----
amounts actually distributed as principal on the Investor Certificates.
Investor Certificate Rate: With respect to the first Accrual Period,
-------------------------
5.69%, and for any subsequent Accrual Period, the sum of (a) LIBOR and (b)
0.19%; provided, however, that in no event shall the Investor Certificate Rate
-------- -------
with respect to any Accrual Period exceed the Maximum Rate.
9
<PAGE>
Investor Certificateholder: The Holder of an Investor Certificate.
--------------------------
Investor Certificateholders' Floating Allocation Percentage: With respect
-----------------------------------------------------------
to any day, the percentage equivalent of a fraction, the numerator of which is
the Invested Amount on the end of the preceding day and the denominator of which
is the Pool Balance on the end of the preceding day (but not more than 100%).
Investor Fixed Allocation Percentage: As to any day, the greater of (x)
------------------------------------
98% and (y) the percentage equivalent of a fraction, the numerator of which is
the Invested Amount and the denominator of which is the Pool Balance on the end
of the preceding day (but not more than 100%).
Investor Insurance Proceeds: As to any Mortgage Loan and day, the product
---------------------------
of (i) the Investor Certificateholders' Floating Allocation Percentage on such
day and (ii) Trust Insurance Proceeds received by the Servicer on such day.
Investor Interest Collections: As to any Distribution Date, an amount
-----------------------------
equal to the sum of (i) aggregate amount of Daily Investor Interest Collections
for the related Collection Period and (ii) amounts deposited in the Certificate
Account pursuant to Sections 5.6(f) and 5.6(g).
Investor Liquidation Proceeds: As to any Mortgage Loan and day, the
-----------------------------
product of (i) the Investor Certificateholders' Floating Allocation Percentage
on such day and (ii) Net Trust Liquidation Proceeds received by the Servicer on
such day.
Investor Loss Reduction Amount: With respect to any Distribution Date, the
------------------------------
portion, if any, of the Aggregate Investor Liquidation Loss Amount for such
Distribution Date and all prior Distribution Dates that has not been (a)
distributed to Investor Certificateholders on such Distribution Date pursuant to
Sections 5.1(a)(v) or 5.1(a)(vi), (b) reflected in a reduction of the
Overcollateralization Amount or (c) funded by the Certificate Insurance Draw
Amount.
Investor Principal Collections: As to any Distribution Date and the
------------------------------
related Collection Period, the aggregate amount of Daily Investor Principal
Collections on deposit in the Certificate Account pursuant to Section 3.2 in
respect of such Distribution Date.
LIBOR: As to the initial Accrual Period, 5.50%. As to any subsequent
-----
Accrual Period, the rate for one month U.S. dollar deposits quoted on Telerate
Page 3750 as of 11:00 A.M., London time, on the second LIBOR Business Day prior
to the first day of such Accrual Period. If such rate does not appear on such
page (or such other page as may replace that page on the Telerate Service or, if
such service is no longer offered, such other service for displaying LIBOR or
comparable rates as may be selected by the Servicer), LIBOR will be the
Reference Bank Rate. If no Reference Bank Rate is available at such time, LIBOR
will be the rate in effect for the previous Accrual Period.
10
<PAGE>
LIBOR Business Day: Any Business Day other than a day on which banking
------------------
institutions in the State of New York or the City of London, England are
required or authorized by law to be closed.
Liquidated Mortgage Loan: As to any Distribution Date, any Mortgage Loan
------------------------
which was not previously a Liquidated Mortgage Loan, was in default during the
Collection Period related to such Distribution Date and in respect of which the
Servicer has determined as of the end of such Collection Period that all amounts
which it expects to recover from or on account of such Mortgage Loan have been
recovered.
Liquidation Expenses: Expenses which are incurred by the Servicer in
--------------------
connection with the liquidation of any Mortgage Loan and not recovered under any
insurance policy or from any Mortgagor, including, without limitation, legal
fees and expenses, title fees and expenses, any unreimbursed amount expended by
the Servicer pursuant to Section 3.6 with respect to such Mortgage Loan
(including, without limitation, amounts advanced to cure defaults on any
mortgage loan which is senior to such Mortgage Loan or to pay in full any such
senior mortgage loan) and any related and unreimbursed expenditures for real
estate property taxes or for property restoration, preservation or insurance
against casualty loss or damage as are customary in the residential mortgage
loan servicing industry.
Liquidation Loss Amount: With respect to any Distribution Date and any
-----------------------
Mortgage Loan that becomes a Liquidated Mortgage Loan during the related
Collection Period, the unrecovered Trust Balance thereof at the end of such
Collection Period, after giving effect to the Net Trust Liquidation Proceeds
applied in reduction of such Trust Balance.
Liquidation Proceeds: Cash (including Insurance Proceeds) received in
--------------------
connection with the liquidation of Liquidated Mortgage Loans, whether through
Foreclosure Proceedings or otherwise.
Loan Agreement: As to any Mortgage Loan, the related loan agreement
--------------
executed by the Mortgagor and the Transferor.
Loan Agreement Amendment: As to any Loan Agreement, either (i) the notice
------------------------
mailed to the related Mortgagor on or about October 15, 1990, the form of which
is attached hereto as Exhibit D, or (ii) the comparable provision in Paragraph 6
of the form of Home Equity Credit Line Agreement attached hereto as Exhibit D.
Loan Balance: As to any Mortgage Loan and day, the unpaid principal
------------
balance of such Mortgage Loan upon which interest accrued for such day was
calculated.
Loan Rate: As to any Mortgage Loan and day, the current per annum rate
---------
of interest applicable to the calculation of interest for such day on the Loan
Balance.
11
<PAGE>
Managed Amortization Period: The period from and including the Closing
---------------------------
Date to and including the earlier of (a) the last day of the Collection Period
related to the Distribution Date in September 2002 and (b) the day prior to the
occurrence of a Rapid Amortization Event.
Margin: As to any Mortgage Loan, the margin of such Mortgage Loan as
------
set forth in the related Loan Agreement.
Maximum Principal Payment: With respect to any Distribution Date, the
-------------------------
product of the aggregate amount of Principal Collections for the related
Collection Period and the Certificateholders' Fixed Allocation Percentage as
of the first day of such Collection Period.
Maximum Rate: As to any Accrual Period, a rate equal to the Weighted
------------
Average Net Loan Rate for the related Collection Period (adjusted to an
effective rate reflecting accrued interest calculated on the basis of the actual
number of days in the Accrual Period and a year assumed to consist of 360 days).
Minimum Monthly Payment: With respect to any Mortgage Loan and any
-----------------------
month, the minimum amount required to be paid by the related Mortgagor
pursuant to the related Loan Agreement.
Moody's: Moody's Investors Service, Inc. or its successor in interest.
-------
Mortgage: The mortgage, deed of trust or other instrument creating a first
--------
or second lien on an estate in fee simple interest in real property securing a
Mortgage Loan.
Mortgage File: The mortgage documents listed in Section 2.1(b) pertaining
-------------
to a particular Mortgage Loan and any additional documents required to be added
to such Mortgage File pursuant to this Agreement.
Mortgage Loan Schedule: As of any date, the schedule of Mortgage Loans
----------------------
included in the Trust Fund on such date. Initially references to "Mortgage Loan
Schedule" shall refer to the magnetic tape delivered to the Trustee and the
Custodial Agent by the Transferor on the Closing Date, which sets forth as to
each Initial Mortgage Loan, as of the Cut-Off Date (i) the Cut-Off Date Trust
Balance, (ii) the Cut-Off Date Credit Limit, (iii) the stated maturity upon
which any outstanding Loan Balance is due and payable, (iv) the Cycle Date and
(v) the name and address of the Mortgagor. The Trustee and the Custodial Agent
shall hold in confidence the portion of the Mortgage Loan Schedule relating to
the names and addresses of the Mortgagors and shall not release such information
except with the consent of the Transferor. Thereafter, "Mortgage Loan Schedule"
shall refer to such schedule as amended from time to time in accordance with
Sections 2.2(c), 2.4(b), 2.6, 2.8(b), 3.1 or 3.7 hereof.
Mortgage Loans: Each Initial Mortgage Loan, Subsequent Mortgage Loan and
--------------
Eligible Substitute Mortgage Loan identified on the Mortgage Loan Schedule. Any
capitalized reference in this Agreement (including, without limitation, any
reference in Section 2.1(a), 2.2(c), 2.4(b), 2.6,
12
<PAGE>
2.8 or 3.1) to a Mortgage Loan transferred to, or removed, from, the Trust or as
constituting part of the Trust Fund shall mean such Mortgage Loan to the extent
of the related balance owned by the Trust.
Mortgaged Property: The underlying property securing a Mortgage Loan.
------------------
Mortgagor: The obligor or obligors under a Loan Agreement.
---------
Net Liquidation Proceeds: As to any Mortgage Loan which has been
------------------------
liquidated, Liquidation Proceeds net of Liquidation Expenses.
Net Trust Liquidation Proceeds: With respect to any Liquidated Mortgage
------------------------------
Loan, the Trust's share of Net Liquidation Proceeds, which share is equal to the
sum of (i) the Trust Percentage of Net Liquidation Proceeds not to exceed Trust
Interest with respect to the period from the last day on which interest was paid
in full on such Liquidated Mortgage Loan to the day on which such Liquidated
Mortgage Loan became a Liquidated Mortgage Loan and (ii) the Trust Percentage of
the amount, if any, by which (A) Net Liquidation Proceeds for such Liquidated
Mortgage Loan exceed (B) the sum of (1) the amounts in clause (i) and (2) the
aggregate of the amounts payable to each Prior Trust pursuant to clause (i) of
the definition of "Net Trust Liquidation Proceeds" in each of the applicable
Prior Trust Pooling and Servicing Agreements.
91-1 Mortgage Loans: Certain balances of revolving credit line home
-------------------
equity loans that had been owned by Trust 1991 if subsequently reacquired by
the Transferor.
Officer's Certificate: A certificate delivered to the Trustee and signed
---------------------
by the Chairman of the Board of Directors, a Vice Chairman of the Board of
Directors, the President, an Executive Vice President, a Senior Vice President
or a Vice President of the Transferor, if delivered by the Transferor, and by a
Servicing Officer, if delivered by the Servicer.
Opinion of Counsel: A written opinion of counsel acceptable to the
------------------
Trustee and the Certificate Insurer, who may be internal counsel for the
Transferor or the Servicer.
Original Invested Amount: $120,460,000.
------------------------
Original Investor Certificate Principal Balance: $120,460,000.
-----------------------------------------------
Original Pre-Funded Amount: $24,000,000.
--------------------------
Overall Minimum Amount: As defined in Section 2.6.
----------------------
Overcollateralization Adjustment Amount: As to any Distribution Date where
---------------------------------------
the Overcollateralization Amount exceeds the Required Overcollateralization
Amount (in each case, after giving effect to all distributions to Investor
Certificateholders on such date), an amount, payable to the Transferor
Certificateholder, equal to the excess of the Overcollateralization Amount over
the Required Overcollateralization Amount to the extent available from Principal
13
<PAGE>
Collections (after giving effect to any Basis Risk Payment and the Scheduled
Principal Collections Distribution Amount on such Distribution Date).
Overcollateralization Amount: At the time of reference thereto, the
----------------------------
amount, if any, by which the Invested Amount exceeds the Investor Certificate
Principal Balance.
Overfunded Amount: As to any Distribution Date during the Pre-Funding
-----------------
Period, the excess, if any, of (x) the amount on deposit in the Capitalized
Interest Account after giving effect to the transfer to the Certificate Account
of the Capitalized Interest Requirement, if any, on such Distribution Date
pursuant to Section 5.6(g) over (y) the aggregate Capitalized Interest
Requirements for the remaining Distribution Dates in the Pre-Funding Period,
including the June 20, 1997 Distribution Date (assuming for purposes of this
definition that (i) the Pre-Funding Period will end on June 20, 1997, (ii) no
Subsequent Mortgage Loans are purchased by the Trust and (iii) LIBOR exceeds the
rate at which interest accrues on the Pre-Funded Amount by 3%).
Ownership Interest: With respect to any Certificate, any ownership or
------------------
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
Paying Agent: Any Person appointed by the Trustee and acting pursuant
------------
to Section 6.6.
Percentage Interest: As to any Investor Certificate, the percentage
-------------------
obtained by dividing the principal denomination of such Investor Certificate by
the aggregate of the principal denominations of all Investor Certificates.
Permitted Investments: One or more of the following:
---------------------
(i) obligations of, or guaranteed as to the full and timely payment
of principal and interest by, the United States or any agency or
instrumentality thereof when such obligations are backed by the full
faith and credit of the United States;
(ii) repurchase agreements on obligations specified in clause (i)
above maturing not more than three months from the date of
acquisition thereof, provided that the unsecured obligations of the
--------
party agreeing to repurchase the specified obligations are at the
time of such agreement rated by each Rating Agency in its highest
short-term rating category and provided, further, that if Moody's is
-------- -------
a Rating Agency, the short-term debt obligations of the party
agreeing to repurchase the specified obligations shall be rated P-1
or better;
(iii) certificates of deposit, demand deposits, time deposits and
bankers' acceptances (which, if Moody's is a Rating Agency, shall
each have an original maturity of not more than 90 days and, in the
case of bankers' acceptances, shall in no event have an original
maturity of more than 365 days) of any United States depository
institution or trust company incorporated under the laws of the
United States or any state or any branch or agency of any foreign
bank licensed under the laws of the
14
<PAGE>
United States or any state thereof, provided that the debt
--------
obligations of such depository institution or trust company at the
date of acquisition of such certificates, demand deposits, time
deposits or bankers' acceptances have been rated by each Rating
Agency in its highest short-term rating category and provided,
--------
further, that if Moody's is a Rating Agency, the short-term
-------
obligations of such depository institution or trust company shall be
rated P-1 or better;
(iv) commercial paper (having original maturities of not more than
270 days) of any corporation incorporated under the laws of the
United States or any state thereof which on the date of acquisition
has been rated by each Rating Agency in its highest short-term
rating category;
(v) investments in money market funds registered under the
Investment Company Act of 1940, as amended, that, at the time of the
Trust's investment or contractual commitment to invest therein, are
rated in the highest investment category or otherwise approved in
writing by each Rating Agency; and
(vi) other obligations or securities that are acceptable to each
Rating Agency and the Certificate Insurer as a Permitted Investment
hereunder and will not result in the reduction, suspension or
withdrawal of the then-current rating of the Investor Certificates
without taking into account the Certificate Insurance Policy;
provided, however, that (a) no instrument described hereunder shall evidence the
- -------- -------
right to receive only interest with respect to the obligations underlying such
instrument and (b) no instrument purchased hereunder may be a callable
investment purchased at a premium. The highest short-term rating of Standard &
Poor's for the investments specified in clauses (ii), (iii) and (iv) is A-1+ and
the highest investment category rating of Standard & Poor's for the investments
specified in clause (v) is either AAAm, or AAAm-G.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Pool Balance: With respect to any date, the sum of (a) the aggregate of
------------
the Trust Balances of all Mortgage Loans as of such date and (b) the
Pre-Funded Amount.
Pre-Funded Amount: The Original Pre-Funded Amount minus all amounts
-----------------
withdrawn from the Pre-Funding Account to purchase Subsequent Mortgage Loans.
Pre-Funding Account: The account created and maintained with the Trustee
-------------------
for the benefit of the Certificateholders pursuant to Section 5.6(a).
Pre-Funding Earnings: Any net investment earnings realized on the
--------------------
amounts on deposit in the Pre-Funding Account pursuant to Section 5.6(c).
15
<PAGE>
Pre-Funding Period: The period commencing on the Closing Date and ending
------------------
on the earliest to occur of (i) the Distribution Date on which the aggregate
amount on deposit in the Pre-Funding Account is equal to or less than $100,000,
(ii) the commencement of the Rapid Amortization Period, or (iii) June 20, 1997.
Premium Rate: The per annum rate on which the premium payable to the
------------
Certificate Insurer is calculated, as set forth in the Insurance Agreement.
Principal Collections: For any day, shall equal (i) the Trust's share of
---------------------
principal collections received from borrowers under the Mortgage Loans on such
day after the application of the allocations described in the second paragraph
of Section 2.1(a), (ii) the principal portion of the Net Trust Liquidation
Proceeds and Trust Insurance Proceeds received by the Servicer on such day and
(iii) the principal portion of the Reassignment Deposit Amount and the
Substitution Adjustment Amount (which pursuant to Section 3.2(f) is deemed to be
received on the last day of the related Collection Period).
Prior Trust: Any of Trust 1990, Trust 1991, Trust 1992, Trust 1993, Trust
-----------
1994 and, in the event that 91-1 Mortgage Loans are conveyed to the Trust during
the Pre-Funding Period, Trust 1995.
Prior Trust Pooling and Servicing Agreement: Any of the Trust 1990 Pooling
-------------------------------------------
and Servicing Agreement, the Trust 1991 Pooling and Servicing Agreement, the
Trust 1992 Pooling and Servicing Agreement, the Trust 1993 Pooling and Servicing
Agreement, the Trust 1994 Pooling and Servicing Agreement and, in the event that
91-1 Mortgage Loans are conveyed to the Trust during the Pre-Funding Period, the
Trust 1995 Pooling and Servicing Agreement.
Prior Trust Trustee: Any of the Trust 1990 Trustee, the Trust 1991
-------------------
Trustee, the Trust 1992 Trustee, the Trust 1993 Trustee, the Trust 1994 Trustee
and, in the event that 91-1 Mortgage Loans are conveyed to the Trust during the
Pre-Funding Period, the Trust 1995 Trustee.
Rapid Amortization Event: As defined in Section 11.1.
------------------------
Rapid Amortization Period: The period which occurs upon the earlier of a
-------------------------
Rapid Amortization Event or on the first day of the Collection Period
immediately prior to the Distribution Date in October 2002.
Rating Agency: Moody's or Standard & Poor's, at least one of which rated
-------------
the Investor Certificates at the time of the initial issuance of such
Certificates. If Moody's or Standard & Poor's or a successor is no longer in
existence or shall cease to rate the Investor Certificates, "Rating Agency"
shall be such statistical credit rating agency, or other comparable Person, as
shall be designated by the Transferor, notice of which designation shall be
given to the Trustee and the Certificate Insurer, or the successor of such
agency or Person.
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Reassignment Deposit Amount: With respect to any Mortgage Loan required to
---------------------------
be removed on any date pursuant to Section 2.2(c), 2.4(b) or 3.1, an amount
equal to the sum of (i) the Trust Balance of such Mortgage Loan as of the last
day of the Collection Period immediately preceding the date of reassignment and
(ii) accrued and unpaid interest through the Cycle Date occurring in such
Collection Period computed on a daily basis at the Loan Rate less the Servicing
Fee Rate.
Record Date: As to any Distribution Date, the day immediately preceding
-----------
such Distribution Date; provided, however, that if Definitive Certificates are
-------- -------
issued pursuant to Section 6.2(d), the Record Date shall be the last day of the
calendar month immediately preceding such Distribution Date.
Reference Bank Rate: The rate to be determined on the basis of the rates
-------------------
at which deposits in U.S. dollars are offered by the Reference Banks as of 11:00
A.M., London time, on the day that is two LIBOR Business Days prior to the
immediately preceding Distribution Date to prime banks in the London interbank
market for a period of one month in amounts approximately equal to the Investor
Certificate Principal Balance then outstanding. The Trustee will request the
principal London office of each of the Reference Banks to provide a quotation of
its rate. If at least two such quotations are provided, the rate will be the
arithmetic mean of the quotations. If fewer than two such quotations are
provided, the rate will be the arithmetic mean of the rates quoted by one or
more major banks in New York City, selected by the Trustee after consultation
with the Servicer, as of 11:00 A.M., New York City time, on such date for loans
in U.S. dollars to leading European banks for a period of one month in amounts
approximately equal to the Investor Certificate Principal Balance then
outstanding.
Reference Banks: Three major banks that are engaged in the London
---------------
interbank market, selected by the Servicer.
Removal Condition: As defined in Section 2.6.
-----------------
Required Overcollateralization Amount: An amount equal to the greater of
-------------------------------------
(a) $2,409,200; provided, however that on any date on which both of the Excess
Spread Conditions are satisfied, the amount in this clause (a) shall be the
lesser of (x) $2,409,200 and (y) 3% of the Investor Certificate Principal
Balance and (b) the Basic Overcollateralization Amount.
Responsible Officer: When used with respect to the Trustee, any officer
-------------------
assigned to the Corporate Trust Division (or any successor thereto), including
any Vice President, Assistant Vice President, Trust Officer, any Assistant
Secretary, any trust officer or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and having direct responsibility for the administration of this
Agreement.
Retained Rights: As defined in Section 2.1(f).
---------------
Retransfer Date: As defined in Section 2.6.
---------------
17
<PAGE>
Retransfer Notice Date: As defined in Section 2.6.
----------------------
SAIF: The Savings Association Insurance Fund, as from time to time
-----
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or if at any time after the execution of this Agreement
the Savings Association Insurance Fund is not existing and performing duties now
assigned to it, the body performing such duties on such date.
Scheduled Principal Collections Distribution Amount: With respect to any
---------------------------------------------------
Distribution Date in respect of the Managed Amortization Period, the amount
equal to the lesser of (i) the Maximum Principal Payment and (ii) the
Alternative Principal Payment. With respect to any Distribution Date in respect
of the Rapid Amortization Period, the Scheduled Principal Collections
Distribution Amount shall be the Maximum Principal Payment.
Servicer: Chevy Chase Bank, F.S.B., a federal savings bank organized under
--------
the laws of the United States or its successor in interest under Section 7.2,
and any Person that is appointed as successor servicer in accordance with the
terms of this Agreement.
Servicing Certificate: A certificate completed by and executed on
---------------------
behalf of the Servicer in accordance with Section 4.1.
Servicing Fee: As defined in Section 3.8.
-------------
Servicing Fee Rate: 0.50% per annum if Chevy Chase Bank, F.S.B. or its
------------------
successor in interest under Section 7.2 is the Servicer; up to a maximum of
0.75% per annum if another Person (including, without limitation, the Trustee)
is appointed as successor Servicer in accordance with the terms of this
Agreement.
Servicing Officer: Any officer of the Servicer involved in, or responsible
-----------------
for, the administration and servicing of the Mortgage Loans whose name appears
on a list of servicing officers annexed to an Officer's Certificate furnished to
the Trustee and the Certificate Insurer by the Servicer, as such list may be
amended from time to time.
Standard & Poor's: Standard & Poor's Ratings Services, a division of
-----------------
The McGraw Hill Companies, Inc. or its successor in interest.
Stated Maturity Date: The Distribution Date in July 2017.
--------------------
Sub-Prime Loan: Any Mortgage Loan with respect to which the Loan
--------------
Agreement requires the repayment of principal after the first five years.
Subsequent Mortgage Loan: Each mortgage loan acquired by the Trust
------------------------
pursuant to Section 2.8 with funds on deposit in the Pre-Funding Account during
the Pre-Funding Period.
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<PAGE>
Substitution Adjustment Amount: As to the Collection Period related to a
------------------------------
Distribution Date with respect to which the Transferor or the Servicer
substitutes one or more Eligible Substitute Mortgage Loans pursuant to Section
2.2(c), 2.4(b) or 3.1, the amount, if any, by which the sum of (i) the aggregate
Loan Balances at the end of such Collection Period of all such Eligible
Substitute Mortgage Loans being added to the Trust Fund is less than (ii) the
aggregate Trust Balances at the end of such Collection Period of the related
Mortgage Loans being removed from the Trust Fund, such amount to be deposited
into the Certificate Account to the extent provided in Sections 2.2(d) and
3.2(c). If balances under Eligible Substitute Mortgage Loans being added to the
Trust Fund have been transferred to any Prior Trust or to any other Person, the
amount to be deposited into the Certificate Account to the extent provided in
Section 2.2(d) and 3.2(c) shall be equal to the amount, if any, by which (i) the
sum of the unpaid principal balances of all such Eligible Substitute Mortgage
Loans being added to the Trust Fund is less, at the end of the specified
Collection Period, than (ii) the aggregate Trust Balances at the end of such
Collection Period of the related Mortgage Loans being removed from the Trust
Fund.
Telerate Page 3750: The display designated as page 3750 on the Telerate
------------------
Service (or such other page as may replace page 3750 on that service for the
purpose of displaying London interbank offered rates of major banks).
Transfer: Any direct or indirect transfer, sale, pledge, hypothecation
--------
or other form of assignment of any Ownership Interest in a Certificate.
Transfer of Retained Rights: As defined in Section 2.1(f).
---------------------------
Transfer Date: With respect to any Mortgage Loan or any Trust Balance
-------------
transferred to or removed from the Trust hereunder, the date on which such
transfer or removal is made under the terms hereof, which date shall be the
Closing Date in the case of all of the Initial Mortgage Loans originally listed
on the Mortgage Loan Schedule.
Transferee: Any Person who is acquiring by Transfer any Ownership
----------
Interest in a Certificate.
Transferor: Chevy Chase Bank, F.S.B., a federal savings bank organized
----------
under the laws of the United States, or its permitted successor in interest.
Transferor Certificateholder: The Holder of the Transferor Certificates.
----------------------------
Transferor Certificates: The certificates executed and authenticated by
-----------------------
the Trustee substantially in the form set forth in Exhibit B hereto.
Transferor Principal Balance: As of the date of determination thereof, the
----------------------------
amount equal to (i) the Pool Balance at the end of such date of determination
less (ii) the Invested Amount at the end of such day
19
<PAGE>
Trigger Event: Any of the following events:
-------------
(i) the Servicer fails to pay any amount payable by the Servicer under
this Agreement, which failure continues unremedied for five (5)
Business Days after receipt by the Servicer of notice thereof and
results in a draw on the Certificate Insurance Policy;
(ii) the Servicer fails to make any payment required under the
Insurance Agreement, which failure continues unremedied for five
(5) Business Days after receipt by the Servicer of notice thereof;
(iii) an Event of Default; or
(iv) the Certificate Insurer determines that the performance of the
Servicer under this Agreement is not, in the reasonable opinion of
the Certificate Insurer, satisfactory.
Trust: The trust created by this Agreement and designated "Capitol
------
Revolving Home Equity Loan Trust 1996-1."
Trust 1990: The trust created by the Trust 1990 Pooling and Servicing
----------
Agreement and designated "Capitol Home Equity Loan Trust 1990-1."
Trust 1991: The trust created by the Trust 1991 Pooling and Servicing
----------
Agreement and designated "Capitol Home Equity Loan Trust 1991-1."
Trust 1992: The trust created by the Trust 1992 Pooling and Servicing
----------
Agreement and designated "Capitol Home Equity Loan Trust 1992-1."
Trust 1993: The trust created by the Trust 1993 Pooling and Servicing
----------
Agreement and designated "Capitol Home Equity Loan Trust 1993-1."
Trust 1994: The trust created by the Trust 1994 Pooling and Servicing
----------
Agreement and designated "Capitol Home Equity Loan Trust 1994-1."
Trust 1995: The trust created by the Trust 1995 Pooling and Servicing
----------
Agreement and designated "Capitol Revolving Home Equity Loan Trust 1995-1."
Trust 1990 Common Mortgage Loans: Such of the Mortgage Loans, certain of
--------------------------------
the balances of which were sold and assigned to the Trust 1990 Trustee pursuant
to the Trust 1990 Pooling and Servicing Agreement, until such balances are
reduced to zero.
Trust 1991 Common Mortgage Loans: Such of the Mortgage Loans, certain of
--------------------------------
the balances of which were sold and assigned to the Trust 1991 Trustee pursuant
to the Trust 1991 Pooling and Servicing Agreement, until such balances are
reduced to zero.
20
<PAGE>
Trust 1992 Common Mortgage Loans: Such of the Mortgage Loans, certain of
--------------------------------
the balances of which were sold and assigned to the Trust 1992 Trustee pursuant
to the Trust 1992 Pooling and Servicing Agreement, until such balances are
reduced to zero.
Trust 1993 Common Mortgage Loans: Such of the Mortgage Loans, certain of
--------------------------------
the balances of which were sold and assigned to the Trust 1993 Trustee pursuant
to the Trust 1993 Pooling and Servicing Agreement, until such balances are
reduced to zero.
Trust 1994 Common Mortgage Loans: Such of the Mortgage Loans, certain of
--------------------------------
the balances of which were sold and assigned to the Trust 1994 Trustee pursuant
to the Trust 1994 Pooling and Servicing Agreement, until such balances are
reduced to zero.
Trust 1995 Common Mortgage Loans: Such of the Mortgage Loans, certain of
--------------------------------
the balances of which were sold and assigned to the Trust 1995 Trustee pursuant
to the Trust 1995 Pooling and Servicing Agreement, until such balances are
reduced to zero.
Trust 1990 Pooling and Servicing Agreement: The Pooling and Servicing
------------------------------------------
Agreement dated as of December 1, 1990 between Chevy Chase Bank, F.S.B., as
Seller and Servicer, and The Chase Manhattan Bank (formerly known as Chemical
Bank), as Trustee, and all amendments thereof and supplements thereto.
Trust 1991 Pooling and Servicing Agreement: The Pooling and Servicing
------------------------------------------
Agreement dated as of December 1, 1991 between Chevy Chase Bank, F.S.B., as
Seller and Servicer, and The Chase Manhattan Bank (formerly known as Chemical
Bank), as Trustee, and all amendments thereof and supplements thereto.
Trust 1992 Pooling and Servicing Agreement: The Pooling and Servicing
------------------------------------------
Agreement dated as of December 1, 1992 between Chevy Chase Bank, F.S.B., as
Seller and Servicer, and The Chase Manhattan Bank (formerly known as Chemical
Bank), as Trustee, and all amendments thereof and supplements thereto.
Trust 1993 Pooling and Servicing Agreement: The Pooling and Servicing
------------------------------------------
Agreement dated as of September 1, 1993 between Chevy Chase Bank, F.S.B., as
Seller and Servicer, and The Chase Manhattan Bank (formerly known as Chemical
Bank), as Trustee, and all amendments thereof and supplements thereto.
Trust 1994 Pooling and Servicing Agreement: The Pooling and Servicing
------------------------------------------
Agreement dated as of September 1, 1994 between Chevy Chase Bank, F.S.B., as
Seller and Servicer, and The Chase Manhattan Bank (formerly known as Chemical
Bank), as Trustee, and all amendments thereof and supplements thereto.
Trust 1995 Pooling and Servicing Agreement: The Pooling and Servicing
------------------------------------------
Agreement dated as of September 1, 1995 between Chevy Chase Bank, F.S.B., as
Transferor and Servicer, and
21
<PAGE>
The Chase Manhattan Bank (formerly known as Chemical Bank), as Trustee, and all
amendments thereof and supplements thereto.
Trust 1990 Trustee: The institution executing the Trust 1990 Pooling and
------------------
Servicing Agreement as Trustee, or its successors in interest, or any successor
trustee that has been appointed in accordance with the terms of the Trust 1990
Pooling and Servicing Agreement.
Trust 1991 Trustee: The institution executing the Trust 1991 Pooling and
------------------
Servicing Agreement as Trustee, or its successors in interest, or any successor
trustee that has been appointed in accordance with the terms of the Trust 1991
Pooling and Servicing Agreement.
Trust 1992 Trustee: The institution executing the Trust 1992 Pooling and
------------------
Servicing Agreement as Trustee, or its successors in interest, or any successor
trustee that has been appointed in accordance with the terms of the Trust 1992
Pooling and Servicing Agreement.
Trust 1993 Trustee: The institution executing the Trust 1993 Pooling and
------------------
Servicing Agreement as Trustee, or its successors in interest, or any successor
trustee that has been appointed in accordance with the terms of the Trust 1993
Pooling and Servicing Agreement.
Trust 1994 Trustee: The institution executing the Trust 1994 Pooling and
------------------
Servicing Agreement as Trustee, or its successors in interest, or any successor
trustee that has been appointed in accordance with the terms of the Trust 1994
Pooling and Servicing Agreement.
Trust 1995 Trustee: The institution executing the Trust 1995 Pooling and
------------------
Servicing Agreement as Trustee, or its successors in interest, or any successor
trustee that has been appointed in accordance with the terms of the Trust 1995
Pooling and Servicing Agreement.
Trust Balance: As to any Mortgage Loan and day, the Cut-Off Date Trust
-------------
Balance plus (i) any Additional Balance in respect of such Mortgage Loan, minus
(ii) all collections credited as principal against the Cut-Off Date Trust
Balance of any such Mortgage Loan in accordance with the related Loan Agreement.
For purposes of this definition, a Liquidated Mortgage Loan shall be deemed to
have a Trust Balance equal to the Trust Balance of the related Mortgage Loan
immediately prior to the final recovery of related Liquidation Proceeds and a
Trust Balance of zero thereafter.
Trust Fund: The corpus of the Trust, consisting of, to the extent
----------
described herein, the following: the Trust Balance of each Mortgage Loan,
including all payments of interest and of principal (to the extent of the Trust
Balance of such Mortgage Loan), from whatever source derived, received on or
with respect to such Mortgage Loan on and after the applicable Cut-Off Date and
allocable to such Trust Balance; such assets as shall from time to time be
identified as deposited into the Certificate Account (excluding, however,
amounts on deposit in the Certificate Account required to be paid to the
Transferor Certificateholder pursuant to Section 3.3); the interest of the
Certificateholders to the extent of the Trust Balances of the Mortgage Loans and
interest accrued thereon in (i) any property which secured a Mortgage Loan and
which has been acquired by or on behalf of the Trustee in Foreclosure
Proceedings or otherwise, (ii) any insurance
22
<PAGE>
policies related to the Mortgage Loans, and (iii) the related Mortgage, Loan
Agreement and other Mortgage File documents for each Mortgage Loan; the
Pre-Funding Account; the Capitalized Interest Account and the proceeds of each
of the foregoing. The Certificateholders shall have the benefit of the
Certificate Insurance Policy.
Trust Insurance Proceeds: As to any Mortgage Loan and Collection Period,
------------------------
the Trust's share of Insurance Proceeds, which share is equal to the product of
(i) the Trust Percentage and (ii) Insurance Proceeds received during such
Collection Period which (x) are not Liquidation Proceeds, (y) are not applied or
expected to be applied to the restoration or repair of the related Mortgaged
Property or released to the related Mortgagor in accordance with the normal
servicing procedures of the Servicer and (z) will be applied by the Servicer in
reduction of the Loan Balance of such Mortgage Loan.
Trust Interest: With respect to any Mortgage Loan, an amount equal to the
--------------
product of (a) the amount allocated to interest multiplied by (b)(x) the amount
of interest accrued at the Loan Rate on the Trust Balance during the related
Interest Period divided by (y) the amount of interest accrued on the Loan
Balance at the Loan Rate during such Interest Period.
Trust Percentage: With respect to any Mortgage Loan (other than any
----------------
Liquidated Mortgage Loan) for any day, the percentage (carried to four decimal
places) obtained by dividing the Trust Balance of such Mortgage Loan for such
day by the Loan Balance of such Mortgage Loan for such day. With respect to any
Liquidated Mortgage Loan on any day, the Trust Percentage will equal the Trust
Percentage on the day such Mortgage Loan became a Liquidated Mortgage Loan.
Trustee: The institution executing this Agreement as Trustee, or its
-------
successor in interest, or any successor trustee that has been appointed in
accordance with the terms of this Agreement.
Unpaid Investor Certificate Interest Shortfall: With respect to any
----------------------------------------------
Distribution Date, the aggregate amount, if any, of Investor Certificate
Interest that was accrued in respect of a prior Distribution Date and has not
been distributed to Investor Certificateholders.
Updated Combined Loan-to-Value Ratio: As to any Mortgage Loan with respect
------------------------------------
to which the Servicer consents to the placement of a senior lien on the related
Mortgaged Property pursuant to Section 3.1(b), the fraction, expressed as a
percentage, the numerator of which is the sum of (i) the Credit Limit of such
Mortgage Loan immediately following such placement and (ii) the unpaid principal
balance of the related first mortgage loan immediately following such placement,
and the denominator of which is the appraised value of the related Mortgaged
Property based upon the drive-by appraisal or other estimate of value made by or
on behalf of the Transferor at the time of and in connection with such consent.
Weighted Average Net Loan Rate: As to any Accrual Period and the Investor
------------------------------
Certificates, the weighted average of the Loan Rates (rounded to the nearest
one-hundredth of a percent, with five one-thousandths of a percent rounded
upward) during the Interest Period ending on the Cycle Date occurring in the
preceding Collection Period for the related Distribution Date (adjusted to an
23
<PAGE>
effective rate reflecting accrued interest calculated on the basis of the actual
number of days in the Accrual Period and a year assumed to consist of 360 days),
less the Servicing Fee Rate and the Premium Rate.
Section 1.2 Other Definitional Provisions.
-----------------------------
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.1, and accounting terms partly defined in Section 1.1 to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles or regulatory accounting principles, as
applicable. To the extent that the definitions of accounting terms herein are
inconsistent with the meanings of such terms under generally accepted accounting
principles or regulatory accounting principles, the definitions contained herein
shall control.
(c) The agreements, representations and warranties of Chevy Chase
Bank, F.S.B. in this Agreement in each of its capacities as Transferor and
Servicer shall be deemed to be the agreements, representations and warranties
of Chevy Chase Bank, F.S.B. solely in the indicated capacity for so long as
the Chevy Chase Bank, F.S.B. acts in such capacity under this Agreement.
(d) The agreements, representations and warranties of The Chase
Manhattan Bank in this Agreement in each of its capacities as Trustee, Custodial
Agent, Paying Agent and Certificate Registrar shall be deemed to be the
agreements, representations and warranties of The Chase Manhattan Bank solely in
the indicated capacity if and for so long as The Chase Manhattan Bank acts in
such capacity under this Agreement.
(e) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; the word
"including" when used in this Agreement is intended to be illustrative and not
exclusive; Section, subsection, paragraph, clause and Exhibit references
contained in this Agreement are references to Sections, subsections, paragraphs,
clauses and Exhibits in or to this Agreement unless otherwise specified; and the
definitions of terms set forth herein are applicable to the singular as well as
the plural forms of such terms and to the masculine as well as the feminine and
neuter genders of such terms.
Section 1.3 Interest Calculations.
---------------------
All calculations of interest on any Certificates shall be made on the
basis of the actual number of days in an Accrual Period and a year assumed to
consist of 360 days.
24
<PAGE>
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.1 Conveyance of Initial Mortgage Loans.
(a) In consideration of the Trustee's delivery to or upon the order
of the Transferor of the Investor Certificates and the Transferor Certificate in
an aggregate principal amount equal to the sum of (i) the Cut-Off Date Trust
Balances of the Initial Mortgage Loans and (ii) the Original Pre-Funded Amount,
the Transferor does hereby transfer, assign, set over and otherwise convey to
The Chase Manhattan Bank, as Custodial Agent (the "Custodial Agent") for the
Trustee, in trust for the benefit of the Certificateholders and the Certificate
Insurer, without recourse (subject to Sections 2.2 and 2.4), all of the
Transferor's right, title and interest in and to (i) each Initial Mortgage Loan,
including its Cut-Off Date Trust Balance and any Additional Balances related
thereto and all payments of interest and principal thereon, from whatever source
derived, which are received on or after the Cut-Off Date for the Initial
Mortgage Loans and are allocable to the Trust Balance thereof, and (ii) to the
extent of the Trust Balances of the Initial Mortgage Loans and interest accrued
thereon, as provided in this Agreement, (A) any Mortgaged Properties related to
the Initial Mortgage Loans converted to ownership through Foreclosure
Proceedings or otherwise, (B) any insurance policies related to the Initial
Mortgage Loans, and (C) the related Mortgages, Loan Agreements and other
Mortgage File documents for the Initial Mortgage Loans; and the proceeds of each
of the foregoing. In addition, in consideration of the foregoing, the Transferor
has obtained the Certificate Insurance Policy, which has been delivered to the
Trustee for the benefit of the Investor Certificateholders.
The Transferor and the Trustee acknowledge that one or more of the Prior
Trusts have rights, interests, power and authority with respect to the Common
Mortgage Loans and the related Loan Agreements, Mortgages and other Mortgage
File documents to the extent provided in the Prior Trust Pooling and Servicing
Agreements. The Servicer acknowledges that, pursuant to either (i) notices sent
to the Mortgagors at the time of the creation of the Prior Trusts or (ii) the
terms of the Loan Agreements, amounts (other than Insurance Proceeds and
Liquidation Proceeds) received from or on behalf of the Mortgagor of a Common
Mortgage Loan which, at the time of receipt, are treated as principal
collections pursuant to the related Loan Agreement, will be applied in reduction
of the principal balance of such Common Mortgage Loan sold to one or more of the
Prior Trusts (including any such principal balances subsequently conveyed to the
Trust) before such collections may be applied as Principal Collections under
this Agreement.
The Transferor hereby grants to the Custodial Agent for the benefit of the
Trustee for the benefit of the Certificateholders, a security interest in all of
the Transferor's right, title and interest in and to the (i) Initial Mortgage
Loans identified on the Mortgage Loan Schedule on the Cut-Off Date, (ii)
Subsequent Mortgage Loans and Eligible Substitute Mortgage Loans added to the
Mortgage Loan Schedule from time to time, and (iii) all property which is
included in the Trust
25
<PAGE>
Fund as collateral security to secure a loan in the amount equal to all
obligations owing on the Certificates. This Agreement shall constitute a
security agreement under applicable law.
In connection with such assignment, transfer, and conveyance, the
Transferor shall file, on or prior to the Closing Date, in the appropriate
office of any applicable state, county or other relevant jurisdiction, a UCC-1
financing statement executed by the Transferor as debtor, naming the Custodial
Agent as secured party and identifying as collateral the mortgage loans
identified on the Mortgage Loan Schedule (including Mortgage Loans added to such
Mortgage Loan Schedule from time to time) and all property constituting the
Trust Fund. In connection with such filing, the Transferor shall cause to be
filed all necessary continuation statements thereof and take or cause to be
taken such actions and execute such documents as are necessary to continue the
perfection and protect the Certificateholders' interest in such property.
(b) In connection with the foregoing assignment, transfer and
conveyance by the Transferor, and except as provided in the immediately
following paragraph, the Transferor shall deliver to, and deposit with, the
Custodial Agent, on or prior to the Closing Date, with respect to the Initial
Mortgage Loans and on or prior to the applicable Transfer Date, with respect to
the Subsequent Mortgage Loans and any Eligible Substitute Mortgage Loan, the
following documents or instruments with respect to each Mortgage Loan:
(i) the related Loan Agreement and any evidence of indebtedness
executed by the related Mortgagor in connection therewith;
(ii) the related Mortgage with evidence of recording indicated
thereon; and
(iii) if the assignments referred to in Section 2.1(d) are not required
to be recorded as provided in Section 2.1(d), an assignment to the
Custodial Agent of such Mortgage in recordable form.
Notwithstanding the immediately preceding sentence, the Transferor shall not be
required to deliver to, and deposit with, the Custodial Agent on or prior to the
Closing Date, with respect to the Initial Mortgage Loans and on or prior to the
applicable Transfer Date, with respect to the Subsequent Mortgage Loans and any
Eligible Substitute Mortgage Loan, as the case may be, any of the documents or
instruments identified in clauses (i) and (ii) above which the Transferor
previously has delivered and deposited pursuant to a Prior Trust Pooling and
Servicing Agreement and which have not subsequently been released to the
Transferor; provided, however, that the Transferor shall furnish the Custodial
-------- -------
Agent and the Trustee with an Officer's Certificate on or prior to the Closing
Date, with respect to the Initial Mortgage Loans and on or prior to the
applicable Transfer Date, with respect to the Subsequent Mortgage Loans and any
Eligible Substitute Mortgage Loan, identifying the Mortgage Loans with respect
to which such documents or instruments previously were delivered and deposited
and have not been so released. The documents or instruments identified in such
Officer's Certificate shall be considered to be part of the Mortgage Files for
all purposes of this Agreement.
26
<PAGE>
If the Transferor cannot deliver a Mortgage with evidence of recording
thereon concurrently with the execution and delivery of this Agreement, with
respect to the Initial Mortgage Loans and on or prior to the applicable Transfer
Date, with respect to the Subsequent Mortgage Loans and any Eligible Substitute
Mortgage Loan, the Transferor shall deliver to the Custodial Agent an Officer's
Certificate, with a photocopy of such Mortgage attached thereto, stating that
such Mortgage has been delivered to the appropriate public recording office for
recordation. Promptly upon receipt thereof from the applicable public recording
office, the Transferor shall deliver to the Custodial Agent either (i) such
Mortgage with evidence of recording indicated thereon or (ii) a true copy of
such Mortgage issued by such public recording office.
(c) The Transferor hereby confirms to the Trustee and the Custodial
Agent that on or prior to the Closing Date, with respect to the Initial Mortgage
Loans and on or prior to the applicable Transfer Date, with respect to the
Subsequent Mortgage Loans and any Eligible Substitute Mortgage Loan, it has
caused or will cause, as the case may be, the portions of the Electronic Ledger
relating to the Mortgage Loans to be clearly and unambiguously marked to
indicate that such Mortgage Loans (to the extent provided herein) have been
transferred and assigned to the Custodial Agent for the benefit of the Trustee
and constitute part of the Trust Fund in accordance with the terms of the trust
created hereunder.
(d) The Transferor, at its own expense, shall either submit for
recordation an assignment of each Mortgage (to the extent of the Custodial
Agent's interest therein) in favor of the Custodial Agent (which may be a
blanket assignment if permitted by applicable law) in the appropriate real
property or other records not later than ninety (90) days after the Closing
Date, with respect to the Initial Mortgage Loans and not later than ninety (90)
days after the applicable Transfer Date, with respect to the Subsequent Mortgage
Loans and any Eligible Substitute Mortgage Loan or (ii) deliver to the Custodial
Agent an assignment of each Mortgage (to the extent of the Custodial Agent's
interest therein) in favor of the Custodial Agent in recordable form, together
with an opinion of Counsel to the effect that recording is not required to
perfect a first priority security interest in favor of the Custodial Agent for
the benefit of the Trustee in the related Mortgage Loan.
(e) On or prior to the Closing Date, the Transferor shall deliver the
Certificate Insurance Policy to the Trustee.
(f) The Chase Manhattan Bank, formerly known as Chemical Bank, as the
Prior Trust Trustee for each of the Prior Trusts, hereby acknowledges that the
Transferor has previously reserved and retained certain rights, interests, power
and authority (the "Retained Rights") with respect to the Common Mortgage Loan
Interests to the extent of the Transferor's interest in the Common Mortgage Loan
Interests not sold to a Prior Trust, all as set forth more fully in the Prior
Trust Pooling and Servicing Agreements. Without limiting the generality of the
foregoing, the Retained Rights include the right of the Transferor to certain
balances arising under the Common Mortgage Loans, together with payments of
principal and interest, from whatever source derived, allocable to such
balances, as provided in the Prior Trust Pooling and Servicing Agreements. The
Transferor hereby notifies the Prior Trust Trustees that it has transferred and
assigned to the
27
<PAGE>
Custodial Agent for the Trustee the Retained Rights with respect to the Mortgage
Loans which are Common Mortgage Loans pursuant to this Agreement (the "Transfer
of Retained Rights").
The Chase Manhattan Bank, formerly known as Chemical Bank, as the Prior
Trust Trustee for each of the Prior Trusts, hereby acknowledges receipt of (i) a
copy of this Agreement, (ii) notice of the Transfer of Retained Rights as set
forth in this Section 2.1, (iii) notice of the transfer and assignment to the
Custodial Agent of the Common Mortgage Loan Interests and related rights
(including, without limitation, payments on the Common Mortgage Loans) as
evidenced by this Section 2.1, and to the extent provided in this Agreement, and
(iv) notice of the Custodial Agent's first priority perfected security interest
in the Common Mortgage Loan Interests and related rights (including, without
limitation, payments on the Common Mortgage Loans) as evidenced by, and to the
extent provided in, this Agreement. The Trustee hereby appoints the Custodial
Agent as its agent to hold any mortgage loans, files or other property delivered
in accordance with this Agreement and to act as assignee of the Mortgages and
the Custodial Agent hereby accepts such appointment. Pursuant to Section 9.2 of
each Prior Trust Pooling and Servicing Agreement, The Chase Manhattan Bank,
formerly known as Chemical Bank, as Prior Trust Trustee for each of the Prior
Trusts hereby appoints the Custodial Agent as its agent to hold any mortgage
loans, files or other property delivered to any Prior Trust Trustee pursuant to
a Prior Trust Pooling and Servicing Agreement and the Custodial Agent hereby
accepts such appointment. Each of the Trustee and each Prior Trust Trustee
hereby agree that with respect to any mortgage loans files or other property
relating to a "Common Mortgage Loan" (as defined in this Agreement and each
Prior Trust Pooling and Servicing Agreement) held by the Custodial Agent, the
Custodial Agent shall hold such mortgage loans, files or other property relating
to such a "Common Mortgage Loan" on behalf of, and as agent for the Trustee and
each applicable Prior Trust Trustee, as applicable. Each of the Prior Trust
Trustees hereby acknowledge and confirm that its right, title and interest in
any mortgage loan and any property related to such mortgage loan conveyed to it
pursuant to Section 2.1(a) of the applicable Prior Trust Pooling and Servicing
Agreement, is limited to the "Trust Balance" (as defined in the applicable Prior
Trust Pooling and Servicing Agreement), if any, of any such mortgage loan plus
accrued interest, if any, thereon.
The Custodial Agent hereby agrees not to transfer possession of the loan
agreement, mortgage or other mortgage file documents with respect to any
"Mortgage Loan" (as defined in this Agreement and each Prior Trust Pooling and
Servicing Agreement) which has outstanding balances under the Agreement or any
Prior Trust Pooling and Servicing Agreement to the Transferor.
Nothing in this Section 2.1(f) shall be deemed to affect the right or
obligation of the Prior Trust Trustee, the Trustee or the Custodial Agent to
release or to cause the release of the Mortgage File of any "Mortgage Loan" (as
defined in this Agreement and each Prior Trust Pooling and Servicing Agreement)
to the servicer of any Prior Trust or the Servicer to the extent permitted or
required by the applicable Prior Trust Pooling and Servicing Agreements or
hereunder.
Notwithstanding anything to the contrary contained herein, the parties
hereto agree that Norwest Bank Minnesota, National Association shall act as
Document Custodian of the documents
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referred to in Section 2.1(b) pursuant to the terms and conditions of the
Custodial Agreement as the agent of the Custodial Agent. Any and all documents
required to be delivered to the Custodial Agent hereunder shall be delivered to
the Document Custodian.
Section 2.2 Acceptance by Custodial Agent; Reassignment of Mortgage Loans;
-------------------------------------------------------------
Substitution of Eligible Substitute Mortgage Loans.
--------------------------------------------------
(a) The Custodial Agent acknowledges conveyance of the documents
referred to in the first paragraph of Section 2.1(b) and to be delivered to it
pursuant thereto, and declares that it does hold and shall hold such documents
and the other documents constituting a part of the Mortgage Files in trust to
the extent received by it, upon the terms herein set forth, for the benefit of
the Trustee for the use and benefit of all present and future Certificateholders
and the Certificate Insurer.
(b) Within 30 days following delivery of the Mortgage Files to the
Custodial Agent pursuant to Section 2.1(b), the Custodial Agent shall review
each Mortgage File to ascertain that all required documents referred to in the
first paragraph of Section 2.1(b) have been executed and received, and that such
documents relate to the Mortgage Loans identified on the Mortgage Loan Schedule;
provided, however, that the Custodial Agent's review of the Mortgage File for
- -------- -------
any Common Mortgage Loan shall be restricted to review of the assignment
referred to in clause (iii) of Section 2.1(b) and provided further that the
-------- -------
Custodial Agent's review of assignments of Mortgages that have been delivered to
the applicable recording office for recordation shall be reviewed in accordance
with the provisions of the following paragraph. The Custodial Agent may rely on
the purported due execution of any such documents and genuineness of any
signature thereon. Prior to the end of such 30 day period, the Custodial Agent
shall deliver to the Transferor, the Servicer and the Certificate Insurer a
certificate substantially in the form of Exhibit E. If, as set forth in such
certificate, the Custodial Agent determines that any document constituting a
part of a Mortgage File (i) does not bear manual signatures, (ii) has not been
received or (iii) is unrelated to the Mortgage Loans identified in the Mortgage
Loan Schedule, the Transferor shall correct or cure any such specified defect
within 60 days following the Transferor's receipt of such certificate. The
Custodial Agent shall be under no duty or obligation (i) to inspect, review or
examine any such documents, instruments, certificates or other papers to
determine that they are genuine, enforceable, or appropriate for the represented
purpose or that they are other than what they purport to be on their face or
(ii) to determine whether any Mortgage File should include any of the documents
specified in Section 2.1(b).
Each original recorded assignment of Mortgage referred to in Section
2.1(d) shall be delivered to the Custodial Agent within ten (10) days following
the date on which it is returned to the Transferor by the office with which such
assignment was filed for recording. Within ten (10) days following receipt by
the Custodial Agent of a recorded assignment, the Custodial Agent shall review
such assignment to confirm evidence of the recording thereof of the Custodial
Agent's interest. Within ten (10) days after the end of each month, the
Custodial Agent shall deliver to the Transferor, the Servicer and the
Certificate Insurer a notice, substantially in the form of Exhibit F, with
respect to any defects relating to the recording of such assignments based upon
the Custodial
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Agent's review. The Transferor shall have a period of sixty (60) days following
receipt of such notice to correct or cure any such defects.
Neither the Trustee nor the Custodial Agent shall have any responsibility
for reviewing any Mortgage File except as expressly provided in this Section
2.2(b). Without limiting the effect of the preceding sentence, in reviewing any
Mortgage File, neither the Trustee nor the Custodial Agent shall have any
responsibility for determining whether any document is valid and binding,
whether the text of any assignment or endorsement is in proper or recordable
form (except to determine if the Custodial Agent is the assignee), whether any
document has been recorded in accordance with the requirements of any applicable
jurisdiction or whether a blanket assignment is permitted in any applicable
jurisdiction, but shall only be required to determine whether a document has
been executed, that it appears to be what it purports to be, and, where
applicable, that it purports to be recorded.
The foregoing notwithstanding, the parties acknowledge that the review of
the Mortgage Files will be performed by the Document Custodian as agent of the
Custodial Agent.
(c) If the time to correct or cure any defect of which the Custodial
Agent has notified the Transferor following the Custodial Agent's review of the
Mortgage Files pursuant to Section 2.2(b) has expired without any correction or
cure, the Transferor shall, on the Business Day immediately preceding the
Distribution Date in the month following the Collection Period in which the time
to correct or cure such defect expired, remove the related Mortgage Loan
(including any property acquired in respect thereof and any insurance policy or
Insurance Proceeds with respect thereto) from the Trust either (i) in exchange
for depositing in the Trust the Reassignment Deposit Amount, which amount shall
be deposited into the Certificate Account pursuant to Section 3.2 on such
immediately preceding Business Day, or (ii) by substituting in its place an
Eligible Substitute Mortgage Loan or Loans. Promptly upon receipt by the Trustee
and Custodial Agent of, (i) in the case of a payment in respect of the removed
Mortgage Loan, written notification signed by a Servicing Officer to the effect
that the Reassignment Deposit Amount for any such Mortgage Loan has been so
deposited into the Certificate Account or (ii) in the case of a substitution,
the Mortgage File for each related Eligible Substitute Mortgage Loan and written
notification signed by a Servicing Officer to the effect that such Mortgage Loan
complies with the definition of Eligible Substitute Mortgage Loan and that the
Substitution Adjustment Amount, if any, has been deposited into the Certificate
Account as provided in Section 2.2(d), the Custodial Agent shall release to the
Transferor the Mortgage File for the removed Mortgage Loan and shall execute and
deliver to the Transferor an assignment substantially in the form of Exhibit G,
without recourse, in order to vest in the Transferor legal and beneficial
ownership of such removed Mortgage Loan (including any property acquired in
respect thereof and any insurance policy or Insurance Proceeds with respect
thereto). Notwithstanding the immediately preceding sentence or the provisions
of Sections 2.4, 3.1, 2.6, or 3.7, the Custodial Agent shall not be required to
release any Mortgage File to the Transferor if the Mortgage File is required to
be retained for the use and benefit of a Prior Trust pursuant to a Prior Trust
Pooling and Servicing Agreement. The form of assignment attached as Exhibit G
may be modified from time to time to the extent required by applicable law, as
evidenced by an Opinion of Counsel delivered to the Custodial Agent. The
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obligation of the Transferor to remove (to the extent permitted herein) any
Mortgage Loan and either deposit the Reassignment Deposit Amount or substitute
an Eligible Substitute Mortgage Loan shall constitute the sole remedy with
respect to such defect available to Certificateholders, the Custodial Agent, the
Trustee (for itself or on behalf of Certificateholders) or the Certificate
Insurer against the Transferor.
Notwithstanding the immediately preceding paragraph, if any Eligible
Substitute Mortgage Loans conveyed to the Trust are Common Mortgage Loans, the
Transferor shall be required to deliver to, and deposit with, the Custodial
Agent with respect to such Common Mortgage Loans, in lieu of the documents or
instruments identified in clauses (i) and (ii) of the first paragraph of Section
2.1(b), an Officer's Certificate identifying the Eligible Substitute Mortgage
Loans with respect to which such documents or instruments previously were
delivered and deposited pursuant to a Prior Trust Pooling and Servicing
Agreement. The documents or instruments identified in such Officer's Certificate
shall be considered to be part of the Mortgage Files for all purposes of this
Agreement and shall be subject to the provisions of Section 2.1(f). The Mortgage
Loan Schedule shall be amended to reflect all additions, substitutions or
deletions of Mortgage Loans provided for in this Section.
(d) Subject to Section 3.2(c), the Substitution Adjustment Amount for
any Collection Period shall be deposited into the Certificate Account on the
Business Day immediately preceding the Distribution Date occurring in the month
following such Collection Period. All amounts received in respect of the
Eligible Substitute Mortgage Loan or Loans during the Collection Period in which
the circumstances giving rise to the relevant substitution occur shall not be a
part of the Trust Fund and shall not be deposited by the Servicer into the
Certificate Account. All amounts received by the Servicer during the Collection
Period in which the circumstances giving rise to such substitution occur in
respect of any Mortgage Loan so removed from the Trust Fund shall be deposited
by the Servicer into the Certificate Account. The Servicer shall amend the
Mortgage Loan Schedule to reflect the removal of such Mortgage Loan from the
terms of this Agreement and the substitution of the Eligible Substitute Mortgage
Loan or Loans therefor. Upon such substitution, the Eligible Substitute Mortgage
Loan or Loans shall be subject to the terms of this Agreement in all respects,
and the Transferor shall be deemed to have entered into or made with respect to
such Eligible Substitute Mortgage Loan or Loans, as of the date of substitution,
the covenants, representations and warranties set forth in Section 2.4. The
procedures applied by the Transferor in selecting each Eligible Substitute
Mortgage Loan shall not be adverse to the interests of the Trustee, the
Certificate Insurer and the Certificateholders and shall be comparable to the
selection procedures applicable to the Mortgage Loans conveyed hereunder as of
the date of this Agreement.
The provisions of this Section 2.2(d) shall also apply to any substitution
of Eligible Substitute Mortgage Loan or Loans by the Transferor pursuant to
Section 2.4(b) and by the Servicer pursuant to Section 3.1.
The Mortgage Loan Schedule shall be amended to reflect all additions,
substitutions or deletions of Mortgage Loans provided for in this Section.
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Section 2.3 Representations and Warranties Regarding the Servicer.
-----------------------------------------------------
The Servicer represents and warrants to the Trustee, the Certificate
Insurer and the Certificateholders as of the date of this Agreement and as of
the Closing Date that:
(i) The Servicer is validly existing as a federally chartered
savings bank in good standing under the laws of the United
States and has the corporate power and authority to own its
assets and to transact the business in which it is currently
engaged.
(ii) The Servicer has the corporate power and authority to make,
execute, deliver and perform this Agreement and all of the
transactions contemplated under this Agreement, and has taken
all necessary corporate action to authorize the execution,
delivery and performance of this Agreement. When executed and
delivered, this Agreement will constitute the legal, valid and
binding obligation of the Servicer enforceable in accordance
with its terms, except as enforcement of such terms may be
limited by applicable bankruptcy, insolvency, reorganization,
receivership, conservatorship, moratorium or other similar laws
now or hereafter in effect affecting the enforcement of
creditors' or obligees' rights generally or the rights of
creditors or obligees of federally chartered savings banks, the
deposits of which are insured by the SAIF, and except as such
enforceability may be limited by general principles of equity
(whether considered in a proceeding at law or in equity).
(iii) The Servicer is not required to obtain the consent of any other
party or any consent, license, approval or authorization from,
or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution,
delivery, performance, validity or enforceability of this
Agreement, except for any such consent, license, approval or
authorization, or registration or declaration, as shall have
been obtained or filed, as the case may be, prior to the
Closing Date.
(iv) The execution, delivery and performance of this Agreement by
the Servicer will not violate any provision of any existing law
or regulation or any order or decree of any court applicable to
the Servicer or any provision of the charter or bylaws of the
Servicer, or constitute a material breach of any mortgage,
indenture, contract or other agreement to which the Servicer is
a party or by which the Servicer may be bound.
(v) No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or
to the knowledge of the Servicer threatened, against the
Servicer or any of its properties or with respect to this
Agreement or the Certificates which could have a material
adverse effect on the transactions contemplated by this
Agreement.
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(vi) The Servicer has fully complied, and will continue to maintain
full compliance, with the provisions of Section 13(e) of the
Federal Deposit Insurance Act, as amended (12 U.S.C. (S)
1823(e)).
Upon discovery by the Transferor, the Servicer or the Trustee of a breach of any
of the representations and warranties in this Section 2.3 which materially and
adversely affects the interests of the Certificateholders, such party shall give
prompt written notice of such breach to the other parties. Within sixty (60)
days after its discovery or receipt of notice of any such breach, the Servicer
shall cure such breach in all material respects.
Section 2.4 Representations and Warranties of the Transferor Regarding the
--------------------------------------------------------------
Mortgage Loans; Removal and Substitution Obligations.
----------------------------------------------------
(a) The Transferor represents and warrants to the Trustee, the
Certificate Insurer, and the Certificateholders as of the date of this Agreement
and as of the Closing Date and as of the related Cut-Off Date for each
applicable Mortgage Loan transferred to the Trust (unless otherwise specified)
that:
(i) As of the Closing Date, with respect to the Initial Mortgage
Loans and the applicable Transfer Date, with respect to the
Subsequent Mortgage Loans and any Eligible Substitute Mortgage
Loan, the information set forth on the Mortgage Loan Schedule
was true and correct in all material respects.
(ii) Each Mortgage is a valid lien on the related Mortgage Property,
subject only to (a) the lien of current real property taxes and
assessments, (b) the lien of the related first mortgage loan, if
any, which first mortgage loan does not contain a future advance
provision, (c) covenants, conditions and restrictions, rights of
way, easements and other matters of public record as of the date
of recording of such Mortgage, such exceptions appearing of
record being acceptable to mortgage lending institutions
generally in the area wherein the related Mortgaged Property is
located or specifically reflected in the appraisal obtained in
connection with the origination of the related Mortgage Loan
obtained by the Transferor and (d) other matters to which like
properties are commonly subject which do not materially interfere
with the benefits of the security interest intended to be
provided by such Mortgage.
(iii) Immediately prior to the transfer and assignment by the
Transferor to the Custodial Agent for the benefit of the Trustee,
the Transferor had good title to each Mortgage Loan, subject to
no prior lien, mortgage, security interest, pledge, charge or
other encumbrance, except to the extent arising under the Prior
Trust Pooling and Servicing Agreements.
(iv) The transfer to the Trust of the Mortgage Loans constitutes
either a valid sale of all right, title and interest of the
Transferor in the Mortgage Loans (to the extent
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provided herein), including the Cut-Off Date Trust Balances
thereof, to the Custodial Agent for the benefit of the Trustee
or the grant of a first priority perfected security interest
therein (to the extent provided herein) to the Custodial Agent
for the benefit of the Trustee.
(v) As of the applicable Cut-Off Date, no Minimum Monthly Payment
on or in respect of any Mortgage Loan is thirty (30) or more
days past due on a contractual basis.
(vi) As of the Closing Date, with respect to the Initial Mortgage
Loans and as of the applicable Transfer Date, with respect to
the Subsequent Mortgage Loans and any Eligible Substitute
Mortgage Loan, no Mortgaged Property is subject to any
mechanics' lien or claim for work, labor or material which is
or may be a lien prior to, or equal or coordinate with, the
lien of the related Mortgage, except those liens which are
fully insured against by the title insurance policy referred to
in clause (xv) below.
(vii) As of the Closing Date, with respect to the Initial Mortgage
Loans and as of the applicable Transfer Date, with respect to
the Subsequent Mortgage Loans and any Eligible Substitute
Mortgage Loan, there is no lien for any delinquent recording
fee, tax or assessment against any Mortgaged Property.
(viii) As of the Closing Date, with respect to the Initial Mortgage
Loans and as of the applicable Transfer Date, with respect to
the Subsequent Mortgage Loans and any Eligible Substitute
Mortgage Loan, no Loan Agreement or Mortgage is subject to any
valid offset, defense or counterclaim.
(ix) As of the Closing Date, with respect to the Initial Mortgage
Loans and as of the applicable Transfer Date, with respect to
the Subsequent Mortgage Loans and any Eligible Substitute
Mortgage Loan, to the best knowledge of the Transferor, each
Mortgaged Property is free of material damage and is in good
repair.
(x) The Loan Agreement Amendment was in effect with respect to each
Mortgage Loan on or prior to the applicable Cut-Off Date.
(ix) The Cut-Off Date Trust Balance for each Mortgage Loan was not
less than $0 or greater than $500,000.
(xii) As of the related Cut-Off Date for each of the Mortgage Loans,
no Mortgage Loan had a stated maturity date later than 240
months after such Cut-Off Date.
(xiii) The minimum variable Loan Rate for each Mortgage Loan,
excluding any introductory Loan Rate, is the applicable Base
Rate plus 1.0%.
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(xiv) At the time it was made, each Mortgage Loan complied in all
material respects with applicable state and federal laws,
including, without limitation, usury, equal credit opportunity
and disclosure laws, and the consummation of the transactions
herein contemplated, including, without limitation, the receipt
of interest by Certificateholders, will not violate such laws
in any material respect.
(xv) A lender's title insurance policy or binder, or other assurance
of title customary in the relevant jurisdiction therefor
(including, without limitation, a title report), was issued on
the date of the origination of each Mortgage Loan and is valid
and remains in full force and effect with respect to each such
Mortgage Loan.
(xvi) As of the Closing Date, with respect to the Initial Mortgage
Loans and as of the applicable Transfer Date, with respect to
the Subsequent Mortgage Loans and any Eligible Substitute
Mortgage Loan, the Transferor has not received a notice of
default of any senior mortgage loan related to a Mortgaged
Property which has not been cured by a party other than the
Transferor.
(xvii) Each Loan Agreement and each Mortgage is in substantially the
form previously provided to the Custodial Agent by the
Transferor (in the case of the Loan Agreement, as amended by
the related Loan Agreement Amendment) and is an enforceable
obligation of the related Mortgagor, except as enforceability
may be limited by (a) bankruptcy, insolvency or other similar
laws now or hereafter in effect relating to the enforcement of
creditors' rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a
proceeding at law or in equity), and, to the best knowledge of
the Transferor, there is no offset, defense, claim or
counterclaim to any obligation under such Loan Agreement, as so
amended, or under the Mortgage, including the obligation of the
Mortgagors to pay principal and interest in accordance with the
terms of such Loan Agreement, as so amended.
(xviii) The definition of Base Rate in each Loan Agreement relating to
a Mortgage Loan is similar to the definition of such term in
the form of Loan Agreement previously provided to the Custodial
Agent and referred to in clause (xvii) above.
(xix) As of the applicable Cut-Off Date, the Combined Loan-to-Value
Ratio for each Mortgage Loan was not in excess of 100% (rounded
to the nearest whole percent).
(xx) As of the Cut-Off Date for the Initial Mortgage Loans, the
weighted average Combined Loan-to-Value Ratio of the Initial
Mortgage Loans was 66.02%.
(xxi) As of the Cut-Off Date for the Initial Mortgage Loans, not more
than 4% of the Initial Mortgage Loans by principal balance was
secured by Mortgaged Properties located in one United States
zip code.
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(xxii) No selection procedure reasonably believed by the Transferor to
be adverse to the interests of the Certificateholders or the
Certificate Insurer was utilized in selecting the Mortgage
Loans.
(xxiii) The Mortgage File for each Mortgage Loan contains all required
documents referred to in the first paragraph of Section 2.1(b),
and such documents bear manual signatures and relate to such
Mortgage Loan.
(xxiv) As of the Cut-Off Date for the Initial Mortgage Loans, no Loan
Agreement relating to any Initial Mortgage Loan (other than
Sub-Prime Loans) provided for scheduled principal payments
prior to the maturity of such Mortgage Loan.
(xxv) As of the Cut-Off Date for the Initial Mortgage Loans, not more
than 2% of the Initial Mortgage Loans (by Cut-Off Date Trust
Balance) were Sub-Prime Loans.
(xxvi) As of each applicable Transfer Date, not more than 5% of the
Cut-Off Date Trust Balances of the Subsequent Mortgage Loans
are Sub-Prime Loans.
(b) The representations and warranties set forth in Section 2.4(a)
shall survive the delivery of the Mortgage Files to the Custodial Agent. Upon
discovery by the Transferor, the Servicer, the Certificate Insurer or the
Trustee of a breach of any of the foregoing representations and warranties with
respect to any Mortgage Loan which materially and adversely affects the
interests of the Certificateholders in such Mortgage Loan, the party discovering
such breach shall give written notice thereof to the other parties with five (5)
days after such discovery. Within sixty (60) days after its discovery or its
receipt of notice of any such breach, the Transferor shall use all reasonable
efforts to cure such breach in all material respects. Unless at the expiration
of such 60-day period, such breach has been cured in a11 material respects or
otherwise does not exist or continue to exist, the Transferor shall, not later
than the Business Day immediately preceding the Distribution Date in the month
following the related Collection Period in which any such cure period expired,
remove such Defective Mortgage Loan (including any property acquired in respect
thereof and any insurance policy or Insurance Proceeds with respect thereto) in
exchange for either (i) deposit of the Reassignment Deposit Amount or (ii)
substitution in its place of an Eligible Substitute Mortgage Loan or Loans, in
either case in the same manner and subject to the same conditions as set forth
in Section 2.2(c). In conjunction with any removal pursuant to the foregoing,
the Transferor shall be entitled to receive an assignment of the removed
Mortgage Loan and a release of the related Mortgage File from the Custodial
Agent to the extent set forth in Section 2.2(c). The obligation of the
Transferor to remove any Mortgage Loan as to which a breach has occurred and is
continuing shall constitute the sole remedy against the Transferor with respect
to such breach available to Certificateholders, the Trustee on behalf of
Certificateholders, or the Certificate Insurer.
A breach of the representation and warranty set forth in clause (xxiii)
of Section 2.4(a) with respect to any Mortgage Loan shall be deemed to affect
materially and adversely the interests of the Certificateholders and the
Certificate Insurer in such Mortgage Loan. Notwithstanding the first
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paragraph of this Section 2.4(b) the provisions of Section 2.2(b) shall control
with respect to notice and cure periods applicable to the correction of any
defective Mortgage Files and the obligations of the Transferor with respect
thereto.
The Mortgage Loan Schedule shall be amended to reflect all additions,
substitutions or deletions of Mortgage Loans provided for in this Section.
Section 2.5 Official Record.
---------------
The Transferor and the Servicer agree that, so long as the Certificates
remain outstanding, this Agreement shall remain outstanding as an official
record of the Transferor within the meaning of Section 13(e) of the Federal
Deposit Insurance Act, as amended (12 U.S.C. (S) 1823(e)).
Section 2.6 Retransfers of Mortgage Loans at Election of Transferor.
-------------------------------------------------------
Subject to the conditions set forth below, the Transferor may, but shall
not be obligated to, require the retransfer of Mortgage Loans and the related
property from the Trust to the Transferor as of the last Business Day of any
Collection Period (the "Retransfer Date"). On the 27th day of such Collection
Period or if that day is not a Business Day the next preceding Business Day (the
"Retransfer Notice Date"), the Transferor shall give the Trustee and the
Custodial Agent a notice of the proposed retransfer that contains a list of the
Mortgage Loans and the related property to be retransferred. Such retransfers of
Mortgage Loans and the related property shall be permitted upon satisfaction of
the following conditions:
(i) the Removal Condition is satisfied;
(ii) On or before the Retransfer Date, the Transferor shall have
delivered to the Trustee and Custodial Agent a revised Mortgage Loan
Schedule, reflecting the proposed retransfer;
(iii) The Transferor shall represent and warrant that no selection
procedures reasonably believed by the Transferor to be adverse to
the interests of the Investor Certificateholders or the Certificate
Insurer were utilized in selecting the Mortgage Loans to be removed
from the Trust;
(iv) Each Rating Agency shall have received on or prior to the
Retransfer Notice Date notice of such proposed retransfer of
Mortgage Loans and, prior to the Retransfer Date, shall not have
notified the Transferor in writing that such retransfer of Mortgage
Loans would result in a reduction or withdrawal of its then current
rating of the Investor Certificates without taking into account the
Certificate Insurance Policy; provided, however that with respect to
-------- -------
the first proposed retransfer, each Rating Agency shall have
received on or prior to the Retransfer Notice Date notice of such
proposed retransfer of Mortgage Loans and, prior to the Retransfer
Date, shall have notified the Transferor in writing that such
retransfer of Mortgage Loans
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would not result in a reduction or withdrawal of its then current
rating of the Investor Certificates without taking into account the
Certificate Insurance Policy.
(v) The Transferor shall have delivered to the Trustee and the
Certificate Insurer an Officer's Certificate certifying that the
items set forth in subparagraphs (i) through (iv), inclusive, have
been performed or are true and correct, as the case may be. The
Trustee may conclusively rely on such Officer's Certificate, shall
have no duty to make inquiries with regard to the matters set forth
therein and shall incur no liability in so relying.
The "Removal Condition" is satisfied if, on the Retransfer Date, after
giving effect to such removal the sum of the Transferor Principal Balance and
the Overcollateralization Amount is not less than the greater of (a) 5% of the
Pool Balance on such date and (b) 2% of the Pool Balance on the Cut-Off Date
(the "Overall Minimum Amount"); provided, however, that (i) no removal may occur
-------- -------
if such removal would reduce the Overcollateralization Amount below the Required
Overcollateralization Amount and (ii) in addition to the foregoing, during the
Rapid Amortization Period, no removal shall occur unless, (A) no Rapid
Amortization Event has occurred, (B) immediately prior to such removal, the Pool
Balance is at least equal to the sum of (x) the outstanding Investor Certificate
Principal Balance and (y) the Overall Minimum Amount and (C) no other removal
has occurred during the calendar year.
Upon receiving the requisite information from the Transferor, the Servicer
shall perform in a timely manner those acts required of it as specified above
and shall indicate on the Electronic Ledger that the Mortgage Loans
retransferred to the Transferor are no longer in the Trust. Upon satisfaction of
the above conditions to the extent provided in Section 2.2(c), on the Retransfer
Date the Custodial Agent shall deliver to the Transferor the Mortgage File for
each Mortgage Loan being retransferred and the Custodial Agent shall execute and
deliver to the Transferor such other documents prepared by the Transferor as
shall be reasonably necessary to retransfer such Mortgage Loan and related
property to the Transferor. Any such retransfer of the Trust's right, title and
interest in and to Mortgage Loans shall be without recourse, representation or
warranty by or of the Trust to the Transferor.
The Mortgage Loan Schedule shall be amended to reflect all additions,
substitutions or deletions of Mortgage Loans provided for in this Section.
Section 2.7 Tax Treatment.
-------------
It is the intention of the Transferor and the Investor Certificateholders
(and Certificate Owners) that the Investor Certificates will be indebtedness of
the Transferor for federal, state and local income and franchise tax purposes
and for purposes of any other tax imposed on or measured by income. The
Transferor, the Trustee and each Investor Certificateholder (and Certificate
Owner) by acceptance of its Investor Certificate (or, in the case of a
Certificate Owner, by virtue of such Certificate Owner's acquisition of a
beneficial interest therein) and the Certificate Insurer agrees to treat the
Investor Certificates (or beneficial interest therein), for purposes of federal,
state
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and local income, as indebtedness of the Transferor secured by the Trust
Balances of the Mortgage Loans and the Pre-Funding Account and to report the
transactions contemplated by this Agreement on all applicable tax returns in a
manner consistent with such treatment. Each Certificateholder agrees that it
will cause any Certificate Owner acquiring an interest in an Investor
Certificate through it to comply with this Agreement as to treatment as
indebtedness for federal, state and local income and franchise tax purposes and
for purposes of any other tax imposed on or measured by income. Furthermore, the
Trustee shall treat the Trust as a security device only, and shall not file tax
returns or obtain an employer identification number on behalf of the Trust.
Section 2.8 Conveyance of Subsequent Mortgage Loans.
---------------------------------------
(a) Subject to the satisfaction of the conditions set forth in
Section 2.1 and paragraph (b) below, in consideration of the Trustee's delivery
to or upon the order of the Transferor of all or a portion of the amount on
deposit in the Pre-Funding Account net of any Pre-Funding Earnings, the
Transferor shall, to the extent of the availability thereof, on any Transfer
Date transfer, assign, set over and otherwise convey to the Trust without
recourse (subject to Sections 2.2 and 2.4) all of its right, title and interest
in and to (i) each Subsequent Mortgage Loan listed on the schedule delivered by
the Transferor on such Transfer Date, including its Cut-Off Date Trust Balance
and any Additional Balances thereon and all payments of interest and principal
thereon, from whatever source derived, which are received on or with respect to
such Subsequent Mortgage Loan on or after the related Cut-Off Date and are
allocable to the Trust Balance thereof and (ii) to the extent of the Trust
Balances of the Subsequent Mortgage Loans and interest accrued thereon, as
provided in this Agreement, (A) any Mortgaged Properties related to the
Subsequent Mortgage Loans converted to ownership through Foreclosure Proceedings
or otherwise, (B) any insurance policies related to the Subsequent Mortgage
Loans, and (C) the related Mortgages, Loan Agreements and other Mortgage File
documents for the Subsequent Mortgage Loans; and the proceeds of each of the
foregoing. The amount released from the Pre-Funding Account shall be one hundred
percent (100%) of the aggregate principal balances of the Subsequent Mortgage
Loans so transferred. Upon the transfer by the Transferor of the Subsequent
Mortgage Loans hereunder, such Subsequent Mortgage Loans and all other rights
and interests with respect to such Subsequent Mortgage Loans shall be deemed for
all purposes hereunder to be part of the Trust.
(b) The obligation of the Trustee to accept the transfer of the
Subsequent Mortgage Loans and the other property and rights related thereto
described in paragraph (a) above is subject to the satisfaction of each of the
following conditions on or prior to the related Transfer Date:
(i) the Transferor shall have given the Trustee at least five (5)
Business Days notice of the transfer, which notice shall specify the Transfer
Date and the aggregate Cut-Off Date Trust Balances of the Subsequent Mortgage
Loans to be transferred on such date;
(ii) the Transferor shall have delivered to the Trustee and
Custodial Agent an amended Mortgage Loan Schedule, listing the Subsequent
Mortgage Loans;
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(iii) the Transferor shall have deposited in the Certificate Account
all collections in respect of such Subsequent Mortgage Loans received on or
after the Cut-Off Date allocable to the Trust Balances of such Subsequent
Mortgage Loans;
(iv) the representations and warranties of the Transferor in Section
2.4, to the extent such representations and warranties do not pertain
exclusively to the Initial Mortgage Loans, shall be true and correct with
respect to the Subsequent Mortgage Loans as of the related Transfer Date;
(v) the Transferor shall have delivered the related Mortgage
Files to the Custodial Agent pursuant to Section 2.1(b);
(vi) the Pre-Funding Period shall not have terminated;
(vii) the Transferor shall represent and warrant that no selection
procedures reasonably believed by the Transferor to be adverse to the interests
of the Investor Certificateholders or the Certificate Insurer were utilized in
selecting the Subsequent Mortgage Loans;
(viii) the Certificate Insurer shall have consented to such transfer
of Subsequent Mortgage Loans (which consent shall not be unreasonably withheld
or delayed);
(ix) the transfer of the Subsequent Mortgage Loans shall not result
in a reduction or withdrawal of the rating on the Investor Certificates without
regard to the Certificate Insurance Policy; and
(x) the Transferor shall have delivered to the Trustee and the
Certificate Insurer an Officer's Certificate confirming the satisfaction of each
condition precedent specified in this paragraph (b).
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
Section 3.1 The Servicer.
------------
(a) The Servicer shall service and administer the Mortgage Loans in
accordance with its customary procedures consistent with general industry
practice, provided, however, that such procedures shall be the same in all
-------- -------
material respects as the procedures followed by the Servicer in the conduct of
its servicing responsibilities pursuant to the Prior Trust Pooling and Servicing
Agreements. The Servicer shall have full power and authority, acting alone or
through one or more subservicers, to do any and all things in connection with
such servicing and administration which it may deem necessary or desirable. Any
amounts received by a subservicer in respect of a Mortgage Loan shall be deemed
to have been received by the Servicer whether or not actually received by it.
Without limiting the generality of the foregoing, the Servicer shall continue,
and is hereby authorized and empowered by the Trustee, to execute and deliver,
on behalf of itself, the
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Certificateholders and the Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Mortgage Loans and with
respect to the Mortgaged Properties. The Trustee shall furnish the Servicer with
any powers of attorney and other documents necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties hereunder.
The relationship of the Servicer (and of any successor to the Servicer
as servicer under this Agreement) to the Trustee and Custodial Agent under this
Agreement is intended by the parties to be that of an independent contractor and
not that of a joint venturer, partner or agent.
(b) The Servicer shall not consent to the placement of a lien on the
Mortgaged Property senior to that of the related Mortgage unless (i) such action
is consistent with reasonable commercial practice and (ii) such consent is given
in any one of the following three situations:
(c) such Mortgage was in a first lien position as of the date the
related Mortgage Loan was conveyed to the Trust and is in a first lien position
immediately prior to the placement of such senior lien and the Updated Combined
Loan-to-Value Ratio of such Mortgage Loan is not greater than the Combined
Loan-to-Value Ratio of such Mortgage Loan as of the date such Mortgage Loan was
conveyed to the Trust;
(d) such Mortgage succeeded to a first lien position after the
related Mortgage Loan was conveyed to the Trust and, immediately following the
placement of such senior lien, such Mortgage is in a second lien position and
either (i) the outstanding principal amount of the mortgage loan secured by such
senior lien is no greater than the outstanding principal amount of the first
mortgage loan secured by the Mortgaged Property as of the date the related
Mortgage Loan was conveyed to the Trust or (ii) the Updated Combined
Loan-to-Value Ratio of such Mortgage Loan is not greater than the Combined
Loan-to-Value Ratio of such Mortgage Loan as of the date such Mortgage Loan was
conveyed to the Trust; or
(e) such senior lien secures a mortgage loan that refinances an
existing first mortgage loan and either (i) the outstanding principal amount of
the replacement first mortgage loan immediately following such refinancing is
not greater than the outstanding principal amount of such existing first
mortgage loan at the date of such refinancing or (ii) the Updated Combined
Loan-to-Value Ratio of the applicable Mortgage Loan is not greater than the
Combined Loan-to-Value Ratio of such Mortgage Loan as of the date such Mortgage
Loan was conveyed to the Trust.
(f) In connection with the servicing and administration of the
Mortgage Loans, the Servicer, at the request of a Mortgagor, may increase the
Credit Limit of up to 10% of the Mortgage Loans by modifying the related Loan
Agreement to provide for such additional amount. However, in the event that (i)
a new loan agreement rather than a modification of such Loan Agreement is
proposed to be entered into in connection with such increase or (ii) such Loan
Agreement is proposed to be modified to provide for an increased Credit Limit
and the Combined Loan-to-Value Ratio of such Mortgage Loan following such
increase and as a result thereof
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exceeds 80% (rounded to the nearest whole percent), the Servicer, not later than
the Business Day immediately preceding the Distribution Date next following the
related Collection Period, shall either purchase the applicable Mortgage Loan or
substitute an Eligible Substitute Mortgage Loan or Loans for such Mortgage Loan.
The Mortgage Loan Schedule shall be amended to reflect all additions,
substitutions or deletions of Mortgage Loans provided for in this Section.
(g) The Servicer may agree to changes in the terms of a Mortgage
Loan, provided, however, that such changes (i) do not materially adversely
-------- -------
affect the interests of Certificateholders or the Certificate Insurer and (ii)
are consistent with prudent business practice; provided, further, that the
Servicer may agree to any changes in the terms of the Mortgage Loans if the
Servicer, not later than the Business Day immediately preceding the Distribution
Date next following the related Collection Period shall either remove the
applicable Mortgage Loan or substitute an Eligible Mortgage Loan or Loans for
such Mortgage Loan.
(h) Any purchase of, or substitution of an Eligible Substitute
Mortgage Loan or Loans for, a Defective Mortgage Loan by the Servicer pursuant
to this Section 3.1 shall be effected in the same manner and subject to the same
conditions as set forth in Section 2.2(c). Upon completing any such purchase or
substitution, the Servicer shall receive an assignment of such Defective
Mortgage Loan and a release of the related Mortgage File from the Custodial
Agent to the extent set forth in Section 2.2(c).
(i) The Servicer may reduce the Margin of any Mortgage Loan up to
0.25%. Except as otherwise required by any requirement of law applicable to the
Servicer, the Servicer shall not reduce the Margin of any Mortgage Loan by more
than 0.25% per annum unless (i) the Servicer has received an opinion of counsel
that such reduction in the Margin will not materially adversely affect the
characterization of the Investor Certificates as debt for Federal income tax
purposes, (ii) the Certificate Insurer has consented to such reduction and (iii)
the Servicer has received confirmation from each Rating Agency then rating the
Investor Certificates that such reduction will not cause a reduction or
withdrawal of the rating of the Investor Certificates without regard to the
Certificate Insurance Policy; provided however that, the Servicer may reduce the
-------- ------- ----
Margin of any Mortgage Loan by more than 0.25% if the Servicer, not later than
the Business Day immediately preceding the Distribution Date following the
related Collection Period shall either remove the applicable Mortgage Loan or
substitute an Eligible Substitute Mortgage Loan or Loans for such Mortgage Loan.
(j) The Servicer may extend the maturity date on (i) any Mortgage
Loan which is then currently in default under the terms of the related Loan
Agreement, (ii) any Mortgage Loan; provided that the Servicer may only grant the
extensions described in this clause (ii) in any one calendar year on Mortgage
Loans with aggregate Trust Balances of up to 2% of the Pool Balance as of the
beginning of such calendar year (net of the Pre-Funded Amount), (iii) any
Mortgage Loan in respect of which the Servicer has delivered a certificate to
the Trustee certifying that such extension will not materially adversely affect
the interests of the Investor Certificateholders and
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(iv) any Mortgage Loan for which the Servicer has not later than the Business
Day immediately preceding the Distribution Date next following the related
Collection Period either removed the applicable Mortgage Loan or substituted an
Eligible Substitute Mortgage Loan or Loans for such Mortgage Loan; provided,
--------
however, that no extension on a Mortgage Loan described in clauses (i), (ii) and
- -------
(iii) shall cause the maturity date of such Mortgage Loan to extend beyond the
last day of the Collection Period immediately preceding the Stated Maturity
Date.
(k) Sections 3.1(f) and 3.1(g) shall be exclusive of and not subject
to Section 3.1(d).
Section 3.2 Collection of Certain Mortgage Loan Payments.
--------------------------------------------
(a) The Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
follow such collection procedures as it follows with respect to mortgage loans
in its servicing portfolio comparable to the Mortgage Loans. Consistent with,
and without limiting the generality of, the foregoing, the Servicer, in its
discretion, may (i) waive any late payment charge or any assumption fees or
other fees which may be collected in the ordinary course of the servicing of the
Mortgage Loans and (ii) arrange with a Mortgagor a schedule for the payment of
interest due and unpaid for a period of not more than ninety (90) days after the
date of the initial uncured delinquency thereon.
(b) On or before the Closing Date, the Trustee shall have
established, and shall thereafter maintain, a separate trust account in the name
of the Trustee for the benefit of the Certificateholders and the Certificate
Insurer (the "Certificate Account"). If such an account maintained with the
Trustee would be an Eligible Account, the Certificate Account shall be
maintained with the Trustee.
(c) On the Closing Date, the Servicer shall, subject to this
Section 3.2(c), deposit into the Certificate Account any amounts representing
payments on, and any collections in respect of, the Initial Mortgage Loans
allocable to the Investor Certificateholders received on or after the Cut-Off
Date for the Initial Mortgage Loans and through the second Business Day prior to
the Closing Date. Thereafter, the Servicer shall, subject to this section
3.2(c), deposit into the Certificate Account on a daily basis within two (2)
Business Days following receipt thereof but in any case prior to the immediately
succeeding Distribution Date relating to such deposit the following payments and
collections allocable to the Trust received or made by it:
(i) Daily Investor Interest Collections; and
(ii) subject to Section 3.2(e), Daily Investor Principal Collections.
Without limiting the generality of the preceding sentence, the Servicer shall
not be required to deposit into the Certificate Account (a) amounts representing
fees (including, without limitation, annual fees and any assumption fees payable
pursuant to Section 3.5) or late charge penalties or other charges payable by
Mortgagors, (b) amounts received by the Servicer for the accounts of
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Mortgagors for application towards the payment of taxes, insurance premiums,
assessments and similar items or (c) any payments or proceeds (including,
without limitation, Insurance Proceeds and Liquidation Proceeds) of any Mortgage
Loans removed by the Transferor or purchased by the Servicer which are received
after the effective date of such removal or purchase or (d) amounts in respect
of the Reassignment Deposit Amounts or Substitution Adjustment Amount that are
not included in Daily Investor Interest Collections or Daily Investor Principal
Collections.
The Trustee shall deposit into the Certificate Account the Certificate
Insurance Draw Amounts received pursuant to Section 4.2.
(d) The Trustee shall hold amounts deposited into the Certificate
Account as trustee for the Certificateholders and the Certificate Insurer to the
extent of receipts in respect of the Mortgage Loans to be included in Available
Funds and as custodian for the Transferor to the extent of receipts, if any, in
excess thereof.
At the written direction of a Servicing Officer, the Trustee shall
invest any funds in the Certificate Account in Permitted Investments specified
in such direction (including obligations of the Trustee or any of its
affiliates, if such obligations otherwise qualify as Permitted Investments).
Such direction shall be in writing, shall designate specific investments and
shall certify that the specified investments constitute Permitted Investments
and mature at the time required hereby. Each investment shall mature not later
than the Business Day immediately preceding the Distribution Date next following
the date of such investment (unless the obligor in respect of such investment is
the Trustee and the Trustee is acting as the Paying Agent, in which case such
investment may mature on such Distribution Date) and shall not be sold or
disposed of prior to its maturity. All net income and gain realized from any
such investment of funds constituting Available Funds shall be distributed to
Certificateholders or the Certificate Insurer pursuant to Section 5.1(a). The
Trustee shall not be liable for any loss incurred in connection with any such
investment except with respect to any investment issued or guaranteed by the
Trustee in its individual capacity.
(e) With respect to the amounts required to be deposited into the
Certificate Account pursuant to item (ii) of Section 3.2(c), on any day during
the Managed Amortization Period where the amount on deposit in the Certificate
Account for the related Collection Period is greater than or equal to 1% of the
Investor Certificate Principal Balance as of the immediately prior Distribution
Date, the Servicer shall be required to deposit into the Certificate Account an
amount, but not less than zero, equal to the aggregate amount of Principal
Collections for such day minus the aggregate amount of Draws for such day.
(f) Any amounts received pursuant to Sections 2.2(c), 2.4(b) and
3.1, in respect of a Reassignment Deposit Amount or a Substitution Adjustment
Amount shall be deemed to be received by the Trustee and the Servicer on the
last day of prior calendar month.
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Section 3.3 Permitted Withdrawals from the Certificate Account.
--------------------------------------------------
(a) The Trustee may, from time to time, make withdrawals from the
Certificate Account subject to the conditions and for the purposes set forth in
this Agreement, including the following:
(i) to make distributions and payments as provided in Section 5.1;
(ii) to indemnify the Servicer to the extent required or permitted
pursuant to Section 7.3(b) or 7.3(c);
(iii) to pay the Transferor or the Servicer, as applicable, amounts
received in respect of Defective Mortgage Loans during the
Collection Period occurring in the month in which such Defective
Mortgage Loans were purchased or replaced or which were otherwise
reflected in the calculation of the related Reassignment Deposit
Amount or any Substitution Adjustment Amount; and
(iv) to clear and terminate the Certificate Account in accordance with
Section 10.1.
(b) To the extent that the amounts described in item (ii) of
Section 3.2(c) on deposit in the Certificate Account on the second Business Day
after the last day of a Collection Period, excluding any amounts to be withdrawn
pursuant to Section 3.3(a) allocable to such amounts, are in excess of the
Scheduled Principal Collections Distribution Amount for the following
Distribution Date plus any Basis Risk Payment due on such Distribution Date and
payable from Investor Principal Collections, such excess shall be withdrawn from
the Certificate Account on such day by the Trustee, at the written direction of
the Servicer, and paid over to the Transferor Certificateholder. To the extent
any Overcollateralization Adjustment Amount is payable on the following
Distribution Date, such excess shall be deemed paid in satisfaction of such
Overcollateralization Adjustment Amount.
(c) Any provision herein to the contrary notwithstanding, if the
Servicer or the Transferor deposits into the Certificate Account any amount not
required to be deposited therein pursuant to Section 3.2(c), the Servicer may at
any time instruct the Trustee to withdraw such amount from the Certificate
Account and to pay such amount to the Servicer. The Servicer shall deliver an
Officer's Certificate to the Trustee which states that it is submitted pursuant
to this Section 3.3(c) and specifies any amounts deposited in error. If the
facts set forth on the face of such Officer's Certificate indicate that amounts
deposited were not required to be deposited into the Certificate Account
pursuant to Section 3.2(c), the Trustee shall withdraw such amount and pay over
such amount to the Servicer. To the extent that any amounts withdrawn are
payable to the Transferor, the Servicer shall receive such amounts as custodian
for the Transferor.
(d) Any provision herein to the contrary notwithstanding, the
Servicer may debit against any amount required to be deposited into the
Certificate Account any amount previously
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deposited into the Certificate Account in respect of payments by Mortgagors made
by checks subsequently returned for insufficient funds or other reason for non-
payment.
Section 3.4 Maintenance of Hazard Insurance; Property Protection Expenses.
-------------------------------------------------------------
The Servicer, in accordance with its customary servicing procedures,
shall cause to be maintained for each Mortgage Loan hazard insurance naming the
Servicer as loss payee thereunder providing extended coverage in an amount which
is at least equal to the lesser of (i) the maximum insurable value of the
improvements securing such Mortgage Loan from time to time or (ii) the sum of
the Loan Balance of such Mortgage Loan and the principal balance of any mortgage
loan senior to such Mortgage Loan from time to time. The Servicer shall also
maintain, on property acquired in Foreclosure Proceedings, hazard insurance with
extended coverage in an amount which is at least equal to the lesser of (i) the
maximum insurable value from time to time of the improvements which are a part
of such property or (ii) the sum of the Loan Balance of such Mortgage Loan and
the principal balance of any mortgage loan senior to such Mortgage Loan at the
time of such Foreclosure Proceedings, plus accrued interest and the good-faith
estimate of the Servicer of related Liquidation Expenses to be incurred in
connection therewith. Amounts collected by the Servicer under any such policies
shall be deposited as Liquidation Proceeds or Insurance Proceeds into the
Certificate Account to the extent provided in Section 3.2(c). In cases in which
any Mortgaged Property is located in a federally designated special flood hazard
area, the hazard insurance to be maintained for the related Mortgage Loan, or on
property acquired in Foreclosure Proceedings, shall include flood insurance. All
such flood insurance shall be in an amount equal to the lesser of (i) the
maximum amount available under standard flood insurance in such designated flood
area and (ii) the sum of the Loan Balance of the applicable Mortgage Loan and
the principal balance of any mortgage loan senior to such Mortgage Loan from
time to time. The Servicer shall be under no obligation to require that any
Mortgagor maintain earthquake or other additional insurance and shall be under
no obligation itself to maintain any such additional insurance on property
acquired in respect of a Mortgage Loan, other than pursuant to such applicable
laws and regulations as shall at any time be in force and as shall require such
additional insurance.
If the Servicer shall obtain and maintain a blanket policy issued by an
insurer acceptable to the Rating Agencies insuring against hazard losses on all
of the Mortgage Loans, it shall conclusively be deemed to have satisfied its
obligations as set forth in the first sentence of this Section 3.4. Any such
blanket policy may contain a deductible clause. In the event that there shall
have been a loss which would otherwise have been covered by such blanket policy
if such blanket policy did not contain a deductible clause, the Servicer shall
deposit into the Certificate Account to the extent provided for in Section
3.2(c) the Trust proportion (computed on the basis of the ratio of the Trust
Balance to the Loan Balance at the time of deposit) of the amount not otherwise
payable under the blanket policy because of such deductible clause.
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Section 3.5 Assumption and Modification Agreements.
--------------------------------------
In any case in which a Mortgaged Property has been or is about to be
conveyed by the Mortgagor, the Servicer shall exercise its right to accelerate
the maturity of the Mortgage Loan secured thereby unless it is prohibited from
doing so by applicable law. If the Servicer is prevented from enforcing such
right by applicable law, the Servicer (so long as such action conforms with the
Servicer's underwriting standards at the time for new originations) is
authorized to take or enter into an assumption and modification agreement from
or with the Person to whom such Mortgaged Property has been or is about to be
conveyed, pursuant to which such Person becomes liable under the Loan Agreement
and, to the extent permitted by applicable law, the Mortgagor remains liable
thereon. No change in the terms of the related Loan Agreement may be made by the
Servicer in connection with any such assumption or modification to the extent
that such change would not be permitted to be made in respect of the original
Loan Agreement pursuant to Section 3.1. The Servicer shall notify the Trustee
that any assumption and modification agreement has been completed by delivering
to the Trustee (i) an Officer's Certificate certifying that such agreement is in
compliance with this Section 3.5 and (ii) a manually executed copy of such
assumption and modification agreement. Any such assumption and modification
agreement shall, for all purposes, be considered a part of the related Mortgage
File to the same extent as all other documents and instruments constituting a
part thereof. Any fee collected by the Servicer for entering into any such
agreement shall be retained by the Servicer as additional servicing
compensation.
Section 3.6 Realization Upon Defaulted Mortgage Loans.
-----------------------------------------
The Servicer shall use its best efforts to foreclose upon or otherwise
comparably convert to ownership Mortgaged Properties securing such of the
Mortgage Loans as come into and continue in default when, in the opinion of the
Servicer based upon the practices and procedures referred to in the following
sentence, no satisfactory arrangements can be made for collection of delinquent
payments. In connection with such foreclosure or other conversion, the Servicer
shall follow such practices (including, in the case of any default on a related
senior mortgage loan, the advancing of funds to correct such default or to pay
in full such senior mortgage loan) and procedures as it shall deem necessary or
advisable and as shall be normal and usual in its general junior mortgage
servicing activities. Notwithstanding the foregoing, the Servicer shall not be
required to foreclose upon or otherwise take any action with respect to any
defaulted Mortgage Loan which would result in the Trust's acquisition of title
to the related Mortgaged Property if, in the reasonable judgment of the
Servicer, such Mortgaged Property is subject to toxic waste or other
environmental hazards that could subject the owner of such Mortgaged Property to
liability under applicable law in excess of the reasonable liquidation value of
such Mortgaged Property. The foregoing is subject to the proviso that the
Servicer shall not be required to expend its own funds in connection with any
foreclosure or towards the correction of any default on a related senior
mortgage loan or restoration of any Mortgaged Property unless it shall
determine, in its discretion, that such foreclosure, correction or restoration
will increase Net Liquidation Proceeds.
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In the event that title to any Mortgaged Property securing a Mortgage
Loan is acquired in Foreclosure Proceedings, the deed or certificate of sale
shall be issued to the Custodial Agent, on behalf of Certificateholders to the
extent of their interest therein. With respect to any Common Mortgage Loan with
an outstanding balance owned by a Prior Trust, in the event that the Trust
acquires any Mortgaged Property as aforesaid or otherwise in connection with a
default or imminent default on a Mortgage Loan, such Mortgaged Property shall be
disposed of by or on behalf of the Trust within two (2) years after its
acquisition by the Trust, which shall not be at the expense of the Trustee,
unless the Trustee shall have received an Opinion of Counsel, which shall not be
at the expense of the Trustee, to the effect that the holding by the Trust of
such Mortgaged Property subsequent to two (2) years after its acquisition will
not result in the imposition of taxes on "prohibited transactions" of the
applicable Prior Trust as defined in section 860F of the Code or cause the
applicable Prior Trust to fail to qualify as a REMIC at any time that any
Certificates are outstanding.
Liquidation Expenses incurred by the Servicer in connection with a
defaulted Mortgage Loan shall be recoverable by the Servicer solely out of
Liquidation Proceeds received in respect of the same defaulted Mortgage Loan,
and shall be recovered at the time that such defaulted Mortgage Loan becomes a
Liquidated Mortgage Loan. The Servicer's failure to claim reimbursement for
Liquidation Expenses out of Liquidation Proceeds received in respect of the
related Liquidated Mortgage Loan for any one or more Collection Periods shall
not in any way be deemed a waiver of its right in the future to seek
reimbursement for such Liquidation Expenses or additional Liquidation Expenses
out of Liquidation Proceeds received in respect to the related Mortgage Loan for
subsequent Collection Periods.
Section 3.7 Trustee to Cooperate.
--------------------
Upon the payment in full of the Trust Balance of any Mortgage Loan or
the distribution of all Investor Liquidation Proceeds with respect to any
Mortgage Loan, the Servicer shall promptly so notify the Trustee or the
Custodial Agent by a certification, substantially in the form of Exhibit H, of a
Servicing Officer. Such certification shall include a statement to the effect
that all amounts received in connection with such payment which are required to
be deposited into the Certificate Account pursuant to Section 3.2(c) have been
so deposited. Upon any such payment or distribution, (i) the Servicer is
authorized to execute, pursuant to the authorization contained in Section
3.1(a), if the Loan Balance of such Mortgage Loan equals zero, an instrument of
satisfaction regarding the related Mortgage, which instrument of satisfaction
shall be recorded by the Servicer if required by applicable law and delivered to
the Person entitled thereto, and (ii) the Custodial Agent shall release the
related Mortgage File to the Transferor. No expenses incurred in connection with
such instrument of satisfaction or assignment shall be reimbursed from amounts
at the time on deposit in the Certificate Account, the Pre-Funding Account or
the Capitalized Interest Account. No certificate or expense incurred pursuant to
this Section 3.7 shall be at the expense of the Trustee.
From time to time and as appropriate for the servicing or foreclosure of
any Mortgage Loan, the Custodial Agent or the Trustee shall, upon request and at
the expense of the Servicer and
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upon delivery to the Custodial Agent or the Trustee of a trust receipt
substantially in the form of Exhibit I signed by a Servicing officer, release
the related Mortgage File to the Servicer solely for the purposes specified in
the Servicer's request, and the Custodial Agent shall execute such documents
prepared by and at the expense of the Servicer as shall be necessary to the
prosecution of any such proceedings or the taking of other servicing actions by
the Servicer. Such trust receipt shall obligate the Servicer to return the
Mortgage File to the Custodial Agent or the Trustee when the need therefor by
the Servicer no longer exists, unless the Mortgage Loan shall be liquidated, in
which case, upon receipt of a certificate of a Servicing Officer similar to that
hereinabove specified stating that the Investor Liquidation Proceeds with
respect to such Mortgage Loan have been deposited into the Certificate Account
pursuant to Section 3.2(c), the trust receipt shall be released by the Custodial
Agent to the Servicer.
In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default, the Custodial Agent shall, if so requested in
writing by the Servicer, assign such Mortgage Loan without recourse for the
purpose of collection to the Servicer or its designee. Any such assignment shall
be prepared by the Servicer and shall unambiguously indicate that the assignment
is for the purpose of collection only. Upon such assignment, such assignee for
collection shall thereupon bring all required actions in its own name and
otherwise enforce the terms of the Mortgage Loan, and the Servicer shall deposit
the Investor Liquidation Proceeds received with respect thereto into the
Certificate Account to the extent provided in Section 3.2(c). In the event that
all delinquent payments due under any such Mortgage Loan are paid by the
Mortgagor and any other defaults are cured, the assignee for collection shall
promptly reassign such Mortgage Loan to the Custodial Agent.
Section 3.8 Servicing Compensation; Payment of Certain Expenses by Servicer.
---------------------------------------------------------------
(a) As compensation for its services hereunder, the Servicer shall
receive on each Distribution Date, a monthly fee (the "Servicing Fee") equal to
the product of (x) the Servicing Fee Rate divided by 12 and (y) the Invested
Amount less 98% of the Pre-Funded Amount as of the opening of business on the
first day of the preceding Collection Period or, with respect to the first
Distribution Date, as of the Closing Date. For any Distribution Date, such fee
shall be payable monthly in arrears in accordance with Section 5.1(a).
Additional servicing compensation in the form of fees, late payment charges or
otherwise shall be retained by the Servicer as additional servicing
compensation.
(b) The Servicer shall be required to pay all expenses incurred by
it in connection with its activities under this Agreement, including fees and
disbursements of the independent accountants referred to in Section 3.10, taxes
imposed on the Servicer, expenses incurred in connection with distributions and
reports to Certificateholders, all Trustee fees and expenses payable to the
Trustee pursuant to Section 9.5, and all other fees and expenses not expressly
stated hereunder to be for the account of the Certificateholders (including,
without limitation, the cost of obtaining Opinions of Counsel required under
this Agreement, except as otherwise provided herein), and shall not be entitled
to reimbursement therefor except to the extent that such expenses constitute
Liquidation Expenses or as otherwise specifically provided herein.
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Section 3.9 Annual Statement as to Compliance.
---------------------------------
The Servicer shall deliver to the Trustee and the Certificate Insurer,
on or before December 31 of each year, beginning with December 31, 1997, an
Officer's Certificate signed by an officer of the Servicer stating that (i) a
review of the activities of the Servicer during the preceding twelve (12) months
ended September 30 (or, in the case of the first such Certificate, the
applicable period ended September 30) and of its performance under this
Agreement has been made under such officer's supervision and (ii) to the best of
such officer's knowledge, based on such review, the Servicer has fulfilled all
its material obligations under this Agreement throughout such year or applicable
period, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof.
Section 3.10 Annual Independent Public Accountants' Servicing Report.
-------------------------------------------------------
The Servicer, at its expense, shall cause a firm of independent public
accountants (who shall be a member of the American Institute of Certified Public
Accountants and may also render other services to the Servicer or the
Transferor) to furnish a statement to the Trustee and the Certificate Insurer on
or before December 31 of each year, beginning with December 31, 1997, to the
effect that such firm has examined certain documents and records relating to the
servicing of the Mortgage Loans by the Servicer under this Agreement during the
preceding twelve (12) months ended September 30 (or, in the case of the first
such Certificate, the applicable period ended September 30) and that such
examination, which has been conducted substantially in accordance with (i) the
audit guide for audits of non-supervised mortgagees approved by the Department
of Housing and Urban Development for use by independent public accountants or
(ii) the requirements of the Uniform Single Audit Program for Mortgage Bankers
(to the extent that the procedures in such audit guide or audit program are
applicable to the servicing obligations hereunder), has disclosed no items of
noncompliance with the provisions of this Agreement which, in the opinion of
such firm, are material, except for such items of noncompliance as shall be set
forth in such report.
Section 3.11 Access to Certain Documentation and Information Regarding the
-------------------------------------------------------------
Mortgage Loans.
--------------
(a) The Servicer and the Transferor shall provide to the
Certificateholders which are federally insured savings and loan associations,
the Office of Thrift Supervision (successor to the Federal Home Loan Bank
Board), the Federal Deposit Insurance Corporation and the supervisory agents and
examiners of the Office of Thrift Supervision, access to the documentation
regarding the Mortgage Loans to the extent required by applicable regulations of
the Office of Thrift Supervision and the Federal Deposit Insurance Corporation
(acting as operator of the SAIF or the BIF). The Servicer and the Transferor
shall provide to the Trustee, and the Servicer, the Transferor and the Trustee
shall provide to the Certificate Insurer, access to the documentation regarding
the Mortgage Loans. Such access in all cases shall be afforded without charge,
but only upon reasonable request and during normal business hours at the offices
of the Servicer, the Transferor or the Trustee, as the case may be. Nothing in
this Section 3.11(a) shall derogate from
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the obligation of the Transferor or the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors, and the failure
of the Transferor or the Servicer to provide access as provided in this Section
3.11(a) as a result of such obligation shall not constitute a breach of this
Section 3.11(a).
(b) The Servicer shall supply information in such form as the
Trustee shall reasonably request to the Paying Agent and the Trustee, on or
before the Determination Date preceding the related Distribution Date, as is
required in the Trustee's reasonable judgment to enable the Paying Agent or the
Trustee, as the case may be, to make required distributions and to furnish the
required reports to Certificateholders and to make any drawing under the
Certificate Insurance Policy.
Section 3.12 Maintenance of Certain Servicing Policies.
-----------------------------------------
The Servicer shall during the term of its service as Servicer maintain
in force (i) a policy or policies of insurance covering errors and omissions in
the performance of its obligations as servicer hereunder and (ii) a fidelity
bond in respect of its officers, employees or agents. Each such policy or
policies and bond shall, together, comply with the requirements from time to
time of the Federal National Mortgage Association for persons performing
servicing for mortgage loans purchased by such Association.
Section 3.13 Reports to the Securities and Exchange Commission.
-------------------------------------------------
The Servicer shall, on behalf of the Trust, cause to be filed with the
Securities and Exchange Commission any periodic reports required to be filed
under the provisions of the Securities Exchange Act of 1934, as amended, and the
rules, regulations or orders of the Securities and Exchange Commission
thereunder.
Section 3.14 Information Required by the Internal Revenue Service Generally
--------------------------------------------------------------
and Reports of Foreclosures and Abandonments of Mortgaged
---------------------------------------------------------
Property.
--------
In addition to the requirements set forth in Section 3.1, the Servicer
shall prepare and file, or cause to be prepared and filed, and shall file or
cause to be filed, all federal and state information reports when and as
required by all applicable state and federal income tax laws, including, without
limitation, reports required by Section 6050J of the Code.
Section 3.15 Tax Returns.
-----------
In accordance with Section 2.7 hereof, the Trustee shall not file any
Federal or State income tax return for the Trust or apply for a taxpayer
identification number on behalf of the Trust. The Transferor shall treat the
Trust Balances of the Mortgage Loans as its property for all Federal and State
tax purposes and shall report all income earned thereon (including amounts
payable as fees to the Servicer) as its income for federal income tax purposes.
In the event the Trust shall be required pursuant to an audit or administrative
proceeding or change in applicable regulations to file Federal or State tax
returns, the Trustee shall prepare and file or shall cause to
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be prepared and filed any tax returns required to be filed by the Trust; the
Trustee shall promptly sign such returns and deliver such returns after
signature to the Servicer and such returns shall be filed by the Servicer
provided, however, that actions taken by the Trustee pursuant to this Section
3.15 shall not be at the expense of the Trustee. The Servicer shall also prepare
or shall cause to be prepared all tax information required by and to be
distributed to Certificateholders. Except as provided otherwise herein with
respect to the Transferor, in no event shall the Trustee or the Servicer be
liable for any liabilities, costs or expenses of the Trust, the
Certificateholders or the Certificate Owners in connection with or arising under
any tax law, including without limitation federal, state or local income or
excise taxes or any other tax imposed on or measured by income (or any interest
or penalty with respect thereto or arising from a failure to comply therewith).
ARTICLE IV
SERVICING CERTIFICATE; CERTIFICATE INSURANCE POLICY
Section 4.1 Servicing Certificate.
---------------------
With respect to each Distribution Date, the Servicer shall, not later
than the related Determination Date, deliver to the Trustee, to the Certificate
Insurer and to the Rating Agencies a Servicing Certificate substantially in the
form of Exhibit J stating the related Collection Period, the designation of the
Certificates, the date of this Agreement, and the following information:
(i) the aggregate amount of collections received on the Mortgage
Loans on or prior to the Determination Date in respect of such
Collection Period;
(ii) the aggregate amount of (a) Trust Interest and (b) Principal
Collections for such Collection Period:
(iii) the Investor Certificateholder's Floating Allocation Percentage
and the Investor Fixed Allocation Percentage as of the last day
of such Collection Period;
(iv) the Investor Interest Collections for such Collection Period;
(v) the Investor Principal Collections for such Collection Period;
(vi) the aggregate amount of (a) Trust Interest and (b) Principal
Collections paid to the Transferor Certificateholder for such
Collection Period;
(vii) Investor Certificate Interest and the Investor Certificate Rate
for the related Accrual Period;
(viii) the amount, if any, of such Investor Certificate Interest that
is not payable on account of insufficient Investor Interest
Collections and amounts under the Certificate Insurance Policy;
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(ix) the portion of the Unpaid Investor Certificate Interest
Shortfall, if any, plus interest thereon at the Certificate Rate
applicable from time to time (separately stated) to be
distributed on such Distribution Date;
(x) the Unpaid Investor Certificate Interest Shortfall, if any, to
remain after the distribution on such Distribution Date;
(xi) the Accelerated Principal Distribution Amount and the portion
thereof that will be distributed pursuant to Section
5.1(a)(viii);
(xii) the Scheduled Principal Collections Distribution Amount;
(xiii) the sum of (x) the aggregate Reassignment Deposit Amount for any
Mortgage Loans which are required to be removed on the Business
Day immediately preceding such Distribution Date pursuant to
Section 2.2(c), 2.4(b) or 3.1 and (y) any Substitution Adjustment
Amounts required to be deposited into the Certificate Account on
the Business Day immediately preceding such Distribution Date
pursuant to Section 2.2(c), 2.4(b) or 3.1;
(xiv) the aggregate amount, if any, of Investor Loss Reduction
Amounts for previous Distribution Dates that have not been
previously reimbursed to Investor Certificateholders pursuant to
Section 5.1(a)(vi);
(xv) the aggregate Trust Balance of the Mortgage Loans, as of the end
of the preceding Collection Period and the end of the second
preceding Collection Period;
(xvi) the Pool Balance as of the end of the preceding Collection Period
and the Pool Balance as of the end of the second preceding
Collection Period;
(xvii) the Invested Amount as of the end of such Collection Period;
(xviii)the Investor Certificate Principal Balance prior to and after
giving effect to the distribution on such Distribution Date;
(xix) the Transferor Principal Balance as of the end of such Collection
Period;
(xx) the aggregate amount of Additional Balances created during such
Collection Period;
(xxi) the aggregate of the Trust Balances as of the end of such
Collection Period of all Mortgage Loans which became Liquidated
Mortgage Loans for such Distribution Date;
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(xxii) whether a Rapid Amortization Event has occurred since the prior
Determination Date, specifying each such Rapid Amortization
Event if one has occurred;
(xxiii) whether an Event of Default has occurred since the prior
Determination Date, specifying each such Event of Default if one
has occurred;
(xxiv) the amount to be distributed to the Certificate Insurer pursuant
to Section 5.1(a)(iv);
(xxv) the Certificate Insurance Draw Amount, if any, for such
Distribution Date;
(xxvi) the amount to be distributed to the Transferor Certificateholder
pursuant to Section 5.1(a)(x);
(xxvii) the Pre-Funded Amount as of such Distribution Date;
(xxviii)the amount of Pre-Funding Earnings, if any, to be deposited in
the Certificate Account for such Distribution Date;
(xxix) the aggregate of the Trust Balances of the Subsequent Mortgage
Loans purchased during such Collection Period;
(xxx) the amount on deposit in the Capitalized Interest Account as of
such Distribution Date;
(xxxi) the Capitalized Interest Requirement to be deposited in the
Certificate Account for such Distribution Date;
(xxii) the amount of any Basis Risk Payment then due.
Section 4.2 Certificate Insurance Policy.
----------------------------
(a) The Trustee shall submit, if necessary, the Notice of
Nonpayment and Demand for Payment of Insured Amounts (as defined in and in the
form specified by the Certificate Insurance Policy) in the amount of the
Certificate Insurance Draw Amount to the Certificate Insurer no later than 12:00
noon, New York City time, on the second Business Day prior to each Distribution
Date. Upon receipt of such Certificate Insurance Draw Amount in accordance with
the terms of the Certificate Insurance Policy, the Trustee shall deposit such
Certificate Insurance Draw Amount in the Certificate Account for distribution to
the Investor Certificateholders on the related Distribution Date.
(b) Subject only to the priority of payment provisions of this
Agreement, each of the Transferor, the Servicer and the Trustee acknowledges
that, to the extent of any payment made by the Certificate Insurer pursuant to
the Certificate Insurance Policy, the Certificate Insurer is to be
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fully subrogated to the extent of such payment (as described in Section
5.1(a)(vii) and (ix)) and any additional interest due on any late payment, to
the rights of the Investor Certificateholders under this Agreement or otherwise.
Each of the Transferor, the Servicer and the Trustee agrees to such subrogation
and, further, agrees to execute such instruments and to take such actions as, in
the sole judgment of the Certificate Insurer, as evidenced in writing to the
Transferor, the Servicer and the Trustee, are necessary to evidence such
subrogation and, subject to the priority of payment provision of this Agreement,
to perfect the rights of the Certificate Insurer to receive any moneys paid or
payable in respect of the Investor Certificates under this Agreement or
otherwise.
Section 4.3 Replacement Certificate Insurance Policy.
----------------------------------------
In the event the rating of the Certificate Insurer is downgraded by any
Rating Agency, such that the rating of the Investor Certificates is reduced,
suspended or withdrawn, the Servicer shall be permitted, in accordance with the
terms of the Insurance Agreement, but shall not be obligated, to substitute a
new certificate insurance policy for the Certificate Insurance Policy or may
arrange for any other form of credit enhancement; provided, however, that, in
-------- -------
each case, the rating of the Investor Certificates following any such
substitution shall be the highest rating available from each of the Rating
Agencies and provided further that the Certificate Insurer is reimbursed for all
amounts due under this Agreement and the Insurance Agreement. It shall be a
condition to substitution of any such new certificate insurance policy or other
form of credit enhancement that there be delivered to the Trustee (i) an
Officer's Certificate by the Servicer stating that the conditions to such
substitution set forth in this Section 4.3 (other than in clause (ii)) have been
satisfied and (ii) a legal opinion, acceptable in form to the Trustee, from
counsel to the provider of such certificate insurance policy or other form of
credit enhancement with respect to the enforceability thereof and such other
matters as the Trustee may require. Upon receipt of written notice of any such
substitution from the Servicer and the taking of physical possession of the
replacement certificate insurance policy or other form of credit enhancement,
the Trustee shall, within five (5) Business Days following receipt of such
notice and such taking of physical possession, deliver the Certificate Insurance
Policy to the Certificate Insurer and the Certificate Insurer will have no
further liability under the Certificate Insurance Policy.
ARTICLE V
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS;
RIGHTS OF CERTIFICATEHOLDERS
Section 5.1 Distributions.
-------------
(a) Distributions of Investor Interest Collections and Investment
-------------------------------------------------------------
Proceeds.
- --------
On each Distribution Date, the Trustee shall distribute out of the
Certificate Account to the extent of the sum of (i) Investor Interest
Collections and (ii) net income, if any, realized from the investment of
Available Funds pursuant to Section 3.2(d) collected or earned during the
related Collection Period, the following amounts in the following order of
priority to the following Persons (based solely on the information set forth in
the Servicing Certificate):
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(i) the Servicing Fee to the Servicer;
(ii) the Investor Certificate Interest for such Distribution Date to the
Investor Certificateholders (other than any Basis Risk Payment);
(iii) the Unpaid Investor Certificate Interest Shortfall, if any, for
such Distribution Date to the Investor Certificateholders plus, to
the extent legally permissible, interest thereon at the Investor
Certificate Rate;
(iv) the premium due under the Certificate Insurance Policy to the
Certificate Insurer;
(v) the Aggregate Investor Liquidation Loss Amount for such
Distribution Date to the Investor Certificateholders as principal
in reduction of the Investor Certificate Principal Balance;
(vi) to Investor Certificateholders as principal in reduction of the
Investor Certificate Principal Balance the aggregate amount of the
Investor Loss Reduction Amounts, if any, for previous Distribution
Dates that have not been previously reimbursed to Investor
Certificateholders pursuant to this clause (vi);
(vii) to reimburse the Certificate Insurer for previously
unreimbursed Certificate Insurance Draw Amounts together with
interest thereon at the applicable rate set forth in the Insurance
Agreement;
(viii) the Accelerated Principal Distribution Amount, if any, to the
Investor Certificateholders;
(ix) to the Certificate Insurer for any amounts owed to the Certificate
Insurer pursuant to the Insurance Agreement, excluding amounts paid
pursuant to Sections 5.1(a)(iv) and 5.1(a)(vii) hereof;
(x) to the Investor Certificateholders for any Basis Risk Payment
that has not previously been paid;
(xi) any remaining amount to the Transferor Certificateholder.
(b) Distribution of Investor Principal Collections. On each
----------------------------------------------
Distribution Date (other than the Stated Maturity Date), the Trustee shall
distribute out of the Certificate Account to the Investor Certificateholders,
based solely upon the information set forth in the Servicing Certificate, the
Investor Principal Collections in the following order of priority: (i) any Basis
Risk Payment then due and not paid pursuant to Section 5.1(b)(x) to the extent
that the Overcollateralization Amount exceeds the Basic Overcollateralization
Amount; and (ii) the Scheduled Principal Collections Distribution Amount but not
in excess of the Investor Certificate
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Principal Balance. On the Distribution Date immediately following the end of the
Pre-Funding Period (or if the last day of the Pre-Funding Period is a
Distribution Date, on such Distribution Date), to the extent any funds are
deposited into the Certificate Account pursuant to Section 5.6(e), the Trustee
shall distribute such funds to Investor Certificateholders in respect of
principal on the Investor Certificates. On the Stated Maturity Date, the Trustee
shall distribute to Investor Certificateholders Investor Principal Collections
up to the Investor Certificate Principal Balance.
(c) [Reserved]
(d) Method of Distribution. The Trustee shall make distributions in
----------------------
respect of a Distribution Date to each Investor Certificateholder of record on
the related Record Date (other than as provided in Section 10.1 respecting the
final distribution) by check or money order mailed to such Investor
Certificateholder at the address appearing in the Certificate Register, or upon
written request by an Investor Certificateholder delivered to the Trustee at
least five Business Days prior to such Record Date, by wire transfer (but only
if such Certificateholder is the Depository or such Certificateholder owns of
record one or more Investor Certificates having principal denominations
aggregating at least $5,000,000), or by such other means of payment as such
Investor Certificateholder and the Trustee shall agree. Distributions among
Investor Certificateholders shall be made in proportion to the Percentage
Interests evidenced by the Investor Certificates held by such Investor
Certificateholders.
(e) Distributions on Book-Entry Certificates. Each distribution with
----------------------------------------
respect to a Book-Entry Certificate shall be paid to the Depository, which shall
credit the amount of such distribution to the accounts of its Depository
Participants in accordance with its normal procedures. Each Depository
Participant shall be responsible for disbursing such distribution to the
Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. All such credits and disbursements
with respect to a Book-Entry Certificate are to be made by the Depository and
the Depository Participants in accordance with the provisions of the Investor
Certificates. None of the Trustee, the Paying Agent, the Certificate Registrar,
the Transferor or the Servicer shall have any responsibility therefor except as
otherwise provided by applicable law. To the extent applicable and not contrary
to the rules of the Depository, the Trustee shall comply with the provisions of
the form of Investor Certificate as set forth in Exhibit A.
(f) Distributions of Interest to the Transferor Certificateholder. On
-------------------------------------------------------------
each day on which the Transferor Principal Balance is greater than zero, the
Servicer shall distribute to the Transferor Certificateholder Trust Interest to
the extent not deposited into the Certificate Account pursuant to Section 3.2(c)
on such day.
(g) Distributions of Principal to the Transferor Certificateholder. On
--------------------------------------------------------------
each day on which the Transferor Principal Balance is greater than zero, the
Servicer shall distribute to the
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Transferor Certificateholder Principal Collections to the extent not deposited
into the Certificate Account pursuant to Section 3.2(c) on such day.
Section 5.2 Calculation of the Investor Certificate Rate.
--------------------------------------------
On the second LIBOR Business Day preceding each Accrual Period after the
initial Accrual Period, the Trustee shall determine LIBOR for such Accrual
Period. The Trustee shall promptly advise the Servicer of such determination by
tested telex or telefax to the address set forth in Section 12.6. The
determination of LIBOR by the Trustee for each such Accrual Period shall (in the
absence of manifest error) be final, conclusive and binding upon the
Certificateholders, the Servicer and any of their respective partners,
beneficiaries, agents, officers, directors, employees or successors or assigns.
Section 5.3 Statements to Certificateholders.
--------------------------------
Concurrently with each distribution to Investor Certificateholders, the
Servicer shall forward to the Trustee for mailing to each such Investor
Certificateholder and the Certificate Insurer a statement with respect to such
distribution substantially in the form of Exhibit K and setting forth:
(i) the Investor Certificateholder's Floating Allocation Percentage
for the last day of the preceding Collection Period;
(ii) the Investor Certificate distribution amount;
(iii) the amount of Investor Certificate Interest included in such
distribution, the related Investor Certificate Rate and the portion
thereof attributable to collections in respect of the Mortgage
Loans;
(iv) the amount, if any, of Unpaid Investor Certificate Interest
Shortfall included in such distribution (and the amount of interest
thereon);
(v) the amount, if any, of the remaining Unpaid Investor Certificate
Interest Shortfall after giving effect to such distribution;
(vi) the amount, if any, of principal included in such distribution,
separately stating the components thereof (including the portion
thereof attributable to collections in respect of the Mortgage
Loans);
(vii) the amount, if any, of the reimbursement of previous Investor
Loss Reduction Amounts included in such distribution;
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(viii) the amount, if any, of the aggregate unreimbursed Investor Loss
Reduction Amounts after giving effect to such distribution;
(ix) the Servicing Fee for such Distribution Date;
(x) the Invested Amount and the Investor Certificate Principal
Balance, each after giving effect to such distribution;
(xi) the Required Overcollateralization Amount, the Basic
Overcollateralization Amount and the Overcollateralization Amount,
if any, after giving effect to such distribution;
(xii) the Pool Balance as of the end of the preceding Collection Period
and the number and aggregate of the Trust Balances of the Mortgage
Loans as to which the minimum monthly payment is delinquent for 30-
59 days, 60-89 days and 90 or more days, respectively, at the close
of business on the last day of the related Collection Period;
(xiii) the Accelerated Principal Distribution Amount, if any;
(xiv) the Certificate Insurance Draw Amount, if any;
(xv) the aggregate Liquidation Loss Amount for all Mortgage Loans that
became Liquidated Mortgage Loans in the preceding Collection
Period;
(xvi) the Trust Balance of any Mortgage Loan, the related Mortgaged
Property of which is acquired by the Trust through foreclosure;
(xvii) the Pre-Funded Amount;
(xviii) the aggregate Cut-Off Date Trust Balances of the Subsequent
Mortgage Loans purchased during the preceding Collection Period;
(xix) the amount on deposit in the Capitalized Interest Account;
(xx) the amount of any Basis Risk Payment included in such
distribution.
In the case of information furnished pursuant to clauses (ii), (iii), (iv)
and (vi) above, the amounts shall be expressed as a dollar amount per Investor
Certificate with a $1,000 denomination.
Within 90 days after the end of each calendar year, the Servicer shall
prepare or cause to be prepared and shall forward to the Trustee the information
set forth in clauses (iii) and (vi) above
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aggregated for such calendar year. Such obligation of the Servicer shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Trustee pursuant to any requirements of the
Code.
The Trustee shall prepare or cause to be prepared (in a manner consistent
with the treatment of the Investor Certificates as indebtedness of the
Transferor) Internal Revenue Service Form 1099 (or any successor form) and any
other tax forms required to be filed or furnished to Certificateholders
(including Form 8811) in respect of distributions by the Trustee (or the Paying
Agent) on the Investor Certificates and shall file and distribute such forms as
required by law.
Section 5.4 Rights of Certificateholders.
----------------------------
The Investor Certificates shall represent fractional undivided interests
in the Trust, including the benefits of the Certificate Account, the Pre-Funding
Account and the Capitalized Interest Account and the right to receive Investor
Interest Collections, Investor Principal Collections and other amounts at the
times and in the amounts specified in this Agreement; the Transferor
Certificates shall represent the remaining interest in the Trust.
Section 5.5 Rights of the Certificate Insurer To Exercise Rights of Investor
----------------------------------------------------------------
Certificateholders.
------------------
By accepting its Investor Certificate, each Investor Certificateholder
agrees that unless a Certificate Insurer Default exists, the Certificate Insurer
shall have its rights as set forth in this Agreement.
Section 5.6 Pre-Funding Account and the Capitalized Interest Account
--------------------------------------------------------
(a) On or before the Closing Date, the Trustee shall have established,
and shall thereafter maintain with itself in the name of the Trustee for the
benefit of the Certificateholders (i) a segregated trust account (the "Pre-
Funding Account") and (ii) a segregated trust account (the "Capitalized Interest
Account"), each of which shall be an Eligible Account.
(b) On the Closing Date, the Transferor shall cause to be deposited in
the Pre-Funding Account the Original Pre-Funded Amount and shall cause to be
deposited the amount of $579,715.73 in the Capitalized Interest Account.
(c) At the written direction of a Servicing Officer, the Trustee shall
invest any funds in the Pre-Funding Account and the Capitalized Interest Account
in Permitted Investments specified in such direction (including obligations of
the Trustee or any of its affiliates, if such obligations otherwise qualify as
Permitted Investments); provided, however that funds on deposit in the Pre-
Funding Account shall be invested in the Permitted Investments specified in
clause (iv) of the definition thereof or such other investments approved by the
Certificate Insurer. Such direction shall be in writing, shall designate
specific investments and shall certify that the specified investments constitute
Permitted Investments and mature at the time required hereby. Each
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investment shall mature not later than the Business Day immediately preceding
the Distribution Date next following the date of such investment (unless the
obligor in respect of such investment is the Trustee and the Trustee is acting
as the Paying Agent, in which case such investment may mature on such
Distribution Date) and shall not be sold or disposed of prior to its maturity.
The Trustee shall not be liable for any loss incurred in connection with any
such investment except with respect to any investment issued or guaranteed by
the Trustee in its individual capacity.
(d) On any Distribution Date during the Pre-Funding Period, upon
satisfaction of the conditions set forth in Section 2.8(b), the Trustee shall
withdraw from the Pre-Funding Account an amount equal to 100% of the aggregate
Cut-Off Date Trust Balances of the Subsequent Mortgage Loans sold to the Trust
on such date and pay such amount to or upon the order of the Transferor.
(e) In the event the Pre-Funded Amount has not been reduced to zero by
the end of the Pre-Funding Period, the Trustee shall withdraw from the Pre-
Funding Account the Investor Fixed Allocation Percentage of the amount on
deposit in the Pre-Funding Account (excluding any Pre-Funding Earnings) on the
next Distribution Date, or if the last day of the Pre-Funding Period is a
Distribution Date, on such Distribution Date, and deposit such amount into the
Certificate Account for distribution to the Investor Certificateholders. Any
amounts remaining in the Pre-Funding Account following such withdrawal and
following the transfer in Section 5.6(f) shall be paid to the Transferor
Certificateholder and the Pre-Funding Account shall be closed.
(f) On each Distribution Date during the Pre-Funding Period, the
Trustee shall transfer from the Pre-Funding Account to the Certificate Account
for distribution as Investor Interest Collections in accordance with Section
5.1(a), the Pre-Funding Earnings, if any, applicable to such Distribution Date.
(g) On each Distribution Date during the Pre-Funding Period, the
Trustee shall transfer from the Capitalized Interest Account to the Certificate
Account the Capitalized Interest Requirement, if any, for such Distribution
Date. In addition, on each Distribution Date during the Pre-Funding Period, the
Trustee shall withdraw any Overfunded Amount from the Capitalized Interest
Account and pay such amount to the Transferor Certificateholder. On the last day
of the Pre-Funding Period or, if such date is not a Distribution Date, on the
following Distribution Date, the Trustee shall withdraw any amounts remaining in
the Capitalized Interest Account, after giving effect to any withdrawals from
the Capitalized Interest Account on such Distribution Date, and pay such amounts
to the Transferor Certificateholder and the Capitalized Interest Account shall
be closed.
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ARTICLE VI
THE CERTIFICATES
Section 6.1 The Certificates.
----------------
The Investor Certificates and Transferor Certificates shall be
substantially in the forms set forth in Exhibits A and B, respectively, and
shall, on original issue, be executed, authenticated and delivered by the
Trustee to or upon the order of the Transferor concurrently with the transfer of
the Initial Mortgage Loans to the Trustee of the Trust. The Investor
Certificates shall be initially evidenced by one or more certificates
representing the entire Original Investor Certificate Principal Balance and
shall be held in minimum dollar denominations of $1,000 and integral dollar
multiples in excess thereof. The sum of the denominations of all outstanding
Investor Certificates shall equal the Original Investor Certificate Principal
Balance. The Transferor Certificates shall be issuable as one or more
certificates representing the entire interest in the assets of the Trust other
than that represented by the Investor Certificates and shall initially be issued
to the Transferor.
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer under its seal imprinted thereon.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures were affixed, authorized to sign on behalf of
the Trustee shall bind the Trustee, notwithstanding that such individuals or any
of them have ceased to be so authorized prior to the authentication and delivery
of such Certificates or did not hold such offices at the date of such
Certificate. No Certificate shall be entitled to any benefit under this
Agreement, or be valid for any purpose, unless such Certificate shall have been
manually authenticated by the Trustee substantially in the form provided for
herein, and such authentication upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication. Subject to Section 6.2(d), the Investor Certificates
shall be Book-Entry Certificates. The Transferor Certificates shall not be Book-
Entry Certificates.
Section 6.2 Registration of Transfer and Exchange of Investor Certificates;
--------------------------------------------------------------
Restrictions on Transfer.
------------------------
(a) The Trustee shall cause to be kept at the Corporate Trust Office a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of Certificates and of
Transfers of registered ownership of Certificates and exchanges of Certificates
as herein provided. The Trustee shall initially serve as Certificate Registrar
for the purpose of registering Certificates and Transfers and exchanges of
Certificates as herein provided.
Upon surrender for registration of Transfer of any Investor Certificate
at the Corporate Trust Office maintained for such purpose pursuant to the
foregoing paragraph, the Trustee shall
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execute, authenticate and deliver, in the name of the designated Transferee or
Transferees, one or more new Investor Certificates of the same aggregate
Percentage Interest.
At the option of the Investor Certificateholders, Investor Certificates
may be exchanged for other Investor Certificates of authorized denominations of
the same aggregate Percentage Interest, upon surrender of the Investor
Certificates to be exchanged at any such office or agency. Whenever any
Certificates are so surrendered for exchange, the Trustee shall execute,
authenticate and deliver the Investor Certificates which the Investor
Certificateholder making the exchange is entitled to receive. Every Investor
Certificate presented or surrendered for Transfer or exchange shall (if so
required by the Trustee or the Certificate Registrar) be duly endorsed by, or be
accompanied by a written instrument of Transfer in form satisfactory to, the
Trustee and the Certificate Registrar and shall be duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any Transfer or exchange of Investor
Certificates, but the Trustee may require payment of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with any
Transfer or exchange of Investor Certificates.
All Certificates surrendered for Transfer and exchange shall be disposed
of by the Certificate Registrar in accordance with its customary procedures.
(b) Intentionally Omitted
(c) Except as provided in Section 6.2(d), the Book-Entry Certificates
shall at all times remain registered in the name of the Depository or its
nominee, and at all times: (i) registration of the Book-Entry Certificates may
not be transferred by the Trustee except to another Depository or its nominee,
or to another nominee of the current Depository; (ii) the Depository or Foreign
Depository, as the case may be, shall maintain book-entry records with respect
to the Certificate Owners and with respect to ownership and transfers of such
Investor Certificates; (iii) ownership and transfers of registration of Investor
Certificates on the books of the Depository shall be governed by applicable
rules established by the Depository; (iv) the Depository may collect its usual
and customary fees, charges and expenses from its Depository Participants; (v)
the Trustee shall deal with the Depository as representative of the Certificate
Owners of the Investor Certificates for purposes of exercising the rights of
Holders under this Agreement, and requests and directions for and votes of such
representatives shall not be deemed to be inconsistent if they are made with
respect to different Certificate Owners; and (vi) the Trustee may rely and shall
be fully protected in relying upon information furnished by the Depository with
respect to directions or consents or other acts of the Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owner. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository or Foreign Depository's normal procedures.
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Whenever notice or other communication to the Investor Certificateholders
is required under this Agreement, unless and until Definitive Certificates shall
have been issued to Certificate Owners pursuant to Section 6.2(d), the Trustee
shall give to the Depository all such notices and communications specified
herein to be given to Certificateholders.
(d) If (x)(i) the Transferor advises the Trustee in writing that the
Depository is no longer willing or able properly to discharge its
responsibilities as Depository and nominee with respect to the Investor
Certificates, and (ii) the Transferor is unable to locate a qualified successor,
(y) the Transferor at its option advises the Trustee in writing that it elects
to terminate the book-entry system through the Depository, or (z) after the
occurrence of an Event of Default, Certificate Owners representing Percentage
Interests aggregating not less than 51% of the aggregate Percentage Interests of
the Investor Certificates advise the Trustee and the Depository through the
Depository Participants in writing that the continuation of a book-entry system
through the Depository (or a successor thereto, provided that such successor
maintains a system that qualifies as a book-entry system for purposes of causing
the Investor Certificates to be in registered form for purposes of the Code) to
the exclusion of any physical certificates being issued to Certificate Owners is
no longer in the best interests of the Certificate Owners, the Trustee shall
notify all Certificate Owners, through the Depository, of the occurrence of any
such event and of the availability of definitive, fully registered Investor
Certificates (the "Definitive Certificates") to Certificate Owners requesting
the same. Upon surrender to the Trustee of the Investor Certificates by the
Depository, accompanied by registration instructions from the Depository for
registration, the Trustee shall issue the Definitive Certificates. Neither the
Transferor nor the Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Certificates, the Trustee
shall recognize the Holders of the Definitive Certificates as Investor
Certificateholders hereunder.
Section 6.3 Mutilated, Destroyed, Lost or Stolen Certificates.
-------------------------------------------------
If (i) any mutilated Certificate is surrendered to the Certificate
Registrar or the Certificate Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Certificate, and (ii) there is delivered
to the Trustee, the Servicer, the Transferor and the Certificate Registrar such
security or indemnity as may be required by them to save each of them harmless,
then, in the absence of notice to the Trustee or the Certificate Registrar that
such Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and Percentage Interest. Upon the issuance of any new Certificate under
this Section, the Trustee may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee and the
Certificate Registrar) connected therewith. Any duplicate Certificate issued
pursuant to this Section shall constitute complete and indefeasible evidence of
ownership in the Trust Fund, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time.
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Section 6.4 Persons Deemed Owners.
---------------------
Prior to due presentation of a Certificate for registration of Transfer,
the Servicer, the Transferor, the Trustee, the Certificate Insurer, the
Certificate Registrar and any agent of the Servicer, the Transferor, the
Trustee, the Certificate Insurer or the Certificate Registrar may treat the
Person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Section 5.1
and for all other purposes whatsoever, and none of the Servicer, the Transferor,
the Trustee, the Certificate Insurer, the Certificate Registrar or any agent of
the Servicer, the Transferor, the Trustee, the Certificate Insurer or the
Certificate Registrar shall be affected by notice to the contrary.
Section 6.5 Restrictions on Transfer of Transferor Certificates.
---------------------------------------------------
(a) The Transferor Certificates shall be assigned, transferred,
exchanged, pledged, financed, hypothecated, participated or otherwise conveyed
(collectively, for purposes of this Section 6.5 and any other Section referring
to the Transferor Certificates, "transferred" or a "transfer") only in
accordance with this Section 6.5.
(b) No transfer of a Transferor Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. The Trustee shall require a written Opinion
of Counsel acceptable to and in form and substance satisfactory to the Trustee
and the Transferor that such transfer may be made pursuant to an exemption,
describing the applicable exemption and the basis therefor, from such Act and
laws or is being made pursuant to said Act and laws, which Opinion of Counsel
shall not be an expense of the Trustee, and the Trustee shall require the
transferee to execute an investment letter acceptable to and in form and
substance satisfactory to the Trustee certifying to the Trustee the facts
surrounding such transfer, which investment letter shall not be an expense of
the Trustee. The Holder of a Transferor Certificate desiring to effect such
transfer shall, and does hereby agree to, indemnify the Transferor and the
Certificate Insurer against any liability that may result if the transfer is not
so exempt or is not made in accordance with such federal and state laws.
(c) The Transferor Certificates and any interest therein shall not be
transferred except upon satisfaction of the following conditions precedent: (i)
the Person that acquires a Transferor Certificate shall (A) be organized and
existing under the laws of the United States of America or any state or the
district of Columbia thereof (B) expressly assume, by an agreement supplemental
hereto, executed and delivered to the Trustee, the performance of every covenant
and obligation of the Transferor hereunder with respect to the assets evidenced
by the Transferor Certificates, and (C) as part of its acquisition of a
Transferor Certificate, acquire all rights of the related Transferor or any
transferee under this Section 6.5(c) to amounts payable to such Transferor or
such transferee hereunder; (ii) the Transferor shall deliver to the Trustee an
Officer's Certificate stating that such transfer and such supplemental agreement
comply with this Section 6.5(c) and that all conditions precedent provided by
this Section 6.5(c) have been complied with and an Opinion of Counsel stating
that all conditions precedent provided by this Section 6.5(c) have been complied
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with, and the Trustee may conclusively rely on such Officer's Certificate, shall
have no duty to make inquiries with regard to the matters set forth therein and
shall incur no liability in so relying; (iii) the Transferor shall deliver to
the Trustee a letter from each Rating Agency confirming that its rating of the
Investor Certificates, after giving effect to such transfer without taking into
account the Certificate Insurance Policy, will not be reduced or withdrawn; (iv)
the Transferor shall deliver to the Trustee an Opinion of Counsel to the effect
that (a) such transfer will not adversely affect the treatment of the Investor
Certificates after such transfer as debt for federal and applicable state income
tax purposes, (b) such transfer will not result in the Trust being subject to
tax at the entity level for federal or applicable state tax purposes, (c) such
transfer will not have any material adverse impact on the federal or applicable
state income taxation of an Investor Certificateholder or any Certificate Owner
and (d) such transfer will not result in the arrangement created by this
agreement, or any "portion" of the Trust Fund, being treated as a taxable
mortgage pool as defined in Section 7701(i) of the Code; (v) all filings and
other actions necessary to continue the perfection of the interest of the Trust
in the Mortgage Loans and the other property conveyed hereunder shall have been
taken or made and (vi) the transferee shall have assumed the obligations of the
Transferor pursuant to Section 7.7 hereof. Notwithstanding the foregoing, the
requirement set forth in subclause (i)(A) of this Section 6.5(c) shall not apply
in the event the Trustee shall have received a letter from each Rating Agency
confirming that its rating of the Investor Certificates, after giving effect to
a proposed transfer to a Person that does not meet the requirement set forth in
subclause (i)(A) without taking into account the Certificate Insurance Policy,
shall not be reduced or withdrawn.
Section 6.6 Appointment of Paying Agent.
---------------------------
The Trustee is empowered to appoint a Paying Agent for the purpose of
making distributions to Certificateholders pursuant to Section 5.1. Any Paying
Agent appointed hereunder must satisfy the eligibility requirements for the
Trustee as set forth in Section 9.6, and if such Paying Agent subsequently shall
fail to satisfy such eligibility requirements, then, unless such Paying Agent
shall promptly resign as such, the Trustee, if a Responsible Officer of the
Trustee has been notified in writing or otherwise has actual knowledge of such
failure, shall terminate the appointment of such Paying Agent. The Trustee
hereby appoints itself as Paying Agent.
The Trustee shall cause such Paying Agent other than itself to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee that such Paying Agent shall hold all sums held by it for the
payment to Certificateholders in trust for the benefit of the Certificateholders
entitled thereto until such sums shall be paid to such Certificateholders.
Section 6.7 Access to List of Certificateholders' Names and Addresses.
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The Certificate Registrar shall furnish or cause to be furnished to the
Servicer or the Certificate Insurer (unless a Certificate Insurer Default shall
have occurred and be continuing), within fifteen (15) days after receipt by the
Certificate Registrar of a request therefor from the Servicer or the Certificate
Insurer in writing, a list, in such form as the Servicer or the Certificate
Insurer may reasonably require, of the names and addresses of the
Certificateholders as of the most
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recent Record Date. If three or more Investor Certificateholders whose aggregate
Percentage Interests evidence not less than 25% of the aggregate Percentage
Interests of the Investor Certificates, apply in writing to the Trustee, and
such application states that the applicants desire to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Certificates, and such application is accompanied by a copy of the
communication that such applicants propose to transmit, then the Certificate
Registrar shall, within five (5) Business Days after the receipt of such
application, afford such applicants access during normal business hours to the
current list of Certificateholders or shall itself cause such communication to
be distributed to Certificateholders. Each Holder, by receiving and holding a
Certificate, shall be deemed to have agreed to hold none of the Servicer, the
Trustee or the Certificate Registrar accountable by reason of the disclosure of
its name and address, regardless of the source from which such information was
derived.
Section 6.8 Actions of Certificateholders.
-----------------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or by
their agent duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where required, to the Transferor, the
Certificate Insurer or the Servicer. Proof of execution of any such instrument
or of a writing appointing any such agent shall be sufficient for any purpose of
this Agreement and conclusive in favor of the Trustee, the Transferor, the
Certificate Insurer and the Servicer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other action by a Certificateholder shall bind every Holder of every
Certificate issued upon the registration of Transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be done,
by the Trustee, the Transferor or the Servicer in reliance thereon, whether or
not notation of such action is made upon such Certificate.
(d) The Trustee may require such additional proof of any matter
referred to in this Section as it shall deem necessary.
(e) The ownership of Certificates shall be proved by the Certificate
Register.
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ARTICLE VII
THE SERVICER AND THE TRANSFEROR
Section 7.1 Liability of the Servicer.
-------------------------
The Servicer shall be liable in accordance herewith only to the extent of
the obligations specifically imposed upon and undertaken by the Servicer herein.
Section 7.2 Merger or Consolidation of, or Assumption of the obligations of,
----------------------------------------------------------------
the Servicer or Transferor.
--------------------------
Any corporation into which the Servicer or Transferor may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer or Transferor shall be a party, or any
corporation succeeding to the business of the Servicer or Transferor by any sale
or transfer by the Servicer or Transferor of all or substantially all of its
property and assets to such corporation, shall be the successor of the Servicer
or Transferor hereunder, and shall execute and deliver to the Trustee and the
Certificate Insurer an agreement in form reasonably satisfactory to the Trustee
and the Certificate Insurer which contains an assumption by such successor
entity of the due and punctual performance and observance of each covenant and
condition to be performed or observed by the Servicer or Transferor under this
Agreement.
Section 7.3 Limitation on Liability of the Servicer and Others.
--------------------------------------------------
(a) No recourse under or upon any obligation or covenant of this
Agreement, or of any Certificate, or for any claim based thereon or otherwise in
respect thereof, shall be had against any incorporator, shareholder, officer or
director, as such, past, present or future, of the Servicer, either directly or
through the Servicer, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that this Agreement and the obligations issued hereunder
are solely corporate obligations, and that no such personal liability whatever
shall attach to, or is or shall be incurred by the incorporators, shareholders,
officers or directors, as such, of the Servicer or of any successor corporation,
or any of them, because of the issuance of the Certificates, or under or by
reason of the obligations, covenants or agreements contained in this Agreement
or in any of the Certificates or implied therefrom; and that any and all such
personal liability, either at common law or in equity or by constitution or
statute, of, and any and all such rights and claims against, every such
incorporator, shareholder, officer or director, as such, because of the issuance
of the Certificates, or under or by reason of the obligations or covenants
contained in this Agreement or in any of the Certificates or implied therefrom,
are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Agreement and the issuance of the
Certificates. The Servicer and any director, officer, employee or agent of the
Servicer may rely in good faith on any document of any kind prima facie properly
----- -----
executed and submitted by any Person respecting any matters arising hereunder.
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(b) The Servicer shall not be under any liability to the Trust or the
Certificateholders for taking any action or for refraining from taking any
action pursuant to this Agreement, or for errors in judgment; provided, however,
-------- -------
that this provision shall not protect the Servicer against any liability which
would otherwise be imposed upon the Servicer by reason of its willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties as Servicer
hereunder. The Servicer shall not be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to its duties to
service the Mortgage Loans in accordance with this Agreement which in its
reasonable opinion may involve it in any expense or liability; provided,
--------
however, that the Servicer, in its sole discretion, may undertake any such
- -------
action which it may deem necessary or desirable in respect of this Agreement,
and the rights and duties of the parties hereto and the interests of the
Certificateholders hereunder. In such event, the reasonable legal expenses and
costs of such action and any liability resulting therefrom shall be expenses,
costs and liabilities of the Trust, and the Servicer shall be entitled to be
reimbursed therefor pursuant to Section 3.3. The Servicer's right to
reimbursement pursuant to this Section 7.3(b) shall survive any resignation or
termination of the Servicer pursuant to Section 7.5 or 8.1 with respect to any
losses, expenses, costs or liabilities arising prior to such resignation or
termination, or arising from events that occurred prior to such resignation or
termination.
(c) The Servicer and any director, officer, employee or agent of the
Servicer shall be indemnified by the Trust and held harmless to the extent
provided herein against any loss, liability or expense incurred in connection
with any legal action relating to this Agreement or the Certificates, other than
any loss, liability or expense related to any specific Mortgage Loan or Mortgage
Loans (except as any such loss, liability or expense shall be otherwise
reimbursable pursuant to this Agreement) and any loss, liability or expense
incurred by the Servicer by reason of willful misfeasance, bad faith or gross
negligence by the Servicer in the performance of its duties hereunder or by
reason of its reckless disregard of its obligations and duties hereunder. The
Servicer and any director, officer, employee or agent of the Servicer shall be
entitled to such indemnity pursuant to Section 3.3. The Servicer's right to
indemnity pursuant to this Section 7.3(c) shall survive any resignation or
termination of the Servicer pursuant to Section 7.5 or 8.1 with respect to any
losses, expenses, costs or liabilities arising prior to such resignation or
termination, or arising from events that occurred prior to such resignation or
termination. Any claims under this Section 7.3(c) by or on behalf of the
Certificateholders or the Trust shall be made only against the Servicer who
shall be liable to the extent provided herein with respect to its own acts and
omissions as well as the acts and omissions of its directors, officers,
employees and agents.
Section 7.4 Delegation of Duties.
--------------------
(a) In the ordinary course of business, and subject to the requirements
of Section 7.4(b), the Servicer at any time may, with the consent of the
Certificate Insurer, delegate any of its duties hereunder to any Person,
including any of its affiliates, who agrees to conduct such duties in accordance
with standards comparable to those with which the Servicer complies pursuant to
Section 3.1. Such delegation shall not relieve the Servicer of its liabilities
and responsibilities with respect to such duties and shall not constitute a
resignation within the meaning of Section 7.5. The
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Servicer shall provide each Rating Agency, the Trustee and the Certificate
Insurer with written notice prior to the delegation of any of its duties to any
Person other than any of the Servicer's affiliates or their respective
successors and assigns.
(b) The parties hereto intend that, for so long as the Trust holds
Trust Balances of one or more Common Mortgage Loans, the Person acting as
Servicer under this Agreement shall at all times be the same as the Person
acting as servicer under the Prior Trust Pooling and Servicing Agreements
applicable to such Common Mortgage Loans. Accordingly, the Servicer shall
delegate its duties pursuant to Section 7.4(a) to the extent that, but only to
those Persons to which, it has delegated its duties as servicer under the
applicable Prior Trust Pooling and Servicing Agreements, and otherwise the
Servicer shall not be authorized to delegate any of its duties hereunder.
Section 7.5 Servicer Not to Resign.
----------------------
Subject to the provisions of Section 7.2 and the last sentence of this
paragraph, the Servicer shall not resign from the obligations and duties hereby
imposed on it (i) for so long as the Trust holds Trust Balances of one or more
Common Mortgage Loans, unless it has resigned from its obligations and duties as
servicer under all Prior Trust Pooling and Servicing Agreements applicable to
such Common Mortgage Loans or (ii) except upon determination that the
performance of its obligations or duties hereunder is no longer permissible
under applicable law or is in material conflict by reason of applicable law with
any other activities carried on by it or its subsidiaries or other affiliates,
the other activities of the Servicer so causing such a conflict being of a type
and nature carried on by the Servicer or such subsidiaries or other affiliates
at the date of this Agreement. For so long as the Trust holds Trust Balances of
one or more Common Mortgage Loans, the determination set forth in clause (ii)
shall provide the basis for the Servicer's resignation only if the Servicer
simultaneously resigns from its obligations and duties as servicer under the
Prior Trust Pooling and Servicing Agreements applicable to such Common Mortgage
Loans. For so long as the Trust holds Trust Balances of one or more Common
Mortgage Loans, the Servicer shall resign from its obligations and duties
hereunder promptly upon any resignation from its obligations and duties as
servicer under the Prior Trust Pooling and Servicing Agreements applicable to
such Common Mortgage Loans.
Any resignation under Section 7.5 shall not relieve the Servicer of
responsibility for any of the obligations specified in Sections 8.1 and 8.2 as
obligations that survive the resignation or termination of the Servicer;
provided, however, that no resignation by the Servicer shall become effective
- -------- -------
until the Trustee or a successor servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section 8.2.
The Servicer shall have no claim (whether by subrogation or otherwise) or other
action against any Certificateholder for any amounts paid by the Servicer
pursuant to any provision of this Agreement. Any determination permitting the
resignation of the Servicer shall be evidenced by an opinion of Counsel to such
effect delivered to the Trustee and the Certificate Insurer.
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Section 7.6 Limitation on Liability of Certain Persons.
------------------------------------------
Except as provided in Section 7.7 hereof, no recourse under or upon any
obligation or covenant of this Agreement, or of any Certificate, or for any
claim based thereon or otherwise in respect thereof, shall be had against any
incorporator, shareholder, officer or director, as such, past, present or
future, of the Transferor or of any successor corporation, either directly or
through the Transferor, whether by virtue of any constitution, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that this Agreement and the obligations issued
hereunder are solely corporate obligations, and that no such personal liability
whatever shall attach to, or is or shall be incurred by the incorporators,
shareholders, officers or directors, as such, of the Transferor, or any of them,
because of the issuance of the Certificates, or under or by reason of the
obligations, covenants or agreements contained in this Agreement or in any of
the Certificates or implied therefrom; and that any and all such personal
liability, either at common law or in equity or by constitution or statute, of,
and any and all such rights and claims against, every such incorporator,
shareholder, officer or director, as such, because of the issuance of the
Certificates, or under or by reason of the obligations, covenants or agreements
contained in this Agreement or in any of the Certificates or implied therefrom,
are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Agreement and the issuance of the
Certificates. The Transferor and any director, officer, employee or agent of the
Transferor may rely in good faith on any document of any kind prima facie
----- -----
properly executed and submitted by any Person respecting any matters arising
hereunder.
Section 7.7 Liability of Transferor.
-----------------------
Notwithstanding Section 7.6 (and notwithstanding any provisions of this
Agreement), the Transferor by entering into this Agreement, by its acceptance
thereof, agrees to be liable, directly to the injured party, for the entire
amount of any losses, claims, damages or liabilities (other than those that
would be incurred by an Investor Certificateholder as an investor in the
Certificates if the Certificates were notes secured by the Mortgage Loans
including, but not limited to, as a result of the performance of the Mortgage
Loans, market fluctuations, a shortfall or failure to make payment under the
Certificate Insurance Policy or other similar market or investment risks
associated with ownership of the Certificates) arising out of or based on the
arrangement created by this Agreement or the actions of the Transferor taken
pursuant hereto (to the extent that, if the Trust assets at the time the claim
is made were used to pay in full all outstanding Certificates, the Trust assets
that would remain after the Certificateholders were paid in full would be
insufficient to pay any such losses, claims, damages or liabilities) as though
this Agreement created a partnership under the New York Revised Uniform
Partnership Act in which the Transferor was a general partner. The rights
created by this Section 7.7 shall run directly to and be enforceable by the
injured party subject to the limitations hereof.
Section 7.8 Transferor May Own Certificates.
-------------------------------
The Transferor and any Person controlling, controlled by or under common
control with the Transferor may in its individual or any other capacity become
the owner or pledgee of Investor
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Certificates with the same rights as it would have if it were not the Transferor
or such an affiliate thereof, except as otherwise provided in the definition of
the term "Certificateholder" specified in Section 1.1. Investor Certificates so
owned by or pledged to the Transferor or such controlling or commonly controlled
Person shall have an equal and proportionate benefit under the provisions of
this Agreement, without preference, priority or distinction as among all of the
Certificates, except as otherwise provided in the definition of the term
"Certificateholder" specified in Section 1.1.
ARTICLE VIII
DEFAULT
Section 8.1 Events of Default.
-----------------
If any one of the following events ("Events of Default") shall occur and
be continuing:
(i) any failure by the Servicer to deposit into the Certificate
Account any deposit required to be made under the terms of this
Agreement which continues unremedied for a period of five (5)
Business Days after the date upon which written notice of such
failure shall have been given to the Servicer by the Trustee or to
the Servicer and the Trustee by the Certificate Insurer or to the
Servicer, the Trustee and the Certificate Insurer by the Holders
of Investor Certificates evidencing not less than 51% of the
aggregate Percentage Interests of the Investor Certificates; or
(ii) failure on the part of the Servicer duly to observe or perform in
any material respect any other covenants or agreements of the
Servicer set forth in the Insurance Agreement or in this
Agreement, which failure (A) materially and adversely affects the
rights of Certificateholders and (B) continues unremedied for a
period of sixty (60) days after the date on which written notice
of such failure, requiring the same to be remedied, shall have
been given to the Servicer and the Certificate Insurer by the
Trustee, or to the Servicer, the Certificate Insurer and the
Trustee by the Holders of Certificates evidencing not less than
51% of the aggregate Percentage Interests of the Investor
Certificates; or
(iii) the entry against the Servicer of a decree or order by a court or
agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings, or for the winding
up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of one hundred
twenty (120) days; or
(iv) the consent by the Servicer to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings of or
relating to the Servicer or of or relating to substantially all of
its property; or any action by the Servicer to admit in writing
its inability to pay its debts generally as they become due, to
file a petition to take
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advantage of any applicable insolvency or reorganization statute
or to make an assignment for the benefit of its creditors;
then, and in each and every such case, so long as an Event of Default shall not
have been remedied by the Servicer, and subject to the proviso below, either the
Trustee, the Certificate Insurer (unless there is currently existing a
Certificate Insurer Default) or the Holders of Investor Certificates evidencing
not less than 51% of the aggregate Percentage Interests of the Investor
Certificates with the consent of the Certificate Insurer (if there exists no
Certificate Insurer Default) by notice then given in writing to the Servicer
(and to the Trustee if given by the Certificate Insurer or the Investor
Certificateholders), may and at the direction of the Holders of Investor
Certificates evidencing no less than 51% of the aggregate Percentage Interests
of the Investor Certificates, the Trustee shall, terminate all of the rights and
obligations of the Servicer as servicer under this Agreement; provided, however,
-------- -------
that, for so long as the Trust holds Trust Balances of one or more Common
Mortgage Loans under which Sold Balances are owned by Trust 1990, Trust 1991,
Trust 1992, Trust 1993 or Trust 1994, the Servicer may not be terminated in such
circumstances, if and for so long as, the Servicer continues to act as servicer
under the Prior Trust Pooling and Servicing Agreements applicable to such Common
Mortgage Loans, as the case may be. Upon such termination, for so long as the
Trust holds Trust Balances of one or more Common Mortgage Loans under which Sold
Balances are owned by Trust 1990, Trust 1991, Trust 1992, Trust 1993, Trust 1994
or Trust 1995, and if and for so long as the Trustee also acts as servicer of
Trust 1990, Trust 1991, Trust 1992, Trust 1993, Trust 1994 or Trust 1995, as the
case may be, the Trustee will succeed to all the responsibilities, duties and
liabilities of the Servicer under this Agreement, pursuant to Section 8.2. If
the Servicer is terminated as servicer under the Prior Trust Pooling and
Servicing Agreements, for so long as the Trust holds Trust Balances of one or
more Common Mortgage Loans under which Sold Balances are owned by Trust 1990,
Trust 1991, Trust 1992, Trust 1993, Trust 1994 or Trust 1995, and whether or not
there is any Event of Default hereunder, the Trustee shall promptly deliver a
notice of termination to the Servicer and shall appoint as successor Servicer
pursuant to Section 8.2 the same Person appointed to succeed the Servicer as
servicer under such Prior Trust Pooling and Servicing Agreements.
Subject to the proviso below, if a Trigger Event shall have occurred, the
Certificate Insurer (unless there is currently existing a Certificate Insurer
Default) may require the Trustee to deliver a notice of termination to the
Servicer and to appoint a successor Servicer pursuant to Section 8.2; provided,
--------
however, that, for so long as the Trust holds Trust Balances of one or more
- -------
Common Mortgage Loans under which Sold Balances are owned by Trust 1990, Trust
1991, Trust 1992, Trust 1993, Trust 1994 or Trust 1995, the Certificate Insurer
may not require the Trustee to deliver such notice of termination and appoint a
successor Servicer in such circumstances if, and for so long as the Servicer
continues to act as servicer under any Prior Trust Pooling and Servicing
Agreement applicable to such Common Mortgage Loans.
Any written notice of termination provided to the Servicer pursuant to
this Section 8.1 shall be simultaneously provided to the Certificate Insurer and
the Rating Agencies. On or after the receipt by the Servicer of such written
notice, all authority and power of, and all benefits accruing to, the Servicer
under this Agreement, whether with respect to the Certificates or the Mortgage
Loans or otherwise, shall pass to and be vested in the Trustee or such successor
Servicer
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as may be appointed under Section 8.2 pursuant to and under this Section 8.1;
and, without limitation, the Trustee is hereby authorized and empowered to
execute and deliver, on behalf of the Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement of the
Mortgage Loans and related documents, or otherwise. The predecessor Servicer
shall cooperate with the successor Servicer and the Trustee in effecting the
termination of the responsibilities and rights of the Servicer hereunder,
including, without limitation, the transfer to the successor Servicer for the
administration by it of all cash amounts that shall at the time be owned by the
predecessor Servicer for deposit, or that shall thereafter be received by the
Servicer with respect to the Mortgage Loans.
The Certificate Insurer (unless there is currently existing a Certificate
Insurer Default) may notify the Trustee of the occurrence of a Trigger Event and
request termination of the rights and obligations of the Servicer hereunder
because of such occurrence; provided, however, that the Trustee shall incur no
-------- -------
liability for voluntarily complying with such request; and, provided, further,
-------- -------
that, for so long as the Trust holds Trust Balances of one or more Common
Mortgage Loans, the Trustee may not so terminate the Servicer for so long as the
Servicer continues to act as servicer under any Prior Trust Pooling and
Servicing Agreement applicable to such Common Mortgage Loans.
No Holder of Investor Certificates will have any right under this
Agreement to institute any proceeding in its name with respect to this Agreement
unless such holder previously has given to the Trustee and the Certificate
Insurer written notice of default and unless holders of Investor Certificates
evidencing not less than 25% of the aggregate Percentage Interests of the
Investor Certificates with the consent of the Certificate Insurer have made
written request upon the Trustee to institute such proceeding in its own name as
Trustee thereunder and have offered to the Trustee reasonable indemnity, and the
Trustee for 60 days has neglected or refused to institute any such proceeding.
The Trustee will be under no obligation to exercise any of the trusts or powers
vested in it by this Agreement or to make any investigation of matters arising
thereunder or to institute, conduct or defend any litigation thereunder or in
relation thereto at the request, order or direction of any of the Holders of
Investor Certificates or the Certificate Insurer covered by this Agreement,
unless such Holders of Investor Certificates or the Certificate Insurer have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities that may be incurred therein or thereby.
Section 8.2 Trustee to Act; Appointment of Successor.
----------------------------------------
(a) Upon the Servicer's receipt of notice of termination pursuant
to Section 8.1 or the Servicer's resignation in accordance with the terms of
Section 7.5, and, for so long as the Trust holds Trust Balances of one or more
Common Mortgage Loans (and if and for so long as the Trustee also acts as
servicer under a Prior Trust Pooling and Servicing Agreement applicable to such
Common Mortgage Loans), the Trustee shall be the successor in all respects to
the Servicer in its capacity as servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed
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on the predecessor Servicer by the terms and provisions hereof; provided,
--------
however, that the responsibilities and duties of the predecessor Servicer with
- -------
respect to the removal of Mortgage Loans pursuant to Section 3.1 shall not
terminate with regard to actions taken prior to the appointment of the successor
Servicer. As compensation therefor, the Trustee shall be entitled to the
compensation of a successor Servicer as set forth in the definition of Servicing
Fee Rate. Notwithstanding the above, if the Trustee is unable to act as
successor Servicer the Trustee shall appoint, with the consent of the
Certificate Insurer, or petition a court of competent Jurisdiction to appoint,
any established housing and home finance institution having a net worth of not
less than $10,000,000 as the successor to the predecessor Servicer hereunder;
provided, however, that, for so long as the Trust holds Trust Balances of one or
- -------- -------
more Common Mortgage Loans under which Sold Balances are owned by any Prior
Trust, any such successor Servicer shall be the same Person that is then acting
as, or has been designated to act as, servicer under the Prior Trust Pooling and
Servicing Agreements applicable to such Common Mortgage Loans; and provided,
--------
further, that the appointment of any such successor Servicer shall not result in
- -------
the reduction, suspension or withdrawal of the ratings assigned to the Investor
Certificates by any Rating Agency without taking into account the Certificate
Insurance Policy. Pending appointment of a successor Servicer hereunder, unless
the Trustee is prohibited by law from so acting, the Trustee shall act in such
capacity as hereinabove provided. In connection with such appointment and
assumption, the Trustee may make such arrangements for the compensation of such
successor out of payments on Trust Balances of Mortgage Loans as it, the
Certificate Insurer (unless there currently exists a Certificate Insurer
Default) and such successor shall agree; provided, however, that such successor
-------- -------
shall be entitled to the compensation of a successor Servicer as set forth in
the definition of Servicing Fee Rate. The Trustee and such successor shall take
such action, consistent with this Agreement, as shall be necessary to effectuate
any such succession. Any successor Servicer appointed pursuant to this Section
8.2 shall be bound by the provisions of the Custodial Agreement.
(b) Any successor Servicer, including the Trustee during the term
of its service as Servicer, shall maintain in force (i) a policy or policies of
insurance covering errors and omissions in the performance of its obligations as
Servicer hereunder, and (ii) a fidelity bond in respect of its officers,
employees and agents to the same extent as the Servicer is so required pursuant
to Section 3.12.
Section 8.3 Notification to Investor Certificateholders.
-------------------------------------------
Upon any termination or appointment of a successor to the Servicer
pursuant to this Article VIII, the Trustee shall give prompt written notice
thereof to Investor Certificateholders at their respective addresses appearing
in the Certificate Register and to the Certificate Insurer and the Rating
Agencies.
Section 8.4 Waiver of Past Events of Default.
--------------------------------
The Holders of Investor Certificates evidencing not less than 51% of the
aggregate Percentage Interests of the Investor Certificates together, with the
consent of the Certificate
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Insurer, may, on behalf of all Holders of Certificates, waive any Event of
Default by the Servicer in the performance of its obligations hereunder and its
consequences, except a default in making any required deposits to or payments
from the Certificate Account in accordance with this Agreement. Upon any such
waiver of a past Event of Default, such Event of Default shall cease to exist
and shall be deemed to have been remedied for every purpose of this Agreement.
No such waiver shall extend to any subsequent or other default or impair any
right consequent thereon.
ARTICLE IX
THE TRUSTEE
Section 9.1 Duties of Trustee.
-----------------
The Trustee, prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee shall have actual knowledge and after the
curing of all Events of Default which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Default has occurred of which a Responsible Officer of
the Trustee shall have actual knowledge (which has not been cured or waived),
the Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs. The appointment of a successor Servicer (including the Trustee)
hereunder shall for purposes of this Article be deemed a cure of an Event of
Default.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement; provided, however, that the
Trustee shall not be responsible for the accuracy or content of any resolution,
certificate, statement, opinion, report, document, order or other instrument
furnished to the Trustee hereunder. If any such instrument is found not to
conform in any material respect to the requirements of this Agreement, the
Trustee shall notify the Investor Certificateholders of such instruments, in the
event that the Trustee, after so requesting, does not receive a satisfactorily
corrected instrument.
No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct; provided, however, that:
-------- -------
(i) prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee shall have actual knowledge,
and after the curing of all such Events of Default which may have
occurred, the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Agreement, the
Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this
Agreement, no implied covenants or obligations shall be read into
this Agreement against the Trustee and, in the absence of bad
faith on the part of the Trustee, the Trustee may conclusively
rely, as to the truth of the
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statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trustee and
conforming to the requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible officer of the
Trustee, unless it shall be proved that the Trustee was negligent
in ascertaining the pertinent facts;
(iii) the Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith
in accordance with this Agreement, at the direction of Holders of
Investor Certificates evidencing not less than 51% of the
aggregate Percentage Interests of the Investor Certificates
together or at the direction of the Certificate Insurer to the
extent provided in Section 8.1 with respect to the time, method
and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Agreement; and
(iv) the Trustee shall not be charged with knowledge of any failure by
the Servicer to comply with the obligations of the Servicer
referred to in clauses (i) and (ii) of Section 8.1 or of any
Trigger Event unless a Responsible Officer of the Trustee assigned
to and working in the Trustee's Corporate Trust Office obtains
actual knowledge of such failure or Trigger Event or the Trustee
receives written notice of such failure or Trigger Event from the
Servicer, the Certificate Insurer or the Holders of Investor
Certificates evidencing not less than 25% of the aggregate
Percentage Interests of the Investor Certificates.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground to believe that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Servicer under this Agreement, except during such
time, if any, as the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Servicer in accordance with the
terms of this Agreement. The Trustee shall provide prior written notice to the
Certificate Insurer of any decision which it has made pursuant to this
paragraph.
Subject to the other provisions of this Agreement and without limiting
the generality of this Section 9.1, the Trustee shall have no duty (A) to see to
any recording, filing, or depositing of this Agreement or any agreement referred
to herein or any financing statement or continuation statement evidencing a
security interest, or to see to the maintenance of any such recording or filing
or depositing or to any rerecording, refiling or redepositing of any thereof,
(B) to see to any insurance, (C) to see to the payment or discharge of any tax,
assessment, or other governmental charge or any lien or encumbrance of any kind
owing with respect to, assessed or levied against,
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any part of the Trust Fund from funds available in the Certificate Account,
(D) to confirm or verify the contents of any reports or certificates of the
Servicer delivered to the Trustee pursuant to this Agreement believed by the
Trustee to be genuine and to have been signed or presented by the proper party
or parties.
Section 9.2 Certain Matters Affecting the Trustee.
-------------------------------------
Except as otherwise provided in Section 9.1:
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party
or parties;
(ii) the Trustee may consult with counsel, and any Opinion of Counsel
shall be full and complete authorization and protection in respect
of any action taken or suffered or omitted by it hereunder in good
faith and in accordance with such opinion of Counsel;
(iii) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation hereunder or in relation hereto,
at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby; nothing
contained herein shall, however, relieve the Trustee of the
obligations, upon the occurrence of an Event of Default of which a
Responsible Officer of the Trustee shall have actual knowledge
(which has not been cured), to exercise such of the rights and
powers vested in it by this Agreement, and to use the same degree
of care and skill in their exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own
affairs;
(iv) the Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred
upon it by this Agreement;
(v) prior to the occurrence of an Event of Default and after the
curing of all Events of Default which may have occurred, 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, consent, order,
approval, bond or other paper or documents, unless requested in
writing to do so by the Certificate Insurer or Holders of Investor
Certificates evidencing not less than 25% of the aggregate
Percentage Interests of the Investor Certificates with the consent
of the Certificate
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Insurer; provided, however, that if the payment within a
-------- -------
reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms
of this Agreement, the Trustee may require reasonable indemnity
against such cost, expense or liability as a condition to such
proceeding. The reasonable expense of every such examination shall
be paid by the Servicer or, if paid by the Trustee, shall be
reimbursed by the Servicer upon demand. Nothing in this clause
(v) shall derogate from the obligation of the Servicer to observe
any applicable law prohibiting disclosure of information regarding
the Mortgagors;
(vi) The right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and
the Trustee shall not be answerable for other than its negligence
or willful misconduct in the performance of such act;
(vii) The Trustee shall not be required to give any bond or surety in
respect of the execution of the Trust Fund created hereby or the
powers granted hereunder; and
(viii) 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 or a custodian and shall not be liable for any
acts or omissions of such agents, attorneys or custodians
appointed by it with due care hereunder.
Section 9.3 Trustee Not Liable for Certificates or Mortgage Loans.
-----------------------------------------------------
The recitals contained herein and in the Certificates (other than the
signature and authentication of the Trustee on the Certificates) shall be taken
as the statements of the Transferor and the Servicer, respectively, and the
Trustee assumes no responsibility for the correctness of such recitals. The
Trustee makes no representations as to the validity or sufficiency of this
Agreement or of the Certificates (other than the signature and authentication of
the Trustee on the Certificates) or of any Mortgage Loan or related document.
The Trustee shall not be accountable for the use or application by the
Transferor of any of the Certificates or of the proceeds of such Certificates,
or for the use or application of any funds paid to the Transferor or the
Servicer in respect of the Mortgage Loans or deposited into or withdrawn from
the Certificate Account by the Servicer or the Transferor, and shall have no
responsibility for filing any financing or continuation statement in any public
office at any time or otherwise to perfect or maintain the perfection of any
security interest or lien granted to it hereunder or to prepare or file any tax
returns or Securities and Exchange Commission filings for the Trust or to record
this Agreement except as required by law. The Trustee shall not be responsible
for the legality or validity of this Agreement or the validity, priority,
perfection or sufficiency of the security for the Certificates issued or
intended to be issued hereunder.
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Section 9.4 Trustee May Own Certificates.
----------------------------
The Trustee in its individual or any other capacity may become the owner
or pledgee of Certificates and may deal with the Transferor and the Servicer in
banking transactions with the same rights as it would have if it were not
Trustee.
Section 9.5 Servicer to Pay Trustee's Fees and Expenses.
-------------------------------------------
The Servicer shall pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
for all services rendered by it in the execution of the trusts hereby created
and in the exercise and performance of any of the powers and duties hereunder of
the Trustee, and the Servicer shall pay or reimburse the Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made
by the Trustee in accordance with any of the provisions of this Agreement,
except any such expense, disbursement or advance as may arise from its
negligence or bad faith or which is the responsibility of a Certificateholder or
Certificateholders hereunder. If the Trustee is appointed as successor Servicer
pursuant to Section 8.2, the provisions of this Section 9.5 shall not apply to
expenses, disbursements or advances made or incurred by the Trustee in its
capacity as successor Servicer. The Servicer shall indemnify the Trustee for,
and hold it harmless against, any loss, liability or expense incurred without
negligence or bad faith on the Trustee's part, arising out of or in connection
with the acceptance or administration by the Trustee of the trust or 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. If and for so long as the successor Servicer is the
Trustee, all references in this Section 9.5 to the Servicer shall be deemed to
refer to Chevy Chase Bank, F.S.B. notwithstanding the appointment of such
successor Servicer.
Section 9.6 Eligibility Requirements for Trustee.
------------------------------------
The Trustee hereunder at all times shall be a corporation (i) having its
principal office in the same state as that in which the initial Trustee under
this Agreement has its principal office and organized and doing business under
the laws of the United States of America or a state of the United States of
America; (ii) authorized under such laws to exercise corporate trust powers;
(iii) having a combined capital and surplus of at least $50,000,000 and subject
to supervision or examination by federal or state authority; and (iv) if Moody's
is a Rating Agency, having a rating with respect to its long-term unsecured debt
obligations of at least Baa3 from Moody's (or such lower rating to which Moody's
may agree). If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section 9.6, 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. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 9.6, the Trustee shall resign
immediately in the manner and with the effect specified in Section 9.7.
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Section 9.7 Resignation or Removal of Trustee.
---------------------------------
The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Transferor and the
Certificate Insurer, provided, however, that, for so long as the Trust holds
-------- -------
Trust Balances of one or more Common Mortgage Loans, in such event the Trustee
shall simultaneously resign and be discharged from the trusts created by the
Prior Trust Pooling and Servicing Agreements applicable to such Common Mortgage
Loans. For so long as the Trust holds Trust Balances of one or more Common
Mortgage Loans, the Trustee shall resign and be discharged from the trusts
created hereby if it is no longer serving as the Prior Trust Trustee with
respect to such Common Mortgage Loans. Upon receiving such notice of
resignation, the Transferor, with the written consent of the Certificate
Insurer, shall promptly appoint a successor Trustee, except that, for so long as
the Trust holds Trust Balances of one or more Common Mortgage Loans, the
Transferor shall promptly appoint as successor Trustee the Person then serving,
or designated to serve, as the Prior Trust Trustee with respect to such Common
Mortgage Loans. Such appointment shall be by written instrument, in duplicate,
one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor Trustee. Any such successor Trustee shall be approved in
writing by the Servicer, which shall not withhold such approval if the proposed
successor Trustee satisfies the eligibility requirements set forth herein. If no
successor Trustee shall have been so appointed and have accepted appointment
within thirty (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.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 9.6 and shall fail to resign after written request
therefor by the Transferor or the Certificate Insurer, or if at any time the
Trustee shall be legally unable to act, 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, the Transferor may remove the Trustee, provided, however, that, for
-------- -------
so long as the Trust holds Trust Balances of one or more Common Mortgage Loans,
the Trustee is no longer serving as the Prior Trust Trustee with respect to such
Common Mortgage Loans. If the Transferor removes the Trustee under the authority
of the immediately preceding sentence, the Transferor shall promptly appoint a
successor Trustee, except that, for so long as the Trust holds Trust Balances of
one or more Common Mortgage Loans, the Transferor shall promptly appoint as
successor Trustee the Person then serving, or designated to serve, as the Prior
Trust Trustee with respect to such Common Mortgage Loans. Such appointment will
be by written instrument, in duplicate, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor Trustee. A
copy of such instrument shall be delivered to the Certificate Insurer.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section 9.7 shall not become
effective until acceptance of appointment by the successor Trustee as provided
in Section 9.8.
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Section 9.8 Successor Trustee.
-----------------
Any successor Trustee appointed as provided in Section 9.7 shall execute,
acknowledge and deliver to the Transferor, the Certificate Insurer and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee. The Transferor, the Servicer and the predecessor Trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for more fully and certainly vesting and confirming in the successor
Trustee all such rights, powers, duties and obligations.
No successor Trustee shall accept appointment as provided in this Section
9.8 unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 9.6. The predecessor Trustee shall
notify the Certificate Insurer and each Rating Agency of the appointment of any
successor Trustee.
Upon acceptance of appointment by a successor Trustee as provided in this
Section 9.8, the Servicer shall mail notice of the succession of such Trustee
hereunder to the Certificate Insurer and all holders of Certificates at their
addresses as shown in the Certificate Register. If the Servicer fails to mail
such notice within ten (10) days after acceptance of appointment by the
successor Trustee, the successor Trustee shall cause such notice to be mailed at
the expense of the Servicer.
Notwithstanding anything to the contrary contained herein, the
appointment of any successor trustee pursuant to any provision of this Agreement
will be subject to the prior written consent of the Certificate Insurer.
Section 9.9 Merger or Consolidation of Trustee.
----------------------------------
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation or banking association
resulting from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation or banking association succeeding to all or
substantially all of the trust business of the Trustee, shall be the successor
of the Trustee hereunder, provided such corporation or banking association shall
--------
be eligible under the provisions of Section 9.6, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
Section 9.10 Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions of this Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Fund or any Mortgaged Property may at the time be located, the
Transferor and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or
separate
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trustee or separate trustees, of all or any part of the Trust Fund, and to vest
in such Person or Persons, in such capacity and for the benefit of the
Certificateholders, such title to the Trust Fund, or any part thereof, and,
subject to the other provisions of this Section 9.10, such powers, duties,
obligations, rights and trusts as the Transferor and the Trustee may consider
necessary or desirable. If the Transferor shall not have joined in such
appointment within fifteen (15) days after the receipt by it of a request so to
do, or in the case an Event of Default shall have occurred and be continuing,
the Trustee alone shall have the power to make such appointment. No co-trustee
or separate trustee hereunder shall be required to meet the terms of eligibility
as a successor trustee under Section 9.6 and no notice to Certificateholders of
the appointment of any co-trustee or separate trustee shall be required under
Section 9.8.
Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised
or performed by the Trustee and such separate trustee or co-
trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as successor to the
Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of
title to the Trust Fund or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Trustee;
(ii) no trustee hereunder shall be held personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Transferor and the Trustee acting jointly may at any time
accept the resignation of or remove any separate trustee or co-
trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then-separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article IX. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Transferor.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any
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lawful act under or in respect of this Agreement on its behalf and in its name.
If any separate trustee or co-trustee shall die, become incapable of acting,
resign or be removed, all of its estates, properties, rights, remedies and
trusts shall vest in and be exercised by the Trustee, to the extent permitted by
law, without the appointment of a new or successor trustee.
Section 9.11 Waiver of Bond Requirement.
--------------------------
The Trustee shall be relieved of, and each Certificateholder hereby
waives, any requirement of any jurisdiction in which the Trust Fund, or any part
thereof, may be located that the Trustee post a bond or other surety with any
court, agency or body whatsoever.
Section 9.12 Waiver of Inventory, Accounting and Appraisal Requirement.
---------------------------------------------------------
The Trustee shall be relieved of, and each Certificateholder hereby
waives, any requirement of any jurisdiction in which the Trust Fund, or any part
thereof, may be located that the Trustee file any inventory, accounting or
appraisal of the Trust Fund with any court, agency or body at any time or in any
manner whatsoever.
Section 9.13 Streit Act.
----------
Any provisions required to be contained in this Agreement by Section 126
of Article 4-A of the New York Real Property Law are hereby incorporated, and
such provisions shall be in addition to those conferred or imposed by this
Agreement; provided, however, that to the extent that such Section 126 shall not
-------- -------
apply to this Agreement, such Section 126 shall not have any effect, and if such
Section 126 should at any time be repealed or cease to apply to this Agreement,
or be construed by judicial decision to be inapplicable, such Section 126 shall
cease to have any further effect upon the provisions of this Agreement. In case
of a conflict between the provisions of this Agreement and any mandatory
provision of Article 4-A of the New York Real Property Law, such mandatory
provisions of such Article 4-A shall prevail, provided, however, that if such
Article 4-A shall not apply to this Agreement, or be construed by judicial
decision to be inapplicable, such mandatory provisions of such Article 4-A shall
cease to have any further effect upon the provisions of this Agreement.
ARTICLE X
TERMINATION
Section 10.1 Termination.
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(a) The respective obligations and responsibilities of the Servicer,
the Transferor and the Trustee created hereby (other than the obligation of the
Trustee to make certain payments to Certificateholders after the final
Distribution Date and the obligation of the Servicer to send certain notices as
hereinafter set forth) shall terminate upon the last action required to be taken
by the Trustee on the final Distribution Date pursuant to this Article X
following the later of (A) the earlier of (i) payment in full of all amounts
owing to the Certificate Insurer and (ii) the final
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payment or other liquidation of the last Mortgage Loan in the Trust and (B) the
earliest of (i) the retransfer, under the conditions specified in Section
10.1(b), to the Transferor of the Investor Certificateholders' interest in each
Mortgage Loan and all property acquired in respect of any Mortgage Loan
remaining in the Trust for an amount equal to the sum of (A) the Investor
Certificate Principal Balance, (B) accrued and unpaid Investor Certificate
Interest through the day preceding the final Distribution Date plus any Basis
Risk Payment then due, and (C) any Unpaid Investor Certificate Interest
Shortfall, (ii) the day following the Distribution Date on which the
distribution made to Investor Certificateholders has reduced the Investor
Certificate Principal Balance to zero, (iii) the final payment or other
liquidation of the last Mortgage Loan remaining in the Trust (including without
limitation the disposition of the Mortgage Loans pursuant to Section 11.2) or
the disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan, (iv) the Stated Maturity Date; provided,
--------
however, notwithstanding anything herein to the contrary the Trust shall
- -------
terminate on September 30, 2017. Upon termination in accordance with this
Section 10.1, the Trustee and Custodial Agent shall execute such documents and
instruments of transfer presented by the Transferor and take such other actions
as the Transferor may reasonably request to effect the retransfer of the
Mortgage Loans and the related property to the Transferor.
(b) The Transferor shall have the right to exercise the option to
effect the retransfer to the Transferor of each Mortgage Loan pursuant to
Section 10.1(a) above on any Distribution Date on or after the Distribution Date
immediately prior to which the Investor Certificate Principal Balance is less
than or equal to five percent (5%) of the Original Investor Certificate
Principal Balance and all amounts due and owing to the Certificate Insurer for
unpaid premiums and unreimbursed draws on the Certificate Insurance Policy,
together with interest thereon as provided under the Insurance Agreement, have
been paid.
(c) Notice of any termination, specifying the Distribution Date
(which shall be a date that would otherwise be a Distribution Date) upon which
the Investor Certificateholders may surrender their Investor Certificates to the
Trustee for payment of the final distribution and cancellation, shall be given
promptly by the Trustee (upon receipt of written directions from the Servicer
given not later than the tenth (10th) day of the month immediately preceding the
month of such final distribution) by letter to Investor Certificateholders and
the Certificate Insurer mailed not later than the twentieth (20th) day of the
month immediately preceding the month of such final distribution. Such notice
shall specify (i) the Distribution Date upon which final distribution of the
Investor Certificates will be made upon presentation and surrender of Investor
Certificates at the office or agency of the Trustee therein designated, (ii) the
amount of any such final distribution and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, distributions being made
only upon presentation and surrender of the Investor Certificates at the office
or agency of the Trustee therein specified.
(d) Upon presentation and surrender of the Investor Certificates,
the Trustee shall cause to be distributed to the holders of Investor
Certificates on the Distribution Date for such final distribution, in proportion
to the Percentage Interests of their respective Investor Certificates, an amount
equal to (i) if such final distribution is not being made pursuant to the
retransfer to the
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Transferor pursuant to Section 10.1(a)(B)(i), the amount required to be
distributed to Investor Certificateholders pursuant to Section 5.1 for such
Distribution Date and (ii) if such final distribution is being made pursuant to
such retransfer, the amount specified in Section 10.1(a)(B)(i). The distribution
on such final Distribution Date pursuant to a retransfer pursuant to Section
10.1(a)(B)(i) shall be in lieu of the distribution otherwise required to be made
on such Distribution Date in respect of the Certificates. On the final
Distribution Date prior to having made the distributions called for above, the
Trustee will withdraw from the Certificate Account and remit to the Certificate
Insurer the lesser of (x) the amount available for distribution on such final
Distribution Date, net of any portion thereof necessary to pay the amounts
described in clauses (d)(i) and (ii) above and (y) the unpaid amounts due and
owing to the Certificate Insurer for unpaid premiums and unreimbursed draws on
the Certificate Insurance Policy, together with interest thereon as provided
under the Insurance Agreement.
(e) In the event that all of the Investor Certificateholders shall
not surrender their Investor Certificates for final payment and cancellation on
or before such final Distribution Date, the Trustee shall on such date cause all
funds in the Certificate Account not distributed in final distribution to the
Certificate Insurer or Investor Certificateholders to be withdrawn therefrom and
credited to the remaining Investor Certificateholders by depositing such funds
in a separate escrow account for the benefit of such Investor Certificateholders
and the Transferor (if the Transferor has exercised its right to retransfer the
Mortgage Loans) or the Trustee (in any other case) and shall give a second
written notice to the remaining Investor Certificateholders to surrender their
Investor Certificates for cancellation and receive the final distribution with
respect thereto. If within one year after the second notice all the Investor
Certificates shall not have been surrendered for cancellation, the Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Investor Certificateholders concerning surrender of their
Investor Certificates, and the cost thereof shall be paid out of the funds on
deposit in such escrow account.
ARTICLE XI
RAPID AMORTIZATION EVENTS
Section 11.1 Rapid Amortization Events.
-------------------------
If any one of the following events shall occur during the Managed
Amortization Period:
(a) failure on the part of the Transferor (i) to make any payment
or deposit required by the terms of this Agreement, on or before the date
occurring five Business Days after the date such payment or deposit is required
to be made herein, or (ii) to record assignments when required, or (iii) duly to
observe or perform in any material respect the covenants of the Transferor set
forth in Section 2.4(b) or (iv) duly to observe or perform in any material
respect any other covenants or agreements of the Transferor set forth in this
Agreement, which failure, in each case, materially and adversely affects the
interests of the Certificateholders or the Certificate Insurer and which, in the
case of clause (iv), continues unremedied and continues to affect materially and
adversely the interests of the Certificateholders for a period of 60 days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Transferor by the
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Trustee, or to the Transferor and the Trustee by the Certificate Insurer or the
Holders of Investor Certificates evidencing Percentage Interests aggregating not
less than 51%;
(b) any representation or warranty made by the Transferor in this
Agreement shall prove to have been incorrect in any material respect when made
and as a result of which the interests of the Investor Certificateholders or the
Certificate Insurer are materially and adversely affected and which continues to
be incorrect in any material respect and continues to affect materially and
adversely the interests of the Investor Certificateholders or the Certificate
Insurer for a period of 60 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Transferor by the Trustee, or to the Transferor and the Trustee by either the
Certificate Insurer or the Holders of Investor Certificates evidencing
Percentage-Interests aggregating not less than 51%; provided, however, that a
Rapid Amortization Event pursuant to this subparagraph (b) shall not be deemed
to have occurred hereunder if the Transferor shall have accepted retransfer of
the related Mortgage Loans or all Mortgage Loans if applicable during such
period (or such longer period (not to exceed an additional 60 days) as the
Trustee may specify) in accordance with the provisions hereof;
(c) the Transferor shall voluntarily go into liquidation, consent
to the appointment of a conservator or receiver or liquidator or similar person
in any insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to the Transferor or of or relating to all or
substantially all of its property, or a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the appointment of
a conservator, receiver, liquidator or similar person in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the Transferor and such decree or order shall have remained
in force undischarged or unstayed for a period of 60 days; or the Transferor
shall admit in writing its inability to pay its debts generally as they become
due, file a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations (any such event, an "Insolvency
Event");
(d) the Trust shall become subject to registration as an
"investment company" under the Investment Company Act of 1940, as amended;
(e) any Event of Default or Trigger Event (other than the event
described in clause (iv) of the definition thereof) shall occur;
(f) the aggregate of Certificate Insurance Draw Amounts exceeds 1% of
the Pool Balance as of the Cut-Off Date; or
(g) if at any time, Liquidation Loss Amounts incurred by the Trust
exceed $1,204,600 and either (i) there exists any unreimbursed draw under the
Certificate Insurance Policy or (ii) either of the Excess Spread Conditions is
not satisfied.
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then, in the case of any event described in subparagraph (a), (b) or (e) after
the applicable grace period, if any, set forth in such subparagraphs, either the
Certificate Insurer, the Trustee or the Holders of Investor Certificates
evidencing Percentage Interests aggregating more than 51%, by notice given in
writing to the Servicer (and to the Trustee, if given by either the Certificate
Insurer or the Investor Certificateholders) may declare that an early
amortization event (a "Rapid Amortization Event") has occurred as of the date of
such notice, and in the case of any event described in subparagraphs (c), (d),
(f) or (g), a Rapid Amortization Event shall occur without any notice or other
action on the part of the Trustee, the Certificate Insurer or the Investor
Certificateholders, immediately upon the occurrence of such event.
Section 11.2 Additional Rights Upon the Occurrence of Certain Events.
-------------------------------------------------------
(a) If an Insolvency Event occurs with respect to the Transferor,
the arrangement among the Investor Certificateholders and the Transferor shall
dissolve and the Trust shall be liquidated in accordance with the following
procedures. The Transferor shall on the day of such Insolvency Event (the
"Appointment Day") immediately cease to transfer Subsequent Mortgage Loans and
Additional Balances to the Trust and shall promptly give notice to the Trustee
thereof. Notwithstanding any cessation of the transfer to the Trust of
Subsequent Mortgage Loans and Additional Balances, Subsequent Mortgage Loans and
Additional Balances transferred to the Trust prior to the occurrence of such
Insolvency Event and Daily Investor Principal Collections and Daily Investor
Interest Collections, whenever created, accrued in respect of such the Mortgage
Loans shall continue to be a part of the Trust, and shall continue to be
allocated and paid in accordance with Article V. Within 15 days of the
Appointment Day, the Trustee shall publish a notice in an Authorized Newspaper
that an Insolvency Event has occurred and that the Trustee intends to sell,
dispose of or otherwise liquidate the Trust Balances of the Mortgage Loans as
described below. The Trustee shall obtain a position listing from the Depository
as of the record date established by the Trustee and make a reasonable attempt
to solicit Investor Certificateholders with respect to such proposed sale.
Unless within 75 days from the day the notice above is given, the Trustee shall
have received written instructions from Holders of Investor Certificates
evidencing more than 50% of the aggregate Percentage Interests of Investor
Certificates and the Person, if any, designated by the Transferor prior to such
Insolvency Event to the effect that such Investor Certificateholders and such
Person, if any, disapprove of the liquidation of the Trust Balances of the
Mortgage Loans, the Trustee shall sell, dispose of or otherwise liquidate the
Trust Balances of the Mortgage Loans in a commercially reasonable manner and on
commercially reasonable terms, which shall include the solicitation of
competitive bids. By accepting its interest in an Investor Certificate
hereunder, each Investor Certificateholder hereby delegates to the Certificate
Insurer its right to give such instructions to the Trustee, unless a Certificate
Insurer Default has occurred and is continuing. Any attempted designation of a
Person for such purposes by the Transferor prior to an Insolvency Event which
does not, by its terms, include an irrevocable written delegation to the
Certificate Insurer of the designee's right to give such instructions to the
Trustee shall be null and void and of no force and effect (unless a Certificate
Insurer Default shall have occurred and be continuing prior to any such
attempted designation). Unless a Certificate Insurer Default shall have occurred
and be continuing, the Certificate Insurer may make such instruction on behalf
of the Investor Certificateholders and such Person, if any, designated by the
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Transferor prior to such Insolvency Event. The Trustee may obtain a prior
determination from any such conservator, receiver or liquidator that the terms
and manner of any proposed sale, disposition or liquidation are commercially
reasonable. The provisions of Sections 9.1 and 9.2 shall not be deemed to be
mutually exclusive.
(b) The proceeds from the sale, disposition or liquidation of the
Trust Balances of the Mortgage Loans pursuant to subsection (a) above (net of
the Trustee's fees and expenses, including the fees and expenses of its counsel)
shall be treated as collections on the Trust Balances of the Mortgage Loans and
shall be allocated and deposited in accordance with the provisions of Article V;
provided, however, that the Trustee shall determine conclusively in its sole
- -------- -------
discretion the amount of such proceeds which are allocable to Trust Interest and
the amount of such proceeds which are allocable to Principal Collections. Such
proceeds shall be distributed on the Distribution Date following the date such
proceeds are received (the "Dissolution Distribution Date"). If the Certificate
Insurer has elected to cause a termination of the Trust pursuant to subsection
(a) above, the Certificate Insurance Policy will be available to cover the
payment of the then-accrued and unpaid interest on the outstanding Investor
Certificate Principal Balance at the Investor Certificate Rate, as well as the
outstanding Investor Certificate Principal Balance, on the Dissolution
Distribution Date, after giving effect to all other amounts distributed to
Investor Certificateholders on or prior to such Dissolution Distribution Date.
On the day following the Dissolution Distribution Date, the Trust shall
terminate.
(c) The Trustee may appoint an agent or agents to assist with its
responsibilities pursuant to this Article XI with respect to competitive bids.
The Trustee may recover its reasonable actual third party expenses from the
Trust Fund (in an amount not to exceed $10,000) if Investor Certificateholders
evidencing more than 50% of the aggregate Percentage Interests of Investor
Certificates and the Person designated by the Transferor prior to an Insolvency
Event, or the Certificate Insurer, on their behalf, vote not to sell the Trust
Balances of the Mortgage Loans.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1 Amendment.
---------
This Agreement may be amended from time to time by the Servicer, the
Transferor and the Trustee, without the consent of any of the
Certificateholders, (i) to cure any ambiguity, (ii) to correct any defective
provisions or to correct or supplement any provisions herein which may be
inconsistent with any other provisions herein, (iii) to add or delete any other
provisions not inconsistent herewith with respect to matters or questions
arising under this Agreement, including provisions relating to the Trust's
ownership of Trust Balances of Common Mortgage Loans and issuance of definitive
Certificates to Certificate Owners in the event that book-entry registration of
Investor Certificates is no longer permitted, (iv) to add or amend any
provisions herein as required by the Rating Agencies in order to maintain or
improve the rating of the Investor Certificates (it being understood that, after
obtaining the ratings in effect on the Closing Date, neither the Transferor nor
the Servicer is obligated to obtain, maintain or improve any such rating) or (v)
to
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add any other provisions herein with respect to matters or questions arising
hereunder; provided, however, that, as evidenced by an Opinion of Counsel, in
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each case such action shall not adversely affect in any material respect the
interests of any Certificateholder or the Certificate Insurer (and provided that
any such amendment will be deemed not to materially and adversely affect the
Investor Certificateholders if the person requesting such amendment obtains a
letter from each Rating Agency stating that such amendment would not result in a
downgrading or withdrawal of the rating of the Investor Certificates and
provided further that any such amendment will be deemed not to materially and
adversely affect the Certificate Insurer if each Rating Agency has confirmed
that such amendment would not result in a reduction below investment grade of
the Investor Certificates without regard to the Certificate Insurance Policy).
This Agreement may also be amended from time to time by the Servicer, the
Transferor and the Trustee, with the consent of the Certificate Insurer (unless
there currently exists a Certificate Insurer Default) and the Holders of
Investor Certificates evidencing Percentage Interests aggregating not less than
51%, and the Servicer, the Trustee and the Certificate Insurer may from time to
time consent to the amendment of the Certificate Insurance Policy for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or the Certificate Insurance Policy, as the
case may be, or of modifying in any manner the rights of the Investor
Certificateholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, collections of payments on
Mortgage Loans or distributions or payments under the Certificate Insurance
Policy which are required to be made on any Investor Certificate, without the
consent of the Holder of such Investor Certificate, (ii) reduce the aforesaid
percentage required to consent to any such amendment, without the consent of the
Holder of each Investor Certificate then outstanding, or (iii) adversely affect
in any material respect the interests of the Certificate Insurer without the
consent of the Certificate Insurer.
Notwithstanding the foregoing, the Agreement may not be amended unless, in
connection with such amendment, an Opinion of Counsel is furnished to the
Trustee that such amendment will not (i) adversely affect the status of the
Investor Certificates as debt; (ii) result in the Trust being taxed at the
entity level; or (iii) result in the Trust (or any portion thereof) being taxed
as a taxable mortgage pool (as defined in Section 7701(i) of the Code).
Prior to the execution of any such amendment made with the consent of the
Investor Certificateholders, the Trustee shall furnish written notification of
the substance of such amendment to each Rating Agency. Promptly after the
execution of any such amendment made with the consent of the Investor
Certificateholders, the Trustee shall furnish written notification of the
substance of such amendment to each Investor Certificateholder and fully
executed original counterparts of the instruments effecting any such amendment
to the Certificate Insurer.
It shall not be necessary for the consent of Investor Certificateholders
under this Section 12.1 to approve the particular form of any proposed amendment
or consent, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such
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consents and of evidencing the authorization of the execution thereof by
Investor Certificateholders shall be subject to such reasonable requirements as
the Trustee may prescribe.
The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise.
In connection with any amendment pursuant to this Section 12.1, the
Trustee shall be entitled to receive and rely on an Opinion of Counsel to the
effect that such amendment is authorized or permitted by this Agreement.
Section 12.2 Recordation of Agreement.
------------------------
This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages are
situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Servicer and at its expense on direction
by the Trustee, but only upon direction of the Trustee accompanied by an Opinion
of Counsel to the effect that such recordation materially and beneficially
affects the interests of Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 12.3 Limitation on Rights of Certificateholders.
------------------------------------------
The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust, nor entitle such Certificateholder's
legal representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any such party.
Except as expressly provided herein, no Investor Certificateholder shall
have any right to vote or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto, nor shall any
Investor Certificateholder be under any liability to any third person by reason
of any action taken by the parties to this Agreement pursuant to any provision
hereof.
No Investor Certificateholder shall have any right by virtue or by
availing itself of any provisions of this Agreement to institute any suit,
action or proceeding in equity or at law upon or under or with respect to this
Agreement, unless such Holder previously shall have given to the Trustee a
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless also the Holders of Investor Certificates evidencing not
less than 25% of the aggregate Percentage Interests of the Investor Certificates
shall have made written request upon the Trustee
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to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses and liabilities to be incurred therein
or thereby, and the Trustee, for sixty (60) days after its receipt of such
notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding; it being understood and intended,
and being expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder, or to enforce
any right under this Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all Certificateholders. For the protection
and enforcement of the provisions of this Section 12.3, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Section 12.4 Application of Certain Provisions of this Agreement.
---------------------------------------------------
Sections 7.4, 7.5, 8.1 and 8.2 of this Agreement provide that, if and
for so long as the Trust holds Trust Balances of Common Mortgage Loans, the
Servicer shall be the same Person that is then acting, or is designated to act,
as the servicer of the Prior Trusts applicable to such Common Mortgage Loans.
Section 9.7 of this Agreement provides that, if and for so long as the Trust
holds Trust Balances of one or more Common Mortgage Loans, the Trustee shall be
the same Person that is then acting, or is designated to act, as the Prior Trust
Trustee with respect to such Common Mortgage Loans. The parties acknowledge that
such provisions are intended to enable the Trust to meet applicable legal
requirements. Notwithstanding any such provision in Section 7.4, 7.5, 8.1, 8.2
or 9.7 to the contrary, and subject to the condition specified in the
immediately following sentence, the parties agree that, in the event that the
implementation of such provisions shall prove impracticable, such Sections shall
be construed and applied as if such Sections did not contain such provisions. It
shall be a condition to the non-application of such provisions that the Trustee
receive an Opinion of Counsel to the effect that the non-application of such
provisions will not (i) adversely affect the status of the Investor Certificates
as debt; (ii) result in the Trust being taxed at the entity level; (iii) result
in the Trust being taxed as a taxable mortgage pool (as defined in Section
7701(i) of the Code); (iv) will not violate any requirement of applicable law or
subject the Trust to compliance with any law, rule or regulation to which it
otherwise would not be subject; and (v) will not adversely affect in any
material respect the legal rights of the Certificateholders or the Certificate
Insurer.
Section 12.5 Governing Law.
-------------
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS; PROVIDED, HOWEVER,
THAT THE IMMUNITIES AND STANDARD OF CARE OF THE TRUSTEE IN THE ADMINISTRATION OF
ITS TRUST HEREUNDER SHALL BE GOVERNED BY THE
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LAWS OF THE JURISDICTION IN WHICH ITS PRINCIPAL PLACE OF BUSINESS IS LOCATED.
Section 12.6 Notices.
-------
All demands, notices and communications hereunder shall be in writing
and personally delivered, mailed by certified mail, return receipt requested, or
telecopied, and shall be deemed to have been duly given upon receipt, (a) in the
case of the Transferor or the Servicer, c/o Chevy Chase Bank, F.S.B., 8401
Connecticut Avenue, Chevy Chase, Maryland 20815, Attention: Stephen R. Halpin,
Jr., Executive Vice President and Chief Financial officer, telecopy: (301) 986-
7401, (b) in the case of the Trustee, to The Chase Manhattan Bank, 450 W. 33rd
Street (15th Floor), New York, New York 10001, Attention: Advanced Structured
Products Group, telecopy (212) 946-3240, (c) in the case of the Certificate
Insurer, AMBAC, One State Street Plaza, New York, New York 10004, Attention:
Structured Finance Department, (d) in the case of Moody's, ABS Monitoring
Department, 4th Floor, 99 Church Street, New York, New York 10007, telecopy:
(212) 553-4773 and (e) in the case of Standard & Poor's, Mortgage-Backed
Securities Surveillance Department, 25 Broadway, New York, New York 10004,
telecopy: (212) 412-0323, or, as to each party, at such other address or
telecopy number as shall be designated by such party in a written notice to each
other party. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice. The Trustee has agreed herein to provide notices to the Rating
Agencies as a matter of courtesy and accommodation and shall incur no liability
to any Person for any failure to provide any such notices.
Section 12.7 Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.
Section 12.8 Assignment.
----------
Notwithstanding anything to the contrary contained herein, except as
provided in Sections 6.5, 7.2 and 7.5, this Agreement may not be assigned by the
Transferor or the Servicer without the prior written consent of the Certificate
Insurer.
If the Servicer or Transferor converts from one form of depository
institution charter to another form of depository institution charter, the
resulting entity shall be the Servicer or Transferor, respectively, for all
purposes under this Agreement. Consistent with the preceding sentence, if the
Servicer or Transferor converts from one form of depository institution charter
to
93
<PAGE>
another form of depository institution charter, such action shall not be
considered: (i) an "assignment" or "transfer" or otherwise be considered a
"conveyance" of the Transferor Certificates (or an interest therein) for
purposes of Section 6.5; (ii) a "merger," "conversion," "assumption of
obligations" or "consolidation" of the Servicer or Transferor for purposes of
Section 7.2; (iii) a "resignation" of the Servicer for purposes of Section 7.5;
or (iv) an "assignment" by the Servicer or Transferor for purposes of Section
12.8.
Section 12.9 Certificates Nonassessable and Fully Paid.
-----------------------------------------
The parties agree that the Certificateholders shall not be personally
liable for obligations of the Trust, that the beneficial ownership interests
represented by the Certificates shall be nonassessable for any losses or
expenses of the Trust or for any reason whatsoever, and that Certificates upon
execution, authentication and delivery thereof by the Trustee pursuant to
Section 6.1 are and shall be deemed fully paid.
Section 12.10 Counterparts.
------------
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 12.11 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 12.12 Third Party Beneficiary.
-----------------------
This Agreement shall inure to the benefit of and be binding upon the
parties hereto, and, in addition, shall inure to the benefit of
Certificateholders and, to the extent provided herein, the Certificate Insurer
and their respective successors and permitted assigns. Except as otherwise
provided in this Agreement, no other Person shall have any right or obligation
hereunder.
Section 12.13 Merger and Integration.
----------------------
Except as specifically stated otherwise herein, this Agreement sets
forth the entire understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, and all contemporaneous
oral understandings, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
94
<PAGE>
IN WITNESS WHEREOF, the Servicer, the Transferor, the Trustee, the
Custodial Agent and the Prior Trust Trustee have caused this Agreement to be
duly executed by their respective officers and their respective seals, duly
attested, to be hereunto affixed, all as of the day and year first above
written.
CHEVY CHASE BANK, F.S.B.,
as Transferor and Servicer
By: /s/ Mark A. Holles
--------------------------------
Name: Mark A. Holles
Title: Vice President
THE CHASE MANHATTAN BANK,
as Trustee
By: /s/ Eileen Rooney
--------------------------------
Name: Eileen Rooney
Title: Trust Officer
THE CHASE MANHATTAN BANK, formerly known
as Chemical Bank, as Trustee of
Capitol Home Equity Loan Trust 1990-1,
Capitol Home Equity Loan Trust 1991-1,
Capitol Home Equity Loan Trust 1992-1,
Capitol Home Equity Loan Trust 1993-1
and Capitol Home Equity Loan Trust
1994-1
By: /s/ Eileen Rooney
--------------------------------
Name: Eileen Rooney
Title: Trust Officer
THE CHASE MANHATTAN BANK,
as Custodial Agent
By: /s/ Eileen Rooney
--------------------------------
Name: Eileen Rooney
Title: Trust Officer
95
<PAGE>
EXHIBIT A
---------
[FORM OF INVESTOR CERTIFICATE]
THIS CERTIFICATE MAY NOT BE ACQUIRED OR HELD BY OR FOR THE ACCOUNT OF A BENEFIT
PLAN (AS DEFINED BELOW).
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
Certificate No. ________
Variable Certificate Rate
Date of Pooling and Servicing Denomination
Agreement: September 1, 1996 $
------------
Cut-Off Date: September 1, 1996 Aggregate Denominations of all
Investor Certificates: $120,460,000
First Distribution Date:
October 20, 1996
CUSIP No. 140915AB5
CAPITOL
REVOLVING HOME EQUITY LOAN ASSET BACKED CERTIFICATES
SERIES 1996-1, INVESTOR CERTIFICATE
evidencing a Percentage Interest in the distributions allocable to the Investor
Certificates and evidencing an undivided interest in a Trust Fund consisting
primarily of a pool of certain revolving credit line home equity mortgage loans
originated, serviced and transferred by
CHEVY CHASE BANK, F.S.B.
A-1
<PAGE>
This Investor Certificate does not evidence a savings account or deposit
or other obligation of, or an interest in, and is not guaranteed by Chevy Chase
Bank, F.S.B. (the "Transferor") or the Trustee referred to below or any of their
affiliates. Neither this Investor Certificate nor the underlying Mortgage Loans
are guaranteed or insured by any governmental agency or instrumentality.
This certifies that ____________ is the registered owner of the ____%
Percentage Interest evidenced by this Investor Certificate in certain monthly
distributions with respect to a Trust Fund consisting primarily of a pool of
certain revolving credit line home equity mortgage loans (the "Mortgage Loans")
transferred by the Transferor and serviced by Chevy Chase Bank, F.S.B. (in
such capacity, the " Servicer, " with the term Servicer including any successor
Servicer under the Pooling and Servicing Agreement referred to below). The Trust
was created pursuant to a Pooling and Servicing Agreement dated as specified
above (the "Pooling and Servicing Agreement") among the Transferor, the
Servicer, The Chase Manhattan Bank, as trustee (the "Trustee") and The Chase
Manhattan Bank, as Custodial Agent (the "Custodial Agent").
To the extent not defined herein, capitalized terms used herein have the
meanings assigned to such terms in the Pooling and Servicing Agreement. This
Investor Certificate is issued under and is subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, as amended from time to time,
to which Pooling and Servicing Agreement, as so amended, the Investor
Certificateholder by virtue of the acceptance hereof, and to which any
beneficial owner, by acquiring a beneficial interest herein, assents and by
which the Investor Certificateholder and any such beneficial owner is bound.
Although this Investor Certificate summarizes certain provisions of the Pooling
and Servicing Agreement, this Investor Certificate does not purport to summarize
the Pooling and Servicing Agreement, and reference is made to the Pooling and
Servicing Agreement for information with respect to the interests, rights,
benefits, obligations and duties evidenced hereby and the rights, duties and
obligations of the Trustee. In the event of any inconsistency or conflict
between the terms of this Investor Certificate and the terms of the Pooling and
Servicing Agreement, the terms of the Pooling and Servicing Agreement shall
control. A copy of the Pooling and Servicing Agreement may be obtained from the
Trustee by writing to The Chase Manhattan Bank, 450 W. 33rd Street, New York,
New York, 10001, Attention: Advanced Structured Products Group, 15th Floor.
Pursuant to the terms of the Pooling and Servicing Agreement, a
distribution shall be made on the 20th day of each month or, if such day is not
a Business Day, on the next succeeding Business Day (the "Distribution Date"),
commencing on the first Distribution Date specified above, to the Person in
whose name this Investor Certificate is registered at the close of business on
the day immediately preceding such Distribution Date (except in certain limited
circumstances, as provided in the Pooling and Servicing Agreement), in an amount
equal to the product of the Percentage Interest evidenced by this Investor
Certificate and the amount to be distributed to Holders of the Investor
Certificates on such Distribution Date.
A-2
<PAGE>
Distributions on this Investor Certificate shall be made by the Trustee
by check or money order mailed to the Person entitled thereto at the address
appearing in the Certificate Register, or, if the conditions specified in the
Pooling and Servicing Agreement are met, upon written request by the Investor
Certificateholder delivered to the Trustee at least fifteen (15) days prior to
the applicable Distribution Date, by wire transfer or by such other means of
payment as such Person and the Trustee shall agree. Notwithstanding the above,
the final distribution on this Investor Certificate shall be made after due
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Investor Certificate at the office or agency
maintained for that purpose in New York, New York.
This Investor Certificate is entitled to the benefits of a Certificate
Insurance Policy issued by the Certificate Insurer. The obligation of the
Certificate Insurer under the Certificate Insurance Policy is unconditional and
irrevocable. The Certificate Insurance Policy is held by the Trustee and is
available for inspection at its corporate trust offices.
This Investor Certificate shall not be entitled to any benefit under the
Pooling and Servicing Agreement or be valid for any purpose unless manually
authenticated by any authorized officer of the Trustee.
This Investor Certificate is one of the Investor Certificates of a duly
authorized issue of Investor Certificates designated as Capitol Revolving Home
Equity Loan Asset Backed Certificates, Series 1996-1, and representing a
beneficial ownership interest, to the extent provided in the Pooling and
Servicing Agreement, in the Trust Balance of each Mortgage Loan, including
payments on or in respect of such Trust Balance received on or after the
applicable Cut-Off Date; such assets as shall from time to time be identified as
deposited into the Certificate Account (excluding, however, amounts on deposit
in the Certificate Account required to be paid to the Transferor or the Servicer
pursuant to the Pooling and Servicing Agreement); the interest of the Investor
Certificateholders in (i) any property which secured a Mortgage Loan and which
has been acquired by or on behalf of the Trustee in Foreclosure Proceedings or
otherwise, (ii) any insurance policies related to the Mortgage Loans and (iii)
the related Mortgage, Loan Agreement and other Mortgage File documents for each
Mortgage Loan; the Pre-Funding Account; the Capitalized Interest Account; and
the proceeds of each of the foregoing. The Holder of this Investor Certificate
also is entitled to the benefit of the Certificate Insurance Policy, as
described above.
The Investor Certificates are limited in right of distribution to
certain payments on and collections in respect of the Mortgage Loans, all as
more specifically set forth in the Pooling and Servicing Agreement. The Investor
Certificateholder, by its acceptance of this Investor Certificate, agrees that
it shall look solely to the funds on deposit in the Certificate Account and
payments made under the Certificate Insurance Policy for payment hereunder and
that the Trustee in its individual capacity is not personally liable to the
Investor Certificateholders for any amount distributable under this Investor
Certificate or the Pooling and Servicing Agreement or, except as expressly
provided in the Pooling and Servicing Agreement, subject to any liability under
the Pooling and Servicing Agreement.
A-3
<PAGE>
The Pooling and Servicing Agreement permits, with certain exceptions
therein provided, the amendment thereof and the modification of the rights and
obligations of the Transferor and the Servicer and the rights of the Investor
Certificateholders under the Pooling and Servicing Agreement at any time by the
Transferor, the Servicer and the Trustee with the consent (i) of the Holders of
Investor Certificates evidencing Percentage Interests aggregating not less than
51% and (ii) the Certificate Insurer. Any such consent by the Holder of this
Investor Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Investor Certificate and of any Investor Certificate
issued upon the transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent is made upon this Investor Certificate. The
Pooling and Servicing Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Holders of any of the Investor
Certificates.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, the transfer of this Investor Certificate
is registrable in the Certificate Register of the Trustee upon surrender of this
Investor Certificate for registration of transfer at the office or agency
maintained for such purpose by the Trustee, accompanied by a written instrument
of transfer in form satisfactory to the Servicer, the Trustee and the
Certificate Registrar duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Investor
Certificates of authorized denominations evidencing the same aggregate
fractional undivided interest in the Trust Fund shall be issued to the
designated Transferee or Transferees.
The Investor Certificates are issuable only as registered Investor
Certificates without coupons in denominations specified in the Pooling and
Servicing Agreement. As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, Investor Certificates are
exchangeable for new Investor Certificates of the same authorized denominations
evidencing the same aggregate Percentage Interest, as requested by the Holder
surrendering the same. No service charge shall be made for any such registration
of transfer or exchange, but the Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
This Certificate may not be acquired or held by or for the account of
any employee benefit plan, trust or account, including an individual retirement
account, that is subject to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as
amended, or an entity whose underlying assets include plan assets of any such
plan, trust or account by reason of its investment in such entity (a "Benefit
Plan"). By accepting and holding this Certificate, the Holder hereof shall be
deemed to have represented and warranted that it is not a Benefit Plan. By
acquiring any interest in this Certificate, the applicable Certificate Owner or
Owners shall be deemed to have represented and warranted that it or they are not
Benefit Plans. The restrictions contained in the foregoing representations and
warranties shall not apply to a Certificate acquired with the assets of the
general account of an insurance company to the extent that the acquisition or
holding thereof, respectively, is permissible under Section 401(c) of ERISA and
final regulations thereunder or
A-4
<PAGE>
other exemptions under ERISA and does not result in the contemplated operations
of the Trust being treated as violations of the prohibited transaction rules.
Prior to due presentment of this Investor Certificate for registration
of transfer, the Trustee, the Servicer, the Transferor, the Certificate Insurer
and the Certificate Registrar and any agent of the Trustee, the Servicer, the
Transferor, the Certificate Insurer or the Certificate Registrar may treat the
Person in whose name this Investor Certificate is registered as the owner hereof
for all purposes, and none of the Trustee, the Servicer, the Transferor, the
Certificate Insurer and the Certificate Registrar or any such agent shall be
affected by any notice to the contrary.
The obligations and responsibilities created by the Pooling and
Servicing Agreement and the Trust created thereby shall terminate upon
distribution to the Investor Certificateholders, or provision therefor, of the
amount required to be so distributed in accordance with the Pooling and
Servicing Agreement upon the later of (A) the earlier of (i) payment in full of
all amounts owing to the Certificate Insurer and (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust and (B) the earliest of (i)
the retransfer, under the conditions specified in Section 10.1(b) of the Pooling
and Servicing Agreement, to the Transferor of the Investor Certificateholders'
interest in each Mortgage Loan and all property acquired in respect of any
Mortgage Loan remaining in the Trust for an amount equal to the sum of (A) the
Investor Certificate Principal Balance, (B) accrued and unpaid Investor
Certificate Interest through the day preceding the final Distribution Date plus
any Basis Risk Payment then due, and (C) any Unpaid Investor Certificate
Interest Shortfall, (ii) the day following the Distribution Date on which the
distribution made to Investor Certificateholders has reduced the Investor
Certificate Principal Balance to zero, (iii) the final payment or other
liquidation of the last Mortgage Loan remaining in the Trust (including without
limitation the disposition of the Mortgage Loans pursuant to Section 11.2 of the
Pooling and Servicing Agreement) or the disposition of all property acquired
upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan, (iv) the
Stated Maturity Date; provided, however, notwithstanding anything in the Pooling
-------- -------
and Servicing Agreement to the contrary the Trust shall terminate on September
30, 2017. The Transferor may effect an early retirement of the Investor
Certificates by paying the price and accepting the Investor Certificates
pursuant to the terms of the Pooling and Servicing Agreement on any Distribution
Date after the Investor Certificate Principal Balance is less than $6,023,000
(5% of the Original Investor Certificate Principal Balance). Upon retirement of
the Investor Certificates in accordance with Section 10.1 of the Pooling and
Servicing Agreement, the Trustee shall execute such documents and instruments of
transfer presented by the Transferor and take such other actions as the
Transferor may reasonably request to effect the retransfer of the Trust Balances
of the Mortgage Loans to the Transferor.
A-5
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Investor Certificate to be
duly executed under its corporate seal.
DATED: THE CHASE MANHATTAN BANK, not in its
individual capacity but solely as
Trustee
[SEAL] By:
Authorized Officer
Authenticated:
By:
--------------------------------------
Authorized Officer of The Chase
Manhattan Bank, not in its individual
capacity but solely as Trustee
A-6
<PAGE>
EXHIBIT B
---------
[FORM OF TRANSFEROR CERTIFICATE]
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR
IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER
SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 6.5 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
CAPITOL REVOLVING HOME EQUITY LOAN ASSET BACKED CERTIFICATES
SERIES 1996-1
TRANSFEROR CERTIFICATE
evidencing a percentage interest in the distributions
allocable to the Transferor Certificates and evidencing an
interest in a Trust Fund consisting primarily of a pool of
certain revolving credit line home equity mortgage loans
originated, serviced and transferred by
CHEVY CHASE BANK, F.S.B.
Certificate No. _____
Percentage Interest: _____
Date of Pooling and Servicing Agreement:
September 1, 1996
Cut-Off Date: September 1, 1996
First Distribution Date: October 20, 1996
This Transferor Certificate does not evidence a savings account or deposit
or other obligation of, or interest in, and is not guaranteed by Chevy Chase
Bank, F.S.B. (the "Transferor") or the Trustee referred to below or any of their
affiliates. Neither this Transferor Certificate nor the underlying Mortgage
Loans are guaranteed or insured by any governmental agency or instrumentality.
This certifies that _____________ is the registered owner of the ______%
Percentage Interest evidenced by this Transferor Certificate in certain
distributions with respect to a Trust Fund consisting primarily of a pool of
certain revolving credit line home equity mortgage loans (the "Mortgage Loans"),
transferred by the Transferor and serviced by Chevy Chase Bank, F.S.B. (in such
capacity, the "Servicer," with the term Servicer including any successor
Servicer under
B-1
<PAGE>
the Pooling and Servicing Agreement referred to below). The Trust was created
pursuant to a Pooling and Servicing Agreement dated as specified above (the
"Pooling and Servicing Agreement") among the Transferor, the Servicer, The Chase
Manhattan Bank, as trustee (the "Trustee") and The Chase Manhattan Bank as
Custodial Agent (the "Custodial Agent").
To the extent not defined herein, capitalized terms used herein have the
meanings assigned to such terms in the Pooling and Servicing Agreement. This
Transferor Certificate is issued under and is subject to the terms, provisions
and conditions of the Pooling and Servicing Agreement, as amended from time to
time, to which Pooling and Servicing Agreement, as so amended, the Transferor
Certificateholder by virtue of the acceptance hereof, and to which any
beneficial owner, by acquiring a beneficial interest herein, assents and by
which the Transferor Certificateholder and any such beneficial owner is bound.
Although this Transferor Certificate summarizes certain provisions of the
Pooling and Servicing Agreement, this Transferor Certificate does not purport to
summarize the Pooling and Servicing Agreement, and reference is made to the
Pooling and Servicing Agreement for information with respect to the interests,
rights, benefits, obligations and duties evidenced hereby and the rights, duties
and obligations of the Trustee. In the event of any inconsistency or conflict
between the terms of this Transfer Certificate and the terms of the Pooling and
Servicing Agreement, the terms of the Pooling and Servicing Agreement shall
control. A copy of the Pooling and Servicing Agreement may be obtained from the
Trustee by writing to The Chase Manhattan Bank, 450 W. 33rd Street, New York,
New York 10001, Attention: Advanced Structured Products Group, 15th Floor.
Distributions on this Transferor Certificate shall be made by the Trustee
by wire transfer or by such other means of payment as such Person and the
Trustee shall agree.
This Transferor Certificate shall not be entitled to any benefit under
this Pooling and Servicing Agreement or be valid for any purpose unless manually
authenticated by any authorized officer of the Trustee.
This Transferor Certificate is one of a duly authorized issue of
Transferor Certificates designated as Capitol Revolving Home Equity Loan Asset
Backed Certificates, Series 1996-1, and representing a beneficial ownership
interest, to the extent provided in the Pooling and Servicing Agreement, in the
Trust Balance of each Mortgage Loan, including payments on or in respect of such
Trust Balance received on or after the applicable Cut-Off Date and the interest
of the Transferor Certificateholders in (i) any property which secured a
Mortgage Loan and which has been acquired by or on behalf of the Trustee in
Foreclosure Proceedings or otherwise, (ii) any insurance policies related to the
Mortgage Loans and (iii) the related Mortgage, Loan Agreement and other Mortgage
File documents for each Mortgage Loan; the Pre-Funding Account; the Capitalized
Interest Account and the proceeds of each of the foregoing.
This Transferor Certificate is limited in right of distribution to certain
payments on and collections in respect of the Mortgage Loans, all as more
specifically set forth in the Pooling and Servicing Agreement. The Transferor
Certificateholder, by its acceptance of this Transferor Certificate, agrees that
it shall look solely to the funds specified in the Pooling and Servicing
Agreement for payment hereunder and that the Trustee in its individual capacity
is not personally
B-2
<PAGE>
liable to the Transferor Certificateholders for any amount distributable under
this Transferor Certificate or the Pooling and Servicing Agreement or, except as
expressly provided in the Pooling and Servicing Agreement, subject to any
liability under the Pooling and Servicing Agreement.
No transfer of this Transferor Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. The Trustee shall require a written Opinion
of Counsel acceptable to and in form and substance satisfactory to the Trustee
and the Transferor that such transfer may be made pursuant to an exemption
describing the applicable exemption and the basis therefor from which Act and
laws is being made pursuant to said Act and laws, which Opinion of Counsel shall
not be an expense of the Trustee, and the Trustee shall require the transferee
to execute an investment letter executed by the proposed transferee in form and
substance satisfactory to the Trustee certifying the facts surrounding such
Transfer, which investment letter shall not be an expense of the Trustee. The
Holder hereof desiring to effect such Transfer shall, and does hereby agree to,
indemnify the Transferor and the Certificate Insurer against any liability that
may result if the transfer is not so exempt or is not made in accordance with
such federal and state laws.
As provided in the Pooling and Servicing Agreement, subject to certain
limitations set forth therein, neither this Transferor Certificate nor any legal
or beneficial interest herein may be, directly or indirectly, purchased,
transferred, sold, pledged, assigned or otherwise disposed of, and any proposed
transferee hereof shall not become the registered Holder hereof, without the
satisfaction of the conditions set forth in Section 6.5 of the Pooling and
Servicing Agreement.
No service charge will be made for any such registration of Transfer or
exchange, but the Trustee 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 Transferor Certificate for registration
of transfer, the Trustee, the Servicer, the Transferor, the Certificate
Registrar and any agent of the foregoing may treat the Person in whose name this
Transferor Certificate is registered as the owner hereof for all purposes, and
neither the Trustee, the Servicer, the Transferor, the Certificate Registrar nor
any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Pooling and Servicing
Agreement and the Trust created thereby shall terminate upon payment to the
Transferor Certificateholders, or provision therefor, in accordance with the
Pooling and Servicing Agreement upon the later of (A) the earlier of (i) payment
in full of all amounts owing to the Certificate Insurer and (ii) the final
payment or other liquidation of the last Mortgage Loan in the Trust and (B) the
earliest of (i) the retransfer, under the conditions specified in Section
10.1(b) of the Pooling and Servicing Agreement, to the Transferor of the
Investor Certificateholders' interest in each Mortgage Loan and all property
acquired in respect of any Mortgage Loan remaining in the Trust for an amount
equal to the sum of (A) the Investor Certificate Principal Balance, (B) accrued
and unpaid Investor Certificate Interest through the day preceding the final
Distribution Date plus any Basis
B-3
<PAGE>
Risk Payment then due, and (C) any Unpaid Investor Certificate Interest
Shortfall, (ii) the day following the Distribution Date on which the
distribution made to Investor Certificateholders has reduced the Investor
Certificate Principal Balance to zero, (iii) the final payment or other
liquidation of the last Mortgage Loan remaining in the Trust (including without
limitation the disposition of the Mortgage Loans pursuant to Section 11.2 of the
Pooling and Servicing Agreement) or the disposition of all property acquired
upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan, (iv) the
Stated Maturity Date; provided, however, notwithstanding anything in the Pooling
-------- -------
and Servicing Agreement to the contrary the Trust shall terminate on September
30, 2017.
IN WITNESS WHEREOF, the Trustee has caused this Transferor Certificate to
be duly executed under its corporate seal.
THE CHASE MANHATTAN BANK, not in its
Dated: individual capacity but solely as Trustee
[SEAL] By:
Authorized Officer
Authenticated:
By:
----------------------------------
Authorized Officer of The Chase
Manhattan Bank, not in its individual
capacity but solely as Trustee
B-4
<PAGE>
EXHIBIT C
---------
FORM OF CERTIFICATE INSURANCE POLICY
C-1
<PAGE>
EXHIBIT D
---------
LOAN AGREEMENT AMENDMENT
D-1
<PAGE>
EXHIBIT E
---------
FORM OF DOCUMENT CUSTODIAN CERTIFICATE AS TO MORTGAGE FILES
CAPITOL REVOLVING HOME EQUITY LOAN TRUST 1996-1
-----------------------------------------------
The undersigned, a duly authorized representative of Norwest Bank
Minnesota, National Association, as Document Custodian (the "Document
Custodian") as agent of The Chase Manhattan Bank, as Custodial Agent pursuant to
the Pooling and Servicing Agreement dated as of September 1, 1996 by and between
Chevy Chase Bank, F.S.B., a federally chartered savings bank, as Transferor and
Servicer, and The Chase Manhattan Bank as Trustee and Custodial Agent
(hereinafter as such agreement may have been, or may from time to time be,
amended, supplemented or otherwise modified, the "Pooling and Servicing
Agreement"), does hereby certify as follows:
A. Capitalized terms used in this Certificate have their respective
meanings set forth in the Pooling and Servicing Agreement. References herein to
certain subsections are references to the respective subsections of the Pooling
and Servicing Agreement.
B. This Certificate is being delivered pursuant to the first
paragraph of subsection 2.2(b).
C. The undersigned is a Responsible Officer.
D. This Certificate is being delivered by the date specified in the
first paragraph of subsection 2.2(b).
E. Pursuant to and in accordance with the limitations set forth in the
third paragraph of subsection 2.2(b), the Document Custodian has reviewed the
Mortgage File with respect to each Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Mortgage Loan paid in full and, to the extent permitted
by the Pooling and Servicing Agreement, any Common Mortgage Loan) and has
determined that, except as indicated on the Schedule hereto, all documents or
instruments required to be delivered to it pursuant to the first paragraph of
subsection 2.1(b) (or if the first sentence of the second paragraph of
subsection 2.1(b) is applicable, pursuant to such first sentence) with respect
to such Mortgage Loan are in its possession.
IN WITNESS WHEREOF, the Document Custodian has caused this Certificate to
be duly executed this day of , 19 .
---- ------------------- --
Norwest Bank Minnesota, National Association,
as Document Custodian
By:
-----------------------------------
Authorized Signatory
E-1
<PAGE>
SCHEDULE
--------
[List here with respect to each applicable Mortgage Loan, the Mortgage
Loan identification number and each document or installment (or portion thereof)
that (i) does not bear manual signatures, (ii) is missing from the related
Mortgage File or (iii) is unrelated to the applicable Mortgage Loan].
E-2
<PAGE>
EXHIBIT F
---------
FORM OF DOCUMENT CUSTODIAN CERTIFICATE AS TO MORTGAGE
ASSIGNMENTS
CAPITOL REVOLVING HOME EQUITY LOAN TRUST 1996-1
The undersigned, a duly authorized representative of Norwest Bank
Minnesota, National Association, as Document Custodian (the "Document
Custodian") as agent of The Chase Manhattan Bank, as Custodial Agent pursuant to
the Pooling and Servicing Agreement dated as of September 1, 1996 by and between
Chevy Chase Bank, F.S.B., a federally chartered savings bank, as Transferor and
Servicer, and The Chase Manhattan Bank, as Trustee and Custodial Agent
(hereinafter as such agreement may have been, or may from time to time be,
amended, supplemented or otherwise modified, the "Pooling and Servicing
Agreement"), does hereby certify as follows:
A. Capitalized terms used in this Certificate have their respective
meanings set forth in the Pooling and Servicing Agreement. Reference herein to
certain subsections are references to the respective subsections of the Pooling
and Servicing Agreement.
B. This Certificate is being delivered pursuant to subsection 2.2(b).
C. The undersigned is a Responsible Officer.
D. This Certificate is being delivered by the date specified in the
second paragraph of subsection 2.2(b).
E. This Certificate is being delivered for the month of 199__.
F. Pursuant to and in accordance with the limitations set forth in the
third paragraph of subsection 2.2(b), the Document Custodian has reviewed the
recorded assignments of Mortgage delivered to it for the period specified above
and has determined that, except as indicated on the Schedule hereto, evidence of
the recording of the Custodial Agent's interest appears on each such assignment.
IN WITNESS WHEREOF, the Document Custodian has caused this Certificate to
be duly executed this day of , 19 .
---- ------------------- --
Norwest Bank Minnesota, National Association,
as Document Custodian
By:
--------------------------------------
Authorized Signatory
F-1
<PAGE>
SCHEDULE
--------
[List here with respect to each applicable Mortgage Loan, any defects
relating to the recording of the assignment of the related Mortgage]
F-2
<PAGE>
EXHIBIT G
---------
PREPARED BY AND
AFTER RECORDING,
PLEASE RETURN TO
- ---------------------
- ---------------------
- ---------------------
- ---------------------
FORM OF ASSIGNMENT OF DEEDS OF TRUST
KNOW ALL MEN BY THESE PRESENTS:
THAT FOR VALUE RECEIVED, THE CHASE MANHATTAN BANK (the "Assignor"), a bank
------------------------
organized and existing under the laws of the State of New York, located at 450
West 33rd Street, 15th Floor, New York, New York 10001, Attn: Advanced
Structured Products Group, as Custodial Agent under that certain Pooling and
Servicing Agreement dated as of September 1, 1996 (the "Agreement"), between the
Assignor, as Trustee and Custodial Agent and Chevy Chase Bank, F.S.B., as
Transferor and Servicer, does hereby assign, transfer and set over unto CHEVY
-----
CHASE BANK, F.S.B. (formerly known as CHEVY CHASE SAVINGS BANK, F.S.B. and as
- ---------- ------------------------
CHEVY CHASE SAVINGS AND LOAN, INC.), a Federal Savings Bank, located at 8401
- ----------------------------------
Connecticut Avenue, Chevy Chase, Maryland 20815 (the "Assignee"), all of the
Assignor's right, title and interest in and to those certain Deeds of Trust
encumbering properties in the County of , State of
---------------
, executed by and recorded all as more particularly described on
- --------------
Exhibit "A" attached hereto and made a part hereof, and encumbering the
- -----------
properties more specifically described in said Deeds of Trust; together with the
-------------
related Loan Agreement and any other documents, instruments or agreements
executed and delivered with respect to the loan secured by each Deed of Trust.
IN WITNESS WHEREOF, THE CHASE MANHATTAN BANK has caused this Assignment to
be signed in its name and on its behalf as of , 19 .
---------------- --- --
THE CHASE MANHATTAN BANK
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
G-1
<PAGE>
STATE OF )
-------------
) ss:
COUNTY OF )
-------------
On , 1996, before me, the undersigned, a Notary Public
--------------- --
in and for said County and State, personally appeared known
--------- --------
to me to be the person who executed the foregoing instrument as the
-----------
of the Assignor and acknowledged to me that the Assignor executed the foregoing
instrument pursuant to its by-laws or a resolution of its board of directors.
WITNESS my hand and official seal.
------------------------------
NOTARY PUBLIC
[SEAL]
My commission expires: ________________
G-2
<PAGE>
EXHIBIT A
[Insert Mortgage Loan information]
A-1
<PAGE>
EXHIBIT H
---------
FORM OF SERVICER CERTIFICATE AS TO
PAYMENT OF TRUST BALANCE
CAPITOL REVOLVING HOME EQUITY LOAN TRUST 1996-1
The undersigned, a duly authorized representative of [INSERT NAME OF
SERVICER UNDER THE POOLING AND SERVICING AGREEMENT] (the "Servicer"), as
Servicer pursuant to the Pooling and Servicing Agreement dated as of September
1, 1996 by and between Chevy Chase Bank, F.S.B., a federally chartered savings
bank, as Transferor and Servicer, and The Chase Manhattan Bank, as Trustee and
Custodial Agent (hereinafter as such agreement may have been, or may from time
to time be, amended, supplemented or otherwise modified, the "Pooling and
Servicing Agreement"), does hereby certify as follows:
A. Capitalized terms used in this Certificate have their respective
meanings set forth in the Pooling and Servicing Agreement. References herein to
certain sections and subsections are references to the respective sections and
subsections of the Pooling and Servicing Agreement.
B. This Certificate is being delivered pursuant to Section 3.7.
C. The Servicer is the Servicer under the Pooling and Servicing
Agreement.
D. The undersigned is a Servicing Officer.
E. Pursuant to Section 3.7, the Servicer hereby certifies to the
Trustee that (i) the Trust Balance of each Mortgage Loan identified on the
Schedule attached hereto has been paid in full [all Net Trust Liquidation
Proceeds with respect to each Mortgage Loan identified on the Schedule attached
hereto have been distributed] in accordance with the Pooling and Servicing
Agreement and (ii) all amounts received in connection with such payment
[distribution] which are required to be deposited into the Certificate Account
pursuant to subsection 3.2(c) have been so deposited.
H-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be duly
executed this ___ day of __________________, 19___.
[INSERT NAME OF SERVICER]
as Servicer
By:_________________________________________
Authorized Signatory
H-2
<PAGE>
SCHEDULE
--------
[List here each Mortgage Loan which has been paid as set forth in the
accompanying Certificate]
<PAGE>
EXHIBIT I
---------
FORM OF TRUST RECEIPT FOR RELEASE
OF MORTGAGE FILES TO SERVICER
CAPITOL REVOLVING HOME EQUITY LOAN TRUST 1996-1
-----------------------------------------------
The undersigned, a duly authorized representative of [INSERT NAME OF
SERVICER UNDER THE POOLING AND SERVICING AGREEMENT] (the "Servicer"), as
Servicer pursuant to the Pooling and Servicing Agreement dated as of September
1, 1996 by and between Chevy Chase Bank, F.S.B., a federally chartered savings
bank, as Transferor and Servicer, and The Chase Manhattan Bank, as Trustee and
Custodial Agent (hereinafter as such agreement may have been, or may from time
to time be, amended, supplemented or otherwise modified, the "Pooling and
Servicing Agreement"), does hereby certify as follows:
A. Capitalized terms used in this Certificate have their respective
meanings set forth in the Pooling and Servicing Agreement. References herein to
certain sections and subsections are references to the respective sections and
subsections of the Pooling and Servicing Agreement.
B. This Certificate is being delivered pursuant to Section 3.7.
C. The Servicer is the Servicer under the Pooling and Servicing
Agreement.
D. The undersigned is a Servicing Officer.
E. Pursuant to Section 3.7, the Servicer hereby requests release to it
of the Mortgage File held by the Custodial Agent with respect to the following
described Mortgage Loan for the reason indicated below.
Mortgage Loan No.:
- ------------------
Reason for Requesting Mortgage File:
- -----------------------------------
____________ 1 Foreclosure Proceedings with respect to the Mortgage Loan
are being initiated.
____________ 2 Other [Insert description of other servicing requirement].
The Servicer represents that release to it of such Mortgage File is
required for the reason herein set forth and acknowledges that the
above-referenced Mortgage File will be held by the Servicer in accordance with
the provisions of the Pooling and Servicing Agreement.
I-1
<PAGE>
IN WITNESS WHEREOF, the Servicer has caused this Certificate to be duly
executed this ___ day of __________________, 19__.
[INSERT NAME OF SERVICER]
as Servicer
By:_________________________________________
Authorized Signatory
I-2
<PAGE>
EXHIBIT J
---------
FORM OF SERVICING CERTIFICATE
CAPITOL REVOLVING HOME EQUITY LOAN TRUST 1996-1
-----------------------------------------------
Under Section 4.1 of the Pooling and Servicing Agreement dated as of
September 1, 1996 by and between Chevy Chase Savings, Bank, F.S.B., a federally
chartered savings bank, as Transferor and Servicer, and The Chase Manhattan
Bank, as Trustee and Custodial Agent (hereinafter as such agreement may have
been, or may from time to time be, amended, supplemented or otherwise modified,
the "Pooling and Servicing Agreement"), [INSERT NAME OF SERVICER UNDER THE
POOLING AND SERVICING AGREEMENT], as the Servicer, is required to prepare
certain information each month regarding current receipts and distributions on
the Certificates and the performance of the Capitol Revolving Home Equity Loan
Trust 1996-1 (the "Trust") during the related Collection Period. The information
which is required to be prepared with respect to the distribution to Holders
(the "Certificateholders") of the Certificates, on _________________, 19__ (the
"Distribution Date") and the performance of the Trust during the month of
_________________, 19__ (the "Collection Period") is set forth under "D" below.
A. Capitalized terms used and not otherwise defined herein have the
meanings assigned them in the Pooling and Servicing Agreement referred to above.
References herein to certain subsections are references to the respective
subsections of the Pooling and Servicing Agreement.
B. The Servicer is the Servicer under the Pooling and Servicing
Agreement.
C. The undersigned is a Servicing Officer.
D. 1 The aggregate amount of collections
received on the Mortgage Loans on or
prior to the Determination Date in respect
of such Collection Period........................$____________
2 the aggregate amount of (a) Trust
Interest and (b) Principal Collections
for such Collection Period.......................$____________
3 the Investor Certificateholder's Floating
Allocation Percentage and the Investor
Fixed Allocation Percentage as of the
last day of such Collection Period ..............$____________
4 the Investor Interest Collections for
such Collection Period...........................$____________
5 the Investor Principal Collections for such
Collection Period ...............................$____________
J-1
<PAGE>
6 the aggregate amount of (a) Trust Interest ......$____________
and (b) Principal Collections paid to the Transferor
Certificateholder for such Collection Period.....$____________
7 Investor Certificate Interest and the Investor
Certificate Rate for the related Accrual Period..$____________
8 the amount, if any, of such Investor Certificate
Interest that is not payable on account of
insufficient Investor Interest Collections and
amounts under the Certificate Insurance Policy ..$____________
9 the portion of the Unpaid Investor Certificate
Interest Shortfall to be distributed on such
Distribution Date................................$____________
10 Interest on 9 above at the Certificate Rate
to be distributed on the Distribution Date.......$____________
11 the Unpaid Investor Certificate Interest
Shortfall, if any, to remain after the
distribution on such Distribution Date...........$____________
12 the Accelerated Principal Distribution Amount ...$____________
13 the portion of 12 (above) that will be
distributed pursuant to Section 5.1(a)(viii).....$____________
14 the Scheduled Principal Collections
Distribution Amount, separately stating the
components thereof...............................$____________
15 the sum of (x) the aggregate Reassignment
Deposit Amount for any Mortgage Loans which
are required to be removed on the Business
Day immediately preceding such Distribution
Date pursuant to Section 2.2(c), 2.4(b) or
3.1 and (y) any Substitution Adjustment
Amounts required to be deposited into
the Certificate Account on the Business Day
immediately preceding such Distribution
Date pursuant to Section 2.2(c), 2.4(b) or 3.1...$____________
16 the aggregate amount, if any, of Investor
Loss Reduction Amounts for previous
Distribution Dates that have not been
previously reimbursed to Investor
Certificateholders pursuant
to Section 5.1(a)(vi)............................$____________
J-2
<PAGE>
17 the aggregate Trust Balance of the Mortgage
Loans, as of the end of the preceding
Collection Period and the end of the second
preceding Collection Period......................$____________
18 a. the Pool Balance as of the end of the
preceding Collection Period..................$____________
b. the Pool Balance as of the end of the second
preceding Collection Period ................$___________
19 the Invested Amount as of the end of the
Collection Period................................$____________
20 a. the Investor Certificate Principal Balance
prior to giving effect to the distribution
on such Distribution Date........................$____________
b. the Investor Certificate Principal Balance
after giving effect to the distribution on such
Distribution Date................................$____________
21 the Transferor Principal Balance.................$____________
22 the aggregate amount of Additional Balances
created during the Collection Period ............$____________
23 the aggregate of the Trust Balances as of the
end of the related Collection Period of all
Mortgage Loans which became Liquidated Mortgage
Loans for such Distribution Date ................$____________
24 whether a Rapid Amortization Event has occurred
since the prior Determination Date, specifying
each such Rapid Amortization Event if one
has occurred......................................____________
25 whether an Event of Default has occurred
since the prior Determination Date, specifying
each such Event of Default if one has occurred....____________
26 the amount to be distributed to the Certificate
Insurer pursuant to Section 5.1(a)(x)............$____________
27 the Certificate Insurance Draw Amount, if any,
for such Distribution Date ......................$____________
28 the amount to be distributed to the Transferor
Certificateholder pursuant to
Section 5.1(a)(xi)...............................$____________
29 the Pre-Funded Amount as of such Distribution
Date.............................................$____________
J-3
<PAGE>
30 the amount of Pre-Funding Earnings, if any, to
be deposited in the Certificate Account for
such Distribution Date...........................$____________
31 the aggregate of the Trust Balances of the
Subsequent Mortgage Loans purchased during such
Collection Period................................$____________
32 the amount on deposit in the Capitalized
Interest Account as of such Distribution Date....$____________
33 the Capitalized Interest Requirement to be
deposited in the Certificate Account for such
Distribution Date................................$____________
34 the amount of any Basis Risk Payment then due....$____________
E. [To be completed if the Transferor is the Servicer]. The Servicer
hereby certifies as follows [check applicable item]:
1. To the best of Servicer's knowledge, following consultation
with counsel, no filing of a financing statement under the Uniform
Commercial Code was required to be made since _____________, 19___
[the date of the most recent previous Servicing Certificate] to
continue (i) the perfection of the Custodial Agent's interest in the
Trust Fund as required pursuant to the last sentence of the fourth
paragraph of subsection 2.1(a).
2. The Servicer has caused the financing statement(s) attached
hereto to be filed under the Uniform Commercial Code since
_____________, 19___ [the date of the most recent previous Servicing
Certificate] for-the following reason(s): [insert description].
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be duly
executed this _____ day of ________________, 19___.
[INSERT NAME OF SERVICER]
as Servicer
By:_________________________________________
Authorized Signatory
J-4
<PAGE>
EXHIBIT K
---------
FORM OF MONTHLY INVESTOR CERTIFICATEHOLDERS' STATEMENT
CAPITOL REVOLVING HOME EQUITY LOAN TRUST 1996-1
-----------------------------------------------
Under subsection 5.3 of the Pooling and Servicing Agreement dated as of
September 1, 1996 by and between Chevy Chase Savings, Bank, F.S.B., a federally
chartered savings bank, as Transferor and Servicer, and The Chase Manhattan
Bank, as Trustee and Custodial Agent (hereinafter as such agreement may have
been, or may from time to time be, amended, supplemented or otherwise modified,
the "Pooling and Servicing Agreement"), [INSERT NAME OF SERVICER UNDER THE
POOLING AND SERVICING AGREEMENT], as the Servicer, is required to prepare
certain information each month regarding current distributions on the
Certificates and the performance of the Capitol Revolving Home Equity Loan Trust
1996-1 (the "Trust") during the related Collection Period. The information that
is required to be prepared with respect to the distribution to Holders (the
"Certificateholders") of the Certificates on ___________, 19__ (the
"Distribution Date") and the performance of the Trust during the month of
___________, 19__ (the "Collection Period") is set forth below. Certain of the
information is presented on the basis of an original principal amount of $1,000
per Certificate, as the case may be. Capitalized terms used and not otherwise
defined herein have the meanings assigned them in the Pooling and Servicing
Agreement.
Information Regarding the Current Monthly Distribution to
Certificateholders
A. (Per $1,000 Original Principal Amount of a Certificate).
1 the Investor Certificateholder's Floating
Allocation Percentage for the last day
of the preceding Collection Period ...._________%
2 the Investor Certificate distribution amount....$_____________
3 the amount of Investor Certificate Interest
included in such distribution, the related
Investor Certificate Rate and the portion
thereof attributable to collections in
respect of the Mortgage Loans...................$_____________
4 the amount, if any, of any Unpaid Investor
Certificate Interest Shortfall included in
such distribution (and the amount of
interest thereon)...............................$_____________
5 the amount, if any, of the remaining Unpaid
Investor Certificate Interest Shortfall after
giving effect to such distribution..............$_____________
K-1
<PAGE>
6 the amount, if any, of principal included in
such distribution, separately stating the
components thereof (including the portion
thereof attributable to collections in
respect of the Mortgage Loans) ..................$____________
7 the amount, if any, of the reimbursement
of previous Investor Loss Reduction
Amounts included in such distribution ...........$____________
8 the amount, if any, of the aggregate
unreimbursed Investor Loss Reduction
Amounts after giving effect to such
distribution.....................................$____________
9 the Servicing Fee for such Distribution Date.....$____________
10 after giving effect to such distribution
a. the Invested Amount .........................$____________
b. the Investor Certificate Principal Balance...$____________
11 after giving effect to such distribution
a. the Required Overcollateralization Amount....$____________
b. the Basic Overcollateralization Amount.......$____________
c. the Overcollateralization Amount ............$____________
12 a. the Pool Balance as of the end of the
preceding Collection Period
b. the number and aggregate of the Trust Balances of the
Mortgage Loans as to which the minimum
monthly payment is delinquent for 30-59
days, 60-89 days and 90 or more days,
respectively, at the close of business on
the last day of the related Collection Period
Number/1/ Aggregate Balance
30-59 days ______________ $_______________
60-89 days ______________ $_______________
90 or more days ______________ $_______________
K-2
<PAGE>
/1/ [___ Mortgage Loans should be disregarded due to double counting as a
result of the existence of 91-1 Mortgage Loans within the Mortgage Loan Pool.]
Suggested footnote to be added in the event of the addition of 91-1
Mortgage Loans.
13 the Accelerated Principal Distribution
Amount, if any ........................................$_________
14 the Certificate Insurance Draw Amount, if any...........$_________
15 the aggregate Liquidation Loss Amount for all
Mortgage Loans that became Liquidated Mortgage
Loans in the preceding Collection Period................$_________
16 the Trust Balance of any Mortgage Loan,
the related Mortgaged Property of which
is acquired by the Trust through foreclosure............$_________
17 the Pre-Funded Amount...................................$_________
18 the aggregate Cut-Off Date Trust Balances of the Subsequent
Mortgage Loans purchased during the preceding Collection
Period..................................................$_________
19 the amount on deposit in the Capitalized Interest
Account.................................................$_________
20 the amount of any Basis Risk Payment included in such
distribution............................................$_________
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be duly
executed this _________ day of _______________, 19___.
[INSERT NAME OF SERVICER]
as Servicer
By:____________________________________
Authorized Signatory
K-3
<PAGE>
EXHIBIT L
---------
FORM OF DEPOSITORY AGREEMENT
L-1
<PAGE>
EXHIBIT 99.1
AMBAC AMBAC Indemnity Corporation
- -----
c/o CT Corporation Systems
44 East Mifflin Street
Madison, Wisconsin 53703
Administrative Office:
One State Street Plaza
New York, New York 10004
Telephone: (212) 668-0340
Certificate Guaranty Insurance Policy
Insured Obligations: $120,460,000, Capital Policy Number: AB0078BE
Revolving Home Equity Loan Trust
1996-1, Capital Revolving Home Equity Loan
Asset Backed Certificates, Series 1996-1 Premium:
calculated as set forth
in the Certificate Guaranty
Insurance Endorsement
attached hereto
AMBAC Indemnity Corporation (AMBAC) A Wisconsin Stock Insurance Company in
consideration of the payment of the premium and subject to the terms of this
Policy, hereby agrees unconditionally and irrevocably to pay to the Trustee for
the benefit of the Holders of the Insured Obligations, that portion of the
Insured Amounts which shall become Due for Payment but shall be unpaid by reason
of Nonpayment.
AMBAC will make such payments to the Trustee from its own funds on the later of
(a) one (1) Business Day following notification to AMBAC of Nonpayment or (b)
the Business Day on which the Insured Amounts are Due for Payment. Such
payments of principal or interest shall be made only upon presentation of an
instrument of assignment in form and substance satisfactory to AMBAC,
transferring to AMBAC all rights under such Insured Obligations to receive the
principal of and interest on the Insured Obligation. AMBAC shall be subrogated
to all the Holders' rights to payment on the Insured Obligations to the extent
of the insurance disbursements so made. Once payments of the Insured Amounts
have been made to the Trustee, AMBAC shall have no further obligation hereunder
in respect of such Insured Amounts.
In the event the Trustee for the Insured Obligations has notice that any payment
of principal or interest on an Insured Obligation which has become Due for
Payment and which is made to a Holder by or on behalf of the Trustee has been
deemed a preferential transfer and theretofore recovered from its Holder
pursuant to the United States Bankruptcy Code in accordance with a final,
nonappealable order of a court of competent jurisdiction, such Holder will be
entitled to payment from AMBAC to the extent of such recovery if sufficient
funds are not otherwise available.
This Policy is noncancelable by AMBAC for any reason, including failure to
receive payment of any premium due hereunder. The premium on this Policy is not
refundable for any reason. This Policy does not insure against loss of any
prepayment or other acceleration payment which at any time may become due in
respect of any Insured Obligation, other than at the sole option of AMBAC, nor
against any risk other than Nonpayment, including failure of the Trustee to make
any payment due Holders of Insured Amounts.
To the fullest extent permitted by applicable law, AMBAC hereby waives and
agrees not to assert any and all rights and defenses, to the extent such rights
and defenses may be available to AMBAC, to avoid payment of its obligations
under this Policy in accordance with the express provisions hereof.
Any capitalized terms not defined herein shall have the meaning given such terms
in the endorsement attached hereto or in the Agreement.
In witness whereof, AMBAC has caused this Policy to be affixed with its
corporate seal and to be signed by its duly authorized officers in facsimile to
become effective as their original signatures and binding upon AMBAC by virtue
of the countersignature of its duly authorized representative.
/s/ P. Lassiter /s/ Stephen D. Cooke
President Secretary
[SEAL]
/s/ Jerry H. Pisecki
Effective Date: September 24, 1996 Authorized Representative
<PAGE>
CERTIFICATE GUARANTY INSURANCE ENDORSEMENT
Attached to and forming Effective Date of Endorsement:
part of Policy #AB0078BE September 24, 1996
issued to:
The Chase Manhattan Bank,
as Trustee for the Holders of
Capitol Revolving Home Equity Loan Asset Backed
Certificates, Series 1996-1
For all purposes of this Policy, the following terms shall have the
following meanings:
"Agreement" shall mean the Pooling and Servicing Agreement dated as of
September 1, 1996 between Chevy Chase Bank, F.S.B., as Transferor and Servicer,
and The Chase Manhattan Bank, as Trustee, as such Agreement may be amended,
modified or supplemented from time to time as set forth in the Agreement.
"Certificate Account" shall mean the account created and maintained with
the Trustee for the benefit of the Certificateholders and the Insurer pursuant
to Section 3.2 of the Agreement.
"Certificate Insurance Draw Amount" shall mean, with respect to any
Distribution Date, the sum of (a) the amount, if any, by which (i) the aggregate
of the full amounts to be distributed to the Holders of the Investor
Certificates pursuant to Sections 5.1(a)(ii) and 5.1(a)(iii) of the Agreement
exceeds (ii) the amount of Investor Interest Collections on deposit in the
Certificate Account on the Business Day preceding such Distribution Date that is
available to be applied therefor and (b) the amount, if any, required to reduce
the Investor Certificate Principal Balance (after giving effect to all other
amounts distributable and allocable to principal on the Investor Certificates on
such Distribution Date) to the Invested Amount (after giving effect to the
distributions of Investor Interest Collections and the Basis Risk Payment, if
any, and Investor Principal Collections that are allocable to principal on the
Investor Certificates on such Distribution Date) for such Distribution Date.
Notwithstanding the foregoing, on the earlier of the Stated Maturity Date or the
Dissolution Distribution Date, the Certificate Insurance Draw Amount shall equal
an amount equal to the sum of (i) any amount calculated pursuant to the
preceding sentence and (ii) an amount equal to the Investor Certificate
Principal Balance after
<PAGE>
-2-
giving effect to all other amounts distributed to Investor Certificateholders in
reduction of the Investor Certificate Principal Balance.
"Certificate Insurance Policy" or "Policy" shall mean this Certificate
Guaranty Insurance Policy together with each and every endorsement hereto.
"Distribution Date" shall mean the 20th day of any month (or if such 20th
day is not a Business Day, the first Business Day immediately following)
beginning with the First Distribution Date.
"Due for Payment" shall mean the Business Day immediately preceding the
Distribution Date on which Insured Amounts are due.
"First Distribution Date" shall mean October 20, 1996.
"Holder" shall mean any person who is the registered owner or beneficial
owner of any Investor Certificate.
"Insurance Agreement" shall mean the Insurance and Indemnity Agreement,
dated as of September 24, 1996, among Chevy Chase Bank, F.S.B., as Transferor
and Servicer, The Chase Manhattan Bank, as Trustee, and AMBAC Indemnity
Corporation, as Insurer, as such Agreement may be amended, modified or
supplemented from time to time.
"Insured Amounts" shall mean, with respect to any Distribution Date, the
Certificate Insurance Draw Amount for such Distribution Date.
"Insured Payments" shall mean, with respect to any Distribution Date, the
aggregate amount actually paid by the Insurer to the Trustee in respect of
Insured Amounts for such Distribution Date.
"Insurer" shall mean AMBAC Indemnity Corporation, or any successor thereto,
as issuer of the Certificate Insurance Policy.
"Investor Certificates" shall mean any one of the Certificates designated
as an Investor Certificate, substantially in the form set forth in Exhibit A to
the Agreement.
"Late Payment Rate" shall mean for any Distribution Date, the greater of
(i) the rate of interest, as it is publicly announced by Citibank, N.A. at its
principal office in New York, New York as its prime rate (any change in such
prime rate of interest to be effective on the date such change is announced by
Citibank, N.A.) plus 2% and (ii) the then applicable highest rate of interest on
----
the Investor Certificates. The Late Payment Rate shall be computed on the basis
of a year of 360 days and the actual number of days elapsed. In no event shall
the Late Payment Rate exceed the maximum rate permissible under any applicable
law limiting interest rates.
<PAGE>
-3-
"Nonpayment" shall mean, with respect to any Distribution Date, a
Certificate Insurance Draw Amount, owing in respect of such Distribution Date.
"Premium Percentage" shall have the meaning set forth in the Insurance
Agreement.
"Reimbursement Amount" shall mean, as to any Distribution Date, the sum of
(x) (i) all Insured Payments paid by the Insurer, but for which the Insurer has
not been reimbursed prior to such Distribution Date pursuant to Section 5.1(a)
of the Agreement, plus (ii) interest accrued thereon, calculated at the Late
----
Payment Rate from the date the Trustee received the related Insured Payments,
and (y) without duplication (i) any amounts then due and owing to the Insurer
under the Insurance Agreement plus (ii) interest on such amounts at the Late
----
Payment Rate.
"Trustee" shall mean The Chase Manhattan Bank or its successor-in-interest,
in its capacity as trustee under the Agreement, or if any successor trustee or
any co-trustee shall be appointed as provided therein, then "Trustee" shall also
mean such successor trustee or such co-trustee, as the case may be, subject to
the provisions thereof.
Capitalized used herein and not otherwise defined shall have the meaning
assigned to them in the Agreement.
The Insurer hereby agrees that it shall be subrogated to the rights of
Holders by virtue of any previous payment under this Policy provided that no
recovery of such payment will occur unless the full amount of the Holders'
allocable distributions for such Distribution Date can be made. In so doing,
the Insurer does not waive its rights to seek full payment of all Reimbursement
Amounts owed to it under the Agreement.
The terms and provisions of the Agreement constitute the instrument of
assignment referred to in the second paragraph of the face of this Policy.
A premium will be payable on this Policy on each Distribution Date as
provided in Section 5.1(a) of the Agreement, beginning with the First
Distribution Date, in an amount equal to the product of (i) the Premium
Percentage and (ii) the Investor Certificate Principal Balance on the prior
Distribution Date (after giving effect to any distributions to be made on such
Distribution Date); provided that on the First Distribution Date, the premium
will be equal to the product of the (i) Premium Percentage and (ii) the Original
Investor Certificate Principal Balance.
The insurance provided by the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Policy to which this Endorsement is attached and of which it forms a
part is hereby amended to provide that there shall be no acceleration payment
due under the Policy unless such acceleration is at the sole option of the
Insurer. The Policy is further hereby amended, to the extent necessary, to
clarify that the reference to "loss of any prepayment or any other acceleration
payment" in the fourth paragraph of the face of the Policy does not refer to
that
<PAGE>
-4-
portion of any shortfall, if any, in interest on any mortgage loan in any month
in which such mortgage loan is paid prior to its stated maturity.
Nothing herein contained shall be held to vary, alter, waive or extend any
of the terms, conditions, provisions, agreements or limitations of the above
mentioned Policy other than as above stated.
This Policy is issued under and pursuant to, and shall be construed under,
the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the Insurer has caused this Endorsement to the Policy
to be signed by its duly authorized officers.
/s/ Jerry H. Pisecki /s/ Kevin J. Doyle
Vice President Secretary
<PAGE>
A-1
EXHIBIT A
TO THE CERTIFICATE GUARANTY INSURANCE POLICY
--------------------------------------------
Policy No. AB0078BE
NOTICE OF NONPAYMENT AND DEMAND
FOR PAYMENT OF INSURED AMOUNTS
Date: [ ]
AMBAC INDEMNITY CORPORATION
One State Street Plaza
New York, New York 10004
Attention: General Counsel
Reference is made to Certificate Guaranty Insurance Policy No. AB0078BE
(the "Policy") issued by AMBAC Indemnity Corporation ("AMBAC"). Terms
capitalized herein and not otherwise defined shall have the meanings specified
in the Policy and the Agreement, as the case may be, unless the context
otherwise requires.
The Trustee hereby certifies as follows:
1. The Trustee is the Trustee under the Agreement for the Holders.
2. The relevant Distribution Date is [date].
3. Payment on the Investor Certificates in respect of the Distribution
Date is due to be received on ____________________________ under the
Agreement, in an amount equal to $_____________________.
4. There is a Certificate Insurance Draw Amount of $__________________ in
respect of the Investor Certificates, which amount is an Insured
Amount pursuant to the terms of the Agreement.
5. The sum of $__________________ is the Insured Amount that is Due For
Payment.
6. The Trustee has not heretofore made a demand for the Insured Amount in
respect of the Distribution Date.
7. The Trustee hereby requests the payment of the Insured Amount that is
Due for Payment be made by AMBAC under the Policy and directs that
payment under the Policy be made to the following account by bank wire
transfer of federal or other immediately available funds in accordance
with the terms of the Policy to:
<PAGE>
A-2
Trustee's account number.
--------------------------
8. The Trustee hereby agrees that, following receipt of the Insured
Amount from AMBAC, it shall (a) hold such amounts in trust and apply
the same directly to the distribution of payment on the Certificates
when due; (b) not apply such funds for any other purpose; (c) deposit
such funds to the Certificate Account and not commingle such funds
with other funds held by the Trustee and (d) maintain an accurate
record of such payments with respect to each Certificate and the
corresponding claim on the Policy and proceeds thereof.
By: Trustee
--------------------------------
Title:
-----------------------------
(Officer)
