Document:

<PAGE>   1
                                                                    EXHIBIT 10.1

                           FAIC II ISSUER TRUST 2000-1

                              AMENDED AND RESTATED
                               AGREEMENT OF TRUST

                                      among

                     FUND AMERICA INVESTORS CORPORATION II,
                                  as Depositor

                        CHRISTIANA BANK & TRUST COMPANY,
                                as Issuer Trustee

                                       and

                      STATE STREET BANK AND TRUST COMPANY,
                           as Issuer Certificate Agent

                          Dated as of January 20, 2000

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                          <C>
FAIC II ISSUER TRUST 2000-1...................................................................................1

        AMENDED AND RESTATED AGREEMENT OF TRUST...............................................................1

ARTICLE I: GENERAL............................................................................................1

     Section 1.01.  Amendment and Restatement of Prior Trust Agreement........................................1
     Section 1.02.  Appointment of Christiana Bank & Trust Company............................................1
     Section 1.03.  Governance of the Issuer..................................................................1
     Section 1.04.  Name, Principal Office, and Name and Address of Issuer Trustee as Agent for
                    Service of Process........................................................................2
     Section 1.05.  Purpose and Powers........................................................................2
     Section 1.06.  Claims Against the Issuer.................................................................3
     Section 1.07.  Beneficial Ownership......................................................................3
     Section 1.08.  Certain Covenants Relating to the Separateness of the Issuer..............................3

ARTICLE II:  DEFINITIONS......................................................................................4

ARTICLE III: CONTRIBUTIONS; CONSENT TO EXECUTION OF CERTAIN AGREEMENTS........................................8

     Section 3.01.  Contributions on the Closing Date.........................................................8
     Section 3.02.  Consideration for Contribution of Contributed Assets......................................8
     Section 3.03.  Holding of the Issuer Estate..............................................................8
     Section 3.04.  Limitation on the Liability of the Issuer Trustee, the Issuer Certificate Agent,
                    the Depositor and Certificateholders......................................................8
     Section 3.05.  Direction of Issuer Trustee's Execution of and Performance Under the Deposit
                    Agreement and the Indenture...............................................................8

ARTICLE IV: THE CLASS R CERTIFICATES..........................................................................9

     Section 4.01.  Initial Ownership.........................................................................9
     Section 4.02.  Authorization of the Class R Certificates.................................................9
     Section 4.03.  Form of Class R Certificates; Denominations...............................................9
     Section 4.04.  Execution and Authentication of Class R Certificates......................................9
     Section 4.05.  Registration of Transfer and Exchange of Class R Certificates.............................9
     Section 4.06.  Mutilated, Destroyed, Lost or Stolen Certificates........................................11
     Section 4.07.  Persons Deemed Owners....................................................................12
     Section 4.08.  Access to List of Certificateholders' Names and Addresses................................12
     Section 4.09.  Maintenance of Office or Agency..........................................................12
     Section 4.10.  Class R Certificates Held by The Depositor...............................................12
     Section 4.11.  Appointment of the Certificate Paying Agent..............................................12
     Section 4.12.  Representations and Warranties of State Street Bank and Trust Company....................13
     Section 4.13.  Resignation, Removal and Replacement of the Issuer Certificate Agent.....................14
     Section 4.14.  Reporting................................................................................15

ARTICLE V: CERTIFICATE DISTRIBUTIONS.........................................................................15

     Section 5.01.  Payments From Issuer Estate..............................................................15
     Section 5.02.  Establishment of Trust Agreement Collection Account......................................15
     Section 5.03.  Certificate Distributions................................................................16
     Section 5.04.  Redemption of the Class R Certificates...................................................17
     Section 5.05.  Account Statements; Other Reports........................................................17
     Section 5.06.  Books and Records........................................................................19
</TABLE>

         Agreement of Trust
                                        i

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<TABLE>
<S>                                                                                                         <C>
ARTICLE VI: CERTIFICATE TERMINATION EVENTS...................................................................19

     Section 6.01.  Certificate Termination Events...........................................................19
     Section 6.02.  Consequences of a Certificate Termination Event..........................................20
     Section 6.03.  Issuer Certificate Agent Termination Events..............................................20

ARTICLE VII:   RIGHTS, OBLIGATIONS, POWERS AND STATUS OF THE CERTIFICATEHOLDERS..............................21

     Section 7.01.  Management of the Issuer.................................................................21
     Section 7.02.  Bankruptcy, Dissolution or Termination of any Certificateholder..........................21
     Section 7.03.  Creditors of the Certificateholders......................................................21
     Section 7.04.  Certain Rights of the Majority Certificateholders........................................21
     Section 7.05.  Tax Status...............................................................................21

ARTICLE VIII:   CONCERNING THE ISSUER TRUSTEE AND CHRISTIANA BANK & TRUST COMPANY............................22

     Section 8.01.  General..................................................................................22
     Section 8.02.  Acceptance of the Issuer.................................................................24
     Section 8.03.  Authority and Duties of the Issuer Trustee...............................................25
     Section 8.04.  Representations and Warranties of Christiana Bank & Trust Company........................26
     Section 8.05.  Resignation of the Issuer Trustee........................................................26
     Section 8.06.  Indemnification..........................................................................27
     Section 8.07.  Fees and Expenses........................................................................28
     Section 8.08.  Litigation, Action Outside Delaware......................................................28

ARTICLE IX:   REDEMPTION OF NOTES............................................................................29

     Section 9.01.  Optional Redemption of the Notes.........................................................29

ARTICLE X:   DISSOLUTION, BANKRUPTCY AND LIQUIDATION OF THE ISSUER...........................................29

     Section 10.01.  Dissolution of the Issuer...............................................................29
     Section 10.02.  Termination.............................................................................30

ARTICLE XI:   NOTICES........................................................................................30

     Section 11.01.  Notices.................................................................................30

ARTICLE XII:    MISCELLANEOUS PROVISIONS.....................................................................32

     Section 12.01.  Entire Agreement........................................................................32
     Section 12.02.  Governing Law; Submission to Jurisdiction...............................................32
     Section 12.03.  Effect..................................................................................32
     Section 12.04.  Pronouns and Number.....................................................................32
     Section 12.05.  Effect of Headings......................................................................32
     Section 12.06.  Severability of Provisions..............................................................32
     Section 12.07.  Amendment or Waiver; Effect on Issuer Trust Agreement...................................33
     Section 12.08.  Binding Upon Assigns....................................................................33
     Section 12.09.  Counterparts............................................................................33
</TABLE>

         Agreement of Trust
                                       ii

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         Schedule I        Agency Securities

         Exhibit A         Form of Class R Certificate
         Exhibit B         Form of Transferee Certificate
         Exhibit C-1       Form of Transferee Affidavit (Freddie Mac)
         Exhibit C-2       Form of Transferee Affidavit (Fannie Mae)

         Agreement of Trust
                                       iii

<PAGE>   5

                           FAIC II ISSUER TRUST 2000-1

                     AMENDED AND RESTATED AGREEMENT OF TRUST

         This AMENDED AND RESTATED AGREEMENT OF TRUST (this "Agreement") of FAIC
II Issuer Trust 2000-1, a Delaware statutory business trust (the "Issuer"), is
made and entered into as of January 20, 2000 by and among Fund America Investors
Corporation II (the "Depositor"), as the initial holder of all beneficial
ownership interest in the Issuer; Christiana Bank & Trust Company, a banking
corporation incorporated in the State of Delaware (in its individual capacity
solely where expressly set forth herein, "Christiana Bank"), otherwise acting
solely in its capacity as trustee of the Issuer hereunder (in such capacity, the
"Issuer Trustee"), and State Street Bank and Trust Company, a trust company
organized in the Commonwealth of Massachusetts (in its individual capacity,
"State Street"), as authenticating agent, certificate registrar and certificate
paying agent hereunder with respect to the Class R Certificates issued hereunder
(in such capacities, the "Issuer Certificate Agent"). Capitalized terms used
without definitions have the meanings assigned to such terms in Article II or,
if not defined therein, such terms have the meanings assigned to them in the
Indenture (as defined herein).

         NOW, THEREFORE, the Issuer shall be governed under the following terms
and conditions providing for the conduct of the business and affairs of the
Issuer and the maintenance of the assets contributed to or otherwise owned or
held by or on behalf of the Issuer, together with the proceeds thereof:

                                   ARTICLE I:
                                     GENERAL

         Section 1.01.  Amendment and Restatement of Prior Trust Agreement.

         This Agreement hereby amends and restates in its entirety the Agreement
of Trust, dated January 19, 2000 (the "Prior Agreement of Trust") and,
notwithstanding any provision therein to the contrary, no provision of such
Prior Agreement of Trust shall survive the execution of this Agreement. The
terms of this Agreement will be effective from the date on which the Certificate
of Trust was filed.

         Section 1.02.  Appointment of Christiana Bank & Trust Company.

         The Depositor hereby appoints Christiana Bank & Trust Company as Issuer
Trustee effective as of the date hereof, to have all the rights, powers and
duties set forth herein and in the Act. The Issuer Trustee is hereby authorized
to file a Certificate of Trust with the Secretary of State pursuant to Section
3810 of the Act.

         Section 1.03.  Governance of the Issuer.

         The Issuer was formed as a statutory business trust under and pursuant
to the Prior Agreement of Trust, the Act and such other provisions of applicable
law as shall pertain to statutory business trusts organized pursuant to and in
accordance with the Act. It is the intention of the parties hereto that, from
and after the date hereof, this Agreement constitute the sole governing
instrument of the Issuer. All Persons owning or otherwise holding interests of
beneficial ownership in the Issuer shall own or otherwise hold such interests of
beneficial ownership pursuant to the provisions of this Agreement.

         Agreement of Trust

<PAGE>   6

         Section 1.04. Name, Principal Office, and Name and Address of Issuer
Trustee as Agent for Service of Process.

         The Issuer shall be conducted under the name "FAIC II Issuer Trust
2000-1," in which name the Issuer or the Issuer Trustee on behalf of the Issuer
shall enter into contracts and agreements with respect to the transactions
contemplated hereby. The principal place of business and office of the Issuer
shall be c/o Christiana Bank & Trust Company, Greenville Center, 3801 Kennett
Pike, Greenville, Delaware 19807, Attention: Corporate Trust Administration. The
Issuer Trustee, which is hereby designated to accept service of process, is
Christiana Bank & Trust Company, and its current office is located at the
address provided in the preceding sentence.

         Section 1.05. Purpose and Powers

                  (a) The Issuer shall have the power and authority to engage,
         and the purpose of the Issuer shall be limited to engaging, in the
         following activities:

                           (i) to enter into the Deposit and Sale Agreement
                  dated as of January 20, 2000 (the "Deposit Agreement") between
                  the Depositor and the Issuer, pursuant to which the Issuer
                  shall receive from the Depositor (a) the Agency Securities and
                  (b) the rights of the Depositor under the Purchase Agreement
                  dated as of January 20, 2000 (the "Purchase Agreement")
                  between Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
                  the Seller (in such capacity, the "Seller") and the Depositor
                  (together, the "Contributed Assets");

                           (ii) to issue U.S. $1,986,400 of the FAIC II Issuer
                  Trust 2000-1, variable rate, Class F Notes, due December 1,
                  2029 (the "Class F Notes") and U.S. $764,000 of the FAIC II
                  Issuer Trust 2000-1, variable rate, Class S Notes, due
                  December 1, 2029 (the "Class S Notes," and, together with the
                  Class F Notes, the "Notes") pursuant to a Terms Indenture (the
                  "Terms Indenture"), dated as of January 20, 2000, together
                  with the Standard Indenture Provisions which are incorporated
                  therein by reference , the "Indenture"), between the Issuer
                  and State Street as trustee thereunder (in such capacity, the
                  "Note Trustee"), and to issue U.S. $465,600 Initial
                  Certificate Balance of FAIC II Issuer Trust 2000-1, Class R
                  Certificates, due December 1, 2029 (the "Class R
                  Certificates"), issued hereunder, and to sell the Notes and
                  the Class R Certificates;

                           (iii) to remit the proceeds of the sale of the Notes
                  and the Class R Certificates to the Depositor as consideration
                  for the Contributed Assets received from the Depositor;

                           (iv) to assign, grant, transfer, pledge, mortgage and
                  convey the Pledged Assets (defined herein) to the Note Trustee
                  for the benefit of the registered holders of the Notes and to
                  hold, manage and distribute to the Certificateholders any
                  portion of the Issuer Estate released from or not included in,
                  the Lien on the Pledged Assets created pursuant to the
                  Indenture and remitted by the Note Trustee to the Trust
                  Agreement Collection Account pursuant to the Indenture in
                  accordance with this Agreement;

                           (v) to enter into and perform its obligations under
                  the Indenture and any other Transaction Document to which it
                  is a party;

                           (vi) to engage in those activities that are necessary
                  to accomplish the foregoing or are incidental thereto; and

         Agreement of Trust
                                        2

<PAGE>   7

                           (vii) subject to compliance with the Transaction
                  Documents, to engage in such other activities as may be
                  required in connection with conservation of the Issuer Estate
                  and making distributions to the Certificateholders.

                  (b) The Issuer is hereby authorized to engage in the foregoing
         activities. The Issuer shall not engage in any activity other than as
         required or expressly authorized by the terms of this Agreement or the
         Transaction Documents or, subject to the terms of this Agreement and
         the other Transaction Documents, as the Certificateholders may from
         time to time direct.

                  (c) References herein to Sections of the Indenture shall mean
         Sections of the Terms Indenture.

         Section 1.06.  Claims Against the Issuer.

         All Persons extending credit to, contracting with or having any claim
against the Issuer shall look only to the Issuer for payment under such credit,
contract or claim. None of the Issuer Trustee (including in its individual
capacity), the Issuer Certificate Agent (including in its individual capacity),
the Depositor, the Certificateholders or any of the Issuer's officers, employees
or agents, whether past, present or future shall be personally liable therefor.

         Section 1.07.  Beneficial Ownership.

         The undivided beneficial ownership interest in the Issuer will be
evidenced by the Class R Certificates issued in accordance with Article IV.

         Section 1.08.  Certain Covenants Relating to the Separateness of the
Issuer.

         The Issuer shall maintain its separate existence and, specifically,
shall conduct its affairs in accordance with the following:

                  (a) The Issuer shall not commingle or pool its funds or other
         assets with those of any other Person.

                  (b) The Issuer shall maintain its assets in such a manner that
         it is not costly or difficult to segregate, ascertain or otherwise
         identify its individual assets from those of any other Person.

                  (c) The Issuer shall maintain its own records and books of
         account.

                  (d) The Issuer shall not incur any indebtedness, except
         pursuant to the Transaction Documents.

                  (e) The Issuer shall not lend money to any Person and will not
         become obligated to provide funds for the purpose of supporting the
         obligations of any Person.

                  (f) The Issuer shall not (i) hold itself out or permit itself
         to be held out as having agreed to pay, or as being liable for,
         indebtedness of another Person; (ii) fail to correct any
         misrepresentation, of which the Issuer Trustee has actual knowledge,
         with respect to the foregoing; or (iii) operate or purport to operate
         collectively as a single or consolidated business entity with respect
         to any other Person.

         Agreement of Trust
                                        3

<PAGE>   8
                  (g) The Issuer shall abide by all statutory Delaware business
         trust formalities, and shall cause its financial statements to be
         prepared in accordance with U.S. GAAP and in a manner that indicates
         the separate existence of the Issuer and the Issuer's assets and
         liabilities.

                  (h) The issuance of the beneficial ownership interest
         evidenced by the Class R Certificates to the Certificateholders is
         intended to be, and shall be accounted for on the books, records, and
         financial statements of the Issuer and the Certificateholders as, the
         issuance of equity capital and not as a loan by the Certificateholders
         to the Issuer.

                  (i) Other than the Accounts maintained under the Indenture and
         the Trust Agreement Collection Account, any bank account of the Issuer
         shall be separate from the accounts of any other Person.

                  (j) The Issuer shall make no transfer of its assets except in
         accordance with the Transaction Documents.

                  (k) The Issuer shall not sponsor at any time, or agree to
         sponsor, maintain, contribute to, or assume an obligation to contribute
         to, any Plan.

                  (1) The Issuer shall not merge, consolidate or convert with or
         into any other Person without the consent of all of the
         Certificateholders and the Note Trustee.

                                   ARTICLE II:
                                   DEFINITIONS

         "Account Bank" means State Street Bank and Trust Company.

         "Account Statement" has the meaning set forth in Section 5.05.

         "Act" means the Delaware Business Trust Act, Chapter 38 of Title 12 of
the Delaware Code, 12 Del. Code Section 3801 et seq., as in effect from time to
time.

         "Agency Security" means each of the securities identified in Schedule I
hereto.

         "Agreement" means this agreement of trust as it may from time to time
be amended, supplemented or otherwise modified in accordance with the terms
hereof.

         "Authenticating Agent" has the meaning assigned to such term in Section
4.04.

         "Available Funds" means, with respect to any Monthly Payment Date, the
aggregate amount on deposit in the Trust Agreement Collection Account on such
date.

         "Bankruptcy Action" has the meaning assigned to such term in Section
10.01.

         "Certificate Balance" means, with respect to each Class R Certificate,
the portion of the Outstanding Certificate Balance corresponding to such Class R
Certificate as specified on the face of such Class R Certificate on its date of
issuance.

         "Certificate Placement Agreement" means the certificate placement
agreement, dated as of January 19, 2000, by and among the Issuer, the Depositor
and Merrill Lynch, Pierce, Fenner & Smith Incorporated.

         Agreement of Trust
                                        4
<PAGE>   9
         "Certificateholder" or "Holder" means, with respect to any date, the
Person or Persons in whose name Class R Certificates are registered in the
Certificate Register.

         "Certificate of Trust" means the Certificate of Trust of FAIC II Issuer
Trust 2000-1 filed with the Secretary of State in order to form the Issuer under
the Act, as such Certificate of Trust may be amended or restated from time to
time.

         "Certificate Paying Agent" has the meaning assigned to such term in
Section 4.11.

         "Certificate Register" has the meaning assigned to such term in Section
4.05(a).

         "Certificate Registrar" has the meaning assigned to such term in
Section 4.05(a).

         "Class R Certificates" means any of the certificates of beneficial
ownership of the Issuer issued and authenticated hereunder, substantially in the
form of Exhibit A hereto.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

         "Corporate Trust Office" means the principal corporate trust office of
the Issuer Certificate Agent, with current addresses at State Street Bank and
Trust Company, Global Investor Services Group - Corporate Trust, 2 Avenue de
Lafayette - 6th Floor, Boston, Massachusetts 02111 and State Street Bank and
Trust Company, Global Investor Services Group - Corporate Trust, P. O. Box 778,
Boston, Massachusetts, 02102-0778, or such other address within the United
States as the Issuer Certificate Agent may designate from time to time by notice
to the Issuer, or the principal corporate trust office of any successor Issuer
Certificate Agent.

         "Cut-off Date" means January 26, 2000.

         "Disqualified Organization" means the United States of America, any
state or political subdivision thereof, any foreign government, any
international organization, any agency or instrumentality of any of the
foregoing, any organization exempt from taxation under the Code (other than a
cooperative described in Code Section 521) unless such organization is subject
to the tax imposed by Code Section 511, and any organization described in Code
Section 1381 (a)(2)(C).

         "ERISA" has the meaning assigned to such term in Section 4.05(g).

         "Event of Default" has the meaning assigned to such term in the
Indenture.

         "Expense Reserve Account" has the meaning assigned to such term in
Section 7.01 of the Indenture.

         "Final Scheduled Monthly Payment Date" has the meaning assigned to such
term in Section 5.04(a).

         "Initial Certificate Balance" means, with respect to the Class R
Certificates, U.S. $465,600.

         "Institutional Accredited Investor" means an "accredited investor" as
defined in subsections (1), (2), (3) and (7) under Rule 501(a) promulgated under
the Securities Act.

         "Issuer Assets" means (i) the Agency Securities; (ii) the amounts in
the Note Collection Account, the Interest Reserve Account, the Expense Reserve
Account and the Trust Agreement Collection Account,

         Agreement of Trust
                                        5
<PAGE>   10

including any Eligible Investments purchased with funds held in the Note
Collection Account, the Expense Reserve Account and the Interest Reserve
Account; (iii) the rights of the Issuer under the Deposit Agreement and this
Agreement; and (iv) all proceeds of the foregoing.

         "Issuer Certificate Agent" means State Street Bank and Trust Company,
in its capacity as Certificate Paying Agent, and in its capacity as Certificate
Registrar and Authenticating Agent or any successor thereto in such capacity as
appointed pursuant to Section 4.13.

         "Issuer Estate" means all right, title and interest of the Issuer in
and to the Issuer Assets, any Transaction Document to which the Issuer is a
party and any other property contributed to the Issuer or otherwise acquired by
the Issuer, together with all distributions, payments, revenues, issues, profits
or proceeds thereof and therefrom, and all appurtenances thereto.

         "Issuer Trustee" means Christiana Bank & Trust Company, not in its
individual capacity but solely as Issuer Trustee hereunder, and any successor
Issuer Trustee appointed in accordance with Section 3807 of the Act and Section
8.05.

         "Majority Certificateholders" means, at any time, Certificateholders
holding, collectively, Class R Certificates representing more than 50% of the
Outstanding Certificate Balance.

         "Monthly Payment Date" means the first Business Day of each month
commencing on March 1, 2000.

         "Optional Certificate Redemption Amount" has the meaning assigned to
such term in Section 5.04(b).

         "Outstanding Certificate Balance" means, with respect to the Class R
Certificates, on any date, an amount equal to (i) the Initial Certificate
Balance thereof minus (ii) the aggregate amount of all distributions of
principal made to the Certificateholders. The Outstanding Certificate Balance
shall be calculated as of the close of business, in the case of any Monthly
Payment Date other than the initial Monthly Payment Date, on the immediately
preceding Monthly Payment Date after giving effect to all distributions of
principal to the applicable Holders on each preceding Monthly Payment Date
(including such immediately preceding Monthly Payment Date); provided that, on
the Closing Date, the Outstanding Certificate Balance thereof shall be equal to
the Initial Certificate Balance.

         "Permitted Certificate Redemption Date" has the meaning assigned to
such term in Section 5.04(b).

         "Plan" has the meaning assigned to such term in Section 4.05(g).

         "Pledged Assets" means all of the Issuer Assets (except for (i) amounts
in the Trust Agreement Collection Account and the Expense Reserve Account
(including any Eligible Investments purchased with funds held in the Expense
Reserve Account) and (ii) until the Outstanding Certificate Balance of the Class
R Certificates has been reduced to zero, principal payments on the Series 2203
Freddie Mac Security).

         "Prior Agreement of Trust" has the meaning assigned to such term in
Section 1.01.

         "Record Date" means, with respect to any Monthly Payment Date, the
close of business on the last Business Day of the calendar month immediately
preceding the calendar month in which such Monthly Payment Date falls.

         "Residual Collections" has the meaning assigned to such term in Section
5.03(a).

         Agreement of Trust
                                        6
<PAGE>   11

         "Secretary of State" means the office of the Secretary of State of the
State of Delaware.

         "Securities Act" means the Securities Act of 1933, as amended, and any
rules and regulations promulgated thereunder.

         "Seller" means the party identified as such in Section 1.05(a)(i).

         "Series 2203 Freddie Mac Security" has the meaning specified in the
Indenture.

         "Tax Matters Partner" has the meaning assigned to such term in Section
7.05.

         "Transferee Affidavit" has the meaning assigned to such term in Section
4.05(h).

         "Transferee Certificate" has the meaning assigned to such term in
Section 4.05(b).

         "Trust Agreement Collection Account" has the meaning assigned to such
term in Section 5.02.

         "Transaction Documents" means this Agreement, the Class R Certificates,
the Indenture, the Notes, the Purchase Agreement, the Underwriting Agreement,
the Certificate Placement Agreement and the Deposit Agreement.

         "Treasury Regulations" means the current, temporary, and proposed
income tax regulations under the Code.

         "Underwriting Agreement" means the underwriting agreement, dated as of
January 19, 2000, by and among the Issuer, the Depositor and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, as underwriter.

         "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation, partnership or other entity created or organized in or under
the laws of the United States or any state (other than a partnership that is not
treated as a U.S. person under any applicable Treasury Regulations), (iii) an
estate whose income is subject to United States federal income tax regardless of
its source, or (iv) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more U.S. persons have the authority to control all substantial decisions of the
trust. Notwithstanding the preceding sentence, to the extent provided in
Treasury Regulations, certain trusts in existence on August 20, 1996 and treated
as U.S. Persons prior to such date, that elect to continue to be treated as U.S.
Persons, will be so treated.

         Agreement of Trust
                                        7
<PAGE>   12

                                  ARTICLE III:
            CONTRIBUTIONS; CONSENT TO EXECUTION OF CERTAIN AGREEMENTS

         Section 3.01.  Contributions on the Closing Date.

         The Depositor hereby agrees to transfer the Contributed Assets,
pursuant to the terms of the Deposit Agreement, on the Closing Date, as a
capital contribution to the Issuer.

         Section 3.02.  Consideration for Contribution of Contributed Assets.

         Proceeds received by the Issuer from the sale of the Class R
Certificates and from the sale of the Notes shall be paid by the Issuer to the
Depositor as consideration for the transfer by the Depositor of the Contributed
Assets to the Issuer.

         Section 3.03.  Holding of the Issuer Estate.

         In order to establish the Issuer created hereby to be known as "FAIC II
Issuer Trust 2000-1," the Depositor appointed the Issuer Trustee to act as
Issuer Trustee hereunder, and the Issuer Trustee hereby declares and agrees that
it will hold all estate, right, title and interest in and to the Issuer Estate
until this Agreement terminates pursuant to the terms of this Agreement, in
trust under and subject to the conditions and agreements hereinafter set forth,
for the use and benefit of the Certificateholders from time to time (subject to
the pledge of the Pledged Assets to the Note Trustee for the benefit of the
Noteholders from time to time).

         Section 3.04.  Limitation on the Liability of the Issuer Trustee, the
Issuer Certificate Agent, the Depositor and Certificateholders.

         None of the Depositor, the Issuer Trustee, the Issuer Certificate Agent
or any Certificateholder shall be liable for any debt, claim, demand, judgment
or obligation of any kind of, against or with respect to the Issuer by reason of
its being the Issuer Trustee, the Issuer Certificate Agent, the Depositor or a
Certificateholder, as the case may be. The Issuer Trustee, the Issuer
Certificate Agent, the Depositor or any Certificateholder, solely by reason of
its status as such, shall not be subject to any personal liability whatsoever,
in tort, contract or otherwise, to any Person in connection with the property,
liabilities or affairs of the Issuer, except as expressly provided herein or in
the other Transaction Documents.

         Section 3.05.  Direction of Issuer Trustee's Execution of and
Performance Under the Deposit Agreement and the Indenture.

         By its execution hereof, the Depositor hereby directs the Issuer
Trustee to execute this Agreement and perform the Issuer Trustee's obligations
under this Agreement as well as to execute on behalf of the Issuer, and to
perform the Issuer Trustee's obligations under, the Deposit Agreement and the
Indenture.

         Agreement of Trust
                                        8
<PAGE>   13

                                   ARTICLE IV:
                            THE CLASS R CERTIFICATES

         Section 4.01. Initial Ownership.

         Upon the formation of the Issuer by the Depositor and until the
issuance of the Class R Certificates, the Depositor shall be the sole
beneficiary of the Issuer.

         Section 4.02. Authorization of the Class R Certificates.

         The Class R Certificates represent undivided, beneficial ownership
interests in the Issuer Estate. All outstanding Class R Certificates shall share
pari passu in the Issuer Estate and any distributions distributable to the
Certificateholders therefrom, subject to the Lien of the Indenture on the
Pledged Assets. The Depositor or its assignee, however, will retain the right to
cause the redemption of the Class R Certificates pursuant to Section 5.04. The
Outstanding Certificate Balance of all Class R Certificates on the Closing Date
to be executed and delivered by the Authenticating Agent under this Agreement
shall be equal to the Initial Certificate Balance, except for Class R
Certificates executed and delivered upon registration or transfer of, or in
exchange for, or in lieu of, other Class R Certificates pursuant to Sections
4.05 or Section 4.06.

         Section 4.03. Form of Class R Certificates; Denominations.

         The Class R Certificates issued hereunder shall be issued in definitive
fully registered form, without interest coupons, in substantially the form
attached as Exhibit A hereto, with such applicable legends as are provided for
in Exhibit A hereto. The Class R Certificates shall be issued in minimum
denominations of $200,000.

         Section 4.04. Execution and Authentication of Class R Certificates.

         The Issuer is hereby authorized to issue the Class R Certificates.
State Street Bank and Trust Company is hereby initially appointed
"Authenticating Agent" for the purpose of authenticating and delivering the
Class R Certificates. The Authenticating Agent is hereby authorized and
directed, subject to the terms and conditions hereof, to authenticate and
deliver the Class R Certificates on the Closing Date, subject to the terms of
the Transaction Documents. The Class R Certificates shall be executed on behalf
of the Issuer by manual or facsimile signature of any authorized signatory of
the Issuer Trustee having such authority. Class R Certificates bearing the
manual or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Issuer Trustee
shall be validly issued and entitled to the benefits of this Agreement,
notwithstanding that such individuals or any of them have ceased to be so
authorized prior to the authentication and delivery of such Class R
Certificates. No Class R Certificates shall be valid for any purpose unless duly
authenticated by manual signature of an authorized officer of the Authenticating
Agent. On the Closing Date, the Authenticating Agent shall cause Class R
Certificates in authorized denominations in an aggregate face amount equal to
the Initial Certificate Balance to be authenticated and delivered to or upon the
order of the Depositor. All Class R Certificates shall be dated the date of
their authentication.

         Section 4.05. Registration of Transfer and Exchange of Class R
Certificates.

                  (a) State Street Bank and Trust Company is hereby initially
         appointed "Certificate Registrar" for the purpose of registering Class
         R Certificates and transfers and exchanges of Class R Certificates as
         provided in this Agreement. The Certificate Registrar shall maintain,
         or cause to

         Agreement of Trust
                                        9
<PAGE>   14

         be maintained, at the Corporate Trust Office of the Certificate
         Registrar, a certificate register (the "Certificate Register") in
         which, subject to such reasonable regulations as it may prescribe, the
         Certificate Register shall provide for the registration of Class R
         Certificates and of transfers and exchanges of Class R Certificates as
         provided in this Agreement.

                  (b) Every Class R Certificate presented or surrendered for
         registration of transfer or exchange shall be accompanied by a written
         instrument of transfer in form satisfactory to the Certificate
         Registrar duly executed by the Certificateholder or his attorney duly
         authorized in writing. Each Class R Certificate surrendered for
         registration of transfer or exchange shall be canceled and subsequently
         disposed of by the Certificate Registrar in accordance with its
         customary practice. At the direction of the Certificate Registrar, the
         Issuer Trustee shall execute, in the case of a transfer, in the name of
         the transferee or transferees, and the Authenticating Agent shall
         authenticate and deliver, a new Class R Certificate or Class R
         Certificates for the same aggregate Certificate Balance; provided that,
         if such a transfer is to be made without registration under the
         Securities Act and applicable state securities laws, the Certificate
         Registrar shall not register such transfer unless and until the
         prospective transferee provides the Certificate Registrar and the
         Issuer Trustee with a Transferee Certificate substantially in the form
         of Exhibit B hereto (each, a "Transferee Certificate").

                  (c) At the option of a Holder, the Class R Certificates may be
         exchanged for other Class R Certificates in authorized denominations of
         a like Certificate Balance upon surrender of the Class R Certificates
         to be exchanged at the office or agency maintained pursuant to Section
         4.09.

                  (d) No service charge shall be made for any registration of
         transfer or exchange of Class R Certificates, but 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 Class R Certificates.

                  (e) Each Class R Certificate shall be subject to the
         restrictions on transfer provided in the applicable legends required to
         be set forth in the face of each Class R Certificate pursuant to
         Exhibit A hereto.

                  (f) The Certificate Registrar also may require, in certain
         circumstances, a certification from the Certificateholder desiring to
         effect the transfer and such Certificateholder's prospective transferee
         concerning the factual basis for the registration or qualification
         exemption relied upon, and an Opinion of Counsel acceptable in form and
         substance to the Certificate Registrar, to the effect that such
         transfer may be made pursuant to an exemption, describing the
         applicable exemption and the basis therefor, from the Securities Act
         and said state laws and is being made in accordance with the Investment
         Company Act of 1940, as amended (the "Investment Company Act"), which
         Opinion of Counsel shall not be an expense of the Certificate
         Registrar, the Issuer Trustee or the Issuer. Each Certificateholder
         will be deemed by its acceptance and holding of its Class R Certificate
         to agree that neither the Issuer nor the Certificate Registrar is under
         an obligation to or intends to register the Class R Certificates under
         the Securities Act or any other securities law.

                  (g) No transfer of a Class R Certificate shall be made unless
         and until the prospective transferee provides the Certificate Registrar
         with an affidavit, in the form of paragraph 7 of Exhibit B hereto, that
         the prospective transferee is not an employee benefit plan that is
         subject to all or a portion of Title I of the Employee Retirement
         Income Security Act of 1974, as amended ("ERISA"), or any retirement
         plan or arrangement that is subject to Section 4975 of the Code, nor

         Agreement of Trust
                                       10

<PAGE>   15

         a person acting, directly or indirectly, on behalf of any such employee
         benefit plan, plan or arrangement (including an insurance company using
         funds in its general account that may constitute "plan assets") (each,
         a "Plan") and is not a governmental plan subject to any laws or
         regulations that are substantially similar to Section 406 of ERISA or
         Section 4975 of the Code, or a person acting, directly or indirectly,
         on behalf of any such government plan.

                  (h) A beneficial or record interest in a Class R Certificate
         may not be sold or transferred to a Disqualified Organization. Any
         attempted or purported transfer of an interest in a Class R Certificate
         shall be absolutely null and void and shall vest no rights in the
         purported transferee unless such transferee provides to the Certificate
         Registrar, who shall be responsible for forwarding it to Fannie Mae or
         Freddie Mac, as appropriate, (i) affidavits, in the forms provided as,
         respectively, Exhibits C-1 and C-2 hereto (the "Transferee
         Affidavits"), each to the effect that such prospective transferee is
         (A) not a Disqualified Organization and is not purchasing such Class R
         Certificate on behalf of a Disqualified Organization and (B) a U.S.
         Person and (ii) if requested by the Certificate Registrar, an opinion
         of counsel (in a form acceptable to the Certificate Registrar) that the
         proposed transfer will not cause such interest to be held by or on
         behalf of a Disqualified Organization. Such transferee shall also
         provide a cover letter addressed to the Issuer Trustee, the
         Authenticating Agent and the Certificate Registrar to the effect that
         the addressees of such letter may rely on the certifications made by
         such transferee in the Transferee Affidavits. In the event that the
         Class R Certificates shall be optionally redeemed, the Seller, as the
         assignee of the Depositor's right to cause the redemption of the Class
         R Certificates and, after the redemption, the owner of 100% of the
         beneficial ownership interest in the Issuer, shall be obligated to
         provide the Transferee Affidavits, a Transferee Certificate and, if
         requested by the Certificate Registrar, an opinion of counsel as
         described in this paragraph, as if the Seller were the prospective
         transferee for the purposes of this paragraph, to the Certificate
         Registrar. The Certificate Registrar shall be responsible for
         forwarding such documents to Fannie Mae or Freddie Mac, as appropriate.

                  (i) Notwithstanding anything contained herein to the contrary,
         neither the Issuer Trustee nor the Certificate Registrar shall be
         responsible for ascertaining whether any transfer complies with the
         registration provisions or exemptions from the Securities Act, the
         Exchange Act, applicable state securities law or the Investment Company
         Act; provided, however, that if a certificate is specifically required
         to be delivered to the Certificate Registrar by a purchaser or a
         transferee of a Class R Certificate, the Certificate Registrar shall be
         obligated to examine such certificate to determine whether it conforms
         to the requirements of this Agreement.

         Section 4.06. Mutilated, Destroyed, Lost or Stolen Certificates.

         In case any Class R Certificate becomes mutilated or defaced or lost,
destroyed or stolen, then on the terms herein set forth, and not otherwise, the
Issuer Trustee, at the direction of the Authenticating Agent, shall execute and
the Authenticating Agent on behalf of the Issuer shall authenticate and deliver
to the registered Holder a new Class R Certificate of like tenor and date, and
bearing such identifying number or designation as the Authenticating Agent may
determine, in exchange and substitution for, and upon cancellation of, the
mutilated or defaced Class R Certificate, or in lieu of and in substitution for
the same if lost, destroyed or stolen. The applicant for a new Class R
Certificate pursuant to this Section 4.06 shall, in the case of any mutilated or
defaced Class R Certificate, surrender such certificate to the Authenticating
Agent and furnish to the Authenticating Agent, in the case of any lost,
destroyed or stolen Class R Certificate, evidence satisfactory to the
Authenticating Agent of such loss, destruction or theft and, in each case,
evidence satisfactory to the Authenticating Agent of the ownership and
authenticity of such Class R Certificate and shall pay all expenses and charges
of such substitution and furnish such security or indemnity as may be reasonably
required by the Issuer Trustee and the Authenticating Agent to indemnify

         Agreement of Trust
                                       11

<PAGE>   16

and defend and save the Authenticating Agent and the Issuer Trustee harmless
(provided, that the unsecured agreement of indemnity of any Certificateholder
who is an Institutional Accredited Investor shall be deemed satisfactory, it
being understood, that the Authenticating Agent may reasonably request
information necessary to establish that any such holder is an Institutional
Accredited Investor). Any defaced or mutilated Class R Certificate shall be
destroyed by the Authenticating Agent, or retained in accordance with its
standard retention policy, upon delivery by it of a new Class R Certificate to
the Holder.

         Section 4.07. Persons Deemed Owners.

         Prior to due presentation of a Class R Certificate for registration of
transfer, the Issuer, and any agent of the Issuer may treat the Person in whose
name any Class R Certificate is registered as the owner of such Class R
Certificate for the purpose of receiving distributions pursuant to Section 5.03
and for all other purposes whatsoever, and neither the Issuer nor any agent of
the Issuer shall be affected by any notice to the contrary.

         Section 4.08. Access to List of Certificateholders' Names and
Addresses.

         The Certificate Registrar shall furnish or cause to be furnished to
each Certificateholder, within 15 days after receipt by the Certificate
Registrar of a written request therefor from such party, a list, in such form as
such party may reasonably require, of the names and addresses of the
Certificateholders as of the most recent Record Date for payment of
distributions to Certificateholders. Every Certificateholder, by receiving and
holding a Class R Certificate, agrees that neither the Certificate Registrar nor
any agent thereof, shall be held accountable by reason of the disclosure of any
such information as to the names and addresses of the Certificateholders under
this Agreement, regardless of the source from which such information was
derived.

         Section 4.09. Maintenance of Office or Agency.

         The Issuer Certificate Agent shall maintain in New York City or Boston,
Massachusetts, an office or offices or agency or agencies where Class R
Certificates may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Issuer in respect of the Class R
Certificates and the Transaction Documents may be served. The Issuer Certificate
Agent initially designates its office at Lafayette Corporate Center, 2 Avenue de
Lafayette, Boston, Massachusetts 02111. Alternatively, the Issuer Certificate
Agent may maintain an office at 61 Broadway, New York, New York 10006 as the
office or agency for such purposes. The Issuer Certificate Agent shall give
prompt written notice to the Certificateholders of any change in the location of
the Certificate Register or any such office of agency.

         Section 4.10. Class R Certificates Held by The Depositor.

         For the purposes of determining whether the Certificateholders of the
requisite percentage of the Outstanding Certificate Balance have taken any
action authorized by this Agreement or the Indenture with respect to the giving
of direction, instruction, consents or approvals or with respect to any other
matter, any Class R Certificates known by the Certificate Registrar to be
directly or indirectly owned by the Depositor or any of its Affiliates shall be
disregarded and deemed not to be outstanding, unless the Depositor is the sole
Certificateholder.

         Section 4.11. Appointment of the Certificate Paying Agent

                  (a) State Street Bank and Trust Company is initially appointed
         as paying agent for the Certificates (in such capacity, the
         "Certificate Paying Agent"). The Certificate Paying Agent shall

         Agreement of Trust
                                       12

<PAGE>   17

         make distributions to the Certificateholders in accordance with Article
         V. The Certificateholders shall cause any successor Certificate Paying
         Agent or any additional Certificate Paying Agent appointed by the
         Certificateholders to execute and deliver to the Issuer an instrument
         in which the successor Certificate Paying Agent or additional
         Certificate Paying Agent shall agree with the Issuer that, as
         Certificate Paying Agent, the successor Certificate Paying Agent or
         additional Certificate Paying Agent will hold any sums held by it for
         payment to the Certificateholders in trust for the benefit of the
         Certificateholders entitled to them until those sums shall be paid to
         the appropriate Certificateholders. Subject to applicable law, the
         Certificate Paying Agent shall return to the Issuer all funds held for
         any Class R Certificate that remain unclaimed for a period of three
         years after such funds were set aside to be distributed to such
         Certificateholder, and upon removal of a Certificate Paying Agent, such
         Certificate Paying Agent shall also return all funds in its possession
         to the Issuer. Any reference in this Agreement to the Certificate
         Paying Agent shall include any co-Certificate Paying Agent unless the
         context requires otherwise.

                  (b) As set forth herein, the Person who serves as the
         Certificate Paying Agent shall also serve as the Authenticating Agent
         and the Certificate Registrar with respect to the Class R Certificates.

                  (c) State Street Bank and Trust Company, as Issuer Certificate
         Agent, Certificate Paying Agent, Authenticating Agent and Certificate
         Registrar hereunder (and any successor thereto) (i) shall receive as
         compensation for its services hereunder the fees specified in Section
         6.02 of the Indenture, subject to the limitations set forth therein
         (provided that the Issuer Certificate Agent will be separately
         compensated by the Seller for its services under Section 4.14 subject
         to a cap of $8,000.00) and (ii) shall have the same rights, protection,
         immunities and indemnifications as are available to the Issuer Trustee
         pursuant to Sections 8.06, 8.07 and 8.08 of this Agreement and to the
         Note Trustee under Section 10.01(d) and (e), 10.02, 10.05 and 10.07 of
         the Indenture.

         Section 4.12. Representations and Warranties of State Street Bank and
Trust Company.

         State Street Bank and Trust Company, in its individual capacity, hereby
represents and warrants to the Depositor and the Holders from time to time of
the Class R Certificates that:

                  (a) Corporate Existence and Power. State Street is a trust
         company duly organized, validly existing and in good standing under the
         laws of the Commonwealth of Massachusetts and has all corporate powers
         and all governmental licenses, authorizations, consents and approvals
         required to carry on its business as now conducted and as contemplated
         by this Agreement.

                  (b) Corporate and Governmental Authorization; No
         Contravention. The execution, delivery and performance by State Street
         of this Agreement are within State Street's corporate powers, have been
         duly authorized by all necessary corporate action, require no action by
         or in respect of, or filing with, any governmental body, agency or
         official and do not contravene, or constitute a default under, any
         provision of applicable law or regulation of the Commonwealth of
         Massachusetts, or of the Certificate of Incorporation or the Bylaws of
         State Street or of any agreement or other instrument binding upon State
         Street or result in the creation or imposition of any Lien on any asset
         of State Street.

                  (c) Binding Obligation. This Agreement has been duly
         authorized, and when executed and delivered by State Street, assuming
         the due authorization and delivery by each party thereto, shall
         constitute the legal, valid, enforceable and binding obligation of
         State Street, enforceable against it in accordance with its respective
         terms, except as subject to applicable bankruptcy, insolvency,
         reorganization, moratorium or other similar laws now or hereafter in
         effect, affecting

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                                       13

<PAGE>   18

         the enforcement of creditors' rights in general and except as such
         enforceability may be limited by general principles of equity (whether
         considered in a proceeding at law or in equity).

                  (d) No Conflict. Neither the execution, delivery and
         performance of this Agreement, nor the consummation of the transactions
         contemplated by this Agreement, (i) is prohibited by, or requires State
         Street to obtain any consent, authorization, approval or registration
         under, any law, statute, rule, regulation, judgment, order, writ,
         injunction or decree that is binding upon State Street or any of its
         properties or assets, or (ii) will violate any provision of, result in
         any default or acceleration of any obligations under, result in the
         creation or imposition of any lien pursuant to, or require any consent
         under, any agreement to which State Street is a party or by which it or
         any of its property is bound.

                  (e) No Proceedings. There are no proceedings pending, or to
         the best knowledge of State Street, threatened against State Street
         before any Federal, provincial or other governmental agency, authority,
         administrator or regulatory body, arbitrator, court or other tribunal
         foreign or domestic, that could have a material adverse effect on the
         Issuer Assets or any action taken or to be taken by State Street under
         this Agreement.

         Section 4.13. Resignation, Removal and Replacement of the Issuer
Certificate Agent.

                  (a) The Majority Certificateholders may remove the Issuer
         Certificate Agent if such Certificateholders determine in their sole
         discretion that the Issuer Certificate Agent has failed to perform its
         obligations under this Agreement in any material respect. The Issuer
         Certificate Agent may not resign and be discharged of the trust created
         by this Agreement unless (i) the Issuer Certificate Agent shall provide
         30 days' written notice to the Issuer Trustee and the
         Certificateholders, (ii) the Issuer Certificate Agent shall locate a
         successor Issuer Certificate Agent satisfying the eligibility
         requirements for such successor Issuer Certificate Agent set forth in
         this Section 4.13, (iii) the Issuer Certificate Agent shall have agreed
         with such successor Issuer Certificate Agent as to fees and expenses to
         be paid to such successor Issuer Certificate Agent for serving as
         Issuer Certificate Agent with respect to the Class R Certificates so
         long as any Class R Certificates are Outstanding and, if such
         agreed-upon fees and expenses to be paid to the successor Issuer
         Certificate Agent exceed the amounts remaining in the Expense Reserve
         Account allocated to the Issuer Certificate Agent, the Issuer
         Certificate Agent shall make provisions for such shortfall in a manner
         satisfactory to such successor Issuer Certificate Agent and (iv) such
         successor Issuer Certificate Agent shall agree to be assigned all of
         the rights and powers, and to assume all of duties and obligations, of
         the Issuer Certificate Agent set forth in this Agreement and the other
         Transaction Documents. Any such removal or resignation shall take
         effect upon receipt by the predecessor Issuer Certificate Agent of an
         instrument of acceptance of appointment executed by a successor Issuer
         Certificate Agent as herein provided; provided that such Person shall
         be a bank or trust company incorporated and doing business within the
         United States of America, whose business shall include the providing of
         paying agent, registrar, and transfer agent services in asset
         securitization transactions and who will have a combined capital and
         surplus of at least $100,000,000, if there be such an institution
         willing, able and legally qualified to perform the duties of the Issuer
         Certificate Agent hereunder upon reasonable or customary terms. The
         appointment of the successor Issuer Certificate Agent shall take effect
         concurrently with (i) the removal or resignation of the former Issuer
         Certificate Agent and (ii) the ratification of the Transaction
         Documents by the successor Issuer Certificate Agent, and no removal or
         resignation of an Issuer Certificate Agent shall be effective absent
         the concurrent appointment of a successor Issuer Certificate Agent.

         Agreement of Trust
                                       14

<PAGE>   19

                  (b) If a successor Issuer Certificate Agent shall not have
         been appointed within 60 days after such notice of resignation, the
         Issuer Certificate Agent or the Majority Certificateholders may apply
         to any court of competent jurisdiction to appoint a successor Issuer
         Certificate Agent to act until such time as a successor shall have been
         appointed as above provided.

                  (c) Any corporation into which the Issuer Certificate Agent
         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 Issuer Certificate Agent shall be a party, or any corporation
         to which substantially all the corporate trust business of the Issuer
         Certificate Agent may be transferred, shall, subject to such
         corporation satisfying in all respects the requirements set forth in
         Section 8.05(a), be the Issuer Certificate Agent hereunder without
         further action.

         Section 4.14. Reporting.

         The Issuer Certificate Agent, on behalf of the Issuer, will file all
reports as required by the Securities and Exchange Commission ("SEC") pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Section 314(a) of the Trust Indenture Act of 1939, as
amended. Within 15 days of filing any such report, the Issuer Certificate Agent
will deliver a copy of the filed report to the Note Trustee. The Issuer
Certificate Agent's responsibilities hereunder shall be to file monthly reports
on Form 8-K attaching a copy of the current Account Statement and an Annual
Report on Form 10-K after the end of each fiscal year of the Issuer, within the
time frames required under the Exchange Act and the rules and regulations
promulgated thereunder. The Issuer Certificate Agent is hereby authorized and
directed to cause the suspension of the periodic reporting requirements with
respect to the Issuer and the Notes pursuant to Section 15(d) of the Exchange
Act, by filing a Form 15 with the SEC and taking all other action to cause such
suspension, as soon as the Notes are eligible to have such periodic reporting
requirements suspended pursuant to Section 15(d) of the Exchange Act.

                                   ARTICLE V:
                            CERTIFICATE DISTRIBUTIONS

         Section 5.01. Payments From Issuer Estate.

         All payments to be made by the Issuer Certificate Agent on behalf of
the Issuer under this Agreement or any of the documents to which the Issuer is a
party shall be made only from the income and proceeds of the Issuer Estate and
only to the extent that the Issuer shall have received income or proceeds from
the Issuer Estate to make such payments in accordance with the terms hereof and
the Indenture.

         Section 5.02. Establishment of Trust Agreement Collection Account

         (a) The Issuer Certificate Agent will establish and maintain a special
purpose, non-interest bearing trust account at the Account Bank for the benefit
of the Certificateholders, subject to Section 5.03(a) (the "Trust Agreement
Collection Account"). The Trust Agreement Collection Account shall be under the
sole dominion and control of the Issuer Certificate Agent on behalf of the
Certificateholders, subject to Section 5.03(a). Only the Issuer Certificate
Agent shall be entitled to withdraw funds from the Trust Agreement Collection
Account and only the Issuer Certificate Agent shall be an authorized signatory
on the Trust Agreement Collection Account. The Issuer Certificate Agent shall
withdraw funds from the Trust Agreement Collection Account only pursuant to and
in accordance with this Agreement.

         (b) All Available Funds on deposit from time to time in the Trust
Agreement Collection Account and in all proceeds thereof (including all income
thereon) shall constitute part of the Issuer Estate.

         Agreement of Trust
                                       15

<PAGE>   20

         Section 5.03. Certificate Distributions.

         Subject to the provisions of Sections 5.04 and 6.02, the Issuer
Certificate Agent shall distribute all Available Funds pursuant to and in
accordance with this Section 5.03.

                  (a) Payments to Issuer Trustee and Note Trustee. In the event
         the Issuer Trustee, the Issuer Certificate Agent, or the Note Trustee
         has a valid claim for reimbursement of expenses or indemnification
         pursuant to Sections 4.11(c), 8.06 or 8.07 of this Agreement or Section
         10.07 of the Indenture, as applicable, all amounts in the Trust
         Agreement Collection Account (other than amounts representing
         collections of principal payments on the Series 2203 Freddie Mac
         Security) ("Residual Collections") shall be allocated and distributed,
         pari passu to the Issuer Trustee, the Issuer Certificate Agent and the
         Note Trustee to the extent of their respective claims for such expense
         reimbursement or indemnification.

                  (b) Distribution of Principal. On any Monthly Payment Date,
         until the Outstanding Certificate Balance of the Class R Certificates
         has been reduced to zero, all amounts in the Trust Agreement Collection
         Account representing collections of principal payments on the Series
         2203 Freddie Mac Security after the Cut-off Date and, following any
         payment made pursuant to Section 5.03(a), any other amounts in the
         Trust Agreement Collection Account shall be allocated and distributed
         to the Certificateholders pro rata in reduction of the Outstanding
         Certificate Balance of the Class R Certificates.

                  (c) Distributions of Investment Yield. The Class R
         Certificates have no stated interest rate. After the Issuer has paid
         all principal of and interest on the Notes in full and after the
         Outstanding Certificate Balance of the Class R Certificates has been
         reduced to zero by application of distributions on Monthly Payment
         Dates as provided in Section 5.03(b) above, any remaining amounts
         remitted to the Trust Agreement Collection Account and held therein on
         a Monthly Payment Date shall be allocated and distributed to the
         Certificateholders pro rata on such Monthly Payment Date as additional
         investment yield.

                  (d) Excess Payments. Each Certificateholder shall be deemed to
         agree, by its acceptance of a Class R Certificate, that it shall
         promptly remit to the Issuer Certificate Agent for payment in
         accordance with this Section 5.03 any excess payment it has received.

                  (e) All payments made to the Certificateholders on any Monthly
         Payment Date shall be made to the Certificateholders of record as of
         the Record Date.

                  (f) The Certificateholders shall be entitled to receive
         distributions hereunder on any Monthly Payment Date by wire transfer to
         the account specified in writing by the applicable Certificateholder to
         the Issuer Certificate Agent. In each case, the account must be
         specified in writing no later than the Record Date for the applicable
         Monthly Payment Date on which wire transfers will commence.

                  (g) It is the parties' intent that the Class R Certificates be
         a "fixed income security" as defined in clause (b)(2) of Rule 3a-7
         promulgated under the Investment Company Act of 1940, as amended.
         Substantially all of the payments to which the Class R Certificates are
         entitled consist of the sum of (1) its stated principal amount of
         $465,600, (2) an amount equal to the portion of the interest received
         on the Agency Securities that is used to make payments of principal on
         the Notes, less an amount equal to the principal balance of the Class R
         Certificates at the time at which the Notes are paid in full, and (3)
         100% of the interest accrued on the Agency Securities at any time after
         the Notes are paid in full.

         Agreement of Trust
                                       16

<PAGE>   21

         Section 5.04. Redemption of the Class R Certificates

                  (a) Full Redemption on Final Scheduled Monthly Payment Date.
         The Class R Certificates will be redeemed or paid in full on or before
         December 1, 2029 (the "Final Scheduled Monthly Payment Date") to the
         extent not redeemed or paid prior thereto.

                  (b) Optional Certificate Redemption. The Depositor or its
         assignee may, by written demand to the Issuer Certificate Agent, cause
         the Issuer to redeem on a Monthly Payment Date all but not less than
         all of the Class R Certificates at a price equal to 105% of the
         Outstanding Certificate Balance of the Class R Certificates on such
         Monthly Payment Date (the "Optional Certificate Redemption Amount").
         Such demand shall be delivered at least 10 calendar days but no more
         than 25 calendar days prior to the Monthly Payment Date on which the
         redemption is to occur. Prior to any redemption of the Class R
         Certificates, the Optional Certificate Redemption Amount shall be
         deposited into the Trust Agreement Collection Account by the Depositor
         or its assignee no later than the 9th calendar day prior to such
         Monthly Payment Date selected for redemption of the Class R
         Certificates. Such redemption shall occur on the Monthly Payment Date
         specified in the written notice, which date shall be on or after the
         earlier of (A) March 1, 2005 and (B) the first Monthly Payment Date on
         which the remaining balance of the Agency Securities shall be equal to
         or less than 20% of the principal amount of the Agency Securities (at
         original issuance), after giving effect to any principal payments on
         such Monthly Payment Date (the "Permitted Certificate Redemption
         Date"). Upon redemption of the Class R Certificates, the party that
         effected the redemption by depositing the Optional Certificate
         Redemption Amount shall own the entire beneficial ownership interest in
         the Issuer until the Notes are redeemed or paid in full and the Issuer
         is terminated, and such party shall have the right to direct redemption
         of the Notes pursuant to the Indenture. Such party's ownership interest
         in the Issuer shall be subject to the same ownership and transfer
         restrictions as the Class R Certificates, which are set forth in
         Section 4.05 hereof.

                  (c) Assignment of Optional Redemption Rights. Pursuant to the
         Purchase Agreement, the Depositor has assigned all of its rights to
         direct the Issuer to redeem the Class R Certificates pursuant to
         Section 5.04(b) above to the Seller, and the Issuer Trustee and the
         Issuer Certificate Agent hereby acknowledge such assignment and agree
         to act in accordance with the directions of the Seller under this
         Section 5.04. No further assignment of this right shall be effective
         unless and until the Issuer Trustee and the Issuer Certificate Agent
         have been notified of such assignment in writing by the Seller or the
         entity whom the Issuer Trustee and the Issuer Certificate Agent most
         recently have been notified by the Seller is the assignee of such
         right.

         Section 5.05. Account Statements; Other Reports

                  (a) Within five Business Days following each Monthly Payment
         Date, the Issuer Certificate Agent shall furnish or make available to
         the Issuer Trustee and each Certificateholder a statement (an "Account
         Statement") setting forth the status of the Note Collection Account,
         the Interest Reserve Account, the Expense Reserve Account and the Trust
         Agreement Collection Account, showing, for the related Interest Accrual
         Period, deposits in or withdrawals from the Note Collection Account,
         the Interest Reserve Account, the Expense Reserve Account and the Trust
         Agreement Collection Account and proceeds of investments of funds in
         the Note Collection Account, the Interest Reserve Account and the
         Expense Reserve Account. The Account Statement shall also set forth the
         following information: (i) the Outstanding Principal Amounts of each
         class of the Notes and the Outstanding Certificate Balance of the Class
         R Certificates, respectively, as of the close of business on the first
         day of the immediately preceding Interest Accrual Period; (ii) the

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                                       17

<PAGE>   22

         amounts in the Note Collection Account, the Interest Reserve Account,
         the Expense Reserve Account and the Trust Agreement Collection Account
         as of the end of the immediately preceding Interest Accrual Period;
         (iii) the amounts of such funds in the Note Collection Account (and, if
         any, the Interest Reserve Account) applied toward the payment of any
         Note Interest Amount on either Class of the Notes on the preceding
         Monthly Payment Date; (iv) the amount, if any, of such amounts in the
         Note Collection Account applied toward the reduction of the Outstanding
         Principal Amount of each Class of the Notes on the preceding Monthly
         Payment Date; (v) the amounts, if any, of such amounts in the Trust
         Agreement Collection Account applied toward the reduction of the
         Outstanding Certificate Balance of the Class R Certificates and to pay
         investment yield on the Class R Certificates on the preceding Monthly
         Payment Date; and (vi) the Outstanding Principal Amount of each Class
         of the Notes and the Outstanding Certificate Balance of the Class R
         Certificates, respectively, as of the close of business on the
         preceding Monthly Payment Date after distributions are made on the
         Notes and Certificates, as applicable, on such Monthly Payment Date.

                  Promptly following the receipt of any tax or information
         reports that it receives relating to the Agency Securities, the Issuer
         Certificate Agent (or, to the extent that any such reports are received
         by the Issuer Trustee, the Issuer Trustee) shall forward to each
         Certificateholder a copy of any tax or information reports that it
         receives relating to the Agency Securities.

                  The Issuer Certificate Agent shall supply to the Note Trustee
         any and all information requested by the Note Trustee to enable it to
         prepare and furnish the reports it is required to furnish to
         Noteholders pursuant to the Indenture.

                  (b) The Internal Revenue Service has proposed regulations
         requiring certain reporting by trustees to holders of "widely held
         fixed investment trusts." To avoid the expense of any such reporting,
         by acquiring the Class R Certificates, whether on original issue or in
         a secondary purchase, each Certificateholder agrees as follows:

                           (i) The Certificateholder shall hold such Class R
                  Certificates directly and not through a "middleman." For this
                  purpose, a "middleman" is any person who holds an interest on
                  behalf of, or for the account of, another person, or who
                  otherwise acts in a capacity as an intermediary for the
                  account of another person, including, without limitation, a
                  custodian, such as a bank, financial institution or brokerage
                  firm; a nominee, including the joint owner of an account,
                  except if the joint owners are husband and wife; or a broker
                  holding an interest for a customer in street name.

                           (ii) If Proposed Treasury Regulations Section
                  1.671-4(j) shall become final in a form which permits such
                  Certificateholder to request quarterly information, the
                  Certificateholder agrees that it shall request such
                  information only upon making provision for additional
                  compensation to the Issuer Certificate Agent for the expenses
                  of providing such information.

                           (iii) The Certificateholder agrees not to transfer
                  such Class R Certificates to any person unless such person
                  agrees to these provisions in writing for the benefit of the
                  Issuer.

                  (c) The Issuer Certificate Agent, on behalf of the Issuer,
         shall supply to any prospective transferee of Class R Certificates
         pursuant to Rule 144A of the Securities Act, upon request of the
         transferor, the information required under Rule 144A(d)(4) promulgated
         under the

         Agreement of Trust
                                       18

<PAGE>   23

         Securities Act of 1933, as amended. The Issuer Certificate Agent shall
         only be responsible for furnishing information relating to the Agency
         Securities, the Note Collection Account, the Interest Reserve Account,
         the Expense Reserve Account, the Trust Agreement Collection Account,
         the Notes and the Class R Certificates under this Section 5.05(c), and
         the Issuer Certificate Agent shall have no responsibility for the
         accuracy of any such information supplied to it by another person nor
         for the sufficiency of the information so supplied by it to any
         prospective transferee.

         Section 5.06. Books and Records

         The Issuer Certificate Agent shall be responsible for the keeping of
all appropriate books and records relating to the receipt and disbursement of
all moneys under this Agreement. The Issuer Certificate Agent will forward to
the Certificateholders copies of any bill or invoice requiring payment by the
Issuer for services rendered or other correspondence regarding amounts owed or
expenses incurred by the Issuer promptly upon receipt. To the extent that any
such bills or invoices are received by the Issuer Trustee, the Issuer Trustee
will forward such bills or invoices to the Issuer Certificate Agent promptly
upon receipt. The Certificateholders shall be responsible for causing to be
prepared and filed, at their respective expense, all income tax returns required
to be filed by the Certificateholders. The Certificateholders shall also be
responsible for causing to be prepared and filed, at their expense, all income
tax returns, if any, required to be filed for the trust created hereby and shall
execute and file such returns, with a copy sent to the Issuer Certificate Agent.
The Issuer Certificate Agent, upon request, will furnish the Certificateholders
with all such information in its possession as may be reasonably required from
the Issuer Certificate Agent in connection with the preparation of all income
and tax returns. Upon written request of the Certificateholders, the Issuer
Trustee shall execute and file such returns prepared by the Certificateholders.

                                   ARTICLE VI:
                         CERTIFICATE TERMINATION EVENTS

         Section 6.01. Certificate Termination Events.

         A Certificate Termination Event (provided that none of the following
shall constitute a Certificate Termination Event until all of the Notes are paid
in full) shall occur if:

                  (a) failure by the Issuer to make (or cause to be made on its
         behalf) a redemption in full on or before the Final Scheduled Monthly
         Payment Date of the Class R Certificates;

                  (b) failure by the Issuer to make (or cause to be made on its
         behalf) on any Monthly Payment Date a distribution to
         Certificateholders of the Available Funds (as reduced by any payments
         pursuant to Section 5.03(a) on such Monthly Payment Date) for such
         Monthly Payment Date.

                  (c) failure by the Issuer duly to observe or to perform any
         other covenant or agreement of the Issuer under this Agreement, the
         Class R Certificates or any other Transaction Document (as defined in
         this Agreement), as the case may be, which failure (i) materially
         adversely affects the rights of the Certificateholders and (ii)
         continues unremedied for a period of 30 days (or, with respect to any
         covenant or agreement relating to the remittance of distributions and
         other amounts by the Issuer, a period of 5 days) after the earlier of
         (x) a responsible officer of the Issuer becoming aware of such default
         and (y) the giving of written notice of such failure by the Issuer
         Certificate Agent or by any Certificateholder;

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                                       19

<PAGE>   24

                  (d) any representation, warranty, certification or statement
         made by the Issuer in this Agreement or in any Transaction Document,
         financial statement or other document delivered pursuant to any
         Transaction Document shall prove to have been incorrect in any material
         respect when made (or deemed made);

                  (e) (i) the Issuer shall become insolvent or bankrupt; or
         shall admit in writing its inability to pay its debts or honor its
         obligations, or shall apply to any tribunal for the appointment of a
         receiver, liquidator or trustee of or for itself or for all or any
         substantial part of its property or assets; (ii) a receiver, liquidator
         or trustee of or for the Issuer (or for all or any substantial part of
         its property or assets) is appointed and not discharged within 60 days;
         or (iii) any bankruptcy, insolvency, reorganization, arrangement or
         liquidation proceedings (or similar proceedings analogous in purpose
         and effect) shall be instituted by or against the Issuer, or any
         supervisory authority having jurisdiction in the premises shall have
         taken possession of the business or property of the Issuer with a view
         to the liquidation of its affairs or the conservation of its assets,
         and in either case, are consented to by the Issuer, or are not
         dismissed within 60 days;

                  (f) the rendering of any final judgment, enforceable in any
         competent court, against the Issuer, for the payment of money equal to
         or in excess of U.S. $10,000, and such judgment shall not be discharged
         or dismissed or execution thereon stayed pending appeal within 60 days
         after entry; or

                  (g) the Certificate of Trust, this Agreement or other related
         organizational documents of the Issuer shall be amended without the
         written consent of the Majority Certificateholders and, where required
         hereunder or the Indenture, the Noteholders.

         Section 6.02. Consequences of a Certificate Termination Event.

         If a Certificate Termination Event with respect to the Class R
Certificates occurs and is continuing, the Issuer Certificate Agent at the
direction of the Majority Certificateholders will cause the Issuer to be
dissolved and terminated, or, upon the occurrence of the Certificate Termination
Event described in Section 6.01(e), the Issuer Certificate Agent shall cause the
Issuer to be dissolved and terminated without any notice from
Certificateholders. Upon any such dissolution, all of the property of the Issuer
(other than amounts in the Expense Reserve Account) will be distributed by the
Issuer Certificate Agent pro rata to the Certificateholders, subject to the
payment provisions for liabilities as required by Section 3808 of the Act. The
Issuer Trustee shall comply with all directions given to it by the Issuer
Certificate Agent to the extent any action by the Issuer Trustee is required to
enable the Issuer Certificate Agent to perform its duties hereunder.

         Section 6.03. Issuer Certificate Agent Termination Events.

         Upon the occurrence of either of the events specified in clauses (a)
and (b) of Section 6.01 (each, an "Issuer Certificate Agent Termination Event"),
the Majority Certificateholders may, or the Issuer Trustee at the direction of
the Majority Certificateholders will, replace the Issuer Certificate Agent in
accordance with Section 4.13.

         Agreement of Trust
                                       20

<PAGE>   25

                                  ARTICLE VII:
                     RIGHTS, OBLIGATIONS, POWERS AND STATUS
                            OF THE CERTIFICATEHOLDERS

         Section 7.01. Management of the Issuer.

         It is the intention of the parties hereto, and the Certificateholders
by their acceptance of their Class R Certificate(s) shall be deemed to agree,
that the Issuer Trustee's duties are to be ministerial in nature only. The
Certificateholders shall have the exclusive right and obligation to determine
the matters herein referenced to be determined by the Certificateholders and to
direct the Issuer Trustee (and the Issuer Certificate Agent, as the case may be)
to carry out and accomplish such matters, and the Certificateholders, in that
capacity, subject to the provisions of the Act, the other provisions of this
Agreement and the Transaction Documents, shall direct the Issuer Trustee (and
the Issuer Certificate Agent, as the case may be) in the management of the
business and affairs of the Issuer in order best to carry out the Issuer's
purposes.

         Section 7.02. Bankruptcy, Dissolution or Termination of any
Certificateholder.

         The incapacity, dissolution, termination or bankruptcy of any
Certificateholder shall not result in the termination or dissolution of the
Issuer.

         Section 7.03. Creditors of the Certificateholders.

         As is provided in paragraph (b) of Section 3805 of the Act, no creditor
of a Certificateholder shall have any right to obtain possession of, or
otherwise exercise legal or equitable remedies with respect to, the Issuer
Estate.

         Section 7.04. Certain Rights of the Majority Certificateholders.

         The Majority Certificateholders shall have the right to direct the
following matters on behalf of all Certificateholders:

                  (a) directing the Issuer Trustee in accordance with Sections
         7.01, 8.01(d) and 8.01(f);

                  (b) instructing the Issuer Trustee to amend the Certificate of
         Trust in accordance with Section 8.03(a) or 12.07;

                  (c) appointing a replacement Issuer Trustee pursuant to
         Section 8.05;

                  (d) instructing the Issuer Trustee to appear in, prosecute or
         defend any action in accordance with Section 8.08(a); and

                  (e) instructing the Issuer Certificate Agent as to the
         exercise, at such Majority Certificateholders expense, of the Issuer
         Certificate Agent's authority under Section 8.02, taking any action
         with regard to the Issuer Certificate Agent pursuant to Section 4.13,
         or removing or appointing a replacement Issuer Certificate Agent
         pursuant to Section 6.03 and Section 4.13.

         Section 7.05. Tax Status.

                  (a) It is the intention of the parties hereto, and the
         Certificateholders by their acceptance of their Class R Certificate(s)
         shall be deemed to agree, that for Federal income tax purposes, the
         Issuer and the ownership of the Class R Certificates shall be treated
         as follows:

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                                       21

<PAGE>   26

                           (i) At such time as there is only one
                  Certificateholder, the Issuer shall be treated as a
                  disregarded entity and the Certificateholder shall be treated
                  as holding the assets of the Issuer directly and shall report
                  the income of the Issuer accordingly.

                           (ii) At such time as there is more than one
                  Certificateholder, the Issuer shall be treated as a
                  partnership and each Certificateholder shall be treated as a
                  partner of the partnership. The period for which there is more
                  than one Certificateholder shall be divided into accounting
                  periods, with a new accounting period beginning at the
                  beginning of each taxable year and at the time that the
                  identity of any Certificateholder changes. The Issuer's income
                  shall be divided among such accounting periods using any
                  reasonable convention. The income for any accounting period
                  shall be allocated to the Certificateholders who hold Class R
                  Certificates during such periods in proportion to the original
                  face amount of the Class R Certificates held by the
                  Certificateholders. The Certificateholder holding the largest
                  original face amount of Class R Certificates shall act as "Tax
                  Matters Partner" within the meaning of Code section 6231(a)(7)
                  of the deemed partnership and shall be responsible for the
                  preparation and filing of the partnership tax return. The Tax
                  Matters Partner may vary the allocation provided for herein to
                  the extent it deems it advisable to satisfy the requirements
                  of Code section 704(b) and the Treasury Regulations
                  promulgated thereunder.

                  If the Class R Certificates have been redeemed, the entity who
         directed such redemption pursuant to Section 5.04, and who deposited
         the Optional Certificate Redemption Amount, shall be considered the
         sole Certificateholder for purposes of this Section 7.05 until the
         Issuer is terminated.

                  (b) The Notes will be treated as indebtedness of the Issuer.

                  (c) To the extent that any of the parties hereto is required
         to report any item of income, gain, loss, deduction or credit relating
         to the Issuer for United States federal, state or local income tax
         purposes, such party shall report such item in a manner consistent with
         the characterization intended by this Section 7.05 and shall not take
         any contrary position on any tax return or report relating to the
         United States federal, state or local income taxes or take any other
         action which is inconsistent with such characterization.

                                  ARTICLE VIII:
        CONCERNING THE ISSUER TRUSTEE AND CHRISTIANA BANK & TRUST COMPANY

         Section 8.01. General

                  (a) In the exercise or administration of the Issuer hereunder,
         the Issuer Trustee at the expense of the Issuer (to be paid as provided
         in Section 8.07) (i) may act directly or through agents or attorneys
         pursuant to agreements entered into with any of them, and the Issuer
         Trustee shall not be liable for the default or misconduct of such
         agents or attorneys if such agents or attorneys shall have been
         selected by the Issuer Trustee with reasonable care; and (ii) may
         consult with counsel, accountants and other skilled Persons to be
         selected with reasonable care and employed by the Issuer Trustee, and
         it shall not be liable for anything done, suffered or omitted in good
         faith by it in accordance with the advice or opinion of any such
         counsel, accountants or other skilled Persons.

                  (b) Except as expressly provided herein, (i) in accepting the
         trust hereby created, Christiana Bank & Trust Company acts solely as
         Issuer Trustee hereunder and not in its individual

         Agreement of Trust
                                       22

<PAGE>   27

         capacity, and (ii) all Persons having any claim against the Issuer or
         the Issuer Trustee by reason of the transactions contemplated by this
         Agreement shall look only to the Issuer Estate for payment or
         satisfaction thereof.

                  (c) Except in accordance with the written instructions
         furnished by the Majority Certificateholders and except as provided
         herein, the Issuer Trustee shall have no duty to (i) see to any
         recording or filing of any document, or (ii) see to the payment or
         discharge of any tax, assessment or other governmental charge or any
         lien or encumbrance of any kind owing with respect to, assessed or
         levied against any part of the Issuer.

                  (d) The Issuer Trustee will manage the business and affairs of
         the Issuer in accordance with the terms of the Act and the Transaction
         Documents subject to Section 8.02(b); provided, however, that the
         Issuer Trustee undertakes to perform only such duties as are
         specifically set forth in this Agreement or as the Issuer Trustee may
         be duly directed from time to time in writing by the Majority
         Certificateholders in accordance with and subject to the Transaction
         Documents and as the Issuer Trustee is required to in order to comply
         with the Transaction Documents. The Issuer Trustee shall not have any
         duty or obligation to manage, control, use, sell, dispose of or
         otherwise deal with the Issuer or to otherwise take or refrain from
         taking any action under this Agreement or the other Transaction
         Documents except as expressly required by the terms hereof (or of the
         other Transaction Documents) or as expressly provided in written
         instructions from the Majority Certificateholders in accordance with
         the Transaction Documents, and no implied duties or obligations shall
         be read into this Agreement and the other Transaction Documents against
         the Issuer Trustee. The Issuer Trustee shall not be required to take
         any action under this Agreement and the other Transaction Documents if
         the Issuer Trustee shall have reasonable grounds for believing that
         repayment of such funds or indemnification, in manner and form
         satisfactory to this Issuer Trustee, against any liability, cost or
         expense (including reasonable counsel fees and disbursements) which may
         be incurred in connection therewith, is not reasonably assured or
         provided to it. Christiana Bank & Trust Company nevertheless agrees
         that it will, at its own cost and expense (and not at the expense of
         the Issuer), promptly take all action as may be necessary to discharge
         any Liens on any part of the Issuer Estate which are attributable to
         actions by or claims against Christiana Bank & Trust Company that are
         not related to the ownership of any part of the Issuer Estate or the
         administration of the Issuer Estate or the transactions contemplated by
         this Agreement.

                  (e) The Issuer Trustee shall not be required to take any
         action under this Agreement if the Issuer Trustee shall reasonably
         determine or shall have been advised by counsel that such action is
         contrary to the terms of this Agreement or is otherwise contrary to
         law.

                  (f) Whenever the Issuer Trustee is unable to decide between
         alternative courses of action permitted or required by the terms of
         this Agreement, or is unsure as to the application, intent,
         interpretation or meaning of any provision hereof, the Issuer Trustee
         may give notice (in such form as shall be appropriate under the
         circumstances) to the Certificateholders requesting written
         instructions as to the course of action to be adopted, and, to the
         extent the Issuer Trustee acts in good faith in accordance with any
         such appropriate written instruction received from the Majority
         Certificateholders, the Issuer Trustee shall not be liable on account
         of such action or inaction to any Person. If the Issuer Trustee shall
         not have received appropriate written instructions within ten days of
         providing 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 which is consistent, in its

         Agreement of Trust
                                       23

<PAGE>   28

         view, with this Agreement and as it shall deem to be in the best
         interests of the Certificateholders, and the Issuer Trustee shall have
         no liability to any Person for any such action or inaction.

                  (g) In no event whatsoever shall the Issuer Trustee be liable
         for any representation, warranty, covenant, agreement, indebtedness or
         other obligation of the Issuer; provided, however, the foregoing shall,
         in no event whatsoever, relieve the Issuer Trustee from any liability
         resulting from the Issuer Trustee's bad faith, willful misconduct or
         gross negligence.

                  (h) The Issuer Trustee may rely upon and 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 reasonably believed by it to be genuine and
         reasonably believed by it to be signed by the proper party or parties.
         The Issuer 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 manner of ascertainment of which is not specifically
         prescribed herein, the Issuer Trustee may for all purposes hereof rely
         on a certificate, signed by the president or any vice president or by
         the treasurer or any assistant treasurer or the secretary or any
         assistant secretary (or equivalent position) of the relevant party, as
         to such fact or matter, and such certificate shall constitute full
         protection to the Issuer Trustee for any action taken or omitted to be
         taken by it in good faith reliance thereon.

                  (i) Except as expressly provided or warranted by the Issuer
         Trustee herein, the recitals contained in this Agreement and in the
         Class R Certificates shall be taken as statements of the Depositor, and
         the Issuer Trustee assumes no responsibility for their correctness.
         Except as expressly provided or warranted by the Issuer Trustee herein,
         the Issuer Trustee makes no representations as to the validity or
         sufficiency of this Agreement or the Class R Certificates or of any of
         the assets of the Issuer or the documents relating to the assets of the
         Issuer.

         Section 8.02. Acceptance of the Issuer

                  (a) The Issuer Trustee declares that it accepts the trust
         hereby created and agrees to perform its duties under this Agreement
         and the Act but only upon the terms of this Agreement and as
         contemplated by the Transaction Documents.

                  (b) It is understood and agreed that the duties and
         responsibilities of the Issuer Trustee shall be limited to (i)
         accepting legal process served on the Issuer in the State of Delaware,
         (ii) the execution, delivery and filing of all documents, and the
         maintenance of all records, necessary to form and maintain the
         existence (or to terminate the existence of) of the Issuer under the
         Act, (iii) monitoring changes to the Act insofar as such changes may
         affect the existence of the Issuer under the Act and this Agreement,
         and advising the Certificateholders when action is necessary to comply
         with the Act and (iv) such other duties and responsibilities of the
         Issuer Trustee as set forth herein and in the other Transaction
         Documents. The Issuer Trustee shall have the duties, obligations and
         responsibilities explicitly set forth herein and in the other
         Transaction Documents only. Any other reference to the Issuer shall
         mean that the Issuer Certificate Agent has the authority to take any
         action or exercise any power on behalf of the Issuer in its capacity as
         Issuer Certificate Agent and shall be the sole responsibility of State
         Street. The Issuer Certificate Agent, on behalf of the Issuer Trustee,
         will prepare, furnish and file any and all reports or notices as
         required by the Terms Indenture. Without limiting the generality of the
         foregoing, the Issuer Trustee agrees that the Issuer Certificate Agent
         shall have the absolute power to act for the Issuer in all
         circumstances in which it is provided herein that the Issuer
         Certificate Agent shall perform certain action, including without
         limitation, redemptions of the Class R Certificates or the Notes
         pursuant to Sections 5.04

         Agreement of Trust
                                       24

<PAGE>   29

         and 9.01 hereof, and actions upon a Certificate Termination Event
         pursuant to Section 6.02, and that such actions by the Issuer
         Certificate Agent will constitute acts of the Issuer.

                  (c) Except as otherwise expressly required by Sections 8.01(g)
         and 8.02(b) above, the Issuer Trustee shall not have any duty or
         liability with respect to the Issuer.

                  (d) Except for the representations, warranties and covenants
         set forth in Sections 8.04 and 8.01(d) hereof, in accepting and
         performing the trust hereby created, the Issuer Trustee acts solely as
         the trustee hereunder and not in its individual capacity, and all
         persons having any claim against the Issuer Trustee by reason of the
         transactions contemplated by this Agreement or any other Transaction
         Document shall look only to the Issuer Estate for payment or
         satisfaction thereof.

         Section 8.03. Authority and Duties of the Issuer Trustee

                  (a) The Issuer Trustee is authorized and directed to execute
         and deliver this Agreement, the Indenture, the Deposit Agreement, the
         Underwriting Agreement and the Certificate Placement Agreement, and
         each certificate or other document attached as an exhibit to or
         contemplated by any such agreement. The execution and delivery of, and
         performance of the terms of, the Indenture, the Underwriting Agreement,
         the Certificate Placement Agreement, the Deposit Agreement and each
         certificate or other document attached as an exhibit to or otherwise
         expressly contemplated by any such agreement shall be deemed not to
         conflict with or constitute a breach or default under this Agreement.
         The Issuer Trustee shall have only such authority and duties as are
         expressly set forth in this Agreement or the other Transaction
         Documents. The Issuer Trustee shall, upon the written instruction of
         the Majority Certificateholders, to the extent permitted by, and
         subject to the conditions contained in, the Transaction Documents, (i)
         amend the Certificate of Trust (provided that such amendment may only
         be made with the prior written consent of the holders of at least
         two-thirds of the Notes by Outstanding Principal Amount, and if the
         Issuer Trustee was not instructed by the Majority Certificateholders to
         make such amendment, the Issuer Trustee shall have received the prior
         written consent of the Majority Certificateholders), (ii) (x) amend any
         provision of the Indenture in accordance with the terms thereof and (y)
         appoint or approve of a replacement Note Trustee in accordance with the
         terms of the Indenture and (iii) execute, acknowledge, deliver, file or
         record any document or instrument necessary or appropriate to carry out
         the provisions of this Agreement, the Indenture or the Deposit
         Agreement in such form as is provided to it; provided that such action
         does not alter the rights, powers and duties of the Issuer Trustee as
         set forth in this Article VIII.

                  (b) The Issuer Trustee shall have the power and authority to
         execute, deliver, acknowledge and file all necessary documents and to
         maintain all necessary records of the Issuer as required by the Act.

                  (c) The Issuer Trustee shall not have the right to make an
         election with the Internal Revenue Service that would cause the Issuer
         not to be disregarded as an entity for federal income tax purposes.

                  (d) It is expressly understood and agreed by the parties that
         each of the representations, undertakings, covenants and agreements
         made on the part of the Issuer herein is made and intended not as a
         personal representation, undertaking, covenant or agreement by the
         Issuer Trustee, but is made and intended for the purpose of binding the
         Issuer. The Issuer Trustee shall not be under any liability to the
         Issuer Certificate Agent, the Certificateholders, the Depositor or any
         other Person for any action taken or for refraining from the taking of
         any action in its

         Agreement of Trust
                                       25

<PAGE>   30

         capacity as Issuer Trustee pursuant to this Agreement; provided,
         however, that this provision shall not protect the Issuer Trustee
         against any liability which would otherwise be imposed by reason of
         willful misfeasance, bad faith or gross negligence in the performance
         of its duties or by reason of reckless disregard of its obligations and
         duties hereunder. The Issuer Trustee may rely in good faith on any
         document of any kind prima facie properly executed and submitted by any
         other Person respecting any matters arising hereunder.

                  (e) The obligations of the Issuer under this Agreement and the
         Class R Certificates are obligations solely of the Issuer. This
         Agreement and the Class R Certificates do not represent an obligation
         of, or an interest in, the Issuer Trustee or any of its affiliates and
         no recourse may be had against the Issuer Trustee or its assets, except
         as may be expressly set forth or contemplated herein or in the Class R
         Certificates.

         Section 8.04. Representations and Warranties of Christiana Bank & Trust
Company.

         Christiana Bank & Trust Company, in its individual capacity, hereby
represents and warrants to the Depositor and the Holders from time to time of
the Class R Certificates that:

                  (a) Corporate Existence and Power. Christiana Bank is a
         banking corporation duly incorporated, validly existing and in good
         standing under the laws of the State of Delaware and has all corporate
         powers and all governmental licenses, authorizations, consents and
         approvals required to carry on its business as now conducted and as
         contemplated by this Agreement.

                  (b) Corporate and Governmental Authorization; No
         Contravention. The execution, delivery and performance by Christiana
         Bank of this Agreement are within Christiana Bank's corporate powers,
         have been duly authorized by all necessary corporate action, require no
         action by or in respect of, or filing with, any governmental body,
         agency or official and do not contravene, or constitute a default
         under, any provision of applicable law or regulation of the State of
         Delaware or of the Certificate of Incorporation or the Bylaws of
         Christiana Bank or of any agreement or other instrument binding upon
         Christiana Bank or result in the creation or imposition of any Lien on
         any asset of Christiana Bank.

                  (c) Binding Obligation. This Agreement has been duly
         authorized, and when executed and delivered by Christiana Bank,
         assuming the due authorization and delivery by each party hereto, shall
         constitute the legal, valid, enforceable and binding obligation of
         Christiana Bank, enforceable against it in accordance with its
         respective terms, except as subject to applicable bankruptcy,
         insolvency, reorganization, moratorium or other similar laws now or
         hereafter in effect, affecting the enforcement of creditors' rights in
         general and except as such enforceability may be limited by general
         principles of equity (whether considered in a proceeding at law or in
         equity).

                  (d) Compliance with Act. Christiana Bank complies with all the
         requirements of the Act relating to the qualification of a trustee of a
         Delaware statutory business trust.

         Section 8.05. Resignation of the Issuer Trustee.

                  (a) The Issuer Trustee may not resign and be discharged of the
         trust created by this Issuer Trust Agreement unless (i) the Issuer
         Trustee shall provide 30 days' written notice to the
         Certificateholders, (ii) the Issuer Trustee shall locate a successor
         Issuer Trustee satisfying the eligibility requirements for such
         successor Issuer Trustee set forth in this Section 8.05, (iii) the
         Issuer Trustee shall have agreed with such successor Issuer Trustee as
         to fees and expenses to be

         Agreement of Trust
                                       26

<PAGE>   31

         paid such successor Issuer Trustee for serving as Issuer Trustee with
         respect to the Issuer so long as any Class R Certificates or Notes are
         Outstanding and, if such agreed-upon fees and expenses to be paid the
         successor Issuer Trustee exceed the amounts remaining in the Expense
         Reserve Account allocated to the Issuer Trustee, the Issuer Trustee
         shall make provisions for such shortfall in a manner satisfactory to
         such successor Issuer Trustee and (iv) such successor Issuer Trustee
         shall agree to be assigned all of the rights and powers, and to assume
         all of duties and obligations, of the Issuer Trustee set forth in this
         Agreement and the other Transaction Documents, and such resignation
         shall take effect upon receipt by the predecessor Issuer Trustee of an
         instrument of acceptance of appointment executed by a successor Issuer
         Trustee as herein provided and consented to by at least two-thirds of
         the Noteholders and the Majority Certificateholders (such consent to be
         deemed consent to the certificate of amendment provided for in Section
         8.05(d); provided that such Person shall in all respects satisfy the
         requirements of Section 3807 of the Act, or any successor provision,
         and shall be a bank or trust company incorporated, or a banking
         association organized, and doing business within the United States of
         America, whose business shall consist at least in part as serving as
         Issuer Trustee in asset securitization transactions and having a
         combined capital and surplus of at least $100,000,000, if there be such
         an institution willing, able and legally qualified to perform the
         duties of the Issuer Trustee hereunder upon reasonable or customary
         terms. The appointment of the successor Issuer Trustee shall take
         effect concurrently with the resignation of the former Issuer Trustee,
         and no resignation of an Issuer Trustee shall be effective absent the
         concurrent appointment of a successor Issuer Trustee.

                  (b) If a successor Issuer Trustee shall not have been
         appointed within 60 days after such notice of resignation, the Issuer
         Trustee or the Majority Certificateholders may apply to any court of
         competent jurisdiction to appoint a successor Issuer Trustee to act
         until such time as a successor shall have been appointed as above
         provided.

                  (c) Any corporation or banking association into which the
         Issuer Trustee may be merged or converted or with which it may be
         consolidated, or any corporation or banking association resulting from
         any merger, conversion or consolidation to which the Issuer Trustee
         shall be a party, or any corporation to which substantially all the
         corporate trust business of the Issuer Trustee may be transferred,
         shall, subject to such corporation or banking association satisfying in
         all respects the requirements set forth in Section 8.05(a), be the
         Issuer Trustee hereunder without further action.

                  (d) Upon the substitution of the Person serving as Issuer
         Trustee, the successor Issuer Trustee shall file an amendment to the
         Certificate of Trust with the Secretary of State of the State of
         Delaware in accordance with the provisions of Section 3810 of the Act,
         indicating the change in the Issuer Trustee and no other change.

         Section 8.06. Indemnification.

                  (a) Each of the Issuer Trustee, its officers, directors,
         employees, shareholders and agents (collectively the "Indemnified
         Persons" or individually an "Indemnified Person") will be indemnified,
         protected, and held harmless from and against any and all liabilities,
         obligations, losses, damages, actions, judgments, suits, proceedings,
         taxes, costs, expenses and disbursements of any kind or nature
         whatsoever including, without limitation, all reasonable legal fees,
         costs and expenses of defense, appeal and settlement of any and all
         suits, actions, or proceedings instituted against such Indemnified
         Person or the Issuer and all reasonable costs of investigation in
         connection therewith that may be imposed on, incurred by, or asserted
         against an Indemnified Person relating to or arising out of any action
         or inaction on the part of the Issuer or an

         Agreement of Trust
                                       27

<PAGE>   32

         Indemnified Person in respect of the Issuer; provided, that a court of
         competent jurisdiction has not found such liabilities to have resulted
         primarily from such Indemnified Person's own bad faith, willful
         misconduct or gross negligence. The Indemnified Persons' rights to
         indemnification as provided herein shall survive the termination of
         this Agreement.

                  (b) The Issuer Trustee shall not be personally responsible for
         or in respect of the validity or sufficiency of this Agreement or the
         other Transaction Documents, the validity, value or genuineness of any
         Issuer asset or for the execution hereof or performance of the
         obligations of any other party hereunder. The provisions of this
         Agreement, to the extent that they restrict the duties and liabilities
         of the Issuer Trustee otherwise existing at law or in equity, replace
         such other duties or liabilities of the Issuer Trustee to the extent
         permissible under law or in equity. Notwithstanding anything contained
         herein to the contrary, the Issuer Trustee shall have no duty or
         liability with respect to compliance by the Issuer, the
         Certificateholders or any other Person with (A) the Securities Act, the
         Investment Company Act of 1940, as amended, or any other applicable
         Federal or state securities laws, rule or regulations, (B) ERISA or (C)
         the Code. The Issuer Trustee shall not be personally liable for any
         error of judgment made in good faith. The Issuer Trustee shall not be
         required to take any action that (i) is inconsistent with the purposes
         of the Issuer set forth herein or (ii) would, to the actual knowledge
         of an officer of the Issuer Trustee, result in the Issuer becoming an
         association taxable as a corporation for federal income tax purposes.

                  (c) The indemnity provided for by this Section 8.06 shall
         supersede and replace any indemnity provided to the Issuer Trustee
         under the Prior Agreement of Trust and the Issuer Trustee agrees to
         look solely to the Trust Agreement Collection Account as provided for
         in Section 5.03(a) of this Agreement for any indemnification obligation
         owed to it hereunder or under the Prior Agreement of Trust.

         Section 8.07. Fees and Expenses.

         The Issuer Trustee shall receive as compensation for its services
hereunder the fee specified in Section 6.02 of the Indenture, subject to the
limitations set forth therein, which amount shall also cover the costs to the
Issuer Trustee of all ordinary expenses incurred in the performance of its
duties hereunder. The Issuer Trustee shall be compensated reasonably for any
extraordinary services rendered by it hereunder and for all reasonable
out-of-pocket expenses, disbursements and advances (other than those ordinary
expenses, disbursements and advances incurred in the normal administration of
its obligations hereunder which are internal costs covered by its fees) incurred
or made by the Issuer Trustee as provided in Section 5.03(a).

         Section 8.08. Litigation, Action Outside Delaware.

                  (a) The Issuer Trustee shall not be under any obligation to
         appear in, prosecute or defend any action which in its opinion may
         require it to incur any out-of-pocket expense or any liability, unless
         it shall be furnished with such reasonable security and indemnity
         against such expense or liability as it may require, and any
         out-of-pocket cost of the Issuer Trustee as a result of such actions
         shall be paid by the Issuer.

                  (b) Notwithstanding anything contained herein to the contrary,
         the Issuer Trustee shall not be required to take any action in any
         jurisdiction other than in the State of Delaware if the taking of such
         action will (i) require the consent or approval or authorization or
         order of or the giving of notice to, or the registration with or the
         taking of any other action in respect of, any state or other
         governmental authority or agency of any jurisdiction other than the
         State of Delaware; (ii) result in any fee, tax or other governmental
         charge under the laws of any jurisdiction or any political subdivisions
         thereof in existence on the date hereof other than the State of
         Delaware

         Agreement of Trust
                                       28

<PAGE>   33

         becoming payable by the Issuer Trustee; or (iii) subject the Issuer
         Trustee to personal jurisdiction in any jurisdiction other than the
         State of Delaware for causes of action arising from acts unrelated to
         the consummation of the transactions by the Issuer Trustee contemplated
         hereby. The Issuer Trustee shall be entitled to obtain advice of
         counsel (which advice shall be an expense of the Issuer) to determine
         whether any action required to be taken pursuant to this Agreement
         results in the consequences described in clauses (i), (ii) and (iii) of
         the preceding sentence. In the event that said counsel advises the
         Issuer Trustee that such action will result in such consequences, the
         Issuer Trustee may resign pursuant to Section 8.05 hereof.

                                   ARTICLE IX:
                               REDEMPTION OF NOTES

         Section 9.01. Optional Redemption of the Notes.

         The holders of all of the Class R Certificates may direct the Issuer to
redeem all but not less than all of the Notes at a price equal to 100% of the
Outstanding Principal Amount of the Notes (the "Optional Note Redemption
Amount") on any Monthly Payment Date on or after the earlier of (A) June 1, 2005
and (B) the first Monthly Payment Date on which the remaining balance of the
Agency Securities shall be equal to or less than 20% of the principal amount of
the Agency Securities (at original issuance), after giving effect to any
principal payments on such Monthly Payment Date (any such date, a "Permitted
Note Redemption Date"); provided that if the Seller, as assignee of the
Depositor, has caused the Issuer to redeem the Class R Certificates or has
delivered a written demand to the Issuer Certificate Agent for the optional
redemption of the Class R Certificates to occur on the upcoming Monthly Payment
Date then the Seller, and not the holders of the Class R Certificates, shall
have the right to cause the Notes to be redeemed. The Issuer Certificate Agent
shall deliver to the Note Trustee a written demand for such redemption no later
than one business day after receipt of written direction to cause such
redemption as described in the preceding sentence. In order for a redemption of
the Notes to occur on a particular Monthly Payment Date, (i) the Issuer
Certificate Agent shall have delivered to the Note Trustee a written demand for
such redemption at least 10 days but no greater than 25 days prior to the
Monthly Payment Date selected for such redemption, and (ii) the Optional Note
Redemption Amount shall have been deposited into the Note Collection Account no
later than the 9th calendar day prior to such Monthly Payment Date. Without
limiting the generality of the foregoing, the Issuer Trustee agrees that the
Issuer Certificate Agent shall perform certain actions, including without
limitation, redemptions of the Class R Certificates or the Notes pursuant to
Sections 5.04 and 9.01 hereof, and actions upon a Certificate Termination Event
pursuant to Section 6.02, and that such actions by the Issuer Certificate Agent
will constitute acts of the Issuer.

                                   ARTICLE X:
              DISSOLUTION, BANKRUPTCY AND LIQUIDATION OF THE ISSUER

         Section 10.01. Dissolution of the Issuer.

                  (a) The Issuer shall be dissolved, wound up and terminated as
         provided herein upon the Note Trustee's determination, in its sole
         discretion after consultation with such counsel and other experts as it
         deems necessary, that the Issuer is insolvent; provided that such
         determination shall be made without regard to any fees or expenses
         imposed on or otherwise owed by the Issuer to any of the Issuer
         Trustee, the Note Trustee and the Issuer Certificate Agent. Upon any
         such determination, the Note Trustee shall have the right, in its sole
         discretion, to (i) apply for or consent to the appointment of, or the
         taking of possession by, a receiver, custodian, examiner or liquidator
         of the Issuer or of all or a substantial part of the Issuer Estate,
         (ii) make a general

         Agreement of Trust
                                       29

<PAGE>   34

         assignment for the benefit of the Issuer's creditors, (iii) file a
         petition seeking to take advantage of any other law relating to
         bankruptcy, insolvency, reorganization, liquidation, dissolution,
         arrangement or winding-up, or composition or readjustment of debts,
         (iv) take any corporate action for the purpose of effecting any of the
         foregoing or (v) do the equivalent of any of the foregoing under the
         laws of the United States (each action described in (i) through (v), a
         "Bankruptcy Action"), each with respect to the Issuer upon 90 days'
         prior written notice to the Certificateholders and the Depositor.
         Neither the Depositor nor any Certificateholder shall have any right to
         direct the taking of a Bankruptcy Action with respect to the Issuer;
         provided, however, the Certificateholders shall have the right to
         liquidate the assets of the Issuer on a date that is at least one year
         and one day after receiving a certificate from the Note Trustee that
         all of the obligations under the Indenture have been satisfied and
         discharged in full. With respect to any determination of insolvency by
         the Note Trustee under this Section 10.01(a), the Note Trustee shall
         incur no personal liability to any Person for any determination (action
         or inaction in connection therewith) made in good faith, and in acting
         (or not in acting as the case may be) under this Section, the Note
         Trustee shall owe no fiduciary duties to any Person other than the
         Noteholders. In connection with the Note Trustee's determination that
         the Issuer is insolvent, the Note Trustee shall not be obligated to
         follow the instructions of the Certificateholders and shall have no
         liability to the Issuer or any other Person for its failure to do so.

                  (b) Upon dissolution of the Issuer, the Issuer shall be wound
         up in accordance with Section 3808 of the Act.

         Section 10.02. Termination.

         The Issuer shall terminate when all of the Issuer's assets shall have
been disposed of and distributed as provided herein. Upon the winding up of the
Issuer and its termination, the Issuer 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 3810 of the Act. Upon such
termination, all Class R Certificates shall be canceled.

                                   ARTICLE XI:
                                     NOTICES

         Section 11.01. Notices.

         Except as otherwise expressly provided herein in any particular case,
all notices, approvals, consents, requests and other communications hereunder
shall be in writing and shall, if addressed as provided in the following
sentence, be deemed to have been given, (i) when delivered by hand, (ii) one
Business Day after being sent by a private nationally or internationally
recognized overnight courier service, or (iii) when sent by telecopy, if
immediately after transmission the sender's facsimile machine records in writing
the correct answer back. Actual receipt at the address of an addressee,
regardless of whether in compliance with the foregoing is effective notice
hereunder. Until otherwise so notified by the respective parties, all notices,
approvals, consents, requests and other communications shall be addressed to the
following addressees:

         If to the Depositor:

                  Fund America Investors Corporation II
                  c/o The Chotin Group

         Agreement of Trust
                                       30

<PAGE>   35

                  Plaza Tower One, Suite 1200
                  6400 South Fiddler's Green Circle
                  Englewood, Colorado 80111
                  Attention: Mr. Howard J. Glicksman
                  Telephone No.: 303-741-0100
                  Telecopy No.: 303-741-6944

         If to the Issuer Trustee or the Issuer:

                  Christiana Bank & Trust Company
                  Greenville Center
                  3801 Kennett Pike
                  Greenville, Delaware 19807
                  Attention: Corporate Trust Administration
                  Telephone No.: 302-421-5800
                  Telecopy No.: 302-421-5815

         If to the Issuer Certificate Agent:

                  If by courier:

                  State Street Bank and Trust Company
                  Global Investor Services Group - Corporate Trust
                  2 Avenue de Lafayette - 6th Floor
                  Boston, MA  02111
                  Attention:  FAIC II Issuer Trust 2000-1
                  Telephone No.: 617-662-1311
                  Telecopy No.: 617-662-1435

                  or, if by U.S. mail:

                  State Street Bank and Trust Company
                  Global Investor Services Group - Corporate Trust
                  P.O. Box 778
                  Boston, MA  02102-0778
                  Attention:  FAIC II Issuer Trust 2000-1
                  Telephone No.: 617-662-1311
                  Telecopy No.: 617-662-1435

         If to the Certificateholders:

                  To the Certificateholders identified as such in the
Certificate Register.

         Agreement of Trust
                                       31

<PAGE>   36

                                  ARTICLE XII:
                            MISCELLANEOUS PROVISIONS

         Section 12.01. Entire Agreement.

         Each of the parties hereto represents and warrants to the others that
this Agreement, when considered together with the other Transaction Documents,
constitutes the entire agreement among the parties hereto relating to the
transactions contemplated hereby.

         Section 12.02. Governing Law; Submission to Jurisdiction.

         THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICT OF LAWS OR CHOICE OF LAW
PRINCIPLES THEREOF. The parties hereto hereby submit to the non-exclusive
jurisdiction of the United States District Court for the Southern District of
New York and of the Supreme Court of the State of New York sitting in New York
County (including its Appellate Division), and of any other appellate court in
the State of New York, for the purposes of all legal proceedings arising out of
or relating to this Agreement or the transactions contemplated hereby. The
parties hereto hereby irrevocably waive, to the fullest extent permitted by
applicable law, any objection that they may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum.

         Section 12.03. Effect.

         Except as otherwise specified herein, this Agreement shall be binding
upon and inure to the benefit of the parties and their respective legal
representatives, successors and permitted assigns.

         Section 12.04. Pronouns and Number.

         Wherever from the context it appears appropriate, each term stated in
either the singular or the plural shall include the singular and the plural, and
pronouns stated in either the masculine, feminine or neuter shall include the
masculine, feminine and neuter.

         Section 12.05. Effect of Headings.

         The Table of Contents and the headings of the Articles, Sections,
subsections, clauses and paragraphs hereof, and of Exhibits hereto, are for
convenience of reference only, and shall not affect the construction or
interpretation of this Agreement.

         Section 12.06. Severability of Provisions.

         If any provision hereof shall be held invalid or unenforceable by any
court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof. To the extent permitted by applicable
law, the parties hereto hereby agree that any provision hereof that renders any
other term or provision hereof invalid or unenforceable in any respect shall be
modified, but only to the extent necessary to avoid rendering such other term or
provision invalid or unenforceable, and such modification shall be accomplished
in the manner that most nearly preserves the benefit of all the parties' bargain
hereunder.

         Agreement of Trust
                                       32

<PAGE>   37

         Section 12.07. Amendment or Waiver; Effect on Issuer Trust Agreement.

         Any provision of this Agreement may be amended or waived by an
amendment or waiver which is in writing and signed by the Depositor and the
Issuer Certificate Agent; provided, that the Issuer Certificate Agent shall
consent to any amendment or waiver only upon written instruction by the Majority
Certificateholders (which shall constitute the Majority Certificateholders'
consent to the amendment); provided, further, that, to the extent that such
amendment materially affects the interests of the Issuer Trustee, such amendment
shall require the consent of the Issuer Trustee; provided, further, that without
the consent of 100% of the Holders at the time, no such amendment or waiver or
any amendment or waiver to any other Transaction Document to which the Issuer is
a party shall (1) alter or amend the right of the Holders to receive payments
thereon, or institute suit in respect thereof, (2) release any portion of the
Issuer Estate or any portion of the assets of the Issuer, or (3) reduce any
amount required to be collected or retained by the Issuer or the Issuer Trustee;
and provided, further, that no such amendment or waiver shall be executed if
otherwise prohibited by the Indenture or other Transaction Documents.

         Promptly after the execution by all required parties of any such
amendment to, or waiver of, this Agreement, the Issuer Certificate Agent shall
furnish a copy of any such amendment or waiver to the Issuer Trustee, each
Certificateholder and the Depositor.

         Section 12.08. Binding Upon Assigns.

         Except as otherwise provided herein, the provisions of this Agreement
(including any amendments, modification and waivers hereof properly adopted)
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns.

         Section 12.09. Counterparts.

         This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.

         Agreement of Trust
                                       33

<PAGE>   38

                  IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date above first written.

                              CHRISTIANA BANK & TRUST COMPANY, as Issuer
                                  Trustee

                              By:    /s/ Louis W. Geibel, Jr.
                                  -------------------------
                              Name:    Louis W. Geibel, Jr.
                              Title:   Vice President

                              FUND AMERICA INVESTORS CORPORATION II,
                              as Depositor

                              By:    /s/ Helen M. Dickens
                                  -------------------------
                              Name:    Helen M. Dickens
                              Title:   Vice President

                             STATE STREET BANK AND TRUST COMPANY as
                             Issuer Certificate Agent

                             By:     /s/ Craig D. Lange
                                  -------------------------
                             Name:     Craig D. Lange
                             Title:    Assistant Vice President

         Agreement of Trust
                                       34

<PAGE>   39

                                                                      SCHEDULE I

                                AGENCY SECURITIES

                                       35

<PAGE>   40

                                                                       EXHIBIT A

                           FORM OF CLASS R CERTIFICATE

         THIS CLASS R CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD OR OTHERWISE
TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO THE SECURITIES ACT AND
REGISTERED OR QUALIFIED UNDER APPLICABLE STATE LAW OR IS RESOLD OR OTHERWISE
TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE LAW.

         THIS CLASS R CERTIFICATE MAY ONLY BE RESOLD OR OTHERWISE TRANSFERRED
(A) TO A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A) PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER OR (B) TO
CERTAIN OTHER INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT), AND IN ACCORDANCE WITH
SECTION 4.05 OF THE ISSUER TRUST AGREEMENT (AS DEFINED HEREIN).

         NO TRANSFER OF THIS CLASS R CERTIFICATE SHALL BE MADE UNLESS (I) THE
ISSUER CERTIFICATE AGENT SHALL HAVE RECEIVED FROM THE TRANSFEREE A TRANSFEREE
CERTIFICATE AND (II) SUCH TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. IN THE EVENT
THAT A TRANSFER OF A CLASS R CERTIFICATE IS TO BE MADE, THE ISSUER CERTIFICATE
AGENT MAY REQUIRE AN OPINION OF COUNSEL ACCEPTABLE TO AND 1N FORM AND SUBSTANCE
SATISFACTORY TO THE REQUESTING PARTY, TO THE EFFECT THAT SUCH TRANSFER MAY BE
MADE PURSUANT TO AN EXEMPTION, DESCRIBING THE APPLICABLE EXEMPTION AND THE BASIS
THEREFOR, FROM THE SECURITIES ACT AND IS BEING MADE IN ACCORDANCE WITH THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED, WHICH OPINION OF COUNSEL SHALL NOT
BE AN EXPENSE OF THE ISSUER CERTIFICATE AGENT OR THE ISSUER. THE
CERTIFICATEHOLDER SHALL BE DEEMED BY ITS ACCEPTANCE AND HOLDING OF THIS CLASS R
CERTIFICATE TO AGREE THAT NEITHER THE ISSUER NOR THE ISSUER CERTIFICATE AGENT IS
UNDER AN OBLIGATION TO OR INTENDS TO REGISTER THIS CLASS R CERTIFICATE UNDER THE
SECURITIES ACT OR ANY OTHER SECURITIES LAW.

         No transfer of this Class R Certificate shall be made unless and until
the prospective transferee provides the Certificate Registrar (as defined in the
Issuer Trust Agreement described below) with an affidavit, in the form of
paragraph 7 of the Transferee Certificate (as defined in the Issuer Trust
Agreement described below), to the effect that such transferee is not an
employee benefit plan that is subject to all or a portion of Title I of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any
retirement plan or arrangement that is subject to Section 4975 of the Code, nor
a person acting, directly or indirectly, on behalf of any such employee benefit
plan, plan or arrangement (including an insurance company using funds in its
general account that may constitute "plan assets") (each, a "Plan") and is not a
governmental plan subject to any laws or regulations that are substantially
similar to Section 406 of ERISA or Section 4975 of the Code (as defined in the
Issuer Trust Agreement described below), or a person acting, directly or
indirectly, on behalf of any such government plan.

                                       36

<PAGE>   41

         A beneficial or record interest in a Class R Certificate may not be
sold or transferred to a Disqualified Organization (as defined in the Issuer
Trust Agreement described below). Any attempted or purported transfer of an
interest in a Class R Certificate shall be absolutely null and void and shall
vest no rights in the purported transferee unless (a) such transferee provides
to the Certificate Registrar, who shall be responsible for forwarding it to
Fannie Mae and Freddie Mac, (i) affidavits, in the forms provided as,
respectively, Exhibits C-1 and C-2 to the Issuer Trust Agreement (the
"Transferee Affidavits"), each to the effect that such prospective transferee is
(i) not a "disqualified organization" as defined in such Underlying Documents
(as defined in the Issuer Trust Agreement described below) and is not purchasing
such Class R Certificate on behalf of a disqualified organization and (ii) a
U.S. Person and (iii) if requested by the Certificate Registrar, an opinion of
counsel (in a form acceptable to the Certificate Registrar) that the proposed
transfer will not cause such interest to be held by or on behalf of a
disqualified organization. Such transferee shall also provide a cover letter
addressed to the Issuer Trustee, the Authenticating Agent (as defined in the
Issuer Trust Agreement described below) and the Certificate Registrar to the
effect that the addressees of such letter may rely on the certifications made by
such transferee in the Transferee Affidavits. In the event that the Class R
Certificates shall be optionally redeemed, the Seller, as assignee of the
Depositor's right to cause the redemption of the Class R Certificates, and,
after such redemption the owner of 100% of the beneficial ownership interest in
the Issuer, shall be obligated to provide to the Certificate Registrar the
Transferee Affidavits, a Transferee Certificate in the form of Exhibit B to the
Issuer Trust Agreement, and if requested by the Certificate Registrar, an
opinion of counsel as described in this paragraph as if the Seller were the
prospective transferee for the purposes of this paragraph. The Certificate
Registrar shall be responsible for forwarding such documents to the Fannie Mae
or Freddie Mac.

                                       37

<PAGE>   42

                           FAIC II ISSUER TRUST 2000-1

                FAIC II ISSUER TRUST 2000-1, CLASS R CERTIFICATES
                              DUE DECEMBER 1, 2029

                                     No. __

Cusip No.  _____________                                           U.S.$_______

         FAIC II ISSUER TRUST 2000-1, a statutory business trust formed under
the laws of the State of Delaware (the "Issuer"), for value received, hereby
promises to pay to _________________________, or registered assigns, upon
presentation and surrender of this Class R Certificate (except as otherwise
permitted by the Issuer Trust Agreement referred to below), the principal sum of
_______________ ______________________ United States Dollars (U.S. $______) due
on December 1, 2029 (the "Final Scheduled Monthly Payment Date"), all as
provided below and in the Issuer Trust Agreement referred to herein.

         This Class R Certificate is issued pursuant to an Agreement of Trust,
dated as of January 20, 2000 (the "Issuer Trust Agreement"), among Fund America
Investors Corporation II, as depositor, Christiana Bank & Trust Company, as
issuer trustee, and State Street Bank and Trust Company, as issuer certificate
agent.

         The obligations of the Issuer under this Class R Certificate and the
Issuer Trust Agreement are obligations solely of the Issuer. This Class R
Certificate does not represent an obligation of, or an interest in, the Issuer
Trustee or any of its affiliates and no recourse may be had against the Issuer
Trustee or its assets, except as may be expressly set forth or contemplated
herein or in the Issuer Trust Agreement. The Class R Certificates represent the
undivided beneficial interest in the assets of the Issuer, subject to the pledge
of the Pledged Assets (as defined in the Indenture) by the Issuer to the Note
Trustee pursuant to the Indenture for the benefit of the Noteholders.
Consequently, any rights of the Certificateholders to the Pledged Assets will be
subject to that pledge.

         Distributions on the Class R Certificates will be payable on the first
Business Day of each month, commencing on March 1, 2000 (each, a "Monthly
Payment Date"), to holders of record of the Class R Certificates (the
"Certificateholders") as of the Record Date.

         Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Issuer Trust Agreement.

         On each Monthly Payment Date, the Class R Certificates are entitled to
receive all payments of principal collected on the Series 2203 Freddie Mac
Security during the preceding Interest Accrual Period until the Outstanding
Certificate Balance of the Class R Certificates has been reduced to zero. On and
after the Monthly Payment Date on which all principal of and interest on the
Notes has been paid in full, all Residual Collections shall be distributed on
the Class R Certificates, less any amounts owed to the Note Trustee, Issuer
Trustee or Issuer Certificate Agent as reimbursed expenses or indemnity. All
distributions on the Class R Certificates shall be allocated pro rata among the
Class R Certificates first to reduce the Outstanding Certificate Balance of the
Class R Certificates to zero, and thereafter to be distributed on the Class R
Certificates as additional investment yield.

         The Class R Certificates have no stated interest rate.

                                       38

<PAGE>   43

         The Class R Certificates will be redeemed in full on December 1, 2029
(the "Final Scheduled Monthly Payment Date") to the extent not repaid or
redeemed prior thereto.

         The Depositor or its assignee may, by written demand to the Issuer
Certificate Agent and the Issuer Trustee, cause the Issuer to redeem on a
Monthly Payment Date all but not less than all of the Class R Certificates at a
price equal to 105% of the Outstanding Certificate Balance of the Class R
Certificates on such Monthly Payment Date (the "Optional Certificate Redemption
Amount"). Such demand shall be delivered at least 10 calendar days but no more
than 25 calendar days prior to the Monthly Payment Date on which the redemption
is to occur. Prior to any redemption of the Class R Certificates, the Optional
Certificate Redemption Amount shall be deposited into the Trust Agreement
Collection Account no later than the 9th calendar day prior to such Monthly
Payment Date selected for redemption of the Class R Certificates. Such
redemption shall occur on a Monthly Payment Date specified in the written
notice, which date shall be on or after the earlier of (A) March 1, 2005 and (B)
the first Monthly Payment Date on which the remaining balance of the Agency
Securities shall be equal to or less than 20% of the principal amount of the
Agency Securities (at original issuance), after giving effect to any principal
payments on such Monthly Payment Date (the "Permitted Certificate Redemption
Date"). Upon redemption of the Class R Certificates, the party who effected the
redemption by depositing the Optional Certificate Redemption Amount shall own
the entire beneficial ownership interest in the Issuer until the Notes are
redeemed or paid in full and the Issuer is terminated, and such party shall have
the right to direct redemption of the Notes pursuant to the Indenture. Such
party's ownership interest in the Issuer shall be subject to the same ownership
and transfer restrictions as the Class R Certificates, which are set forth in
Section 4.05 of the Issuer Trust Agreement.

         The holders of the Class R Certificates may direct the Issuer to redeem
all but not less than all of the Notes at a price equal to 100% of the
Outstanding Principal Amount of the Notes (the "Optional Note Redemption
Amount") on any Monthly Payment Date on or after the earlier of (A) June 1, 2005
and (B) the first Monthly Payment Date on which the remaining balance of the
Agency Securities shall be equal to or less than 20% of the principal amount of
the Agency Securities (at original issuance), after giving effect to any
principal payments on such Payment Date (any such date, a "Permitted Note
Redemption Date"); provided that if the Seller as assignee of the Depositor, has
caused the Issuer to redeem the Class R Certificates or has delivered a written
demand to the Issuer Certificate Agent for the optional redemption of the Class
R Certificates to occur on the upcoming Monthly Payment Date then the Seller,
and not the holders of the Class R Certificates, shall have the right to cause
the Notes to be redeemed. In order for a redemption of the Notes to occur on a
particular Monthly Payment Date, (i) the Issuer Trustee shall have delivered to
the Note Trustee a written demand for such redemption at least 10 days but no
greater than 25 days prior to the Monthly Payment Date selected for such
redemption, and (ii) the Optional Note Redemption Amount shall have been
deposited into the Note Collection Account no later than the 9th calendar day
prior to such Monthly Payment Date.

         The Internal Revenue Service has proposed regulations requiring certain
reporting by trustees to holders of "widely held fixed investment trusts." To
avoid the expense of any reporting, by acquiring this Class R Certificate,
whether on original issue or in a secondary purchase, the registered holder of
this Certificate agrees as follows:

                  (i) The Certificateholder shall hold this Class R Certificate
         directly and not through a "middleman." For this purpose, a "middleman"
         is any person who holds an interest on behalf of, or for the account
         of, another person, or who otherwise acts in a capacity as an
         intermediary for the account of another person, including, without
         limitation, a custodian, such as a bank, financial institution or
         brokerage firm; a nominee, including the joint owner of an account,
         except if the joint owners are husband and wife; or a broker holding an
         interest for a customer in street name.

                                       39

<PAGE>   44

                  (ii) If Proposed Treasury Regulations Section 1.671-4(j) shall
         become final in a form which permits this Certificateholder to request
         quarterly information, the Certificateholder agrees that it shall
         request such information only upon making provision of compensation to
         the Issuer Certificate Agent for the expenses of providing such
         information.

                  (iii) The Certificateholder agrees not to transfer this Class
         R Certificate to any person unless such person agrees to these
         provisions in writing for the benefit of the Issuer.

         The Issuer Certificate Agent will send each payment on a Monthly
Payment Date to each Class R Certificateholder, together with a statement
setting forth, among other things, (i) the amount of such payment allocable to
principal and (ii) the amount of such payment allocable to investment yield.
Such amounts will be expressed as a dollar amount per U.S. $1,000 of the
original principal amount of the Class R Certificates.

         Unless the certificate of authentication hereon has been executed by
the Authenticating Agent by the manual signature of one of its Authorized
Officers, this Class R Certificate shall not be entitled to any benefit under
the Issuer Trust Agreement or be valid or obligatory for any purpose.

         If a Certificate Termination Event with respect to the Class R
Certificates occurs and is continuing, the Issuer Certificate Agent at the
direction of the Majority Certificateholders will cause the Issuer to be
dissolved and terminated, or, upon the occurrence of the Certificate Termination
Event described in Section 6.01(e) of the Issuer Trust Agreement, the Issuer
Certificate Agent shall cause the Issuer to be terminated without any notice
from Certificateholders. Upon any such termination, subject to the requirements
of Section 3808 of the Act, all of the property of the Issuer (other than
amounts in the Expense Reserve Account) will be distributed by the Issuer
Certificate Agent pro rata to the Certificateholders.

         Title to this Class R Certificate shall pass by registration in the
Certificate Register kept at the Corporate Trust Office by the Certificate
Registrar.

         No service charge shall be made for exchange or registration of
transfer of this Class R Certificate, but the Issuer may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.

         The recitals contained herein shall be taken as statements of the
Depositor and the Issuer Trustee assumes no responsibility for the correctness
thereof. The Issuer Trustee makes no representations as to the validity or
sufficiency of this Class R Certificate or of any of the assets of the Issuer or
related documents.

         THIS CLASS R CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND
GOVERNED BY, THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICT OF LAWS OR CHOICE OF LAW
PRINCIPLES THEREOF.

                                       40

<PAGE>   45

                  IN WITNESS WHEREOF, the Issuer has caused this Class R
         Certificate to be duly executed.

         Dated _____________

                                   FAIC II ISSUER TRUST 2000-1

                                     By: CHRISTIANA BANK & TRUST COMPANY, as
                                          Issuer Trustee

                                   By: ___________________________
                                   Name:
                                   Title:

                          CERTIFICATE OF AUTHENTICATION

                  This is one of the Class R Certificates referred to in the
         within-mentioned Issuer Trust Agreement.

                                   STATE STREET BANK AND TRUST COMPANY, as
                                   Authenticating Agent

                                   By:__________________________
                                   Authorized Signatory

                                       41

<PAGE>   46

                                 ASSIGNMENT FORM

         For value received

         hereby sell, assign and transfer unto

         Please insert social security or other identifying number of assignee
Please print or type name and address, including zip code, of assignee:
____________________________ the within Class R Certificate and does hereby
irrevocably constitute and appoint ________________________ Attorney to transfer
the Class R Certificate on the books of the Company with full power of
substitution in the premises.

      Date:  _________                   Your Signature:_____________________

                 (Sign exactly as your name appears on this Class R Certificate)

                                       42
<PAGE>   47

                                                                       EXHIBIT B

                         FORM OF TRANSFEREE CERTIFICATE

         COUNTY OF )
                           : SS.:
         STATE OF )

                [Name], being first duly sworn, deposes and says:

                  1. That [s/he] is the [title] of [transferee entity] proposed
transferee of [one of the] U.S. $324,992.88 aggregate principal amount of FAIC
II Issuer Trust 2000-1 Class R Certificates Due December 1, 2029, representing
100% of the equity interest of the Issuer (the "Transferee"), a statutory
business trust duly organized and existing under the laws of the State of
Delaware, on behalf of which he has the authority to make this affidavit and
agreement. The Class R Certificates were issued pursuant to the Agreement of
Trust dated as of January 20, 2000 (the "Issuer Trust Agreement") among Fund
America Investors Corporation II, Christiana Bank & Trust Company, a banking
corporation incorporated in the State of Delaware (in its individual capacity
solely where expressly set forth in the Issuer Trust Agreement, "Christiana
Bank"), otherwise acting solely in its capacity as trustee of the Issuer
thereunder (in such capacity, the "Issuer Trustee"), and State Street Bank and
Trust Company (in its individual capacity, "State Street"), as agent thereunder
with respect to the Class R Certificates issued thereunder (in such capacity,
the "Issuer Certificate Agent"). Unless otherwise defined herein, capitalized
terms used herein shall have the meanings assigned to such terms in the Issuer
Trust Agreement.

                  2. That the Transferee has reviewed the restrictions set forth
on the face of the Class R Certificates and the provisions of Article IV of the
Issuer Trust Agreement under which the Class R Certificates were issued. The
Transferee expressly agrees to be bound by and to comply with such restrictions
and provisions.

                  3. That the Transferee is a "U.S. Person," or a U.S. citizen
or resident, a corporation, partnership, or other entity created or organized
in, or under the laws of, the United States or any political subdivision
thereof, an estate whose income is subject to United States federal income tax
regardless of its source, or a trust if a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more U.S. Persons
have the authority to control all substantial decisions of the trust.

                  4. That this affidavit and agreement relates only to the Class
R Certificates to be held by the Transferee and not to any other Holder of the
Class R Certificates.

                  5. That the Transferee, by accepting the Class R Certificates,
acknowledges, represents and agrees as follows:

                  (a) The Class R Certificates have not been registered under
         the Securities Act of 1933, as amended (the "Securities Act"), or the
         securities laws of any state of the United States and, until
         registered, may not be offered, sold or otherwise transferred unless
         exemptions from registration under the Securities Act and such
         applicable state securities laws are available.

                  (b) The Transferee (a)(i) is a Qualified Institutional Buyer
         and (ii) is acquiring the Class R Certificates for its own account or
         for the account of a Qualified Institutional Buyer or (b)

                                       43

<PAGE>   48

         is an institution which is an institutional accredited investor
         (meaning an "accredited investor" as defined in Rule 501 (a)(1), (2),
         (3) or (7) of Regulation D under the Securities Act) who is not a
         Qualified Institutional Buyer.

                  (c) The Transferee understands that transfers of the Class R
         Certificates offered and sold to a Qualified Institutional Buyer or to
         an institutional Accredited Investor will be registered only if the
         Class R Certificates are transferred in accordance with the transfer
         restrictions referred to in paragraph (b) above and an appropriate
         transfer letter (copies of which are available from the Issuer
         Certificate Agent) is delivered to the Issuer Certificate Agent
         appropriately completed.

                  (d) The Transferee understands that the Class R Certificates
         offered and sold to Qualified Institutional Buyer or to an
         institutional Accredited Investor shall bear a legend to the following
         effect:

                           "THIS CLASS R CERTIFICATE HAS NOT BEEN AND WILL NOT
                  BE REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933,
                  AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF
                  ANY STATE AND MAY NOT BE RESOLD OR OTHERWISE TRANSFERRED
                  UNLESS IT IS REGISTERED PURSUANT TO THE SECURITIES ACT AND
                  REGISTERED OR QUALIFIED UNDER APPLICABLE STATE LAW OR IS
                  RESOLD OR OTHERWISE TRANSFERRED IN TRANSACTIONS WHICH ARE
                  EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND UNDER
                  APPLICABLE STATE LAW. THIS CERTIFICATE MAY ONLY BE RESOLD OR
                  OTHERWISE TRANSFERRED (A) TO A QUALIFIED INSTITUTIONAL BUYER
                  (AS DEFINED IN RULE 144A) PURCHASING FOR ITS OWN ACCOUNT OR
                  FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER OR (B) TO
                  CERTAIN OTHER INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED
                  IN RULE 501 (A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT),
                  AND IN ACCORDANCE WITH SECTION 4.05 OF THE ISSUER TRUST
                  AGREEMENT (AS DEFINED HEREIN)."

                  6. That the Transferee is acquiring the Certificate for its
own account for investment and not with a view to or for sale or transfer in
connection with any distribution thereof, in whole or in part, in any manner
which would violate the Securities Act, or any applicable State securities laws.

                  7. That the Transferee is not an employee benefit plan that is
subject to all or a portion of Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or any retirement plan or
arrangement that is subject to Section 4975 of the Code, nor a person acting,
directly or indirectly, on behalf of any such employee benefit plan, plan or
arrangement(including an insurance company using funds in its general account
that may constitute "plan assets") (each, a "Plan") and is not a governmental
plan subject to any laws or regulations that are substantially similar to
Section 406 of ERISA or Section 4975 of the Code, or a person acting, directly
or indirectly, on behalf of any such government plan.

                  8.       That the Transferee agrees as follows:

                  (a) Such Transferee shall hold such Class R Certificates
         directly and not through a "middleman." For this purpose, a "middleman"
         is any person who holds an interest on behalf of, or for the account
         of, another person, or who otherwise acts in a capacity as an
         intermediary for the account of another person, including, without
         limitation, a custodian, such as a bank, financial

                                       44

<PAGE>   49

         institution or brokerage firm; a nominee, including the joint owner of
         an account, except if the joint owners are husband and wife; or a
         broker holding an interest for a customer in street name.

                  (b) If Proposed Treasury Regulations Section 1.671-4(j) shall
         become final in a form which permits such Transferee to request
         quarterly information, such Transferee agrees that it shall request
         such information only upon making provision of compensation to the
         Issuer Certificate Agent for the expenses of providing such
         information.

                  (c) Such Transferee agrees not to transfer such Class R
         Certificates to any person unless such person agrees to these
         provisions in writing for the benefit of the Issuer.

                  9. That the Transferee (i) is not a "disqualified
organization" as defined in Section 860E(e)(5) of the Internal Revenue Code of
1986, as amended, and will not be a disqualified organization as of [date of
transfer], (ii) is not acquiring the Class R Certificate for the account of a
disqualified organization, (iii) consents to any amendment of the Issuer Trust
Agreement that shall be deemed necessary by the Issuer (upon advice of counsel)
to constitute a reasonable arrangement to ensure that the Class R Certificate
will not be owned directly or indirectly by a disqualified organization, (iv)
does not have as a purpose for acquiring the Class R Certificate to avoid or
impede the assessment or collection of tax, (v) understands that it may incur
tax liabilities in excess of any cash flows generated by the Class R
Certificate, (vi) intends to pay taxes associated with holding the Class R
Certificate as they become due; and (vii) will not transfer such Class R
Certificate unless (a) it has received from the transferee an affidavit in
substantially the same form as this affidavit containing these same seven
representations and (b) as of the time of the transfer, it does not have actual
knowledge that such affidavit is false.

                                       45

<PAGE>   50

                                                                     EXHIBIT C-1

                  FORM OF TRANSFEREE AFFIDAVIT (TO FREDDIE MAC)

                      Date of Transfer: [________ __, ____]

         Federal Home Loan Mortgage Corporation
         8200 Jones Branch Drive
         McLean, Virginia 22102
         Ladies and Gentlemen:

                  We propose to acquire the Residual Classes of the Series1 of
Freddie Mac's Multiclass REMIC Certificates listed on Schedule I hereto (the
"Residual Classes"). The Residual Classes are described in the related Offering
Circular Supplement.

                  1. We certify that (a) we are not a disqualified organization
and (b) we are not acquiring the Residual Classes on behalf of a disqualified
organization. For this purpose, the term "disqualified organization" means the
United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of any
of the foregoing (except for the Federal Home Loan Mortgage Corporation
("Freddie Mac") or any entity treated as other than an instrumentality of the
foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code of
1986 (the "Code")), any organization (other than a cooperative described in
Section 521 of the Code) that is exempt from taxation under the Code (unless
such organization is subject to tax on its unrelated business taxable income)
and any organization that is described in Section 1381(a)(2)(C) of the Code. We
understand that any breach by us of this certification may cause us to be liable
for an excise tax imposed upon transfers to disqualified organizations.

                  2. We certify that (a) we have historically paid our debts as
they become due, (b) we intend, and believe that we will be able, to continue to
pay our debts as they become due in the future, (c) we understand that as
beneficial owner of the Residual Classes, we may incur tax liabilities in excess
of any cash flows generated by such Classes, and (d) we intend to pay any taxes
associated with holding the Residual Classes as they become due.

                  3. We acknowledge that we will be the beneficial owner of the
Residual Classes shown on Schedule I hereto and the Residual Classes will be
either registered in our name or held in the name of our nominee (which is not a
disqualified organization), as indicated on Schedule I.

                  4. Unless Freddie Mac has consented to a transfer to a
transferee that is not a U.S. person by executing a consent in a form
satisfactory to Freddie Mac, we certify that we are a U.S. Person. For this
purpose, the term "U.S. Person" means 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 State (other than a partnership that
is not treated as a U.S. Person under any applicable Treasury regulations), an
estate whose income is subject to United States federal income tax regardless of
its source, or a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more U.S.
Persons have the authority to control all substantial decisions of the trust. We
agree that any breach by us of this certification shall render the transfer of
any interest in the Residual Classes to us absolutely null and void and shall
cause no rights in such Residual Classes to vest in us.

-----------------------
   (1) A separate transferee affidavit will be executed for each Residual Class.

                                       46

<PAGE>   51

                  5. We agree that in the event that at some future time we wish
to transfer an interest in a Residual Class, we will transfer such interest in a
Residual Class only (a) to a transferee that (i) is not a disqualified
organization and is not purchasing such interest in a Residual Class on behalf
of a disqualified organization, (ii) is a U.S. Person and (iii) has delivered to
Freddie Mac a letter in the form of this letter and, if requested by Freddie
Mac, an opinion of counsel (in form acceptable to Freddie Mac) that the proposed
transfer will not cause the interest in a Residual Class to be held by a
disqualified organization or a person who is not a U.S. Person or (b) with the
written consent of Freddie Mac.

                  6. We hereby designate Freddie Mac as our fiduciary to act as
the tax matters person for each REMIC Pool in which the Residual Classes
represent an interest.

                         Very truly yours,
                   [INSERT TRANSFEREE]
                   By:_________________________________________________________
                         Name:
                         Title:
                         Date:
                         Taxpayer Identification Number:[                   ]
                         Address for Receipt of Tax
                          Information (Schedule Qs):
                         Name:   [                        ]
                         Attn:   [                        ]
                         Address:[                        ]
                                 [                        ]
                         City:   [                        ]
                         State:  [                        ]
                         Zip:    [                        ]

                                       47

<PAGE>   52

         Under penalties of perjury, I declare that I am an authorized signatory
of the above Transferee and I am duly authorized to act on behalf of the
Transferee, and to the best of my knowledge and belief, the statements in
paragraphs 1, 2, 3 and 4 (excluding the last sentence thereof) of this
Transferee's Letter are true.

                       __________________________________________________By:
                            Name:
                            Title:
                            Date:    [_________ __, ____]

                                       48

<PAGE>   53
                                                                      SCHEDULE I

                (to Transferee's Letter dated _________ __, ____)

<TABLE>
<CAPTION>
Series                                      Class                      Name and Capacity*
------                                      -----                      -----------------
<S>                                         <C>                        <C>
2114                                        R                                  [C]
2137                                        R                                  [C]
2149                                        R                                  [C]
</TABLE>

-----------------------
     * Indicate whether the "name" in which the security is held is an
individual ("I"), corporation ("C"), fiduciary ("F"), partnership ("P"), exempt
organization("EO") or nominee/custodian ("N").

<PAGE>   54

                                                                    EXHIBIT C-2

                  FORM OF TRANSFEREE AFFIDAVIT (TO FANNIE MAE)

                                                     Affidavit pursuant to (i)
                                                     Section 860E(e)(4) of the
                                                     Internal Revenue Code of
                                                     1986, as amended, and (ii)
                                                     certain provisions of the
                                                     Trust Agreement (or, if
                                                     applicable, the Issue
                                                     Supplement) relating to
                                                     Fannie Mae REMIC Trust
                                                     1999-[___](1)
         STATE OF                   )
                                    )  ss:
         COUNTY OF                  )

                   [NAME OF OFFICER], being first duly sworn, deposes and says
under penalties of perjury:

                  1. That he is [Title of Officer] of [Name of Investor] (the
"Investor") a [savings institution] [corporation] duly organized and existing
under the laws of [the State of ___________] [the United States], on behalf of
which he makes this affidavit.

                  2. That (i) the Investor is not a "disqualified organization"
as defined in Section 860E(e)(5) of the Internal Revenue Code of 1986, as
amended, and will not be a disqualified organization as of [date of transfer],
(ii) it is not acquiring the Class [__]-R REMIC Certificate for the account of a
disqualified organization, (iii) it consents to any amendment of the Trust
Agreement (or, if applicable, the Issue Supplement) that shall be deemed
necessary by Fannie Mae (upon advice of counsel) to constitute a reasonable
arrangement to ensure that the Class [__]-R REMIC Certificate will not be owned
directly or indirectly by a disqualified organization, (iv) no purpose of the
acquisition of the Class [__]-R REMIC Certificate is to avoid or impede the
assessment or collection of tax; (v) it understands that it may incur tax
liabilities in excess of any cash flows generated by the Class [__]-R REMIC
Certificate; (vi) it intends to pay taxes associated with holding the Class
[__]-R REMIC Certificate as they become due; and (vii) it will not transfer such
Class [__]-R REMIC Certificate unless (a) it has received from the transferee an
affidavit in substantially the same form as this affidavit containing these same
seven representations and (b) as of the time of the transfer, it does not have
actual knowledge that such affidavit is false.

(1) A separate transferee affidavit will be executed for each residual security.

<PAGE>   55

         IN WITNESS WHEREOF, the Investor has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Title of Officer] and its corporate seal to be hereunto attached, attested
by its [Assistant] Secretary, this ____ day of __________, [year].

                                    [NAME OF INVESTOR]

                                    By:
                                       -----------------------
                                          [Name of Officer]
                                          [Title of Officer]
                                          [Address of Investor for
                                           receipt of distributions]
                                          [Taxpayer I.D. number]

                                          Address of Investor for receipt of
                                          tax information:

                                          ----------------------------------

                                          ----------------------------------

         [Corporate Seal]
         Attest:

         -----------------------
         [Assistant] Secretary

                           Personally appeared before me the above-named [Name
of Officer], known or proved to me to be the same person who executed the
foregoing instrument and to be the [Title of Officer] of the Investor, and
acknowledged to me that he executed the same as his free act and deed and the
free act and deed of the Investor.
       Subscribed and sworn before me this ____ day of __________, [year].

       -----------------------
       Notary Public
       COUNTY OF ________________________
       STATE OF _________________________
       My commission expires on the _____________________.

                                       2<PAGE>   1

                                                                 EXHIBIT 10.2

--------------------------------------------------------------------------------

                           DEPOSIT AND SALE AGREEMENT

                                     between

                FUND AMERICA INVESTORS CORPORATION II, DEPOSITOR

                                       and

                       FAIC II ISSUER TRUST 2000-1, ISSUER

                          dated as of January 20, 2000

--------------------------------------------------------------------------------

<PAGE>   2

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                                Page
<S>              <C>                                                                                             <C>

ARTICLE I  DEFINITIONS............................................................................................2

         Section 1.01.  Definitions...............................................................................2

ARTICLE II  SALE; CONSIDERATION...................................................................................4

         Section 2.01.  Sale......................................................................................4

         Section 2.02.  Consideration.............................................................................5

ARTICLE III  REPRESENTATIONS, WARRANTIES AND COVENANTS............................................................5

         Section 3.01.  Representations, Warranties and Covenants of the Depositor................................5

         Section 3.02.  Assignment of Representations and Warranties and Covenants of the

                             Depositor Regarding the Agency Securities............................................7

         Section 3.03.  Representations, Warranties and Covenants of the Issuer...................................8

ARTICLE
IV................................................................................................................9

         Section 4.01.  Optional Certificate Redemption...........................................................9

         Section 4.02.  Optional Note Redemption..................................................................9

ARTICLE V  MISCELLANEOUS PROVISIONS..............................................................................10

         Section 5.01.  Amendment................................................................................10

         Section 5.02.  Governing Law; Submission to Jurisdiction................................................10

         Section 5.03.  Waiver of Jury Trial.....................................................................10

         Section 5.04.  Notices..................................................................................10

         Section 5.05.  Severability of Provisions...............................................................11

         Section 5.06.  Assignment...............................................................................11

         Section 5.07.  Further Assurances.......................................................................11

         Section 5.08.  No Waiver; Cumulative Remedies...........................................................11

         Section 5.09.  Counterparts.............................................................................12

         Section 5.10.  Binding Effect...........................................................................12

         Section 5.11.  Merger and Integration...................................................................12

         Section 5.12.  Headings.................................................................................12

         SCHEDULE I:  AGENCY SECURITIES

</TABLE>
                                       i
<PAGE>   3

                  DEPOSIT AND SALE AGREEMENT (this "Agreement") dated as of
January 20, 2000, by and between FUND AMERICA INVESTORS CORPORATION II, a
Delaware corporation (the "Depositor"), and FAIC II ISSUER TRUST 2000-1, a
Delaware statutory business trust (the "Issuer").

                               W I T N E S S E T H

                  WHEREAS, pursuant to a Purchase Agreement dated as of January
20, 2000 (the "Purchase Agreement") between Merrill Lynch, Pierce, Fenner &
Smith Incorporated, a Delaware corporation (the "Seller") and the Depositor, the
Seller sold, assigned and transferred certain securities guaranteed by either
Fannie Mae or the Federal Home Loan Mortgage Corporation ("Freddie Mac") which
securities are identified on Schedule I attached hereto (the "Agency
Securities"), to the Depositor subject to the terms specified in the Purchase
Agreement;

                  WHEREAS, the Issuer was formed as a Delaware statutory
business trust on January 19, 2000 pursuant to an Agreement of Trust, dated as
of January 19, 2000, as amended and restated by an Amended and Restated
Agreement of Trust dated as of January 20, 2000 (the "Issuer Trust Agreement")
among the Depositor, Christiana Bank & Trust Company, not in its individual
capacity, but solely as trustee of the Issuer (in such capacity, the "Issuer
Trustee"), and State Street Bank and Trust Company, as the authenticating agent,
registrar and paying agent thereunder with respect to the Class R Certificates
issued thereunder (in such capacity, the "Issuer Certificate Agent");

                  WHEREAS, the Depositor desires to contribute and assign to the
Issuer (i) all of its right, title and interest to and under the Agency
Securities and (ii) all of its rights under the Purchase Agreement (together,
the "Contributed Assets") for the cash and other consideration, and upon the
terms and conditions, set forth herein (the "Sale");

                  WHEREAS, pursuant to the terms of the Indenture dated as of
January 20, 2000 (the "Indenture"), between the Issuer and State Street Bank and
Trust Company, as the trustee thereunder (in such capacity, the "Note Trustee"),
the Issuer will issue U.S. $1,986,400 aggregate principal balance of variable
rate FAIC II Issuer Trust 2000-1, Class F Notes, due December 1, 2029 (the
"Class F Notes"), and U.S. $764,000 aggregate principal balance of variable
rate, FAIC II Issuer Trust 2000-1, Class S Notes, due December 1, 2029 (the
"Class S Notes" and, together with the Class F Notes, the "Notes"), secured by a
pledge of certain assets of the Issuer, including the Contributed Assets;

                  WHEREAS, pursuant to the terms of the Issuer Trust Agreement,
the Issuer will issue U.S. $465,600 aggregate principal amount of FAIC II Issuer
Trust 2000-1, Class R Certificates, due December 1, 2029 (the "Class R
Certificates"), representing 100% of the equity interest of the Issuer;
<PAGE>   4

                  WHEREAS, the Issuer desires to grant to the Depositor the
right to direct the Issuer to redeem the Class R Certificates and in connection
therewith certain rights regarding redemption of the Notes; and

                  WHEREAS, the Depositor and the Issuer are entering into this
Agreement with the intention that the transactions contemplated hereby will be
executed;

                  NOW, THEREFORE, it is hereby agreed by and between the
Depositor and Issuer as follows:

                                    ARTICLE I

                                   DEFINITIONS

                  SECTION 1.01.00 DEFINITIONS. For all purposes of this
Agreement, except as otherwise expressly provided herein or unless the context
otherwise requires, capitalized terms shall have the following meanings and such
meanings shall be equally applicable to the singular and plural forms of such
terms. Capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Indenture or, if not defined therein, in the
Issuer Trust Agreement. All other capitalized terms used herein shall have the
meanings specified herein.

                  "Agency Security" means each of the securities specified in
Schedule I hereto.

                  "Agreement" means this Deposit and Sale Agreement as it may
from time to time be amended, supplemented or otherwise modified in accordance
with the terms hereof.

                  "Class F Notes" has the meaning assigned to it in the fourth
WHEREAS clause hereof.

                  "Class R Certificates" has the meaning assigned to it in the
fifth WHEREAS clause hereof.

                  "Class S Notes" has the meaning assigned to it in the fourth
WHEREAS clause hereof.

                  "Closing Date" means January 20, 2000.

                  "Contributed Assets" has the meaning assigned to such term in
the third WHEREAS clause hereto.

                  "Cut-off Date" means January 26, 2000.

                  "Depositor" means Fund America Investors Corporation II, a
corporation formed under the laws of the State of Delaware.

                  "Indenture" means the Indenture dated as of January 20, 2000
between the Issuer and State Street, as trustee thereunder.

                                       2
<PAGE>   5

                  "Initial Certificate Balance" means, with respect to the Class
R Certificates, U.S. $465,600.

                  "Issuer" means FAIC II Issuer Trust 2000-1, a statutory
business trust formed under the laws of the State of Delaware.

                  "Issuer Certificate Agent" has the meaning assigned to such
term in the second WHEREAS clause hereto.

                  "Issuer Trust Agreement" has the meaning assigned to such term
in the second WHEREAS clause hereto.

                  "Issuer Trustee" has the meaning assigned to such term in the
second WHEREAS clause hereto.

                  "Lien" means, as applied to property or assets, real or
personal, tangible or intangible, any claim, pledge, mortgage, lien, charge,
security interest or encumbrance of any kind thereon (including, without
limitation, any agreement to give any of the foregoing, any conditional sale or
other title retention agreement, any lease in the nature thereof or the interest
of the lessor under any capitalized lease and the filing of or agreement to give
any financing statement or similar document to perfect any security interest
under the Uniform Commercial Code of any jurisdiction or any other similar
filing to perfect any security interest).

                  "Monthly Payment Date" means the first business day of each
month, commencing March 1, 2000.

                  "Notes" has the meaning assigned to it in the fourth WHEREAS
clause hereof.

                  "Note Trustee" means State Street Bank and Trust Company, in
its capacity as trustee under the Indenture.

                  "Optional Certificate Redemption Amount" has the meaning
assigned to such term in Section 4.01 of this Agreement.

                  "Optional Note Redemption Amount" has the meaning assigned to
such term in Section 4.02 of this Agreement.

                  "Outstanding Certificate Balance" means, with respect to the
Class R Certificates, on any date, an amount equal to (i) the Initial
Certificate Balance thereof minus (ii) the aggregate amount of all distributions
of principal made to the Holders thereof. The Outstanding Certificate Balance
shall be calculated as of the close of business, in the case of any Monthly
Payment Date other than the initial Monthly Payment Date, on the preceding
Monthly Payment Date after giving effect to all distributions of principal to
the applicable Certificateholders on each preceding Monthly Payment Date
(including such preceding Monthly Payment Date); provided that on the Closing
Date the Outstanding Certificate Balance thereof shall be equal to the Initial
Certificate Balance thereof.

                                       3
<PAGE>   6

                  "Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.

                  "Purchase Agreement" means the Purchase Agreement dated as of
January 20, 2000, between the Seller and the Depositor.

                  "REMIC" means a real estate mortgage investment conduit, as
defined in Section 860D of the Internal Revenue Code of 1986, as amended.

                  "Sale" has the meaning assigned to such term in the third
WHEREAS clause hereto.

                  "Seller" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, a Delaware corporation.

                  "State Street" means State Street Bank and Trust Company, a
banking corporation incorporated in the Commonwealth of Massachusetts.

                  "Subsidiary" means with respect to any Person, any corporation
or other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other individuals
performing similar functions, are at the time directly or indirectly owned by
such Person.

                  "Transaction Documents" means the Indenture, the Notes, the
Issuer Trust Agreement, the Class R Certificates, this Deposit Agreement and the
Purchase Agreement.

                  "Underlying Issuing Documents" means the documents identified
in Schedule I hereto, which relate to the issuance of the Agency Securities.

                                   ARTICLE II

                               SALE; CONSIDERATION

                  SECTION 2.01.00 SALE.

                  (a)      Upon the terms and subject to the conditions set
forth herein, the Depositor hereby assigns, transfers and conveys to the Issuer
all of its right, title, interest in, to and under the Contributed Assets, and
all payments made thereon on and after the Cut-off Date, and the Issuer hereby
accepts and assumes from the Depositor, all of the Depositor's right, title and
interest in, to and under the Contributed Assets, free and clear of all Liens.

                  (b)      It is the express intent of the Depositor and the
Issuer that the Sale be construed as an absolute conveyance, without recourse,
of the Contributed Assets by the Depositor to the Issuer. It is, further, not
the intention of the Depositor or the Issuer that the Sale be deemed a grant of
a security interest in the Contributed Assets by the Depositor to the Issuer to
secure a debt or other obligation of the Depositor. However, in the event that,
notwithstanding
                                       4
<PAGE>   7
 the intent of the parties, the Contributed Assets are held to
continue to be property of the Depositor, then the Sale provided for in this
Agreement shall be deemed to be and hereby is a grant by the Depositor to the
Issuer of a security interest in and to all of the Depositor's right, title and
interest in, to and under the Contributed Assets. The Depositor and the Issuer
shall, to the extent consistent with this Agreement, take such actions as may be
necessary to ensure that, if this Agreement were deemed to create a security
interest in the Contributed Assets, such security interest would be deemed to be
a perfected security interest of first priority under applicable law and will be
maintained as such throughout the term of this Agreement.

                  SECTION 2.02.00 CONSIDERATION. As consideration for the Sale,
the Issuer shall (i) remit to the Depositor all of the net proceeds of the sale
of the Notes and the Class R Certificates and (ii) grant to the Depositor the
right to direct the Issuer to redeem the Class R Certificates (and, under
certain circumstances specified in the Issuer Trust Agreement, the Notes), in
whole, in accordance with Article IV hereof and the Issuer Trust Agreement.

                                   ARTICLE III

                    REPRESENTATIONS, WARRANTIES AND COVENANTS

                  SECTION 3.01.00 REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE DEPOSITOR.

                  (a)      The Depositor hereby represents, warrants and
covenants, as of the Closing Date, that:

                           (i) Binding Obligation. This Agreement has been duly
         authorized, and when executed and delivered by the Depositor, assuming
         the due authorization and delivery by each party hereto, shall
         constitute the legal, valid, enforceable and binding obligation of the
         Depositor, enforceable against it in accordance with its respective
         terms, except as subject to applicable bankruptcy, insolvency,
         reorganization, moratorium or other similar laws now or hereafter in
         effect, affecting the enforcement of creditors' rights in general and
         except as such enforceability may be limited by general principles of
         equity (whether considered in a proceeding at law or in equity).

                           (ii) Existence and Power. The Depositor is a
         corporation duly formed, validly existing and in good standing under
         the laws of the State of Delaware and has all powers and all
         governmental licenses, authorizations, consents and approvals required
         to carry on its business as now conducted and as contemplated by this
         Agreement.

                           (iii) No Consents. All consents, approvals,
         authorizations or other orders of all regulatory authorities required
         for or in connection with the execution, delivery and performance of
         this Agreement have been obtained to the extent necessary and are in
         full force and effect and not contingent upon the fulfillment of any
         condition.

                           (iv) Governmental Authorization; No Contravention.
         The execution, delivery and performance by the Depositor of this
         Agreement are within the Depositor's

                                       5

<PAGE>   8

         powers, have been duly authorized by all necessary action, require no
         action by or in respect of, or filing with, any governmental body,
         agency or official and do not contravene, or constitute a default
         under, any provision of applicable law or regulation of the State of
         Delaware or the State of New York or of the Articles of Incorporation
         or Bylaws of the Depositor or of any agreement or other instrument
         binding upon the Depositor or result in the creation or imposition of
         any Lien on any asset of the Depositor.

                           (v) Litigation. There is no action, suit or
         proceeding pending against, or to the knowledge of the Depositor
         threatened against or affecting, the Depositor before any court or
         arbitrator or any governmental body, agency or official.

                           (vi) Not an Investment Company. The Depositor is not,
         and is not directly or indirectly controlled by or acting on behalf of
         any Person which is, an "investment company" within the meaning of the
         Investment Company Act of 1940, as amended.

                           (vii) Taxes Upon Execution of this Agreement. Neither
         the execution and delivery of this Agreement, nor the enforcement
         hereof, is subject to any tax, duty, fee or other charge, including,
         without limitation, any registration or transfer tax, stamp duty,
         mortgage recordation tax or similar levy, other than those that have
         been paid on or prior to the Closing Date.

                           (viii) No Conflict. The consummation of any of the
         transactions contemplated herein will not conflict with or result in
         the breach of any material term or provision of any agreement to which
         the Depositor is a party or any of the Underlying Issuing Documents,
         and the Depositor is not in breach or violation of or in default (nor,
         to the best of the Depositor's knowledge, has an event occurred which
         with notice or lapse of time or both would constitute a default) under
         the terms of (a) any agreement to which the Depositor is a party, (b)
         any of the Underlying Issuing Documents or (c) any law, decree, order,
         rule or regulation applicable to the Depositor of any court or
         supervisory, regulatory, administrative or governmental agency, body or
         authority, or arbitrator having jurisdiction over its properties, the
         default in or the breach or violation of which would have a material
         adverse effect on the Depositor or the ability of the Depositor to
         perform its obligations under this Agreement.

                           (ix) Valid Business Reason. The Depositor has a valid
         business reason for contributing or otherwise effecting an absolute
         transfer of the Contributed Assets. The transfer of the Contributed
         Assets constitutes a practical and reasonable course of action designed
         to improve the Depositor's financial condition without impairing the
         rights of the Depositor's creditors.

                           (x) Conduct of Business. The Depositor will conduct
         its business in an independent manner so that its assets should not be
         substantively consolidated with the assets, or deemed to be part of the
         bankruptcy or receivership estate, of any other entity by a court
         adjudicating the bankruptcy, receivership or insolvency of such other
         entity.

                                       6
<PAGE>   9

                           (xi) Absolute Transfer. Pursuant to the Sale, the
         Depositor intends to relinquish all rights to possess, control and
         monitor the Contributed Assets. The Depositor will not take any action
         inconsistent with the Issuer's ownership of the Contributed Assets.
         Upon the inquiry of a third party (including a potential purchaser of
         the Contributed Assets), the Depositor will promptly state that it has
         contributed or otherwise made an absolute transfer of the Contributed
         Assets to the Issuer and will claim no ownership interest in the
         Contributed Assets. Nothing in this Agreement shall affect the rights
         of the Depositor or its assigns under Article IV hereof.

                           (xii) Sale Treatment. The Depositor will treat the
         Sale as a sale for federal income tax and accounting purposes.

                  (b)      Notice of Breach. The representations and warranties
set forth in this Section 3.01(a) shall survive the contribution and sale of the
Contributed Assets to the Issuer. Upon discovery by the Depositor or the Issuer
of a breach of any of such representations and warranties, the party discovering
such breach shall give prompt written notice thereof to the other.

                  SECTION 3.02.00 ASSIGNMENT OF REPRESENTATIONS AND WARRANTIES
AND COVENANTS OF THE DEPOSITOR REGARDING THE AGENCY SECURITIES.

                  (a)      Representations and Warranties. The Depositor hereby
represents and warrants to the Issuer as of the date of the Sale that:

                           (i) Immediately before the Sale, the Depositor was
         the legal and beneficial owner of all right, title and interest in, to
         and under the Contributed Assets, with full right and authority to
         assign or otherwise transfer the Contributed Assets free and clear of
         any or all Liens encumbering the Contributed Assets;

                           (ii) Upon execution and delivery by the Depositor and
         the Issuer of this Agreement, the Issuer shall acquire the Contributed
         Assets free of any Lien;

                           (iii) The Agency Securities have been duly and
         validly issued, are entitled to the benefits of the Underlying Issuing
         Documents, and each Underlying Issuing Document has been duly and
         validly authorized, executed and delivered, constitutes the valid,
         legal and binding obligation of the parties thereto enforceable in
         accordance with its terms, except as the enforcement thereof may be
         limited by applicable bankruptcy, insolvency, reorganization,
         moratorium or other similar laws affecting creditors' rights generally
         and by principles of equity (whether considered in a proceeding or
         action in equity or at law), and no default has occurred and is
         continuing in respect thereof;

                           (iv) The Agency Securities have been properly
         assigned in the manner and form required to effect a transfer of
         ownership of the Agency Securities (x) from the Seller to the Depositor
         and (y) from the Depositor to the Issuer; and

                           (v) Each Agency Security has been issued by an entity
         which has made an election to be treated as a REMIC, and such election
         remains in effect.

                                       7
<PAGE>   10

                  (b)      Notice of Breach. The representations and warranties
set forth in this Section 3.02(a) shall survive the contribution and sale of
Contributed Assets to the Issuer. Upon discovery by the Depositor or the Issuer
of a breach of any of such representations and warranties, the party discovering
such breach shall give prompt written notice thereof to the other.

                  SECTION 3.03.00 REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE ISSUER.

                  (a)      The Issuer hereby represents, warrants and covenants,
as of the Closing Date:

                           (i) Binding Effect. This Agreement has been duly
         authorized and, when executed and delivered by the Issuer, assuming the
         due authorization and delivery by each party thereto, shall constitute
         the legal, valid, enforceable and binding obligation of the Issuer,
         enforceable against the Issuer in accordance with its terms except as
         subject to applicable bankruptcy, insolvency, reorganization and other
         similar laws, now or hereinafter in effect, affecting the enforcement
         of creditors' rights in general and except as such enforceability may
         be limited by general principles in equity (whether considered in a
         proceeding at law or equity).

                           (ii) Existence and Power. The Issuer is a statutory
         business trust duly formed, validly existing and in good standing under
         the laws of the State of Delaware and has all powers and all
         governmental licenses, authorizations, consents and approvals required
         to carry on its business as now conducted and as contemplated by this
         Agreement.

                           (iii) Special Purpose Status. The Issuer has not
         engaged in any activities since its formation (other than those
         incidental to its formation and other appropriate steps including the
         authorization and the issuance of the Notes and the Class R
         Certificates and the execution of the Underwriting Agreement, the
         Certificate Placement Agreement and this Agreement), and the Issuer has
         not made any distributions since its formation.

                           (iv) No Consents. All consents, approvals,
         authorizations or other orders of all regulatory authorities required
         for or in connection with the execution, delivery and performance of
         this Agreement by the Issuer and the issuance and performance of the
         Notes and the Class R Certificates and the offering of the Notes and
         the Class R Certificates by the Issuer and the creation of the security
         therefor have been obtained and are in full force and effect and not
         contingent upon fulfillment of any condition.

                           (v) Governmental Authorization; No Contravention. The
         execution, delivery and performance by the Issuer of this Agreement are
         within the Issuer's powers, have been duly authorized by all necessary
         action, require no action by or in respect of, or filing with, any
         governmental body, agency or official and do not contravene, or
         constitute a default under, any provision of applicable law or
         regulation of the State of Delaware or

                                       8
<PAGE>   11

         of the Certificate of Trust of the Issuer or of any agreement or other
         instrument binding upon the Issuer or result in the creation or
         imposition of any Lien on any asset of the Issuer.

                           (vi) Litigation. There is no action, suit or
         proceeding pending against, or to the knowledge of the Issuer
         threatened against or affecting, the Issuer before any court or
         arbitrator or any governmental body, agency or official.

                           (vii) Not an Investment Company. The Issuer is not,
         and is not directly or indirectly controlled by or acting on behalf of
         any Person which is, an "investment company" within the meaning of the
         Investment Company Act.

                           (viii) Taxes Upon Execution of This Agreement.
         Neither the execution and delivery of this Agreement, nor the
         enforcement hereof, is subject to any tax, duty, fee or other charge,
         including, without limitation, any registration or transfer tax, stamp
         duty, mortgage recordation tax or similar levy, other than those that
         have been paid on or prior to the Closing Date.

                           (ix) No Conflict. The consummation of any of the
         transactions contemplated herein will not conflict with or result in
         the breach of any material term or provision of this Agreement or any
         other agreement to which the Issuer is a party, and the Issuer is not
         in breach or violation of or in default (nor, to the best of the
         Issuer's knowledge, has an event occurred which with notice or lapse of
         time or both would constitute a default) under the terms of (a) any
         agreement to which the Issuer is a party or (b) any law, decree, order,
         rule or regulation applicable to the Issuer of any court or
         supervisory, regulatory, administrative or governmental agency, body or
         authority, or arbitrator having jurisdiction over its properties, the
         default in or the breach or violation of which would have a material
         adverse effect on the Issuer or the ability of the Issuer to perform
         its obligations under this Agreement.

                           (x) Sale Treatment. The Issuer shall treat the Sale
         as a sale for federal income tax and accounting purposes.

                  (b)      Notice of Breach. The representations and warranties
set forth in Section 3.03(a) shall survive the contribution and sale of the
Contributed Assets to the Issuer. Upon discovery by the Depositor or the Issuer
of a breach of any of such representations and warranties, the party discovering
such breach shall give prompt written notice thereof to the other.

                                   ARTICLE IV

                  SECTION 4.01.00 OPTIONAL CERTIFICATE REDEMPTION. The
Certificates may be redeemed as provided in Section 5.04 of the Issuer Trust
Agreement.

                  SECTION 4.02.00 OPTIONAL NOTE REDEMPTION. In the event that
the Seller, as the assignee of the Depositor, has caused the Issuer to redeem
the Class R Certificates or has

                                       9
<PAGE>   12

instructed the Issuer to redeem the Class R Certificates, in either case in
accordance with Section 5.04 of the Issuer Trust Agreement, the Seller, as the
assignee of the Depositor, may direct redemption of the Notes as provided in
Section 9.01 of the Issuer Trust Agreement.

                                    ARTICLE V

                            MISCELLANEOUS PROVISIONS

                  SECTION 5.01.00 AMENDMENT. This Agreement and the rights and
obligations of the parties hereunder may not be amended, modified or waived
orally, but only by an instrument in writing signed by the Issuer and the
Depositor. No amendment to this Agreement shall affect the rights of the Seller
without the prior written consent of the Seller.

                  SECTION 5.02.00 GOVERNING LAW; SUBMISSION TO JURISDICTION.
This Agreement shall be construed in accordance with and governed by the
substantive laws of the State of New York applicable to agreements made and to
be performed in the State of New York, and the obligations, rights and remedies
of the parties hereto shall be determined in accordance with such laws and
without regard to the conflict of laws principles therein. The parties hereto
hereby submit to the exclusive jurisdiction of the United States District Court
for the Southern District of New York and of the Supreme Court of the State of
New York sitting in New York County (including its Appellate Division), and of
any other appellate court in the State of New York, for the purposes of all
legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. The parties hereto hereby irrevocably waive,
to the fullest extent permitted by applicable law, any objection that they may
now or hereafter have to the laying of the venue of any such proceeding brought
in such a court and any claim that any such proceeding brought in such a court
has been brought in an inconvenient forum.

                  SECTION 5.03.00 WAIVER OF JURY TRIAL. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

                  SECTION 5.04.00 NOTICES. All demands, notices and
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered at or mailed by registered mail, return
receipt requested, to:

                                       10
<PAGE>   13

                  (a)      in the case of the Depositor,

                                    Fund America Investors Corporation II
                                    c/o The Chotin Group
                                    6400 South Fiddlers
                                    Green Circle, Suite 1200
                                    Englewood, Colorado  80111
                                    Attention:   Mr. Howard Glicksman
                                    Telephone:   303-741-0100
                                    Telecopy:    303-741-6944

                  (b)      in the case of the Issuer,

                                    FAIC II Issuer Trust 2000-1
                                    c/o Christiana Bank & Trust Company
                                    Greenville Center
                                    3801 Kennett Pike
                                    Greenville, Delaware  19807
                                    Attention:   Corporate Trust Administration
                                    Telephone:   302-421-5800
                                    Telecopy:    302-421-5815

or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party.

                  SECTION 5.05.00 SEVERABILITY OF PROVISIONS. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall for
any reason whatsoever be held invalid, then such covenants, agreements,
provisions, or terms shall be deemed severable from the remaining covenants,
agreements, provisions, or terms of this Agreement and shall in no way affect
the validity or enforceability of the other provisions of this Agreement.

                  SECTION 5.06.00 ASSIGNMENT. This Agreement may not be assigned
by the parties hereto except with the written consent of the non-assigning
party; provided, that the Depositor, by its execution of this Agreement,
consents to the assignment by the Issuer of its rights under this Agreement to
the Note Trustee, on behalf of the holders of the Notes, pursuant to the terms
of the Indenture, and provided, further, that the Issuer, by its execution of
this Agreement, consents to the assignment by the Depositor of all the
Depositor's rights under Article IV of this Agreement to the Seller pursuant to
the Purchase Agreement.

                  SECTION 5.07.00 FURTHER ASSURANCES. The Depositor and the
Issuer agree to do and perform, from time to time, any and all acts and to
execute any and all further instruments required or reasonably requested by the
other party more fully to effect the purposes of this Agreement.

                  SECTION 5.08.00 NO WAIVER; CUMULATIVE REMEDIES. No failure to
exercise and no delay in exercising, on the part of the Depositor or the Issuer,
any right, remedy, power or

                                       11
<PAGE>   14

privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exhaustive of any rights, remedies, powers and privileges
provided by law.

                  SECTION 5.09.00 COUNTERPARTS. This Agreement may be executed
in two or more counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which together shall constitute
one and the same instrument.

                  SECTION 5.10.00 BINDING EFFECT. This Agreement will inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.

                  SECTION 5.11.00 MERGER AND INTEGRATION. Except as specifically
stated otherwise herein, this Agreement and the other Transaction Documents set
forth the entire understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, are superseded by this
Agreement and the other Transaction Documents. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.

                  SECTION 5.12.00 HEADINGS. The headings herein are for purposes
of reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.

                                       12
<PAGE>   15

                  IN WITNESS WHEREOF, the Issuer and the Depositor each have
caused this Agreement to be duly executed by their respective officers as of the
day and year first above written.

                                   FUND AMERICA INVESTORS
                                   CORPORATION II,
                                   a Delaware corporation

                                   By: /s/Helen M. Dickens
                                      -----------------------
                                       Name:    Helen M. Dickens
                                       Title:   Vice President

                                   FAIC II ISSUER TRUST 2000-1
                                   a Delaware statutory business trust

                                     By:  Christiana Bank & Trust Company,
                                       solely in its capacity as trustee of the
                                       Issuer

                                   By: /s/Louis W. Geibel, Jr.
                                      ---------------------------
                                       Name:     Louis W. Geibel, Jr.
                                       Title:    Vice President

                      [Signature Page to Deposit Agreement]

                                       13
<PAGE>   16

                                   SCHEDULE I
                                AGENCY SECURITIES

                                    [To Come]

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