EXIBIT 4.4
TRUST AGREEMENT
among
PREFERRED SECURITIZATION CORPORATION,
as Depositor,
PREFERRED MORTGAGE SPC FUNDING CORP.,
as the Company,
[WILMINGTON TRUST COMPANY,]
as Owner Trustee
and
[BANKERS TRUST COMPANY,]
as Co-Owner Trustee
Dated as of ______________
[PREFERRED CREDIT OWNER TRUST 199_-_]
[Asset Backed Securities, Series 199_-_]
TABLE OF CONTENTS
PAGE
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.................................8
SECTION 2.8. Title to Trust Property.................................9
SECTION 2.9. Situs of Trust..........................................9
SECTION 2.10.Representations and Warranties of the Depositor
and the Company; Covenant of the Company..............10
SECTION 2.11.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...................................13
SECTION 3.4. Registration of Transfer and Exchange of
Trust Certificates...................................14
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen
Trust Certificates...................................14
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......................15
SECTION 3.9. Appointment of Paying Agent..........................16
SECTION 3.10.Ownership by Company of the Company Certificates.....16
SECTION 3.11.Book-Entry Certificates..............................16
SECTION 3.12.Notices to Clearing Agency...........................17
SECTION 3.13.Definitive Certificates..............................17
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.....................................23
ARTICLE V.
Application of Trust Funds; Certain Duties
SECTION 5.1. Establishment of Trust Account.......................23
SECTION 5.2. Application Of Trust Funds...........................24
SECTION 5.3. Method of Payment....................................25
SECTION 5.4. Segregation of Moneys; No Interest...................25
SECTION 5.5. Accounting and Reports to the Certificateholder,
Owners, the Internal Revenue Service and Others......25
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.......................................26
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......................................28
SECTION 6.6. Restrictions.........................................28
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..32
SECTION 7.8. Licenses............................................32
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.......................33
ARTICLE IX.
Termination of Trust Agreement
SECTION 9.1. Termination of Trust Agreement......................34
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............................37
SECTION 10.4. Merger or Consolidation of Owner Trustee...........38
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee......38
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...................42
SECTION 11.4. Notices...........................................42
SECTION 11.5. Severability......................................42
SECTION 11.6. Separate Counterparts.............................42
SECTION 11.7. Successors and Assigns............................43
SECTION 11.8. Covenants of the Company..........................43
SECTION 11.9. No Petition.......................................43
SECTION ▇▇.▇▇.▇▇ Recourse.......................................43
SECTION 11.11.Headings..........................................44
SECTION 11.12.GOVERNING LAW.....................................44
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
TRUST AGREEMENT, dated as of [____________], among PREFERRED
SECURITIZATION CORPORATION, a Delaware corporation, as Depositor (the
"Depositor"), PREFERRED MORTGAGE SPC FUNDING CORP.(the "Company"), a Delaware
corporation, [WILMINGTON TRUST COMPANY,] a Delaware banking corporation, as
Owner Trustee (the "Owner Trustee") and [BANKER TRUST COMPANY,] 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 [_______________] among the Issuer, the Transferor and [Banker Trust
Company,] as Administrator.]
"Administrator" shall mean [Banker Trust Company,] 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.
"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
[▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇;] 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).
"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.
"Company 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 [________________],
by and between the Issuer and the Indenture Trustee.
"Indenture Trustee" means [Banker Trust Company,] as Indenture Trustee
under the Indenture.
"Initial Certificate Principal Balance" shall mean $---------------.
"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;
(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
_____________ among the Transferor, the Seller, the Issuer, the Indenture
Trustee [and the Securities Insurer].]
"Issuer" shall mean PREFERRED CREDIT OWNER TRUST 199_-_], 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 Investment, as applicable.
"Owner Trust Estate" shall mean all right, title and interest of the
Trust in and to the property and rights assigned to the Trust pursuant to
Section 2.5 hereof and Article II of the Sale and Servicing Agreement (including
the Trust Estate), all funds on deposit from time to time in the Trust Accounts
(including the Certificate Distribution Account) and all other property of the
Trust from time to time, including any rights of the Owner Trustee and the Trust
pursuant to the Sale and Servicing Agreement and the Administration Agreement.
"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.
"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).
"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, the Transferor, 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, the
Transferor, and [Advanta Mortgage Corp. U.S.A.] as the 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": 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, 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 [______________] 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".
(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
["PREFERRED CREDIT OWNER TRUST 199_-_",] 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 ▇▇▇ 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 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 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;
(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 Company 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.
SECTION 2.7. LIABILITY OF THE OWNERS.
(a) The Company, as holder of the Company 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 Company 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
Transferor, 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.
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
Delaware, 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 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 Delaware,
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.
(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 serving as an indemnitor in
connection with the Preferred Credit Asset-Backed Certificates, Series
1996-2 and 1997-1, 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.
(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. FEDERAL INCOME TAX ALLOCATIONS. Net income of the Trust
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:
(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. 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 Company
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 Company 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.
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 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 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 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.
SECTION 3.10. OWNERSHIP BY COMPANY OF THE COMPANY CERTIFICATES. On the
Closing Date, the Company shall receive from the Trust and thereafter shall
retain beneficial and record ownership of the Company 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 Company
Certificates shall be non-transferable. Any attempted transfer of any Company
Certificates shall be null and void. The Owner Trustee shall cause any Company
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 Company 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 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 the
Transferor 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 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 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 the Transferor 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.
(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 [the
Transferor] 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]):
(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;
(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 and the Servicer.
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 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 [Bankers Trust Company] 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, BANKERS
TRUST COMPANY, AS CO- OWNER TRUSTEE, IN TRUST FOR THE PREFERRED CREDIT ASSET
BACKED SECURITIES, SERIES 199_-_".] 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 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 Company 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 the Co-Owner
Trustee shall direct the 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.
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.
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 $___________, Class A-2 Notes in the aggregate
principal amount of $_____________, Class A-3 Notes in the aggregate principal
amount of $______________, Class A-4 Notes in the aggregate principal amount of
$_____________, Class A-5 Notes in the aggregate principal amount of
$_____________, Class A-6 Notes in the aggregate principal amount of
$____________, Class A-7 Notes in the aggregate principal amount of
$____________, Class A-8 Notes in the aggregate principal amount of $__________
and Certificates in the aggregate principal amount of $______________. 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.
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.
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 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 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 New
York. 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 New York 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 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 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 Company 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 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (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.
(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.
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 Company
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 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] [Owner
Trustee] 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 [Owner Trustee] [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 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.
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 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 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.
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
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, PREFERRED SECURITIZATION CORPORATION,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇; (iii) if to the Company, PREFERRED MORTGAGE SPC FUNDING CORP., ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇; (iv) [if to the Securities Insurer, [MBIA Insurance Corporation, ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: IPM-SF FIRSTPLUS 1996-3,
telephone: ▇▇▇-▇▇▇-▇▇▇▇, confirmation: ▇▇▇-▇▇▇-▇▇▇▇]; (v) if to the Co-Owner
Trustee, [Bankers Trust Company, ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, 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.
(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 the Transferor, or make any distribution on or in respect of its
capital stock to the Transferor, or repay the principal amount of any
indebtedness of the Company held by the Transferor, 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 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 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..
(b) 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.
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.
PREFERRED SECURITIZATION CORPORATION
Depositor
By:
Name:
Title:
PREFERRED MORTGAGE SPC FUNDING CORP.
By:
Name:
Title:
[WILMINGTON TRUST COMPANY,] not in its individual capacity but solely
as Owner Trustee
By:
Name:
Title:
[BANKERS TRUST COMPANY,] not in its
individual capacity but solely as
Co-Owner Trustee and Paying Agent
By:
Name:
Title:
EXHIBIT A
TO THE TRUST AGREEMENT
(FORM OF CERTIFICATE)
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
[DEPOSITORY TRUST COMPANY,] A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF [DTC] (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION
OF PREFERRED SECURITIZATION CORPORATION, PREFERRED CREDIT
CORPORATION OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT TO
THE EXTENT DESCRIBED BELOW.
[PREFERRED CREDIT OWNER TRUST 199_-_]
[____% ASSET BACKED CERTIFICATE]
evidencing a fractional undivided interest in the Trust, as defined below, the
property of which includes a pool of Home Loans sold to the Trust by PREFERRED
SECURITIZATION CORPORATION.
NUMBER:____ FRACTIONAL UNDIVIDED INTEREST: ________/
CUSIP No._________
(See Reverse Pages for certain definitions)
THIS CERTIFIES THAT___________ is the registered owner of a _________
/__________th nonassessable, fully-paid, fractional undivided interest in
[PREFERRED CREDIT OWNER TRUST 199_-_] (the "Trust") formed by PREFERRED
SECURITIZATION CORPORATION, a Delaware corporation (the "Seller").
The Trust was created pursuant to a Trust Agreement dated as of [ ]
(as amended and supplemented from time to time, the "Trust Agreement"), among
the Seller, PREFERRED MORTGAGE SPC FUNDING CORP., a Delaware corporation (the
"Company"), [Wilmington Trust Company,] as owner trustee (the "Owner Trustee")
and Bankers Trust Company, as Co-Owner Trustee (the "Co-Owner Trustee"), a
summary of certain of the pertinent provisions of which is set forth below. To
the extent not otherwise defined herein, the capitalized terms used herein have
the meanings assigned to them in the Trust Agreement or the Sale and Servicing
Agreement dated as of [ ] (as amended and supplemented from time to time, the
"Sale and Servicing Agreement"), among the Trust, the Seller, Advanta Mortgage
Corp. U.S.A., as servicer (the "Servicer") and the Co-Owner Trustee, as
applicable.
This Certificate is one of the duly authorized Certificates designated
as ["Preferred Credit Asset Backed Certificates, Series 199_-_"] (herein called
the "Certificates") issued under the Trust Agreement. Also issued under an
Indenture dated as of [ ,] between the Trust and [Bankers Trust Company,] as
Indenture Trustee, are the [eight] classes of Notes designated as ["Preferred
Asset Backed Notes, Series 199_-_, Class A-1, Class ▇- ▇, Class A-3, Class A-4,
Class A-5, Class A-6, Class A-7 and Class A-8] (collectively, the "Notes"). This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement to which Trust Agreement the holder of this
Certificate by virtue of the acceptance hereof assents and by which such holder
is bound. Payments of principal and interest on this Certificate shall be made
by [Bankers Trust Company,] in its capacity as Co-Owner Trustee under the Sale
and Servicing Agreement. The property of the Trust includes a pool of Initial
Home Loans and Subsequent Home Loans (collectively, the "Home Loans"), all
monies due thereunder on or after the respective Cut-off Dates thereof, certain
bank accounts and the proceeds thereof, proceeds from claims on certain
insurance policies and certain other rights under the Trust Agreement and the
Sale and Servicing Agreement and all proceeds of the foregoing. The rights of
the holders of the Certificates are subordinated to the rights of the holders of
the Notes, as set forth in the Sale and Servicing Agreement and the Indenture.
Under the Trust Agreement, there will be distributed on the 20th day
of each month or, if such 25th day is not a Business Day, the next Business Day,
(each, a "Distribution Date"), commencing in [ ,] to the person in whose name
this Certificate is registered at the close of business on the last Business Day
of the month immediately preceding the month in which each Distribution Date
occurs (the "Record Date") such Certificateholder's fractional undivided
interest in the Certificateholder Distributable Amount to Certificateholders on
such Distribution Date pursuant to Section 5.06 of the Sale and Servicing
Agreement; provided however, that no principal will be distributed to the
Certificateholders until on or after the Distribution Date on which the Class
A-8 Notes have been paid in full.
The holder of this Certificate acknowledges and agrees that its rights
to receive distributions in respect of this Certificate are subordinated to the
rights of the Noteholders as described in the Sale and Servicing Agreement and
the Indenture.
It is the intent of the Seller, the Company, the Servicer and the
Certificateholders that, for purposes of Federal Income, state and local income
and single business tax and any other income taxes, the Trust will be treated as
a partnership and the Certificateholders (including the Company) will be treated
as partners in that partnership. The Company and the other Certificateholders by
acceptance of a Certificate, agree to treat, and to take no action inconsistent
with the treatment of, the Certificates for such tax purposes as partnership
interests in the Trust.
Each Certificateholder or Certificate Owner, by its acceptance of a
Certificate or, in the case of a Certificate Owner, a beneficial interest in a
Certificate, covenants and agrees that such Certificateholder or Certificate
Owner, as the case may be, will not at any time institute against the Company,
or join in any institution against the Company of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Certificates, the Notes, the
Trust Agreement or any of the Basic Documents.
Distributions on this Certificate will be made as provided in the
Trust Agreement, and the Indenture by the Indenture Trustee by wire transfer or
check mailed to the Certificateholder of record in the Certificate Register
without the presentation or surrender of this Certificate or the making of any
notation hereon, except that with respect to Certificates registered on the
Record Date in the name of the nominee of the Clearing Agency (initially, such
nominee to be Cede & Co.), payments will be made by wire transfer in immediately
available funds to the account designated by such nominee. Except as otherwise
provided in the Trust Agreement and notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Co-Owner
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency maintained for the purpose
by the Co-Owner Trustee in the Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
[Remainder of page intentionally left blank]
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual or facsimile
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or the Sale and Servicing Agreement or be valid for
any purpose.
THIS TRUST CERTIFICATE 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.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Certificate to be duly executed.
[PREFERRED CREDIT OWNER TRUST 199_-_]
By: [Wilmington Trust Company,] not in its individual
capacity but solely as Owner Trustee under the
Trust Agreement
By:
Authorized Signatory
DATED:
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Trust Agreement.
[BANKERS TRUST COMPANY,]
as Authenticating Agent
By:
Authorized Signatory
(REVERSE OF TRUST CERTIFICATE)
The Certificates do not represent an obligation of, or an interest in,
the Seller, the Servicer, the Company, the Owner Trustee, the Co-Owner Trustee
or any affiliates of any of them and no recourse may be had against such parties
or their assets, except as may be expressly set forth or contemplated herein or
in the Trust Agreement or the Basic Documents. In addition, this Certificate is
not guaranteed by any governmental agency or instrumentality and to limited in
right of payment to certain collections with respect to the Home Loans (and
certain other amounts), all as more specifically set forth herein and in the
Sale and Servicing Agreement. The Certificates are limited in right of payment
to certain collections and recoveries respecting the Home Loans, all as more
specifically set forth in the Sale and Servicing Agreement and the Indenture. A
copy of each of the Sale and Servicing Agreement, the Indenture and the Trust
Agreement may be examined during normal business hours at the principal office
of the Seller, and at such other places, if any, designated by the Seller, by
any Certificateholder upon written request.
[[MBIA Insurance Corporation,] as the [Securities Insurer], has issued
a Guaranty Policy in the name of the Indenture Trustee for the benefit of the
Certificateholders, which policy guarantees payments on each Distribution Date
to the Indenture Trustee for the benefit of the Certificateholders of the
related Certificateholders' Interest Distributable Amount and the portion of the
Regular Principal Distribution Amount then payable on the Certificates. Unless a
Securities Insurer Default shall be continuing, [the Securities Insurer] shall
be deemed to be the Holder of 100% of the outstanding Certificates for the
purpose of exercising the rights, including voting rights, of the
Certificateholders under the Trust Agreement and the Sale and Servicing
Agreement. In addition, on each Distribution Date, after the Certificateholders
have been paid all amounts to which they are entitled, [the Securities Insurer]
will be entitled to be reimbursed for any unreimbursed Guaranteed Payments and
any other amounts owed under the Guaranty Policy.]
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Seller and the Company and the rights of the Certificateholders under the Trust
Agreement at any time by the Seller, the Company and the Owner Trustee with the
consent of the holders of the Notes and the Certificates each voting as a class
evidencing not less than a majority of the outstanding Notes and the Certificate
Principal Balance. Any such consent by the holder of this Certificate shall be
conclusive and binding on such holder and on all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Trust Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the holders of
any of the Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registerable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies of the Certificate Registrar maintained by
the Co-Owner Trustee in the Borough of Manhattan, The City of New York,
accompanied by a written instrument of transfer in form satisfactory to the Co-
Owner Trustee and the Certificate Registrar duly executed by the holder hereof
or such holder's attorney duly authorized in writing, and thereupon one or more
new Certificates of authorized denominations evidencing the same aggregate
interest in the Trust will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Trust Agreement is the Co-Owner
Trustee.
The Certificates are issuable only as registered Certificates without
coupons in denominations of $100,000 and in integral multiples of $1,000 in
excess thereof. As provided in the Trust Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same aggregate
denomination, as requested by the holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but the
Co-Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Owner Trustee, the Co-Owner Trustee, the Certificate Registrar and
any agent of the Owner Trustee, the Co-Owner Trustee or the Certificate
Registrar may treat the person in whose name this Certificate is registered as
the owner hereof for all purposes and none of the Owner Trustee, the Co-Owner
Trustee, the Certificate Registrar or any such agent shall be affected by any
notice to the contrary.
The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby and the Servicing Agreement shall terminate
eighteen months after the payment to Certificateholders of all amounts required
to be paid to them pursuant to the Trust Agreement and the Sale and Servicing
Agreement and the disposition of all property held as part of the Trust. The
Company may at its option purchase the corpus of the Trust at a price specified
in the Sale and Servicing Agreement, and such purchase of the Home Loans and
other property of the Trust will effect early retirement of the Certificates;
however, such right of purchase is exercisable only on a Distribution Date on
which the Pool Principal Balance is less than or equal to 15% of the Pool
Principal Balance of the Initial Home Loans and the Subsequent Home Loans
conveyed to the Trust as of the respective Cut-off Dates.
The Certificates may not be acquired by (a) an employee benefit plan
(as defined in Section 3(3) of ERISA) that is subject to the provisions of Title
I of ERISA, (b) a plan described in Section 4975(e)(1) of the Code or (c) any
entity, including an insurance company separate 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 this Certificate, the Holder hereof
shall be deemed to have represented and warranted that it is not a Benefit Plan.
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
(Please print or type name and address, including postal zip code, of assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to transfer said Certificate on the books of the Certificate
Registrar, with full power of substitution in the premises.
Dated:
--------------------------------------
Signature Guaranteed:
--------------------------------------
------------------
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the Now York Stock Exchange or a commercial bank
or trust company.
EXHIBIT A-2
TO THE TRUST AGREEMENT
(FORM OF CERTIFICATE ISSUED TO THE COMPANY)
EXHIBIT B
TO THE TRUST AGREEMENT
(FORM OF RESIDUAL INTEREST INSTRUMENT]
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 PERSON IS OBLIGATED TO
REGISTER THIS RESIDUAL INTEREST UNDER THE ACT OR ANY STATE SECURITIES LAWS.
NO TRANSFER OF THIS RESIDUAL INTEREST INSTRUMENT OR ANY BENEFICIAL
INTEREST THEREIN SHALL BE MADE TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS
RECEIVED A CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE
(I) IS NOT A PERSON WHICH IS AN EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT SUBJECT
TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA") OR SECTION 4975 OF THE CODE OR A GOVERNMENTAL PLAN, DEFINED IN SECTION
3(32) OF ERISA SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A
MATERIAL EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE (ANY
SUCH PERSON BEING A "PLAN") AND (II) IS NOT AN 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.
THIS AGREEMENT IS NONTRANSFERABLE. NOTWITHSTANDING ANYTHING HEREIN OR
IN THE TRUST AGREEMENT TO THE CONTRARY, ANY ATTEMPTED TRANSFER OF THIS RESIDUAL
INTEREST INSTRUMENT SHALL BE NULL AND VOID FOR ALL PURPOSES.
[PREFERRED CREDIT OWNER TRUST 199_-_]
RESIDUAL INTEREST CERTIFICATE
No. _____
THIS CERTIFIES THAT __________________________________ (the "Owner")
is the registered owner of a _____% residual interest in [PREFERRED CREDIT OWNER
TRUST 199_-_] (the "Trust") existing under the laws of the State of Delaware and
created pursuant to the Trust Agreement dated as of [ ] (the "Trust Agreement")
between PREFERRED SECURITIZATION CORPORATION, as Depositor, PREFERRED MORTGAGE
SPC FUNDING CORP., as the Company, [WILMINGTON TRUST COMPANY,] not in its
individual capacity but solely in its fiduciary capacity as owner trustee under
the Trust Agreement (the "Owner Trustee") and [Bankers Trust Company,] as
Co-Owner Trustee (the "Co- Owner Trustee"). Initially capitalized terms used but
not defined herein have the meanings assigned to them in the Trust Agreement.
The Owner Trustee, on behalf of the Issuer and not in its individual capacity,
has executed this Residual Interest Instrument by one of its duly authorized
signatories as set forth below. This Residual Interest Instrument is one of the
Residual Interest Instruments referred to in the Trust Agreement and is issued
under and is subject to the terms, provisions and conditions of the Trust
Agreement to which the holder of this Residual Interest Instrument by virtue of
the acceptance hereof agrees and by which the holder hereof is bound. Reference
is hereby made to the Trust Agreement and the Sale and Servicing Agreement for
the rights of the holder of this Residual Interest Instrument, as well as for
the terms and conditions of the Trust created by the Trust Agreement.
The holder, by its acceptance hereof, agrees not to transfer this
Residual Interest Instrument except in accordance with terms and provisions of
the Agreement.
THIS RESIDUAL INTEREST INSTRUMENT 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.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Residual Interest Instrument to be
duly executed.
[PREFERRED CREDIT OWNER TRUST 199_-_]
By: [Wilmington Trust Company,] not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By: ---------------------------
DATED: [ ] Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Residual Interest referred to in the within-
mentioned Agreement.
[BANKERS TRUST COMPANY,]
as Authenticating Agent
By: ______________________________
Authorized Signatory
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
-----------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
-----------------------------------------------------------------------------
the within Instrument, and all rights thereunder, hereby irrevocably
constituting and appointing
------------------------------------------------------------- Attorney to -
transfer said Instrument on the books of the Certificate Registrar, with full
power of substitution in the premises.
Dated: ________________
____________________________________*/
Signature Guaranteed:
____________________________________*/
---------------
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the Now York Stock Exchange or a commercial bank
or trust company.
EXHIBIT B-2
TO THE TRUST AGREEMENT
(FORM OF RESIDUAL INTEREST ISSUED TO THE COMPANY)
EXHIBIT C
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
[PREFERRED CREDIT OWNER TRUST 199_-_]
THIS Certificate of Trust of [PREFERRED CREDIT OWNER TRUST 199_-_]
(the "Trust"), dated as of [ ], 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 [PREFERRED
CREDIT OWNER TRUST 199_-_
2. Delaware Trustee. The name and business address of the trustee of
the Trust in the State of Delaware is [Wilmington Trust Company] of ▇▇▇▇▇▇
Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. 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 [ ].
By: --------------------------------
Name:
Title:
EXHIBIT D
TO THE TRUST AGREEMENT
(Form of Certificate Depository Agreement)