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EXHIBIT 4.2
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TRUST AGREEMENT
among
FIRSTPLUS INVESTMENT CORPORATION,
as Depositor,
FIRSTPLUS RESIDUAL HOLDINGS, INC.,
as the Company,
WILMINGTON TRUST COMPANY,
as Owner Trustee
and
FIRST BANK NATIONAL ASSOCIATION,
as Co-Owner Trustee
Dated as of November 1, 1996
FIRSTPLUS HOME LOAN OWNER TRUST 1996-4
Asset Backed Securities, Series 1996-4
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms .................................... 1
SECTION 1.2 Other Definitional Provisions ........................ 6
ARTICLE II
ORGANIZATION
SECTION 2.1 Name ................................................. 7
SECTION 2.2 Office ............................................... 7
SECTION 2.3 Purposes and Powers .................................. 7
SECTION 2.4 Appointment of Owner Trustee ......................... 8
SECTION 2.5 Initial Capital Contribution of Owner Trust Estate ... 8
SECTION 2.6 Declaration of Trust ................................. 8
SECTION 2.7 Liability of the Owners .............................. 9
SECTION 2.8 Title to Trust Property .............................. 9
SECTION 2.9 Situs of Trust ....................................... 10
SECTION 2.10 Representations and Warranties of the Depositor and
the Company; Covenant of the Company ................. 10
SECTION 2.11 Maintenance of the Demand Note ....................... 12
SECTION 2.12 Federal Income Tax Allocations ....................... 12
ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1 Initial Ownership .................................... 13
SECTION 3.2 The Trust Certificates ............................... 13
SECTION 3.3 Execution, Authentication and Delivery of Trust
Certificates ......................................... 14
SECTION 3.4 Registration of Transfer and Exchange of Trust
Certificates ......................................... 14
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Trust
Certificates ......................................... 15
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SECTION 3.6 Persons Deemed Owners ..................................... 15
SECTION 3.7 Access to List of Owners' Names and Addresses ............. 15
SECTION 3.8 Maintenance of Office or Agency ........................... 16
SECTION 3.9 Appointment of Paying Agent ............................... 16
SECTION 3.10 Ownership by Company of the FRH Certificates .............. 17
SECTION 3.11 Book-Entry Certificates ................................... 17
SECTION 3.12 Notices to Clearing Agency ................................ 18
SECTION 3.13 Definitive Certificates ................................... 18
SECTION 3.14 Restrictions on Transfer of Residual Interest Instruments.. 18
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Owners with Respect to Certain Matters .... 21
SECTION 4.2 Action by Owners with Respect to Certain Matters .......... 23
SECTION 4.3 Action by Owners with Respect to Bankruptcy ............... 23
SECTION 4.4 Restrictions on Owners' Power ............................. 23
SECTION 4.5 Majority Control .......................................... 24
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Trust Account ............................ 24
SECTION 5.2 Application Of Trust Funds ................................ 25
SECTION 5.3 Method of Payment ......................................... 25
SECTION 5.4 Segregation of Moneys; No Interest ........................ 26
SECTION 5.5 Accounting and Reports to the Certificateholder, Owners,
the Internal Revenue Service and Others ................... 26
SECTION 5.6 Signature on Returns; Tax Matters Partner ................. 26
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 General Authority ......................................... 26
SECTION 6.2 General Duties ............................................ 27
SECTION 6.3 Action upon Instruction ................................... 27
SECTION 6.4 No Duties Except as Specified in this Agreement, the
Basic Documents or in Instructions ........................ 28
SECTION 6.5 No Action Except Under Specified Documents or Instructions. 29
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SECTION 6.6 Restrictions .............................................. 29
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1 Acceptance of Trusts and Duties ........................... 29
SECTION 7.2 Furnishing of Documents ................................... 30
SECTION 7.3 Representations and Warranties ............................ 30
SECTION 7.4 Reliance; Advice of Counsel ............................... 31
SECTION 7.5 Not Acting in Individual Capacity ........................ 32
SECTION 7.6 Owner Trustee Not Liable for Trust Certificates or
Home Loans ................................................ 32
SECTION 7.7 Owner Trustee May Own Trust Certificates and Notes ........ 33
SECTION 7.8 Licenses .................................................. 33
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
SECTION 8.1 Owner Trustee's Fees and Expenses ......................... 33
SECTION 8.2 Indemnification ........................................... 33
SECTION 8.3 Payments to the Owner Trustee ............................. 34
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.2 Dissolution Upon Bankruptcy of the Company ................ 35
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 Eligibility Requirements for Owner Trustee ................ 36
SECTION 10.2 Resignation or Removal of Owner Trustee ................... 37
SECTION 10.3 Successor Owner Trustee ................................... 38
SECTION 10.4 Merger or Consolidation of Owner Trustee .................. 38
SECTION 10.5 Appointment of Co-Trustee or Separate Trustee ............. 38
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ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Supplements and Amendments ................................ 40
SECTION 11.2 No Legal Title to Owner Trust Estate in Owners ............ 41
SECTION 11.3 Limitations on Rights of Others ........................... 41
SECTION 11.4 Notices ................................................... 42
SECTION 11.5 Severability .............................................. 42
SECTION 11.6 Separate Counterparts ..................................... 42
SECTION 11.7 Successors and Assigns .................................... 42
SECTION 11.8 Covenants of the Company .................................. 43
SECTION 11.9 No Petition ............................................... 43
SECTION 11.10 No Recourse ............................................... 43
SECTION 11.11 Headings .................................................. 43
SECTION 11.12 GOVERNING LAW ............................................. 43
SECTION 11.13 Certificate and Residual Interest Transfer Restrictions ... 44
SECTION 11.14 Grant of Certificateholder and Residual Interest Holder
Rights to Securities Insurer .............................. 44
SECTION 11.15 Third-Party Beneficiary ................................... 45
SECTION 11.16 Suspension and Termination of Securities Insurer's Rights.. 45
EXHIBIT A Form of Certificate
EXHIBIT A-2 Form of Certificate issued to the Company
EXHIBIT B Form of Residual Interest
EXHIBIT B-2 Form of Residual Interest issued to the Company
EXHIBIT C Form of Certificate of Trust
EXHIBIT D Form of Demand Note
EXHIBIT E Form of Certificate Depository Agreement
EXHIBIT F1 Form of Investment Letter
EXHIBIT F2 Form of Investment Letter
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TRUST AGREEMENT, dated as of November 1, 1996, among FIRSTPLUS INVESTMENT
CORPORATION, a Nevada corporation, as Depositor (the "Depositor"), FIRSTPLUS
RESIDUAL HOLDINGS, INC., a Nevada corporation (the "Company"), WILMINGTON TRUST
COMPANY, a Delaware banking corporation, as Owner Trustee (the "Owner Trustee")
and First Bank National Association, as Co-Owner Trustee (the "Co-Owner
Trustee").
ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms. For all purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Agreement" shall mean this Trust Agreement, as the same may be amended and
supplemented from time to time.
"Administration Agreement" shall mean the Administration Agreement, dated
as of November 1, 1996 among the Issuer, FFI, and First Bank National
Association, as Administrator.
"Administrator" shall mean First Bank National Association, or any
successor in interest thereto, in its capacity as Administrator under the
Administration Agreement.
"Basic Documents" shall mean this Agreement, the Sale and Servicing
Agreement, the Indenture, the Administration Agreement, the Insurance Agreement,
the Custodial Agreement, the Note Depository Agreement, the Certificate
Depository Agreement and the other documents and certificates delivered in
connection therewith.
"Benefit Plan" shall have the meaning assigned to such term in Section
11.13.
"Book-Entry-Certificate" shall mean a beneficial interest in the
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 3.11.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of I the
Delaware Code, 12 Del. Code Section 3801 et seq., as the same may be amended
from time to time.
"Certificate" shall mean a certificate (other than a Residual Interest
Instrument) evidencing the beneficial interest of an Owner in the Trust,
substantially in the form attached hereto as Exhibit A.
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"Certificate Depository Agreement" shall mean the agreement among the Trust
and the DTC, dated as of the Closing Date, substantially in the form attached
hereto as Exhibit E, relating to the Certificates, as the same may be amended
and supplemented from time to time.
"Certificate Distribution Account" shall have the meaning assigned to such
term in Section 5.1.
"Certificate of Trust" shall mean the Certificate of Trust in the form of
Exhibit C to be filed for the Trust pursuant to Section 3810(a) of the Business
Trust Statute.
"Certificate Owner" shall mean, with respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Book-Entry Certificate, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).
"Certificate Register" and "Certificate Registrar" shall mean the register
mentioned and the registrar appointed pursuant to Section 3.4.
"Certificateholder" or "Holder" shall mean a Person in whose name a
Certificate is registered.
"Clearing Agency" shall mean an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee located at Xxxxxx Square
North, 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000-0000; or at such other
address in the State of Delaware as the Owner Trustee may designate by notice to
the Owners and the Company, or the principal corporate trust office of any
successor Owner Trustee (the address (which shall be in the State of Delaware)
of which the successor owner trustee will notify the Owners and the Company).
"Demand Note" means the Demand Note dated November 22, 1996, in the amount
of $4,800,000.00 from RAC to the Company in substantially the form attached
hereto as Exhibit D.
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"Definitive Certificates" means a certificated form of security that
represents a Certificate pursuant to Section 3.13 or a Residual Interest
Instrument.
"DTC" shall mean the Depository Trust Company, as the initial Clearing
Agency.
"ERISA" shall have the meaning assigned thereto in Section 11.13.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Expenses" shall have the meaning assigned to such term in Section 8.2.
"FFI" shall mean FIRSTPLUS FINANCIAL, INC., a Texas corporation.
"FRH Certificates" shall mean (i) the Definitive Certificate in
substantially the form attached hereto as Exhibit A-2 representing 1% Percentage
Interest of the Initial Certificate Principal Balance of the Certificates that
the Company is receiving pursuant to Section 3.10 and (ii) the Definitive
Certificate in substantially the form attached hereto as Exhibit B-2
representing a 1% Percentage Interest in the Residual Interest that the Company
is receiving pursuant to Section 3.10.
"Indenture" shall mean the Indenture, dated as of November 1, 1996, by and
between the Issuer and the Indenture Trustee.
"Indenture Trustee" means First Bank National Association, as Indenture
Trustee under the Indenture.
"Initial Certificate Principal Balance" shall mean $23,710,000.
"Insolvency Event" shall have occurred with respect to the Company if:
(i) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or
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, shall have been entered against the Company and
such decree or order shall have remained in force, undischarged or unstayed
for a period of 60 days; or
(ii) the Company shall consent 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 Company or of or relating to all or substantially all of the
Company's property;
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(iii) the board of the directors of the Company shall voluntarily
dissolve the Company; or
(iv) the Company shall admit in writing its inability to pay its
debts 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.
PROVIDED HOWEVER, that the substantive consolidation of the Company with an
entity in respect of which the events described in (i) - (iv) above have
occurred shall not constitute an Insolvency Event with respect to the Company.
"Insurance Agreement" shall mean the Insurance Agreement, dated as of
November 22, 1996, among the Transferor, the Seller, the Issuer, RAC Financial
Group, Inc., the Company, the Indenture Trustee and the Securities Insurer.
"Issuer" shall mean FIRSTPLUS HOME LOAN OWNER TRUST 1996-4, the Delaware
business trust created pursuant to this Agreement.
"Non-permitted Foreign Holder" shall have the meaning set forth in Section
3.14.
"Non-U.S. Person" shall mean an individual, corporation, partnership or
other person other than a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or an estate or
trust that is subject to U.S. federal income tax regardless of the source of its
income.
"Owner" shall mean each Holder of a Certificate and each holder of a
Residual Interest Instrument, as applicable.
"Owner Trust Estate" shall mean the Collateral (as defined in the
Indenture), including the contribution of $1 referred to in Section 2.5 hereof.
"Owner Trustee" shall mean Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor owner trustee hereunder.
"Paying Agent" shall mean the Co-Owner Trustee or any successor in interest
thereto or any other paying agent or co-paying agent appointed pursuant to
Section 3.9 and authorized by the Issuer to make payments to and distributions
from the Certificate Distribution Account, including payment of principal of or
interest on the Certificates on behalf of the Issuer.
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"Percentage Interest" shall mean with respect to any Certificate, the
portion of the Certificates as a whole evidenced by such single Certificate,
expressed as a percentage rounded to five decimal places, equivalent to a
fraction, the numerator of which is the denomination represented by such single
Certificate and the denominator of which is the Initial Certificate Principal
Balance. With respect to each Residual Interest Instrument, the percentage
portion of all of the Residual Interest evidenced thereby as stated on the face
of such Residual Interest Instrument.
"Prospective Owner" shall have the meaning set forth in Section 3.14(a).
"RAC" shall mean RAC Financial Corporation, a Nevada corporation.
"Rating Agency Condition" means, with respect to any action to which a
Rating Agency Condition applies, that each Rating Agency shall have been given
10 days (or such shorter period as is acceptable to each Rating Agency) prior
notice thereof and that each of the Rating Agencies shall have notified the
Seller, the Servicer, the Securities Insurer, the Owner Trustee and the Issuer
in writing that such action will not result in a reduction or withdrawal of the
then current rating of the Notes and Certificates.
"Record Date" shall mean as to each Distribution Date the last Business Day
of the month immediately preceding the month in which such Distribution Date
occurs.
"Residual Interest" shall mean the right to receive distributions of Excess
Spread, if any, and certain other funds, if any, on each Distribution Date,
pursuant to Section 5.06 of the Sale and Servicing Agreement.
"Residual Interest Instrument" shall mean an instrument substantially in
the form attached as Exhibit B hereto and evidencing the Residual Interest.
"Residual Interestholders" shall mean, initially, FFI, as holder of 99%
Percentage Interest of the Residual Interest, and the Company, as holder of 1%
Percentage Interest of the Residual Interest.
"Sale and Servicing Agreement" shall mean the Sale and Servicing Agreement
dated as of the date hereof, among the Trust as Issuer, the Depositor, as
Seller, the Indenture Trustee as Indenture Trustee and Co-Owner Trustee and FFI,
as Transferor and Servicer.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Securities Insurer" shall mean MBIA Insurance Corporation.
"Securities Insurer Default" shall mean the failure of the Securities
Insurer to make payments under the Guaranty Policy, if such failure has not been
remedied with ten (10) days of notice thereof,
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or the entry of an order or decree with respect to the Securities Insurer in
any insolvency or bankruptcy proceedings which remain unstayed or undischarged
for 90 days.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to
specific provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Trust Certificates" shall mean the Certificates and the Residual Interest
Instruments, collectively.
"Underwriters" shall mean those underwriters named in and parties to the
Underwriting Agreement dated as of November 15, 1996 pursuant to which the
Certificates will be offered publicly.
SECTION 1.2 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Sale and Servicing
Agreement or, if not defined therein, in the Indenture.
(b) 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.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such
certificate or other document to the extent not defined, shall have the
respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms in this
Agreement or in any such certificate or other document are inconsistent
with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Agreement or in any such
certificate or other document shall control.
(d) The words "hereof", "herein", "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; Section and
Exhibit references contained in this Agreement are references to Sections
and Exhibits in or to this Agreement unless otherwise specified; and the
term "including" shall mean "including without limitation".
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(e) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns.
ARTICLE II
ORGANIZATION
SECTION 2.1 Name. The Trust created hereby shall be known as
"FIRSTPLUS HOME LOAN OWNER TRUST 1996-4", in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and xxx and be sued.
SECTION 2.2 Office. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address in Delaware
as the Owner Trustee may designate by written notice to the Owners, the
Securities Insurer, and the Company.
SECTION 2.3 Purposes and Powers. (a) The purpose of the Trust is to
engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the
Certificates pursuant to this Agreement and to sell such Notes and such
Certificates;
(ii) with the proceeds of the sale of the Notes and the
Certificates, to fund the Pre-Funding Account, the Capitalized Interest
Account and the Reserve Account and to pay the organizational, start-up and
transactional expenses of the Trust and to pay the balance to the Depositor
and the Company, as their interests may appear pursuant to the Sale and
Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey the
Owner Trust Estate pursuant to the Indenture and to hold, manage and
distribute to the Owners pursuant to the terms of the Sale and Servicing
Agreement any portion of the Owner Trust Estate released from the lien of,
and remitted to the Trust pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
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(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to
engage in such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of distributions to
the Owners and the Noteholders.
(vii) to issue the FRH Certificates and the Residual Interest
Instrument pursuant to this Agreement.
The Trust is hereby authorized to engage in the foregoing activities. The
Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this
Agreement or the Basic Documents.
SECTION 2.4 Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.5 Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Certificate Distribution Account. The Depositor
or the Company shall pay organizational expenses of the Trust as they may arise
or shall, upon the request of the Owner Trustee, promptly reimburse the Owner
Trustee for any such expenses paid by the Owner Trustee.
SECTION 2.6 Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Owners, subject to
the obligations of the Trust under the Basic Documents. It is the intention of
the parties hereto that the Trust constitute a business trust under the Business
Trust Statute and that this Agreement constitute the governing instrument of
such business trust. It is the intention of the parties hereto that, solely for
income and franchise tax purposes, the Trust shall be treated as a partnership,
with the assets of the partnership being the Home Loans and other assets held by
the Trust, the partners of the partnership being the holders of the Trust
Certificates and the Notes being non-recourse debt of the partnership. The
parties agree that, unless otherwise required by appropriate tax authorities,
the Trust will file or cause to be filed annual or other necessary returns,
reports and other forms consistent with the characterization of the Trust as a
partnership for such tax purposes. Effective as of the date hereof, the Owner
Trustee shall have all rights, powers and duties set forth herein and in the
Business Trust Statute with respect to accomplishing the purposes of the Trust.
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SECTION 2.7 Liability of the Owners.
(a) The Company, as holder of the FRH Certificates, shall be
liable directly to and will indemnify the injured party for all losses, claims,
damages, liabilities and expenses of the Trust (including Expenses, to the
extent not paid out of the Owner Trust Estate) to the extent that the Company
would be liable if the Trust were a partnership under the Delaware Revised
Uniform Limited Partnership Act in which the Company were a general partner;
provided, however, that the Company shall not be liable for any losses incurred
by an Owner in the capacity of an investor in the Trust Certificates or a
Noteholder in the capacity of an investor in the Notes. In addition, any third
party creditors of the Trust (other than in connection with the obligations
described in the preceding sentence for which the Company shall not be liable)
shall be deemed third party beneficiaries of this paragraph and paragraph (c)
below. The obligations of the Company under this paragraph and paragraph (c)
below shall be evidenced by the FRH Certificates the Company is receiving
pursuant to Section 3.10.
(b) No Owner, other than to the extent set forth in paragraphs
(a) and (c), shall have any personal liability for any liability or obligation
of the Trust.
(c) The Company agrees to be liable directly to and will
indemnify the injured party for all losses, claim damages, liabilities and
expenses (other than those incurred by an Owner in the capacity of an investor
in the Trust Certificates or a Noteholder in the capacity of an investor in the
Notes) arising out of or based on the arrangements pursuant to which the amounts
distributed to the Residual Interestholders are held by the Company and the FFI,
respectively, as Residual Interestholders, as though such arrangements were
partnerships under the Delaware Revised Uniform Limited Partnership Act in which
the Company were a general partner.
SECTION 2.8 Title to Trust Property.
(a) Subject to the Indenture, legal title to all the Owner Trust
Estate shall be vested at all times in the Trust as a separate legal entity
except where applicable law in any jurisdiction requires title to any part of
the Owner Trust Estate to be vested in a trustee or trustees, in which case
title shall be deemed to be vested in the Owner Trustee, the Co-Owner Trustee
and/or a separate trustee, as the case may be.
(b) The Owners shall not have legal title to any part of the
Owner Trust Estate. No transfer by operation of law or otherwise of any
interest of the Owners shall operate to terminate this Agreement or the trusts
hereunder or entitle any transferee to an accounting or to the transfer to it of
any part of the Owner Trust Estate.
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SECTION 2.9 Situs of Trust. The Trust will be located and
administered in the state of Delaware. All bank accounts maintained by the
Owner Trustee on behalf of the Trust shall be located in the State of Delaware
or the State of New York, except with respect to the Co-Owner Trustee. The
Trust shall not have any employees; provided, however, that nothing herein shall
restrict or prohibit the Owner Trustee from having employees within or without
the State of Delaware. Payments will be received by the Trust only in Delaware
or New York, and payments will be made by the Trust only from Delaware or New
York, except with respect to the Co-Owner Trustee. The only office of the Trust
will be at the Corporate Trust Office in Delaware.
SECTION 2.10 Representations and Warranties of the Depositor and the
Company; Covenant of the Company.
(a) The Depositor hereby represents and warrants to the Owner
Trustee and the Securities Insurer that:
(i) The Depositor is duly organized and validly existing
as a corporation in good standing under the laws of the State of Nevada,
with power and authority to own its properties and to conduct its business
as such properties are currently owned and such business is presently
conducted.
(ii) The Depositor is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease
of property or the conduct of its business shall require such
qualifications.
(iii) The Depositor has the power and authority to
execute and deliver this Agreement and to carry out its terms; the
Depositor has full power and authority to sell and assign the property to
be sold and assigned to and deposited with the Trust and the Depositor has
duly authorized such sale and assignment and deposit to the Trust by all
necessary corporate action; and the execution, delivery and performance of
this Agreement has been duly authorized by the Depositor by all necessary
corporate action.
(iv) The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof do not conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or by-laws of the Depositor, or any indenture,
agreement or other instrument to which the Depositor is a party or by which
it is bound; nor result in the creation or imposition of any lien upon any
of its properties pursuant to the terms of any such indenture, agreement or
other instrument (other than pursuant to the Basic Documents); nor violate
any law or, to the best of the Depositor's knowledge, any order, rule or
regulation applicable to the Depositor of any court or of any Federal or
state regulatory
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body, administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties.
(v) There are no proceedings or investigations pending or
notice of which has been received in writing before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties: (i) asserting the
invalidity of this Agreement, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement.
(vi) The representations and warranties of the Depositor in
Section 3.01 of the Sale and Servicing Agreement are true and correct.
(b) The Company hereby represents and warrants to the Owner Trustee
and the Securities Insurer that:
(i) The Company is duly organized and validly existing as a
corporation in good standing under the laws of the State of Nevada, with
power and authority to own its properties and to conduct its business as
such properties are currently owned and such business is presently
conducted.
(ii) The Company is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease
of property or the conduct of its business shall require such
qualifications.
(iii) The Company has the power and authority to execute and
deliver this Agreement and to carry out its terms; and the execution,
delivery and performance of this Agreement has been duly authorized by the
Company by all necessary corporate action.
(iv) The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or by-laws of the Company, or any indenture,
agreement or other instrument to which the Company is a party or by which
it is bound; nor result in the creation or imposition of any lien upon any
of its properties pursuant to the terms of any such indenture, agreement or
other instrument (other than pursuant to the Basic Documents); nor violate
any law or, to the best of the Company's knowledge, any order, rule or
regulation applicable to the Company of any court or of any Federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Company or its properties.
17
(v) There are no proceedings or investigations pending or,
to the Company's best knowledge, threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Company or its properties: (i) asserting the
invalidity of this Agreement, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Company of its obligations under, or the validity or
enforceability of, this Agreement.
(vi) From the date of its incorporation until the date of
this Agreement, except with respect to obtaining an Investing Lender
Approval from the Department of Housing and Urban Development, the Company
has not conducted any business or trade, has not entered into any
contracts, written or oral, has not had any employees, has no liabilities
or creditors, and no liens or encumbrances have existed or exist with
respect to the Company or its assets, except with respect to this Trust
Agreement and any similar trust agreement that relates to a prior issuance
of "FIRST PLUS Asset Backed Securities" insured by the Securities Insurer.
(c) The Company covenants with the Owner Trustee and the Securities
Insurer that during the continuance of this Agreement it will comply in all
respects with the provisions of its Articles of Incorporation in effect from
time to time.
SECTION 2.11 Maintenance of the Demand Note. To the fullest extent
permitted by applicable law, the Company agrees that it shall not sell, convey,
pledge, transfer or otherwise dispose of the Demand Note. Upon maturity of the
Demand Note, the Company shall take such action as is necessary to renew the
Demand Note and to maintain the Demand Note in effect until the expiration of
this Agreement.
SECTION 2.12 Federal Income Tax Allocations. Net income of the Trust for
any month, as determined tor Federal income tax purposes (and each item of
income, gain, loss and deduction entering into the computation thereof), shall
be allocated:
(a) among the Certificates as of the first Record Date following the
end of such month, in proportion to their ownership of principal amount of
Trust Certificates on such date, an amount of net income up to the sum of (i)
the amount distributed in respect of interest to the Certificateholders
pursuant to Section 5.06(c) of the Sale and Servicing Agreement for such month,
and (ii) the portion of the market discount on the Home Loans accrued during
such month that is allocable to the excess, if any, of the initial aggregate
principal amount of the Certificates over their initial aggregate issue price;
and
(b) to the Residual Interestholders, pro rata, to the extent of
any remaining net income.
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If the net income of the Trust for any month is insufficient for the allocations
described in clause (a) above, subsequent net income shall first be allocated to
make up such shortfall before being allocated as provided in the preceding
sentence. Net losses of the Trust, if any, for any month, as determined for
Federal income tax purposes (and each item of income, gain, loss and deduction
entering into the computation thereof), shall be allocated to the Residual
Interestholders to the extent the Residual Interestholders are reasonably
expected to bear the economic burden of such net losses, and any remaining net
losses shall be allocated among the Certificates as of the first Record Date
following the end of such month in proportion to their ownership of principal
amount of Trust certificates on such Record Date. Any indebtedness allocated
pursuant to Treasury Regulation Section 1.752 - 3(a)(3) shall be allocated to
the Residual Interest.
ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1 Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.5 and until the issuance of
the Trust Certificates, the Depositor shall be the sole Owner of the Trust.
SECTION 3.2 The Trust Certificates. The Certificates (other than the
Residual Interest) shall be issued in minimum denominations of $100,000 and in
integral multiples of $1,000 in excess thereof; provided, however, the FRH
Certificates issued to the Company pursuant to Section 3.10 may be issued in a
lesser denomination. Upon the issuance of the Trust Certificates, the Company
will be issued the FRH Certificates. The Residual Interest shall not be issued
with a principal amount. The Trust Certificates shall be executed on behalf of
the Trust by manual or facsimile signature of a Trust Officer of the Owner
Trustee. Trust Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be valid and binding
obligations of the Trust, notwithstanding that such individuals or any of them
shall have ceased to be so authorized prior to the authentication and delivery
of such Trust Certificates or did not hold such offices at the date of
authentication and delivery of such Trust Certificates.
A transferee of a Trust Certificate shall become an Owner, and shall be
entitled to the rights and subject to the obligations of an Owner hereunder and
under the Sale and Servicing Agreement, upon such transferee's acceptance of a
Trust Certificate duly registered in such transferee's name pursuant to Section
3.4.
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SECTION 3.3 Execution, Authentication and Delivery of Trust Certificates.
Concurrently with the initial sale of the Home Loans to the Trust pursuant to
the Sale and Servicing Agreement, the Owner Trustee shall cause the
Certificates, in an aggregate principal amount equal to the Initial Certificate
Principal Balance, and the Residual Interest Instruments representing 100% of
the Percentage Interests of the Residual Interest to be executed on behalf of
the Trust, authenticated and delivered to or upon the written order of the
Depositor, signed by its chairman of the board, its president or any vice
president, without further corporate action by the Depositor, in authorized
denominations. No Trust Certificate shall entitle its holder to any benefit
under this Agreement, or shall be valid for any purpose, unless there shall
appear on such Trust Certificate a certificate of authentication substantially
in the form set forth in Exhibit A and B, executed by the Owner Trustee or the
Administrator, as the Owner Trustee's authenticating agent, by manual or
facsimile signature; such authentication shall constitute conclusive evidence
that such Trust Certificate shall have been duly authenticated and delivered
hereunder. All Trust Certificates shall be dated the date of their
authentication.
SECTION 3.4 Registration of Transfer and Exchange of Trust Certificates.
The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 3.8, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Owner Trustee
shall provide for the registration of Trust Certificates and of transfers and
exchanges of Trust Certificates as herein provided. The Administrator shall be
the initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate at the
office or agency maintained pursuant to Section 3.8, the Owner Trustee shall
execute, authenticate and deliver (or shall cause the Administrator as its
authenticating agent to authenticate and deliver), in the name of the designated
transferee or transferees, one or more new Trust Certificates in authorized
denominations of a like aggregate amount dated the date of authentication by the
Owner Trustee or any authenticating agent. At the option of an Owner, Trust
Certificates may be exchanged for other Trust Certificates of authorized
denominations of a like aggregate amount upon surrender of the Trust
Certificates to be exchanged at the office or agency maintained pursuant to
Section 3.8.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Owner or his attorney duly authorized in writing. In addition,
each Residual Interest Instrument presented or surrendered for registration of
transfer and exchange must be accompanied by a letter from the Prospective Owner
certifying as to the representations set forth in Section 3.14(a) and (b). Each
Trust Certificate surrendered for registration of transfer or exchange shall be
canceled disposed of by the Owner Trustee in accordance with its customary
practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum
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sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Trust Certificates.
The preceding provisions of this Section notwithstanding, the Owner Trustee
shall not make and the Certificate Registrar shall not register transfer or
exchanges of Trust Certificates for a period of 15 days preceding the due date
for any payment with respect to the Trust Certificates.
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Trust Certificates. If
(a) any mutilated Trust Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Trust Certificate and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee such
security or indemnity as may be required by them to save each of them harmless,
then in the absence of notice that such Trust Certificate shall have been
acquired by a bona fide purchaser, the Owner Trustee on behalf of the Trust
shall execute and the Owner Trustee, or the Administrator as the Owner
Trustee's authenticating agent, shall authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Trust Certificate, a
new Trust Certificate of like tenor and denomination. In connection with the
issuance of any new Trust Certificate under this Section, the Owner Trustee or
the Certificate Registrar may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Trust Certificate issued pursuant to this Section
shall constitute conclusive evidence of ownership in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Trust Certificate shall be
found at any time.
SECTION 3.6 Persons Deemed Owners. Prior to due presentation of a Trust
Certificate for registration of transfer, the Owner Trustee or the Certificate
Registrar may treat the Person in whose name any Trust Certificate shall be
registered in the Certificate Register as the owner of such Trust Certificate
for the purpose of receiving distributions pursuant to Section 5.2 and for all
other purposes whatsoever, and neither the owner Trustee nor the Certificate
Registrar shall be bound by any notice to the contrary.
SECTION 3.7 Access to List of Owners' Names and Addresses. The Owner
Trustee shall furnish or cause to be furnished to the Servicer and the
Depositor, within 15 days after receipt by the Owner Trustee of a request
therefor from the Servicer, the Depositor or the Indenture Trustee in writing, a
list, in such form as the Servicer, the Depositor or the Indenture Trustee may
reasonably require, of the names and addresses of the Owners as of the most
recent Record Date. If three or more Certificateholders or one or more Holders
of Certificates together evidencing not less than 25% of the Certificate
Principal Balance apply in writing to the Owner 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 Owner Trustee shall, within five
Business Days after the receipt of such application, afford such applicants
access during normal business hours to the current list of Certificateholders.
Each Owner, by receiving and holding a
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Trust Certificate, shall be deemed to have agreed not to hold any of the
Depositor, the Company, the Certificate Registrar or the Owner Trustee
accountable by reason of the disclosure of its name and address, regardless of
the source from which such information was derived.
SECTION 3.8 Maintenance of Office or Agency. The Owner Trustee shall
maintain in the Borough of Manhattan, The City of New York, an office or offices
or agency or agencies where Trust Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Trust Certificates and the Basic Documents
may be served. The Owner Trustee initially designates the Administrator's
office in New York as its principal corporate trust office for such purposes.
The Owner Trustee shall give prompt written notice to the Company and to the
Certificateholders of any change in the location of the Certificate Register or
any such office or agency.
SECTION 3.9 Appointment of Paying Agent. The Owner Trustee hereby
appoints the Co-Owner Trustee as Paying Agent under this Agreement. The Paying
Agent shall make distributions to Certificateholders from the Certificate
Distribution Account pursuant to Section 5.2 hereof and Section 5.06 of the Sale
and Servicing Agreement and shall report the amounts of such distributions to
the Owner Trustee. The Paying Agent shall have the revocable power to withdraw
funds from the Certificate Distribution Account for the purpose of making the
distributions referred to above. In the event that the Co-Owner Trustee shall
no longer be the Paying Agent hereunder, the Owner Trustee shall appoint a
successor to act as Paying Agent (which shall be a bank or trust company)
acceptable to the Securities Insurer. The Owner Trustee shall cause such
successor Paying Agent or any additional Paying Agent appointed by the Owner
Trustee to execute and deliver to the Owner Trustee an instrument in which such
successor Paying Agent or additional Paying Agent shall agree with the Owner
Trustee that as Paying Agent, such successor Paying Agent or additional Paying
Agent will hold all sums, if any, held by it for payment to the Owners in trust
for the benefit of the Certificateholders entitled thereto until such sums shall
be paid to such Owners. The Paying Agent shall return all unclaimed funds to
the Owner Trustee, and upon removal of a Paying Agent, such Paying Agent shall
also return all funds in its possession to the Owner Trustee. The provisions of
Sections 7.1, 7.3, 7.4 and 8.1 shall apply to the Co-Owner Trustee also in its
role as Paying Agent, for so long as the Co-Owner Trustee shall act as Paying
Agent and, to the extent applicable, to any other paying agent appointed
hereunder. Any reference in this Agreement to the Paying Agent shall include
any co-paying agent unless the context requires otherwise. Notwithstanding
anything herein to the contrary, the Co-Owner Trustee and the Paying Agent shall
be the same entity as the Indenture Trustee under the Indenture and the Sale and
Servicing Agreement, unless a Securities Insurer Default has occurred and is
continuing. In such event, the Co-Owner Trustee and the Paying Agent shall
resign and the Owner Trustee shall assume the duties and obligations of the
Co-Owner Trustee and the Paying Agent hereunder and under the Sale and Servicing
Agreement. In addition, in such event, the Indenture Trustee shall agree to
continue to make claims under the Guaranty Policy on behalf of the Owner Trustee
for the benefit of the Certificateholders pursuant to the Sale and Servicing
Agreement.
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SECTION 3.10 Ownership by Company of the FRH Certificates. On
the Closing Date, the Company shall receive from the Trust and thereafter shall
retain beneficial and record ownership of the FRH Certificates representing at
least a 1% Percentage Interest of the Initial Certificate Principal Balance and
at least a 1% Percentage Interest of the Residual Interest. The FRH
Certificates shall be non-transferable. Any attempted transfer of any FRH
Certificates shall be null and void. The Owner Trustee shall cause any FRH
Certificate issued to the Company to contain a legend substantially to such
effect.
SECTION 3.11 Book-Entry Certificates. The Certificates, upon
original issuance, will be issued in the form of a typewritten Certificate or
Certificates representing Book-Entry Certificates, to be delivered to The
Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the
Trust; provided, however, that one Definitive Certificate (the Residual
Interest Instrument constituting one of the FRH Certificates) may be issued to
the Company pursuant to Section 3.10. Such Certificate or Certificates shall
initially be registered on the Certificate Register in the name of Cede & Co.,
the nominee of the initial Clearing Agency, and no Certificate Owner will
receive a definitive Certificate representing such Certificate Owners' interest
in such Certificate, except as provided in this Section 3.11 and in Section
3.13. Unless and until Definitive Certificates, fully registered, have been
issued to Certificate Owners pursuant Section 3.13:
(i) the provisions of this Section shall be in full force
and effect;
(ii) the Certificate Registrar and the Owner Trustee shall
be entitled to deal with the Clearing Agency for all purposes of this
Agreement (including the payment of principal of and interest on the
Certificates and the giving of instructions or directions hereunder)
as the sole Holder of the Certificates and shall have no obligation to
the Certificate Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Agreement, the provisions
of this Section shall control;
(iv) the rights of Certificate Owners shall be exercised
only through the Clearing Agency and shall be limited to those
established by law and agreements between such Certificate Owners and
the Clearing Agency and/or the Clearing Agency Participants. Pursuant
to the Certificate Depository Agreement, unless and until Definitive
Certificates are issued pursuant to Section 3.13, the initial Clearing
Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit payments of principal of and
interest on the Certificates to such Clearing Agency Participants; and
(v) whenever this Agreement requires or permits actions
to be taken based upon instructions or directions of Holders of
Certificates evidencing a specified percentage of the Certificate
Principal Balance, the Clearing Agency shall be deemed to represent
such percentage only to the extent that it has received instructions
to such effect from Certificate
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Owners and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in the
Certificates and has delivered such instructions to the Owner Trustee.
SECTION 3.12 Notices to Clearing Agency. Whenever a notice or other
communication to the Certificateholders is required under this Agreement, unless
and until Definitive Certificates shall have been issued to Certificate Owners
pursuant to Section 3.13, the Owner Trustee shall give all such notices and
communications specified herein to be given to Certificateholders to the
Clearing Agency, and shall have no obligations to the Certificate Owners.
SECTION 3.13 Definitive Certificates. If (i) the Administrator advises
the Owner Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the
Certificates, and the Administrator is unable to locate a qualified successor,
(ii) the Administrator at its option advises the Owner Trustee in writing that
it elects to terminate the book-entry system through the Clearing Agency or
(iii) after the occurrence of an Event of Default, Certificate Owners
representing beneficial interests aggregating at least 50% of the Certificate
Principal Balance advise the Clearing Agency in writing that the continuation of
a book-entry system through the Clearing Agency is no longer in the best
interest of the Certificate Owners, then the Clearing Agency shall notify all
Certificate Owners, the Securities Insurer and the Owner Trustee of the
occurrence of any such event and of the availability of the Definitive
Certificates to Certificate Owners requesting the same. Upon surrender to the
Owner Trustee of the typewritten Certificate or Certificates representing the
Book-Entry Certificates by the Clearing Agency, accompanied by registration
instructions the Owner Trustee shall execute and authenticate the Definitive
Certificates in accordance with the instructions of the Clearing Agency. Neither
the Certificate Registrar nor the Owner 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 Owner Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders. The Definitive Certificates shall be
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Owner Trustee, as evidenced by its execution
thereof.
SECTION 3.14 Restrictions on Transfer of Residual Interest Instruments.
(a) Each prospective purchaser and any subsequent transferee of
a Residual Interest Instrument (each, a "Prospective Owner"), other than
FFI or the Company, shall represent and warrant, in writing, to the Owner
Trustee and the Certificate Registrar and any of their respective
successors that:
(i) Such Person is (A) a "qualified institutional
buyer" as defined in Rule 144A under the Securities Act of 1933, as
amended (the "Securities Act"), and is aware that the seller of the
Residual Interest Instrument may be relying on the exemption from the
registration requirements of the Securities Act provided by
24
Rule 144A and is acquiring such Residual Interest Instrument for its
own account or for the account of one or more qualified institutional
buyers for whom it is authorized to act, or (B) a Person involved in
the organization or operation of the Trust or an affiliate of such
Person within the meaning of Rule 3a-7 of the Investment Company Act
of 1940, as amended (including, but not limited to, the Transferor or
the Company).
(ii) Such Person understands that the Residual Interest
Instruments have not been and will not be registered under the
Securities Act and may be offered, sold, pledged or otherwise
transferred only to a person whom the seller reasonably believes is
(A) a qualified institutional buyer or (B) a Person involved in the
organization or operation of the Trust or an affiliate of such Person,
in a transaction meeting the requirements of Rule 144A under the
Securities Act and in accordance with any applicable securities laws
of any state of the United States.
(iii) Such Person understands that the Residual Interest
Instruments bear a legend to the following effect:
"THE RESIDUAL INTEREST IN THE TRUST REPRESENTED BY THIS
RESIDUAL INTEREST INSTRUMENT HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS. THIS RESIDUAL
INTEREST MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR
OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE HOLDER
HEREOF ONLY TO (I) A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE ACT, IN A TRANSACTION THAT
IS REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR (II) A
PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF THE
TRUST OR AN AFFILIATE OF SUCH A PERSON WITHIN THE MEANING
OF RULE 3a-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS
AMENDED (INCLUDING, BUT NOT LIMITED TO, FIRSTPLUS RESIDUAL
HOLDINGS, INC. AND FIRSTPLUS FINANCIAL, INC. ) IN A
TRANSACTION THAT IS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS.
NO
25
PERSON IS OBLIGATED TO REGISTER THIS RESIDUAL INTEREST UNDER THE
ACT OR ANY STATE SECURITIES LAWS. "
(iv) Such Person shall comply with the provisions of Section
3.14(b), as applicable, relating to the ERISA restrictions with
respect to the acceptance or acquisition of such Residual Interest
Instrument.
(b) Each Prospective Owner, other than FFI or the Company, shall
either:
(i) represent and warrant, in writing, to the Owner Trustee and
the Certificate Registrar and any of their respective successors that
(1) the Prospective Owner is not an "employee benefit plan" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or a "plan" within the meaning of
Section 4975(e)(1) of the Code (any such plan or employee benefit
plan, a "Plan") and is not directly or indirectly purchasing such
Residual Interest Instrument on behalf of, as investment manager of,
as named fiduciary of, as trustee of, or with assets of a Plan, or (2)
either (I) the Prospective Owner is acquiring such Residual Interest
Instrument for its own account and no part of the assets used to
acquire such Residual Interest Instrument constitute assets of a Plan,
or (II) the source of funds to be used to acquire such Residual
Interest Instrument is an "insurance company general account," within
the meaning of Prohibited Transaction Class Exemption 95-60,60 Fed.
Reg. 35925 (July 12, 1995) (the "Exemption"), and there is no Plan
with respect to which the amount of such general account's reserves
for the contract(s) held by or on behalf of such Plan (determined
under Section 807(d) of the Code), together with the amount of the
reserves of the contract(s) held by or on behalf of any other Plans
(determined under Section 807(d) of the Code) maintained by the same
employer (or an affiliate thereof as defined in Section V(a)(1) of the
Exemption) or by the same employee organization, exceed 10% of the
total of all liabilities of such general account; or
(ii) furnish to the Owner Trustee and the Certificate Registrar
and any of their respective successors an opinion of counsel
acceptable to such persons that (A) the proposed issuance or transfer
of the Residual Interest Instrument to such Prospective Owner will not
cause any assets of the Trust to be deemed assets of a Plan, or (B)
the proposed issuance or transfer of the Residual Interest Instrument
will not cause the Owner Trustee or the Certificate Registrar or any
of their respective successors to be a fiduciary of a Plan within the
meaning of Section 3(21) of ERISA and will not give rise to a
transaction described in Section 406 of ERISA or Section 4975(c)(1) of
the Code for which a statutory or administrative exemption is
unavailable.
26
(c) By its acceptance of a Residual Interest Instrument, each
Prospective Owner agrees and acknowledges that no legal or beneficial interest
in all or any portion of any Residual Interest Instrument may be transferred
directly or indirectly to (i) an entity that holds residual securities as
nominee to facilitate the clearance and settlement of such securities through
electronic book-entry changes in accounts of participating organizations (a
"Book-Entry Nominee"), or (ii) an individual, corporation, partnership or other
person unless such transferee is not a Non-U.S. Person (any such person being
referred to herein as a "Non-permitted Foreign Holder"), and any such purported
transfer shall be void and have no effect.
(d) Subject to paragraph (f) below, the Trustee shall not execute, and
shall not countersign and deliver, a Residual Interest Instrument in connection
with any transfer thereof unless the transferor shall have provided to the
Trustee a certificate, substantially in the form attached as Exhibit F1 to this
Agreement, signed by the transferee, a Book-Entry Nominee or a Non-permitted
Foreign Holder, which certificate shall contain the consent of the transferee to
any amendments of this Agreement as may be required to effectuate further the
foregoing restrictions on transfer of the Residual Interest Instruments to
Book-Entry Nominees or Non-permitted Foreign Holders, and an agreement by the
transferee that it will not transfer a Residual Interest Instrument without
providing to the Trustee a certificate substantially in the from attached as
Exhibit F1 to this Agreement.
(e) The Residual Interest Instruments shall bear an additional legend
referring to the restrictions contained in paragraphs (b) and (c) above.
(f) Notwithstanding paragraph (d) above, in the event that FIRSTPLUS
FINANCIAL, INC. pledges, mortgages, assigns or otherwise grants any security
interest in the Residual Interest to any person (each, a "Pledgee"), the
Trustee may execute, countersign and deliver a Residual Interest Instrument to
such Pledgee, provided that such Pledgee shall have delivered to the Trustee a
Certificate signed on behalf of the Pledgee substantially in the form attached
as Exhibit F2 to this Agreement.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Owners with Respect to Certain Matters.
With respect to the following matters, the Owner Trustee shall not take action,
and the Owners shall not direct the Owner Trustee to take any action, unless at
least 30 days before the taking of such action, the Owner Trustee shall have
notified the Owners and the Securities Insurer in writing of the proposed action
and the Owners and/or the Securities Insurer shall not have notified the Owner
Trustee in writing prior to the 30th day after such notice is given that such
Owners and/or the Securities Insurer have withheld consent or the Owners have
provided alternative direction (any direction by the Owners shall require the
prior consent of the Securities Insurer):
27
(a) the initiation of any claim or lawsuit by the Trust (except
claims or lawsuits brought in connection with the collection of the Home Loans)
and the compromise of any action, claim or lawsuit brought by or against the
Trust (except with respect to the aforementioned claims or lawsuits for
collection of the Home Loans);
(b) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed under the
Business Trust Statute);
(c) the amendment or other change to this Agreement or any Basic
Document in circumstances where the consent of any Noteholder or the Securities
Insurer is required;
(d) the amendment or other change to this Agreement or any Basic
Document in circumstances where the consent of any Noteholder or the Securities
Insurer is not required and such amendment materially adversely affects the
interest of the Owners;
(e) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of a
successor Certificate Registrar, or the consent to the assignment by the Note
Registrar, Paying Agent or Indenture Trustee or Certificate Registrar of its
obligations under the Indenture or this Agreement, as applicable.
(f) the consent to the calling or waiver of any default of any
Basic Document;
(g) the consent to the assignment by the Indenture Trustee or
Servicer of their respective obligations under any Basic Document;
(h) except as provided in Article IX hereof, dissolve, terminate
or liquidate the Trust in whole or in part;
(i) merge or consolidate the Trust with or into any other entity,
or convey or transfer all or substantially all of the Trust's assets to any
other entity;
(j) cause the Trust to incur, assume or guaranty any indebtedness
other than as set forth in this Agreement;
(k) do any act that conflicts with any other Basic Document;
(l) do any act which would make it impossible to carry on the
ordinary business of the Trust as described in Section 2.13 hereof;
(m) confess a judgment against the Trust;
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(n) possess Trust assets, or assign the Trust's right to
property, for other than a Trust purpose;
(o) cause the Trust to lend any funds to any entity; or
(p) change the Trust's purpose and powers from those set forth in
this Trust Agreement.
In addition the Trust shall not commingle its assets with those of any
other entity. The Trust shall maintain its financial and accounting books and
records separate from those of any other entity. Except as expressly set forth
herein, the Trust shall pay its indebtedness, operating expenses from its own
funds, and the Trust shall not pay the indebtedness, operating expenses and
liabilities of any other entity. The Trust shall maintain appropriate minutes
or other records of all appropriate actions and shall maintain its office
separate from the offices of the Company, the Depositor, FFI and RAC.
The Owner Trustee shall not have the power, except upon the direction of
the Owners with the consent of the Securities Insurer, and to the extent
otherwise consistent with the Transaction Documents, to (i) remove or replace
the Servicer or the Indenture Trustee, (ii) institute proceedings to have the
Trust declared or adjudicated a bankruptcy or insolvent, (iii) consent to the
institution of bankruptcy or insolvency proceedings against the Trust, (iv) file
a petition or consent to a petition seeking reorganization or relief on behalf
of the Trust under any applicable federal or state law relating to bankruptcy,
(v) consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or any similar official) of the Trust or a substantial portion of
the property of the Trust, (vi) make any assignment for the benefit of the
Trust's creditors, (vii) cause the Trust to admit in writing its inability to
pay its debts generally as they become due, (viii) take any action, or cause the
Trust to take any action, in furtherance of any of the foregoing (any of the
above, a "Bankruptcy Action"). So long as the Indenture and the Insurance
Agreement remain in effect and no Securities Insurer Default exists, no
Certificateholder shall have the power to take, and shall not take, any
Bankruptcy Action with respect to the Trust or the Company or direct the Owner
Trustee to take any Bankruptcy Action with respect to the Trust or the Company.
SECTION 4.2 Action by Owners with Respect to Certain Matters. The
Owner Trustee shall not have the power, except upon the direction of the Owners
and the consent of the Securities Insurer, to (a) remove the Administrator under
the Administration Agreement pursuant to Section 8 thereof, (b) appoint a
successor Administrator pursuant to Section 8 of the Administration Agreement,
(c) remove the Servicer under the Sale and Servicing Agreement pursuant to
Section 10.01 thereof or (d) sell the Home Loans after the termination of the
Indenture. The Owner Trustee shall take the actions referred to in the
preceding sentence only upon written instructions signed by the Owners and only
after obtaining the consent of the Securities Insurer.
SECTION 4.3 Action by Owners with Respect to Bankruptcy. The Owner
Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the
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consent and approval of the Securities Insurer, the unanimous prior approval of
all Owners and the Securities Insurer and the delivery to the Owner Trustee by
each such Owner of a certificate certifying that such Owner reasonably believes
that the Trust is insolvent.
SECTION 4.4 Restrictions on Owners' Power. The Owners shall not direct
the Owner Trustee to take or refrain from taking any action if such action or
inaction would be contrary to any obligation of the Trust or the Owner Trustee
under this Agreement or any of the Basic Documents or would be contrary to
Section 2.3 nor shall the Owner Trustee be obligated to follow any such
direction, if given.
SECTION 4.5 Majority Control. Except as expressly provided herein, any
action that may be taken by the Owners under this Agreement may be taken by the
Holders of Certificates evidencing more than 50% of the Certificate Principal
Balance and holders of Residual Interest evidencing more than 50% of the
Percentage Interest in the Residual Interest. Except as expressly provided
herein, any written notice of the Owners delivered pursuant to this Agreement
shall be effective if signed by Holders of Certificates evidencing more than 50%
of the Certificate Balance and holders of Residual Interest evidencing more
than 50% of the Percentage Interest in the Residual Interest at the time of the
delivery of such notice.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Trust Account. The Owner Trustee shall
cause the Servicer, for the benefit of the Owners, to establish and maintain
with First Bank National Association for the benefit of the Owner Trustee or
Co-Owner Trustee one or more Eligible Accounts which while the Co-Owner Trustee
holds such Trust Account shall be entitled "CERTIFICATE DISTRIBUTION ACCOUNT,
FIRST BANK NATIONAL ASSOCIATION, AS CO-OWNER TRUSTEE, IN TRUST FOR THE FIRSTPLUS
ASSET BACKED SECURITIES, SERIES 1996-4". Funds shall be deposited in the
Certificate Distribution Account as required by the Sale and Servicing
Agreement.
All of the right, title and interest of the Co-Owner Trustee or Owner
Trustee in all funds on deposit from time to time in the Certificate
Distribution Account and in all proceeds thereof shall be held for the benefit
of the Owners, the Securities Insurer and such other persons entitled to
distributions therefrom. Except as otherwise expressly provided herein or in
the Sale and Servicing Agreement, the Certificate Distribution Account shall be
under the sole dominion and control of the Owner Trustee or Co-Owner Trustee for
the benefit of the Owners, the Securities Insurer and the Servicer.
In addition to the foregoing, the Certificate Distribution Account is a
Trust Account under the Sale and Servicing Agreement and constitutes part of the
Trust Estate pledged by the Trust to
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the Indenture Trustee under the Indenture. The Certificate Distribution
Account shall be subject to and established and maintained in accordance with
the applicable provisions of the Sale and Servicing Agreement and the
Indenture, including, without limitation, the provisions of Section 5.06(c) of
the Sale and Servicing Agreement regarding distributions from the Certificate
Distribution Account.
The Company by virtue of its acceptance of the FRH Certificates, agrees to
direct and shall have the sole authority to direct the Owner Trustee or Co-Owner
Trustee, or their successor in interest, as to the Permitted Investments in
which the funds on deposit in the Trust Accounts (as such term is defined in the
Sale and Servicing Agreement) may be invested.
SECTION 5.2 Application Of Trust Funds.
(a) On each Distribution Date, the Owner Trustee or Co-Owner
Trustee shall direct the or Paying Agent to distribute to the
Certificateholders, the Securities Insurer, the Servicer and the Residual
Certificateholders from amounts on deposit in the Certificate Distribution
Account the distributions as provided in Section 5.06 of the Sale and Servicing
Agreement with respect to such Distribution Date.
(b) On each Distribution Date, the Owner Trustee shall cause the
Paying Agent to send to the DTC and each Residual Interestholder the statement
provided to the Owner Trustee by the Servicer pursuant to Section 6.01 of the
Sale and Servicing Agreement with respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the
Trust's payment (or allocations of income) to an owner, such tax shall reduce
the amount otherwise distributable to the Owner in accordance with this Section.
The Owner Trustee is hereby authorized and directed to retain from amounts
otherwise distributable to the Owners sufficient funds for the payment of any
tax that is legally owed by the Trust (but such authorization shall not prevent
the Owner Trustee from contesting any such tax in appropriate proceedings, and
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings). The amount of any withholding tax imposed with respect to an
Owner shall be treated as cash distributed to such Owner at the time it is
withheld by the Trust and remitted to the appropriate taxing authority. If
there is a possibility that withholding tax is payable with respect to a
distribution (such as a distribution to a non-U.S. Owner), the Owner Trustee
may in its sole discretion withhold such amounts in accordance with this
paragraph (c). In the event that an Owner wishes to apply for a refund of any
such withholding tax, the Owner Trustee shall reasonably cooperate with such
owner in making such claim so long as such Owner agrees to reimburse the Owner
Trustee for any out-of-pocket expenses incurred.
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SECTION 5.3 Method of Payment. Subject to Section 3.11, distributions
required to be made to Owners on any Distribution Date shall be made to each
Owner of record on the preceding Record Date either by wire transfer, in
immediately available funds, to the account of such Holder at a bank or other
entity having appropriate facilities therefor, if such Owner shall have provided
to the Certificate Registrar appropriate written instructions at least five
Business Days prior to such Distribution Date and such Holder's Certificates in
the aggregate evidence a denomination of not less than $1,000,000, or, if not,
by check mailed to such Owner at the address of such holder appearing in the
Certificate Register.
SECTION 5.4 Segregation of Moneys; No Interest. Subject to Sections
4.1 and 5.2, moneys received by the Owner Trustee hereunder and deposited into
the Certificate Distribution Account will be segregated except to the extent
required otherwise by law or the Sale and Servicing Agreement and shall be
invested in Permitted Investments at the direction of the Company. The Owner
Trustee shall not be liable for payment of any interest in respect of such
moneys.
SECTION 5.5 Accounting and Reports to the Certificateholder, Owners,
the Internal Revenue Service and Others. The Owner Trustee shall (a) maintain
(or cause to be maintained) the books of the Trust on a calendar year basis on
the accrual method of accounting, and such books shall be maintained separate
from those of any other entity and reflect the separate interest of the Trust,
(b) deliver to each Owner, as may be required by the Code and applicable
Treasury Regulations, such information as may be required (including Schedule
K-1) to enable each Owner to prepare its federal and state income tax returns,
(c) file such tax relating to the Trust (including a partnership information
return, IRS Form 1065), and make such elections as may from time to time be
required or appropriate under any applicable state or Federal statute or rule or
regulation thereunder so as to maintain the Trust's characterization as a
partnership for Federal income tax purposes, (d) cause such tax returns to be
signed in the manner required by law and (e) collect or cause to be collected
any withholding tax as described in and in accordance with Section 5.2(c) with
respect to income or distributions to Owners. The Owner Trustee shall elect
under Section 1278 of the Code to include in income currently any market
discount that accrues with respect to the Home Loans. The Owner Trustee shall
not make the election provided under Section 754 of the Code.
SECTION 5.6 Signature on Returns; Tax Matters Partner.
(a) The Owner Trustee shall sign on behalf of the Trust the tax
returns of the Trust, unless applicable law requires an Owner to sign such
documents, in which case such documents shall be signed by the Company.
(b) The Company shall be designated the "tax matters partner" of
the Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
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ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 General Authority. The Owner Trustee is authorized and
directed to execute and deliver or cause to be executed and delivered the Notes,
the Trust Certificates and the Basic Documents to which the Trust is to be a
party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party and any
amendment or other agreement or instrument described in Article III, in each
case, in such form as the Company shall approve, as evidenced conclusively by
the Owner Trustee's execution thereof, and, on behalf of the Trust, to direct
the Indenture Trustee to authenticate and deliver Class A-1 Notes in the
aggregate principal amount of $100,750,000, Class A-2 Notes in the aggregate
principal amount of $37,740,000, Class A-3 Notes in the aggregate principal
amount of $50,270,000, Class A-4 Notes in the aggregate principal amount of
$27,520,000, Class A-5 Notes in the aggregate principal amount of $37,100,000,
Class A-6 Notes in the aggregate principal amount of $56,620,000, Class A-7
Notes in the aggregate principal amount of $44,340,000, Class A-8 Notes in the
aggregate principal amount of $21,950,000 and Certificates in the aggregate
principal amount of $23,710,000. In addition to the foregoing, the Owner Trustee
is authorized, but shall not be obligated, to take all actions required of the
Trust, pursuant to the Basic Documents.
SECTION 6.2 General Duties. It shall be the duty of the Owner Trustee:
(a) to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this Agreement and the Basic Documents
to which the Trust is a party and to administer the Trust in the interest of the
Owners, subject to the Basic Documents and in accordance with the provisions of
this Agreement. Notwithstanding the foregoing, the Owner Trustee shall be
deemed to have discharged its duties and responsibilities hereunder and under
the Basic Documents to the extent the Administrator or the Co-Owner Trustee has
agreed in the Administration Agreement or this Agreement, respectively, to
perform any act or to discharge any duty of the Owner Trustee or the Trust
hereunder or under any Basic Document, and the Owner Trustee shall not be held
liable for the default or failure of the Administrator or the Co-Owner Trustee
to carry out its obligations under the Administration Agreement or this
Agreement, respectively; and
(b) to obtain and preserve, the Issuer's qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Indenture, the
Notes, the Collateral and each other instrument and agreement included in the
Trust Estate.
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SECTION 6.3 Action upon Instruction.
(a) Subject to Article IV and in accordance with the terms of the
Basic Documents, the Owners may by written instruction direct the Owner Trustee
in the management of the Trust but only to the extent consistent with the
limited purpose of the Trust. Such direction may be exercised at any-time by
written instruction of the Owners pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or under any Basic Document, the Owner Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances) to the
Owners and the Securities Insurer requesting instruction from the Owners as to
the course of action to be adopted, and to the extent the Owner Trustee acts in
good faith in accordance with any written instruction of the Owners received,
the Owner Trustee shall not be liable on account of such action to any Person.
If the Owner Trustee shall not have received appropriate instruction within 10
days of such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Basic Documents, as it shall deem to be
in the best interests of the Owners, and shall have no liability to any Person
for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Basic Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the Owners
requesting instruction and, to the extent that the Owner Trustee acts or
refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or refrain
from taking such action, not inconsistent with this Agreement or the Basic
Documents, as it shall deem to be in the best interests of the Owners, and shall
have no liability to any Person for such action or inaction.
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SECTION 6.4 No Duties Except as Specified in this Agreement, the Basic
Documents or in Instructions. The Owner Trustee shall not have any duty or
obligation to manage, make any payment with respect to, register, record, sell,
dispose of, or otherwise deal with the Owner Trust Estate, or to otherwise take
or refrain from taking any action under, or in connection with, any document
contemplated hereby to which the Owner Trustee is a party, except as expressly
provided by the terms of this Agreement, any Basic Document or in any document
or written instruction received by the Owner Trustee pursuant to Section 6.3;
and no implied duties or obligations shall be read into this Agreement or any
Basic Document against the Owner Trustee. The Owner Trustee shall have no
responsibility for filing any financing or continuation statement in any public
office at any time or to otherwise perfect or maintain the perfection of any
security interest or lien granted to it hereunder or to prepare or file any
Securities and Exchange Commission filing for the Trust or to record this
Agreement or any Basic Document. The Owner Trustee nevertheless agrees that it
will, at its own cost and expense, promptly take all action as may be necessary
to discharge any liens on any part of the Owner Trust Estate that result from
actions by, or claims against, the Owner Trustee that are not related to the
ownership or the administration of the Owner Trust Estate.
SECTION 6.5 No Action Except Under Specified Documents or Instructions.
The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise
deal with any part of the Owner Trust Estate except (i) in accordance with the
powers granted to and the authority conferred upon the Owner Trustee pursuant to
this Agreement, (ii) in accordance with the Basic Documents and (iii) in
accordance with any document or instruction delivered to the owner Trustee
pursuant to Section 6.3.
SECTION 6.6 Restrictions. The Owner Trustee shall not take any action
(a) that is inconsistent with the purposes of the Trust set forth in Section 2.3
or (b) that, to the actual knowledge of the Owner Trustee, would result in the
Trust's becoming taxable as a corporation for Federal income tax purposes. The
Owners shall not direct the Owner Trustee to take action that would violate the
provisions of this Section.
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1 Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts but only upon the terms of this Agreement and the Basic
Documents. The Owner Trustee also agrees to disburse all moneys actually
received by it constituting part of the Owner Trust Estate upon the terms of the
Basic Documents and this Agreement. The Owner Trustee shall not be answerable
or accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own willful misconduct or gross negligence or (ii) in the
case of the inaccuracy of any representation or warranty
35
contained in Section 7.3 expressly made by the Owner Trustee. In particular,
but not by way of limitation (and subject to the exceptions set forth in the
preceding sentence):
(a) the Owner Trustee shall not be liable for any error of judgment
made by a responsible officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of the
Administrator or the Owners;
(c) no provision of this Agreement or any Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers hereunder
or under any Basic Document if the Owner Trustee shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in respect of
the validity or sufficiency of this Agreement or for the due execution hereof by
the Depositor or the Company or for the form, character, genuineness,
sufficiency, value or validity of any of the Owner Trust Estate or for or in
respect of the validity or sufficiency of the Basic Documents, other than the
certificate of authentication on the Trust Certificates, and the Owner Trustee
shall in no event assume or incur any liability, duty, or obligation to any
Noteholder or to any Owner, other than as expressly provided for herein and in
the Basic Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Administrator, the Seller, the Company, the Indenture Trustee
or the Servicer under any of the Basic Documents or otherwise and the Owner
Trustee shall have no obligation or liability to perform the obligations of the
Trust under this Agreement or the Basic Documents that are required to be
performed by the Administrator under the Administration Agreement, the Indenture
Trustee under the Indenture or the Servicer under the Sale and Servicing
Agreement; and
(g) the Owner 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 under this Agreement or otherwise or in relation to
this Agreement or any Basic Document, at the request, order or direction of any
of the Owners, unless such Owners have offered to the Owner Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities that
may be incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its gross negligence or willful misconduct in the
performance of any such act provided, that the Owner Trustee shall be liable for
its negligence or willful
36
misconduct in the event that it assumes the duties and obligations of the
Co-Owner Trustee under the Sale and Servicing Agreement pursuant to Section
10.5 hereof.
SECTION 7.2 Furnishing of Documents. The Owner Trustee shall furnish
(a) to the Owners promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents and (b) to Noteholders promptly upon written request
therefor, copies of the Sale and Servicing Agreement, the Administration
Agreement and the Trust Agreement.
SECTION 7.3 Representations and Warranties.
(a) The Owner Trustee hereby represents and warrants to the
Depositor and the Company, for the benefit of the Owners, that:
(i) It is a banking corporation duly organized and validly
existing in good standing under the laws of the State of Delaware. It has
all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement.
(ii) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this Agreement will
be executed and delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of this
Agreement nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof will
contravene any Federal or Delaware law, governmental rule or regulation
governing the banking or trust powers of the owner Trustee or any judgment
or order binding on it, or constitute any default under its charter
documents or by-laws or any indenture, mortgage, contract, agreement or
instrument to which it is a party or by which any of its properties may be
bound.
(b) The Co-Owner Trustee hereby represents and warrants to the
Depositor and the Company and the Securities Insurer, for the benefit of the
Owners, that:
(i) It is a banking corporation duly organized and validly
existing in good standing under the laws of the State of Minnesota. It has
all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement.
(ii) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this Agreement will
be executed and delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf.
37
(iii) Neither the execution nor the delivery by it of this
Agreement nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof will
contravene any Federal or Minnesota law, governmental rule or regulation
governing the banking or trust powers of the owner Trustee or any judgment
or order binding on it, or constitute any default under its charter
documents or by-laws or any indenture, mortgage, contract, agreement or
instrument to which it is a party or by which any of its properties may be
bound.
SECTION 7.4 Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in
acting upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond, or other document or paper believed
by it to be genuine and believed by it to be signed by the proper party or
parties. The Owner Trustee may accept a certified copy of a resolution of the
board of directors or other governing body of any corporate party as conclusive
evidence that such resolution has been duly adopted by such body and that the
same is in full force and effect. As to any fact or matter the method of the
determination of which is not specifically prescribed herein, the Owner Trustee
may for all purposes hereof rely on a certificate, signed by the president or
any vice president or by the treasurer or other authorized officers of the
relevant party, as to such fact or matter and such certificate shall constitute
full protection to the Owner Trustee for any action taken or omitted to be taken
by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and
in the performance of its duties and obligations under this Agreement or the
Basic Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and not contrary to this Agreement or
any Basic Document.
SECTION 7.5 Not Acting in Individual Capacity. Except as provided in
this Article VII, in accepting the trusts hereby created Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason of
the transactions contemplated by this Agreement or any Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6 Owner Trustee Not Liable for Trust Certificates or Home
Loans. The recitals contained herein and in the Trust Certificates (other than
the signature and countersignature of the
38
Owner Trustee on the Trust Certificates) shall be taken as the statements of the
Depositor and the Company, and the Owner Trustee assumes no responsibility for
the correctness thereof. The Owner Trustee makes no representations as to the
validity or sufficiency of this Agreement, of any Basic Document or of the Trust
Certificates (other than the signature and countersignature of the Owner Trustee
on the Trust Certificates and as specified in Section 7.3) or the Notes, or of
any Home Loans or related documents. The Owner Trustee shall at no time have
any responsibility or liability for or with respect to the legality, validity
and enforceability of any Home Loan, or the perfection and priority of any
security interest created by any Home Loan or the maintenance of any such
perfection and priority, or for or with respect to the sufficiency of the Owner
Trust Estate or its ability to generate the payments to be distributed to Owners
under this Agreement or the Noteholders under the Indenture, including, without
limitation: the existence, condition and ownership of any Mortgaged Property;
the existence and enforceability of any insurance thereon; the existence and
contents of any Home Loan on any computer or other record thereof; the validity
of the assignment of any Home Loan to the Trust or of any intervening
assignment; the completeness of any Home Loan; the performance or enforcement of
any Home Loan; the compliance by the Depositor, the Company or the Servicer with
any warranty or representation made under any Basic Document or in any related
document or the accuracy of any such warranty or representation or any action of
the Administrator, the Indenture Trustee or the Servicer or any subservicer
taken in the name of the Owner Trustee.
SECTION 7.7 Owner Trustee May Own Trust Certificates and Notes. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of Trust Certificates or Notes and may deal with the Depositor, the Company, the
Administrator, the Indenture Trustee and the Servicer in banking transactions
with the same rights as it would have if it were not Owner Trustee.
SECTION 7.8 Licenses. The Owner Trustee shall cause the Trust to use its
best efforts to obtain and maintain the effectiveness of any licenses required
in connection with this Agreement and the Basic Documents and the transactions
contemplated hereby and thereby until such time as the Trust shall terminate in
accordance with the terms hereof.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
SECTION 8.1 Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Company and the Owner
Trustee, and the Owner Trustee shall be entitled to be reimbursed by the Company
for its other reasonable expenses hereunder, including the reasonable
compensation, expenses and disbursements of such agents, representatives,
experts and
39
counsel as the Owner Trustee may employ in connection with the exercise and
performance of its rights and its duties hereunder.
SECTION 8.2 Indemnification. The Depositor shall be liable as primary
obligor, and the Servicer as secondary obligor pursuant to the Administration
Agreement, for, and shall indemnify the Owner Trustee and its successors,
assigns, agents and servants (collectively, the "Indemnified Parties") from and
against, any and all liabilities, obligations, losses, damages, taxes, claims,
actions and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by, or
asserted against the Owner Trustee or any Indemnified Party in any way relating
to or arising out of this Agreement, the Basic Documents, the Owner Trust
Estate, the administration of the Owner Trust Estate or the action or inaction
of the Owner Trustee hereunder, except only that the Depositor shall not be
liable for or required to indemnify an Indemnified Party from and against
Expenses arising or resulting from any of the matters described in the third
sentence of Section 7.01. The indemnities contained in this Section shall
survive the resignation or termination of the Owner Trustee or the termination
of this Agreement. In any event of any claim, action or proceeding for which
indemnity will be sought pursuant to this Section, the Owner Trustee's choice of
legal counsel shall be subject to the approval of the Depositor, which approval
shall not be unreasonably withheld.
SECTION 8.3 Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.1 Termination of Trust Agreement.
(a) This Agreement (other than Article VIII) and the Trust shall
terminate and be of no further force or effect on the earlier of: (i) the
satisfaction and discharge of the Indenture pursuant to Section 4.1 of the
Indenture and the termination of the Sale and Servicing Agreement; (ii) at the
time provided in Section 9.2.; and (iii) the expiration of 21 years from the
death of the last survivor of the descendants of Xxxxxx X. Xxxxxxx (The late
ambassador of the United States to the Court of St. James's). The bankruptcy,
liquidation, dissolution, death or incapacity of any Owner, other than the
Company as described in Section 9.2, shall not (x) operate to terminate this
Agreement or the Trust, nor (y) entitle such Owner's legal representatives or
heirs to claim an accounting or to take any action or proceeding in any court
for a partition or winding up of all or any part of the Trust or Owner Trust
Estate nor (z) otherwise affect the rights, obligations and liabilities of the
parties hereto.
40
(b) The Certificates shall be subject to an early redemption or
termination at the option of the Company, and in certain instances the
Securities Insurer, in the manner and subject to the provisions of Section 11.02
of the Sale and Servicing Agreement.
(c) Except as provided in Sections 9.1(a) and (b) above, none of
the Depositor, the Company, the Securities Insurer nor any Owner shall be
entitled to revoke or terminate the Trust.
(d) Notice of any termination of the Trust, specifying the
Distribution Date upon which the Certificateholders shall surrender their
Certificates to the Paying Agent for payment of the final distributions and
cancellation, shall be given by the Owner Trustee to the Certificateholders, the
Securities Insurer and the Rating Agencies mailed within five Business Days of
receipt by the Owner Trustee of notice of such termination pursuant to Section
9.1(a) or (b) above, which notice given by the Owner Trustee shall state (i)
the Distribution Date upon or with respect to which final payment of the
Certificates shall be made upon presentation and surrender of the Certificates
at the office of the Paying Agent therein designated, (ii) the amount of any
such final payment and (iii) that the Record Date otherwise applicable to such
Distribution Date is not applicable, payments being made only upon presentation
and surrender of the Trust Certificates at the office of the Paying Agent
therein specified. The Owner Trustee shall give such notice to the Certificate
Registrar (if other than the Owner Trustee) and the Paying Agent at the time
such notice is given to Certificateholders. Upon presentation and surrender of
the Certificates, the Paying Agent shall cause to be distributed to
Certificateholders amounts distributable on such Distribution Date pursuant to
Section 5.06 of the Sale and Servicing Agreement.
In the event that all of the Certificateholders shall not
surrender their Trust Certificates for cancellation within
six months after the date specified in the above mentioned
written notice, the Owner Trustee shall give a second written
notice to the remaining Certificateholders to surrender their
Trust Certificates for cancellation and receive the final
distribution with respect thereto. If within one year after
the second notice all the Trust Certificates shall not have
been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take
appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Trust
Certificates, and the cost thereof shall be paid out of the
funds and other assets that shall remain subject to this
Agreement. Any funds remaining in the Trust after exhaustion
of such remedies shall be distributed by the Owner Trustee to
the Residual Interestholders on a pro rata basis.
(e) Upon the winding up of the Trust and its termination, the
Owner Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3820 of the Business Trust Statute.
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SECTION 9.2 Dissolution Upon Bankruptcy of the Company. (i) In the event
that an Insolvency Event shall occur with respect to the Company when there is a
Securities Insurer Default subsisting, this Agreement shall be terminated in
accordance with Section 9.1 90 days after the date of such Insolvency Event,
unless, before the end of such 90-day period, the Owner Trustee shall have
received written instructions from (a) each of the Owners (other than the
Company) representing more than 50% of the Certificate Principal Balance and
more than 50% of the Percentage Interest of the Residual Interest (not including
the Certificate Principal Balance of the Certificates held by the Company), and
(b) an Opinion of Counsel described in Section 9.2(ii). Promptly after the
occurrence of any Insolvency Event with respect to the Company, (A) the Company
shall give the Indenture Trustee and the Owner Trustee written notice of such
Insolvency Event, (B) the Owner Trustee shall, upon the receipt of such written
notice from the Company, give prompt written notice to the Owners (other than
the Company) and the Indenture Trustee, of the occurrence of such event, and (C)
the Indenture Trustee shall, upon receipt of written notice of such Insolvency
Event from the Owner Trustee or the Company, give prompt written notice to the
Noteholders and Securities Insurer of the occurrence of such event; provided,
however, that any failure to give a notice required by this sentence shall not
prevent or delay, in any manner, a termination of the Trust pursuant to the
first sentence of this Section 9.2. Upon a termination pursuant to this Section,
the Owner Trustee shall direct the Indenture Trustee promptly to sell the assets
of the Trust (other than the Trust Accounts and the Certificate Distribution
Account) in a commercially reasonable manner and on commercially reasonable
terms. The proceeds of such a sale of the assets of the Trust shall be treated
as collections under the Sale and Servicing Agreement.
(ii) If an Insolvency Event occurs when the Insurance Agreement shall be
in effect and there is no Securities Insurer Default existing, then the Owner
Trustee shall retain for the benefit of the Certificateholders and the
Securities Insurer, all remedies available at law or under this Agreement and
none of the liens or security interests granted by the Trust shall be
extinguished, released, terminated or impaired by such Insolvency Event; but
rather, such liens and security interests shall continue to encumber the Owner
Trust Estate until all principal and interest on the Certificates is paid in
full and any other amounts required to be distributed by the Trust under this
Agreement have been so distributed. In any case however, subject to the
following, upon the occurrence of an Insolvency Event, the Owner Trust Estate
held under this Agreement shall be sold within 90 days of the occurrence of such
event and the proceeds of such sale distributed in accordance with the
provisions of Article 5 of this Agreement. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall not terminate and the assets
shall not be sold upon the occurrence of an Insolvency Event, if within ninety
(90) days of such Insolvency Event the holders of a majority in Percentage
Interest of the Certificates and a majority in Percentage Interest of the
Residual Interest (in each case exclusive of the FRH Certificates) and the
Securities Insurer agree that this Agreement shall not so terminate and the
Owner Trustee and the Securities Insurer shall receive an opinion of counsel to
the Trust from counsel acceptable to the Securities Insurer, to the effect that
the entity created or reconstituted under this Agreement, if any, would not be
characterized as an association taxable as a corporation for federal and state
income tax purposes. If authorization to continue this Agreement is not
received and the Insurance Agreement is still in
42
effect, and provided that the Owner Trustee and the Securities Insurer shall
have received an opinion of counsel to the Trust from counsel acceptable to the
Securities Insurer to the effect that the actions described in this sentence,
if consummated, shall not cause the Trust to be characterized as an association
taxable as a corporation for federal and state income tax purposes, the assets
shall not be sold, but the Owner Trustee shall adopt a plan of dissolution,
acceptable to the Securities Insurer, to make collections on the Owner Trust
Estate for distribution in accordance with the terms and priority of payment
which would apply under the provisions of the Basic Documents. Any party
hereto who has actual knowledge of the occurrence of an Insolvency Event shall
immediately notify the Securities Insurer of such occurrence.
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation satisfying the provisions of Section
3807(a) of the Business Trust Statute; authorized to exercise corporate powers;
having a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by Federal or state authorities; and having (or
having a parent which has) a rating of at least "Baa3" by Moody's and "A-1" by
Standard & Poor's and being acceptable to the Securities Insurer. If such
corporation shall publish reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority,
then for the purpose of this Section, 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
Owner Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Owner Trustee shall resign immediately in the manner and with
the effect specified in Section 10.2.
SECTION 10.2 Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Administrator, the Indenture Trustee and
the Securities Insurer. Upon receiving such notice of resignation, the
Administrator shall promptly appoint a successor Owner Trustee (acceptable to
the Securities Insurer) by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Owner Trustee and one copy to the
successor Owner Trustee. If no successor Owner Trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Owner Trustee or the Securities Insurer may
petition any court of competent jurisdiction for the appointment of a successor
Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 10.1 and shall fail to resign after written
request therefor by the Administrator, or if at any time the Owner Trustee shall
be legally unable to act, or shall be adjudged bankrupt or insolvent, or
43
a receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Securities Insurer, or the Administrator with the consent
of the Securities Insurer, may remove the Owner Trustee. If the Administrator
or the Securities Insurer shall remove the Owner Trustee under the authority of
the immediately preceding sentence, the Securities Insurer, or the
Administrator with the consent of the Securities Insurer, shall promptly
appoint a successor Owner Trustee by written instrument in duplicate, one copy
of which instrument shall be delivered to the outgoing Owner Trustee so removed
and one copy to the successor Owner Trustee and payment of all fees owed to the
outgoing Owner Trustee.
Any resignation or removal of the owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.3 written approval by the Securities Insurer and
payment of all fees and expenses owed to the outgoing owner Trustee. The
Administrator shall provide notice of such resignation or removal of the Owner
Trustee to each of the Rating Agencies and the Securities Insurer.
SECTION 10.3 Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the
Administrator, the Securities Insurer and to its predecessor Owner Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become effective
and such successor Owner Trustee (if acceptable to the Securities Insurer),
without any further act, deed or conveyance, shall become fully vested with all
the rights, powers, duties, and obligations of its predecessor under this
Agreement, with like effect as if originally named as Owner Trustee. The
predecessor Owner Trustee shall upon payment of its fees and expenses deliver to
the successor Owner Trustee all documents and statements and monies held by it
under this Agreement; and the Administrator and the predecessor Owner Trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties, and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice of the successor of such Owner
Trustee to all Owners, the Indenture Trustee, the Noteholders, the Securities
Insurer and the Rating Agencies. If the Administrator fails to mail such notice
within 10 days after acceptance of appointment by the successor Owner Trustee,
the successor Owner Trustee shall cause such notice to be mailed at the expense
of the Administrator.
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SECTION 10.4 Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such corporation shall be eligible pursuant to Section 10.1, without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided
further that the Owner Trustee shall mail notice of such merger or consolidation
to the Rating Agencies.
SECTION 10.5 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 Owner Trust Estate or any Mortgaged Property may at the time be located,
and for the purpose of performing certain duties and obligations of the Owner
Trustee with respect to the Trust and the Certificates under the Sale and
Servicing Agreement, the Administrator and the Owner Trustee acting jointly
shall have the power and shall execute and deliver all instruments to appoint
one or more Persons approved by the Owner Trustee and acceptable to the
Securities Insurer to act as co-trustee, jointly with the Owner Trustee, or
separate trustee or separate trustees, of all or any part of the Owner Trust
Estate, and to vest in such Person, in such capacity, such title to the Trust,
or any part thereof, and, subject to the other provisions of this Section, such
powers, duties, obligations, rights and trusts as the Administrator, the
Securities Insurer and the Owner Trustee may consider necessary or desirable. If
the Administrator shall not have joined in such appointment within 25 days after
the receipt by it of a request so to do, the Owner Trustee (with the consent of
the Securities Insurer) shall have the power to make such appointment. No
co-trustee or separate trustee under this Agreement shall be required to meet
the terms of eligibility as a successor trustee pursuant to Section 10.1 and no
notice of the appointment of any co-trustee or separate trustee shall be
required pursuant to Section 10.3.
The Owner Trustee hereby appoints the Indenture Trustee as Co-Owner Trustee
for the purpose of establishing and maintaining the Certificate Distribution
Account and making the distributions therefrom to the Persons entitled thereto
pursuant to Section 5.06 of the Sale and Servicing Agreement. The Owner Trustee
and the Co-Owner Trustee each agree that upon the occurrence and continuation of
a Securities Insurer Default, the Co-Owner Trustee shall resign and the Owner
Trustee shall assume the duties and obligations of the Co-Owner Trustee under
the Sale and Servicing Agreement and this Agreement, including without
limitation, the obligations of the Co-Owner Trustee as Paying Agent pursuant to
Section 3.9 hereof.
Each separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provision and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner Trustee
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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 Owner 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, the Owner 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 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
Owner Trustee; provided that Co-Owner Trustee, in performing its duties and
obligations under the Sale and Servicing Agreement, may act separately in
its capacity as Co-Owner Trustee without the Owner Trustee joining in such
Acts.
(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Administrator and the Owner 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 Owner Trustee shall be
deemed to have been given to the separate trustees and co-trustees, as if given
to each of them. Every instrument appointing any separate trustee or
co-trustee, other than this Agreement, shall refer to this Agreement and to the
conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of appointment, shall be vested with the estates specified in its
instrument of appointment, either jointly with the Owner 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 Owner Trustee.
Each such instrument shall be filed with the Owner Trustee and a copy thereof
given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its Agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any 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 Owner Trustee, to the extent permitted by law, without the appointment of
a new or successor trustee.
The Co-Owner Trustee, in its capacity as Co-Owner Trustee, shall not have
any rights, duties or obligations except as expressly provided in this Agreement
and the Sale and Servicing Agreement.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Supplements and Amendments. This Agreement may be amended
by the Depositor, the Company and the Owner Trustee, with the prior consent of
the Securities Insurer, and with prior written notice to the Rating Agencies and
the Securities Insurer, but without the consent of any of the Noteholders or the
Owners or the Indenture Trustee, to cure any ambiguity, to correct or supplement
any provisions in this Agreement or for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions in this Agreement
or of modifying in any manner the rights of the Noteholders or the Owners
provided, however, that such action shall not adversely affect in any material
respect the interests of any Noteholder or Owner or the rights of the Securities
Insurer. An amendment described above shall be deemed not to adversely affect
in any material respect the interests of any Noteholder or Owner if (i) an
opinion of counsel is obtained to such effect, and (ii) the party requesting the
amendment satisfies the Rating Agency Condition with respect to such amendment.
This Agreement may also be amended from time to time by the Depositor, the
Company and the Owner Trustee, with the prior written consent of the Rating
Agencies and with the prior written consent of the Indenture Trustee, the
Securities Insurer, the Holders (as defined in the Indenture) of Notes
evidencing more than 50% of the Outstanding Amount of the Notes, the Holders of
Certificates evidencing more than 50% of the Certificate Principal Balance and
holders of Residual Interest Instruments evidencing more than 50% of the
Percentage Interests of the Residual Interest, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders or
the Owners; provided, however, that no such amendment shall (a) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on the Home Loans or distributions that shall be
required to be made for the benefit of the Noteholders or the Certificateholders
or the Securities Insurer (b) reduce the aforesaid percentage of the Outstanding
Amount of the Notes and the Certificate Principal Balance or the Percentage
Interests required to consent to any such amendment, in either case of clause
(a) or (b) without the consent of the holders of all the outstanding Notes and
Certificates and the Securities Insurer, and in the case of clause (b) without
the consent of the holders of all the outstanding Residual Interest Instruments.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Indenture Trustee, the Securities Insurer
and each of the Rating Agencies.
It shall not be necessary for the consent of Owners, the Noteholders or the
Indenture Trustee pursuant to this Section 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 consents (and any
other consents of Owners provided for in this Agreement or in any other
47
Basic Document) and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the
Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of Trust,
the Owner Trustee shall cause the filing of such amendment with the Secretary of
State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment which affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.2 No Legal Title to Owner Trust Estate in Owners. The Owners
shall not have legal title to any part of the Owner Trust Estate. The Owners
shall be entitled to receive distributions with respect to their undivided
ownership interest therein only in accordance with Articles V and IX. No
transfer, by operation of law or otherwise, of any right, title, or interest of
the Owners to and in their ownership interest in the Owner Trust Estate shall
operate to terminate this Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of legal title to any part
of the Owner Trust Estate.
SECTION 11.3 Limitations on Rights of Others. Except for Section 2.7,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Company, the Owners, the Administrator, the
Securities Insurer and, to the extent expressly provided herein, the Indenture
Trustee and the Noteholders, and nothing in this Agreement (other than Section
2.7), whether express or implied, shall be construed to give to any other Person
any legal or equitable right, remedy or claim in the Owner Trust Estate or under
or in respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 11.4 Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt by the intended recipient or three Business Days after
mailing if mailed by certified mail, postage prepaid (except that notice to the
Owner Trustee shall be deemed given only upon actual receipt by the Owner
Trustee), at the following addresses: (i) if to the Owner Trustee, its
Corporate Trust Office; (ii) if to the Depositor, FIRSTPLUS INVESTMENT
CORPORATION, 0000 Xxxxxx Xxxxxx Xxxxxxx, Xxxxx 000X, Xxx Xxxxx, Xxxxxx 00000,
Attention: Xxxxx X. Xxxxxx; (iii) if to the Company, FIRSTPLUS RESIDUAL
HOLDINGS, INC., 0000 Xxxxxx Xxxxxx Xxxxxxx, Xxxxx 000X, Xxx Xxxxx, Xxxxxx 00000,
Attention: Xxxxx X. Xxxxxx; (iv) if to the Securities Insurer, MBIA Insurance
Corporation, 000 Xxxx Xxxxxx, Xxxxxx, Xxx Xxxx 00000, Attention: IPM-SF
FIRSTPLUS 1996-4, telephone: 000-000-0000, confirmation: 000-000-0000; (v) if to
the Co-Owner Trustee, First Bank National Association, 000 Xxxx Xxxxx Xxxxxx,
Xx. Xxxx, Xxxxxxxxx 00000, Attention: Corporate Trust Department; or, as to
each such party, at such other address as shall be designated by such party in a
written notice to each other party.
48
(b) Any notice required or permitted to be given to an Owner shall be
given by first-class mail, postage prepaid, at the address of such Owner 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 Owner receives such notice.
SECTION 11.5 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.6 Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.7 Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
Depositor, the Company, the Securities Insurer, the Owner Trustee and its
successors and each owner and its successors and permitted assigns, all as
herein provided. Any request, notice, direction, consent, waiver or other
instrument or action by an Owner shall bind the successors and assigns of such
Owner.
SECTION 11.8 Covenants of the Company. In the event that (a) the
Certificate Principal Balance shall be reduced by Realized Losses and (b) any
litigation with claims in excess of $1,000,000 to which the Company is a party
which shall be reasonably likely to result in a material judgment against the
Company that the Company will not be able to satisfy shall be commenced by an
Owner, during the period beginning nine months following the commencement of
such litigation and continuing until such litigation is dismissed or otherwise
terminated (and, if such litigation has resulted in a final judgment against the
Company, such judgment has been satisfied), the Company shall not pay any
dividend to RAC, or make any distribution on or in respect of its capital stock
to RAC, or repay the principal amount of any indebtedness of the Company held by
RAC, unless (i) after giving effect to such payment, distribution or repayment,
the Company's liquid assets shall not be less than the amount of actual damages
claimed in such litigation or (ii) the Rating Agency Condition shall have been
satisfied with respect to any such payment, distribution or repayment and the
Securities Insurer consents to such payment. The Company will not at any time
institute against the Trust any bankruptcy proceedings under any United States
Federal or state bankruptcy or similar law in connection with any obligations
relating to the Trust Certificates, the Notes, the Trust Agreement or any of the
Basic Documents.
SECTION 11.9 No Petition. The Owner Trustee, by entering into this
Agreement, each Owner, by accepting a Trust Certificate, and the Indenture
Trustee and each Noteholder by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute
49
against the Company, the Depositor or the Trust, or join in any institution
against the Company or the Trust of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States Federal or state bankruptcy or law in connection with any
obligations relating to the Trust Certificates, the Notes, this Agreement or
any of the Basic Documents.
SECTION 11.10 No Recourse. Each Owner by accepting a Trust Certificate
acknowledges that such Owner's Trust Certificate represents a beneficial
interest in the Trust only and does not represent an interest in or an
obligation of the Seller, the Servicer, the Company, the Administrator, the
Owner Trustee, the Co-Owner Trustee or any Affiliate thereof and no recourse may
be had against such parties or their assets, except as may be expressly set
forth or contemplated in this Agreement, the Trust Certificates or the Basic
Documents.
SECTION 11.11 Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 11.12 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13 Certificate and Residual Interest Transfer Restrictions.
Neither the Certificates nor the Residual Interest may be acquired, by or for
the account of (i) an employee benefit plan (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is
subject to the provisions of Title I of ERISA, (ii) a plan described in Section
4975(e)(1) of the Internal Revenue Code of 1986, as amended, or (iii) any
entity, including an insurance company separate account or general account,
whose underlying assets include plan assets by reason of a plan's investment in
the entity (each, a "Benefit Plan"). By accepting and holding a Trust
Certificate, the Owner thereof shall be deemed to have represented and warranted
that it is not a Benefit Plan.
SECTION 11.14 Grant of Certificateholder and Residual Interest Holder
Rights to Securities Insurer.
(a) In consideration for the guarantee of the Certificates by
the Securities Insurer pursuant to the Guaranty Policy, the Certificateholders
hereby grant to the Securities Insurer the right to act as the Holder of 100% of
the outstanding Certificates for the purpose of exercising the rights of the
Certificateholders under this Agreement without the consent of the
Certificateholders, including the voting rights of such holders hereunder, but
excluding those rights requiring the consent of all such Holders under Section
11.1 and any rights of such Holders to distributions under
50
Section 5.06 of the Sale and Servicing Agreement; provided that the preceding
grant of rights to the Securities Insurer by the Certificateholders shall be
subject to Section 11.16.
(b) In consideration for the issuance of the Residual Interest
and for the guarantee of the Certificates by the Securities Insurer pursuant to
the Guaranty Policy, the holders of the Residual Interest hereby grant to the
Securities Insurer the right to act as the holder of 100% of the Residual
Interest for the purpose of exercising the rights of the holders of the Residual
Interest under this Agreement, including the voting rights of such holders
hereunder, but excluding those rights requiring the consent of all such holders
under Section 11.1 and any rights of such holders to Distributions under Section
5.06 of the Sale and Servicing Agreement; provided that the preceding grant of
rights to the Securities Insurer by the holders of the Residual Interest shall
be subject to Section 11.16.
(c) The rights of the Securities Insurer to direct certain
actions and consent to certain actions of the Certificateholders hereunder will
terminate at such time as the Certificate Principal Balance of the Certificates
has been reduced to zero and the Securities Insurer has been reimbursed for all
Guaranteed Payments and any other amounts owed under the Guaranty Policy and the
Insurance Agreement and the Securities Insurer has no further obligation under
the Guaranty Policy.
SECTION 11.15 Third-Party Beneficiary. The parties hereto acknowledge
that the Securities Insurer is an express third party beneficiary hereof
entitled to enforce any rights reserved to it hereunder as if it were actually a
party hereto.
SECTION 11.16 Suspension and Termination of Securities Insurer's Rights.
(a) During the continuation of a Securities Insurer Default,
rights granted or reserved to the Securities Insurer hereunder shall vest
instead in the Owners; provided that the Securities Insurer shall be entitled to
any distributions in reimbursement of the Securities Insurer Reimbursement
Amount, and the Securities Insurer shall retain those rights under Section 11.1
to consent to any amendment of this Agreement.
At such time as either (i) the Certificate Principal Balance has been
reduced to zero or (ii) the Guaranty Policy has been terminated and in either
case of (i) or (ii) the Securities Insurer has been reimbursed for all
Guaranteed Payments and any other amounts owed under the Guaranty Policy and the
Insurance Agreement (and the Securities Insurer no longer has any obligation
under the Guaranty Policy, except for breach thereof by the Securities Insurer),
then the rights and benefits granted or reserved to the Securities Insurer
hereunder (including the rights to direct certain actions and receive certain
notices) shall terminate and the Owner shall be entitled to the exercise of such
rights and to receive such benefits of the Securities Insurer following such
termination to the extent that such rights and benefits are applicable to the
Owners.
51
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
FIRSTPLUS INVESTMENT CORPORATION,
Depositor
By:
----------------------------------
Name: Xxxxxxxxxxx X. Xxxxxxxx
Title: Senior Vice President
FIRSTPLUS RESIDUAL HOLDINGS, INC.
By:
----------------------------------
Name: Xxxxxxxxxxx X. Xxxxxxxx
Title: Senior Vice President
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee
By:
----------------------------------
Name:
Title:
FIRST BANK NATIONAL ASSOCIATION, not in its
individual capacity but solely as Co-Owner
Trustee and Paying Agent
By:
---------------------------------
Name: Xxxxx Xxxxxxxxxxxxxx
Title: Vice President
52
EXHIBIT A-1
TO THE TRUST AGREEMENT
(FORM OF CERTIFICATE)
53
EXHIBIT A-2
TO THE TRUST AGREEMENT
(FORM OF CERTIFICATE ISSUED TO THE COMPANY)
54
EXHIBIT B-1
TO THE TRUST AGREEMENT
(FORM OF RESIDUAL INTEREST INSTRUMENT]
55
EXHIBIT B-2
TO THE TRUST AGREEMENT
(FORM OF RESIDUAL INTEREST ISSUED TO THE COMPANY)
56
EXHIBIT C
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
FIRSTPLUS HOME LOAN OWNER TRUST 1996-4
THIS Certificate of Trust of FIRSTPLUS HOME LOAN OWNER TRUST 1996-4 (the
"Trust"), dated as of November __, 1996, is being duly executed and filed by
Wilmington Trust Company, a Delaware banking corporation, as trustee, to form a
business trust under the Delaware Business Trust Act (12 Del. Code, Section
3801 et seq.).
1. Name. The name of the business trust formed hereby is FIRSTPLUS
HOME LOAN OWNER TRUST 1996-4.
2. Delaware Trustee. The name and business address of the trustee of
the Trust in the State of Delaware is Wilmington Trust Company of Xxxxxx Square
North, 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000.
Attention:___________.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust,
has executed this Certificate of Trust as of the date first above written.
Wilmington Trust Company not in its
individual capacity but solely as Owner
Trustee under a Trust Agreement dated as of
November 1, 1996.
By:
------------------------------
Name:
Title:
57
EXHIBIT D
TO THE TRUST AGREEMENT
(Form of Demand Note)
58
EXHIBIT E
TO THE TRUST AGREEMENT
(Form of Certificate Depository Agreement)
59
EXHIBIT F-1
FORM OF INVESTMENT LETTER
60
EXHIBIT F-2
FORM OF INVESTMENT LETTER
