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X.X. XXXXXXXXX RECEIVABLES III LLC,
as the Issuer,
X.X. XXXXXXXXX & COMPANY, INC.,
as the Master Servicer,
and
PNC BANK, NATIONAL ASSOCIATION,
as the Trustee,
===========================================
SERIES 1997-A SUPPLEMENT
Dated as of September 30, 1997
to
MASTER TRUST INDENTURE AND
SECURITY AGREEMENT
Dated as of September 30, 1997
===========================================
$60,506,718 7.2% STRUCTURED SETTLEMENT-BACKED NOTES, SERIES 1997-A
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TABLE OF CONTENTS
Section Page
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ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions.....................................................1
ARTICLE II
CREATION OF THE SERIES 1997-A NOTES
SECTION 2.01 Designation....................................................13
SECTION 2.02 Limitations on the Initial Issuance and Sales or
Transfers of Series 1997-A Notes...............................13
ARTICLE III
GRANT OF SECURITY INTEREST; ISSUER
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Grant of Security Interest in Series Pledged Assets............16
SECTION 3.02. Acceptance by Trustee..........................................16
SECTION 3.03. Representations and Warranties of the Issuer Relating
to the Series Pledged Assets...................................16
SECTION 3.04. Full Disclosure................................................19
ARTICLE IV
COMPENSATION OF MASTER SERVICER,
BACK-UP SERVICER AND TRUSTEE
SECTION 4.01. Compensation of the Master Servicer, the Back-up
Servicer and the Trustee.......................................19
SECTION 4.02. Successor Master Servicer......................................19
ARTICLE V
CONDITIONS TO ISSUANCE OF NOTES
SECTION 5.01 Conditions to Issuance..........................................20
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Section Page
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ARTICLE VI
RIGHTS AND OBLIGATIONS OF SERIES 1997-A NOTEHOLDERS;
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 6.01. Creation of the Series Accounts for Series 1997-A.............21
SECTION 6.02. Determination of Payment Amounts; Deposits to and
Withdrawals from the Series 1997-A Reserve Account
` and the Series 1997-A Funding Account.........................23
SECTION 6.03. Distributions.................................................24
ARTICLE VII
STATEMENTS TO NOTEHOLDERS
SECTION 7.01. Statements to Noteholders.....................................26
ARTICLE VIII
SERIES EVENTS OF DEFAULT
SECTION 8.01. Series Events of Default......................................26
ARTICLE IX
ADDITIONAL AGREEMENTS AND RIGHTS
OF THE ISSUER AND MASTER SERVICER
SECTION 9.01. Reporting Requirements........................................29
SECTION 9.02. Indemnification by the Master Servicer........................30
SECTION 9.03. Optional Purchase.............................................30
SECTION 9.04. Net Worth of the Issuer.......................................30
SECTION 9.05. Indemnities by the Issuer.....................................31
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Ratification of Agreement; Integration........................32
SECTION 10.02. Counterparts..................................................33
SECTION 10.03. GOVERNING LAW.................................................33
SECTION 10.04. Amendments and Waivers........................................33
SECTION 10.05. Limitations on Liability......................................34
SECTION 10.06. Confidentiality...............................................35
SECTION 10.07. Tax and Usury Treatment.......................................35
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Section Page
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SECTION 10.08. Section Headings..............................................35
SECTION 10.09. Notices.......................................................35
iii
SCHEDULES
Schedule I - List of Receivables
Schedule II - List of Closing Documents
EXHIBITS
Exhibit A - Form of Series 1991-A Notes
Exhibit B - [RESERVED]
Exhibit C - Form of Daily Report
Exhibit D - Form of Monthly Report
Exhibit E - Form of Investor Letter
Exhibit F-1 - Form of Settlement Purchase Agreement
Exhibit F-2 - Form of Notice of Direction of Payment
Exhibit F-3 - Form of Irrevocable Special Power of Attorney
Exhibit F-4 - Form of Absolute Assignment and Waiver of Claim
iv
SERIES 1997-A SUPPLEMENT, dated as of September 30, 1997, among X.X.
Xxxxxxxxx Receivables III LLC, a Delaware limited liability company (the
"Issuer"), X.X. Xxxxxxxxx & Company, Inc., a Pennsylvania corporation (the
"Master Servicer"), and PNC Bank, National Association, a national banking
association, as trustee (in such capacity, the "Trustee").
RECITALS
Section 6.09 of the Agreement provides, among other things, that the
Issuer and the Trustee may at any time and from time to time enter into a
Supplement to the Agreement for the purpose of authorizing the issuance by the
Trustee of one or more Series of Notes. In the event that any term or provision
contained herein shall conflict with or be inconsistent with any term or
provision contained in the Agreement, the terms and provisions of this
Supplement shall govern with respect to Series 1997-A Notes.
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. (a) Whenever used in this Supplement and
when used in the Agreement with respect to the Series 1997-A Notes, the
following words and phrases shall have the following meanings, and the
definitions of such terms are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such terms. Unless otherwise defined in this Supplement, terms
defined in the Agreement are used herein as therein defined.
"Acceleration Date" shall mean the date occurring on or after the
occurrence of any Event of Default described under Section 9.01(a) or 9.01(b) of
the Agreement or any Series Event of Default hereunder, upon which the principal
and interest of the Series 1997-A Notes shall have automatically become or have
been declared to be immediately due and payable in accordance with Section
9.02(b) of the Agreement.
"Accredited Investor" shall mean an accredited investor under (and
as defined in) Rule 501(a) under the Act.
"Additional Series 1997-A Receivables" shall mean all Receivables
sold by the Seller to the Issuer under the Issuer Purchase Agreement after the
Series Closing Date and before the first Series Determination Date and
identified in any List of Receivables delivered to the Trustee as a Series
Receivable in accordance with Section 6.01(e).
"Agreement" shall mean, for purposes of this Supplement, the Master
Trust Indenture and Security Agreement dated as of September 30, 1997 among the
Issuer, the Initial Master Servicer and the Trustee (without regard to this
Supplement or Supplements for other Series), as the same may be amended,
supplemented or otherwise modified from time to time.
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"Amortization Date" shall mean with reference to Series 1997-A, the
Series Closing Date in respect of Series 1997-A.
"Available Issuer Funds" shall mean, at any time, all cash of the
Issuer to the extent fully distributable by the Issuer at the Issuer's
discretion.
"Back-up Servicing Fee" shall mean, for any Payment Date with
respect to Series 1997-A, the sum of (i) the product of (x) 1/12 (or, in the
case of the initial Payment Date, a fraction, the numerator of which is the
number of days from (and including) the Series Closing Date to (but excluding)
such Payment Date and the denominator of which is 360), (y) the per annum fee
for the Collection Period preceding such Determination Date determined in
accordance with the fee schedules attached to the Back-up Servicing Agreement
and relating to fees for performing its duties in such capacity with respect to
this Series and each other Series issued under the Agreement and (z) the
Aggregate Discounted Receivables Balance of all Series Receivables on first day
of the Collection Period immediately preceding such Payment Date, (ii) the
product of (x) the amount of any fee charged from time to time for the standby
support obligations of the Back-up Servicer pursuant to the Back-up Servicer
Agreement and (y) a fraction to be determined on the Series Closing Date and on
each anniversary thereof, the numerator of which is the Aggregate Discounted
Receivables Balance of the Series Receivables for Series 1997-A on such date and
the denominator of which is the Aggregate Discounted Receivables Balance of the
Series Receivables of all Series on such date, (iii) such other amounts as may
be payable as fees for special services during the Collection Period preceding
such Payment Date pursuant to the Back-up Servicing Agreement, and (iv) any
accrued but unpaid Back-up Servicing Fees with respect to any Payment Dates
preceding the Payment Date for which such determination is being made.
"Business Day" shall mean any day that is a Business Day under the
Agreement.
"Collection Date" shall mean, with reference to Series 1997-A, the
earlier of (a) the date following the Series Closing Date on which the principal
amount of the Series 1997-A Notes, all interest thereon and all fees and other
amounts payable in connection therewith have been paid in full and (b) the date
of discharge and satisfaction of the Agreement in accordance with Section 12.01
of the Agreement.
"Control Party" shall mean for purposes of Series 1997-A, the
Majority Noteholders.
"Daily Report" shall mean a report in the form of that attached
hereto as Exhibit C to be delivered by the Master Servicer to the Trustee and
the Collateral Trustee on each Business Day, and acknowledged by the Seller in
writing, and relating to the immediately preceding Business Day.
"Defaulted Receivable" shall have the meaning specified in the
Agreement.
"Discount Rate" shall mean a per annum rate equal to eight and
forty-five hundredths percent (8.45%).
2
"Eligible Receivable" shall mean a Series Receivable in respect of
which, on the Series Cut-Off Date relating thereto:
(a) (x) all Scheduled Payments required to be made thereon to the
Company, the Seller and the Issuer from the time of their acquisition of
such Receivable to the applicable Series Closing Date for the Series to be
secured thereby have been paid (or no portion thereof is past due more
than thirty (30) days) and (y) no such Scheduled Payments have been
diverted from the Company, the Seller or the Issuer, unless, in the case
of this clause (y), such Receivable shall have been and continues to be
Rehabilitated, it being understood that only such portion of such
Receivable that has been Rehabilitated shall be deemed to be an Eligible
Receivable pursuant to this clause (a);
(b) the underlying Settlement (x) does not arise from a settlement
or a court judgment that is subject to court approval or appeal and (y) is
the subject of a transaction in which the related Settlement Agreement
remains in full force and effect notwithstanding any Assignee's or
Settlement Counterparty's purchase or ownership of an Annuity Contract;
(c) the underlying Settlement is denominated and payable only in
U.S. Dollars;
(d) if such Settlement is the subject of a Qualified Assignment or
other assignment, the underlying Settlement Agreement releases all liable
parties (other than the Assignee) under the applicable Settlement
Agreement from all liability pertaining thereto;
(e) (x) the underlying Settlement Agreement is not governed by the
law of a state or other jurisdiction which expressly (A) prohibits the
assignability of proceeds of Settlements or (B) requires approval of a
court in order for payments on Settlements to be made other than to the
beneficiary thereof (unless such court approval has been obtained as of
such Series Cut-Off Date) and (y) as of the date of the Settlement
Purchase Agreement in respect of such Settlement Agreement, the Claimant
related thereto did not maintain his/her residence in Illinois;
(f) in the event the Claimant thereon was married at any time on or
after the date upon which the underlying Settlement Agreement was entered
into, all documents evidencing and effecting the original purchase by the
Company of the Claimant's right to receive the Scheduled Payments are
signed by the Claimant's spouse or either (x) a court having jurisdiction
has determined (as evidenced by appropriate orders or a divorce decree
issued thereby) that no former spouse has any rights in, to or under any
such Receivable or (y) the Company shall have received an opinion of
counsel acceptable to it opining that the right to receive the Scheduled
Payments thereunder is not property to which any such spouse has any
rights;
3
(g) the related Claimant's attorney issued an estoppel letter to the
Company certifying that the Claimant understood the nature and financial
implications of the transaction contemplated under the related Settlement
Purchase Agreement;
(h) the following are true: (x) such Receivable is not subject to
any lien, encumbrance, deduction, withholding, dispute or set-off with
respect thereto; provided that only such portion of such Receivable which
is subject to such lien, claim, encumbrance, deduction, dispute or set-off
shall be deemed ineligible pursuant to this clause (x), (y) such
Receivable is a "general intangible" within the meaning of the UCC of the
state in which the Claimant thereon has its residence, and is not
evidenced by any instrument or chattel paper and (z) such Receivable is
not a Defaulted Receivable, a Commutable Settlement or a Non-Guaranteed
Settlement;
(i) the Back-up Servicer has received all documents required to be
delivered with respect thereto pursuant to the Back-Up Servicing
Agreement, and has received a Settlement Purchase Agreement, a Notice of
Direction of Payment, an Irrevocable Special Power of Attorney and an
Absolute Assignment and Waiver of Claim, each of which such specified
agreements shall be in substance similar in all material respects to the
forms of such agreements set forth as Exhibit F-1, F-2, F-3 and F-4,
respectively;
(j) all notices and filings required to (x) create a first priority
ownership interest therein in favor the Seller as against the Company and
in favor of the Issuer as against the Seller and (y) perfect a first
priority security interest therein in favor of the Trustee, on behalf of
the Noteholders, as against the Issuer, and in each case, enforceable as
against the Claimant, the Claimant's creditors and/or a bankruptcy trustee
or debtor-in-possession of or for the Claimant have been given or made;
(k) the Claimant thereon has represented in writing or in a freely
taped telephone conversation that such Claimant sold such Receivable of
his own free will, that such Claimant received proper advisory services in
support of the sale of such Receivable;
(l) the Claimant thereon has represented in writing or in a freely
taped telephone conversation that (a) either (x) such Claimant's
Settlement is not his/her primary source of income, or (y) such Claimant
is physically capable of gaining employment and (b) such Claimant has
consulted independent counsel in connection with the sale of such
Receivable and the consequences associated therewith;
(m) prior to the date of the purchase of such Receivable by the
Company, at least six (6) months had elapsed from the date the Claimant
thereon
4
originally entered into the related Settlement Agreement or at least one
Scheduled Payment thereunder had been made to such Claimant thereunder;
(n) the Issuer shall have obtained a first priority, indefeasible
ownership interest therein;
(o) the payment of such Receivable is supported by an Annuity
Contract in the full amount thereof, or is the direct obligation of an
Obligor rated "A-" or better by Duff & Xxxxxx and the equivalent by
Xxxxx'x (or, if not rated by either, by A.M. Best (or any successor
thereto)), and the Collections thereon have been directed to be made
directly from the Annuity Provider (or, if applicable, the Obligor)
relating thereto to a Lock-Box Account or a related lock-box;
(p) the Claimant thereon did not at the time of its sale of such
Receivable to the Company pursuant to the applicable Settlement Purchase
Agreement reside in a Prohibited State;
(q) the Claimant has executed and delivered to the Company a Power
of Attorney in favor of the Company (with a full power of substitution by
the Company), and such Power of Attorney has been delivered to the Back-Up
Servicer;
(r) neither the related Settlement Agreement nor any other agreement
relating thereto releases the Assignee (or, if there is no Assignee, the
Obligor thereunder) from liability thereunder as a result of the existence
of the Annuity Contract issued to fund the Settlement relating thereto;
(s) the Claimant thereon did not at the time of its sale of such
Receivable to the Company pursuant to the applicable Settlement Purchase
Agreement own the Annuity Contract related thereto;
(t) all representations and warranties relating to such Series
Receivables set forth in Section 3.03 hereof are true and correct;
(u) if the Annuity Contract relating to such Receivable is governed
by Texas law, then such Annuity Contract does not prohibit the
assignability of payments made by the Annuity Provider thereunder and none
of the Claimants, at the time of its sale of such Receivable to the
Company pursuant to the applicable Settlement Purchase Agreement, resided
in Texas;
(v) the underlying Settlement does not arise under, nor is subject
to, any workmens' compensation statute; and
(w) the Annuity Contract related thereto has not been issued by
Principal Mutual Life Insurance Company or Lincoln National Corporation or
any affiliate of either of the foregoing.
5
In addition to the foregoing, Series Receivables with respect to which the
underlying Settlement Agreements are not the subject of a Qualified
Assignment shall only be Eligible Receivables to the extent that, as of
the Series Cut-Off Date (or as of the date of substitution, as the case
may be), the Aggregate Discounted Receivables Balance thereof does not
exceed 30% of the Original Aggregate Discounted Receivables Balance of the
Series Receivables.
"Fiscal Year" shall mean the taxable year of the Issuer which,
except in the case of a short taxable year, shall be the calendar year (or such
other year as is required by Section 706(b) of the Internal Revenue Code).
"Indemnified Loss" shall have the meaning specified in Section 9.02.
"Indemnified Party" shall have the meaning specified in Section
9.02.
"Initial Series 1997-A Receivables" shall mean all Series
Receivables which are not Additional Series 1997-A Receivables.
"Institutional Accredited Investor" shall mean an Accredited
Investor under (and as defined in) Rule 501(a)(1) and (3) under the Act.
"Interest Distribution Amount" shall mean, with respect to any
Payment Date for any Class, an amount equal to the sum of (a) the product of (i)
1/12 (or, in the case of the initial Payment Date, a fraction, the numerator of
which is the number of days from (and including) the Series Closing Date to (but
excluding) such Payment Date and the denominator of which is 360), (ii) the Note
Rate applicable to such Class and (iii) the Aggregate Principal Balance of such
Class on the immediately preceding Payment Date (or, in the case of the initial
Payment Date, on the Series Closing Date) after giving effect to any
distributions made on such preceding Payment Date to the Noteholders of such
Class in reduction of the Aggregate Principal Balance thereof, plus (b) any
unpaid amounts in respect of the Interest Distribution Amount for such Class
with respect to any Payment Date preceding the Payment Date for which such
determination is being made, together (unless prohibited by applicable law) with
interest thereon at the Note Rate.
"Investment Proceeds" shall have the meaning specified in Section
6.01(c).
"Investment Proceeds Account" shall mean the segregated bank account
established and designated as such pursuant to Section 6.01(a). The Investment
Proceeds Account shall initially be account number 47-47-002-301251 established
and maintained with PNC Bank, Delaware, 000 Xxxxxxxx Xxxxxx, 00xx Xxxxx,
Xxxxxxxxxx, XX 00000.
"Investor Letter" shall mean a certificate in the form of Exhibit E
attached hereto to be delivered by each purchaser or transferee of a Series
1997-A Note (other than a Noteholder that is a party as a purchaser to the Note
Purchase Agreement).
6
"Issuer Interest" shall mean the excess of the Original Aggregate
Discounted Receivables Balance of the Series Receivables over the Original
Series 1997-A Note Principal Balance (less any funds on deposit in the Series
1997-A Reserve Account prior to the Subsequent Funding Date and less any
prepayments of the Series 1997-A Notes from funds on deposit in the Series
1997-A Funding Account).
"Issuer Invested Amount" shall mean, on any date of determination,
(i) the original aggregate stated amount of the Issuer Interest minus (ii) all
returns or distributions of capital made to the Issuer minus (iii) the aggregate
of the Discounted Receivables Balances of each Series 1997-A Receivable which
has become a Defaulted Receivable as of the date when such Receivable became a
Defaulted Receivable plus (iv) any Collections subsequently received on any such
Defaulted Receivables plus (v) without duplication, the aggregate of the
Discounted Receivables Balances of each Series Receivable which was previously a
Defaulted Receivable but has become a Rehabilitated Receivable as of the date
when such Receivable became a Rehabilitated Receivable.
"Issuer Return Amount" shall mean, with respect to any Payment Date
for the Issuer Interest, an amount equal to the product of (i) 1/12 (or, in the
case of the initial Payment Date, a fraction, the numerator of which is the
number of days from (and including) the Series Closing Date to (but excluding)
such Payment Date and the denominator of which is 360), (ii) five percent (5.0%)
per annum and (iii) the Issuer Invested Amount on the immediately preceding
Payment Date (or, in the case of the initial Payment Date, on the Series Closing
Date) after giving effect to any distributions made on such preceding Payment
Date to the Issuer in reduction of the aggregate stated amount of the Issuer
Interest as of such preceding Payment Date.
"Majority Control Parties" shall have the meaning assigned to such
term in the Agreement; provided, that such term shall for all purposes under the
Agreement be deemed to require the inclusion therein of the Control Party for
this Series.
"Majority Noteholders" shall mean, at any time with reference to the
Series 1997-A Notes, the holders of Series 1997-A Notes evidencing more than 50%
of the Aggregate Principal Balance of the Series 1997-A Notes (in each case, as
calculated without giving effect to any Series 1997-A Notes owned of record by
any Affiliated Entities).
"Master Servicing Fee" shall mean, with respect to any Payment Date
in respect of Series 1997-A, the sum of (a) the product of (x) 1/12 (or, in the
case of the initial Payment Date, a fraction, the numerator of which is the
number of days from (and including) the Series Closing Date to (but excluding)
such Payment Date and the denominator of which is 360), (y) the average daily
Aggregate Discounted Receivables Balance of the Series Receivables for the
Collection Period ending immediately prior to such Payment Date and (z) the
Master Servicing Fee Rate, plus (b) any unpaid Master Servicing Fees in respect
of Series 1997-A for any Payment Date preceding the Payment Date for which such
determination is being made; provided, however, that no Master Servicing Fee
with respect to Series 1997-A shall be payable with respect to any portion of
any
7
Collection Period for which the Back-up Servicer is acting as the Successor
Servicer with respect to Series 1997-A.
"Master Servicing Fee Rate" shall mean (a) 1.00% per annum or (b) in
respect of any Collection Period (or portion thereof) during which any Successor
Servicer (other than the Back-Up Servicer) is acting as Master Servicer and such
Successor Servicer shall have notified the Trustee that the Master Servicing Fee
Rate is insufficient, then such other rate (x) as shall be specified by such
Successor Servicer but not to exceed 120% of the actual reasonable out-of-pocket
costs and expenses (including any conversion costs) reasonably incurred by such
Successor Master Servicer in performing its duties hereunder and under the
Agreement with respect to the Series Pledged Assets and (y) in respect of which
each Rating Agency then rating the Series 1997-A Notes shall have confirmed that
as a result of such fee increase, the ratings of such Notes would not be reduced
or withdrawn.
"Monthly Report" shall mean a report in the form of that attached
hereto as Exhibit D to be delivered by the Master Servicer to the Trustee on or
prior to 3:00 p.m. (New York City time) on each Series Determination Date
relating to the immediately preceding Collection Period.
"Noteholder Collections" shall mean, with reference to Series
1997-A, Collections in respect of the Series Receivables or any Related Property
related thereto.
"Note Purchase Agreement" shall mean the Note Purchase Agreement
dated as of September 30, 1997, among the Issuer and those Persons parties
thereto as "Purchasers" thereunder.
"Note Rate" shall mean with respect to the Series 1997-A Notes, a
per annum rate equal to 7.2%, payable monthly as set forth herein.
"Operative Documents" shall have the meaning specified in the
Agreement.
"Original Aggregate Discounted Receivables Balance of the Series
Receivables" shall mean the Aggregate Discounted Receivables Balance of the
Series Receivables (including any Additional Series 1997-A Receivables)
calculated as of the Series Cut-Off Date discounted at the Discount Rate.
"Original Series 1997-A Note Principal Balance" shall mean
$60,506,718.
"Overcollateralization Default" shall mean, at any time, that the
Aggregate Discounted Receivables Balance of all Series Receivables (other than
any such Receivables which became Defaulted Receivables and have not been
Rehabilitated or been replaced by new Series Receivables in accordance with
Section 2.06(f) of the Agreement) at such time shall equal or be less than the
Aggregate Principal Balance of the Series 1997-A Notes at such time.
"Overcollateralization Shortfall" shall mean, at any time, that the
sum of (x) the Aggregate Principal Balance of the Series 1997-A Notes plus (y)
the balance of the funds on
8
deposit in the Series 1997-A Reserve Account, is greater than 85.5% of the
Aggregate Discounted Receivables Balance of all Series Receivables which are
Eligible Receivables.
"Payment Date" shall mean the 15th day of each calendar month
(commencing on November 15, 1997) or, if such day is not a Business Day, the
immediately succeeding Business Day.
"Placement Agent" shall mean ING Baring (U.S.) Securities, Inc.
"Prohibited State" shall mean any of Connecticut, Louisiana,
Tennessee and Vermont.
"Projected Note Repayment Date" means the earlier of (i) January 15,
2008 and (ii) the Acceleration Date.
"Qualified Institutional Buyer" shall have the meaning specified in
Rule 144A under the Act.
"Qualified Purchaser" shall have the meaning specified in Section
2(a)(51) of the Investment Company Act.
"Record Date" shall mean, with respect to any Payment Date, the 10th
day of the calendar month (or, if such day is not a Business Day, the
immediately succeeding Business Day) in which such Payment Date occurs.
"Related Property" shall have the meaning with reference to Series
1997-A as is specified in the Agreement and shall also include all rights to,
and monies from time to time on deposit in, the Series 1997-A Reserve Account,
and all Eligible Investments acquired with such amounts and all Investment
Proceeds thereof and to which the Series 1997-A Noteholders are entitled, in
each case, in accordance with Section 6.02(c).
"Sale," "Sell" and "Sold" shall have the meanings specified in
Section 2.02(b).
"Series Accounts" shall have the meaning with respect to Series
1997-A specified in Section 6.01.
"Series Closing Date" shall mean, with reference to Series 1997-A,
September 30, 1997.
"Series Collection Account" shall mean the segregated bank account
established and designated as such pursuant to Section 6.01(a). The Series
Collection Account shall initially be account number 47-47-003-0000000
established and maintained by PNC Bank, National Association with PNC Bank,
Delaware, 000 Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxxxx, XX 00000.
9
"Series Cut-Off Date" shall mean September 30, 1997.
"Series Determination Date" shall mean, with reference to Series
1997-A, the 10th day of each calendar month or, if such day is not a Business
Day, the immediately preceding Business Day.
"Series Event of Default" shall have the meaning specified in
Section 8.01.
"Series Payment Account" shall mean the segregated bank account
established and designated as such pursuant to Section 6.01(a). The Series
Payment Account shall initially be account number 47-47-002-0000000 established
and maintained by PNC Bank, National Association at PNC Bank, Delaware, 000
Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxxxx, XX 00000.
"Series Pledged Assets" shall mean, with respect to Series 1997-A,
all of the Series Receivables, all Related Property relating thereto, all
Collections thereof and all products and proceeds thereof, accessions thereto
and substitutions therefor. Without limiting the foregoing in any way, the
Series Pledged Assets for Series 1997-A shall include all of the Issuer's
rights, title, interests, remedies, powers and privileges in and under the
following:
(a) the Series Receivables;
(b) all monies and other items on deposit on the Series 1997-A
Reserve Account and the Series 1997-A Funding Account;
(c) all Collections received under the Series Receivables or any
Related Property relating thereto on or after the Series Cut-Off Date,
other than such amounts payable to the Claimants as Split Payments in
accordance with the related Settlement Purchase Agreements and the Credit
Policy Manual;
(d) the Lock-Box Accounts and the related lock-boxes to which (and
to the extent of) any Collections on the Series Receivables are remitted;
the Series Payment Account and the Series Collection Account; the Master
Collection Account to the extent of any Collections of Series Receivables
deposited therein; all monies and other items from time to time on deposit
therein, all Eligible Investments purchased with any such amounts and all
investment income earned thereon;
(e) all security interests or liens and property subject thereto
from time to time purporting to secure payment of the Series Receivables;
(f) all other agreements or arrangements of whatever character
(including guaranties, letters of credit, annuity contracts (including,
Annuity Contracts) or other credit support) from time to time supporting
or securing payment of the Series Receivables whether pursuant to a
Settlement Agreement, a Qualified Assignment, a Qualified Annuity
Contract, a Settlement Purchase Agreement or any other agreement related
to such Receivable or otherwise;
10
(g) the rights of the Trustee for the benefit of the Noteholders
under the Agreement and the Back-up Servicing Agreement to the extent
relating to the Series Pledged Assets;
(h) as against the Seller under the Issuer Purchase Agreement,
including an assignment of the rights of the Seller as against the Company
under the Seller Purchase Agreement to the extent relating to the Series
Pledged Assets;
(i) all UCC financing statements filed by the Company against the
Claimants under the Series Receivables (and the provision of Section 3.01
hereof shall be deemed to constitute an assignment thereof by the Issuer
to the Trustee for purposes of the UCC of all applicable jurisdictions)
and by the Seller against the Company and by the Issuer against the
Seller; and
(j) the rights and remedies of the Company under and pursuant to
each of the Settlement Purchase Agreements relating to the Series
Receivables and all rights of the Company in, to and under the Powers of
Attorney delivered by the Claimants of the Series Receivables.
"Series Receivables" shall mean, with reference to Series 1997-A,
those Receivables identified on the List of Receivables attached hereto as
Schedule I, together with any other Receivables identified in any subsequent
List of Receivables delivered to the Trustee with respect to any new Receivable
being added (i) as an Additional Series 1997-A Receivable or (ii) as a Series
Receivable in accordance with Section 2.06(f) of the Agreement.
"Series 1997-A" shall mean the Series of Notes, the terms of which
are specified in this Supplement.
"Series 1997-A Funding Account" shall mean the segregated bank
account established and designated as such pursuant to Section 6.01(a). The
Series 1997-A Funding Account shall initially be account number
47-47-002-0000000 established and maintained with PNC Bank, National Association
at PNC Bank, Delaware, 000 Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxxxx, XX 00000.
"Series 1997-A Interest Distribution Amount" shall mean, with
respect to any Payment Date, the Interest Distribution Amount for Series 1997-A
Note on such date.
"Series 1997-A Noteholder" shall mean the Person in whose name a
Series 1997-A Note is registered in the Note Register.
"Series 1997-A Note" shall mean any of the 7.2% Structured
Settlement-Backed Notes, Series 1997-A, and "Series 1997-A Notes" shall mean all
such Notes, each of which Notes shall be in substantially the form of that
attached hereto as Exhibit A.
"Series 1997-A Reserve Account" shall mean the segregated bank
account established and designated as such pursuant to Section 6.01(a). The
Series 1997-A Reserve
11
Account shall initially be account number 47-47-002-0000000 established and
maintained by PNC Bank, National Association at PNC Bank, Delaware, 000 Xxxxxxxx
Xxxxxx, 00xx Xxxxx, Xxxxxxxxxx, XX 00000.
"Servicer Default" shall mean, with reference to Series 1997-A, the
occurrence of any of the following:
(a) (x) any failure by the Master Servicer to remit any funds
received by it in accordance with Section 3.04(b) of the Agreement, or (y)
any failure (other than as described in clause (x) above) by the Master
Servicer to make any allocation of any material payment or to make any
payment, transfer or deposit or, if applicable, to give instructions or
notice to the Trustee or the Collateral Trustee to make such payment,
transfer or deposit, in either case, required to be made under the
Agreement or any of the other Operative Documents on or before the date
occurring five (5) Business Days after the date such payment, transfer or
deposit or such instruction or notice is required to be made or given, as
the case may be (in each case, whether relating to Series 1997-A or any
other Series);
(b) the Master Servicer shall assign its duties under the Agreement
or hereunder other than as permitted by Section 8.02 of the Agreement; or
(c) any failure by the Master Servicer duly to observe or perform in
any material respect any other covenant or agreement by it under the
Agreement or hereunder, which failure (other than a failure to comply with
Section 8.02 of the Agreement) (x) continues unremedied for thirty (30)
days after the earlier of (i) the date upon which a Responsible Officer of
such breaching party obtained actual knowledge of such failure and (ii)
the date upon which written notice of such failure shall have been given
to it by the Trustee, the Collateral Trustee, or to the Master Servicer
and the Trustee by the Back-up Servicer, any Series 1997-A Noteholder, the
Collateral Trustee or the Control Party, and (y) has, or could reasonably
be expected to have, a material adverse effect on the Series 1997-A
Noteholders (other than the Affiliated Entities) or any of the Series
Receivables;
(d) any representation, warranty or certification made or deemed to
have been made by the Master Servicer under or in connection with this
Supplement, the Agreement or any of the other Operative Documents shall
prove to have been incorrect in any material respect when made or deemed
to have been made or remade, which incorrectness (x) continues unremedied
for thirty (30) days after the earlier of (i) the date upon which a
Responsible Officer of such breaching party obtained actual knowledge of
such failure and (ii) the date upon which written notice of such
incorrectness shall have been given to it by the Trustee, or to the Master
Servicer and the Trustee by the Back-up Servicer, any Series 1997-A
Noteholder or the Control Party, and (y) has, or could reasonably be
expected to have, a material adverse effect on the Series 1997-A
Noteholders (other than the Affiliated Entities) or any of the Series
Receivables; or
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(e) the Master Servicer shall become the subject of an Insolvency
Event; or
(f) an Overcollateralization Default.
"Specified Series 1997-A Reserve Balance" shall mean, with respect
to the Series 1997-A Reserve Account, a balance on deposit therein equal on each
Payment Date (after giving effect to all withdrawals to be made therefrom in
respect of such Payment Date) to the lesser of (i) 1% of the Original Aggregate
Discounted Receivables Balance of the Series Receivables and (ii) the Aggregate
Principal Balance of the Series 1997-A Notes on such date (after giving effect
to all distributions to be made on such date in reduction of the Aggregate
Principal Balance of such Notes).
"Subsequent Funding Date" shall mean any date after the Series
Closing Date and before the first Series Determination Date on which funds are
released from the Series 1997-A Funding Account in accordance with Section
6.01(e) .
"Supplement" shall mean this Series 1997-A Supplement.
"Trustee Fee" shall mean, with respect to any Payment Date in
respect of Series 1997-A, the sum of (a) the product of (x) 1/12 (or, in the
case of the initial Payment Date, a fraction, the numerator of which is the
number of days from (and including) the Series Closing Date to (but excluding)
such Payment Date and the denominator of which is 360), (y) the average daily
outstanding Aggregate Principal Balance of the Series 1997-A Notes for the
Collection Period ending immediately prior to such Payment Date, (z) .018% per
annum, plus (b) any unpaid Trustee Fees in respect of Series 1997-A for any
Payment Date preceding the Payment Date for which such determination is being
made.
(b) All capitalized terms used herein and not otherwise defined
herein have the meanings ascribed to them in the Agreement.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Supplement shall refer to this Supplement as a
whole and not to any particular provision of this Supplement; references herein
to any Article, Section or Exhibit are references to Articles, Sections and
Exhibits in or to this Supplement unless otherwise specified; and the term
"including" means "including without limitation."
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ARTICLE II
CREATION OF THE SERIES 1997-A NOTES
SECTION 2.01 Designation. There is hereby created a series of Notes
to be issued pursuant to the Agreement and this Supplement to be known as
"Series 1997-A Notes," which shall consist of a senior Class to be known as the
"7.2% Structured Settlement-Backed Notes, Series 1997-A." The Series 1997-A
Notes shall be issued in a minimum denomination of $100,000 and in integral
multiples of $100,000 in excess thereof. Subject to the conditions set forth in
Article V, the Issuer shall execute, and the Trustee shall authenticate and
deliver, the Series 1997-A Notes, in accordance with the Issuer's direction to
be set forth in an Order delivered to the Trustee on or before the Series
Closing Date, in an aggregate principal amount equal to the Original Series
1997-A Note Principal Balance. Each of the Series 1997-A Notes shall be
executed, authenticated and delivered in the manner and at the times for
authentication and delivery of Notes as are specified in Article VI of the
Agreement and the aforementioned Order.
SECTION 2.02 Limitations on the Initial Issuance and Sales or
Transfers of Series 1997-A Notes. (a) Without limiting the provisions of the
Agreement in any way, each Noteholder by its purchase of a Series 1997-A Note
will be deemed to acknowledge that the Series 1997-A Notes have not been and
will not be registered under the Act or under any states' securities laws. As
such, the initial issuance of the Series 1997-A Notes on the Series Closing Date
may only be made by the Issuer to investors that are Institutional Accredited
Investors, and which have delivered to the Issuer on or before the Series
Closing Date an Investor Letter (or, to the extent such purchaser is a party to
the Note Purchase Agreement, the Note Purchase Agreement executed by such
purchaser).
(b) Without limiting the provision of Section 6.10 of the Agreement
in any way, none of the Series 1997-A Notes may be sold, transferred or
otherwise disposed of (any such sale, transfer or other disposition, as defined
for purposes of this Section, being called a "Sale", with "Sell" and "Sold"
having a correlative meaning), unless (i) such Sale is made to a Person who is a
Qualified Purchaser and (ii) such Sale is made:
(x) in the United States of America to Institutional
Accredited Investors (or, in the case of any such Sale to an
Affiliated Entity, the Company or any Affiliate thereof, an
Accredited Investor) in a transaction exempt from the
registration requirements of the Act and to whom such sale or
transfer is being made pursuant to an available exemption from
the registration requirements of applicable state securities
laws, in any case, upon delivery to the Trustee and the Issuer
(or any designated agent of either of the foregoing) of an
Investor Letter and, if requested by the Trustee and/or the
Issuer, an opinion (which may be an opinion of in-house
counsel) confirming the availability of such exemptions to any
such Sale rendered form and substance satisfactory to the
Trustee and/or the Issuer, as the case may be;
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(y) in the United States of America to a transferee that
such Holder reasonably believes is a Qualified Institutional
Buyer purchasing such Series 1997-A Notes for its own account
or for the account of another Person that is a Qualified
Institutional Buyer in a transaction exempt from the
registration requirements of the Act pursuant to Rule 144A
thereunder, and which transferee is aware that the proposed
Sale is being made in reliance on Rule 144A under the Act and
to whom such Sale is being made pursuant to an available
exemption from the registration requirements of applicable
state securities laws, in any case, upon delivery to the
Trustee and/or the Issuer (or any designated agent of either
of the foregoing) of an Investor Letter and, if requested by
the Trustee and/or the Issuer, an opinion (which may be an
opinion of in-house counsel) confirming the availability of
such exemptions to any such Sale in form and substance
satisfactory to the Trustee and/or the Issuer, as the case may
be; or
(z) in the United States of America to a transferee to
whom such Sale is being made in reliance on Rule 144 under the
Act and to whom such Sale is being made pursuant to an
available exemption from the registration requirements of all
applicable state securities laws, upon delivery to the Trustee
and the Issuer (or any designated agent of either of the
foregoing) of an Investor letter and, if requested by the
Trustee and/or the Issuer, an opinion (which may be an opinion
of in-house counsel) confirming the availability of such
exemptions to any such Sale in form and substance satisfactory
to the Trustee and/or the Issuer, as the case may be, and
in any event, the Note Registrar and Transfer Agent shall have
received, prior to the date of any such proposed Sale, a written
instrument of Sale executed by the transferring Noteholder and the
Trustee.
(c) Without limiting in any way Section 6.09, Section 6.10 or any
other Section of the Agreement, the following restrictions shall apply to all
Sales of the Series 1997-A Notes (whether such Sale is the initial issuance on
the Series Closing Date or a subsequent sale on any other date):
(i) The Series 1997-A Notes shall bear a legend regarding the
restrictions on transfer as set forth herein which shall be in
substantially the forms set forth in the form of the Series 1997-A
Notes attached hereto as Exhibit A.
(ii) Such Series 1997-A Note shall not be Sold to any Person
in respect of which the purchase or holding thereof would constitute
a "prohibited transaction" under ERISA or Section 4975 of the
Internal Revenue Code, and each prospective purchaser shall be
required to make certain representations with respect thereto as set
forth in the Note Purchase Agreement.
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(iii) Each Holder of any Series 1997-A Notes will notify any
prospective purchaser, pledgee or other transferee of any Series
1997-A Notes from such Holder of the transfer restrictions referred
to in this Section 2.02(c) and in Section 6.10 of the Agreement.
(d) The Issuer shall make available to any selling Holder of Series
1997-A Notes and any prospective transferee of such Series 1997-A Notes such
information as is required under Rule 144A(d)(4) under the Act in connection
with the resale of any such Series 1997-A Notes, promptly after the same is
requested.
(e) Upon the confirmation by each of the Rating Agencies rating the
Series 1997-A Notes that such ratings would not be reduced or withdrawn as a
result of the following, the Issuer may issue additional Classes of Notes to be
secured by the Series Pledged Assets (which Classes of Notes shall be
subordinate to the Series 1997-A Notes to the same extent (without giving effect
to the issuance of such new Class of Notes) as the Issuer Interest) upon the
delivery to the Trustee and the Issuer of a supplement hereto setting forth the
relative designations and rights and remedies of such Classes, a Tax Opinion, an
opinion of counsel, in form and substance reasonably satisfactory to the
Trustee, the Control Party and the Issuer, confirming that such issuance would
not impair or adversely effect the Series 1997-A Noteholders, and such other
opinions of counsel as the Trustee and/or the Issuer shall request, in each
case, in form and substance reasonably satisfactory to the Trustee and the
Issuer. Each such new Class issued by the Issuer, and authenticated and
delivered by the Trustee, pursuant to an Order related thereto and such
supplement hereto would be subject to all of the terms and provisions hereof, of
the Agreement and of any such supplement hereto; provided, that in the event any
terms or provisions of any such supplement hereto entered into in connection
with any such subdivision of the Issuer Interest shall in any way conflict with
the terms or the intent hereof or of the Agreement, the terms of this Supplement
or the Agreement, respectively, shall govern. Any Series 1997-A Notes issued in
substitution for the Issuer Interest shall be issued only to the Issuer which
can then Sell any or all of them in accordance with the terms hereof and of
Section 6.10 of the Agreement.
(f) Notwithstanding anything contained herein to the contrary, the
Issuer shall not transfer any interest in the Issuer Interest except (x) for
fair consideration (as determined in the reasonable judgment of the Seller in
its capacity as the Designated Manager of the Issuer), (y) upon not less than
five (5) Business Days' prior written notice to each of the Rating Agencies then
rating any of the Series 1997-A Notes and (z) in respect of which transfer, the
Issuer shall have delivered to each such Rating Agency an opinion of counsel in
form and substance reasonably satisfactory to each such Rating Agency confirming
the nature of the transfer of the Series Receivables by the Seller to the Issuer
as being absolute transfers. It is expressly understood that, if the Issuer
satisfies the foregoing conditions, the Issuer shall be allowed to sell its
interest in the Issuer Interest notwithstanding anything contained herein or in
the Agreement to the contrary.
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ARTICLE III
GRANT OF SECURITY INTEREST; ISSUER REPRESENTATIONS
AND WARRANTIES
SECTION 3.01. Grant of Security Interest in Series Pledged Assets.
(a) In order to secure payment of the amounts due under the Series 1997-A Notes
and the fees and expenses due and payable to the Trustee hereunder, the Issuer
hereby grants a first priority security interest in and against all of the
Issuer's right, title and interest in and to the Series Receivables and the
other Series Pledged Assets to the Trustee, for its benefit and the benefit of
the Holders of the Series 1997-A Notes.
(b) Such grant of a security interest shall not be deemed to
constitute, nor is it intended to result in, an assumption by the Trustee or any
Holder of any Series 1997-A Note of any obligation of the Claimant, the Company,
the Seller, the Issuer or any other Person in connection with the Series
Receivables or under any Settlement Agreement relating to the Series
Receivables, any Settlement Purchase Agreement relating to the Series
Receivables or the Seller Purchase Agreement or the Issuer Purchase Agreement or
under any agreement or instrument relating to any of the foregoing, including,
without limitation, any obligation to any Claimant.
SECTION 3.02. Acceptance by Trustee. The Trustee hereby acknowledges
its acceptance on behalf of the Holders of the Series 1997-A Notes of a security
interest in and against all of the Issuer's rights, title and interests in and
to the Series Receivables and the Series Pledged Assets, now existing and
hereafter created and declares that it shall maintain such security interest,
for the benefit of such Noteholders.
SECTION 3.03. Representations and Warranties of the Issuer Relating
to the Series Pledged Assets. The Issuer hereby represents and warrants to the
Trustee and each of the Noteholders as of the Series Closing Date and as of the
Subsequent Funding Date in respect of Series 1997-A, that with respect to each
such Series Receivable pledged to the Trustee for the benefit of the Noteholders
on the Series Cut-Off Date:
(a) Such Series Receivable is an Eligible Receivable.
(b) To the best of the Issuer's knowledge, such Series Receivable is
the legal, valid and binding obligation of each Obligor related thereto, which
obligation is, in each case, enforceable against each such Person in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
affecting creditors' rights generally, now or hereafter in effect, and except as
such enforceability may be limited by general principles of equity.
(c) The assignment of the related Claimant's right to receive
payments under such Series Receivable does not contravene or conflict with any
applicable law, rule or regulation or any contractual or other restriction,
limitation or encumbrance, which, in any case, would materially impair the
enforceability of such assignment as against the creditors or any
debtor-in-possession, bankruptcy trustee, receiver or other similar Person of or
for such Claimant.
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(d) To the best of the Issuer's knowledge, such Series Receivable
has not, nor has any document in the related Receivable Package, been satisfied,
subordinated or rescinded.
(e) Such Series Receivable is unrelated to any Annuity Provider
which on the Series Closing Date therefor is, or Claimant which as of the Series
Cut-Off Date was, the subject of an Insolvency Event (as determined without
giving effect to the thirty (30) day grace period for involuntary proceedings),
unless, with respect to a Claimant which was the subject of such an event, the
bankruptcy court having jurisdiction over such Claimant had approved the sale of
such Series Receivable to the Company.
(f) The Claimant thereof was, at the time of the sale of such Series
Receivable to the Company pursuant to the Settlement Purchase Agreement, (x) a
resident of a state (other than a Prohibited State) in the United States of
America and (y) of the age of majority in such state.
(g) Such Series Receivable has no related guaranty, letter of credit
providing support therefor, or collateral security therefor, other than any
guaranty, letter of credit or collateral security that has been assigned by the
Claimant to the Company, by the Company to the Seller and by the Seller to the
Issuer.
(h) The Back-Up Servicer has received a Receivables Package which is
complete in all material respects with respect to such Series Receivable.
(i) To the best of the Issuer's knowledge:
(x) the Annuity Contract relating to such Series Receivable
has been duly authorized and issued and constitutes the legal, valid
and binding obligation of the Annuity Provider and is not subject to
defense, rescission, reduction, set-off or other defenses;
(y) the Settlement Agreement under which such Series
Receivable arises has been duly executed by all parties thereto and
constitutes the legal, valid and binding obligation of such parties
(except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally or
general principals of equity (regardless of whether such enforcement
is considered in a proceeding in equity or at law)) and is not
subject to defense, rescission, reduction, set-off or other
defenses; provided that only such portion of such Receivable which
is subject to such defense, rescission, reduction, set-off or other
defense shall be deemed to violate this clause (y); and
(z) neither such Annuity Contract nor the Settlement Agreement
contravenes in any material respect any Requirement of Law
applicable thereto.
(j) Neither the transfer of such Series Receivable from the Seller
to the Issuer, nor the grant of a security interest in such Series Receivables
to the Trustee for the benefit of the
18
Noteholders, would cause an Event of Default or a Potential Event of Default to
occur, nor would it cause a default under the Revolving Credit Facility.
(k) The Issuer has taken and completed all actions required to
protect and perfect the Trustee's and the Noteholders' interest and priority in
such Series Receivable under the UCC and other applicable law as against the
creditors or any trustee(s) in bankruptcy of or for the Claimant thereon, the
Company, the Seller, and the Issuer.
(l) The total purchase price to have been paid by the Company to the
Claimant for such Series Receivable under the applicable Settlement Purchase
Agreement has been paid in full and all obligations of the Company to fully
effectuate the purchase of such Receivable pursuant to the Settlement Purchase
Agreement have been fully performed by the Company (it being understood and
agreed that the Company may have a continuing obligation to remit Split Payments
to such Claimant from time to time, but such obligation alone shall not render
the foregoing incorrect).
(m) All of the applicable Eligible Receivable Purchase Procedures
have been completed in all material respects with respect to such Series
Receivables.
(n) No effective financing statement or other instrument similar in
effect that covers all or part of any such Series Receivable or any other Series
Pledged Assets relating thereto is on file in any recording office except (i)
such as may be filed in favor of the Company in accordance with the Settlement
Purchase Agreement, (ii) such as shall be filed by the Seller against the
Company (and which shall be assigned to the Trustee) pursuant to the Seller
Purchase Agreement, (iii) such as shall be filed by the Issuer against the
Seller (and which shall be assigned to the Trustee) pursuant to the Issuer
Purchase Agreement, (iv) such as shall be filed in favor of the Trustee, for the
benefit of the Noteholders, in accordance with the Agreement and this
Supplement, (v) such as shall be filed in favor of the Agent against the Seller
under the Revolving Credit Facility to the extent the Intercreditor Agreement
remains in full force and effect, and (v) filings in respect of which duly
executed UCC-3 termination statements or releases effective to terminate such
filing against the Pledged Assets shall have been delivered to the Trustee.
The representations and warranties made pursuant to this Section
3.03 as of each Series Cut-Off Date in respect of Series 1997-A shall survive
such Series Cut-Off Date. Upon discovery by the Issuer, any Master Servicer, the
Back-Up Servicer or the Trustee of a material breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the other parties hereto. The Trustee's obligations in
respect of any such breach are limited as provided in Article XI of the
Agreement, including, without limitation, Section 11.02(g) of the Agreement.
SECTION 3.04. Full Disclosure. All written factual information
heretofore furnished by either of the Master Servicer and the Issuer to the
Trustee and the Noteholders (including, without limitation, the Confidential
Private Placement Memorandum dated September 28, 1997 (the "PPM") but
specifically excluding any earlier draft of the PPM including the Preliminary
Confidential Placement Memorandum (the "Preliminary PPM") dated as of August
19
29, 1997 for the purposes of or in connection with this Agreement and the offer
and sale of the Notes was true and correct in all material respects and did not
fail to state any material fact or statement which would make any such
information materially misleading in light of the circumstances in which any
such disclosure was made, in either case, on the date as of which such
information was stated or certified and remains true and correct in all material
respects as of the Closing Date.
ARTICLE IV
COMPENSATION OF MASTER SERVICER, BACK-UP SERVICER AND TRUSTEE
SECTION 4.01. Compensation of the Master Servicer, the Back-up
Servicer and the Trustee. (a) The Master Servicing Fee, the Back-up Servicing
Fee and the Trustee Fee, in each case, in respect of Series 1997-A, shall be
payable to the Master Servicer, the Back-up Servicer and the Trustee,
respectively, in arrears, on each Payment Date in respect of any Collection
Period (or portion thereof during which the Series 1997-A Notes are
outstanding). Such fees shall be payable to the Master Servicer, the Back-up
Servicer and the Trustee solely to the extent amounts are available for
distribution pursuant to Sections 6.03 or 6.02(c). In the event that there are
insufficient amounts available for distribution to facilitate the payment in
full of all such fees owing in respect of such Payment Date, such available
amounts shall be distributed to the Master Servicer, the Back-up Servicer and
the Trustee, ratably, in accordance with the relation that the Master Servicing
Fee, the Back-up Servicer Fee or the Trustee Fee, as applicable, owing on such
Payment Date bears to the sum of all such fees owing on such date.
SECTION 4.02. Successor Master Servicer. Each successor to the
Master Servicer appointed under or with respect to this Supplement shall be
deemed bound by the terms of the Agreement, this Supplement and each of the
other Operative Documents relating to Series 1997-A to which the Master Servicer
is a party or is subject.
ARTICLE V
CONDITIONS TO ISSUANCE OF NOTES
SECTION 5.01 Conditions to Issuance. The Issuer will not execute,
nor will the Trustee authenticate or deliver, any Series 1997-1 Notes to be
issued hereunder on the Series Closing Date for Series 1997-A unless:
(a) the Trustee and the Placement Agent shall have received written
certification from the Issuer that the Agreement, this Supplement, the
Issuer Purchase Agreement, the Seller Purchase Agreement, the Note
Purchase Agreement, the Intercreditor Agreement and Lock-Box Notices with
respect to all of the then-existing Lock-Box Accounts and the lock-boxes
relating thereto shall have been fully executed and shall have become
effective and continue to be effective on or concurrently with the Series
Closing Date for Series 1997-A;
20
(b) the Trustee and the Placement Agent shall have received written
certification from the Issuer that all conditions to the issuance of the
Series 1997-A Notes under Section 6.09 of the Agreement shall have been
satisfied;
(c) the Trustee and the Placement Agent shall have received original
copies of the Opinions of Counsel identified on Schedule II hereto, in
each case, in form and substance and from such counsel as shall be
satisfactory to it;
(d) on the Series Closing Date for the Series 1997-A Notes, the
Trustee and the Placement Agent shall have received written confirmation
from Duff & Xxxxxx and Xxxxx'x that the Series 1997-A Notes shall be rated
at least "A" by Duff & Xxxxxx and at least "A2" by Xxxxx'x;
(e) the Trustee shall have received written certification from the
Placement Agent that (i) the Placement Agent shall have received
fully-executed copies of all of the instruments, documents and agreements
identified on the list of closing documents set forth as Schedule II
hereto and (ii) that the Placement Agent has not made any public
solicitations or public offers (in each case, within the meaning of the
Act) in connection with its placement of the Series 1997-A Notes; and
(f) the Trustee shall have received written confirmation from the
Placement Agent that the Placement Agent shall have received its placement
agent fee (such fee to be determined in accordance with, and set forth in,
a separate letter agreement between the Placement Agent and the Company).
ARTICLE VI
RIGHTS AND OBLIGATIONS OF SERIES 1997-A NOTEHOLDERS;
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 6.01. Creation of the Series Accounts for Series 1997-A. (a)
On or prior to the Series Closing Date, the Issuer and/or Master Servicer, shall
establish and maintain with an Eligible Institution, in the name of the Trustee,
on behalf of the Trustee. the 1997-A Noteholders, the Back-up Servicer, the
Collateral Trustee and the Master Servicer, the following segregated bank
accounts: (i) an interest bearing account (the "Series Collection Account") to
be identified as the "Series 1997-A Collection Account for X.X. Xxxxxxxxx
Receivables III LLC," (ii) an interest bearing account (the "Series 1997-A
Reserve Account") to be identified as the "Series 1997-A Reserve Account for
X.X. Xxxxxxxxx Receivables III LLC," (iii) an interest bearing account (the
"Series Payment Account") to be identified as the "Series 1997-A Payment Account
for X.X. Xxxxxxxxx Receivables III LLC", (iv) an interest bearing account (the
"Series 1997-A Funding Account") to be identified as the "Series 1997-A Funding
Account for X.X. Xxxxxxxxx Receivables III LLC", and (v) an interest bearing
account (the "Investment Proceeds Account") (the Series Collection Account, the
Series 1997-A Reserve Account, the Series Payment Account, the Series 1997-A
Funding Account and the Investment Proceeds Account being referred to
hereinafter with respect to Series 1997-A, collectively, as the "Series
Accounts").
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(b) Out of the proceeds of the issuance and sale of the Series
1997-A Notes, the Issuer and/or the Master Servicer shall instruct the Trustee,
prior to making any payments thereof to the Issuer, (i) to deposit to the Series
1997-A Funding Account an amount equal to $34,435,838, and (ii) to deposit to
the Series 1997-A Reserve Account an amount equal to one percent (1.0%) of the
Original Aggregate Discounted Receivables Balance of the Series Receivables as
of the Series Closing Date.
(c) At the written direction of Wentworth (which may be a standing
order), funds on deposit in the Series Collection Account, the Series 1997-A
Reserve Account, the Series 1997-A Funding Account and the Investment Proceeds
Account shall be invested by the Trustee in Eligible Investments selected by
Wentworth (or, if not so instructed, then held by the Trustee on deposit in such
account). All such Eligible Investments shall be held by the Trustee for the
benefit of Series 1997-A. All interest and other investment earnings and
interest (net of losses and investment expenses, the "Investment Proceeds") on
funds on deposit in the Series Accounts shall upon receipt thereof be deposited
in the Investment Proceeds Account and be distributed therefrom in accordance
with Sections 6.02(c). Neither funds deposited in the Series Payment Account nor
funds deposited to any other Series Account on the Business Day prior to the
Payment Date shall be required to be invested overnight. Any direction by
Wentworth to invest funds on deposit in any applicable Series Account in
accordance with this Section shall be in writing (which may be a standing
instruction) and shall certify that the requested investment is an Eligible
Investment which matures (and the proceeds of which are distributable to the
Trustee) no later than the Business Day immediately preceding the next Payment
Date.
(d) Subject to the terms of the Intercreditor Agreement and the
Agreement, the Master Servicer (together with the Company and the other
Applicable Master Servicers) shall have the power to instruct the Collateral
Trustee (but only to the extent that such instructions are in accordance with
the requirements of the Agreement and this Supplement) in accordance with
Section 3.01(c) of the Agreement, to make withdrawals from the Master Collection
Account and to transfer such amounts to the Series Collection Account (or, with
respect to amounts not constituting Series Pledged Assets, to such other account
as shall be specified to the Trustee) and, with respect to any Split Payments
therein, to the Split Payment Account, which instructions shall be given daily
by delivery of the Daily Report. The Master Servicer shall also have the power
to instruct the Trustee (but only to the extent that such instructions are in
accordance with the requirements of the Agreement and this Supplement) to make
withdrawals, (x) from the Series Collection Account and the Series 1997-A
Reserve Account on the Business Day preceding each Payment Date and to transfer
such amounts to the Series Payment Account, which directions shall be set forth
in the Monthly Report, (y) on each Payment Date from the Investment Proceeds
Account and to pay such amounts to the Persons specified in Section 6.02(c) in
accordance the directions set forth in the Monthly Report, and (z) on each
Payment Date from the Series Payment Account and to pay such amounts to the
Person entitled thereto pursuant to Section 6.03 and in accordance with the
directions set forth in the Monthly Report. If so requested by the Control Party
at any time after the occurrence and during the continuance of a Servicer
Default with respect to Series 1997-A (with a copy of such request sent to the
Trustee), the Paying Agent shall cease to follow the direction of the Master
Servicer and shall instead rely on the directions of the Back-up Servicer.
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(e) At the written direction of the Issuer and/or the Master
Servicer, funds on deposit in the Series 1997-A Funding Account may be paid to
the Seller in consideration of the Issuer's purchase of Additional Series 1997-A
Receivables from the Seller; provided, that the Trustee shall not release any
such funds in the Series 1997-A Funding Account absent the following conditions:
(i) The Trustee shall have received a List of Receivables
identifying the Additional Series 1997-A Receivables to be so purchased
and included in the Series Receivables, which Additional Series 1997-A
Receivables shall have an Aggregate Discounted Receivables Balance of not
less than 119% of the amount of funds to be released from the Series
1997-A Funding Account;
(ii) Immediately prior to such release of funds, the Trustee shall
have withdrawn from the Series 1997-A Funding Account and deposited into
the Series 1997-A Reserve Account the amount, as certified by the Master
Servicer, necessary to increase the balance thereof to the Specified
Series 1997-A Reserve Balance after giving effect to the purchase of such
Additional Series 1997-A Receivables; and
(iii) The Trustee shall receive Officer's Certificates from each of
the Company, the Seller and the Issuer certifying: (i) that the
representations and warranties set forth in Section 3.03 are true and
correct with respect to the Additional Series 1997-A Receivables; (ii)
that no Event of Default or Potential Event of Default has occurred and is
continuing; and (iii) that, after giving effect to the Issuer's purchase
of Additional Series 1997-A Receivables, the ratio of the Issuer Interest
to the Original Aggregate Discounted Receivables Balance (expressed as a
percentage) shall not have been reduced below the ratio in effect on the
Closing Date.
Funds in the Series 1997-A Funding Account may not be withdrawn except as
provided in this Section 6.01(e) and as provided in Sections 6.02(b) and (d).
SECTION 6.02. Determination of Payment Amounts; Deposits to and
Withdrawals from the Series 1997-A Reserve Account and the Series 1997-A Funding
Account. (a) On or prior to the Series Determination Date for each month, the
Master Servicer shall determine (such determinations to be set forth in the
Monthly Report to be delivered to the Trustee on each such Series Determination
Date) the amount of Collections and Investment Proceeds, in each case, for the
immediately preceding Collection Period, the amounts required to be paid or
deposited pursuant to Section 6.03 to the Persons listed therein or to the
Series 1997-A Reserve Account, as applicable, and, to the extent applicable, the
amounts to be withdrawn from the Series 1997-A Reserve Account and the
Investment Proceeds Account in respect of the following Payment Date. The Master
Servicer (or, in accordance with Section 6.01(d), the Back-up Servicer) shall
instruct the Paying Agent to make the appropriate transfers from the Series
Collection Account and the Series 1997-A Reserve Account to the Series Payment
Account and from the Investment Proceeds Account, in each case, to facilitate
making the payments required pursuant to Sections 6.02(c) and
23
6.03 by the close of business on the Business Day immediately preceding the
Payment Date following such Series Determination Date.
(b) As described in Section 6.01(b), the Trustee (or the Initial
Master Servicer on behalf of the Trustee) shall deposit funds in the amount of
the Specified Series 1997-A Reserve Balance in the Series 1997-A Reserve Account
out of the initial proceeds received by it from the initial sale of the Series
1997-A Notes. In addition, as described in Section 6.01(e), to the extent that
funds deposited in the Series 1997-A Funding Account are used by the Issuer to
purchase Additional Series 1997-A Receivables, the Trustee (or the Initial
Master Servicer on behalf of the Trustee) shall deposit funds from the Series
1997-A Funding Account into the Series 1997-A Reserve Account on the date of any
such purchase to the extent that the balance of the Series 1997-A Reserve
Account is less than the Specified Series 1997-A Reserve Balance (after giving
effect to such purchase of Additional Series 1997-A Receivables), in order to
increase the balance thereof, to the Specified Series 1997-A Reserve Balance. In
addition, pursuant to Section 6.03, funds (to the extent available pursuant to
and in accordance with such Section 6.03) shall be deposited to the Series
1997-A Reserve Account on each Payment Date occurring prior to the Projected
Note Repayment Date to the extent that the balance thereof is less than the
Specified Series 1997-A Reserve Balance to increase the balance thereof to the
Specified Series 1997-A Reserve Balance. Funds in the following amounts (and to
be used for the payment of such amounts) may be withdrawn from such account on
the Business Day immediately preceding each Payment Date and deposited into the
Series Payment Account for distribution on the succeeding Payment Date as set
forth in Section 6.03: (i) to the extent Collections and other amounts received
by the Trustee or the Issuer (and remitted to the Trustee as required hereunder
and under the Agreement), in each case, with respect to Series 1997-A during the
immediately preceding Collection Period are less than the sum of (x) the
aggregate amount of the Master Servicing Fee (to the extent the Master Servicer
is not an Affiliated Entity), the Trustee Fee, the Back-up Servicing Fee and the
Series 1997-A Interest Distribution Amount payable in respect of such Collection
Period and (y) with respect to any Payment Date occurring after the Projected
Note Repayment Date, the Aggregate Principal Balance of the Series 1997-A Notes,
the amount of such deficiency; and (ii) to the extent that the balance of the
Series 1997-A Reserve Account would exceed the Specified Series 1997-A Reserve
Balance (as such amounts are calculated after giving effect to all withdrawals,
deposits and payments required to be made on such Payment Date), the amount of
such excess. On the first Payment Date to occur after the Collection Date with
respect to the Series 1997-A Notes, all amounts in the Series 1997-A Reserve
Account shall be remitted to the Issuer.
(c) As described in Section 6.01(c), all Investment Proceeds with
respect to the Series Accounts shall be deposited into the Investment Proceeds
Account. On each Payment Date, the amount of such Investment Proceeds received
during the immediately preceding Collection Period shall be distributed to the
Persons set forth in clauses (i) through (iv) of Section 6.03(a) to the extent
insufficient funds in the Series Payment Account exist to pay the amounts owing
to such Persons on such Payment Date, and otherwise all such excess Investment
Proceeds with respect to such Collection Period shall be distributed to the
Issuer on such date.
(d) As described in Section 6.01(b), the Trustee (or the Initial
Master Servicer on behalf of the Trustee) shall deposit funds in the amount of
$34,435,838 in the Series 1997-A
24
Funding Account out of the initial proceeds received by it from the initial sale
of the Series 1997-A Notes. All funds on deposit in the Series 1997-A Funding
Account on the Business Day immediately preceding the first Payment Date after
the Series Closing Date shall be withdrawn therefrom and deposited to the Series
Payment Account for distribution on the first Payment Date after the Series
Closing Date as set forth in Section 6.03.
SECTION 6.03. Distributions. (a) On each Payment Date (and, to the
extent set forth in clause (ii) below, on October 15, 1997), the Paying Agent
shall, in accordance with the Master Servicer's (or the Back-up Servicer's, as
applicable) instructions (a copy of which shall be delivered to the Trustee (if
other than the Paying Agent)), distribute the funds on deposit in the Series
Payment Account (or, to the extent provided, in the Investment Proceeds Account)
in payment of the following amounts in the following order of priority:
(i) to following amounts to the following parties, pari passu:
a) to the Trustee, the Trustee Fee in respect of the immediately
preceding Collection Period;
b) to the Master Servicer (if other than an Affiliated Entity),
the Master Servicing Fee in respect of the immediately
preceding Collection Period; and
c) to the Back-up Servicer (or to the Trustee to facilitate the
payment by the Trustee of the Back-up Servicer as provided in
the Back-up Servicing Agreement), the Back-up Servicing Fee in
respect of the immediately preceding Collection Period;
(ii) to the Series 1997-A Noteholders, the Series 1997-A Interest
Distribution Amount in respect of such Payment Date, plus, on October 15,
1997, an amount of principal on the Series 1997-A Notes equal to all funds
on deposit in the Series 1997-A Funding Account on the Business Day
immediately preceding such date;
(iii) prior to the first Payment Date occurring on or after the Projected
Note Repayment Date, to the Series 1997-A Reserve Account to the extent
such funds are required to increase the balance thereof to the Specified
Series 1997-A Reserve Balance;
(iv) to the Master Servicer (if an Affiliated Entity), the Master
Servicing Fee in respect to the immediately preceding Collection Period;
(v) unless (a) the Trustee shall have received written notice of an
Overcollateralization Shortfall, which Overcollateralization Shortfall is
still in existence as of such Payment Date or (b) there has occurred any
Event of Default upon which occurrence the principal and interest of the
Series 1997-A Notes shall have automatically become or have been declared
to be due and payable, to the Issuer, the Issuer Return Amount in respect
of the immediately preceding Collection Period;
25
(vi) to the Series 1997-A Noteholders an amount equal to the lesser of (x)
any remaining amounts available for distribution on such date after
payment of items (i) through (v) above and (y) the Aggregate Principal
Balance of the Series 1997-A Notes at such time;
(vii) ratably to the Master Servicer (if other than an Affiliated Entity),
the Back-up Servicer, the Trustee and the Series 1997-A Noteholders, any
and all other amounts then owing to such Persons hereunder (including,
without limitation, any indemnities); and
(viii) to the Issuer, all remaining amounts available for distribution on
such date after payment in full of items (i) through (vii) above (other
than amounts in the Series 1997-A Reserve Account or the Investment
Proceeds Account).
(b) Notwithstanding any provision to the contrary herein, if at any
time after any payment to any Series 1997-A Noteholder, the Trustee, the Master
Servicer (if other than an Affiliated Entity) or the Back-up Servicer made
pursuant to this Section 6.03, such payment is rescinded or must otherwise be
returned for any reason, effective upon such rescission or return such payment
shall automatically be deemed, as between such Series 1997-A Noteholder, the
Trustee, such Master Servicer or the Back-up Servicer, as the case may be, and
the Issuer and the Master Servicer (if an Affiliated Entity), never to have
occurred, and the Issuer and/or such Master Servicer shall be required, to the
extent it received any amounts under this Section 6.03 of a lower priority then
such rescinded or returned payment, to pay to the Person from whom such returned
or rescinded payment was recovered, an amount equal to such rescinded or
returned payment.
(c) Distributions to Series 1997-A Noteholders hereunder shall be
made by wire transfer to each Series 1997-A Noteholder to such account as may be
designated in writing, received by the Paying Agent at least fifteen (15)
Business Days prior to the applicable Payment Date, by each Series 1997-A
Noteholder without presentation or surrender of any Series 1997-A Note or the
making of any notation thereon. Any designation by a Series 1997-A Noteholder of
an account for receipt of wire transfers pursuant to the preceding sentence may
be a standing instruction, effective with respect to the applicable Payment Date
and each Payment Date thereafter until revoked. In the absence of such timely
wire transfer instructions, payment will be made by check to the address of
record of the Series 1997-A Noteholder. All other payments will be made in
accordance with the Agreement or as otherwise may be agreed upon by the Paying
Agent and such other Person entitled to payment thereon.
ARTICLE VII
STATEMENTS TO NOTEHOLDERS
SECTION 7.01. Statements to Noteholders. (a) By 1:00 P.M. (New York
City time) on each Business Day, the Master Servicer shall deliver to the
Trustee and the Collateral Trustee a Daily Report for Series 1997-A, in
substantially the form attached hereto as Exhibit C, for the second preceding
Business Day.
26
(b) Promptly following receipt by the Trustee (which shall deliver a
copy thereof to the Paying Agent if the Paying Agent does not receive a copy
directly from the Master Servicer) of each Monthly Report for Series 1997-A for
each Payment Date, such Monthly Report to be in substantially the form attached
hereto as Exhibit D, the Paying Agent, on behalf of the Trustee, shall forward a
copy thereof to each Series 1997-A Noteholder and the Rating Agencies.
(c) On or before March 31 of each calendar year (or such earlier
time as may be required by the Internal Revenue Code), beginning March 31, 1998,
the Issuer, will furnish to the Paying Agent (unless, in either case, a tax
authority of competent jurisdiction requires delivery of a different report) a
Form 1099 for each Person that was a Series 1997-A Noteholder during the
preceding fiscal year of the Issuer, or such other applicable information
statement for each Person that was a Series 1997-A Noteholder during the
preceding fiscal year of the Issuer, together with such other customary
information as is necessary to enable the Series 1997-A Noteholders to prepare
their tax returns. Promptly following its receipt thereof, the Paying Agent, on
behalf of the Trustee, shall forward a copy thereof to each such Noteholder.
(d) Promptly following receipt by the Trustee of each certificate
furnished to the Trustee pursuant to Section 3.06 of the Agreement, the Paying
Agent, on behalf of the Trustee, shall forward a copy thereof to each Series
1997-A Noteholder and to each Rating Agency then rating the Series 1997-A Notes.
ARTICLE VIII
SERIES EVENTS OF DEFAULT
SECTION 8.01. Series Events of Default. If any one of the following
(each, a "Series Event of Default") shall occur:
(a) (i) there shall be a failure to pay in full the Series 1997-A
Interest Distribution Amount for any three consecutive Payment Dates, or
(ii) the Aggregate Principal Balance of the Series 1997-A Notes shall not
have been repaid in full on or prior to July 15, 2012; or
(b) any failure by the Issuer, the Seller or the Company to make any
payment, transfer or deposit or remit any funds, or, if applicable, to
give instructions or notice to the Trustee or the Paying Agent to make
such payment, transfer or deposit or remit any funds, in each case, when
required to do so and such failure remains unremedied for two (2) Business
Days after the Issuer, the Seller or the Company, as applicable, was
required to make such payment, deposit or remittance or give such
instruction; or
(c) any failure by the Issuer, the Seller or the Company duly to
observe or perform in any material respect any other covenant or agreement
of the Issuer, the Seller or the Company set forth in any of the
Agreement, this Supplement, the Issuer Purchase Agreement, the Seller
Purchase Agreement, the Note Purchase
27
Agreement, any other Operative Document relating to Series 1997-A, any
other instrument, agreement or document related to any Series 1997-A Note
or to any of the foregoing, which failure (x) continues unremedied for
thirty (30) days after the earlier of (i) the date upon which a
Responsible Officer of such breaching party obtained actual knowledge of
such failure and (ii) the date upon which written notice of such failure
shall have been given to such breaching party by the Trustee, any
Noteholder, the Master Servicer, any Control Party or any other Person,
and (y) has, or could reasonably be expected in the determination of the
Majority Noteholders to have, a Material Adverse Effect with respect to
Series 1997-A; or
(d) any representation, warranty or certification made or deemed to
have been made by the Issuer, the Seller or the Company under or in
connection with the Agreement, the Supplement, the Issuer Purchaser
Agreement, the Seller Purchase Agreement, the Note Purchase Agreement, any
other Operative Document relating to Series 1997-A, any other instrument,
agreement or document related to any Series 1997-A Note or to any of the
foregoing, or in any certificate or information delivered pursuant to or
in connection with any of the foregoing (including, without limitation,
any certificates delivered by any officer of X.X. Xxxxxxxxx Structured
Settlement Funding Corporation for, and on behalf of, the Company) (either
individually and/or in its capacity as a member or manager of the Seller)
(either individually and/or in its capacity as a member or manager of the
Issuer) in connection with any of the opinions of counsel delivered on the
Series Closing Date), shall, in any event, prove to have been incorrect in
any material respect when made or deemed to have been made, and such
incorrectness (x) continues unremedied for thirty (30) days after the
earlier of (i) the date upon which a Responsible Officer of such breaching
party obtained actual knowledge of such incorrectness and (ii) the date
upon which written notice of such failure shall have been given to such
breaching party by the Trustee, any Noteholder, the Master Servicer, any
Control Party or any other Person, and (y) has, or could reasonably be
expected in the determination of the Majority Noteholders to have, a
Material Adverse Effect with respect to Series 1997-A; provided, however,
that to the extent that any such untrue representation relates to a Series
Receivable, it shall not constitute a Series Event of Default hereunder to
the extent the Issuer causes the Seller to repurchase or substitute such
Series Receivable as required pursuant to Section 2.06(f) of the Agreement
and the Seller shall so repurchase and substitute such Series Receivables
as required therein; or
(e) the Trustee shall cease to have, a valid, perfected and
continuing first priority "security interest" (as defined in the UCC of
the jurisdiction the law of which governs the perfection of the interest
in such Series Pledged Assets created hereunder) in the Series Pledged
Assets for Series 1997-A now existing and hereafter arising and the
proceeds thereof; provided, that, if such affected Series Pledged Assets
constitute 10% or less of the Aggregate Discounted Receivables Balance of
all of the Series Pledged Assets, then such circumstance shall not
constitute a Series Event of Default if, within fifteen (15) days after
learning of any
28
such circumstance, the Issuer shall cause the Seller to repurchase such
affected Pledged Assets from the Issuer for a price equal to the Aggregate
Discounted Receivables Balance thereof (to be paid in cash to the
Trustee's Account) or to contribute (in exchange for such affected
Receivables) to the Issuer for inclusion in the Series Pledged Assets,
Eligible Receivables in respect of which such circumstance does not exist
and having an Aggregate Discounted Principal Balance equal to or in excess
of that of the affected Receivables; or
(f) an Overcollateralization Default shall occur; or
(g) the Issuer, the Seller, the Company or the Master Servicer (if
an Affiliated Entity) shall become, or become controlled by, an
"investment company" within the meaning of the Investment Company Act; or
(h) either (i) the Series 1997-A Notes shall be characterized by the
Internal Revenue Service as other than indebtedness of the Issuer for
federal income tax purposes or (ii) the Issuer shall become an association
taxable as a corporation for federal income tax purposes or shall become a
publicly traded partnership within the meaning of Section 7701 of the
Internal Revenue Code; or
(i) any transfer by the Company to the Seller, or by the Seller to
the Issuer, of Receivables and Related Property (whether constituting
Series Receivables for Series 1997-A or otherwise) thereunder on any date
shall cease to create a valid sale, transfer and/or assignment to the
Seller and/or the Issuer of all right, title and interest of the Company
and/or the Seller, as applicable, in, to and under all such Receivables
and Related Property; or
(j) the Issuer or the Seller shall cease to be an Affiliate of the
Company or the Company shall cease to own or control a controlling
percentage of the limited liability company interest of the Seller, or the
Company (indirectly through the Seller or otherwise) shall cease to own or
control a controlling percentage of the limited liability company
interests of the Issuer; or
(k) to the extent that the Master Servicer is an Affiliated Entity,
a Servicer Default shall occur which has a material adverse effect on the
interests of the Series 1997-A Noteholders under the Agreement, this
Supplement, the Issuer Purchase Agreement, the Seller Purchase Agreement,
the Note Purchase Agreement or any related instrument or agreement; or
(l) the Intercreditor Agreement shall be held (by a court having
jurisdiction in a final, unappealable decision or order) to be
unenforceable in any material respect; or
(m) either (i) the Back-up Servicing Agreement shall be terminated
or (ii) the Back-up Servicer shall breach its obligations thereunder and
such breach (x) shall remain unremedied for more than sixty (60) days
after notice thereof has been given to the Back-up
29
Servicer and (y) has, or could reasonably be expected to have a Material
Adverse Effect and, in either of the cases of clause (i) or (ii) above,
the Rating Agencies (or any of the them) then rating the Series 1997-A
Notes have reduced or withdrawn their ratings of such rated Notes as a
result thereof and shall not have, within such sixty (60) day period
increased or reinstated such ratings to a level at least equal to the
ratings which existed at the time of the occurrence of such event .
then, (i) the Majority Noteholders or (ii) the Trustee (at the direction of the
Majority Noteholders), in either case, by notice given in writing to the Issuer
and the Master Servicer (and to the Trustee to the extent that such notice is
given by the Majority Noteholders) may declare that an Event of Default has
occurred with respect to Series 1997-A as of the date of such notice.
Notwithstanding any provision to the contrary in the Agreement, the
Issuer or the Master Servicer on its behalf shall promptly notify the Trustee
and the Rating Agencies of the occurrence of any Series Event of Default or any
event or circumstance that with the lapse of time or the giving of notice or
both would constitute such a Series Event of Default, which notice shall contain
a statement from such Person's chief financial officer describing what action
the Issuer or the Master Servicer intends to take with respect to such
occurrence.
ARTICLE IX
ADDITIONAL AGREEMENTS AND RIGHTS
OF THE ISSUER AND MASTER SERVICER
SECTION 9.01. Reporting Requirements.
(a) Promptly following receipt by the Trustee from the Issuer or the
Master Servicer of any of the financial or other reports described in Sections
2.05(i) or 3.04(h) of the Agreement, the Paying Agent, on behalf of the Trustee,
shall forward a copy of such financial or other report to each Series 1997-A
Noteholder and to each Rating Agency rating any of the Series 1997-A Notes.
(b) Promptly following any request therefor by the Trustee or the
Control Party, each of the Issuer or the Master Servicer, as applicable, will
furnish to the Trustee or the Series 1997-A Noteholders, as applicable, such
other information, documents, records or reports respecting the Series
Receivables, the other Series Pledged Assets or the condition or operations,
financial or otherwise, of the Issuer or the Master Servicer as the Trustee, the
Control Party or any Rating Agency then rating the Series 1997-A Notes may from
time to time reasonably request.
SECTION 9.02. Indemnification by the Master Servicer. The Master
Servicer, if an Affiliated Entity, shall indemnify and hold harmless each of the
Trustee, any Series 1997-A Noteholder, or any Affiliate of any of the foregoing
(each, an "Indemnified Party") from and against any and all claims, losses and
liabilities (including reasonable attorneys' fees) (all of the foregoing being
collectively referred to as the "Indemnified Losses") suffered or sustained by
reason of any breach by the Master Servicer of its representations and
warranties or obligations
30
under the Agreement or this Supplement (it being agreed that the breach of any
such representation or warranty by the Master Servicer (to the extent it is an
Affiliated Entity), and the indemnification obligations of the Master Servicer
(if an Affiliated Entity) resulting therefrom, shall in each case, be determined
without giving effect to any limitation on the "knowledge," "best of knowledge"
or other similar limitation on the knowledge of the Master Servicer (if an
Affiliated Entity) contained in any such representation or warranty), excluding,
however, (a) Indemnified Losses to the extent resulting from willful misconduct,
bad faith, gross negligence, the reckless disregard by such Indemnified Party of
any of his, her or its obligations and duties, (b) recourse (except as otherwise
specifically provided in the Agreement or this Supplement) for uncollectible
Receivables or (c) any net income taxes or franchise taxes imposed with respect
to net income (or any interest or penalties with respect thereto) incurred by
such Indemnified Party arising out of or as a result of the Agreement, this
Supplement or the interest conveyed thereunder or hereunder in Pledged Assets or
in respect of any Receivable or any Contract or the Seller Purchase Agreement or
the Issuer Purchase Agreement. In addition, in no event shall "Indemnified
Losses" include any consequential, special or punitive damages. Indemnification
pursuant to this Section 9.02 shall not be payable from the Pledged Assets. The
agreement contained in this Section 9.02 shall survive the collection of all
Receivables, the termination of the Agreement and this Supplement and the
payment of all amounts otherwise due hereunder.
SECTION 9.03. Optional Purchase. On any Payment Date occurring on or
after the date on which the Aggregate Principal Balance of the Series 1997-A
Notes held by non-Affiliated Entities is reduced to an amount equal to or less
than 10% of the Original Aggregate Principal Balance of the Series 1997-A Notes,
the Issuer shall have the option to purchase the outstanding Series 1997-A Notes
at a purchase price equal to the Aggregate Principal Balance thereof, plus all
accrued and unpaid interest thereon. The Issuer shall give the Master Servicer
and the Trustee at least thirty (30) days prior written notice of the date on
which the Issuer intends to exercise such option to purchase. Not later than
1:00 p.m. (New York City time) on the Business Day preceding such Payment Date,
the Issuer shall deposit the purchase price into the Trustee's Account in
immediately available funds. Such purchase option is subject to payment in full
of the purchase price. On the applicable Payment Date, the Paying Agent shall
pay to the Series 1997-A Noteholders in accordance with their respective
interests therein, the remainder of such purchase price.
SECTION 9.04. Net Worth of the Issuer. From the Series Closing Date
until the Collection Date for the Series 1997-A Notes, the Issuer shall be
solvent, maintain a net worth sufficient to carry on its business as then
conducted and pay its debts as they generally become due.
SECTION 9.05. Indemnities by the Issuer. Without limiting any other
rights which any of the Indemnified Parties may have hereunder or under
applicable law, but without duplication, the Issuer hereby agrees to indemnify
each of the Indemnified Parties from and against any and all damages, losses,
claims, judgments, liabilities and related costs and expenses, including
reasonable attorneys' fees and disbursements, awarded against or incurred by any
Indemnified Party relating to or resulting from or in connection with any of the
following (all of the foregoing being called the "Issuer Indemnified Losses"),
other than any such Issuer Indemnified Loss (x)
31
constituting recourse for Receivables which are uncollectible for credit reasons
or (y) which arise solely from the gross negligence or willful misconduct of the
affected Indemnified Party:
(i) the sale or transfer to the Issuer of any Series Receivable
which was not at the time of such transfer an Eligible Receivable;
(ii) reliance on any representation or warranty made in writing by
the Issuer (or any of its officers) or by the Seller under or in
connection with this Agreement, any "Seller Transfer Report" (as defined
in the Issuer Purchase Agreement) or any Monthly Report, or reliance on
any other information or report delivered by the Issuer or by the Master
Servicer with respect to the Issuer (to the extent based on information
provided by the Issuer) pursuant hereto, which shall have been false,
incorrect or materially misleading in any respect when made; it being
agreed that the incorrectness of any such representation or warranty or
the determination that any such representation or warranty was materially
misleading, and the indemnification obligations of the Issuer pursuant to
this clause (ii) resulting therefrom, shall in each case, be determined
without giving effect to any limitation on the "knowledge," "best of
knowledge" or other similar limitation on the knowledge of the Issuer
contained in any such representation or warranty;
(iii) the failure by the Issuer to comply with (x) any term,
provision or covenant contained in the Agreement, this Supplement, any of
the other Operative Documents or any agreement executed in connection with
any of the foregoing or (y) any applicable law, rule or regulation with
respect to any Receivable, the related Settlement Purchase Agreement or
the Related Security, or the nonconformity of any Series Receivable, the
related Settlement Purchase Agreement or the Related Security relating
thereto with any such applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in the Trustee, or to
transfer to the Trustee, a first priority perfected ownership or security
interest in, the Series Receivables and the associated Related Security,
free and clear of any Lien (other than as contemplated under the Operative
Documents);
(v) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any
Series Receivables and the associated Related Security, whether at the
time of the transfer thereof to the Issuer or otherwise;
(vi) the failure by the Issuer to be duly qualified to do business,
to be in good standing or to have filed appropriate fictitious or assumed
name registration documents in any jurisdiction;
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(vii) the failure of the Issuer to pay when due any sales taxes or
other governmental fees or charges imposed in connection with the transfer
of the Series Receivables hereunder;
(viii) the failure of the Issuer or any of its agents, employees or
representatives to remit any Collections received by it in accordance with
the terms hereof;
(ix) the assignment by a Claimant, the Company, the Seller or the
Issuer of the rights to Scheduled Payments (or any portion thereof) under
a Settlement Purchase Agreement in contravention of an anti-assignment
provision in such Settlement Agreement that prohibits the transfer of the
rights to such Scheduled Payments (or any portion thereof); and
(x) any Indemnified Loss arising in connection with a Series
Receivable, the underlying Settlement Agreement of which was not the
subject of a Qualified Assignment, to the extent such Indemnified Loss
would not have been incurred had such Settlement Agreement been the
subject of a Qualified Assignment (without regard to whether there may
have been a different Annuity Provider had there been a Qualified
Assignment and disregarding any rights against any Person which would have
been an Assignee had there been a Qualified Assignment).
Subject to Section 10.05, any Issuer Indemnified Losses payable by the Issuer
under this Section 9.05 shall, be paid by the Issuer to the requesting
Indemnified Party within five (5) Business Days following such Indemnified
Party's written demand therefor, setting forth in reasonable detail the basis
for such demand. The agreements of the Issuer contained in this Section 9.05
shall survive the Collection Date of the Series 1997-A Notes and the termination
of this Supplement. In addition, in no event shall Indemnified Losses include
any consequential, special or punitive damages. The provisions of this Section
9.05 shall survive the termination of this Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Ratification of Agreement; Integration. (a) As
supplemented by this Supplement, the Agreement is in all respects ratified and
confirmed and the Agreement, as so supplemented by this Supplement shall be
read, taken and construed as one and the same instrument.
(b) This Supplement, the Agreement, the Note Purchase Agreement, the
Series 1997-A Notes, the Back-up Servicing Agreement, the Intercreditor
Agreement and the other Operative Documents and other instruments, documents and
agreements relating to Series 1997-A or any of the foregoing set forth the
complete agreement of the parties hereto, thereto and the Holders of the Series
1997-A Notes, and shall be deemed to have incorporated and superseded all
33
prior written or oral agreements with respect thereto. Each of the Holders of
the Series 1997-A Notes, by its acceptance thereof, hereby acknowledges and
agrees that prior to its purchase or other acquisition of such Notes, it has
reviewed all of the Operative Documents and has completed such independent due
diligence as, in each case, it has deemed relevant in making its investment
decision with respect to Series 1997-A.
SECTION 10.02. Counterparts. This Supplement may be executed in two
or more counterparts, each of which so executed shall be deemed to be an
original, but all of which shall together constitute but one and the same
instrument.
SECTION 10.03. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS DISTINGUISHED FROM THE
CONFLICTS OF LAW PROVISIONS) OF THE STATE OF DELAWARE, AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.
SECTION 10.04. Amendments and Waivers. Notwithstanding anything
contained in Section 13.01 of the Agreement:
(a) without the prior consent of all of the Series 1997-A
Noteholders (other than those held by Affiliated Entities), no amendment
or waiver of any term or condition of the Agreement, this Supplement, the
Issuer Purchase Agreement, the Seller Purchase Agreement or any other
Operative Document relating to Series 1997-A shall be made which has the
effect of (i) releasing all or any material portion of the Series Pledged
Assets, (ii) waiving any Event of Default or Series Event of Default with
respect to Series 1997-A resulting from (A) the occurrence of an
Insolvency Event with respect the Issuer, the Seller, the Master Servicer
(if an Affiliated Entity) or the Company, or (B) the occurrence of any
event described in Section 8.01(a), (d), (e), (f), (g), (h) or (k) of this
Supplement, (iii) modifying the definition of "Control Party," "Insolvency
Event," or "Majority Noteholders," (iv) modifying any provision of (x)
Section 6.02, or 6.03 of this Supplement which amendment, waiver or
modification would materially adversely affect any such Noteholders, (y)
this Section 10.04 or (z) Section 13.01(b) of the Agreement;
(b) without the prior consent of the Majority Noteholders, no
amendment or waiver of any term or condition of (i) the Agreement or this
Supplement shall be made which has the effect of modifying so as to render
less restrictive any of the definitions of "Defaulted Receivable" or
"Eligible Receivable" or any element thereof (but without limitation to
the right of any Control Party to exercise its discretion to the extent
provided in any such definition) or (ii) the Back-Up Servicing Agreement,
except for any amendment or waiver thereof which could not reasonably be
expected to have a Material Adverse Effect;
34
(c) without the consent of all of the Series 1997-A Noteholders, no
amendment or waiver of any term or condition hereof shall be made which
has the effect of reducing the Specified Series 1997-A Reserve Balance;
and
(d) (i) it shall be a condition precedent to the effectiveness of
any amendment to any of the Operative Documents (other than any amendment
to cure any ambiguity or to correct or supplement any provisions herein or
therein which may be inconsistent with any other provision herein or
therein), that each Rating Agency shall have confirmed in writing that
such amendment will not result in a reduction or withdrawal of the rating
of the Series 1997-A Notes; and (ii) the Issuer or the Master Servicer
shall promptly notify each Rating Agency of (x) any waiver of any term or
condition of any Operative Documents and (y) any amendment of the type
described in clause (i) which does not require confirmation from the
Rating Agencies.
No waiver with respect to any term or condition of the Agreement or this
Supplement shall extend to any subsequent or other event, circumstance or
default or impair any right consequent thereon except to the extent expressly so
waived.
SECTION 10.05. Limitations on Liability. (a) Notwithstanding any
provision to the contrary in this Supplement or the Agreement to the contrary,
indemnification payments and other amounts described herein as payable by the
Issuer hereunder (including, without limitation, amounts payable pursuant to
Section 9.05) shall be payable only from Available Issuer Funds (and, as a
result, may be payable from any allocable Pledged Asset only if, to the extent
that, and after such Pledged Asset shall have been distributed to the Issuer in
accordance with the terms of the Agreement and the Supplements thereto). Unless
and until sufficient Available Issuer Funds become available to pay any such
amount in accordance with the immediately preceding sentence, such
indemnification payments and other amounts shall not be due and payable until a
year and a day after the Collection Date for the last then outstanding Series.
(b) None of the members, managers, officers, employees, agents,
stockholders, holders of limited liability company interests, officers or
directors of or in the Issuer or the Master Servicer, past, present or future,
shall be under any liability to the Trustee, the Series 1997-A Noteholders or
any other Person for any action taken or for refraining from the taking of any
action in such capacities or otherwise pursuant to the Agreement or this
Supplement or for any obligation or covenant under the Agreement or this
Supplement, it being understood that, with respect to the Issuer, the Agreement
and this Supplement and the obligations created thereunder and hereunder shall
be, to the fullest extent permitted under applicable law, solely the limited
liability company or corporate obligations of the Issuer or the Master Servicer,
as applicable. The Issuer, the Master Servicer and any member, manager, officer,
employee, agent, stockholder, holder of limited liability company interest,
officer or director of or in the Issuer or the Master Servicer, as applicable,
may rely in good faith on any document of any kind prima facie properly executed
and submitted by any Person (other than the Issuer or any Affiliate thereof, in
the case of the Issuer, or the Master Servicer or any Affiliate thereof, in the
case of the Master Servicer) respecting any matters arising hereunder.
35
SECTION 10.06. Confidentiality. Except to the extent otherwise
required by applicable law or as may be necessary to enforce any rights in
respect of any Operative Document, each Series 1997-A Noteholder (other than the
initial Series 1997-A Noteholders), by its acceptance of the Series 1997-A Notes
held by it, agrees to (a) maintain the confidentiality of the financial terms of
the Operative Documents (unless the Issuer shall otherwise consent in writing)
and (b) not disclose, deliver or otherwise make available to any third party any
non-public information regarding the financial condition, the Credit Policy
Manual, any of the other credit and collection policies and procedures or the
operations of the Issuer, the Master Servicer, the Seller or the Company that
such Series 1997-A Noteholder may obtain pursuant to any Operative Document or
in connection with the transactions contemplated thereby (the information
described in clauses (a) and (b) above being referred to herein as the
"Confidential Information"); provided, however, that such Series 1997-A
Noteholder may disclose any Confidential Information and the Operative Documents
(A) to its directors, officers and employees to the extent necessary or
desirable in connection with such Holder's investment in the Series 1997-A Notes
and to its legal counsel, auditors and accountants, provided they are made aware
of the confidential nature of the information and agree to be bound by the
provisions hereof, (B) to any rating agency, the National Association of
Insurance Commissioner or Governmental Authority, and (C) subject to a written
confidentiality agreement for the benefit of the Issuer having terms
substantially similar to this Section 10.06, to any assignee or potential
assignee of the Series 1997-A Notes held by such Series 1997-A Noteholder;
provided, further, however, that such Series 1997-A Noteholder shall have no
obligation of confidentiality in respect of any information which may be
generally available to the public or becomes available to the public through no
fault of such Series 1997-A Noteholder.
SECTION 10.07. Tax and Usury Treatment. The Issuer, the Master
Servicer and the Trustee have entered into this Supplement, and the Series
1997-A Notes will be issued and acquired by the Series 1997-A Noteholders, with
the intention that, for federal, state and local income and franchise tax and
usury law purposes, the Series 1997-A Notes shall be treated as debt of the
Issuer secured by the Series Pledged Assets. Neither the Trustee nor the Issuer
shall elect (or cause or permit an election to be made) to be taxed for federal
income tax purposes as a corporation or an association taxable as a corporation.
SECTION 10.08. Section Headings. The Section headings contained in
this Supplement are for convenience only and in no way define, limit or describe
the scope or intent of any provision or Section of this Supplement.
SECTION 10.09. Notices. Notices hereunder shall be given in the
manner set forth in the Agreement. Notices to the Rating Agencies with respect
to this Series 1997-A, whether pursuant to this Supplement, the Agreement or
otherwise, shall be sent to the following addresses, (x) if to Duff & Xxxxxx, to
Xxxx & Xxxxxx Credit Rating Co. at 00 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx 00000, Attn.: Asset-Backed Monitoring, and (y) if to Moody's, to
Xxxxx'x Investors Service, Inc., 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attn.: Xxxx Xxxx.
36
IN WITNESS WHEREOF, the Issuer, the Master Servicer and the Trustee
have caused this Supplement to be fully executed by their respective officers as
of the day and year first above written.
X.X. XXXXXXXXX RECEIVABLES III LLC
By: X.X. Xxxxxxxxx S.S.C. Limited Partnership, as the
Designated Manager
By: X.X. Structured Settlement Funding Corporation, as its
General Partner
By:
---------------------------------------
Name:
Title:
X.X. XXXXXXXXX & COMPANY, INC., as the Initial Master
Servicer
By:
---------------------------------------
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION (not individually but
solely in its capacity as Trustee)
By:
---------------------------------------
Name:
Title:
